Merrill Upgrades Macromedia to 'Neutral'

Analyst Jay Vleeschhouwer says the web software company cut costs more than he expected, however, he says a more diverse revenue stream is essential

Merrill Lynch upgraded Macromedia (MACR ) to neutral.

Analyst Jay Vleeschhouwer says Macromedia cut its operating costs by more than he thought, as there had been a big reduction in headcount over the past year or so. Vleeschhouwer says he expects only a small sequential increases in costs from the new lower base. He thinks Macromedia must balance and manage its packaged software model, as well as diversify into and execute its new strategy, addressed markets, and revenue sources.

Vleeschhouwer notes the web software company's largest products lead their segments by a wide margin but are relatively small, so multiple incremental revenue sources over the next few years is essential.

He raised his 32 cents fiscal 2003 (March) fourth quarter estimate to 40 cents, and raised the 48 cents fiscal 2004 estimate to 55 cents.

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