Key Street Calls: Microsoft-Yahoo, VMware, Akamai

VMware (VMW): BARD still neutral on VMW after in-line Q1. “Competitive headline risk and valuation” prevent upgrade to Buy. Target price to $63, cuts 2008/2009 EPS, maintains Neutral.

Yahoo! (YHOO), Microsoft (MSFT): Cantor Fitzgerald doesn’t see Yahoo’s Q1 changing anything vis-a-vis YHOO’s value to MSFT. Doesn’t expect MSFT to alter offer but remain convinced that MSFT buyout is “most likely scenario.” Collins Stewart disagrees and thinks that there’s a “strong possibility” that MSFT will increase offer. Price target remains $33.50. Credit Suisse sees little chance that MSFT will raise bid, downgrades to Neutral from Outperform. Jefferies believes results “could encourage MSFT to raise its bid, leading to a fast, friendly butout deal.” Raises target to $30 from $28. Stanford does not believe results were strong enough to improve YHOO’s negotiating position and expect Microsoft to launch a hostile bid. (FLWS): JMP Securities thinks FLWS will blow quarter: Sees $0.03 EPS for Q3, below consensus of $0.03.

Citrix Systems (CTXS): Kaufman Bros. expects in-line Q1 revenue rom CTXS, but see gross marging coming in 80 basis points below Street expectations due to “lower margin XenSource revenue and additional revenue from low-margin NetScaler products.” But still thinks company “poised to meet expectations.” [Our take: If Kaufman right, Street won’t like in-line revenue and lower gross margin]

Akamai (AKAM): Piper raises target after comScore reports solid video volumes. Valuation attractive, maintain Buy.

Game Stop (GME): Citi adds GME to its “Top Picks Live” list on expectations that hardware price cuts and PS3 momentum will deliver upside.


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