S&P Keeps Buy on Qualcomm

Plus analysts' opinions on Broadcom, Walt Disney, and more

Qualcomm (QCOM ): Reiterates 4 STARS (buy)

Analyst: Kenneth Leon, CPA

Following yesterday's filing by Broadcom of an antitrust lawsuit against Qualcomm, the company states the allegations of supposed monopolization of WCDMA market are false. Qualcomm says that to date it has granted over 130 licenses to broad range of companies. Based on its record of success in defending its intellectual property, we think Qualcomm will prevail in the lawsuit. We would regard any weakness today in Qualcomm shares as enhanced buying opportunity. Our 2005 earnings per share estimate remains 26 cents. Given our view of its unique pricing power with CDMA technology, our opinion is buy.

Broadcom (BRCM ): Reiterates 3 STARS (hold)

Analyst: Amrit Tewary, Scott Kessler

Yesterday Broadcom announced it has filed an antitrust lawsuit against Qualcomm, related to Qualcomm's practices on cellular technology and products. It alleges that Qualcomm's licensing arrangements violate that company's commitment to provide fair, reasonable and non-discriminatory licensing terms, and that Qualcomm is engaged in exclusionary and anticompetitive practices. This action ups the ante in Broadcom's multi-front battle against Qualcomm, which also includes patent lawsuits and a trade commission investigation, but does not change our investment thesis or opinion on Broadcom.

Walt Disney (DIS ): Reiterates 4 STARS (buy)

Analyst: Tuna Amobi, CPA, CFA

Pursuant to a pact with network operator Sprint, Disney will launch Disney Mobile, a family-targeted wireless phone service, in 2006. We think this move seems consistent with plans to systematically increase investments in higher-growth digital communications and entertainment platforms, which could gain more priority under new leadership of Bob Iger effective Oct. 1, 2005. After earlier ESPN Mobile wireless deal targeted to sports fans, we expect to see more of such moves aimed to capitalize on Disney's branded content under the Mobile Virtual Network Operator (MVNO) model.

Maytag Corp. (MYG ): Maintains 3 STARS (hold)

Analyst: Amy Glynn, CFA

Unconfirmed report in Financial Times says Maytag may end talks by mid-July with Haier and private equity firms Bain Capital and Blackstone, a consortium that preliminarily made a $16 per share buyout bid. This is earlier than 6 to 8 weeks Haier wanted for its due diligence. Ripplewood Holdings warned last week that talks with Haier were disruptive to its pact for buyout of Maytag at $14. Unconfirmed report by Reuters says Haier has confirmed interest in Maytag but had not made formal decision. We continue to see Haier bid as viable but see risk to our target price of $17 if suitors fall away.

Conseco (CNO ): Downgrades to 3 STARS (hold) from 4 STARS (buy)

Analyst: Gregory Simcik, CFA

With shares up 15% over the past two months, we now believe the stock is fairly valued and are lowering our recommendation. We see a turnaround situation as Conseco focuses on cost savings and building underwriting capital in the near term in order to boost earnings per share and position itself for a financial strength ratings review. However, we still see challenges for independent agent sales in 2005. Our 12-month target price stays $24, 13.5 times our 2005 operating earnings per share estimate of $1.75, a premium to peers to account for our view of potential upside if Conseco's financial strength rating improves.

Fair Isaac (FIC ): Maintains 3 STARS (hold)

Analyst: Zaineb Bokhari

We see Fair Isaac benefiting from the rising public awareness of identity theft and the resulting desire to monitor and protect their credit. Fair Isaac derives about 20% of revenues from its scoring solutions, which includes its proprietary FICO score. We continue to see revenue growth of about 15% in fiscal 2005 (ending September) to $811 million, aided by recent acquisitions, and about 11% in fiscal 2006. We are maintaining our earnings per share estimates of $1.80 and $2.05 for fiscal 2005 and fiscal 2006, respectively. We are raising our 12-month target price to $40 from $36, based on a blend of p-e and p-e-to-growth analyses.

Macromedia Inc. (MACR ): Upgrades to 4 STARS (buy) from 3 STARS (hold)

Analyst: Scott Kessler

Macromedia agreed in April to be acquired by Adobe in an all-stock transaction valued at $3.4 billion. Accordingly, Macromedia shares now trade in line with Adobe's. Notwithstanding concerns related to recent MACR restatements that we consider minor, and a related shareholder suit that we see as lacking merit, we expect the deal to be consummated by Nov. 2005, pending necessary approvals. Our upgrade of Macromedia reflects our upgrade today of Adobe to buy from hold. Like Adobe and Macromedia has fallen some 18% since June 1. Our 12-month target price for Macromedia remains $47.

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