Dell (DELL) this afternoon reported fiscal Q1 revenue short of analysts’ estimates, but delivered adjusted EPS well ahead, and offered a better-than-expected outlook for the current quarter’s revenue growth.

Revenue rose 1%, year over year,  to $15.02 billion from $14.87 billion a year earlier, yielding EPS of 55 cents.

Analysts had been modeling $15.4 billion in revenue and 44 cents EPS.

The company reaffirmed an expectation for full-year revenue growth of 5% to 9%, versus the 5% consensus. For Q2, Dell sees revenue growth “in the mid-single digits” compared to Q1, which the company noted would be above its normal sequential seasonal growth of 2% to 3%.

Dell said it expects spending by governments to improve, better-than-average seasonality in small and medium business, and education customers, and a “solid” back-to-school season. The timing of Dell’s offerings based on Intel’s (INTC) “Sandy Bridge” chips will help with small business and consumer sales, the company said, as will a refresh of its “XPS” product line.

Consumer revenue declined 7% to $3 billion, Dell said, with softer-than-expected demand. Public revenue was down 2%, large enterprise revenue was up 5%, and small and medium business revenue was up 7%.

Dell will hold a conference call with analysts at 4 pm, Central time, 5 pm, Eastern, which you can catch here.

Dell shares were halted just before the release. Apparently, the stock is to resume trading at 4:20 pm, Eastern.

Update: DELL has resumed trading and is now up 81 cents, or 5%, at $16.69.

No doubt, the rough outlook by Hewlett-Packard (HPQ) this morning may have some folks breathing a sigh of relief, and perhaps even shifting some money around. HP shares, I should note, are up 3 cents in late trading.

Article courtesy of Tech Trader Daily

Charlie Wolf of Needham & Co., who last week cut his rating on Research in Motion (RIMM) to Hold for its failure to maintain competitive products, today initiated coverage of Motorola Mobility (MMI) with a Hold rating, writing that Moto’s strategy of riding Google’s (GOOG) “Android” coat-tails could become increasingly risky this year.

There are two risks, as he sees it: there will be a proliferation of smartphone licensees of Android (some would say there are already a plethora), and, closely tied to that, there is a risk that Moto won’t be able to sufficiently differentiate itself as Android devices become commodities.

Moreover, he sees the same risk to Moto’s efforts with Android tablets, despite the fact that its “Xoom” tablet has gotten positive reviews so far.

“Since Android phones run on the same operating system, the major risk facing Motorola and the other licensees is the Android platform could commoditize, sending margins into value-destroying territories.”

Because smartphone growth is exploding, and because the devices are sold through carriers, subsidies have kept Android from commoditizing — meaning, no one buys them on price alone, he implies. As smartphone growth slows, Wolf expects carriers to press Moto and other vendors for lower prices on a wholesale basis.

He notes, “Google has licensed Android to over 40 manufacturers; and the only option for many second-tier licensees, located in emerging markets, is to capture share through aggressive pricing rather than differentiating features and services.”

On the strength of 20% revenue growth, Motorola Mobility should earn $0.85 in 2011 as the company leverages the fixed components in its expense structure. We do not anticipate that Motorola Mobility will experience smartphone sales shortfalls or increasing margin pressures in 2011 because the Android platform itself is growing so rapidly. However, 2012 could be a different story. We expect Motorola Mobility’s revenue growth to slow to 15% in that year. We also expect that pricing and gross margin pressures will begin to emerge as growth in the Android platform slows. With little additional leverage available in its expense structure, Motorola Mobility’s 2012 earnings should rise modestly to $1.10 per share.

I would note Wolf’s estimate is higher than the 80 cents analysts are estimating this year, but the 2012 figure for $1.10 is well below the consensus $1.70.

Moto shares today are down 41 cents, or 1.6%, at $25.13.

Article courtesy of Tech Trader Daily

Shares of Akamai Technologies (AKAM) were off 15.1% in recent trading, the worst performer in the S&P 500 (SPX), following the company’s earnings report last night.

Although the stock gained at first on the report, in which Akamai reported small EPS and revenue beats, it then reversed course after hours on its uninspiring forecast, and continued to fall this morning.

Collins Stewart analyst Greg Miller called Akamai’s outlook “questionable,” writing in a research note that “We believe investors will largely view the comments as a sign of incremental competition from Level 3 (LVLT) and others and that the perceived attractiveness of that segment of business is just not as once anticipated.” He reiterated his Neutral rating.

Think Equity’s Robert Coolbrith also reiterated his Hold rating, warning “While we view the company’s long-term secular growth opportunities as intact, we believe management’s previously stated objective for 15%+ FY11 revenue growth could now be out of reach.”

Akamai wasn’t the only name suffering; tech stocks in general were falling, with the Nasdaq (COMP) down 0.05%, even as the S&P gained 0.07% and the Dow Jones Industrial Average (DJIA) was up 0.14%. A notable exception was Citrix Systems (CTXS), which gained 10% following its earnings report last night.

Article courtesy of Tech Trader Daily

Bit9 has raised $12.5 million in a new round of funding for its enterprise security business.

The Waltham, Mass.-based company offers protection for endpoints, or the smartphones, tablets, and computers that connect to an enterprise network. Since those endpoints are increasingly vulnerable to attack, Bit9 specializes in protecting them so that information technology managers can still allow employees to use them. Overall, the endpoint security market is expected to reach $10 billion by 2014 as corporations try to protect their assets from increasingly sophisticated cyber attacks.

Atlas Venture led the round, with participation from existing investors Highland Capital Partners, Kleiner Perkins Caufield & Byers, and .406 Ventures. New investor Paul Capital also joined the funding. To date, Bit9 has raised more than $23 million.

Demand for Bit9’s technology has escalated in the past year across industry segments such as government, healthcare, defense and retail. That happened in part because of sophisticated attacks, such as Operation Aurora, which cracked Google’s security system, and Stuxnet, which destroyed some of Iran’s nuclear centrifuges.

Patrick Morley, chief executive of Bit9, said that the company’s technology allows IT teams to precisely control what software is allowed to run and what is not. The company saw 140 percent revenue growth in 2010 and 60 percent growth in new customer acquisition. The company will use the money for new product development, better sales and marketing, and expansion in Europe.

Market researcher IDC expects the market to grow at a compound annual growth rate of 8.3 percent, reaching $10 billion in 2014, compared to $6.6 billion in 2009.

Bit9 was founded in 2002 and has more than 70 employees. Rivals include Symantec, McAfee and others.

[image credit: inbluetech]

Tags: cyber attack, security

Companies: Bit9

People: Patrick Morley

Article courtesy of VentureBeat » deals

Oppenheimer & Co.’s Rich Schafer was the other analyst upgrading Broadcom (BRCM) shares today, along with DA Davidson’s Aalok Shah, whom I mentioned earlier. He raised his rating on Broadcom from “Perform” to Outperform, and set a $55 price target, after a 19% decline from a recent high in January.

Broadcom is “one of the few remaining large-cap semiconductor growth stories,” in Schafer’s view.

Schafer thinks that some people came away with too dour a view on Broadcom’s operating expense trajectory when the company reported Q4 results on February 1st.

“1Q’s higher OpEx outlook proved a negative inflection point and some still question mgmt’s commitment to expense control. We expect OpEx to lag the top line going forward and see little need to accelerate spending.”

Schafer also thinks revenue growth projected at about 15% this year could be higher for Broadcom thanks to the “connectivity megatrend” in mobile and wireless devices, especially with Apple (AAPL) an “anchor customer” for Broadcom’s WiFi plus Bluetooth plus FM “combo” radio chips.

Broadcom shares today are up $1.20, or 3%, at $39.65.

Article courtesy of Tech Trader Daily

Shares of network processor maker Cavium Networks (CAVM) are up $2.09, or almost 5%, today at $45.01 after the stock was upgraded to Buy from Hold by Auriga Securities analyst Sandeep Shyamsukha, based on an expectation that the global build-out of 4G wireless networks, also referred to as “Long Term Evolution,” or LTE, in some cases, will boost sales of the company’s chips into access and aggregation networking equipment that carriers buy.

Shyamsukha raised his price target on the stock to $54 from a prior $44, based on longer-term growth rates of 30% revenue growth per annum, compounded, over the next five years, and non-GAAP EPS growth of 35% to 45%.

“Our analysis suggests that the service provider segment could contribute about 30% to 40% of revenue in 2015 from 10% in 2011.”

He adds, “Conversations with industry experts suggest that CAVM’s solutions have already been selected for 4G/LTE packet processing at almost all tier 1 wireless equipment vendors.”

Article courtesy of Tech Trader Daily

Following reports yesterday that AOL (AOL) will be consolidating several media properties, UBS Securities analyst Brian Pitz this morning raised his rating on the shares to Buy from Neutral, with a $25 price target, arguing that the company stands to gain from “stabilization” and “monetization.”

AOL shares today are up 64 cents, or 3.4%, at $19.61.

AOL’s effort on display ads, dubbed “Project Devil,” appear to be getting higher-than-average CPMs, at about $30, writes Pitz. That should allow the company to show ad revenue growth “in the low teens” on a percentage basis in the second half of this year, about in line with online ad trends broadly, which would off-set continued declines in its dialup subscriber business, he thinks.

Also, he thinks, there’s a chance AOL’s ad formats will become an industry standard, given that they appear to have the blessing of the Interactive Advertising Bureau.

The current stock price likely reflects little of the advertising and content businesses’ value, Pitz thinks: $14 can be attributed to the subscriber business alone, based on his discounted cash flow model, with another $4 in cash per share.

AllThingsD’s Kara Swisher had previewed the changes to AOL’s content properties in a post yesterday, noting that sites such as Politics Daily will cease to exist as standalone brands.

The content consolidation comes after reports last week AOL intends to cut a fifth of its workforce.

Article courtesy of Tech Trader Daily

Shares of companies that own and operate cellular towers, including American Tower (AMT), Crown Castle (CCI), and SBA Communications (SBAC) continue to trade down today following AT&T’s (T) announcement it intends to purchase Deutsche Telekcom‘s (DT) T-Mobile USA for $39 billion, the implication being that all these companies will lose some business as AT&T consolidates the network footprint.

However, some more information has filtered out that is worth taking into consideration: SBA and CCI both offered statements this morning that describe in detail how their networks reflect the respective AT&T and T-Mobile assets.

• SBA says in an 8-K filing that as of today it has “separate leases for antenna space with AT&T and T-Mobile on the same tower at approximately 1,533 of the Company’s 9,260 total current owned tower sites,” and that, “The total annualized site leasing revenue generated by T-Mobile at these sites is approximately $40.1 million” while “the total annualized site leasing revenue generated by AT&T at these sites is approximately $53.6 million. The weighted average remaining current term of these leases is approximately 3 years.”
• CCI said in its press release that, “As of December 31, 2010, AT&T and T-Mobile represented 21% and 11%, respectively, of Crown Castle’s consolidated revenues. Further, there are approximately 4,000 Crown Castle towers on which both carriers currently reside. Crown Castle’s revenue from T-Mobile on these 4,000 towers represents approximately 6% of Crown Castle’s consolidated revenues. In addition, there is an average of approximately 12 years and 7 years of current term remaining on all lease agreements with AT&T and T-Mobile, respectively.”

In response to both announcements, Gray Powell of Wells Fargo this afternoon writes that the impact of the deal now seems not as bad as he had anticipated.

For SBAC, he had anticipated that 7.5% of revenue might be at risk over 5 years, resulting in “a 150 percentage point drag” on his projected 9% revenue growth rate. But now he thinks only 4.4% of revenue is at risk, for a 145 percentage point drag, assuming that AT&T decommissioned “at most a net $26.5 million in revenue from SBAC.”

For CCI, “AT&T could decommission all of T-Mobile’s overlapping sites which would impact revenue by 6% over 7 years,” he thinks, down from an original estimate of 6.4%. This might rob CCI of 83 percentage points of revenue growth, not as bad as the 130 points he had originally supposed.

Powell rates SBAC stock Outperform, writing that the valuation of 13.9 times projected 2012 free cash flow per share is “very attractive.” He rates CCI Market Perform but thinks “the sell off today is overdone.”

SBAC shares are down $3.60, or almost 9%, at $37.01. CCI shares are down $1.83, or almost 5%, at $37.33. American Tower shares are off $3.80, or 7.5%, at $46.82.

Article courtesy of Tech Trader Daily

Craig Ellis with Caris & Co. offers some bullish words regarding the semiconductor supply chain: days of inventory in the supply chain are at the third lowest level in 14 years, he writes, and “chip inventory dollars as a percent of forward two-quarter hardware saels are 10% below the long term trend and are at 2004 to 2008 lows.”

To benefit from that, Ellis recommends buying Intel (INTC), Microchip Technology (MCHP), and Analog Devices (ADI), as somewhat defensive picks.

The other issue to consider, he writes, is the recent run-up in fuel prices with the Mid-East crisis,

Past work showing a $40 per barrel change in oil impacting annual global GDP growth by ~100 bps suggests a 13% increase in West Texas Intermediate Crude to $97 per barrel from pre-crisis levels – if sustained, could shave 25 bps off expected calendar ’11 global GDP growth, and thus, ~80 bps off the Street’s 10.2% year-over-year chip sector revenue growth, a risk to our SOX 550 call.

He also, however, expects Semtech (SMTC) to see better-than-expected results for the current quarter thanks to a boost from shipments of parts into smartphones and tablets. Ellis rates SMTC stock Average.

He thinks National Semi (NSM) will report an in-line quarter based on a “waning cyclical inventory de-stocking” and relatively steady sales into industrial products. But investors “will need sustained evidence of better relative revenue growth to continue putting new money to work,” he thinks. Ellis gives NSM stock an Average rating as well.

Lastly, Marvell Technology Group (MRVL) which he rates Above Average, should report this quarter in line with the Street at 42 cents per share in earnings. The stock is up only 2% this year, versus a 13% rise for the Philadelphia Semiconductor Index, but Ellis advises patience. A big swing factor is the price it may get for its application processors for tablets, he writes. The company’s “Armada 628” chip is “one of the slickest architectures in our 10-company, 31-product comparative analysis,” writes Ellis, although “design-wins non-existent on our checks and Nvidia’s (NVDA) quad-core “Kal-El” potentially leapfrogging” that part by the third quarter of this year.

For a different perspective on Marvell, specifically, the dangers in a weakening PC market and a weakening disk drive market, see comments today by Craig Berger with FBR Capital.

Article courtesy of Tech Trader Daily

Canaccord Genuity analyst Heath Terry today kicked off coverage of three Internet names, AOL (AOL), comScore (SCOR), and IAC (IACI), with a hold rating on AOL and IAC and a Buy on comScore.

ComScore, he writes, is “in the relatively early stages of adding a significant new business line, ad effectiveness, to its leading audience measurement franchise that should drive significant revenue growth and margin expansion.”

Specifically, Terry sees 37% revenue growth this year and another 27% per annum in the three years following. ComScore’s pro-forma operating, or Ebitda, margin of 22% last year can expand over time to 27% to 32%, he believes, as incremental margin for the company’s services has an 80% gross margin, higher than the company’s average.

IACI, on the other hand, is a “collection of loosely related online” properties that have failed to reap the benefits of network effects and a common platform.

And AOL is facing “headwinds from changing user behavior online [that] will likely prove too much to overcome for the advertising business before its access business loses all subscribers,” he writes.

Terry notes that AOL is losing share in its major properties, with page views in its email service, search offering, its news content and its MapQuest unit all having lost a few percent of market share month by month in the last twelve months. The exception is that email showed improvement in the last year. but Terry doesn’t seem especially encouraged by that bright spot. “AOL continues to experience share loss in email, and remains a distant fourth in the email market in the US.”

Terry does note that AOL’s home page improvements has stemmed some of the decline in overall page views.

As for the company’s $315 million purchase of The Hunffington Post, announced last month, Terry’s not sure it will work: “The Huffington Post’s momentum and content costs may be difficult to maintain within AOL,” and “Culturally, it remains to be seen whether Huffington Post’s liberal culture will clash with AOL’s unbiased approach to news.

AOL shares this afternoon are up 19 cents, almost 1%, at $21.09. ComScore shares are up 65 cents, or 2.4%, at $28.16, and IAC shares are up 19 cents, or 0.6%, at $31.46.

Article courtesy of Tech Trader Daily