UPDATE: Stifel Nicolaus Cuts PT to $30 on Cavium; Core Business Focus

Stifel Nicolaus lowers its price target from $32 to $30 on Buy-rated Cavium Networks

as the company's Q1 numbers were dragged down by low performance in non-core portfolio. Stifel Nicolaus notes, "1Q12 results were roughly in-line with management's pre-announcement. Revenue guidance for 3-6% sequential growth is a slight disappointment although core Enterprise and Service Provider revenues are expected to be up 5%-10% q/q. Tape out charges and low margin sales of obsolete non-core products are expected to drag gross margins down 80bps q/q, well below our expectations for expansion. We expect gross margins to expand in 2H12 with increasing Enterprise and Service Provider revenue. We applaud management's move in concentrating resources on its core businesses. We expect leverage to return to the income model beginning in 2H12 although we are tempering our growth estimates to reflect uncertainty in end markets." CAVM closed at $29.75 on Tuesday.