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THE DAY AHEAD: Analysts struggle for material

COMMENTARY -- Wall Street analysts started the week with a slew of reports that aren't exactly going to make the highlight reels. Maybe it was a slow Monday. Maybe we were bored. Or maybe Wall Street analysts were really in the "duh" mode.

Here's a look at Monday's gems from the research community:

Deutsche Bank overdue rating change

You know an analyst is behind the curve when he drops a line like this. "We are implementing our long overdue rating reduction from strong buy to a buy, given our concerns about the immediate outlook for Sycamore based on macro and company-specific issues," said Raj Srikanth, an analyst with Deutsche Bank in a research note.

Now these macroeconomic issues aren't anything new. Srikanth is "more concerned" about top-line growth for Sycamore (Nasdaq: SCMR). Gee, maybe it was Cisco's outlook last week. Deutsche Bank cited inventory woes, which were flagged by a handful of brokerages weeks ago, and a first-half slowdown in the economy as the main reasons it was worried.

In addition, Sycamore's largest customer, Williams Communication (NYSE: WCG) said it has cut its capital spending plans when it recently reported earnings. Now that's detective work. Don't worry though, Deutsche Bank still recommends you buy shares of Sycamore, just not as strongly as before.

The great Amazon debate

Lehman Brothers bond analyst Ravi Suria is getting those equity guys riled up again. Suria's report on Amazon's working capital position sparked the great debate on the e-tailer's future last week. On Monday, two prominent analysts ran to Amazon's defense.

We quoted several analysts responding to Suria's report last week, but Merrill Lynch analyst Henry Blodget had one of the best observations. "(Suria's report) is not silly by any means," Blodget said. "The fact that we're in a position where this argument can even be made is unfortunate."

Very true. Blodget didn't say it, but I will. If Amazon had operated like a real company in the first place, there wouldn't be this big debate about its liquidity.

Nevertheless, Blodget had his formal defense of Amazon yesterday. In a nutshell, Amazon's cash balance will bottom in the second and third quarter and working capital will go negative. Blodget, who has a higher long-term rating on Amazon than Microsoft, just doesn't see the negative working capital position as a problem. Suria does.

"We continue to believe that the major issue for Amazon's stock is decelerating revenue growth (and, therefore, valuation), not cash and/or liquidity," said Blodget. "This said, it is unfortunate that a company as strong as Amazon has gotten itself in a position where it is even possible to argue that liquidity is an issue."

CS First Boston analyst Jamie Kiggen launched a similar rebuttal. Amazon's current cash position is more than enough for the company. A lot has to go wrong--inventory buildup, even higher losses and an illiquid portfolio--for Amazon to see a credit crunch, he said.

Kumar finally downgrades QLogic

USB Piper Jaffray analyst Ashok Kumar has been known for making a few good calls about Dell (Nasdaq: DELL) and Intel (Nasdaq: INTC). His blind spot, however, has been storage player Brocade (Nasdaq: BRCD). Kumar would nail Brocade, while cheering QLogic (Nasdaq: QLGC), a rival that isn't as strong.

Kumar had been saying negative things about QLogic in the last two weeks or so, but formally bit the bullet on Monday with a "neutral" rating, the equivalent of "sell now."

Kumar's call comes after QLogic had already posted disappointing December sales. Apparently, Emulex's (Nasdaq: EMLX) warning about orders was the final straw. In reality, Kumar was looking for an excuse to downgrade QLogic, but was waiting for the right opening.

CMGI new target $6

In the "why bother" department, Salomon Smith Barney initiated CMGI (Nasdaq: CMGI) with a neutral rating.

Analyst Charles Grom covered the usual territory. CMGI, which can't predict its financial picture beyond next week, is a conglomerate of No. 2 and No. 3 players in nearly every vertical it targets.

Although a restructuring is a good step, Grom said CMGI has a long way to go. Now there's a newsflash. The truly amusing part, however, was Grom's price target of $6. Those days of lofty price targets must be ending--CMGI closed 47 cents below his price target.

Grom was more complimentary with Internet Capital Group (Nasdaq: ICGE). He rated that Internet incubator as an "outperform" and slapped a $7 price target on the stock. Funny how times change. Analysts were trying to justify ICG's $200 price target just a year ago. TDAIN

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