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Technology Stocks : Sonicwall Inc. - SNWL

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To: D. K. G. who wrote (57)10/13/2003 4:40:00 PM
From: D. K. G.   of 63
Lehman on SNWL

EPS (FY Dec)
2002 2003 2004 % Change
Actual Old New St. Est Old New St. Est 2003 2004
1Q 0.02 (0.03)A (0.03)A (0.03)A NA (0.03)E (0.01)E (250) 0
2Q 0.04 (0.06)A (0.06)A (0.06)A NA (0.02)E (0.01)E (250) 67
3Q 0.01 (0.05)E (0.05)E (0.05)E NA (0.01)E 0.00E (600) 80
4Q 0.00 (0.03)E (0.03)E (0.03)E NA 0.00E 0.01E NA NA
Year 0.06 (0.17)E (0.17)E (0.16)E (0.14)E (0.06)E (0.01)E (383) 65
Market Data Financial Summary
Market Cap 462.4M Revenue FY03 86.20
Shares Outstanding (Mil) 67.7 Five-Year EPS CAGR NA
Float 54 Return on Equity NA
Dividend Yield NA Current BVPS NA
Convertible No Debt To Capital NA
52 wk Range 7.31 - 1.83
Investment conclusion
! Concurrent with our sector upgrade, we are
upgrading shares of SonicWALL from 2-Equal
Weight to 1-Overweight and increasing price target
from $5 to $9.
! With an entirely new management team and product
refresh underway, we believe SonicWALL is in early
stages of turnaround which should gain speed in
2004. Recent product releases, including SOHO
TZW, and new Pro Series 3060 and 4060 released
in mid September, should be 4Q sales driver. We
believe we are likely to get further updates on
product roadmap at October 30th Analyst Day.
! Believe pricing beginning to stabilize suggesting
improved inventory levels which should alleviate
gross margin pressure. Channel checks point to
stable demand environment.
! Maintain FY03 estimates. For FY04, raising EPS
estimates from loss of $0.14 to loss of $0.06. Also
raising our topline slightly from $91.3 million to $95.0
(+10% y/y).
! Our $9 price target reflects an enterprise value of
3.9x C04.

Upgrading to 1-Overweight
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