Salomon Smith Barney analyst Clark Westmont hacked at LSI Logic's ( LSI - Get Report) estimates like Jason Voorhees at a late-night bonfire. Westmont dropped his 2001 and 2002 projections on the company to a level way below what the rest of Wall Street thinks.

Instead of coming in with a profit for 2001, the analyst thinks that LSI will come in with a 24-cent loss. That's lower than his previous call for a 14-cent profit and a whopping 45 cents lower than the consensus estimate. LSI's 2002 estimate wasn't much better. Westmont thinks the company will make 5 cents a share, down from his previous 34-cent target and well off the 62 cents expected, on average, from analysts that track the company.

"Recent commentary from most industry sources indicates that business conditions remain on a steep downward slope, including the outlook for the coming three months," he wrote, explaining the move.

LSI's major problem is that sales are derived from selling chips to communications and storage companies, both of which face a tremendous amount of trouble right now. Business in these two areas has dropped off a cliff in the last two quarters and LSI will feel the same pinch that its customers feel.

Westmont also took on two other companies in the semiconductor sector, tweaking estimates on Xilinx ( XLNX) and Altera ( ALTR). And like LSI, these estimates were dropped below what the rest of Wall Street thinks, but not nearly as drastically.

Altera's 2001 earnings per share estimate was cut to 46 cents from 59 cents, while consensus is still at 58 cents a share. The 2002 forecast isn't much better, pegged at 60 cents a share, down from 81 cents. The Thomson Financial/First Call estimate for 2002 is 80 cents.

Rival Xilinx also got nailed. Westmont cut his 2002 estimate to 65 cents a share from 95 cents a share. The average forecast for Xilinx's 2002 was 97 cents a share.

Will electronics manufacturing service companies make more money in 2001 than they did in 2000?

According to Goldman Sachs analyst Michael Zimm -- probably not.

"We now consider any EMS company having the potential to show positive earnings growth in calendar 2001 to be the rare exception rather than the rule," wrote Zimm in a note to investors from this morning. "Over the past ten days, five EMS companies have revised their outlook such that year over year earnings declines for 2001 appear unavoidable. For investors with time horizons measuring less than 6 to 12 months, we continue to believe that it is too early to initiate fresh long positions."

Zimm then reduced his earnings forecasts on:
  • Act Manufacturing /LI>
  • Benchmark Electronics (BHE)
  • Celestica (CLS)
  • C-Mac Industries
  • Flextronics (FLEX) and
  • Sanmina (SANM - Get Report).

Oh, yeah. Zimm also reduced estimates on Plexus ( PLXS), which warned that profits would be impacted by the deadly combination of rising inventory and falling demand.

Credit Suisse First Boston analyst Herve Francois downgraded ACT Manufacturing to buy from strong buy, while dropping his earnings estimates for Plexus. And Robertson Stephens only added to that burgeoning headache, lowering ratings on four companies. Celestica, Plexus, SCI Systems ( SCI) and Flextronics were all downgraded to buy from strong buy by analyst J. Keith Dunne.

Yesterday, Plexus preannounced, joining Solectron and Jabil Circuits ( JBL) in warning about earnings going forward. Dunne, like many of his peers, said that near-term problems were the major reason for the downgrades. Visibility is low, demand is falling and inventory is not going away. But Dunne held out hope that once the economy picks up again, these EMS names would bounce back nicely.

"Given our new outlook and decreased visibility, we have less confidence in our near-term earnings estimates for the entire sector. However, we expect major new programs... to ramp into production in the second half of the year and believe these companies are well positioned to capitalize on improvement in end market conditions," he wrote.

A spate of analyst actions have been made to companies in the EMS sector lately. Two days ago, Deutsche Banc Alex. Brown cut Celestica's earnings forecast. Merrill Lynch cut seven companies a week ago. covered the analyst actions and problems facing EMS companies in a story from March 21.

W.R. Hambrecht analyst Bill Lennan initiated coverage on two companies in the content management space. FileNet , which makes software to manage documents and provides training and services to support that, was started with a buy rating and a price target of $24. Documentum , which does pretty much the same thing as FileNet, was started at neutral.


Gadzoox Networks ( ZOOX): DOWN to market perform from buy at Robertson Stephens.

Imax ( IMAX): DOWN to market perform from market outperform at Goldman Sachs.

Wireless Facilities : DOWN to buy from strong buy at Credit Suisse First Boston.


Rio Tinto : NEW buy at Lehman Brothers; price target: $82.

InterCept Group ( ICPT): NEW buy at CSFB; price target: $30.

Tupperware ( TUP - Get Report): NEW neutral at Salomon Smith Barney; price target: $26.