The continuous strong performance in the company's Brazilian soft drink division has been quite encouraging, including continued growth in revenues and volumes and a strict cost discipline that keeps cost of goods under control.

The launch of a new law in Brazil, in June, which established zero tolerance limits for drinking and driving is very negative for the company as it has been reducing beverage sales considerably. We need more time to have a more accurate measure of the effect of this law on the company's revenues, but the effect is a definite negative and worth noting.

NMS Comms Target Reduced

We maintain our Hold rating, but reduce the valuation target for NMS Communications Corporation (NMSS), an applications provider for value-added services in mobile communications.

This follows second quarter 2008 financial results that were well below our estimates. Revenue from its newly acquired LiveWire Mobile segment was impacted by delays in revenue recognition associated with several capital expenditure deals. We believe softness in product demand will continue in the second half of the current fiscal year as a result of weak global economic indicators.

The management guidance for the remainder of 2008 remains tepid, with only modest improvement in selling opportunities. On the other hand, NMSS' strategic decision to rebuild itself from a platform developer for mobile value-added services to a full-suit mobile personalized service provider may turn out favorably over longer investment periods.

NMSS is operating with a net loss, and it is not appropriate to value the stock on a P/E basis. With respect to other selected valuation metrics, the stock is trading well below its peer group averages. We believe these discounts, in terms of financial metrics, are the reflection of continued soft sales growth and a lack of earnings visibility over the longer-term.

However, according to our assessment, the market size for ring-back tone services continues to grow which, in turn, may generate solid opportunities for the company. Furthermore, the gradual conversion of indirect ring-back tone platform customers to direct customers remains encouraging. We set a reduced target price of $1.50 based on an EV/Sales multiple of 0.7x to our 2008 sales estimates.

Trimeris Has Further to Fall

Sales of Trimeris, Inc.'s (TRMS) lead drug Fuzeon -- its first-generation fusion inhibitor for HIV -- has been declining dramatically since 1Q08 due to fierce competition from Selzentry and Isentress. The collaboration amendment with Roche and several management changes further cast a shadow on the company?s future. We maintain our Sell rating on Trimeris with a $3.50 price target.

U.S. sales of Fuzeon came in at only $16.1 million in the second quarter of 2008, down 51 percent year-over-year. Ex-U.S. sales of Fuzeon were $22.2 million, down 23.8 percent year-over-year. As a result, Trimeris booked only $4.7 million in revenue in 2Q08, a decline of 48% year-over-year. Net income in 2Q08 was $2.5 million ($0.11 per share) on an adjusted basis compared to net income of $4.6 million ($0.21 per share) one year ago.

The Biojector 2000 was expected to be approved in 2008. The device was expected to make Fuzeon more convenient for intake and drive the drug s sales. However, in October 2007, Trimeris and Roche announced the withdrawal of the supplemental New Drug Application (sNDA) for Biojector 2000 due to a significant delay in receiving approval of Biojector 2000.

Further, we don?t think the dividend and the share repurchase program will create value to shareholders unless the company acquires meaningful late-stage drug candidates. We remain clueless as to how the management will drive topline growth in the coming years.

Avnet Tech Upped from a Sell

Avnet, Inc. (AVT) is one of the world?s largest distributors of electronic components and computer products. The company reported June quarter revenue and adjusted EPS of $4.68 billion and $0.85 versus our estimates of $4.60 billion and $0.80, respectively.

Generally speaking, performance improved sequentially across the company quarter over quarter (q/q), particularly at Technology Solutions (TS), where there was a nice jump in operating margin, despite a notable softening of the European IT market. That said, growth appears stalled or slowing in nearly every region on an organic basis, making it difficult for the distributor to realize significant operating leverage.

In fact, the September quarter guidance calls for another year-over-year (y/y) decline in operating margin, despite ongoing cost cutting efforts. The company does continue to execute well, positioning itself with lean inventories, a large cash stockpile and an increasingly lean cost structure. In this environment, however, we believe the uncertainty around demand warrants caution from investors.

Avnet shares are currently trading at 9.4x multiple to our fiscal 2009 earnings estimate. The TTM ROE (trailing 12-month return on equity) was 13.3%. After rising steadily for six quarters till Q4:FY2007, the metric has picked up slightly from 11.5% to 12.4% as of the June quarter. We analyzed the ROE by splitting it into its three components net margin, asset turnover and equity multiplier. The combination of cost reductions and strategic acquisitions is raising the TTM net margin.

TTM revenue had grown steadily up until Q1:FY08 and has bounced back in Q4:FY08.