Content provided in partnership with

Business Services Industry

Zacks Analyst Blog Highlights: Activision, 3Com Corp., Taubman Centers, Skyworks Solutions and iPass

Business Wire, April 3, 2008

CHICAGO -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Activision, Inc. (Nasdaq: ATVI), 3Com Corporation (Nasdaq: COMS), Taubman Centers (NYSE: TCO), Skyworks Solutions, Inc. (Nasdaq: SWKS) and iPass, Inc. (Nasdaq: IPAS).

See the latest posts to the Analyst Blog: http://www.zacks.com/blog/post_info.html?g=6

Here are highlights from Wednesday's Analyst Blog:

Guitar Hero "Shreds" Competition

Most Popular Articles in Business: Research and Markets : Tesco Plc - SWOT Framework Analysis; Do Us a Flavor - Ben & Jerry's Issues a Call for Euphoric New Flavors; eBay made easy: ready to start an eBay business? These 5 simple steps will ...; Katrina's lawsuit surge: a legal battle to force insurers to pay for flood ...; Wal-Mart's newest distribution center opened last month near the southwest ...; More »

Activision, Inc. (Nasdaq: ATVI) reported record revenues of $1.48 million in the third quarter of fiscal 2008, up 80% year-over-year. The year-over-year growth was fueled by the success of Guitar Hero III: Legends of Rock and Call of Duty 4.

Q3 is a seasonally strong quarter for the company. Gross margin improved to 48.5% from 41.4% in Q3 2007 and 35.5% in Q2 2008. GAAP EPS was $0.86. Excluding stock-based compensation expense, EPS was $0.90 beating our and consensus estimates of $0.80. Given a year-over-year decline in total revenue in FY2009, we expect to see the company's product mix shift, with owned intellectual property and lower cost licensed property comprising a greater portion of publishing revenues.

We also expect the merger with Vivendi Games to be completed during Activision's first fiscal quarter. Going forward, management upgraded its outlook for 2008. For full year 2008, revenues are now expected around $2.65 billion, up from the earlier estimate of $2.45 billion. Excluding the impact of equity-based compensation expense, EPS is estimated to be $1.07.

For Q4, revenues are expected to come around $350 million while EPS, excluding equity-based compensation expense, is expected to be $0.04. While Activision's recent results have been impressive, we believe that favorable operating momentum exists in the coming quarters. The company's portfolio of proven franchises, success of newly-launched properties, impressive product pipeline and excellent financial condition pave the way for further growth.

3Com Improves to Hold from Sell

On March 20, 2008, an affiliate of Bain Capital Partners, LLC advised 3Com Corporation (Nasdaq: COMS) that it is terminating their merger agreement because the Committee on Foreign Investment in the United States (CFIUS) said it intended to take action to prohibit that transaction. On March 21, 2008, 3Com held its scheduled shareholder meeting to enable 3Com shareholders to vote on the company's existing merger agreement. In a filing with the U.S. Securities and Exchange Commission, 3Com said approximately 70% of its shareholders voted in favor of the deal at the special meeting.

The approval of the merger agreement by its shareholder was to preserve 3Com's rights under the existing merger agreement, including the right to pursue a break-up fee of $66 million. With the acquisition by Bain Capital now off the table, 3Com Corporation has begun trading on fundamentals of the business, which we believe are still poor.

The stock is now trading well below the price that the acquisition was announced at, and below our initial Sell recommendation and target price. With fairly strong third quarter results, we believe current holders of COMS shares would be better served by holding the shares for a better exit point.

Retail Slowdown Affecting Taubman

Taubman Centers (NYSE: TCO) reported solid 4Q07 and full-year 2007 results with FFO increasing of 4.8% and 12.5% over comparable periods in 2006. Better-than-expected results were due to rental rate growth at existing malls and contributions from new mall openings and expansions. Retail spending continues to support mall fundamentals, and all operating metrics reported positive results in year-over-year comparisons.

However, the U.S. economy is faltering and consumer spending patterns in early 2008 are not encouraging. We are concerned about retail stocks in an inflationary and weakening economic environment.

Taubman is currently trading 15.8x our 2008 projected FFO [funds from operations] estimates, which is about 21% higher than regional mall sector averages and 30% higher than retail strip FFO averages. We sense that retail stocks could be in for a rougher road and expect a continued pullback as more bad news on the economy comes out. It seems that spending will moderate in the next six months as consumers face increasing energy costs, and a free-falling housing market.

Sky's the Limit for Skyworks

Skyworks Solutions, Inc. (Nasdaq: SWKS) is expected to report its Q2:FY08 results on April 22, 2008. The company extended its partnership with Media Tek in China in the quarter, as expected by the management. SWKS appears to be winning business in handset semis as well as successfully broadening its footprint in linear products.

Going forward, March is a seasonally low quarter for the company. Management reiterated earlier its Q2 guidance: revenues are expected to be around $200 million while EPS is anticipated to be $0.15. We have a Buy rating on the stock and maintain our target price of $11.

Business Services Industry

Zacks Analyst Blog Highlights: Activision, 3Com Corp., Taubman Centers, Skyworks Solutions and iPass

Business Wire, April 3, 2008

Find Research Guides for:

Find Featured Titles for: Reference

Most Popular Articles in Business

Most Popular Publications in Business