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Canaccord Genuity on Intel, Nike, and OfficeMax

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Intel wants to do away with passwords, Nike will report FQ1 earnings on September 27, and OfficeMax rallied on Friday.

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The following are excerpts from Canaccord Genuity analysts' commentaries.

Intel (INTC): Taking a hands-on approach.
Intel last week said it wants to do away with computer passwords. Research scientists at the world's largest chipmaker demonstrated a system that recognizes the pattern of veins in the palm of a hand as it's waved over a sensor, eliminating the need for the string of numbers and letters now used to gain access to phones, computers, or websites. "Nobody likes passwords," Intel Chief Technology Officer Justin Rattner said at a meeting for developers on Thursday. "This completely removes this deeply inconvenient notion of passwords." While other so-called biometric identification devices are already in common use, Intel's system goes further.

Once the machine has identified a user, embedded hardware and software connects with all the other protected services, say, online banking, that person would normally access. For added protection, the machines will contain additional sensors that detect when a user has stepped away and will automatically lock down access to all connected machines and sites, Rattner said. He also took pains to reassure people who may be concerned that miscreants might resort to violence to gain access to a person's palm. "Severed hands won't work because you have to have blood flow," he assured. Phew.

Nike (NKE): No slam dunk here.
Nike will report FQ1 earnings on September 27 and Canaccord Genuity Consumer Products Analyst Camilo Lyon is anticipating a decent quarter (his EPS estimate is $0.03 above the Street); however, he believes decelerating futures orders will be the key driver of the stock. With the two major catalytic events (Olympics and Euro Champs) behind Nike, coupled with issues in China retail and macro pressures in Europe, Lyon expects futures orders will slow meaningfully. He believes futures orders could decelerate to 7.7% constant currency now that the two major events are behind the company. Furthermore, he expects China futures will turn negative (estimating -3%).

Gross margin headwinds (NFL, Converse conversion to wholesale, and digital R&D) are not expected to abate until H2/13. Therefore he does not expect any change to the company's gross margin outlook. Q1 sales likely benefitted from the London Olympics; but Lyon is concerned that any excess post-Olympic inventory will further compress margins and delay the recovery. As such, Lyon believes the risk/reward is slanted to the downside at current levels, leading him to remain neutral on shares of Nike.
OfficeMax (OMX): Putting it in Lehman terms.
OfficeMax rallied after saying on Friday any liabilities related to timber notes backed by Lehman Brothers Holdings are officially extinguished, meaning the office-supply chain can book a gain of $671.1 million. The office products supplier said the bankruptcy court has issued an order resolving the claims related to the notes, which were backed by Lehman and stem from OfficeMax's 2004 sale of its timberlands. In fact, the issue over the timberland notes was big enough for OfficeMax to post a six-page "frequently asked questions" document on the financial portion of its website, including ones about how Lehman's bankruptcy affected the company. Payment of the securitization notes was guaranteed by Lehman, but the bank's bankruptcy filing in September 2008 constituted an event of default under the $817.5-million note.

On the business side of things, OfficeMax has suffered from weak sales for the better part of four years, although the company has recently shown slight improvements. Pricing wars have cut the company deepest, although OfficeMax's online and Mexico operations have posted higher sales. Last November, the company announced a plan to close 15-20 of its 900 stores every year for the next five years and that it would reduce the square footage in some of its existing stores and relocate others. Rivals Staples (SPLS) and Office Depot (ODP) had already put those strategies in place.

Editor's note: For more information on Canaccord Genuity, click here.
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No positions in stocks mentioned.
Canaccord Financial and its affiliated companies may have a Corporate Finance or other relationship with the companies mentioned and may trade in any of the Designated  Investments mentioned herein either for their own account or the accounts of their customers, in good faith and in the normal course of market making. The authors have not received, and will not receive, compensation that is directly based upon or linked to one or more specific Corporate Finance activities, or to coverage herein.
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