Update: We are encouraged by GOOG's third quarter results, which evidence the resiliency of its revenue model and a new focus on cost and expense management. Specifically, we think GOOG's search-based advertising offerings and emerging applications cater to customers looking for quick ROI. We also think new CFO Patrick Pichette is instilling a sense of financial discipline. Although newsflow always seems to be a risk, at a 2009 p-e of 21, the stock appears to reflect notable concerns. Moreover, GOOG is generating billions in annual free cash flow and has over $14 billion in cash/investments. -S. Kessler

S&P REITERATES STRONG BUY RECOMMENDATION ON SHARES OF IBM (IBM) 91.52]:

IBM reported third quarter EPS of $2.05, vs. $1.68, which is in line with the pre-announcement of Oct. 8. Revenue rose 5% year-over-year, led by services and software. Margins widened and the effective tax rate fell. We expect moderating trends in information technology spending to dim revenue growth near term, but believe advantages such as a services backlog of $114 billion lend to IBM's attractiveness. We are trimming our EPS projections to $8.83 from $8.95 for 2008 and to $9.80 from $10.10 for 2009. On revised p-e analysis, we lower our 12-month target price to $130 from $135. -T. Smith-CFA

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF AMBAC FINANCIAL GROUP (ABK; 3.04):

Unconfirmed reports on Bloomberg quote ABK CEO Callen saying ABK and other bond insurers are working on a plan to ask the U.S. Treasury to buy some of their troubled assets. ABK and other bond insurers like Assured Guaranty (AGO; 11.46), MBIA (MBI; 8.83) and Syncora Holdings (SCA; 1.09) have struggled under the weight of their mortgage-related structured finance obligations. We believe some firms will also need additional capital to regain their top-tier financial strength ratings, and believe these capital raises could dilute existing equity holders. -C. Seifert

S&P MAINTAINS BUY OPINION ON SHARES OF SCHLUMBERGER (SLB; 48.56):

Third quarter EPS of $1.25, vs. $1.09, is $0.04 shy of our estimate. Results were led by improved activity levels in North American land gas drilling, but partly offset by hurricanes Ike and Gustav in the U.S. Gulf, which shaved $0.04 from EPS. Given uncertainty associated with the credit crisis and the prospect for a global recession, we expect upstream capex spend to decelerate in 2009, which should limit SLB's revenue growth; we are cutting our 2009 EPS estimate by $0.40 to $5.62. On updated DCF and relative valuation metrics, we reduce our 12-month target price by $8, to $68. -S. Glickman

S&P REITERATES BUY OPINION ON ADSS OF SATYAM COMPUTER SERVICES (SAY; 14.84):

The ADSs are up 10% this morning after SAY reports September-quarter earnings per ADS of $0.39, vs. $0.30, $0.04 above our estimate. We are lowering our fiscal year 2009 [March] revenue growth forecast to 21% from 25%, reflecting unfavorable currency movements and increased concern about the pace of spending on IT services over the next couple of quarters. However, we trim our fiscal year 2009 earnings per ADS projection by just $0.01, to $1.46, reflecting improving operating margins. Based on changing peer valuations, however, we are cutting our 12-month target price by $6, to $17. -D. Cathers

S&P MAINTAINS HOLD OPINION ON SHARES OF ADVANCED MICRO DEVICES (AMD; 4.12):

Adjusted third quarter EPS of $0.14, vs. $0.50, is much better than our $0.42 loss estimate. A one-off process technology license revenue of $191 million benefited sales and margins. Also, AMD's core microprocessor and graphics segments posted notable growth and improved profitability. We narrow our 2008 loss estimate to $0.97 from $1.86, based on third quarter results and our projections for higher sales, improving margins, and a lower cost base from restructuring. We raise our target price by $0.50 to $6, based on relative analysis. However, we are concerned about execution risk and longer-term margins. -C. Montevirgen

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