Deutsche Bank Industry Bulletins

In this report we include the results from our annual survey of wireless carriers’ retail outlets.

US Carrier Retail Survey

This week we conducted our annual survey of wireless carriers’ retail outlets. Once again, the price of smartphones was up and carrier subsidies remain healthy. In the analysis, we compare the current environment to previous years to remind ourselves just how far we’ve come – in just the last year, we have seen the number of Android handsets increase from 30 to 53; in 2008, there was only one Android handset on the market. Additionally, the iPhone is now prominently displayed at two more carriers and this has lifted overall pricing. We have come a long way, as it was only a few years ago that touch screen was available on only a few models and GPS was the feature of the day.

For more information, please click on the report PDF.

In this report we take a look at the key challenges confronting carriers when building out an LTE network. The truth of the matter is that the industry still has a significant amount of technical hurdles to overcome before LTE reaches maturity. We see four areas of concern: 1) support for voice and legacy services; 2) spectrum availability; 3) network congestion; and 4) band support in handset radios. We walk through each of these issues and discuss the investment implications for Acme Packet, F5 Networks, Qualcomm and others.

For more information download the report PDF.

In this special report, we analyze the bear case scenario for our coverage universe by experimentally cutting our 2012 revenue estimates by 10% and also by 20%. As a result, our names with weaker operating models were exposed to much lower earnings power. In contrast, better-quality names like Acme Packet, F5 and Qualcomm outperformed all others.

For more information, please click on the report PDF.

In this report we take a look at how the overall handset landscape shaped up in Q2. We also reprint our earnings notes for Brightpoint, Juniper, Motorola Mobility and Motorola Solutions.

Smartphone units continue to grow

With all of the handset vendors having reported, we took a look at how the overall handset landscape shaped up in Q2. Depending on how you count it, smartphone units grew at about double the rate of the whole market in the quarter. A rate which we think will continue for some time. We see this as a positive for component vendors who are seeing a good mix shift towards the higher end of their product range. This remains a core tenet of our investment thesis on Qualcomm.

Brightpoint Q2 Results - Solid results and raised guidance

Brightpoint reported Q2 revenues of $1.2 b, above our estimate and consensus of $1.1 b. Pro-forma EPS of $0.23 was above our estimate and consensus of $0.21. The company also raised the lower end of their full year EPS guidance. Overall it was a good quarter for the company. However, we are lowering our price target to $13 based on our reduced FY12 EPS estimate due to lower GM's in distribution and logisitics. Maintain Hold.

Juniper Q2 Results – Bring in the hockey sticks- Disappointing quarter and guide; maintain Hold on FY11/12 growth caution

Q2 revs of $1.1b came in slightly below our estimate and consensus. PF EPS of $0.31 fell short of our expectations and consensus of $0.34. Guidance for revs of $1.07b - $1.12b and PF EPS of $0.26- $0.30 also disappointed, with management stepping back from their long-term 20% revenue growth target. While we see some positive signs for new products next year, we maintain our Hold rating on concerns that the company will struggle to meet even this revised 2H guidance.

Motorola Mobility Q2 Results - Decent results, but guidance below expectations

Motorola Mobility reported Q2 revenues of $3.3 b, ahead of our estimate of $3.0 b and consensus of $3.1 b. Pro-forma EPS of $0.09 came in above our estimate of ($0.05) and consensus of $0.06. The company guided Q3 pro forma EPS to be $0.00 to $0.10, below our estimate of $0.16 and consensus of $0.25. We remain cautious on the company's near term outlook given the increasing Android competition, and the upcoming iPhone 5 release. We are maintaining our Hold rating and lowering our price target to $22 from $23.

Motorola Solutions – Q2 Results- Strong results and raised guidance

Motorola Solutions reported Q2 revenues of $2.1b, ahead of our estimate and consensus of $2.0b. Pro-forma EPS of $0.57 came in ahead of our estimate of $0.50 and consensus of $0.51. Management raised full year guidance and also announced a dividend and share repurchase program. While the company continues to execute and deliver strong results, we maintain our Hold rating but are increasing our price target to $43 based on our updated estimates.

For more information, please click on the attached PDF.

Enterprise SIP Trunking; upside prospects for Acme Packet

In this issue we summarize learnings from our recent round of IT conversations around the enterprise SIP trunking opportunity. We discuss the near-term demand trends for SIP trunking adoption in Fortune 500 enterprises in the US and rest of world, and the upside prospects for Acme Packet – one of our top small-cap ideas in the layer 4/7 “software in a box” category.


Qualcomm Uplinq

We attended Qualcomm's Uplinq developer conference last week and had a chance to meet with management. The event was as crowded as we have ever seen it, signaling growing developer interest in Qualcomm's expanding support for software tools. The company's comments echoed our State of the Baseband report from two weeks ago which highlighted the company's growing share in the WCDMA baseband market and the struggles its competitors face.


For more information, please click on the attached PDF document.

A look back at earnings and our Indian handset survey

In this report, we wrap up earnings season by discussing a few key takeaways. We felt that the earthquake in Japan turned out to be much less of a disruption than people (ourselves included) cautioned. We also provide some color around the big shortfall from RIM. Moving to our annual Indian handset study, we analyze the results and discuss the implications behind Nokia's waning popularity and the shift to Android smartphones.

The struggle continues for Research in Motion

We have been writing a lot about RIM's struggle in recent weeks, beginning with our downgrade to Sell after their earnings call last month. We think their current struggles raise the question as to how they got to this point. In recent years, RIM has meaningfully increased R&D spending and added intangible assets at a steady clip. All this spending and they have very little to show for it. We discuss this in detail in our note this week.

Indian handset survey

This year's results are a continuation of trends we saw last year. Beginning in our previous survey we saw a sharp change in the dynamics of the market. Nokia was under threat, Samsung rising and smartphones were suddenly everywhere. This year's results do not show as dramatic a shift but the trends which we saw last year continue unabated. Positive for Qualcomm, 63% of those surveyed consider 3G necessary for their next phone.

Neophotonics: Q1 Results; lowering price target to $10

Neophotonics reported Q1 revenue of $51 million, ahead of our estimate of $46 million and consensus of $50 million. Pro-forma EPS of $0.01 beat our estimate of a loss of ($0.02) and consensus of ($0.03). The company guided revenue to $47 million to $53 million, bracketing our estimate and consensus of $50 million, but guided EPS to ($0.01) to $0.01 below our estimate of $0.01 and consensus of $0.04. They cited order fluctuations from customers for the shortfall.

Tekelec: Q1 Results

Tekelec reported Q1 revenues of approximately $108 million, above our estimate of $85 million and consensus of $88 million. Pro-forma earnings per share of $0.08 was above our estimate of $0.00 and consensus of $0.01. Overall, the company reported solid results, but we remain cautious on their longer-term outlook as they navigate this transition to new technologies. Maintain our Hold rating and and $8 Price Target.

For more information, please click on the attached report.

In this issue we report the findings from our wireless data drive tests. Over the past week, we tested data cards from Sprint, T- Mobile and Verizon. We discuss how the carriers stack up against each other and against their wireline counterparts. While none offers true 4G speeds, Verizon's LTE was the clear winner. In fact, the speeds at Verizon surprised us...so much so that we may cancel our home DSL lines.

For more information, please click on the attached PDF document.

Product cycle and network transition implications

Juniper's QFabric launch invites questions on the fundamental value of virtualized networking in accelerating the ongoing transition of enterprise and carrier datacenters to Clouds. In this report thought piece, we summarize learnings from our recent round of CIO/IT checks following the Juniper announcement and share our thoughts on upcoming long-tail product cycles for virtualized networking equipment with comments on JNPR, CSCO and FFIV.

For more information, please click on the attached PDF document.

In this report we regale with tales of our visit to Barcelona and the Mobile World Congress. We saw a growing divide between new insurgents and slowing incumbents. The Nokia decision to run with Microsoft greatly shifts industry dynamics, further cementing Qualcomm's leading role. The equipment side is also innovating with disruptive technologies - good news for Acme Packet, Ciena, Cavium and F5. Bottom line, we raised our estimates and price targets on QCOM and APKT in today's notes. We are also raising price target on CAVM (see page 3).

Qualcomm in the limelight

Qualcomm announced a range of new products at the show, demonstrating strong execution. Nokia's decision to move to Microsoft's Windows Phone 7 heavily tilts the game in their favor as they remain the only vendor capable of supporting WP7 today. We expect to see a Compal-built, Qualcomm-powered WP7 Nokia phone on the market later this year. The company also looks set to build on recent share gains with potential for more business at all major handset vendors including Apple, Samsung, RIM, MMI and Sony Ericsson. Based on our recent findings, we are raising our estimates and price target on Qualcomm from $60 to $65 (please see today's note on Qualcomm for further details).

Other Baseband vendors are in disarray

Nokia's move presents a serious challenge for ST Ericsson who are left without the software to support their flagship customer. It will take them over a year to ramp this effort up. Broadcom recently replaced the management team of its cellular business raising questions about their execution. Marvell appears confined to its niche, with Qualcomm knocking on RIM's door. Mediatek launched an HSPA part, but is sandwiched between a tough set of competitors. Renasas' baseband efforts look set to end before it begins. Infineon appears upbeat now that it has a solid corporate parent in Intel, though its Apple business is in decline. Of all of these, only privately-held Icera appears to be making real progress, albeit one constrained by a small balance sheet.

Self-organizing, self-healing networks

Network architectures continue to evolve rapidly. The advent of IP edge and access networks puts further pressure on carriers to find solutions for handling voice traffic. One leading-edge carrier seems to think this new paradigm will require session border controllers, giving us renewed confidence in Acme Packet's prospects. The Osborne effect continues to distract carriers from purchasing current F5 gear, but the launch later this year of TMOS v.11 should reignite growth there (though enterprise demand continues to be strong for F5). Cavium's Octeon platform continues to garner incremental design wins.

The Base Station in the Cloud

We saw several innovations in base stations at the show including Ubidyne's highly flexible antenna array enabling an IP Cloud based network deployment and a base station small enough to fit in a lady's large handbag. Carriers are looking to pull fiber to all of their base stations, and 1GB systems may not be sufficient. This is good news for Ciena who remains in the lead for supplying 100GB and OTN systems. More 1GB and above base stations means more traffic and this should be lead to solid demand for Cisco's and Juniper's carrier business.


For more information, please click on the attached PDF document.

Positive network equipment demand and spending trends in 2011

We have a sector call in this issue of Singals to Noise for our networking names. Our proprietary research suggests meaningful across the board improvement in network equipment spending in CY11 focused around:
1) network intelligence (‘Layer 4/7');
2) datacenter to Private Cloud transition; and,
3) productivity and cost savings.

We see our top small/midcap ideas – F5, Acme Packet, Cavium, and Ciena secularly benefiting from the thematic IT spending cycles over the next few years; a trend that is likely to be directionally positive for Cisco and Juniper as well.

* Acme Packet Q4 results - solid beat and raise results; maintain Buy on strong SBC momentum

Solid Q4 results: revenues of $70.2 m and PF EPS of $0.26 – a beat versus our estimate and consensus. PF gross margin was 85.3% with 38.9% operating margin. Their updated CY11 outlook calls for $300 m / $1.05; implying a +36% yearly growth rate. The strong momentum in the SBC product cycle and several TAM expansion use cases are likely to drive upside to the CY11/12 view - meriting our Buy rating. We are increasing our estimates and raising our PT to $65 ($63).

* Brightpoint Q4 results - solid results and a good guide

Brightpoint reported Q4 revenues of $1.1b, above our estimate of $975m and consensus of $1.0b. Pro-forma EPS of $0.34 beat our estimate of $0.26 and consensus of $0.27. The company provided an EPS guidance range of $0.90 to $1.05, which bracketed our estimate of $0.94 but came in ahead of the street's estimate of $0.89. Overall, we think the company is in solid shape, and we think they can continue to deliver steady growth. We maintain our Hold rating, but raise our price target from $10 to $14 on higher estimates.

* Cavium Q4 results - decent results and guide; raising PT to $48; reiterate our Buy rating

Decent results and guide from Cavium: revenues of $59.8 million (up 8% sequentially and up 86 % yearly) and $0.29 of PF EPS. Revenues were roughly inline vs. our estimate and consensus, while PF EPS was a $0.02 beat. The Q1 guide calls for $62.5m-$63m in revenues and $0.28-$0.29 in PF EPS. A solid $500m+ Tier-1 OEM design win funnel, combined with the potential for growth acceleration in 2H11+ from the OCTEON II and PureVu chips, merits our Buy rating. Raising Price Target from $40 to $48 on increased forward estimates.

* Ixia Q4 results - solid results and good guide

Ixia reported Q4 revenues of $78m, beating our estimate of $76m and consensus of $75m. Pro forma earnings per share was $0.18, above our estimate and consensus of $0.17. We continue to believe that Ixia is a leading indicator of major technology transitions and as these transitions continue to ramp, Ixia will increasingly benefit. Maintain our Buy and $20 price target.

* Powerwave Q4 results - mixed results and a decent guide

Powerwave reported Q4 revenues of $176 m, below our estimate of $177 m and consensus of $180 m. Pro-forma EPS of $0.06 was below our estimate and consensus of $0.08. Powerwave continues to experience a decline in base station revenue, but has improved its gross margins reaching 29.6% in the quarter, above expectations. We maintain our Hold rating but raise our estimates slightly on improving margins.


For more information, please click on the attached report PDF.

In this issue we breakdown the likelihood of a USD100 smartphone and what that means for consumers and companies alike. We also include the quarterly results from the past week.

By 2013, we expect 1 GHz smartphones to be available for USD100 The combination of a free license for Android and the steady march of Moore's Law could translate into USD100 smartphones by late 2012 or early 2013. At that point, we think even the average emerging markets' consumer will shift their purchase sharply away from feature phones to smartphones, posing a serious challenge to companies such as Nokia without a clear strategy for low-end operating systems.

Juniper Q4 results: decent quarter; weak guide; maintain Hold on near-term growth caution

Juniper reported solid Q4 results with revenues of $1.19 b and $0.42 of PF EPS. The Q1 outlook calls for $1.08 b in revs and $0.32 in EPS (on the mid-point). Maintain Hold as near-term growth is pegged to 1H11 spending and with our research suggesting new platforms ramps in 2H11+. We are constructive on Juniper's longer-term growth outlook with anticipation of meaningful revenue growth and earnings leverage from the new products ramp. Price Target moves up from $28 to $36; reflecting our updated estimates.

Motorola Mobility Q4 results: good quarter with conservative guidance

Motorola Mobility reported Q4 revenues of $3.43 billion, slightly ahead of our estimate of $3.40 billion and consensus of $3.41 billion. Pro-forma EPS of $0.37 came in ahead of consensus of $0.36. The company shipped 11.3 million handsets, including 4.9 million smartphones. We see signs of continued improvement, but remain cautious about the near-term prospects. We maintain our Hold rating and $30 price target.

Motorola Solutions Q4 results: mixed results and light guidance

Motorola Solutions reported Q4 revenues of $2.25 billion, ahead of our estimate of $2.0 billion. Pro-forma earnings of $352 million came in below our estimate of $369 million. The company guided Q1 pro forma EPS of $0.29 - $0.34, below the street's and our estimate of $0.44. The company appears to be executing well, but we believe the prospects are fully reflected in the current share price. We maintain our Hold rating and lower our price target to $35 based on lower estimates. Qualcomm Q1 results: solid quarter and guidance; reiterate our Buy rating

Qualcomm reported solid Q1 results: revenues of $3.35 b; meaningfully ahead of our est. and consensus of $3.2 b. PF EPS of $0.82 was a strong beat versus our est. and consensus of $0.72. The company guided both 2Q11 and FY11 ahead of expectations. We think the company's product cycles and the underlying demand trends in mobile Internet devices and mobile data position them well to accelerate revenue and earnings growth - meriting our Buy. Raising PT from $55 to $60.

Riverbed Q4 results: solid results; in-line guide; maintain Hold on valuation

Solid results with revs of $165 m and PF EPS $0.19; ahead of our estimate and consensus. The Q1 guide was roughly in-line with expectations (adjusting for the tax benefit) at $160 m in revs (mid- point) and $0.18 in PF EPS. While near-term trends remain favorable, our caution around Riverbed's customer base skewing towards big enterprises combined with increasing competition in the datacenter and Cloud, merits our Hold rating. Still, our PT moves from $21 ($42 pre-split) to $33 to reflect our forward estimates and a higher PE multiple.

For more information, please click on the attached PDF.

In this issue we report back on our visit to China. We now expect a big push from Chinese companies into the enterprise and datacenter computing markets. We also see some progress for Qualcomm, and see solid trends for optical spending.

China Inc. comes to the enterprise

In our conversations with equipment vendors and the channel we have learned that major Chinese equipment makers are now looking to extend their reach into enterprise markets. We think this could eventually have a significant impact on existing vendors in servers, storage and VoIP PBX.

Qualcomm in China – update

When we visited China six months ago we noticed a distinct uptick in Qualcomm’s presence in China. We noted that the company was exploring alternative licensing structures that would enable small, domestic Chinese handset vendors access to Qualcomm products. This process is still underway, and while we cannot yet gauge if it was successful, we do see signs of their expanded presence in the region. We also see mixed progress from the low-cost baseband providers.

Optical trends look healthy

Consistent with our China Tech team’s view, we believe China wireless carrier capex looks set to decline in 2011. This will be at least partially offset by increased capex from China wireline operators. In particular, the carriers look set to focus on building up the country’s backbone and core operations. We also visited with several China datacenter providers who are in nascent stages of development. This should all translate into another important driver of optical spending in 2011 as carriers everywhere look to upgrade capacity to keep up with booming mobile data growth.

For more information, please click on the attached PDF.

In this issue we share our findings from the Consumer Electronics Show in Las Vegas. We were busy with company meetings, but we did find time to walk the floor amongst the largest crowd we have seen in years. The show had everything, from tablets and 3D TVs to HD snow goggles and Dr. Dre headphones. We boil this down for you on a company-specific basis and fill you in on the details from our management meetings.

Qualcomm – A new sense of optimism

We saw further signs of Qualcomm improving fortunes at CES last week. In a visit to their booth and in conversation with their team and customers we believe the company is seeing solid order trends from customers as well as the launch of a large number of Qualcomm- based phones and tablets. The show had its usual tidal wave of product announcements and news, and sifting out the details always takes times, but we clearly picked up a new sense of optimism from Qualcomm.

Motorola – Signs of continued improvement with handset offerings

Motorola showed signs of improvement. The company introduced a feature-rich phone called the Atrix, which boasts a dual core processor. We also viewed the Xoom, the first tablet using Android's Honeycomb operating system, and demoed their new “webtop” solution. The company is moving in the right direction, producing innovative designs which are made with careful thought towards the end-user experience.

Rim – Buzz around the Playbook, but questions to be answered

The Playbook garnered most of the attention at Rim's booth this year. They let us demo the device and we were somewhat impressed by the QNX OS. There are more than a few concerns about the device, including app development, email and contact sync, and battery life. Even though Blackberries appear to be selling well internationally, we are cautious on the story here as we think investors will be focused on the success or failure of the Playbook.

Brightpoint – Management optimistic about 2011 and the prospects of a new, mid-tier smartphone category

We met with Brightpoint's management, who sounded optimistic about the upcoming year. They noted that a new segment in mid-tier smartphones will help with the shift away from feature phones and improve overall ASP's. They feel comfortable with their balance sheet given their recent acquisition of Touchstone. They reiterated the service focus of the company. While we like this focus on services, we still remain cautious on the name until we see further proof of this in the numbers.

Cavium – Opportunity grows with increased video traffic

We met with Cavium's management team and saw a demo of their new “Purevu” video processor chip. The consensus view we gather from this and other CES meetings is the emergence of HD video and broadband mobility (Wi-Fi and 3G/4G) as positive catalysts for accelerating the use of mobile and media-rich devices such as tablets, HDTVs, gaming consoles, etc. within the home. We view the company as a pure play on the ‘network intelligence' and ‘merchant silicon' themes and think they can leverage this position as video traffic continues to grow.

For more information, please click on the attached PDF document.

In this issue of S2N we set our expectations for the year. We see networks evolving to cope with strong growth and new usage models. This process reminds us of the shift we saw in the 1990's as legacy Layer 1 and 2 equipment lost value relative to Layer 3 routing. Now those are becoming less important as the emphasis shifts to Layer 4- 7 technology. This could likely pose a challenge for incumbents.

* It's about the features

In the future, we expect the emphasis of equipment makers will be less about touting the speed of their equipment and the number of ports they offer (i.e. speeds and feeds) and more about measuring the difficulty of the problem they solve.

* Cost efficiencies through ‘sub-linear' scaling; key Layer 4/7 value proposition

The ability of the Layer 4/7 appliances to avoid the cost penalty of linear scaling by ‘intelligently' processing the incoming user requests for applications is the core value proposition, in our view, of Layer 4/7 appliances.

* Transaction Velocity – key growth metric for F5 and Acme Packet The fundamental growth driver for incremental sales of Layer 4/7 equipment is ‘transactions velocity'. Growth in application transactions velocity, therefore, necessitates a meaningful capacity upgrade cycle for Layer 4/7 equipment – hence our positive outlooks on F5 and Acme.

* Raising our Price Target on Cavium from $35 to $40; maintain Buy rating

Our positive 2011 outlook on growth themes such as datacenter consolidation, virtualization, Cloud infrastructures, and service provider platform upgrades – and the increasing use of merchant silicon across major network equipment categories is basis for our conviction on the solid growth prospects for Cavium over the next few years. We maintain our Buy rating and raise our PT from $35 to $40; noting that unanticipated changes in telecom equipment spending patterns and refresh cycle timing are the key downside risks. We have arrived at our price target using DCF. For our DCF analysis, we assume WACC of 12% and a 5% perpetual growth rate. Our 12.5% WACC is based on a risk-free rate of 5%, beta of 1.5, and equity risk premium of 5.0%. Our growth rate assumption is consistent with Cavium's peer group; reflecting longer-term capex trends and refresh cycles.

For more information, please click on the attached PDF document.

In this issue of S2N we report the results of our US wireless retail survey. We found fewer phones on sale than in years past. We also found carrier subsidies remain healthy. The most interesting data we gathered was the pricing of smartphones and how unsubsidized prices for handsets have increased through the years. We also compare the current environment to our last survey to remind ourselves just how far we've come since 2008 when Android was on one handset, Touch screen was only available on a few models and GPS was the feature of the day.

For more information, please click on the attached PDF.

In this issue of S2N we report on the results of Black Friday survey of 113 phone retailers with calls to AT&T, Best Buy and Verizon outlets, as well as visits to a half dozen stores. Demand is good with stores crowded. We saw very few stock-outs. Android momentum is very strong, but iPhone remains the clear leader. Samsung looks very strong, HTC is holding its own. Motorola is very strong at Verizon, but concentrated there. RIM looks weaker than we had expected. And a large number of the best-selling phones are Qualcomm powered.

For more information, please click on the attached PDF.

A week of Analyst Days

We attended Motorola Solutions, F5 and Qualcomm's analyst day, followed up by the private company equivalent, an org meeting for a networking company that may go public next year.

F5 Networks analyst day

The company highlighted surging growth in data traffic increases the complexity of networks. We think this complexity will require Application Delivery solutions become a regular feature in all networks. F5's years of experience in creating this space has given them a meaningful advantage against the competition and increases the importance of their role.

Motorola Solutions analyst day

The new company will focus on Government and Enterprise IT spending. Management laid out a clear roadmap for how the new company will expand its portfolio and addressable market. We think the new company will have a healthy balance sheet and be well positioned for steady growth when it spins out in January.

Qualcomm analyst day

The company showed continued signs of improved and regained confidence. The product roadmap continues to lead the competitive field by a healthy margin. Management also gave better clarity on how device prices impact their licensing business. Mix shift may remain an issue near-term, but the company is now positioned to grow again.

For more information, please click on the PDF document.

In this issue we review our time at the LTE Forum, we review the findings from Riverbed's cloud event, we take a look at our updated handset model and we reprint the results from the week.

…And they will find ways to use it

Last week, we attended the LTE Forum, an industry conference in Dallas organized around the principle of carriers presenting to the audience the things they would like to see from their suppliers. So while we have heard (and written) a lot about data tsunamis, this event was a good chance to get a glimpse of what it will actually take to meet that surging demand.

Riverbed and the cloud

We attended Riverbed's Cloud appliance launch event in NY last week and report our takeaways.

Handset Trends

After every earnings season we like to look back at the handset data compiled from all the vendors results. Today's top 5 looks very different than it did 5 years ago - we break this down and explain why.

Cisco's Q1 Results – Downgrading to Hold; lowering PT to $22

Cisco reported Q1 revenues of $10.75b; in-line with our estimate and consensus. PF EPS of $0.42 met our estimate and beat consensus of $0.40. However, citing pockets of weakness, management guided below expectations. While we still believe the company has a strong technology roadmap, we are concerned about near-term stability and are lowering our rating to hold. Lowering PT from $28 to $22.

For more information, please click on the PDF.

In this issue we reprint the week's research and provide weekly news.

Brightpoint Q3 Results – Good quarter amidst rising expectations

Brightpoint reported Q3 revenues of $889 million, above our estimate of $828 million and consensus of $865 million. Pro-forma EPS of $0.23 beat our estimate of $0.15 and consensus of $0.17. Management sounded upbeat about their Q4 prospects highlighting strength of smartphones and pent-up demand across geographies. We remain cautious about the company's ability to sustain its growth trajectory as industry trends even out. We maintain our Hold rating.

Qualcomm Q4 Results, raising our price target to $55

Qualcomm reported Q4 revenue of $2.95 b, ahead of our estimate of $2.82b and consensus of $2.85 b. PF EPS of $0.68 also beat our estimate and consensus of $0.59. The company guided 1Q11 and FY11 both ahead of expectations. We think the company's product cycle versus the competitive landscape favor Qualcomm giving them the potential to accelerate growth, meriting our Buy rating.

Tekelec Q3 Results

Tekelec reported revenues of $108 m and pro-forma EPS of $0.15. The revs were higher versus our estimate and consensus, while the EPS was a penny below consensus. PF gross margin came in at 63% with 14% operating margin. They trimmed their CY10 outlook, calling for $435 m in revs and $0.775 in PF EPS, on the mid-point. Our latest checks suggest continued weak near-term demand trends with a return to double digit growth potentially in CY12, given positive order momentum in the policy management portfolio. Maintain Hold.

For more information, please click on the PDF.

In this report we review the latest from our attendance of F5's sales event. We also reprint this week's research.

Cavium Q3 Results

Decent results and guide from Cavium: revenues of $55.2 million (up +11% sequentially and up +113% yearly) and $0.25 of PF EPS. Revenues came roughly in-line, while EPS was a beat vs our estimate and consensus of $0.23. The Q4 guide calls for $58-$60m in revenues and $0.27-$0.28 in PF EPS. A solid design win funnel, especially with Tier-1 telco and datacenter vendors, and the potential for upside to consensus in 2H11+ from the OCTEON II and PureVu ramp, merits our Buy rating. Raising Price Target from $33 to $35.

Acme Packet Q3 Results - Solid CY11 outlook; maintain Buy on strong SBC momentum

Acme reported Q3 revenues of $56.6 m and PF EPS of $0.20 - versus our estimate and consensus of $55m / $0.19. PF gross margin was 83.5% with 35.9% operating margin. Their updated CY10 guide calls for $220.5 m / $0.765 (midpoint). For CY11, management's expectation is for 30% revenue and EPS growth. The strong momentum in the SBC rollout cycle is likely to drive upside to the CY11 view - meriting our Buy rating. We are increasing our estimates and raising our Price Target from $33 to $45.

Motorola Q3 Results - Strong Q3 with continued improvement across all segments

Motorola reported Q3 revenues of $5.9 billion, ahead of our estimate of $5.6 billion and consensus of $5.7 billion. Pro-forma EPS of $0.12 came in ahead of our estimate and consensus of $0.11. The company shipped 9.1 million handsets including 3.8 million smartphones. Motorola guided ahead of expectations. We remain positive on management's operational execution, enhanced by continued strength in Android adoption and share gains in international markets. Maintain Buy and $10 price target.

For more information, please click on the attached document.

In this report - insights from our Interop NY industry conversations

We attended Interop in NYC last week. Among the key takeaways: 1) indication of above-target performance of Cisco's collaboration and datacenter business; 2) potential for smart-grid buildouts to drive upside to Cisco's FY12+ consensus view; and, 3) opportunities for F5 in real-time communications.

* Juniper Q3 Results - Inline quarter and guide; maintain Hold on near-term growth caution

Juniper reported an in-line quarter with revenues of $1.012 b and $0.32 of proforma EPS. The Q4 outlook was roughly in-line, calling for $1.12 b and $0.36 diluted EPS on the mid-point. Maintain Hold as near-term growth is pegged to front-half CY11 spending (capx flat y/y in North America). Juniper's longer-term growth outlook could fundamentally improve in 2H11 and into CY12 with checks suggesting major new platforms ramp in CY12+. Price Target unchanged at $28.

* Riverbed Q3 Results - Decent results and guide; maintain Hold on longer term growth concerns

Solid results with revs of $148 m and PF EPS $0.34; well ahead of our estimate and consensus. The Q4 guide was also ahead of expectations: $156.5 m in revs(mid-point) and $0.35 in PF EPS. While near-term trends remain favorable, our longer-term caution around Riverbed's customer base skewing towards big enterprises combined with increasing competition, is the basis for our neutral outlook and our Hold rating on the name. Still, our PT moves up from $30 to $42 to reflect our forward estimates.

* TomTom Q3 Results - Good quarter, but demand is slipping

TomTom reported Q3 revenue of €374m well ahead of our estimate and consensus. PF EPS of €0.14 was a penny ahead of us and in-line with consensus but weighed down by currency charges. The company re- affirmed their full-year guidance of flat revenue and EPS. Better results are offset by our continued concerns on long-term trends for PNDs, meriting a Hold rating.

For more information, please click on the attached document.

In this report, we summarize our discussions with a group of enterprise CIOs from the financial services industry, at a private IT event in San Francisco, around IT spending priorities and initiatives in 2011 and over the next few years. We also met with the Cisco datacenter team to get an update on the progress of their UCS, Nexus, and related datacenter portfolio, from a platforms roadmap and use case adoption point of view.

For more information download the PDF.

In this issue, we report back on our industry, carrier and handset conversations while on the road last week. We have an update on Qualcomm's prospects and carrier spending patterns.

For more information download the PDF.

In this issue we offer a shortened note. We have been marketing in Greater New York and felt that the most interesting data we had to offer was feedback from that trip on investor interest.

For more information download the PDF.

In this issue we review the presentations and meetings at our recent technology conference, we report on our latest findings around RIM's new OS, and reprint our notes from last week.

In this issue we outline how datacenters are fundamentally transitioning from a collection of physical IT equipment to a set of 'virtualized' Cloud IT services. We overview the investor opportunities in 'Infrastructure Virtualization' - a spending theme we believe is the phase II of a datacenter's journey to the Cloud. Cisco and F5, we believe, are best positioned in the near-term to benefit from the infrastructure virtualization cycle. We also summarize what the infrastructure virtualization trend means across our networking names.

For more information please download the PDF.

In this report we summarize our insights from our conversations while at VMWorld 2010 last week. Infrastructure consolidation through virtualization and the transition from siloed equipment to Clouds rank among the top IT priorities. We see F5 and Cisco continuing to meaningfully benefit from these trends based on the market leading positions of their portfolios and the competitive advantage of their IT ecosystems. Cavium, a derivative play, is benefitting from the trend towards utilizing merchant silicon for data networking gear.

For more information please download the PDF.

In this issue we update our Where Are the Profits analysis with Q2 data. We also reprint our notes from last week's research including results from PWAV, TKLC and CELL.

* Handset profits still flowing to RIM and Apple

We update our analysis of where handset industry profits flow with the latest Q2 data. RIM and Apple still consume two-thirds of industry profits on less than 10% share of units. LG slipped into a loss for the quarter, and we think that is in large part due to their weak smartphone line-up. We expect a real battle this Q4 shopping season as HTC, Motorola, Samsung, RIM and Apple duke it out for smartphone share.

For more information, please click on the attached PDF.

In this issue of S2N we summarize insights from our recent checks around the accelerated adoption of merchant silicon in IT equipment. Cavium, we believe, is among the handful of vendors positioned to benefit from the adoption of merchant silicon in both up-market and down-market opportunities.

For more information, please click on the attached PDF.

In this issue we take stock of our investment thesis for the sector and reprint last week's earnings notes from Qualcomm, F5 Networks, and Riverbed.

For more information see the attached PDF.

In this issue we discuss technologies around self-organizing networks (SON) which lets network equipment dynamically adjust to changing traffic patterns and business/IT priorities. We believe Cisco is one of the few vendors to be aggressively investing in the R&D behind this. We see SON as an example of Cisco's strategy to fend off competitors who are seeking to commoditize campus switches. Cisco's strategy is to leverage its R&D to differentiate their products and further cement their relationships with their customers and channel.

For more information, please click on the attached PDF.

In this issue of S2N, In Signals to Investors, we share our point of view of the recently launched AT&T Microcell ('femtocell') service. In Sines of the Times, we summarize our key takeaways from our industry conversations at the Gigaom Structure 2010 event held here in SF last week.


* AT&T's Femto services shows that its data troubles sit in the core.

We examine AT&T's MicroCell. The pricing of the device highlights that the bottleneck in AT&T's network is not an issue solved simply by adding more base stations. The true problem rests in their core network. While this is not a simple problem to solve, we believe the Starent team at Cisco is working to improve it and we expect an upgrade at some point in the future. Carriers are asking consumers to pay for capex (the $150 cost of the box), the opex (configuration and backhaul) and a monthly plan.

* Hands on with our own MicroCell

To better understand the service, we installed an AT&T MicroCell at the S2N compound. We found set-up and configuration to be relatively painless. We also saw much improved radio signal, with coverage extending to many previously unreachable corners. On the negative side, we were disappointed to see that data usage over the femto does indeed count towards our monthly data quota. Equally troubling is that AT&T required we sign up for a $20 a month voice plan. This gives us unlimited voice minutes over the femto, but we still found a few bugs in the system including poor voice quality and dropped calls.

* ‘Clouds have Structure': Key takeaways from Gigaom Structure 2010

We summarize key takeaways for our infrastructure universe from our checks at Gigaom Structure 2010. For both F5 and Cisco, business trends seem to be trending at or ahead of plan across major end- markets, with no signs of spending slowdown due to Eurozone or other macro factors. F5, in particular, is seeing an above target ramp of Viprion on the ‘revenue side' of telcos and a BIG-IP platform and feature-set refresh cycle. Cisco is seeing meaningful ramp for its datacenter portfolio in large enterprise IT, telcos, and datacenter provider rollouts of virtualized datacenter and Cloud rollouts. Cisco's video and wireless and routing products are also seeing above target deployment patterns.

For more information, please click on the attached PDF.

In this issue of S2N we discuss Nokia's pre- announcement, its current struggles and the opportunity it presents for our handset names. In Sines of the Times, we highlight the service provider play for virtualized datacenter equipment vendors; specifically, the near-term implications for Cisco and F5, and longer term for our data networking universe.

* The Nokia pre-announcement and derivative impacts

We share our thoughts on the negative pre-announcement from Nokia last week and discuss the derivative impacts of Nokia's current struggles on our handset names – Qualcomm, Motorola, and RIM.

* UCS and the Trojan Horse

We discuss the fundamental implications $2-3 billion IT as a Service infrastructure rollout cycle for data networking names. Cisco and F5 are likely to meaningfully benefit from the upgrade cycle over the near term, while Juniper is likely to see an impact in CY12+ and Brocade likely to see limited demand in mid-tier opportunities.

For more information, please click on the attached PDF.

In this issue of S2N, we summarize key takeaways from our conversations with CSCO, JNPR, and our IT contacts around understanding the growth accelerants driving the virtualized datacenter upgrade cycle. Specifically, we discuss implications of the growth drivers on our data networking names - CSCO, JNPR, FFIV, BRCD, RVBD, and CAVM.

For more information, please click on the attached PDF.

In this issue of S2N, we summarize highlights on wireless industry trends from our recently concluded Asia trip. Over our last several visits to China, it has become clear to us the emphasis that Qualcomm is now putting on winning over this market and the many small handset vendors there.

* Thoughts on Eurozone demand trends

While trends in the Eurozone remain forefront on investor minds, our latest checks suggest incrementally positive demand trends from Europe in secular high growth areas - mobile core, infrastructure consolidation, and virtualized datacenters. These trends, we argue, are beneficial to Cisco and F5 – among our top large cap and mid cap ideas in our group. We believe our large cap universe, in general, seems well-positioned from any relief rally, given the meaningful upside potential and solid longer-term growth drivers.

For more information, please click on the attached PDF.

S2N #345 - Can Cisco reach its 12%-17% revenue target

In this issue of S2N, we follow up on Cisco's results from last week, and take a deeper look at the company's ability to reach its target revenue growth.

* Can Cisco reach 17% revenue growth
Cisco has set out a long term revenue growth target of 12% to 17%. We are currently modeling them to break through the lower end of that range, but we see a path for them to get to the high end. Our sense is that investors do not think this is achievable, but the company merits further attention as one of the fastest growing large cap names in tech.

* Vblock and Acadia
We met with our industry contacts at EMC World last week. A key takeaway from our industry conversations was the stronger than anticipated trend in the enterprise and carrier adoption of Vblock; a solutions approach we believe is a meaningful growth accelerant for Cisco's datacenter and routing portfolios in the FY11+ timeframe.

For more information, please click on the PDF.

S2N #344 - An in-depth look at India's cell phone market

In this issue of S2N we present the findings from our survey of Indian cell phone retailers and several hundred middle-class consumers. We find Samsung has made solid gains in brand presence and awareness, much of this at Nokia's expense. The market here is increasingly resembling markets everywhere else, with growth at the top and the bottom of the pricing range.

For more information, please click on the PDF.

In this issue of S2N we share our thoughts on why virtualization is getting mainstream IT interest and the fundamental reasons why the technology is viewed as a top-tier CIO and IT priority. We also summarize our latest round of checks on Cisco and F5, from our industry conversations and management meetings, while at the Interop trade show last week.

For more information download the PDF.

In this issue of S2N we share our thoughts on the datacenter upgrade cycle and upside implications for our data networking names - Cisco, F5, and Juniper. We argue that the datacenter upgrade cycle, driven primarily by virtualization, is a 'long tail' initiative, stretching through 2020. Cisco and F5, based on their market leadership position in virtualized datacenter gear are likely to disproportionately benefit from the upgrade cycle, while Juniper could see secular upside for its Stratus Cloud switch.

For more information, please click on the attached PDF.

In this issue we report back from CTIA where we had a chance to catch up with a number of companies and industry contacts, we are raising our smartphone forecast, extending our 3G baseband forecast to 2012.

* Raising our Smartphone estimates
Reflecting strong interest from carriers and robust product roadmaps we are raising our smartphone forecasts. We now expect 18% of global phones to be smartphones in 2010 (based on our recently revised and expanded handset market). We see growth particularly strong in North America and Developed Asia. We expect this trend to remain strong as price points for smartphones fall. One obstacle could be the need for carriers to realign their data plan pricing, we expect some form of tiered or metered pricing to help segment the market and bring smartphones within reach of a broader audience of consumers.

* Extending our State of the Baseband
Handset vendors can take a long time to qualify new baseband partners. We have recently learned of several recent design wins among the top OEMs. These are meaningful but could take multiple quarters to reach commercial volumes. As a result, we have extended our 3G baseband forecast to 2012, when we expect to see Qualcomm see a noticeable share increase in that timeframe. In our March 29, 2010 QCOM bulletin, we raised our forward estimates on QCOM; published our FY12 estimates and raised our price target from $52 to $54.

* CTIA checks on wireless infrastructure
At CTIA we spoke with a number of carriers and equipment vendors. Their comments were consistent with comments in our recent notes on capex trends. Carriers continue to increase budgets for wireless core and edge networks, sometimes at the expense of wireline and RAN spending. We think Cisco, Juniper, F5 and Tekelec should all show signs of this through the year.

For more information download the PDF.

* S2N #340 - The data tsunami continues to roll in.

In this issue of S2N we examine trends in data traffic and the affect that is having on carrier spending patterns, we also take a close look at how this will affect F5.

* FFIV: Color on TAM expansion opportunities
Our Cloud Connect conversations suggest that F5's $2.5 billion addressable market is likely to double over the next several years. Our TAM expansion thesis is based on meaningful traction for F5's platforms at big telcos for mobile Internet and Cloud hosting services, at datacenter providers for Infrastructure as a Service (IaaS) opportunities, and new use cases for the ARX in IT/Cloud file virtualization.

For more information, please click on the attached PDF.

In this report we publish our revised handset model which includes higher unit shipments, our estimates for 4G devices and a search for the industry's undercounted handsets. We also take a look at the Cisco/EMC/VMware joint venture Acadia.

More from Mobile World Congress. In this issue we conclude our data flow from Barcelona with a look at the 3G baseband market and map out the share of 3G basebands across the industry. Qualcomm is slowly gaining share. Broadcom has made clear progress, but remains a small player. MTK has only just begun shipping, but starts to show up meaningfully next year as it works its installed base. TI remains an important player despite their plans to exit the business. Nokia remains an important swing factor, but is proving slow at transitioning from TI to STE, Qualcomm and other potential partners.

In this issue we revisit our analysis from last June comparing industry share of units and share of profits. Smartphone vendors Apple and RIM continue to be over-represented with a combined 3% share of units with almost 60% of industry profits.

For more information, please click on the attached document.

In this issue we take a complex subject (wireless carrier pricing plans) and try to make it simple; then we take an over simplified subject (cloud computing) and pull it apart to try to make it more useful.

We lay out our views for 2010 with a look at wireless and data networking trends and an update on our investment thesis for QCOM, MOT, RIMM, CSCO, CELL, FFIV, and JNPR.

For more information, please click on the attached PDF.

In this issue we summarize our industry contact discussions around infrastructure equipment spending trends in 2010, and discuss implications for Cisco, Juniper, and F5 - our leading data networking names under coverage.

For more information click on the PDF

In this issue we take a closer look at the emerging femtocell industry, we also report back from our day on the road with Tekelec and comment on the Qualcomm/Mediatek announcement.

* Femto cells You can't fight the feeling

Femto cells are going through the S-curve of industry enthusiasm and disappointment. Currently, it feels like the wireless industry is going through the down-slope of that curve, but we think this current lowering of expectations is part of a normal process of technology adoption. Carriers will need to find more advanced solutions to densify their networks and provide better indoor connections. We also think enterprise femtos, with companies like SpiderCloud, are emerging as a promising area.

* Qualcomm and Mediatek The calm before the storm

Last week, Qualcomm and Mediatek (2454.TW; Sell, 520TWD) announced that they had signed a licensing agreement. Under the agreement, Mediatek's UMTS customers will still need to obtain a license from Qualcomm and pay royalties. Mediatek is now better positioned to win designs for its products with 3G handset vendors. The benefits for Qualcomm are less clear, but we think it is likely that they extracted some valuable concession whether financial or otherwise.

* On the road with Tekelec

We were on the road last week with Tekelec's management team. They remain upbeat about their outlook for the year. We think they are well positioned to be an important player in the convergence of circuit-switched and VoIP/SIP signaling. However, it will likely take some time before this growth is apparent in their numbers, probably some point in 2H10 or beyond.

For more information, please click on the PDF.

In this issue, we review our outlook on Brightpoint, take a closer look at Juniper's enterprise efforts and reprint our notes on Cisco and F5 from last week.

We share our thoughts on the Cisco, EMC & VMware Virtual Computing Environment coalition, and the Cisco and EMC Acadia JV. We also reprint notes from the week on Cisco, Qualcomm, Brightpoint, Tekelec, and Skyworks.

We take a look at handset units and ASPs, gauge implications for Qualcomm, question Juniper's strategy and RIM's marketing campaign. We also reprint notes from the week on Airvana, Acme Packet, Juniper, Motorola and Powerwave.

We examine the impact of Cisco's announced acquisition of Starent, we also take stock of share price movements for the year.

We discuss the handset industry outlook, and in specific Qualcomm, in Signals to Investors. We preview our infrastructure names - Cisco,F5, and Juniper, in Sines of the Times. We expect all 3 companies to post a beat, based on relatively modest street expectations for the networking vendors and a sooner-than- expected spending rebound. We remain positive on Cisco's and F5's growth stories, and cautious on Juniper, as we move into the back- half.

In this S2N, we share our thoughts on Motorola in Signals to Investors and on Cisco's Unified Computing System (UCS) in Sines of the Times.

* Motorola's handset turnaround?

This week, we may get our first glimpse of Motorola's first Android device. While we have not had direct contact with Motorola's devices, but several carriers have. We believe T-Mobile and Verizon are both likely to launch the new Motorola Android devices, with AT&T likely coming on board early next year. We also hear of a high degree of interest outside the US.

What's it Worth? We dust off our Sum of the Parts model on Motorola and evaluate what the company is worth with handsets at breakeven ($8) and with a modest 4% profit ($12).

* Cisco UCS

The UCS solution and the Nexus switch portfolio are the cornerstone of Cisco's entry into the data center market, and part of their Datacenter 3.0 strategy. In a nutshell, Cisco's datacenter strategy aims at transforming the IT datacenter, using virtualized versions of the three datacenter building blocks of compute, storage, and networking -- with the network as the underlying platform.

Well Positioned: We believe Cisco's UCS and the Nexus switches are among their best-positioned products to capture the majority share of the datacenter infrastructure equipment upgrade opportunities, many of which are previously paused projects that are anticipated to resume in the September through December timeframe and continue through 2010+.

For more information, please click on the attached PDF.

In this S2N, we take a bottoms-up look at Starent's order book which looks good, we relate our most recent checks on some of those carrier prospects, and reprint our earnings notes from Cisco, Tekelec and Brightpoint.

* Reading tea leaves: a bottom-up analysis of Starent's potential order book

We drew up a list of 45 carriers where we think Starent has some level of sales potential and built a probability-weighted model to determine Starent's potential order book over the next several years. From this analysis and our ongoing checks we think their pipeline looks crowded through 2010 and into 2011. We are raising our price target on Starent from $29 to $30.

* Further checks on key Starent's prospects at a number of key carriers

Contrary to industry reports, we think Starent's prospects for participating in the AT&T EPC opportunity are improving. We think Verizon and Vodafone's validation have proven important factors improving their prospects at China Telecom, with the company well positioned at China Unicom and China Mobile as well. Checks indicate that they have begun booking revenue (not just billings) from Vodafone. Their hands-on support has also given a meaningful boost at a number of Indian carriers.

* Raising Starent price target from $29 to $30, maintain Buy rating

Our price target is based on a DCF analysis. For the DCF, we assume a WACC of 12% and a 3% growth rate. Our 12% WACC is based on a risk- free rate of 4.8%, Beta of 1.5, and equity risk premium of 4.8%. Key downside risks include mobile equipment capex delays, shifts in capex spending patterns, and UMTS market competition. For a complete risks overview, please see page 7

* Cisco: Solid results and positive outlook; maintain Buy rating

A beat-and-raise from Cisco; consistent with our preview. Company's starting to see double-digit increases in orders, across sales theaters and product categories, and a return to normal seasonal patterns. We remain bullish on Cisco as a near-term IT spending recovery and longer-term growth story. TP raised to $28, pg. 10.

* Tekelec: In-line revenues, EPS beat; maintain Hold rating

Decent execution in a tough carrier capex environment; with signaling growth being the key capex spend and growth driver. We expect double- digit revenue growth levels to materialize in the 1H11+ timeframe, based on ramp-up in upgrades of their core signaling, number portability, and messaging products.

* Brightpoint:

Brightpoint put in a good quarter, with Q2 PF EPS of $0.11 to our estimate of $0.09. Logistics gross margins came in ahead of our estimates. Distribution gross margins are a bit light, but we expect a recovery in 2H09. The company continues to track ahead of our estimates in paying down debt and continue to manage their balance sheet well. We maintain our Buy rating on the back of their ability to expand their higher-margin logistics business, especially in their recently acquired European properties. We are raising our estimates and price target from $7 to $8.50. For details, please see pgs 14 & 15.

For more information, please click on the attached PDF.

In this S2N we take a look at history repeating itself with Qualcomm hitting the pedal on 4G investments just as their competitors seem to be cutting back. We also republish earnings notes on Motorola, Powerwave, Airvana and Acme Packet.

* Qualcomm: Haven't we met somewhere before? Wasn't it 2001?

It seems that history is repeating itself. Once again Qualcomm is pouring new investment into 3G/4G just as its competitors are shying away or cutting back. The company continues to execute well on all fronts. They are pushing process nodes down and we expect the bulk of their CY10 baseband shipments to be at 45nm. They have just added a second design win at Nokia. We expect to see them launch a TD-SCDMA chip with the backing of China Mobile. And we would not be surprised to see Qualcomm supplying basebands to all ten of the top ten handset vendors in CY2010. Bottom line - we are increasing our forward estimates and raising our price target from $52 to $55.

* Motorola: Waiting for the Androids

Motorola reported a surprisingly good quarter. The handset business halved its operating losses and we saw sign of pick-up or at least stabilization in their other businesses. The focus remains on the launch of their new Android devices which still appear to be on track for Q4 launch.

Powerwave: Another Miss

Powerwave's Q3 came in well below our estimates for revenue. Loss per share was closer, but we have little confidence that they can maintain the improved cost structure. We remain cautious on the name and maintain our Hold rating.

* Airvana:

Airvana's results and guide point to an uptick in Tier-1 operator pull-through of their EV-DO software. We remain concerned about substantive operational and business-case issues that are likely to surface as femto rollouts transition from sub-scale to scale, sometime in 2H10+ and the reason for our Hold rating

* Acme Packet:

Decent results; in-line guide. The market is likely mispricing the stock, suggesting the likelihood of a buyout, and also a lack of clarity around the potential upside to their numbers from their recent Tier-1 SBC deals. Maintain our Hold rating.

For more information, please click on the attached PDF.

In this S2N we preview Cisco's upcoming quarter in Signals to Investors. We conclude with a reprint of our earnings notes from last week on Qualcomm, Skyworks, Starent, and Juniper.

* Cisco quarter preview: Sleeping Giant, Waking Up?

We anticipate a beat-and-raise from Cisco. Our conviction is based on our checks which suggest modest sequential growth in Cisco's large enterprise and service provider business, through the back- half of the year, and into 2010+.

* Qualcomm:

After positively pre-announcing, Qualcomm reported numbers, slightly ahead of our estimates and consensus. Investors' focus was clearly on the guide; slightly below our estimates and street, which we interpret as a return to normal seasonality. We remain positive on the stock. Maintain our Buy rating.

* Skyworks:

Skyworks reported numbers, better than our estimates and consensus. Skyworks continues to benefit from share gains with sockets at every major handset vendor and key baseband reference designs. While Skyworks can outperform, relative to its competitors, it is not immune from macro conditions. Maintain our Hold rating.

* Starent Networks:

Another solid quarter; the company raised 2009 revenue and margin guidance. Starent continues to execute well and gain operator traction. Our checks suggest increasing interest from Tier 1 and Tier 2 operators and continued progress in UMTS and LTE packet core field trials, in North America, EMEA, and APAC. Our outlook for the company and the stock remains solid. Maintain our Buy rating.

* Juniper Networks:

Decent numbers; EPS was a penny beat. Juniper's results and Q3 outlook, while indicative of top-line stabilization, are telling of sales declines in their established router portfolio. Current levels are likely pricing in a buy-out scenario and fully reflect their mid- term growth profile. Maintain our Hold rating.

For more information, please click on the attached PDF.

In this issue we summarize what we learned from our recent industry conversations about AT&T's technology domain strategy. We also discuss our perspectives on the potential implications of the strategy on the communications equipment value chain.

For more information, please click on the attached PDF.

In this S2N we preview earnings for companies in our sector. We think the Q2 handset market is a flat to up slightly in units, Q3 should see normal seasonality and Q4 remains an open question. Infrastructure spending is mixed, with total carrier capex down but spending still healthy for long-term, core networking builds.

QCOM: Qualcomm has already pre-announced positively, sparking some confusion, based on the company previously indicating that they expect unit shipments to decline in the September quarter. While it is still unclear on how Q3 trends are shaping up, our recent checks indicate good demand for CDMA handsets in China and flattish ASIC unit sales sequentially. While QCOM remains a safe haven in volatile times, we see no blow-out performances on the horizon.

MOT: The stock remains in wait-and-see mode as the world awaits their new handsets which should be unveiled at some point in Q3. We remain positive on the stock and would continue to accumulate at current levels. Our checks continue to point to strong carrier interest in their new Android phones. We have confirmed press reports that Verizon should be a big supporter of this launch, as will T-Mobile, and, possibly a third-major carrier.

STAR: Our checks point to revenues and EPS slightly ahead of our expectations for Q2. The stock has been among the best performers in the group. Tier-2 mobile operators and cable operators are likely to be a solid growth opportunity for Starent, incremental to their Tier- 1 pipeline, based on planned (2010+) initiatives from 10-15 operators worldwide.

For more information, please click on the attached PDF.

In this S2N, we share our views on the handset industry's production ramp. We also discuss the value proposition of multi-core network processors for Starent and its mobile packet core equipment peers. We also reprint last week's note on RIM's Q1 FY10 results.

* But will they come?

The industry has started building, now will the consumers show up? The industry has recently begun to ramp up production after the cataclysmal de-stocking in Q4 and disappointing shipments in Q1. End- demand, however, remains an open question.

* Multi-core network processors: Implications for STAR and its peer group

We discuss the value propositions of multi-core network processors for Starent and its mobile packet core equipment peer group. We expect multi-core processor enabled mobile packet core platforms to substantially improve the relative competitive positions of both the equipment suppliers and the operators, reduce the cost-basis of the packet core platforms, and enhance their capability to run a variety of value-add features required by operators offering 3G/4G data services.

* RIMM: Q1 FY10 results review

We reprint our RIM Q1 results note from last week. While their Q1 results were inline with street and DB estimates, they missed consensus on subs-adds and devices shipped. Q2 guidance was in-line. We remain on the sidelines on this name, given our concerns for cash- flows, combined with increasing competition and pricing pressures in the sector (details on page 6).

For more information, please click on the attached PDF.

In this S2N we report from our globetrotting trips - China, Hong Kong, Taiwan, and San Diego. We also raise our estimates on Qualcomm and raise our price target from $50 to $52; maintain our Buy rating.

* Qualcomm: Valuation and risks

We maintain our Buy rating. Our price target is derived from a DCF analysis, based on a 11% discount rate and a 5% perpetual growth rate. The discount rate is based on a risk-free rate of 5%, beta of 2.0, and equity risk premium of 3%. The 5% growth rate assumption is in-line with our view of long term growth rate trends in industry and Qualcomm's favorable risk/reward profile. Risks to our price target include macro conditions, consumer spending and wireless capex trends, and 3G adoption trends.

For more information, please click on the PDF.

In this S2N we take a closer look at handsets. In the near- term we see signs that unit growth may not be as strong as expected in Q2 as inventory levels stabilize. We also take a longer term look at profitability. Increasingly, the smartphone vendors are claiming more of the industry's profit dollars even as the pool of profitability stabilizes or shrinks.

For more information, please click on the attached PDF.

In this S2N we update our State of the baseband report from last October. The WCDMA chip market continues to winnow down. Seventeen vendors have fallen to eleven, with several more set to exit. We continue to see three vendors left standing in three years - Qualcomm, STE and Mediatek. Broadcom, Infineon and Icera remain wild cards. As that market consolidates, the market for applications processors is set to expand this year with Qualcomm's Snapdragon, Intel and Nvidia going after Marvell and TI's product lines.

For more information, please click on the attached PDF.

In this S2N we wrap up earnings and reprint our notes from Brightpoint, Powerwave and Tekelec's earnings calls.

* Are things getting better or just not getting worse?

The market seems to have priced in a recovery that is not immediately apparent in earnings. For our companies, we revised up 2009E EPS 9% this earnings season, and left 2010 estimates largely unchanged, but the same companies are up 20% since April 1st. While it seems unlikely that we will see any further earnings cuts this year, we see nothing that leads us to expect meaningful upward revisions.

For more information, please click on the attached PDF.

For more information, please click on the PDF document.