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2009-06-04 01:40

LIFE CAN BE SEEN

NEW YORK, NY In the wake of a rather spectacular performance by the indexes at the beginning of the week, there was a not too surprising bout of profit taking by market participants. However, the current market action suggests that a modest recovery is on the way. Much of the move today, and for the past several weeks for that matter, can be attributed to the shifting sentiment by traders and investors that the worst of the current economic malaise is now in the history books. The plethora of economic data that has been released in recent weeks in the aggregate appears to suggest that early dawn is breaking on the economic landscape. Needless to say, there is still robust debate between the believers and non-believers about the near-term sustainability of this current rally. However, there is an almost universal consensus that the long-term outlook for the economy is very favorable. This stems from the underlying belief that much of the excesses have been wrung out of the economy and it is sometimes necessary to take one or two steps back in order to make a gazelle like leap forward. Such appears to be the case with the current recovery. In fact, the approximately 2,500 point move in the Dow Jones Industrial Average since early March is creating many converts to the favorable outlook camp. Most of the relevant data points seem to suggest that there is some light flickering on the horizon. Given that, it is better to get in front of trades before the good news about how they are performing is seen as headlines on daily newspapers. At this point it appears that crude oil and other commodities are in the early stages of making a sustained move up due in part to the faltering value of the dollar but also, to a large extent, to the improving outlook for the U.S. and global economies. Once a recovery starts to take place, the demand for crude oil and that of other commodities will also increase, driving up the price and by extension, the underlying equities with which they are associated. Underscoring this outlook is the fact that the price of crude oil is trading higher in the current session based on the outlook by a major bank that the commodity will hit $85.00 per barrel by the end of 2009. Afternoon Notes from WSS Research Desk Carlos Guillen Earlier today, Intel (INTC) announced that it intends to acquire Wind River Systems (WIND) for a price tag of approximately $884.0 million, which is equivalent to $11.50 per share. However, if we exclude Wind's current cash balance of $94.6 million, the price tag is lower at $789.0 million. During 2008, Wind reported revenue totaling $360.0 million. If we consider the price tag to revenue ratio of 2.19x, we see that this multiple is significantly higher than the industry average of 1.06. During the past 365 days, shares of Wind River Systems have troughed at $5.73 (3/9/09), peaked at $12.82 (8/13/08), and closed yesterday at $8.00. We had our subscribers take profits this morning on their position in WIND from back in April (for a profit of a whopping 68%). Wind River Systems is a leading provider of operating systems, middleware, and software tools. The company markets proprietary VxWorks OS, open-source Linux, and Workbench software tools. Despite the fact that the purchase seems to be overpriced, we believe there are synergies that more than compensate for the price premium. Intel is taking the steps in an effort to diversify its offerings into markets beyond its core PC, Server, or Mobile markets. While Intel is working on chips for these diverse sectors, it will also need specialty software, and Wind River Systems will certainly bring this to the table. In addition, Wind is a well established company with many of clients, which Intel will sell to and expand. As such, we are positive this acquisition is a good one for Intel and will certainly add value to its shares in the long-run.

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Disclaimer: Securities Operations Forum is providing this research to assist investors in determining when to buy and when to sell. All investment decisions are yours and as a result you could make or lose money. Securities Operations Forum, its employees and/or its affiliates and family members may from time to time take positions in the open market or otherwise with respect to the securities discussed, but not have stock ownership equal to or greater than 1% of the outstanding stock of the covered company nor does any employee of Securities Operations Forum sit on the Board of Directors of any covered company. The statements made herein include information obtained from sources believed to be reliable, but no independent verification has been made and we do not guarantee its accuracy or completeness. The statements made herein contain general information and do not constitute an offer to buy or sell any security.