Bear Stearns: KOMG On Track; PLT Seeks to Expand Margins

Bear Stearns analysts Andy Neff, Bill Hand and Ted Chung released a note to clients in which they discussed Komag, Inc.'s (KOMG) positive outlook for the upcoming quarter, as well as Plantronics' (PLT) commitment to consumer audio despite mixed results. Excerpts from the report:

Komag, Inc. (KOMG) affirms 4Q06 outlook and highlights strong growth opportunities. Presenting at Bear Stearns SMid-Cap Conference yesterday (11/14), KOMG CEO Tim Harris tacitly affirmed its 4Q06 outlook, indicating that KOMG would have issued an 8K if business wasn't tracking to plan (recall that KOMG pre-announced shortfall in September). Regarding supply/demand for media, KOMG noted that even with substantial amounts of media capacity coming online, it still sees tight supply through 2007 (supply could temporarily outstrip demand in 2Q07 as HDD business hits seasonal low but KOMG will use any excess capacity toward fulfilling 2H07 demand. KOMG remained optimistic on expanding its addressable market (e.g., adding Samsung as customer, ramping perpendicular/PMR, 2.5" aluminum qualifications at 2 customers, 2.5" glass disks in '07). Despite some concerns about Vista stalling HDD demand, KOMG stated that Playstation 3 ramp could be an offset and Vista remains strong driver for early '07. Stock impact: positive for KOMG (business on track).

Plantronics, Inc. (PLT) still committed to consumer audio business. Presenting at Bear Stearns SMid-Cap Conference yesterday (11/14), CFO Barbara Scherer reaffirmed PLT's commitment to its consumer audio business (Altec Lansing) despite recent operating losses and lack of a positive catalyst until next product refresh (2007 holiday season). PLT continues to see Altec Lansing as key to its participation in long-term trend towards convergence given Altec Lansing's expertise in consumer market and speaker audio technology. As for its core headset business, PLT noted that it is seeing increasing sales of wireless headsets, especially in Bluetooth headsets. The company reiterated its goal of expanding margins by improving utilization of its manufacturing facilities in China and Mexico, as well as streamlining supply and R&D expenses with focused marketing expenditures. PLT did not provide any financial update. Stock impact: mixed for PLT (Altec Lansing could remain a drag on margins/earnings offset by long-term margin improvement initiatives).