I think any effects of this article were proven moot yesterday; MACR went up 22% based on their Q3 earnings.
On Wed, 19 Jan 2005 20:09:19 -0000, Ciliotta, Mario <[EMAIL PROTECTED]> wrote: > Here is an article I received this afternoon: > > TECH BIZ from CNN/Money and Business 2.0 > Wednesday, January 19, 2005 > > *********************************************************** > Be the first to know when there is breaking financial news! > Sign up now to receive your BREAKING NEWS e-mail alerts. > http://money.cnn.com/services/newsletters/ > *********************************************************** > > Doing the Macromedia limbo > > The market has overreacted to the declining sales of a major > product. > > By Eric Hellweg, CNN/Money contributing columnist > > BOSTON (CNN/Money) - How low can it go? It's a question a DJ > at a limbo contest poses, and it's likely on the minds of most > Macromedia investors as the company prepares to report its > third-quarter earnings at the close of the market Wednesday. > > The "low" in question isn't the company's stock price, which > at about $27 a share is hovering far closer to its 52-week > high of $31.66 than its 52-week low of $17.30. > > No, the question relates to how low the demand will dip for > Macromedia's MX2004 software suite of Web authoring tools. > > The demand question seems to befuddle the company and its > investors. Macromedia, the maker of such ubiquitous Web > authoring tools as ColdFusion, DreamWeaver, and Flash, derives > more than 60 percent of its revenue from cyclical products > like these. > > MX2004, a suite containing all those popular products, is > entering its 17th month of sales. Demand for the product > should be sliding as potential customers hold off buying to > wait for all the cool stuff in the next version, which is due > out in the second half of this year. > > Macromedia has historically had a tough time predicting the > demand downturn of its products, leaving the Street and > investors in the lurch when it misjudges on the downside. > > "It's unpredictable in the quarter before the product launch," > says Gene Munster, an analyst with Piper Jaffray. "Investors > regard it as 'Buyer beware.'" > > But Munster doesn't believe that the quarter will be as soft > as some predict. > > "We talked to six of their 12 distributors in the United > States," he says, "and their take was December would be up > from September, and their expectation for March is flat to > up." Munster notes that Wall Street is expecting flat to down. > > "In the past, Macromedia has had some erratic patterns," > concurs Jamie Friedman, an analyst with Fulcrum Global > Partners. "In 2002, they missed earnings when a cycle ended > faster than they anticipated." > > Noticing diminishing interest in MX2004, on Jan. 3 Friedman > lowered his estimates for the quarter. That knocked > Macromedia's share price down 12 percent, where it still > hovers today. > > Apparently investors didn't pay any attention to the rest of > Friedman's report, in which he reiterated his "buy" rating on > the stock, with a target price of $31. > > I think the Street has overreacted to perceived weakness in > the company, which explains why Macromedia trades at less than > five times its projected 2005 revenue while most of its peers > trade at almost six times. > > But its operating margins are expected to grow from 16.2 > percent this fiscal year to 20.7 percent next year. > > And Macromedia is making great strides toward being a less > cyclical company. Its Mobile Flash technology for cell phones > has gained traction of late. Macromedia has signed deals with > T-Mobile and NTT DoCoMo. Friedman is predicting that the > mobile segment will bring in $8.5 million in revenue for the > quarter, while Munster says it could be less, in the range of > $6 million to $8 million. > > If Friedman's estimate -- and his growth projection of 5 > percent -- is accurate, the mobile segment will soon account > for 10 percent of Macromedia's revenue. And since the mobile > revenue is recurring, not cyclical, it should help the company > smooth out the quarterly projections that so annoy investors. > > Furthermore, with much higher margins coming from this new > line of business, Macromedia's earnings will look stronger. > > Meanwhile, if the market remains convinced that Macromedia > can't sell its core product, well, that's a good opportunity > to buy some of its shares. > > ### > > Check out all the TECH BIZ columns at: > http://money.com/technology/techinvestor/ > > ============================================================================== > This message is for the sole use of the intended recipient. If you received > this message in error please delete it and notify us. If this message was > misdirected, CSFB does not waive any confidentiality or privilege. 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