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Affymetrix Stock Lifted by New CEO Appointment

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Shares of Affymetrix's stock rose as much as 13 percent today following the announcement on Wednesday that a new president and CEO would be leading the company starting July 1.

Following the announcement by the Santa Clara, Calif., microarray company that Frank Witney had rejoined Affy, replacing Kevin King as president and CEO, investment firm R.W. Baird also revised the company's share price target and rating.

Investors greeted the news favorably, driving Affy's stock to a high of $7.08 today, a 52-week high, before settling back to $7 in late afternoon trading. More than 7.9 million shares of Affy stock were traded, nearly nine times the average daily volume of 948,017 shares during the past three months

Today in an analyst note, R.W. Baird also upgraded Affy's rating to "Outperform" from "Neutral" and increased Affy's target share price to $11 from $6. In the note, Quintin Lai wrote, "We expect Witney to hone in on Affy's languishing revenue base while continuing the drive to improve gross and operating margins."

Witney rejoins Affy from Dionex where he served as president and CEO from 2009 until it was acquired by Thermo Fisher Scientific earlier this year. He held the same positions at Panomics from 2002 to 2008, and when that firm was bought by Affy, he joined Affy becoming its executive vice president and COO.

Lai added that he believes that a top priority for Witney will be returning Affy back to top-line growth. Under King, the firm had struggled with revenue growth, posting year-over-year declines for four quarters in a row.

Affy, has improved its cost structure in recent years, and Witney's appointment could return the company to organic revenue growth, Lai said.

"While we continue to believe there remains some uncertainty on revenue estimates for 2011 and 2012 and a higher cost structure than its peers in the space, we think Witney's appointment is a positive step toward returning the business to top-line growth and sustainable profitability," he said.

In particular, he noted the expected launch of the Cytoscan array during the third quarter. The product and continued penetration by Affy into cytogenetics could be a revenue driver. During the past few quarters, Lai added, Affy's consumables sales has grown, though that has been offset by an unfavorable shift to lower cost products.

"As this anniversaries, we would expect the company to see growth driven by volumes without further mix headwinds," he said.

Another investment firm, Oppenheimer was more cautious in assessing the changes at Affy. David Ferreiro noted Witney's extensive experience in the diagnostics and tools space and said he "brings immediate credibility to the post."

However, Ferreiro said that Affy's business is tethered to the microarray market and as next-generation sequencing threatens to overtake microarray technology, "the array market remains unpredictable. Microarray will continue to lose ground to new technological developments that are both more robust and cheaper, creating a fundamental business headwind" for Affy, he said.

Oppenheimer is maintaining a "Perform" rating on the company and a full-year 2011 revenue estimate of $298 million and EPS of $.05.