Indian technology-outsourcing companies no longer just want to serve their clients’ computing departments–they want to be them.

For years, India’s big tech firms positioned themselves as a cheap alternative to U.S. and European competitors for tasks such as software maintenance and database upgrades. They were content to take whatever work companies like Citigroup Inc. (C) and BT Group PLC parceled out to offshore specialists.

But the days of 30 percent annual revenue growth from such work are over, a casualty of the global economic downturn and increasing competition in the tech services industry world-wide. Now, Indian companies such as Infosys Technologies Ltd. (INFY) and Wipro Ltd. (WIT) are racing to broaden the services they offer and compete for higher-level work that usually goes to larger rivals including International Business Machines Corp. (IBM), Hewlett-Packard Co. (HPQ) and Accenture Ltd. (ACN).

Read the rest of this post on the original site

A provocative story from Reuters Monday ruminated on which companies are likely to replace Citigroup (C) and General Motors (GM) in the Dow Jones Industrial Average. Its conclusion: Google (GOOG) and Cisco (CSCO) are the most likely contenders, with Apple (AAPL) and Visa (V) having a less likely chance.

It’s a safe bet that those two troubled companies–trading below $2 a share–will get the boot, potentially along with Bank of America (BAC), which is trading below $4. All are plagued by concerns that bankruptcies or government takeovers would wipe out shareholders. Talk of a reshuffling of the Dow has been heating up of late.

Does Google belong in the Dow? I think it does for a few reasons. According to Dow Jones’ explanation of the indexes composition, “a stock typically is added only if it has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors and accurately represents the sector(s) covered by the average.”

Read the rest of this post

For the solar industry, there is good news and bad news about the demand picture.

In 2009, Citigroup’s (C) Timothy Arcuri observes in a research note today, global demand is likely to sink to 5 GW, from 5.3 GW in 2008. But driven by a growing pipeline of utility-scale projects and aided by government stimulus programs, he thinks the total will jump up to 7.6 GW in 2010 and 9.6 GW in 2011. But Arcuri cautions that at the moment there is about 4 GW of product in the supply chain, or about 10-12 months of current demand. He says production cuts are still not keeping up with inventory build, and contends that long-term polysilicon and wafer supply agreements are preventing a more efficient response from suppliers.

Read the rest of this post

Have THQ (THQI) shares gotten too cheap?

That’s the underlying question in a research note this morning from Citigroup’s Brent Thill. On the surface, he hardly sounds positive. Thill maintains a Hold rating, and cut his price target to $3 from $5.50. He also trimmed his EPS estimate for the March 2010 fiscal year to 29 cents, from 39 cents. Thill notes as well that there is “little buzz” at this point about THQ’s pending launch of the games Red Faction and Darksiders. But he says there is good buzz building for its upcoming UFC game, and that its game, Warhammer 40,000: Dawn of War II, is selling well.

Meanwhile, Thill writes that the company’s studio restructuring realigns costs without cutting into its “top development muscle.”

Read the rest of this post

The bears on Palm (PALM) continue to cave after a furious rally in the stock following the company’s announcement of its “new newness,” the Palm Web OS and the Palm Pre handset.

Yesterday, the stock was upgraded by former Palm bears at Citigroup and Deutsche Bank. This morning, UBS analyst Maynard Um made a similar move, raising his rating to Neutral from Sell, and upping his price target to $6.50 from $1.35. “The Palm Pre generated significant buzz at CES, surprised us to the upside and breathed new life into Palm’s stagnant portfolio,” he wrote in a research note. “Though the company still has challenges ahead, it’s clear the winds now appear to have shifted in its favor.”

Um raised his EPS estimate for the May 2010 fiscal year to positive 48 cents from a loss of 52 cents. His revenue forecast for the year jumps to $1.68 billion, from $1 billion.

Um also set a short-term Buy rating on the stock ahead of the 3GSM World Congress in Barcelona in February; he thinks the company will announced a 3G version of the phone, as well as potentially a carrier.

Read the rest of this post

Numbers continue to ratchet lower for Dell (DELL) ahead of the company’s earnings report after the close Thursday for the fiscal third quarter ended October. While Hewlett-Packard’s (HPQ) preliminary results today impressed the Street, investors are more focused on the implications of recent ominous warnings from Intel (INTC) and others about the prospects for the rest of this year and 2009.

A number of analysts issued pre-earnings notes this morning and brought down numbers; these follow previous cautionary comments from analysts at Barclays, Merrill Lynch, Goldman, BMO Capital, Citigroup and Credit Suisse.

Cowen’s Louis Miscioscia today repeated his Outperform rating on the stock, but slashed his estimates. He now sees EPS of 31 cents for the October quarter, down from 34 cents; 30 cents for the January quarter, down from 35 cents; $1.30 for the January 2009 fiscal year, down from $1.39; and $1.25 for fiscal 2010, down from $1.49.

Read the rest of this post

Citigroup analyst Mark Mahaney this morning cut his rating on Amazon.com (AMZN) to Hold from Buy on a combination of valuation and macroeconomic concerns.

Mahaney notes that AMZN shares have surged “as much as 36 percent” since it reported Q3 results, “primarily due to growth rates that are surprisingly strong in a severe recession, but also due in part to increased enthusiasm for its Kindle product.” But he notes that consumer spending data points from other e-commerce companies, like recent cautious comments form Expedia and Blue Nile, have become consistently negative.

Mahaney did not change estimates, but sees increasing risk to the Street consensus. For Q4, he sees EPS of 40 cents, below the Street at 44 cents. For 2009, he sees $1.50, below the Street at $1.59.

Read the rest of this post

Citigroup’s Glen Yeung this morning turned positive on the chip sector, asserting that the sector has reach the right point in the cycle to jump in for the next upturn.

Yeung uses the 1990-91 downturn as a model for the current period, and concludes that “the risk/reward has now become favorable” for select names in the group. “It is optimal to invest ahead of the report of [the] first quarter of year-over-year GDP growth,” he writes, adding that current valuations are near 1990 troughs.” In a research note this morning, Yeung also contends that “estimate capitulation has occurred.” His bottom line: now is the right time to invest in semi names.

In connection with the call, he upgrades Integrated Device Technology (IDTI), Nvidia (NVDA) and STMicro (STM) to Buy from Hold. Yeung’s colleague, Craig Ellis, who covers specialty semis, raised Fairchild (FCS) to Hold from Sell, and National Semi (NSM) to Buy from Hold.

Read the rest of this post

Investors have thrown in the towel on Cadence Design Systems (CDNS).

Just a week after the board booted most of senior management, the company yesterday disclosed some serious revenue recognition issues. While the company confirmed its previous Q3 guidance, the Street has obviously lost all faith in Cadence, and the stock has cratered.

Citigroup’s Terence Whalen today cut his rating on the stock to Hold from Buy, lowering his price target on the shares to $5.50 from $11.50. He says that the accounting freeze stops the company from buying back stock and “casts doubt” on results and the guidance. And he says the management exodus “was deeper and potentially more disruptive than we expected.”

Read the rest of this post

From Citigroup’s Jim Suva this morning comes the mother of all Research in Motion (RIMM) reports, 21 pages long, under the title “Outlook is Increasingly Binary.” Suva says that given uncertainty as to whether RIM’s recently announced new BlackBerrys will hit the market in time for the holidays, there is a wide swath of estimate revisions that are possible, up or down, for the company’s earnings.

Writes Suva, “Investors are unsure if Bold will hit AT&T (T) and if Storm will be at Verizon [Communications' Verizon Wireless] (VZ) in time/scale for the holidays.”

Suva provides a handy graphic, a flowchart or decision tree, with possible outcomes. There’s a 25 percent chance RIM’s new products do not reach stores for the holidays, in which case, the stock goes to $45. More likely is that the products do make it in time, consumer uptake is strong, and profit margins improve as a result.

Read the rest of this post

When the going gets tough, the tough go shopping.

Or at least that’s why they do in the technology business.

In what seems like a fairly optimistic note in these gloomy times, some companies are taking advantage of reduced valuations to pick up strategic assets at prices that undoubtedly are a lot lower than they would have been even a few months earlier.

Oracle (ORCL), the king of the enterprise software shoppers, is buying Philadelphia-based Primavera Software, which providers portfolio project management software. No terms were disclosed. Investors in the company included Insight Venture Partners and Francisco Partners.

Read the rest of this post

Citigroup’s Brent Thill today chopped estimates and/or target prices on 11 of the 22 software companies he covers to reflect–you guessed it–the softening macro economy. Thill writes in a research note this morning that he expects negative Street revisions across the group over the next few quarters. The analyst reports that checks on current demand in the enterprise software sector “are not encouraging.” He writes “a full budget flush this year sounds less likely, and visibility is diminishing.” Thill is not that concerned about Q3 results, but he does worry about Q4 guidance–and the possibility of “a more pronounced” Q1 slowdown.

Read the rest of this post

In the latest in a string of analysts getting spooked about slowing consumer spending, Citigroup (C) analyst Richard Gardner this morning cut his estimates for Apple (AAPL) for this year, 2009, and 2010, and lowered his target price to $170 from $287. The reasons are familiar: an expected decline in disposable consumer income growth will pressure computer and consumer electronics sales. Still, Gardner thinks any concerns he has are priced into the stock following its 18 percent drop yesterday, and he expects outperformance from Apple next year relative to other PC makers, despite a diminished outlook.

Gardner’s revised outlook is for profit of $5.29 on sales of $32.68 billion the fiscal year ending this month, and profit of $5.43 on sales of $35.2 billion next fiscal year.

Read the rest of this post

Solar stocks are off to a rousing start this morning after the U.S. Senate last night voted 93-2 to back a tax-extender package that includes an eight-year extension of solar investment tax credits. The measure now moves to the House.

While quick House approval would be nice, it might not play out that way. Citigroup analyst Timothy Arcuri notes in a research piece this morning that approval in the House could drag into November, in part because the solar tax credit extension is longer than the bill’s one-year extension for wind-related credits and two years for other renewable energy sources. “We don’t think that distinction was broadly expected,” he writes.

Read the rest of this post

It’s been a rough day for highly-leveraged semiconductor stocks.

In a research note this morning, Citigroup’s Glen Yeung provided a review of the credit liabilities of the chip companies Citi has under coverage. He notes that Advance Micro Devices (AMD), Spansion (SPSN), Infineon (IFX) and Qimonda (QI) all have debt coming due in the next 15 months. “In each instance, we point out that an already difficult financial position is compromised by the current credit market,” Yeung noted.

He also noted that AMD, MU and QI also rank among the chip companies with the worst interest coverage ratio.

Read the rest of this post