Robertson Stephens Daily Growth Stock Update on CSCO, CGNX, VTSS, AMGN, AOL, CDN, CYTC, DNA, JNY, RITA, SYK

Apr 17, 2001, 01:00 ET from Robertson Stephens, Inc.

    SAN FRANCISCO, April 17 /PRNewswire/ -- The following is being issued by
 Robertson Stephens:
 
     Estimate Changes:
 
     Cisco Systems, Inc.
     (Nasdaq: CSCO) $17.20
     Market Performer
     F2001E EPS: $0.39, down from $0.50
     F2002E EPS: $0.16, down from $0.27
 
     Paul Johnson, Communications/Networking
     "After the close of the market on Monday, April 16, 2001, Cisco announced
     that it expects to report financial results for its April quarter below
     Street consensus expectations," said Johnson. "In the past several weeks
     new information has been uncovered suggesting that Cisco's health even
     worse than previous expectations.  Extreme and Foundry's announcements of
     25% negative sequential quarters have lead us to believe that Cisco's
     enterprise business will also be down by 25% sequentially this quarter.
     We are now forecasting carrier revenues to be down roughly 40% from the
     previous quarter and, in line with both Foundry (FDRY $9.24) and Extreme
     (EXTR $17.13), we are adjusting enterprise revenues to be down 25%
     sequentially.  We are cutting our estimates substantially to reflect the
     change in outlook and the increasingly competitive environment in which
     Cisco operates. From a valuation standpoint, with our current revenues and
     earnings estimates, we believe Cisco is grossly overvalued.  The company
     has overbuilt inventory to the point that it has had to write half of it
     off and is currently evaluating each and every product line in an effort
     to regain focus.  The company has announced a workforce reduction of just
     under 25% in the next two quarters that we believe could be larger.  This
     situation is several orders of magnitude worse than that of its leading
     competitors (Extreme, Juniper (JNPR $48.38), and Redback (RBAK $17.05)),
     who have also experienced revenue slowdowns.  We do not believe that this
     is strictly a function of macroeconomic issues for Cisco, and in our
     opinion, Cisco has lost much of its leadership position!  We believe their
     leading competitors will continue to take market share from Cisco at an
     accelerated pace throughout the slowdown -- especially in the service
     provider focussed product arena.  In fact, we believe that the lengthening
     sell cycles may give incumbent carriers a chance to really experience next
     generation equipment in the labs and, as a result, move away from Cisco
     products.  As a direct result of these observations, we are maintaining
     our Market Performer rating on the shares of Cisco."
 
     Cognex Corporation
     (Nasdaq: CGNX) $27.64
     Long-Term Attractive
     2001E EPS: $0.25, down the $0.46
 
     Sue Billat, Semiconductors/Foundries
     "Cognex posted Q1:01 operating EPS of $0.11, in line with our and the
     Street estimates, which was lowered after the company pre-announced
     negatively on 3/20/01," said Billat. "We believe the bookings level has
     dropped substantially due to the deteriorating outlook of its large OEM
     customers in the semiconductor capital equipment industry. In the end user
     segment, we believe sales to the wireless handset industry, especially to
     those in Europe, were particularly weak. Although the rate of bookings
     decline appears to be slowing, we expect September to be the trough
     quarter rather than June, as the company has heavy exposure to back end
     semiconductor manufacturing that is suffering from lack of technology
     drivers and excess capacity. In light of the weakened outlook, we are
     lowering our EPS estimates for Q2:01 to $0.05 (from $0.10) on revenues of
     $38.5 million (formerly $42.0 million) and for F2001 to $0.25 (from $0.46)
     on revenues of $158.2 million (formerly $175.0 million). We are also
     publishing F2002 EPS of $0.45 on revenues of $180.5 million. At 61.4x our
     CY02 EPS estimate, CGNX is trading at a steep premium to most stocks under
     our coverage. Although we believe the multiple is partly justified given
     the company's market position and its growth prospects in the end-user
     segment, the stock is as vulnerable to the slowdown in the capital
     equipment sector, in our view, which comprises its core customer base.
     Accordingly, we are maintaining our LTA rating on CGNX."
 
     Vitesse Semiconductor Corporation
     (Nasdaq: VTSS) $23.95
     Long-Term Attractive
     F2001E EPS: $0.46, down from $0.54
     F2002E EPS: $0.31, down from $0.51
 
     Arun Veerappan, Communications Components/Semiconductor Devices
     "Vitesse reported March quarter revenue of $121.8 million, down 26% Q-Q,"
     said Veerappan. "Gross margin of 62.2% was down 607 basis points quarter-
     over-quarter and 178 basis points below our estimate. Operating margin of
     19.2% was down 1,955 basis points quarter-over-quarter and 227 basis
     points below our estimate. Fully diluted EPS from continuing operations of
     $0.10 was $0.01 lower than our estimate. Vitesse's revenue outlook for the
     June quarter is to be down 10% to 26% sequentially. Based on an assumption
     of zero turns business in the June quarter and a book to bill of 0.8 to
     1.0, we are modeling the June quarter to be down 20% sequentially to $97.4
     million in revenue. Given lower utilization and throughput from its
     internal fabs, we are modeling June quarter EPS from continuing operations
     of $0.06, which is in line with Vitesse's outlook of $0.03 to $0.07. For
     F01, we are forecasting revenue of $481.6 million, down 4% from our
     estimate of $501.1 million, and EPS from continuing operations of $0.46,
     down 15% from our estimate of $0.54. For F02, we are forecasting revenue
     of $460.9 million, down 12% from our estimate of $525.6 million, and EPS
     from continuing operations of $0.31, down 40% from our estimate of $0.51.
     Despite the near-term softness, we firmly believe that Vitesse remains a
     key player in the communications markets, with a significant number of
     design wins in OC-48 FEC chips, network processing devices, and switch
     fabrics. Additionally, the company has developed an opto-electrical
     integration expertise at OC-192 and OC-768 data rates, which will likely
     strengthen the company's competitive positioning for the next leg of
     growth in the communications semiconductor markets."
 
     Comments:
 
     Amgen Inc.
     (Nasdaq: AMGN) $54.14
     Buy
 
     Jay Silverman, Biopharmaceuticals
     "Abstract books have been released for the upcoming American Society of
     Clinical Oncology conference," said Silverman. "Amgen plans to present
     positive data from five studies for Aranesp in cancer patients, several
     studies for Abarelix Depot in prostate cancer patients, two studies for
     SD-01 in the treatment of chemotherapy-induced neutropenia (low white
     blood cell count), and two studies for KGF in the treatment of mucositis.
     We believe this year's ASCO is a key meeting for AMGN and the company will
     host an analyst meeting on Sunday, May 13th to discuss results of the
     clinical trials. We expect AMGN to emerge as a winner from this meeting,
     with key marketing data for Aranesp and Abarelix depot prior to their
     respective launches. We also believe data from SD-01 and KGF will give
     investors a much clearer picture into these compounds eventual
     approvability and market size. We reiterate our Buy rating."
 
     AOL Time Warner
     (NYSE:   AOL) $43.31
     Long-Term Attractive
 
     Lowell Singer, Next-Generation Internet eNablers
     "We are concerned that AOL Time Warner's current valuation may not fully
     reflect potential near-term risk factors that could place downward
     pressure on the stock," said Singer. "Specifically, we believe continued
     deterioration in the advertising market, a lack of visibility into 2H
     2001-skewed filmed entertainment and music segments, and possible
     integration challenges could drive risk to management's guidance of +12-
     15% revenue growth and 30%+ year-over-year EBITDA growth. While some of
     this risk may be factored into AOL's current price, we believe that a
     revenue or EBITDA shortfall could drive the stock toward the mid-$30s.
     Despite our concerns that AOL Time Warner could fall short of its full-
     year 2001 revenue and EBITDA growth target, we want to stress that we do
     not anticipate a Q1 shortfall. In fact, we expect the company to report Q1
     results in line or ahead of our revenue and EBITDA estimates of $8.965
     billion and $2.154 billion, respectively. Despite our near-term concerns,
     we remain bullish on the longer-term prospects for the company and the
     stock. We believe AOL Time Warner is the media model of the future and a
     safe way for investors to participate in continued media convergence. In
     our view, within 12-18 months investors will be rewarding AOL Time Warner
     for its unique market position and for the progress that the company has
     made in integrating its businesses. Thus, we are assuming coverage of AOL
     Time Warner with a rating of Long-Term Attractive and a 12-18 month price
     target of $50."
 
     Cadence Design Systems, Inc.
     (NYSE:   CDN) $17.65
     Buy
 
     John Barr, Design Enabling Technologies
     "Cadence reports earnings tonight after the market close," said Barr. "On
     April 5, we reduced our estimate of Cadence's 1Q:01 revenue to $339
     million and EPS to $0.14 per share.  We believe Cadence will meet or come
     close to these numbers. Over the last two weeks, we have heard increasing
     anecdotal evidence of customers slowing design automation expenditures. On
     April 5, we reduced our estimate for 2001 service revenue from $423
     million to $392 million.  We now believe it is likely 2001 service revenue
     could be more in the range of $350-375 million. We have yet to publish a
     2002 model, but believe revenue and EPS growth could be 10-15%, below the
     guidance for 2001 of above 20%.  We believe that Cadence could temper its
     outlook for the balance of 2001 this evening. We maintain our Buy rating."
 
     Cytyc Corporation
     (Nasdaq: CYTC) $16.70
     Buy
 
     Wade King, Medical Devices
     "Cytyc will announce Q1'01 financial results on April 25," said King. "We
     believe that Cytyc posted another strong performance in Q1'01 and that the
     company's cash flow profile is extremely favorable. In our view,
     disposables pricing was stable in the quarter, and we expect Cytyc to at
     least meet our estimates. We believe that Cytyc represents a very
     compelling investment opportunity. Cytyc is trading at 27.4x our 2002 EPS
     estimate of $0.61 while we expect over 50% bottom line growth for the
     company for the next several years. Note that our estimates exclude the
     three recent deals announced with Roche, Digene and ProDuct, respectively.
     Historically, Cytyc has traded at or above its EPS growth rate of 50+%,
     due to strong fundamentals, superior management, and a recent history of
     exceptional revenue and earnings growth. We believe Cytyc will continue to
     leverage its ThinPrep platform as the standard of care for cervical
     cytology testing and as the common diagnostic portal for women's health
     care. Our year-end price target for Cytyc is $30, based on 50x our 2002
     EPS estimate of $0.61. This offers investors the potential for 80% ROI. We
     reiterate our Buy rating on CYTC."
 
     Genentech, Inc.
     (NYSE:   DNA) $48.00
     Buy
 
     Jay Silverman, Biopharmaceuticals
     "We believe this year's annual American Society of Clinical Oncology
     (ASCO) meeting will be another important and positive one for Genentech,"
     said Silverman. "Herceptin and HER2 generated the largest share of
     abstracts for Genentech. Two abstracts show that the FISH test predicts
     superior outcomes in treating metastatic breast cancer patients with
     Herceptin. Many other studies show positive results when combining
     Herceptin with various chemotherapies. For Rituxan, a subset analysis of
     the GELA study showed that Rituxan provides even more impressive survival
     benefit when added to standard chemotherapeutic regimen CHOP, to treat
     intermediate-grade non-Hodgkins lymphoma (NHL), in lower risk patients.
     Another study demonstrated that Rituxan, when added to chemotherapy,
     produced an overall response rate of 100% in patients with chronic
     lymphocytic leukemia (CLL). For anti-VEGF, positive abstracts on non-
     squamous cell lung cancer (NSCLC) and advanced colorectal will be
     presented. An analysis of NSCLC patients showed squamous cell type NSCLC
     predisposed patients to pulmonary bleeding, suggesting that use in
     patients with non-squamous cell type may not be accompanied by significant
     bleeding. Investigators will also present positive results on OSI-774 in
     NSCLC, head and neck cancer and ovarian cancer. We eagerly await the
     unveiling more complete data from the above studies at the ASCO meeting
     May 12-15 in San Francisco. In our opinion, ASCO will certainly be an
     important catalyst for Genentech. Reiterate Buy rating."
 
     Jones Apparel Group, Inc.
     (NYSE:   JNY) $35.75
     Buy
 
     Janet Joseph Kloppenburg, Specialty Retailing/Apparel Manufacturers
     "Yesterday, Jones Apparel Group announced its intent to acquire 100% of
     McNaughton Apparel Group (MAGI), a designer and marketer of moderately-
     priced, branded women's career and casual labels including Norton
     McNaughton, Erika, Energie, Jamie Scott and Currants," said Kloppenburg.
     "JNY plans to offer $21 for each MAGI share, translating to a 20% premium
     to the shares' closing price of $17.40 on Thursday, April 12, 2001. Total
     consideration for McNaughton was $572 million. Importantly, JNY management
     expects the transaction to be accretive in the first year, purely from a
     financing perspective. In addition, we believe the merger should generate
     meaningful cost savings and synergies on an operational level. We look for
     the transaction to close during Q3:01 and expect the acquisition to be
     neutral to slightly accretive to F2001 EPS. We view JNY's acquisition of
     McNaughton as a strategic move that should enable JNY to continue its
     business strategy through (1) solidifying JNY's dominant market-share
     position in the branded apparel manufacturing industry, (2) further
     diminishing JNY's reliance on the promotional department store
     distribution channel, and (3) generating growth vehicles and investment
     opportunities to support 18-20% EPS growth annually. JNY shares are
     currently trading at 12.2x our $2.94 F2001 EPS estimate and 10.5x our
     $3.42 F2002 EPS estimate-well below the company's average historical
     valuation of 13.5x forward one-year EPS estimates. As investors gain
     confidence in the company's ability to achieve financial and operating
     accretion from the McNaughton acquisition, and as further interest rate
     cuts and possible tax cuts encourage consumers to sustain strong spending
     levels and lure investors back to the consumer sector, we believe JNY
     shares' forward one-year P/E multiple can expand to 14-15x range. Applying
     this multiple to what we believe is a more likely F2002 EPS result of
     $3.50, we derive a 12-18 month price target of at least $50, offering
     investors the potential for 40% appreciation from the shares' current
     level. As a result, we maintain our Buy rating and $50 price target on JNY
     shares."
 
     RITA Medical Systems, Inc.
     (Nasdaq: RITA) $3.75
     Buy
 
     Wade King, Medical Technologies
     "Yesterday, RITA announced that the company has hired Don Stewart as the
     new CFO and Vice President of Finance & Administration," said King.
     "Stewart comes with operational experience at a diverse group of medical
     technology companies. Next week, RITA is scheduled to announce its Q1'01
     financial results on Thursday, 4/26 after the market close. Our estimates
     for the quarter are revenues of $3.4MM, associated with EPS of $(0.22).
     This represents annual growth in revenues of 82%, and sequential growth of
     11%. Our assumptions for the quarter include 77 generators placed
     worldwide along with 4,400 disposable needle electrodes. We believe that
     RITA is an attractive investment opportunity. We believe that RITA's
     franchise in liver cancer therapy is undervalued, and that the company has
     opportunities ahead in additional clinical areas. The company has almost
     $3 per share in cash, and currently, RITA is trading at barely $10MM above
     its cash assets. We believe that this is an extraordinarily low valuation
     for this cancer therapeutics platform. Our rating on shares of RITA is
     Buy."
 
     Stryker Corporation
     (NYSE:   SYK) $51.86
     Buy
 
     Wade King, Medical Technologies
     "Stryker management plans to report its Q1'01 financial results on
     Wednesday, April 18 after the market close," said King. "We expect another
     solid report from Stryker, and we believe that the company will meet our
     expectations. For the quarter our estimates are revenues of $605.6MM
     associated with EPS of $0.31. The consensus EPS estimate is also $0.31.
     Our forecast assumes 7.7% yr/yr revenue growth, with the strongest
     divisional growth from MedSurg Equipment at 16%, a yr/yr orthopedic
     implant growth rate of 2.2%. Our model calls for gross margin during the
     quarter of 64.9% and, with operating expenses of $268.4MM, operating
     margin of 20.6%. Also, we assume a corporate tax rate unchanged at 34%.
     Stryker is a hallmark of stability in a volatile market. We believe that
     shares of Stryker should hold up well in a volatile market environment. In
     our view, Stryker is one of the highest-quality large-cap med-tech
     companies run by an experienced management team with a strong track record
     of building shareholder value. We have the highest regard for Stryker's
     strong fundamentals and proven solid performance. Given our high regard
     for Stryker's strong fundamentals and proven solid performance, our price
     target for Stryker $55, based on 35x our 2002 EPS estimate of $1.58. Our
     rating on shares of Stryker is Buy."
 
     Industry Updates:
 
     The Communications Components Report
 
     Arun Veerappan, Communications Components/Semiconductor Devices
     "Over the past several months, Cisco said that it had reduced supply-chain
     requests significantly and worked through its existing supply
     commitments," said Veerappan. "However, these actions apparently were not
     sufficient to bring the company's inventory levels in line with its new
     operating environment, and Cisco announced yesterday that it will take a
     $2.5 billion charge to inventories in an effort to "wipe its slate clean,"
     after which it will have $1.6 billion worth of inventories on hand. While
     investors may be inclined to believe that this inventory charge will
     effectively "clear the channel" for new orders by Cisco, this view may be
     premature. Specifically, we note that Cisco did not classify its excess
     inventory charge under its "restructuring charges" line; rather it was
     listed as a separate charge, leading us to believe that Cisco will use
     these parts again as demand picks up even though they now remain in a
     "secure area".  Our thesis remains that the segment of inventories
     relevant to the communications components space (i.e. Cisco's "raw
     materials" line), particularly those products selling to the core of the
     network, will not be so easily "wiped clean" because of the long product
     life-cycles those products typically enjoy. As a result their long shelf-
     lives (typically as long as 3-5 years or more), those products remain both
     functional and utilizable and thus, should still be considered "inventory
     in the channel." We recognize however that the reverse logic could hold
     true at the edge of the network.  For non-custom, commodity parts, we
     believe that Cisco could potentially tap the resale market as well.
     Therefore, our estimate of the level of inventory currently residing at
     Cisco, both in its "secured area" (charged-off) and its post-charge
     inventory on hand is shown overleaf. On a concluding note, while we
     recognize that the magnitude of the inventory charge that Cisco is taking
     certainly appears on the high-end and is an indication of the excess
     inventory problem for communications components suppliers, we are
     encouraged that we finally have this inventory cloud behind us."
 
     Gaming Industry
 
     Harry Curtis, Gaming & Lodging
     "Detroit's three casinos posted a 37% increase in gaming revenue in March
     of $86.3 million versus $62.7 million in March 2000," said Curtis.
     "Results included the Greektown casino, which opened in November 2000. MGM
     Mirage's casino posted a 14.8% decline in revenue, offset by Mandalay
     Resort Group's MotorCity casino, which posted 26.7% revenue growth.
     Revenues for the Windsor casino (located outside of Detroit in Windsor,
     Canada) are not yet available. However, 4Q:00 casino revenue at this
     property declined approximately 10%, and we forecast a 9-%10% decline in
     1Q:01 as well. Thus, for 1Q:01, we estimate a 2%-3% same-store decline in
     casino revenues and a 19%-20% increase in total casino win."
 
     Unless otherwise noted, prices are as of Monday, April 16, 2001.
 
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 Extreme Networks, Foundry Networks, Juniper Networks, Redback Networks, Cognex
 Corp., Amgen, Cytyc Corp., Vitesse Semiconductor Corp., and RITA Medical
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 placed securities of Extreme Networks, Juniper Networks, Redback Networks,
 Genentech and RITA Medical Systems within the past three years.
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SOURCE Robertson Stephens, Inc.
    SAN FRANCISCO, April 17 /PRNewswire/ -- The following is being issued by
 Robertson Stephens:
 
     Estimate Changes:
 
     Cisco Systems, Inc.
     (Nasdaq: CSCO) $17.20
     Market Performer
     F2001E EPS: $0.39, down from $0.50
     F2002E EPS: $0.16, down from $0.27
 
     Paul Johnson, Communications/Networking
     "After the close of the market on Monday, April 16, 2001, Cisco announced
     that it expects to report financial results for its April quarter below
     Street consensus expectations," said Johnson. "In the past several weeks
     new information has been uncovered suggesting that Cisco's health even
     worse than previous expectations.  Extreme and Foundry's announcements of
     25% negative sequential quarters have lead us to believe that Cisco's
     enterprise business will also be down by 25% sequentially this quarter.
     We are now forecasting carrier revenues to be down roughly 40% from the
     previous quarter and, in line with both Foundry (FDRY $9.24) and Extreme
     (EXTR $17.13), we are adjusting enterprise revenues to be down 25%
     sequentially.  We are cutting our estimates substantially to reflect the
     change in outlook and the increasingly competitive environment in which
     Cisco operates. From a valuation standpoint, with our current revenues and
     earnings estimates, we believe Cisco is grossly overvalued.  The company
     has overbuilt inventory to the point that it has had to write half of it
     off and is currently evaluating each and every product line in an effort
     to regain focus.  The company has announced a workforce reduction of just
     under 25% in the next two quarters that we believe could be larger.  This
     situation is several orders of magnitude worse than that of its leading
     competitors (Extreme, Juniper (JNPR $48.38), and Redback (RBAK $17.05)),
     who have also experienced revenue slowdowns.  We do not believe that this
     is strictly a function of macroeconomic issues for Cisco, and in our
     opinion, Cisco has lost much of its leadership position!  We believe their
     leading competitors will continue to take market share from Cisco at an
     accelerated pace throughout the slowdown -- especially in the service
     provider focussed product arena.  In fact, we believe that the lengthening
     sell cycles may give incumbent carriers a chance to really experience next
     generation equipment in the labs and, as a result, move away from Cisco
     products.  As a direct result of these observations, we are maintaining
     our Market Performer rating on the shares of Cisco."
 
     Cognex Corporation
     (Nasdaq: CGNX) $27.64
     Long-Term Attractive
     2001E EPS: $0.25, down the $0.46
 
     Sue Billat, Semiconductors/Foundries
     "Cognex posted Q1:01 operating EPS of $0.11, in line with our and the
     Street estimates, which was lowered after the company pre-announced
     negatively on 3/20/01," said Billat. "We believe the bookings level has
     dropped substantially due to the deteriorating outlook of its large OEM
     customers in the semiconductor capital equipment industry. In the end user
     segment, we believe sales to the wireless handset industry, especially to
     those in Europe, were particularly weak. Although the rate of bookings
     decline appears to be slowing, we expect September to be the trough
     quarter rather than June, as the company has heavy exposure to back end
     semiconductor manufacturing that is suffering from lack of technology
     drivers and excess capacity. In light of the weakened outlook, we are
     lowering our EPS estimates for Q2:01 to $0.05 (from $0.10) on revenues of
     $38.5 million (formerly $42.0 million) and for F2001 to $0.25 (from $0.46)
     on revenues of $158.2 million (formerly $175.0 million). We are also
     publishing F2002 EPS of $0.45 on revenues of $180.5 million. At 61.4x our
     CY02 EPS estimate, CGNX is trading at a steep premium to most stocks under
     our coverage. Although we believe the multiple is partly justified given
     the company's market position and its growth prospects in the end-user
     segment, the stock is as vulnerable to the slowdown in the capital
     equipment sector, in our view, which comprises its core customer base.
     Accordingly, we are maintaining our LTA rating on CGNX."
 
     Vitesse Semiconductor Corporation
     (Nasdaq: VTSS) $23.95
     Long-Term Attractive
     F2001E EPS: $0.46, down from $0.54
     F2002E EPS: $0.31, down from $0.51
 
     Arun Veerappan, Communications Components/Semiconductor Devices
     "Vitesse reported March quarter revenue of $121.8 million, down 26% Q-Q,"
     said Veerappan. "Gross margin of 62.2% was down 607 basis points quarter-
     over-quarter and 178 basis points below our estimate. Operating margin of
     19.2% was down 1,955 basis points quarter-over-quarter and 227 basis
     points below our estimate. Fully diluted EPS from continuing operations of
     $0.10 was $0.01 lower than our estimate. Vitesse's revenue outlook for the
     June quarter is to be down 10% to 26% sequentially. Based on an assumption
     of zero turns business in the June quarter and a book to bill of 0.8 to
     1.0, we are modeling the June quarter to be down 20% sequentially to $97.4
     million in revenue. Given lower utilization and throughput from its
     internal fabs, we are modeling June quarter EPS from continuing operations
     of $0.06, which is in line with Vitesse's outlook of $0.03 to $0.07. For
     F01, we are forecasting revenue of $481.6 million, down 4% from our
     estimate of $501.1 million, and EPS from continuing operations of $0.46,
     down 15% from our estimate of $0.54. For F02, we are forecasting revenue
     of $460.9 million, down 12% from our estimate of $525.6 million, and EPS
     from continuing operations of $0.31, down 40% from our estimate of $0.51.
     Despite the near-term softness, we firmly believe that Vitesse remains a
     key player in the communications markets, with a significant number of
     design wins in OC-48 FEC chips, network processing devices, and switch
     fabrics. Additionally, the company has developed an opto-electrical
     integration expertise at OC-192 and OC-768 data rates, which will likely
     strengthen the company's competitive positioning for the next leg of
     growth in the communications semiconductor markets."
 
     Comments:
 
     Amgen Inc.
     (Nasdaq: AMGN) $54.14
     Buy
 
     Jay Silverman, Biopharmaceuticals
     "Abstract books have been released for the upcoming American Society of
     Clinical Oncology conference," said Silverman. "Amgen plans to present
     positive data from five studies for Aranesp in cancer patients, several
     studies for Abarelix Depot in prostate cancer patients, two studies for
     SD-01 in the treatment of chemotherapy-induced neutropenia (low white
     blood cell count), and two studies for KGF in the treatment of mucositis.
     We believe this year's ASCO is a key meeting for AMGN and the company will
     host an analyst meeting on Sunday, May 13th to discuss results of the
     clinical trials. We expect AMGN to emerge as a winner from this meeting,
     with key marketing data for Aranesp and Abarelix depot prior to their
     respective launches. We also believe data from SD-01 and KGF will give
     investors a much clearer picture into these compounds eventual
     approvability and market size. We reiterate our Buy rating."
 
     AOL Time Warner
     (NYSE:   AOL) $43.31
     Long-Term Attractive
 
     Lowell Singer, Next-Generation Internet eNablers
     "We are concerned that AOL Time Warner's current valuation may not fully
     reflect potential near-term risk factors that could place downward
     pressure on the stock," said Singer. "Specifically, we believe continued
     deterioration in the advertising market, a lack of visibility into 2H
     2001-skewed filmed entertainment and music segments, and possible
     integration challenges could drive risk to management's guidance of +12-
     15% revenue growth and 30%+ year-over-year EBITDA growth. While some of
     this risk may be factored into AOL's current price, we believe that a
     revenue or EBITDA shortfall could drive the stock toward the mid-$30s.
     Despite our concerns that AOL Time Warner could fall short of its full-
     year 2001 revenue and EBITDA growth target, we want to stress that we do
     not anticipate a Q1 shortfall. In fact, we expect the company to report Q1
     results in line or ahead of our revenue and EBITDA estimates of $8.965
     billion and $2.154 billion, respectively. Despite our near-term concerns,
     we remain bullish on the longer-term prospects for the company and the
     stock. We believe AOL Time Warner is the media model of the future and a
     safe way for investors to participate in continued media convergence. In
     our view, within 12-18 months investors will be rewarding AOL Time Warner
     for its unique market position and for the progress that the company has
     made in integrating its businesses. Thus, we are assuming coverage of AOL
     Time Warner with a rating of Long-Term Attractive and a 12-18 month price
     target of $50."
 
     Cadence Design Systems, Inc.
     (NYSE:   CDN) $17.65
     Buy
 
     John Barr, Design Enabling Technologies
     "Cadence reports earnings tonight after the market close," said Barr. "On
     April 5, we reduced our estimate of Cadence's 1Q:01 revenue to $339
     million and EPS to $0.14 per share.  We believe Cadence will meet or come
     close to these numbers. Over the last two weeks, we have heard increasing
     anecdotal evidence of customers slowing design automation expenditures. On
     April 5, we reduced our estimate for 2001 service revenue from $423
     million to $392 million.  We now believe it is likely 2001 service revenue
     could be more in the range of $350-375 million. We have yet to publish a
     2002 model, but believe revenue and EPS growth could be 10-15%, below the
     guidance for 2001 of above 20%.  We believe that Cadence could temper its
     outlook for the balance of 2001 this evening. We maintain our Buy rating."
 
     Cytyc Corporation
     (Nasdaq: CYTC) $16.70
     Buy
 
     Wade King, Medical Devices
     "Cytyc will announce Q1'01 financial results on April 25," said King. "We
     believe that Cytyc posted another strong performance in Q1'01 and that the
     company's cash flow profile is extremely favorable. In our view,
     disposables pricing was stable in the quarter, and we expect Cytyc to at
     least meet our estimates. We believe that Cytyc represents a very
     compelling investment opportunity. Cytyc is trading at 27.4x our 2002 EPS
     estimate of $0.61 while we expect over 50% bottom line growth for the
     company for the next several years. Note that our estimates exclude the
     three recent deals announced with Roche, Digene and ProDuct, respectively.
     Historically, Cytyc has traded at or above its EPS growth rate of 50+%,
     due to strong fundamentals, superior management, and a recent history of
     exceptional revenue and earnings growth. We believe Cytyc will continue to
     leverage its ThinPrep platform as the standard of care for cervical
     cytology testing and as the common diagnostic portal for women's health
     care. Our year-end price target for Cytyc is $30, based on 50x our 2002
     EPS estimate of $0.61. This offers investors the potential for 80% ROI. We
     reiterate our Buy rating on CYTC."
 
     Genentech, Inc.
     (NYSE:   DNA) $48.00
     Buy
 
     Jay Silverman, Biopharmaceuticals
     "We believe this year's annual American Society of Clinical Oncology
     (ASCO) meeting will be another important and positive one for Genentech,"
     said Silverman. "Herceptin and HER2 generated the largest share of
     abstracts for Genentech. Two abstracts show that the FISH test predicts
     superior outcomes in treating metastatic breast cancer patients with
     Herceptin. Many other studies show positive results when combining
     Herceptin with various chemotherapies. For Rituxan, a subset analysis of
     the GELA study showed that Rituxan provides even more impressive survival
     benefit when added to standard chemotherapeutic regimen CHOP, to treat
     intermediate-grade non-Hodgkins lymphoma (NHL), in lower risk patients.
     Another study demonstrated that Rituxan, when added to chemotherapy,
     produced an overall response rate of 100% in patients with chronic
     lymphocytic leukemia (CLL). For anti-VEGF, positive abstracts on non-
     squamous cell lung cancer (NSCLC) and advanced colorectal will be
     presented. An analysis of NSCLC patients showed squamous cell type NSCLC
     predisposed patients to pulmonary bleeding, suggesting that use in
     patients with non-squamous cell type may not be accompanied by significant
     bleeding. Investigators will also present positive results on OSI-774 in
     NSCLC, head and neck cancer and ovarian cancer. We eagerly await the
     unveiling more complete data from the above studies at the ASCO meeting
     May 12-15 in San Francisco. In our opinion, ASCO will certainly be an
     important catalyst for Genentech. Reiterate Buy rating."
 
     Jones Apparel Group, Inc.
     (NYSE:   JNY) $35.75
     Buy
 
     Janet Joseph Kloppenburg, Specialty Retailing/Apparel Manufacturers
     "Yesterday, Jones Apparel Group announced its intent to acquire 100% of
     McNaughton Apparel Group (MAGI), a designer and marketer of moderately-
     priced, branded women's career and casual labels including Norton
     McNaughton, Erika, Energie, Jamie Scott and Currants," said Kloppenburg.
     "JNY plans to offer $21 for each MAGI share, translating to a 20% premium
     to the shares' closing price of $17.40 on Thursday, April 12, 2001. Total
     consideration for McNaughton was $572 million. Importantly, JNY management
     expects the transaction to be accretive in the first year, purely from a
     financing perspective. In addition, we believe the merger should generate
     meaningful cost savings and synergies on an operational level. We look for
     the transaction to close during Q3:01 and expect the acquisition to be
     neutral to slightly accretive to F2001 EPS. We view JNY's acquisition of
     McNaughton as a strategic move that should enable JNY to continue its
     business strategy through (1) solidifying JNY's dominant market-share
     position in the branded apparel manufacturing industry, (2) further
     diminishing JNY's reliance on the promotional department store
     distribution channel, and (3) generating growth vehicles and investment
     opportunities to support 18-20% EPS growth annually. JNY shares are
     currently trading at 12.2x our $2.94 F2001 EPS estimate and 10.5x our
     $3.42 F2002 EPS estimate-well below the company's average historical
     valuation of 13.5x forward one-year EPS estimates. As investors gain
     confidence in the company's ability to achieve financial and operating
     accretion from the McNaughton acquisition, and as further interest rate
     cuts and possible tax cuts encourage consumers to sustain strong spending
     levels and lure investors back to the consumer sector, we believe JNY
     shares' forward one-year P/E multiple can expand to 14-15x range. Applying
     this multiple to what we believe is a more likely F2002 EPS result of
     $3.50, we derive a 12-18 month price target of at least $50, offering
     investors the potential for 40% appreciation from the shares' current
     level. As a result, we maintain our Buy rating and $50 price target on JNY
     shares."
 
     RITA Medical Systems, Inc.
     (Nasdaq: RITA) $3.75
     Buy
 
     Wade King, Medical Technologies
     "Yesterday, RITA announced that the company has hired Don Stewart as the
     new CFO and Vice President of Finance & Administration," said King.
     "Stewart comes with operational experience at a diverse group of medical
     technology companies. Next week, RITA is scheduled to announce its Q1'01
     financial results on Thursday, 4/26 after the market close. Our estimates
     for the quarter are revenues of $3.4MM, associated with EPS of $(0.22).
     This represents annual growth in revenues of 82%, and sequential growth of
     11%. Our assumptions for the quarter include 77 generators placed
     worldwide along with 4,400 disposable needle electrodes. We believe that
     RITA is an attractive investment opportunity. We believe that RITA's
     franchise in liver cancer therapy is undervalued, and that the company has
     opportunities ahead in additional clinical areas. The company has almost
     $3 per share in cash, and currently, RITA is trading at barely $10MM above
     its cash assets. We believe that this is an extraordinarily low valuation
     for this cancer therapeutics platform. Our rating on shares of RITA is
     Buy."
 
     Stryker Corporation
     (NYSE:   SYK) $51.86
     Buy
 
     Wade King, Medical Technologies
     "Stryker management plans to report its Q1'01 financial results on
     Wednesday, April 18 after the market close," said King. "We expect another
     solid report from Stryker, and we believe that the company will meet our
     expectations. For the quarter our estimates are revenues of $605.6MM
     associated with EPS of $0.31. The consensus EPS estimate is also $0.31.
     Our forecast assumes 7.7% yr/yr revenue growth, with the strongest
     divisional growth from MedSurg Equipment at 16%, a yr/yr orthopedic
     implant growth rate of 2.2%. Our model calls for gross margin during the
     quarter of 64.9% and, with operating expenses of $268.4MM, operating
     margin of 20.6%. Also, we assume a corporate tax rate unchanged at 34%.
     Stryker is a hallmark of stability in a volatile market. We believe that
     shares of Stryker should hold up well in a volatile market environment. In
     our view, Stryker is one of the highest-quality large-cap med-tech
     companies run by an experienced management team with a strong track record
     of building shareholder value. We have the highest regard for Stryker's
     strong fundamentals and proven solid performance. Given our high regard
     for Stryker's strong fundamentals and proven solid performance, our price
     target for Stryker $55, based on 35x our 2002 EPS estimate of $1.58. Our
     rating on shares of Stryker is Buy."
 
     Industry Updates:
 
     The Communications Components Report
 
     Arun Veerappan, Communications Components/Semiconductor Devices
     "Over the past several months, Cisco said that it had reduced supply-chain
     requests significantly and worked through its existing supply
     commitments," said Veerappan. "However, these actions apparently were not
     sufficient to bring the company's inventory levels in line with its new
     operating environment, and Cisco announced yesterday that it will take a
     $2.5 billion charge to inventories in an effort to "wipe its slate clean,"
     after which it will have $1.6 billion worth of inventories on hand. While
     investors may be inclined to believe that this inventory charge will
     effectively "clear the channel" for new orders by Cisco, this view may be
     premature. Specifically, we note that Cisco did not classify its excess
     inventory charge under its "restructuring charges" line; rather it was
     listed as a separate charge, leading us to believe that Cisco will use
     these parts again as demand picks up even though they now remain in a
     "secure area".  Our thesis remains that the segment of inventories
     relevant to the communications components space (i.e. Cisco's "raw
     materials" line), particularly those products selling to the core of the
     network, will not be so easily "wiped clean" because of the long product
     life-cycles those products typically enjoy. As a result their long shelf-
     lives (typically as long as 3-5 years or more), those products remain both
     functional and utilizable and thus, should still be considered "inventory
     in the channel." We recognize however that the reverse logic could hold
     true at the edge of the network.  For non-custom, commodity parts, we
     believe that Cisco could potentially tap the resale market as well.
     Therefore, our estimate of the level of inventory currently residing at
     Cisco, both in its "secured area" (charged-off) and its post-charge
     inventory on hand is shown overleaf. On a concluding note, while we
     recognize that the magnitude of the inventory charge that Cisco is taking
     certainly appears on the high-end and is an indication of the excess
     inventory problem for communications components suppliers, we are
     encouraged that we finally have this inventory cloud behind us."
 
     Gaming Industry
 
     Harry Curtis, Gaming & Lodging
     "Detroit's three casinos posted a 37% increase in gaming revenue in March
     of $86.3 million versus $62.7 million in March 2000," said Curtis.
     "Results included the Greektown casino, which opened in November 2000. MGM
     Mirage's casino posted a 14.8% decline in revenue, offset by Mandalay
     Resort Group's MotorCity casino, which posted 26.7% revenue growth.
     Revenues for the Windsor casino (located outside of Detroit in Windsor,
     Canada) are not yet available. However, 4Q:00 casino revenue at this
     property declined approximately 10%, and we forecast a 9-%10% decline in
     1Q:01 as well. Thus, for 1Q:01, we estimate a 2%-3% same-store decline in
     casino revenues and a 19%-20% increase in total casino win."
 
     Unless otherwise noted, prices are as of Monday, April 16, 2001.
 
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