Ciena Cut to Sell

Also: Analyst opinions on Pixar, Cisco, and Baxter International

Ciena (CIEN ): Cut to 1 STAR (sell) from 2 STARS (avoid)

Analyst: Ari Bensinger

Bensinger downgraded the stock of the optical transport and switching company amid the difficult telecom environment. He projects sharply lower spending from major customers Qwest and Sprint, which are estimated at 60% of Ciena's July quarter revenue.

Optical long haul remains very weak and metro is growing less than expected, he said. he is cutting his fiscal year 2002 (Oct.) earnings per share estimates to $0.29 from $0.60. He expects premium multiples of 55 times that estimate and four times his fiscal year 2002 sales estimate to decrease as lower expectations set in.

Pixar (PIXR ): Still 4 STARS (accumulate)

Analyst: Mark Basham

Basham is advising investors to pay attention to the appreciating value of Pixar's still small, but growing, film library, which should help to smooth out cycles between films. He said the peaks in the stock price in conjunction with prior theatrical releases of the past two films is a widely-known phenomenon. That PIXR peaked four months ahead of release of "Monsters, Inc." and is now off 26% from mid-year high suggests a price movement in anticipation of phenomenon, he says. The analyst has a 6-12 month price target on the stock of $44-$46.

Cisco Systems (CSCO ): Maintain 3 STARS (hold)

Analyst: Megan Graham-Hackett

The networking gear company posted first quarter proforma earnings per share of $0.04 versus $0.18. The results were $0.02 above expectations. Graham-Hackett said the quality of the earnings per share was solid, with upside from revenues and gross margin. Revenues were up 3% versus the fourth quarter to $4.4 billion, which was above Graham-Hackett's $4.1 billion estimate.

Gross margin at 54% was above Graham-Hackett's 52.5% estimate. The company generated first quarter cash flow from operations of $1.4 billion on progress in receivables and inventories. Despite the first quarter strength, the company noted limited visibility. Cisco sees second quarter revenues flat to up slightly versus the first quarter. Graham-Hackett said she is raising fiscal year 2002 estimates (July) by $0.02 to $0.22.

Baxter International (BAX ): Still 4 STARS (accumulate)

Analyst: Herman Saftlas

The medical device company is trading down today on its planned $100-150 million fourth quarter charge related to Dialysis filters, Saftlas says, after the fluid employed in making certain filters used in dialysis machines was linked to 51 deaths. The charge reflects the costs of discontinuing suspect filter lines, which account for $20 million in sales or 0.3% of Baxter's total plus liability costs.

Saftlas says the after-tax cash impact is limited to $50 million. Before the charge, the company expects to meet forecasts of mid-teens earnings per share growth in both 2001 and 2002. Baxter is trading at a 15% discount to intrinsic valuation based on Saftlas' discounted cash flow model.

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