Downgrading Applied Micro

Also: analysts' opinions on Emmis Communications and PRI Automation

Applied Micro Circuits (AMCC ): Downgrades to 2 STARS (avoid) from 3 STARS (hold)

Analyst: Thomas Smith

The chipmaker warned that June-quarter revenue is likely to drop 65% from the March quarter. The company sees a pro forma per-share loss of $0.04-$0.06, before restructuring and other charges. S&P says all big communications customers are suffering low demand, and inventories have been slower to clear than expected. S&P cut the pro forma fiscal 2002 (March) estimate to a $0.20 loss from $0.05 EPS, and cut the fiscal 2003 to $0.05 EPS from $0.20. The stock is still trading over 3.5 times the tangible book price while some peers have dipped to 1.5 times the book price, so Applied Micro has room to dip lower. With earnings recovery several quarters away, S&P says steer clear of these shares.

Emmis Communications (EMMS ): Maintains 3 STARS (hold)

Analyst: Howard Choe

The radio and television station operator posted a May-quarter loss per share of $0.33 vs. a year-ago's $0.08 EPS, $0.04 below consensus. Revenues rose 37% on acquisitions, basically in line, with shortfall in television revenue partly offset by stronger-than-expected radio revenue. The television advertising market continues to be weak. EBITDA is up 25.4%, but net margin fell 290 basis points on acquisition integration costs. Emmis lowered the fiscal 2002 (Feb.) guidance modestly, mostly on weak television ads. The company cut the fiscal 2002 sales guidance to $572 million from $577 million and trimmed the fiscal 202 broadcast cash flow guidance to $218 million from $223 million. S&P says Emmis is fairly valued at an enterprise value of 15 times EBITDA.

PRI Automation (PRIA ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Robert Tortoriello

The company warned that July-quarter revenues will be 20% lower than previously expected, resulting in a larger-than-expected operating loss. S&P views PRI as the second strongest competitor in a currently very weak market for semiconductor factory automation equipment. Shares are currently near trough valuations on both price-to-book and price-to-sales ratios. However, S&P expects a loss per share of $1.24 for fiscal 2001 (Sept.). With earnings continuing to weaken, and no signs of a turnaround in orders any time soon, S&P would hold the shares for now.

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