Needham & Company Maintains a 'Buy' on Xyratex (XRTX); Brief Update

Needham & Company maintains a 'Buy' on Xyratex (NASDAQ: XRTX), price target lowered from $13 to $11.

Needham analyst says, "Although XRTX execution appears ok, there are some offsetting factors within each of its segments. SI should benefit from slowing HDD areal density growth (meaning more heads and platters), an expanding customer base (ie. Toshiba-N/R) and entering new HDD CAPEX segments offset by increased competition (Teradyne (NYSE: TER)) (Not/Rated), weak demand related to pending WDC/HGST and STX/Samsung M&A, and slower 2.5”/notebook
demand. In NSS - expanding within IBM (NYSE: IBM) (N/R) (V7000), anticipated higher volumes due to HP (NYSE: HPQ) and Dell (Nasdaq: DELL) buying PAR and CML and good momentum at NTAP are offset by NetApp (Nasdaq: NTAP) using XRTX/Jabil (NYSE: JBL)- 75/25% in ’11 and up to 50/50% in ’12, potential implications long-term of NTAP/Engenio acquisition and EMC (NYSE: EMC) transition to in-house in 1H’12."

"We are raising our F4Q revenue (to $330M from 315M)...Adjusting F12 to EPS $1.14 from $1.23 on $1.415B (unchanged)."

For more ratings news on Xyratex click here and for the rating history of Xyratex click here.

Shares of Xyratex closed at $8.87 yesterday.

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