All Things Digital

Salesforce.com (CRM) shares are trading higher this morning after Citigroup’s Brent Thill raised his rating on the stock to Buy from Hold, while maintaining a $70 price target. Thill notes that the stock had dropped 13 percent in the three days after the company reported earnings, “even after short-covering.” He notes that the company trades at 24.1 times calendar 2009 free cash flow per share, a reasonable valuation given expected 30 percent annual growth through 2010. He also notes that September and October are seasonally the strongest months for CRM’s stock. Thill notes that the stock trades at about 4.4 times enterprise value/sales, only a slight premium to the median enterprise software multiplier of four, despite expected 2009 revenue growth of 34 percent, versus 11 percent for the group.

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Citigroup’s solar technology analyst Tim Arcuri laid out the argument today for preferring shares of solar panel maker First Solar (FSLR) over those of SunPower (SPWR)–arguing that people get it wrong when they tend to think the former’s stock is more expensive than the latter’s. As measured by next year’s earnings per share (both companies are on a calendar fiscal year), SunPower trades at 26 times, while First Solar trades at 40 times, just going by today’s closing stock prices and the per-share forecast of $6.96 for First Solar and $3.64 for SunPower.

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What’s the killer app on a BlackBerry? … Citigroup analyst Jim Suva has a note out today detailing his experience testing the forthcoming Research in Motion (RIMM) BlackBerry–the “Bold.” He says one of his tests involved watching the comedy movie “Talladega Nights” about race car driver Ricky Bobby, which showed off the pretty screen on the device. (It is nice, I’ve seen it.)

Suva has recently made known his belief that the Bold will be an important factor for RIM in the second half of 2008.

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Shares of flash memory chipmaker SanDisk (SNDK) are falling $1.89, almost 11 percent, to $15.75 this afternoon following a note by Citigroup analyst Craig Ellis today that says 2009 earnings estimates are in jeopardy for the company because contract prices for flash are plummeting. The stock had shown some improvement of late, rising 18 percent since the end of July as investors speculated that the worst news is over in this year’s collapse in flash prices.

Apparently, it isn’t. Ellis writes that contract pricing in the current quarter looks on track to fall 22 percent, “worse than our SanDisk royalty model [of] down 10 percent.” As a result, Ellis says product gross margin for the fourth quarter of this year and for all of next year could be 1 to 3 percentage points lower than the Street’s modeling.

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You know what would be cool? If you could stream Sirius (SIRI) or XM satellite radio
on your Apple (AAPL) iPhone.

As it happens, Citigroup’s Tony Wible this morning writes in a research note that there are “reports” of a new Internet streaming application that would allow SIRI users to listen on portable devices. Wible says the idea highlights that SIRI’s value “lies in its content and not its hardware or infrastructure.”

Wible notes that as the seller of iPods, Apple is often seen as a competitor to satellite radio. But he says the new streaming application suggests the two companies may complement each other.

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Best Buy (BBY) has a nice niche with its Geek Squad, providing tech-savvy service people to help customers set up large-screen televisions, home theater systems, wireless networks and other high-end consumer electronics goods. It’s such a nice niche, in fact, that now everyone wants to do it.

Citigroup analyst Kate McShane raised the issue this morning in launching coverage of the electronics retailing giant. She rates Best Buy a “Hold,” and specifically focuses on the the rise of Geek Squad clones. That would be good news for geeks, not so good for Best Buy.

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There was a certain irony Monday when Citigroup analyst Mark Mahaney jacked up his sales forecast for the Kindle, the electronic book reader developed by Amazon.com Inc. (AMZN)

Ironic because in Silicon Valley–the capital of early-technology adopters and the bleeding-edge users of all things geek–actual sightings of the device are quite rare.

Most of the digerati around here are still obsessed with Apple Inc.’s (AAPL) latest 3G iPhone, which still draws lines wrapping around the block. By contrast, the Kindle is so scarcely spotted that whenever tech analyst Rob Enderele uses his, little crowds tend to gather around him.

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Amazon.com (AMZN) shares are sharply higher today, aided by a bullish note this morning from Citigroup’s Mark Mahaney focused on the company’s Kindle e-book reader.

Mahaney today doubled his 2008 unit estimate on Kindle sales to 380,000 from 190,000. He notes that 380,000 is exactly how many iPods Apple (AAPL) sold in the first year. “Turns out the Kindle is becoming the iPod of the book world,” he writes.

Mahaney thinks the Kindle could turn out to be one of the top “gadget” gifts of this year’s holiday gift season. He thinks the company can sell 150,000 Kindles this holiday season.

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Not that you’d notice it from yesterday’s stock action, but Citigroup analyst Jim Suva thinks BlackBerry-maker Research In Motion (RIMM) is setting itself up for a strong second half of the year with the introduction over the next several weeks of its 3G version of the BlackBerry, the “Bold.”

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Salesforce.com (CRM) shares are trading lower after Citigroup’s Brent Thill this morning cut his rating on the stock to Hold from Buy on a valuation basis.

Thill notes that he sees no cracks in the company’s fundamentals, and that the stock has held up well given the weakening economy and difficult equity market. He says CRM shares have benefited from continued “beat and raise” quarters and a potential mergers-and-acquisition premium. But he says that a near-term takeout is unlikely, and that “signs of caution could pressure the stock.”

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For the memory sector, it is a day to forget.

Last night, SanDisk (SNDK) reported an extremely nasty June quarter earnings report–the Street has responded with a host of downgrades. Meanwhile, this morning, Citigroup chip analyst Glen Yeung cut his ratings on Micron (MU), Qimonda (QI) and Spansion (SPSN) to Hold from Buy. The result is that all of the stocks in the beleaguered sector are getting pummeled. Again.

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Applied Materials (AMAT) shares are trading off sharply this morning after Citigroup’s Timothy Arcuri cut his rating on the stock to Hold from Buy. He also cut estimates on KLA-Tencor (KLAC), Novellus (NVLS), Lam Research (LRCX) and Advanced Energy Industries (AEIS).

Arcuri reports in a research note that he sees AMAT’s Q3 semi equipment orders tracking down 5 to 10 percent in sequentially off a Q2 that was at the low end of guidance due to push-outs from Hynix that now also include Samsung and Taiwan Semiconductor (TSM).

Arcuri writes that there have been “big changes at Samsung,” where the company has “significantly downsized” second-half orders, with its Line16 now planned as “a stripped down copper fab” with re-used tools rather than a “full-blown production fab.”

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Investors continued to shed VMware (VMW) shares today in the wake of yesterday’s firing of CEO Diane Greene and a reduction in the company’s 2008 outlook.

The company, which went public August 13, 2007 at $29 a share, immediately went soaring higher, trading as high as $125.25 on an intra-day basis last Halloween. At the time, the perception was that the company had essentially no competition in the burgeoning market for server virtualization software; Microsoft (MSFT) has since made an aggressive move into the market, as did Citrix Systems (CTXS).

Several analysts this morning actually asserted that replacing Greene with former Microsoft exec Paul Maritz should be considered a positive development for the company. “It was not a completely unexpected move,” writes Citigroup’s Brent Thill.

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Blockbuster (BBI) shares are getting a lift today from Citigroup’s Tony Wible, who raised his price target on the stock to $8.50 from $8 and added the stock to the firm’s “Top Picks Live” list.

Wible writes that the company’s Q1 results reported yesterday provide evidence that the company’s turnaround is bearing fruit. He writes that that company has produced improvement in inventory management, raised prices for its Total Access service and cut costs. He also repeated his view that the company’s proposed acquisition of Circuit City (CC) would “provide cost synergies and help BBI become an open provider of technology and content.”

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