Stock Market Chumps..........9-07-06

Martek Biosciences Corp. (MATK)

Last Trade:	21.54
Trade Time:	11:45AM ET
Change:	7.08 (24.74%)

Analyst Says Martek Biosciences to Face Weak Quarters, Cites Higher Costs

-- Martek Biosciences Corp., which makes nutritional oils to supplement baby food, could be in for a weak three quarters due to higher manufacturing costs and already penetrated markets, a Merrill Lynch analyst said Thursday.

Late Wednesday, the Columbia, Md.-based company said it swung to a profit for the quarter ended July 31, but guided for full-year earnings of 62 cents per share to 65 cents per share. Analysts expected earnings of 70 cents per share, according to a Thomson Financial poll.

Merrill Lynch analyst David Munno reiterated a "Sell" rating, saying the company has already penetrated much of its core baby formula market, and the market is unlikely to expand.

Since costs for manufacturing remain high, and due to fluctuations in customers' production timing, earnings for the next three quarters will probably be weak, wrote Munno.

But after the stock declined in aftermarket trading Wednesday, shares are closer to a fair value, he said.

Flow International Corp. (FLOW)

Last Trade:	11.30
Trade Time:	11:44AM ET

Change: 2.30 (16.91%)


Flow International Corp., a supplier of high-pressure waterjet products, on Wednesday said it will delay releasing results for its first fiscal quarter amid questions over how it should record certain revenue.

The Kent, Washington, company said it was "recently made aware of information which raises questions as to whether it is appropriate to recognize revenues for certain sales of waterjet cutting systems in the first quarter and needs additional time to review the transactions."

Flow said it will reschedule a conference call to discuss first-quarter results as soon as possible. The company, though, will still host its annual shareholder meeting in Chicago for the 2006 fiscal year on Sept. 11.

Palm, Inc. (PALM)

Last Trade:	14.01
Trade Time:	11:38AM ET
Change:	1.52 (9.79%)

Palm Shares Plunge on Revenue Shortfall, Analysts Worry NewTreos Might Not Solve Slowdown

-- Shares of Palm Inc. plunged Thursday morning as analysts en masse reacted to Wednesday's news that slow Treo smartphone sales will cause the company to miss its first-quarter sales outlook by about $30 million.

Palm's stock plummeted $1.35, or 8.7 percent, to $14.18 in morning trading on the Nasdaq, having traded as low as $12.25 and as high as $24.91 in the past year.

"After providing first-quarter guidance $30 million below expectations June 29, Palm ... now expects $30 million shortfall to new guidance," wrote RBC Capital Markets analyst Mike Abramsky in a note to investors.

The analyst downgraded Palm to "Sector Perform" from "Outperform" and dropped the price target to $16 from $23.

Palm said after the bell Wednesday it expects revenue of $354 million to $356 million for the quarter ended Sept. 1, down from the outlook it gave June 29 for revenue of $380 million to $385 million. However, the company said its outlook for adjusted earnings of 18 cents to 19 cents per share stands.

"The extent of impact from the $199 Motorola Q (vs. Treo 700 at $399) on Treo retail sellthrough appears to be greater than we expected," wrote Abramsky.

The analyst added that the Treo's features and design may not justify its premium price, but that the upcoming launch of a somewhat less-expensive Treo might not fix the first-quarter issues. "We do not believe market demand is the issue, which we think will continue to grow as strongly as the wireless data market expands, but is Palm-specific issues."

Morgan Keegan's Tavis C. McCourt wrote in a note to investors that a falling stock price may "provide an interesting opportunity in the stock depending on where the shares settle out." The analyst continues "to believe Palm will ultimately be bought by either a traditional computer manufacturer looking to get into the smartphone business ... or a mobile phone manufacturer looking to bring a better cost structure to a great product and a great brand."

McCourt maintained a "Market Perform" rating on Palm. Meanwhile, Lehman Brothers dropped their price target for the stock to $14 from $18.

Merrill Lynch analyst Vivek Arya took a more positive stance, maintaining a "Buy" rating and a $19 target for the stock.

Hi Tech Pharmacal Co. Inc. (HITK)

Last Trade:	14.51
Trade Time:	4:00PM ET
Change:	2.94 (16.85%)

Hi-Tech Pharmacal Co., a maker of over-the-counter generic drugs, said Thursday it swung to a first-quarter loss as sales declined by 27 percent and research and development costs increased sharply.

Losses totaled $959,000, or 8 cents per share, down from a profit of $1.4 million, or 11 cents per share, last year. Sales for the quarter were $11.3 million, down from $15.4 million last year.

Research and development costs for the quarter increased to $1.3 million from $637,000 last year.

Shares closed Wednesday at $17.45 on the Nasdaq, but tumbled $270, or 15.5 percent, to $14.75 in pre-market trading on the INET electronic exchange.

Hi-Tech said sales of generic drugs fell to $8.4 million from $13.9 million last year, due to lower unit sales of cough and flu products as the flu season ended up being weaker compared with a "stronger than normal" season in the prior year. In addition, the company said it experienced pricing pressure on several higher margin products.

The company also said it increased its stock buyback plan by $10 million. It's previous plan has remaining authorization of $4.5 million.

Looking forward, the company said it still expects 2007 sales to grow between 5 percent and 15 percent over 2006.

Aspen Technology Inc. (AZPN)

Last Trade:	10.35
Trade Time:	4:00PM ET
Change:	1.21 (10.47%)

Although Aspen Technology Inc. said late Wednesday it will have to restate earnings from its investigation of stock option practices, a Jefferies & Co. analyst remains upbeat on the software provider.

Analyst Robert Schwartz rates the stock "Buy," saying the stock options review appears to be focused on technical problems associated with the measurement date of the grants _ not on intentional backdating of grant dates.

"We think the restatement of 2001 to 2006 statements could be finished within several weeks, given that the company has already calculated and announced the estimated impact of the restatement," Schwartz wrote in a client note on Thursday.

He said investors would probably be disappointed by the accounting problems, but remained encouraged by the company's fourth-quarter license revenue.

On Wednesday, Aspen said a 20 percent rise in license revenue fueled a 10 percent rise in fiscal fourth-quarter revenue. "Overall, we view the preliminary results positively," wrote Schwartz.

Aspen didn't release full financial information for the quarter or the year because of the ongoing investigation, but remained optimistic about the outlook for fiscal 2007.