S&P Says Buy Adobe

Adobe (ADBE ) and Macromedia (MACR ): Reiterates 5 STARS (buy); Open Text (OTEX ): Maintains 4 STARS (accumulate); FileNet (FILE ) and Interwoven (IWOV ): Maintains 3 STARS (hold)

Analyst: Scott Kessler

AIIM 2004, the largest conference and expo focused on enterprise content management (ECM), is taking place today through Wednesday, Mar. 10. S&P covers several companies that participate in this segment that announced new or updated products as the event began. S&P's favorite stocks with prominent ECM businesses are Adobe and Open Text. S&P also likes Macromedia, which earlier today introduced the new release of its Breeze Internet communications software.

General Electric (GE ): Maintains 3 STARS (hold)

Analyst: Robert Friedman

Although the multi-industry giant's recent decision to offer 118 million shares represents only 1.2% of common shares outstanding, S&P believes it's an indicator that GE itself does not view its shares as inexpensive. S&P thinks this supports S&P's view that, at current prices, the stock is fairly valued, at best. Based on S&P's free cash flow model, which incorporates S&P's 8.5% sustainable free cash flow compound annual growth rate and 17% debt-adjusted return on equity forecasts, S&P's intrinsic value-based 12-month target price is $30 a share. Thus, S&P would hold current positions.

Corning (GLW ): Maintains 3 STARS (hold)

Analyst: Ari Bensinger

Corning reaffirmed its first-quarter revenue guidance of $770 to $830 million, with earnings per share at 4 cents to 5 cents. Robust demand for liquid-crystal display products is offsetting weaker optical fiber volume than expected. Based on recent strong sales growth, the display technologies division, which includes LCD sales, now represents a greater percentage of company sales than the fiber-optic cable division. For 2004, S&P sees display technology products growing over 60%. S&P is maintaining the 2004 earnings per share estimate of 24 cents. Applying a group-average ratio of price-to- book value, S&P's 12-month target price remains $13.

BellSouth (BLS ): Maintains 2 STARS (avoid)

Analyst: Todd Rosenbluth

Pending approvals, BellSouth agreed to sell its Latin American wireless assets to Telefonica for $5.85 billion, or 8.4 times the unit's EBITDA. The deal should cut BellSouth's debt by $1.5 billion. S&P sees the proposed sale of this relatively lower margin business as consistent with BellSouth's strategy of spending on its core U.S. market. S&P's 2005 operating earnings per share estimate goes down by 4 cents, to $1.54. S&P thinks BellSouth faces sizable challenges to its planned deal for AT&T Wireless and to competition in the wireline segment. As shares are trading above S&P's 12-month target price of $24, S&P would avoid.

Janus Capital (JNS ): Maintains 2 STARS (avoid)

Analyst: Robert Hansen, CFA

Janus reported assets under management of $147.5 billion for the month of February, down 0.9% from the previous month and below S&P's estimate. Net outflows were $2.0 billion, vs. $3.1 billion in January. The company expects $4.5 billion in outflows from institutional clients over the next three months, resulting in a $14 million charge in the first quarter. S&P sees higher 2004 expenses vs. 2003, and S&P's 2004 earnings per share estimate is 85 cents. S&P's 12-month target price remains $15, which is 18 times S&P's 2004 earnings per share estimate, and a discount to peers. S&P would avoid the shares given S&P's view of continued net outflows, business risk, and lack of product diversification.

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