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Tech Wrap-Up: CREE, BRCM, AMD, MSI

NEW YORK (TheStreet) -- In Wednesday's tech stock recap, TheStreet brings you the latest on Cree  (CREE)Advanced Micro Devices  (AMD)EMC Corporation  (EMC)Broadcom Corporation  (BRCM) and Motorola Solutions  (MSI).


Cree, Inc.

LED manufacturer Cree, Inc. plummeted 16.9% during Wednesday trading after reporting first-quarter profits a day earlier.

The Durham, North Carolina-based company recorded first-quarter earnings of 39 cents on $391 million in revenue, compared to 27 cents on $315.8 million a year earlier. Net income totaled $47.3 million, a 49% year-on-year increase.

"The strong performance was primarily due to increased sales of our lighting products, higher gross margins and improved operating leverage across the business," said CEO Chuck Swoboda in a statement.

However, investors remained concerned on a lower-than-expected second-quarter guidance of between 36 and 41 cents a share and low gross margins on its moneymaker division, lighting. 

Financial services company D.A. Davidson has maintained its "neutral" rating and $65 price target, citing concerns on the "company's ability to grow margins".

"We point out that gross margins within the company's Lighting Products segment (27%) are significantly lower than gross margins within both the LED Products (47%) and Power & RF (54%) segments," analyst Avinash Kant said in a research report. "As the Lighting Products division has been the fastest-growing segment for Cree (both sequentially and on a year-over-year basis), we believe margin expansion prospects remain challenging despite expectations of strong revenue growth."

TheStreet Ratings team rates Cree Inc as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate Cree Inc (CREE) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow."


Broadcom Corporation

Broadcom lost 2.9% to $26.36 by market close, shedding a further 0.6% in after-hours trading. On Tuesday, the semiconductor company reported earnings of 76 cents a share, compared to analysts' expectations of 69 cents a share, according to Thomson Reuters. Third-quarter revenue totaled $2.146 billion, a 3% year-on-year increase, and net profit of $316 million, 43.6% higher than a year earlier.

For the fourth quarter, Broadcom said revenue would be around $1.975 billion within a positive or negative 3% range. Investors were disappointed having expected a total $2.135 billion in fourth-quarter revenue.

UBS has maintained its "neutral" rating while reducing its price target to $27 from $30.

"After a solid Q3, Broad Broadcom's Q4 outlook was softer than expected largely due to mobile OEM year-end inventory adjustment and a lower ASP mix in combo chips," writes UBS.

Wedbush downgrades the stock to "neutral" and reduces its price target to $27 from $33 on industry pressures and Q4 guidance.

"We expected Q4 guide to be down, it was much worse than we expected primarily due to an even choppier mobile market from intense competition in 3G, inventory corrections, and connectivity share loss. We expect challenges in the mobile business to persist into the 1H and despite our high expectations for LTE share gains; we now see 2014 as a year of rebuilding rather than a year of growth," Wedbush wrote in its research report.

Topeka Capital Markets, however, maintained its "buy" rating but lowered its price target to $30 from $35, on reflection of its "near-term revenue headwinds primarily in its mobile/wireless and broadband segments".

TheStreet Ratings team rates Broadcom Corp as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate Broadcom Corp (BRCM) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."


Advanced Micro Devices

Advanced Micro Devices shares fell in sympathy with as weaker-than-expected guidance troubled fellow chipmakers Broadcom, Intel  (INTC) and Texas Instruments  (TXN).

AMD reported third-quarter results last week. Net income totaled $48 million, or 6 cents a share, on revenue 15% higher than a year earlier to $1.46 billion. The company forecast that fourth-quarter revenue will increase between 2% and 8% sequentially.

AMD tripped 1.3% to $3.14 in Wednesday trading, before recovering 0.64% in after-hours trading.

TheStreet Ratings team rates Advanced Micro Devices as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate Advanced Micro Devices (AMD) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally high debt management risk."


Motorola Solutions

Motorola Solutions reported third-quarter sales of $2.1 billion, 2% lower than a year-earlier. Government sales, its primary income, dropped 4% while Enterprise sales gained 2%.

The company recorded earnings of $1.32 a share, a 57% year-on-year increase, and operating earnings of $397 million. Analysts surveyed by Yahoo! Finance estimated earnings of $1.02 a share and revenue of $2.13 billion.

Weak government sales contributed to revised flat full-year 2013 guidance with earnings per share between $4.63 and $4.70 a share, considerably higher than Yahoo! Finance estimates of $4.43 a share.

"With the ongoing uncertainty around the U.S. federal business, our full year outlook is for sales to be approximately flat to last year," said Gino A. Bonanotte, interim CFO, in a conference call. "We remain on track for operating margins of approximately 18% for the year."

Shares gained 1.1% in after-hours trading $63.09, adding to a 3.3% gain already seen throughout the trading day.

TheStreet Ratings team rates Motorola Solutions Inc as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate Motorola Solutions Inc (MSI) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

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