STOCKWATCH: Salomon's painful wisdom
STOCKWATCH: Salomon's painful wisdom
The name of Clinton Vaughan is mud this week in the storage industry, as the analyst from Salomon Smith Barney has caused a scare in the storage industry by announcing that he had cut financial estimates for five companies in the sector.
The targets of Salomon's pronouncements were Brocade, Emulex, Network Appliance, QLogic and StorageTek. Vaughan explained that "storage demand has not eroded but has continually been pushed out due to a lack of available funds".
While Vaughan's amendments to annual earnings forecasts for the five companies were not changed much - less than ten per cent on all of them - his slashing of targets for the stock price were far more damaging. Brocade's stock is currently trading at under US$6, and Vaughan cut his target for the stock from US$22 to US$8. This pattern of cutting price targets to not much more than current prices was followed with the other stocks, with Emulex cut from US$24 to US$11 (now at US$8.35), Network Appliance lowered from US$14 to US$8 (now at US$5.95), QLogic cut from US$29 to US$23 (now at US$19.97) and StorageTek dropped from US$14 to US$11 (now at US$10.13).
Brocade and Network Appliance were up four and five per cent respectively overnight, while Emulex dropped slightly, and Qlogic and StorageTek dropped just under four per cent each. The stocks of all five companies are near 52-week lows, like the rest of the storage sector, and indeed much of the technology field in general.
Elsewhere in the industry, InRange scored a hit with a preannouncement of its latest quarterly results, with revenue coming in at between US$52 million and US$53 million, along with a narrow loss within analyst estimates. InRange's stock jumped over 17 per cent by 32 cents to US$2.18 on the news.
Earlier in the week, McData gave out mixed blessings when it warned that its revenue would be slightly less than expected, but that this shortfall would not be reflected in earnings. McData's shares jumped 12 cents to US$4.71 on Tuesday when the news was released, but dropped overnight to US$4.35.
Quantum hit a new 52-week low of US$1.42 overnight, dropping over 25 per cent in a single day to pass its previous low of US$1.57. No company news was released on the day, and there have been no significant announcements since September 9 when it announced 1,100 job losses and a major restructuring.