Names to follow on Thrusday Morning – FFIV, VMW, QCOM, SCSS, EMC.

The market seemed to be tepid with leaders hanging in there. The leading stocks, stocks that have led from the font in last 3 to 6 months, are still outperforming the S & P 500 index. In a typical correction the leaders tend decline by at least 1.5 to 2.5 times the market. Even if the correction starts, keep an eye out for future leaders. The young leaders will go sideways, form a flat base and will be the one to break out first. As of now URI, ISRG, etc seem to tread those waters.

Once again be defensive dont open big positions now. Just buy 50% of final positions size and wait for market to give the green flag. If needed open BLV and TLT.

Looking at the earnings

FFIV, Force Five solutions, a network hardware and software gear maker, beat on both revenue and earnings. The company has been slowing eating CISCO’s share. The beat wasnt a blowout though.

For its fiscal second quarter ended March 30, F5 said profit rose 24% to $1.09 per share. It said revenue rose 22% from the year-earlier quarter to $339.6 million. Analysts polled by Thomson Reuters had expected $1.07 EPS on sales of $335.3 million.

But analysts had hoped for a bump up in June quarter guidance. Seattle-based F5 Networks said it expects fiscal Q3 revenue of $350 million to $355 million, and per-share profit of $1.12 to $1.14. Analysts had been expecting $1.14 on sales of $353 million.

As the data load over the network grows be it internet or wireless, I feel FFIV is well positioned to take advantage of this technology macro trend by providing network solutions. Following is a quick peek at FFIV’s solution chest.

  1. F5’s network controllers speed up application and Web servers in data centers. F5’s biggest customers are financial service companies, telecom service providers, tech firms with big Web portals such as Facebook and federal government agencies.
  2. F5’s network controllers speed up application and Web servers in data centers. F5 Networks holds 47% of the ADC market but faces stiff competition from Citrix Systems, startup A10 Networks and Riverbed Technology. As companies build bigger data centers and move to cloud computing, F5 Networks aims to sell more powerful network controllers that handle more computer servers and larger amounts of Internet traffic.
  3. F5 is making a big push in security products that defend data centers from Web-based threats. Internet firewall software runs on F5’s network controllers.
  4. Wireless phone companies use F5’s network controllers to route text messages and email, as well as to manage customer access to data services. F5 in February acquired Israel-based startup Traffix Systems, which sells software for 4G wireless data networks.
  5. In 2013, F5 is expected to release “deep packet inspection” software that enables wireless firms to analyze data traffic flowing over 4G LTE networks.

The market isn’t in the best shape so if you are interested, buy 50% of your usual position size at $129.1. I think it will stick around 50 DMA till market finds some direction.

QCOM, Qualcomm, saddens me. Why? It’s unable to meet the demand.

Qualcomm cannot get enough supply from its existing manufacturer and is seeking additional output, said its chief executive, Paul E. Jacobs.

The company is spending to get its latest chips made by new suppliers, Mr. Jacobs said. The shortfall reflects heavy demand and was not caused by manufacturing problems, he said, adding that the discrepancy should be made up by the end of the year.

“It’s painful not to be able to supply all of the chips your customers ask for,” Mr. Jacobs said.

I mean come on. You are not a school going kid who has run out of capacitor or resistance in a science project. You are a the epi-center of tsunami of smartphones.

For its second quarter, which ended on March 25, Qualcomm reported net income of $2.23 billion, or $1.28 a share, compared with $999 million, or 59 cents, a year earlier. Sales rose 28 percent to $4.94 billion. Analysts on average had predicted earnings of $1.10 a share and sales of $4.84 billion. Mobile phone shipments are estimated to reach 1.7 billion in 2012, a gain of 8.2 percent from 2011, according to IDC. Smartphone shipments, a subset of the mobile phone market, will surge 33.5 percent, the market researcher predicts.

But it got beat up when it guided for Q3. The San Diego-based company estimated that sales for its third fiscal quarter, ending in June, would be $4.45 billion to $4.85 billion. Analysts on average had estimated $4.81 billion, according to data compiled by Bloomberg. Qualcomm forecast net income of 67 cents to 73 cents a share, compared with the average prediction of 77 cents.

So this means opportunity of people such as me to get in. I would get in around $64 with stop at $57.

VMW, VMWare, king of virtualization continues to deliver outstanding results. The growth is organic and among the better seasonally weak quarter.

The leading maker of virtualization software said earnings per share rose 37.5% vs. a year earlier to 66 cents excluding various items. Wall Street had expected 60 cents. That ended two quarters of decelerating growth.Revenue rose 25% to $1.06 billion. That was VMware’s third straight quarter of decelerating sales gains and the smallest advance in more than two years.

Analysts expected $1.028 billion, though VMware last week said it would “meet or slightly exceed” its guidance for $1.02 billion to $1.04 billion.

“Customers are investing in IT for the longer term and we are certainly primary beneficiaries,” said CEO Paul Maritz on the post-earnings conference call.

The company sees Q2 revenue of $1.10 billion to $1.12 billion. Analysts have forecast $1.105 billion and a per-share profit of 63 cents. A year ago, VMware reported revenue of $921.2 million and a per-share profit of 55 cents.

This is another company that is leader in the macro trend of cloud computing and data handling.

Cloud computing equipment revenue rose 15% in 2011 to $39.4 billion, with Hewlett-Packard, (HPQ) IBM (IBM) and Cisco Systems (CSCO) the leaders, but VMware (VMW) and EMC (EMC) the biggest gainers, says Synergy Research Group.

SCSS, Select Comfort, had another stellar quarter but it seems that the 50% run up in last 3 months wanted more. Select Comfort (SCSS) posted strong first-quarter profit and sales gains that were well above analyst expectations.

The mattress store chain, which operates 382 stores that sell adjustable firmness beds and bedroom accessories, reported after Wednesday’s market close that earnings per share jumped 50% vs. the same quarter a year earlier, to 45 cents a share. Analysts expected 40 cents.Sales climbed 36% to $262.4 million, easily topping estimates of $233.7 million.

The company guided 2012 EPS to $1.38-$1.46, a 19%-36% increase vs. the prior year. The midpoint tops consensus of nine analysts polled by Thomson Reuters by 4 cents.

I would wait till this name consolidates. The exisiting owners please stick around it slides below 50 DMA on heavy volume.

Let’s see what TPX and EMC has in store for us tomorrow. If EMC deliver solid number and goes past 30.7$ with fan fare, I would add some.

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