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Analyst Actions: Broadcom, Texas Instruments, Intel, Fox Entertainment

Credit Suisse First Boston lowered the boom on three big-name tech stocks, downgrading them due to fairly pervasive visibility worries. Broadcom (BRCM), Texas Instruments (TXN) and Intel (INTC) were all snipped by analyst Charles Glavin, just one day after semiconductors rallied in the wake of last week's selloff.

"We believe a substantial 2001 is unlikely for Intel," Glavin wrote, downgrading the blue-chip bluechips chipmaker to hold from a buy. He also slashed his price target to $33 from $40, which is pretty bad news for Intel, considering it closed above that mark -- at $34.56 -- yesterday.

None of the other companies were spared the rod, however. Glavin also had strong words and decisive action for Texas Instruments (TXN). He cut the stock to hold from buy, cut its price target to $35 from $45 and essentially said it was overvalued. Yesterday, TI closed at $37.70.

But Broadcom, which was cut to hold from buy and given an $80 price target, $95 lower than the previous target, took the harshest criticism. "We are downgrading our rating and price target based on impaired visibility in terms of end market growth and customer demand," he wrote. Glavin said the company's problems included "excess inventories at major networking and cable modem OEMs [original equipment manufacturers], a looming gigabit Ethernet price war, digesting acquisitions and the affects of aggressively courting customers."

Just last week, CSFB issued a dire note about the semiconductor industry after some new data from the Semiconductor Industry Association showed that chip sales are falling. That report said sales were down 6% in the Americas in the period from the third quarter to the fourth quarter, and they have dropped 3% worldwide. Normally, sales had increased 5% quarter-over-quarter.

At that time, Credit Suisse First Boston said inventory levels have worsened in recent months and could likely take until the end of the second quarter to burn off.

Upgrades

Fox Entertainment (FOX): UP to intermediate-term accumulate from intermediate-term neutral at Merrill Lynch. "Fox's valuation more than reflects the worst of the advertising downturn," wrote analyst Jessica Reif Cohen.

Downgrades

Analog Devices (ADI): DOWN to neutral from accumulate at Merrill Lynch. "We believe that distributors, which account for about half of Analog's overall revenue, are becoming increasingly less willing to hold inventory, given the uncertain demand environment," wrote analyst Joe Osha.

Connectiv (CIV): DOWN to neutral from outperform at Morgan Stanley Dean Witter.

Grant Prideco (GRP): DOWN to outperform from buy at Salomon Smith Barney.

Motient (MTNT): DOWN to market perform from buy at Deutsche Bank Alex. Brown.

Plantronics (PLT): DOWN to intermediate-term neutral at Merrill Lynch. "Gross margins will be below expectations due to the lower sales volumes, a negative foreign exchange impact and a small amount of pricing pressure in the retail channel," wrote analyst Seth Weber.

Portal Software (PRSF): DOWN to neutral from outperform at Morgan Stanley Dean Witter.

Smithfield Foods (SFD): DOWN to hold from accumulate at Prudential Securities.

Sonera (SNRA): DOWN to buy from accumulate at Merrill Lynch. "Although Sonera met our year 2000 projections, we had set a very low hurdle, which was only just met," wrote analyst Victoria Granger.

Initiations

Allegheny Energy (AYE): NEW buy at Salomon Smith Barney; price target: $60.

Audible.com (ADBL): NEW hold at Credit Suisse First Boston.

Charter One Financial (CF): NEW buy at UBS Warburg; price target: $34.50.

Ciena (CIEN): NEW buy at W.R. Hambrecht; price target: $100. "We believe the company's shares represent the most attractive investment exposure in the optical networking arena," according to Hambrecht.

Constellation Energy (CEG): NEW buy at Salomon Smith Barney; price target: $53.

Fuelcell Energy (FCEL): NEW strong buy at UBS Warburg; price target: $87.

Meredith (MDP): NEW hold at Prudential Securities; price target: $37.

PPL (PPL): NEW outperform at Salomon Smith Barney; price target: $53.

TXU (TXU): NEW outperform at Salomon Smith Barney; price target: $45.

Xcel Energy (XEL): NEW outperform at Salomon Smith Barney; price target: $36.

Group Moves

Merrill Lynch, as part of a forthcoming report on the IP switching and routing industry called Making the Net Work 1.0, made a bunch of rather interesting comments on the state of the Web, while initiating coverage on related companies. Michael Ching and Sam Wilson, the two gentlemen responsible for the report, wrote to investors this morning that although the Web was down, by no means is it out for the count.

"In the near term, the big picture is cloudy," the duo wrote. "Economic activity is slowing and the supply chain is sending up red flags.

"Longer-term, we are bullish on the Internet. The Internet continues to expand at breakneck speeds," they continued. "Less than 5% of the world's population has Internet access at their home or work. Coming wireless and residential gateways will expand the amount of IP traffic from homes and individuals."

The following companies were started today; the analysts' quotes about each are included:

  • Avici Systems (AVCI): NEW intermediate-term neutral, long-term accumulate. "The unprofitable nature, high customer concentration, new product architecture and fierce competition means that Avici should have a tough road ahead," the analysts said.

  • Extreme Networks (EXTR): NEW accumulate; price target: $48. "Extreme Networks ranks first in port shipments for layer 3 ethernet switching."

  • Juniper Networks (JNPR): NEW accumulate; price target: $110. "Juniper Networks has emerged as one of the leading companies in the high-end router space."

Lehman Brothers initiated coverage of some major cable companies and had some things to say, too. Their quotes are quoted in the following.:

  • Cablevision Systems (CVC): NEW strong buy; price target: $108. "The company benefits from superior demographics, tremendous scope, and an enviable portfolio of locally focused sports content."

  • Charter Communications (CHTR): NEW buy; price target: $27. "2001 will be a year of both opportunity and challenge."

  • Comcast (CMCSK): NEW strong buy; price target: $55. "Comcast is poised to deliver increasing returns over the next five years."

  • Cox Communications (COX): NEW strong buy; price target: $56. "Cox is one of the best operations in the industry."

  • First Data (FDC): NEW buy; price target: $75. "The company is also well positioned to participate in developing Internet-based payments industry."

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