Weekend Edition

The 24/7 Weekend Edition are articles picked from the best and most quoted material from the last week.

Weekend Edition: GM: Render Unto Caesar...

Stocks: (F)(GM)

And, so it goes. With Renault and Nissan more anxious to build a three-way partnership with GM than GM is, the big American car company has asked for a multi-billion cash compensation based on the fact that the North America partner brings more to the table than the Japanese or European ones do.

With Nissan losing share in its own home market of Japan and Renault without a dealer network to sell cars in the US, GM is probably right.

Carlos Ghosn, head of Renault and Nissan, waited to long to press the GM board. GM has now taken $9 billion a year out of its annual costs, and its stock is up almost 60% this year. GM's business is also growing quickly in markets like Russia. The company's market share was also up in August in the US market.

With GM demanding tribute in exchange for forming a partnership, it is time for Nissan and Renault to catch a cab across town to Ford. If they have cabs in Detroit.

Weekend Edition: Nasdaq Short Interest

Nasdaq Short Interest, September 2006
These are figures for short interest in stocks listed on Nasdaq. Numbers compare September 15, 2006 with August 15, 2006.


Largest Short Positions:

Sirius Satellite 129.5 million shares, up 12.2 million
Level 3 99.1 million shares, up .4 million
Yahoo! 87.2 million, down 5.1 million
JDS Uniphase 85.8 million, up 1.7 million
Microsoft 74.6 million, up 1.7 million
Intel 69.2 million, down .1 million
Charter 65.6 million, down .5 million
Cisco 62.3 million, up 6.9 million
Oracle 60.3 million, up 6.5 million
JetBlue 54.6 million, up 1.2 million
eBay 49.0 million, down 2.4 million
Comcast 46.4 million, up 3.2 million
Amazon 43.6 million, up 3.4 million
Dell 43.3 million, down 4.2 million
Starbucks 35.2 million, up .5 million
Take Two 34.2 million, up .9 million
Sun 32.7 million, down .4 million
Apple 32.3 million, up 4.0 million
Finisar 31.2 million, up .2 million
XM Satellite 30.2 million, up 1.4 million
Conexant 29.8 million, up .5 million
Brocade 28.7 million, up 10.5 million

Largest Increases:

Level 3 14.3 million to 99.1 million
Brocade 12.2 million to 28.7 million
Cisco 6.9 million to 62.3 million
Oracle 6.5 million to 60.3 million

Largest Decreases:

Genesis Micro down 5.9 million to 4.6 million
Yahoo! down 5.1 million to 87.2 million
TDAmeritrade down 4.5 million to 10.6 million
Dell down 4.2 million to 43.3 million
Novell down 3.5 million to 11.7 million


Coverage Ratio:

SCO Group 261 days
Intergr Alarm 123 days
Bnk Ozarks 60 days
ZipRealty 58 days
ParkerVision 55 days

Sources: NASDAQ and WSJ

Weekend Edition: The Shorts And Dell

Stocks: (DELL)(HPQ)(SUNW)

Short interest in Dell dropped 4.2 million shares in September to 43.3 million. Maybe Dell has had enough and could make a little turn North.

Over the last year, the stock has dropped from $34.50 to $22.72. It has had a tiny rally since it was below $20 in July.

Most investors think that the air has gone out of the PC ballon and that Dell's poor execution and bad customer service has hurt the company. It has also lost share in the critical server market. However, it is still the No. 1 PC manufacturer, and the management is acutely aware of its problems. The CEO knows he only has a certain amount of time to improve things, or founder Michael Dell will be pressured to replace him

Dell's stock is also cheap It trades at .9 times sales and has a P/E of about 18. Hewlett-Packard's P/E is 21 and it trades for 1.1 times sales. Even server company Sun Micro, a stock kicked around like a soccor ball for the last several years, trades at 1.4 times sales.

Dell may be down, but it may not be out. If so, some of the short sellers are making a wise decision.

Weekend Edition: Can Ad Reveue Save XM Radio?

Can Advertising Revenue Save XM? (XMSR)(SIRI)

Satellite radio has had a rough road. But, advertising revenue could change that. There is a broad perception that satellite radio is commercial-free. But, that is only true on some channels. The new Oprah show carries commercials and some of them are large marketers including like Target, Dove and Snapple.

According to XM, the company did $20 million in revenue in 2005. The previous year the figure was $8.5 million.

XM’s revenue run rate is about $1 billion a year. Advertising is clearly an extremely small part of this. But, XM has not had Oprah before. As here syndicated TV show and magazine have proven, she is a tremendous draw for marketers.

With an operating loss of $100 million a quarter, and a slowing subscriber base that may only reach 8 million by the end of the year, XM needs a hand. The market for advertising revenue on radio is still huge. Citadel Broadcasting, a modest-sized public radio company did $420 million in revenue last year. The company owns 153 FM and 58 AM stations. The company had an operating profit of $143 million last year.

Over the air radio has lost a great deal of it momentum to satellite radio. But, with its stock But, with its stock down from over $36 a little less than a year ago to $13 now, XM hardly looks like it has taken the momentum torch from the old line broadcast companies. Rival Sirius is doing no better. In December, its stock traded near $8. It is now below $4.

A hybrid model of paid subscribers and advertising is what may save XM’s bacon. The Oprah channel is not just an experiment. It may be XM’s future.

Weekend Edition: Is Google A $200 Stock?

Is Google A $200 Stock That Trades At $400?

Google had net income of $721 million last quarter, its best quarter of the last four. At eBay, the best quarterly number over that same period was $279 million. Of course, the holidays make their business more seasonal. At Yahoo! the best of the last four Qs was net income of $632 million. At Amazon, the number was $199 million.

Google’s market cap is about $124 billion now. Yahoo!’s runs about $35 billion. eBay weighs in at $40 billion. Amazon at $13 billion. So, Google is worth 41% more than the other three combined.

Of course, Google’s revenue almost doubled last year, to $6.1 billion. At Yahoo! revenue has not doubled since 2004, when it was up 120%. eBay almost doubled revenue in 2003, and came close again in 2004. Amazon has not grown that fast since 2000.

Obviously, Google gets a huge market premium for its spectacular growth being in a more recent period than the rest of the companies. Based primarily on anticipation of future increases in revenue and operating income, Google trades at about 15 times sales. At Yahoo!, the number is 5.7 times. At Amazon, the number is only 1.5 times, but their big growth year was six years ago. The eBay ratio of sales to market cap is 7.3 times.

Virtually all of Google’s revenue comes from key word advertising. Internet advertising has been growth at an extremely rapid rate, but a recent study from the Internet Advertising Bureau says it is slowing. While US internet advertising was up 37% in the first half of 2006 compared to the same period in 2005, it only grew by 5.5% from Q1 2006 to Q2.

Predicting whether internet ad revenue growth will continue to slow is impossible. Obviously Yahoo! has suffered recently from the perception that some of its major ad categories are not doing well. It is too early to tell whether this will spill over into other internet companies.

One thing is certain. When Wall St. gets a whiff of slower growth, stock prices stumble. Yahoo! is a case in point. This year its price has gone from over $43 to $25. In late 2004, eBay traded at over $58. Today, it changes hands at $26.

Google’s day is coming. In the June quarter, revenue jumped to $2.456 billion from $1.385 billion in the same quarter a year ago. Another double. But, with overall web ad revenue growing at less than 40%, Google is too big to gain enough market share to overcome the overall trend.

And, when the trend is not your friend, eBay and Yahoo! would indicate that a company’s market cap can fall by half.

Weekend Edition: Cramer Loves DIVX

Cramer on MAD MONEY (9/26/06) Says BUY Walgreens and DivX

Tonight Cramer on MAD MONEY, Cramer wanted to note that this is a high-five type of market and we have a broad-based rally where almost everything is rallying. Cramer says the market is not done going up, and this rally is based extra because commodity prices are falling. Cramer said it is good for all companies consuming natural resources for their products. He is giving the market a Boyah Buy.

Cramer said that Walgreen's (WAG) has been condemned for the wrong reason and the jury is wrong. It is not a broken stock and is not a broken company. He calls WAG a "mom-back" buy. He says the Wal-Mart $4 generics and the lower-margins and the potential store growth slowing are worries that are wrong and overblown. It trades at 22 times next year's earnings and is growing at 16%. Cramer says the $5 stock could really be a $72 stock. Cramer shotdown the Wal-Mart program as a PR campaign and said that some of Walgreen prices are actually under that of Wal-Mart.

Cramer on a call-in said that the charts showing a breakout are right and you need to be in Tech stocks and Drug stocks as they will lead the market higher. He did say sell Barr Labs (BRL) in another call-in.

A Broken tech IPO that has been overlooked. Cramer said DivX (DIVX) was overlooked. He said it rose 17% after the IPO and you should buy this company with limit orders. He said the video compression and decompression. He said 18% of their business is with Google (GOOG). He said Google pays them a fee when people download videos. He said DIVX is sexy as there may even be a bandwidth glut. Cramer said the fundamentals and the numbers are a thing of beauty. He thinks the operating margins may be so big he wants to do a mom-back. He thinks there could be 93% gross margins in 2003. It has doubled revenues for 6-years so it has accelerated revenue growth. He even compared it by saying it could be the next Akamai (AKAM). He said it has $4 cash and no debt per share and it was overlooked. DIVX traded up 8% on this.

Jon C. Ogg

Weekend Edition: High Seas Mergers

Overseas Shipholding Group, Inc. (OSG) and Maritrans Inc. (TUG) jointly announced this morning that they have entered into a definitive merger agreement. We have OSG will acquire Maritrans for some $37.50 per share. Maritrans a leading U.S. Flag crude oil and petroleum product shipping company that owns and operates one of the largest fleets of double hull vessels serving the East coast and U.S. Gulf coast trades.

The Boards of Directors of each company have already approved this all-cash transaction for $37.50 per share. The transaction is valued at approximately $455 million based on approximately 12 million shares outstanding and the assumption of net debt outstanding as of June 30, 2006. OSG will finance the acquisition through a combination of available cash and borrowings under existing credit facilities. The transaction is expected to be immediately accretive to OSG's earnings per share, before considering any transaction synergies. This compares to OSG's $2.4 Billion market cap, and represents a 47% premium to Maritrans (TUG) closing prices.

"The strategic fit of Maritrans within OSG's diversified portfolio of assets will broaden our service offerings to customers in the Jones Act market," said Morten Arntzen, President and CEO of OSG. "Additionally, the lightering business in Delaware Bay and the addition of new customers in the complementary ATB Gulf of Mexico and Florida short-haul trade, will contribute meaningfully to our contractual base of business. Most importantly, however, are Maritrans' strong commercial reputation and its team of talented personnel which, when combined with our U.S. Flag operation, will give us the platform to support our 10 Jones Act product carrier newbuilds, as well as future growth opportunities in U.S. coastal trades."

Jonathan P. Whitworth, CEO of Maritrans, commented, "We are very excited about the transaction with OSG and the benefits it brings to shareholders, customers and employees. A greater commercial footprint will allow us to serve our customers better with a more diversified product offering. The larger fleet also enhances our market intelligence, a critical ingredient in effectively competing in the shipping market. Moreover, the financial strength that OSG brings to the combination will enhance our ability to compete. We look forward to a successful integration and to becoming the newest member of the OSG family."

We have been expecting many such mergers to commence in the international shipping companies, particularly as the switch to double hull tankers is in full tilt. We have about 5 other shipping companies in our BAIT SHOP that we believe will be acquired in a similar fashion. In the wake of hurricane damage to US ship building and because of a myriad of other factors, this industry is ripe for added consolidation.

ADDITIONAL DATA ON THE MERGER
The transaction combines two fleets with complementary strengths in different trade routes and diversifies OSG's U.S. Flag presence with the ability to offer expanded services to current and future customers of both companies. The addition of Maritrans' fleet of 11 articulated tug barges (ATBs), five product carriers, two of which have been redeployed to transport grain, and three large ATBs under construction will complement OSG's U.S. Flag fleet of seven operating vessels and 10 newbuild product carriers. The combination will expand OSG's market presence in the U.S. Gulf coast, Florida and East coast trades and add lightering operations along the U.S. East coast. It is expected that Maritrans' vessel construction program, which involves ATBs to be used in lightering operations, will allow OSG to use a substantial portion of its Capital Construction Fund. OSG's commitment to invest and expand in the Jones Act market results from strong, positive market fundamentals that include a steady and growing demand in the U.S. for oil and refined petroleum products, especially transportation fuels such as gasoline, low sulfur diesel and ethanol, and the need to replace the capacity of ships that will be retired pursuant to the OPA-90 phase-out schedule. The transaction, which is expected to close by year-end 2006, is subject to approval by a majority of Maritrans' shareholders and other customary closing conditions, including regulatory approvals. Upon completion, the U.S. Flag strategic business unit will operate its combined fleet from Maritrans' headquarters in Tampa, Florida and will report to Jonathan P. Whitworth as Senior Vice President of OSG.

UBS Investment Bank is acting as OSG's sole financial advisor and Cravath, Swaine & Moore LLP is acting as lead legal counsel to OSG. Merrill Lynch & Co is acting as Maritrans' financial advisor and Morgan, Lewis & Bockius LLP is acting as legal counsel to Maritrans.

Jon C. Ogg

Weekend Edition: Halliburton Spin-Off

Halliburton Still Plans to Spin-Off Its KBR Unit
KBR, the former Kellogg Brown & Root, is cooperating with Halliburton (HAL) to accomplish a tax-free distribution by Halliburton to its stockholders of shares of common stock, and it agreed to promptly take any and all actions necessary or desirable to effect any such distribution. The distribution may occur through a dividend, exchange or other transaction. We still do not have any formal plan, but the plan still apears "to have a plan."

An amended filing with the SEC was dated September 22, 2006, so this is fresh and doesn't make it look like the company wants to hold off on the division of the two operations. This will also allow Halliburton and KBR to each be evaluated as pure-play companies rather than the culmination of an oil services company mixed with a warfare support and infrastructure builder.

THE TWO COMPANIES (Mostly described by themselves)

Notes from KBR regarding the filing: We will enter into a master separation agreement with Halliburton that will provide for the separation of our assets and businesses from those of Halliburton. The master separation agreement will also contain agreements relating to the conduct of this offering and future transactions, and will govern the relationship between Halliburton and us subsequent to the separation and this offering. In addition, we will enter into several ancillary agreements with Halliburton, including a tax sharing agreement, a registration rights agreement, two transition services agreements, an employee matters agreement, and an intellectual property matters agreement. The terms of these agreements were determined by Halliburton. These agreements will continue in accordance with their terms after any distribution by Halliburton of our common stock to its stockholders. Summaries of the master separation agreement and the ancillary agreements are set forth below, and these agreements will be filed as exhibits to the registration statement of which this prospectus forms a part.

Founded in 1919, Halliburton is one of the world's largest providers of products and services to the oil and gas industries. The Company adds value through the entire lifecycle of oil and gas reservoirs and provides and integrates products and services, starting with exploration and development, moving through production, operations, maintenance, conversion and refining, to infrastructure and abandonment. Halliburton employs more than 100,000 people in over 120 countries working in five major operating groups:

Halliburton's Energy Services Group consists of four business segments:
•Drilling and Formation Evaluation
•Fluid Systems
•Production Optimization
•Digital and Consulting Solutions

These segments offer a broad array of products and services to upstream oil and gas customers worldwide, ranging from the manufacturing of drill bits and other downhole and completion tools to pressure pumping services.

KBR, Halliburton’s engineering and construction subsidiary, employs more than 60,000 people in 43 countries. Its strength is in engineering and project management, with a strong historical position in LNG and oil and gas projects. The company is a leading government services contractor as well. This global technology and services company is composed of two distinct divisions: the Energy & Chemicals Division and the Government & Infrastructure Division. The Energy & Chemicals Division provides state-of-the-art engineering, procurement, construction and technology capabilities focused on upstream and downstream markets. The Government & Infrastructure Division, with its premier civil infrastructure capabilities, is one of the largest government logistics and services contractors in the world. Whether designing an LNG facility, serving as a defense industry contractor or providing capital construction, KBR delivers world-class service and performance.

There will be many indemnifications. KBR is an entirely different operation than Halliburton and it carries many different liabilities.

FINANCIALS:
KBR posted revenues of $10.2 Billion and net income of $240 million. Its first half of 2006 revenues were $4.7 Billion and net income was $118 million. Its first half of 2005 showed over $5 Billion in revenues, but $91 million attributable net income. As of June 30, 2006 KBR held some $930 million in cash and total short-term assets of $3.956 Billion, and its total assets were listed as $5.623 Billion; and liabilities were broken down as $2.844 Billion in current liabilities with its total liabilities listed as $4.098 Billion.

Perhaps the most interesting issue in the entire prospectus is that the sale date and terms are blank, but it still says: Delivery of the shares of common stock will be made on or about , 2006. That still says that 2006 is the anticipated time frame. You need to be aware that this is a cookie cutter prospectus from the company, but it does still lend hope that KBR will be its own public company by the end of the year. This is an updated prospectus date September 22, and the last filing was listed as May 26. This incorporates the new six-month period of performance. There are still no listed terms because this is still pending and is still up in the air, so there is no assurance it will occur this calendar year.

There are still no underwriters listed on the prospectus, which is the same as before. That also means this may not be via a legitimate IPO, but it is too soon to know since the company hasn't determined its path. The "2006" date indication, while not specific, still lends hopes that a tax-free spin-off, sale, or distribution is the hoped-for route here. This will likely be an IPO or paid out in another tax free situation. Halliburton (HAL) has been drifting lower and lower is actually trading at the lowest level since it went ballistic last summer. It has also been trading outside of its uptrend for several weeks with the oil-patch names as oil prices have officially entered bear market territory.

We do not yet know what avenue the company will use to seperate KBR from Halliburton, but the company is still at least going through the motions that it wants to seperate the operations. KBR has been deemed a laggard and worse for the entire Halliburton organization, and the company still knows that. Hopefully this will get the process expedited.

Jon C. Ogg

Weekend Edition: Ebay Learns Chinese

Changes Coming at eBay in China?
If reports out of China are "accurate," there could be some changes in eBay's (EBAY) China operations. The company is reportedly in its 5th round of negotiations with Tencent. There are questions about how much Tencent wants and it may be too high for what eBay is willing to shell out.

There is even a mention that eBay may sell its Chinese operations of eBay Eachnet, although that isn't clear if it is all or part. It also noted that Tencent may be an interested buyer.

This article is sourcing Sohu, so you will have to decide for yourself if there is any validity to it. It has happened on many many more times than a few that "rumors" on Asian online news sources that post freely to the public have been.....how do you say "Far from accurate"?

We'll check around to see if this has any legs to it, but it would be interesting if ebay really changes its efforts very much there.

Goldman Sachs has maintained its Buy rating in a seperate note this morning.

Jon C. Ogg

Weekend Edition: World's Biggest IPO

Bracing For The Largest IPO Ever: Industrial & Commercial Bank of China Ltd.
China's largest bank, the Industrial & Commercial Bank of China Ltd., has shown its planned date for its long-awaited IPO. The price will be determined on October 23 and it should debut for trading on October 27, 2006, assuming there are no major market changes. Its stock will initially only be listed in Hong Kong and Shanghai. This may make it hard for US and European retail investors and many US-only institutions to participate in what appears to be the world's biggest initial public offering ever.

"ICBC" hopes to raise up to an equivalent of $19 billion and if this amount is raised it would break the IPO record of $18.4 Billion raised in the 1998 IPO in Japan's mobile phone operator NTT DoCoMo.

Before any over-allotments over subscriber indications, "ICBC" plans to issue 13 billion A shares priced in Chinese currency in Shanghai and 35.39 billion H shares. The actual price range is not indicated, but that is equal to 14.8% of its share capital. The company has indicated that up to 16.7 percent of total capital could be raised if the subscriptions come in higher than expected. If these numbers are accurate on the base amount, it would put the overall equivalent market cap of "ICBC" at roughly $128 Billion. That number may not be accurate because of share discrepancies, but there is over 1 month yet to figure out the comparative details.

PRIOR CAPITAL RAISED

"ICBC" already plans to sell IPO shares worth $3.5 billion to strategic investors from government investment agencies from Kuwait, Qatar and Singapore. It also received a commitment in June from China's social security fund to invest an equivalent of $2.25 Billion in the bank. Another group of global financial powerhouses including Goldman Sachs, American Express and Allianz AG invested about $3.78 Billion back in January, 2006. That totals over $9.5 Billion raised so far in capital this year alone, and not all of that may be on the prospectus by the actual IPO date. "ICBC" listed assets of 6.5 trillion Yuan ($800 billion) as of the end of 2005.

EXCHANGES AND MARKETS

Hong Kong has its own financial system and mainland regulators treat it as a foreign market even though it is Chinese territory. This does open it up more easily to foreign investors, but most individuals and many smaller institutions in the US do not have access to any foreign accounts other than trading US-listed ADR's and GDR's. It appears as though 3/4 of the funds raised would come from Hong Kong.

COMPARED TO OTHER CHINESE & GLOBAL BANKS:

The country's second-biggest lender, Bank of China (#2), raised $11.2 billion in May, 2006 with an IPO in Hong Kong. China Construction Bank (#3) raised $8 billion in October, 2005. We were supposed to already have the IPO for the Agricultural Bank of China (#4), but its IPO was delayed because it has to get its books in order after its bad loans are higher than any normal banking standards.

China's banks are modernizing as they prepare to meet Beijing's December deadline of opening their market to foreign competitors under its World Trade Organization commitments. Interestingly enough, some ownership and license regulations have been restricted in recent months, so the true degree of "opening up to foreign competitors" may be somewhat overstated. Bank of America recently sold its Hong Kong and Macau retail and commercial operations to China Construction Bank.

If the $128 Billion is accurate, and we stress the IF, here is how it compares to the other large financial institutions with banking operations you know quite well (in market caps): Citigroup (C) $247 Billion; Bank of America (BAC) $242 Billion; J.P.Morgan (JPM) $163 Billion; UBS AG (UBS-ADR) $116 Billion; Mitsubishi UFJ Financial (MTU-ADR) $122 Billion; Banco Bilbao Vizcaya Argentaria (BBV-ADR) $77 Billion; Allianz AG (AZ-ADR) $71 Billion; Lloyds TSB plc (LYG-ADR) $56 Billion; Royal Bank of Canada (RY-ADR) $56 Billion; ABN AMRO NV (ABN-ADR) $55 Billion; Deutsche Bank (DB-ADR) $54 Billion.

You can see that this massive IPO will garner a lot of discussions in global circles, but because of the share listings it is going to be difficult for most US individuals and smaller institutions to participate directly in this IPO.

Jon C. Ogg

Weekend Edition: Predicting Earnings Winners

StarMine Telegraphs Winners & Losers for Earnings Season"

Predicting Stocks That Will Beat and Miss Estimates Ahead of Earnings Season
Stock Tickers: SAIA, UHS, CINF, F, HET, BRC

StarMine is an analyst tracking service we like to review and to refer to. This service is essentially an analyst "of the analysts' predictions and they monitor analysts' track records on the calls they make. They break it down by sector, but more importantly they break it down by individual stocks. Based on the "5-star" rating of certain analysts in a given stock, StarMine actually goes out and derives its own earnings prediction for companies that may exceed or miss the street estimates ahead of each earnings season. This is the sort of behavior we have done on many select names in the past, but they do it on most of the liquid stocks out there.

If you can believe it we are essentially within 3 weeks of the next earnings season that will begin in the second week of September and go into full-tilt earnings season mode in the 3rd and 4th weeks of September.

Today on CNBC StarMine gave some interesting predictions around 1:55 PM EST on CNBC. The gave a short list of 3 companies that they felt would exceed estimates and 3 they felt would miss. They use who they deem as the best 5-star analyst for each stock.

We have each StarMine prediction noted as Consensus estimates, Brokerage 5-star analyst prediction, and by the implied StarMine estimate based on a blend of the two. We took this one step further by including today's stock price, its dollar gain/loss so far today, and we even provided an adjusted 52-week trading range to show if it was at the high-end or low-end of each range.

The ones that StarMine thinks will BEAT estimates:

SAIA Inc. (SAIA) $0.63 consensus; Morgan Keegan at $0.67; so StarMine is predicting $0.66.
SAIA $32.29, up $0.01; 52-week trading range $14.70 to $34.04.

Universal Health (UHS) $0.62 consensus; $0.64 at B of A; so StarMine is predicting $0.63.
UHS $60.10, up $0.41; 52-week trading range $44.50 to $59.84.

Cincinati Financial (CINF) $0.72 consensus; Keybanc $0.76; so StarMine is predicting $0.74
CINF $48.20, down $0.05; 52-week trading range $39.91 to $48.55.

The ones that StarMine thinks will MISS estimates:

Ford (F) -$0.53 consensus; Citigroup is far lower on it; so StarMine predicts -$0.70.
F $8.12, down $0.29; 52-week trading range $6.06 to $10.04.

Harrah's (HET) $1.00 consensus; Calyon is lower; so StarMine is predicting $0.97.
HET $65.66, up $1.01; 52-week trading range $57.29 to $83.33.

Brady (BRC) $0.61 consensus; R.W.Baird is 0.50; 0.56 is StarMine.
BRC $35.34, up $0.13; 52-week trading range $26.98 to $42.79.

Last quarter they were 3 for 3 on positives on Wesco (WSO), Investment Technology Group (ITG) and IntercontinentalExch (ICE). Not all stock prices followed with higher prices but ITG & ICE were noted well. We look forward to tracking these predictions. Please keep in mind that StarMine only chose 6 names here, and that is a fraction of their stock coverage universe.

Weekend Edition: XBox Profit

"Microsoft Debut Should Make Xbox Profitable Net-Net in 2007"

Master Chief is....Peter Jackson?

At the X06 conference in Barcelona, Spain the Xbox team showed many developments, all of which are going to be good for gamers AND items which should turn Microsoft's Xbox franchise into a net-net profit center for Microsoft (MSFT). To date the Xbox unit has been a net money-loser for the company. I have said that the street acronym of Microsoft as "Mister Softie" should be changed to "Master Chief," and that is even more true after looking over today's news and reviews for the Xbox franchise at the X06 conference.

"Lord of the Rings" mega-film series creator Peter Jackson has teamed with Microsoft to launch a development studio and collaborate on a new "Halo" game.

Jackson is also producing a big screen "Halo" movie. He and Microsoft to create Wingnut Interactive to focus exclusively on video games, and its first untitled game will be set in the "Halo" universe. Wingnut will work with Bungie Studios, which created the franchise and is currently working on "Halo 3." Halo 3 is set for release next year, and as a big personal fan of the game franchise hopefully this one won't be delayed like the company's Vista operating system.

Besides Halo 3, Wingnut is supposed create another game that will focus on attracting non-gamers to gaming. Microsoft-owned Ensemble Studios also revealed it has been working on a game set in that universe: "Halo Wars," which is said to be a real-time strategy game for the Xbox 360.

The announcements came Wednesday at Microsoft's annual X06 event, held in Barcelona, Spain. There is no word of financial terms and it is not disclosed if Microsoft will invest in Jackson's company. Microsoft said the Xbox360 peripheral player will go on sale in the U.S. in mid-November for $199.99, and it will come with a HD-DVD version of Jackson's film "King Kong." This is a corporate strategy geared directly to mess with Sony and even Nintendo as they release their new consoles. Xbox 360 has more than 5 million units sold and the company said it is on track to sell 10 million by the end of the year.

Sony's PlayStation 3 launches in November, but the street is criticising it as late and not as good. The PS2's market share was roughly 70 percent of the global console market, and with the launch of Nintendo's new Wii around the same time and with the Xbox360 price cut and some exclusives it is being questioned about the prospects of Sony maintaining such an outright dominance.

Part of the key to Sony's success has been having exclusive deals with game makers such as Take Two Interactive (TTWO), but that is not the case this go-round. Microsoft today announced Take Two will offer Xbox 360 players of "GTA 4" two exclusive, downloadable episodic add-ons within months of the game's release. Take Two confirmed the upcoming title "Bioshock," which wowed critics earlier this year at E3, would be console-exclusive to the 360.

id Software and Microsoft announced a downloadable Doom title for the Xbox Live Marketplace that is actually a port of Ultimate Doom, including that game's fourth episode, "Thy Flesh Consumed."

This downloading of games is something we will have to monitor and something we have to monitor VERY closely for the investing community that trades video game stocks and the peripherals around it. If studios can start selling downloads direct, it could have major implications for retailers such as GameStop (GME), Best Buy (BBY), and even Amazon.com (AMZN). That is not to mean it is a threat yet, but it is something the retailers need to strike with publishers. These games would be nothing if it was not for the sales efforts of the retailing chains that depend on these sales, so you would think the retailers would secure their future with game publishers. I personally have a strategy for the stores to fight this if the publishers try to go around them, but this is still a ways out.

Electronic Arts (ERTS) has showcased the following for Xbox360: FIFA 07, Need for Speed(TM) Carbon, Tiger Woods PGA TOUR® 07, NBA LIVE 07, NHL(TM)07, Half Life 2 and SUPERMAN RETURNS(TM): THE VIDEOGAME.

Weekend Edition: Keefe Bruyette IPO

"Keefe Bruyette & Woods IPO on Track"

KBW, Inc. is still planning to come public via an IPO. For those who are not familiar with the name KBW this is the parent of Keefe, Bruyette, & Woods, a stellar investment bank that tends to focus on the financial sector.

The underwriters include KBW, Merrrill Lynch, Banc of America, Fox-Pitt Kelton, JMP Securities, Thomas Weisel, BNY Capital, and FTN Midwest.

430 people as of June 30, 2006, including 101 in investment banking, 151 in sales and trading and 82 in research; it covers 489 companies under research.

-U.S. registered broker-dealer, Keefe, Bruyette & Woods, Inc.;
-U.S. registered investment advisor, KBW Asset Management, Inc.;
-Keefe, Bruyette & Woods Limited, an investment firm authorized and regulated by the U.K. Financial Services Authority.

The firm specialized in the bank and thrift sector; and expanded the financial services sector: insurance companies, broker-dealers, mortgage banks, asset management companies, mortgage REITs, consumer and specialty finance firms, financial processing companies and securities exchanges. It also expanded from the United States into Europe with a European-focused team in the London office.

It provides research, sales & trading, investment banking, and fixed income services.

KBW posted 2005 revenues combined at $307.8 million and net income was listed at $17.4 Million on an after-tax basis. For the first 6 months of 2006 the company posted revenues of $193.1 million and after-tax net income of $14.8 Million. As of June 30, 2006 it carried Assets of $622 million and total operating liabilities of $340 million.

The company has the traditional range of risks listed in the prospectus for the company, including the equivalent comments that its real assets walk out the front door and go home every night. In truth, unless they have hidden and buried ghosts that aren't known this IPO will be well received. It is hard to call that before you start to see some price indications, so we will wait to see the financial details before we blindly go out with an open endorsement.

This is a financial IPO we are looking forward to.

Jon C.Ogg

Weekend Edition: RIMM Goes Wild

"Research-in-Motion Blows Past Estimates"

RIM's Good Job
Research-in-Motion (RIMM) is trading up some 15% in after-hours trading. The company beat its estimates handily and raised guidance. The stock closed at $86.06, down 0.16%, and is trading up to around $99.00 and $100.00 in after-hours.

The stock initially slid because there was a delay in the call announced, but the results are being viewed as far better than the restatement announcement.

QUARTER:
Revenue for the second quarter of fiscal 2007 was $658.5 million, compared to estimates of $648+ million. Revenues were up 7.4% from $613.1 million in the previous quarter and up 34.4% from $490.1 million in the same quarter of last year. It posted preliminary net GAAP EPS of $0.74 and pro forma was $0.77 vs. $0.71 estimates.

The revenue breakdown for the quarter was approximately 72% for handhelds, 19% for service, 6% for software, and 3% for other revenue. Approximately 705,000 BlackBerry subscriber accounts were added in the quarter. At the end of the quarter, the total BlackBerry subscriber account base was approximately 6.2 million.

GUIDANCE:
Revenue for the third quarter of fiscal 2007 ending December 2, 2006 is expected to be in the range of $780-$820 million. Subscriber account additions in the third quarter are expected to be approximately 800,000. GAAP earnings per share for the third quarter are expected to be in the range of 88-95 cents per share diluted. Adjusted earnings per share for the third quarter, which excludes regular stock option expense of approximately $4.5 million, are forecast to be in the range of 90-97 cents per share diluted. ESTIMATES are $0.78 EPS and $699+ million in revenues.

RESTATEMENT:
RIMM announced today that the Audit Committee of RIM's Board of Directors, comprised solely of independent directors, is completing a management-initiated, voluntary review of RIM's historical option granting practices. The Audit Committee has made a preliminary determination that GAAP accounting errors were made around the administration of certain historical stock options granted from fiscal 1998 to present, and has made a preliminary determination that a restatement of RIM's historical financial statements will be required to reflect this. Although the review is ongoing, it is currently expected that the potential effect of such restatement will be to increase the amount of non-cash charges associated with past option grants and thereby reduce the amount of the Company's previously reported GAAP earnings by an aggregate amount of approximately $25-45 million over the period since the Company's IPO in 1997. The Company has voluntarily informed the SEC and the OSC about its internal review of its stock option grants. The Company does not at present anticipate a material adjustment to current or future fiscal years' operating results, including the preliminary Q2 operating results reported today in its separate earnings press release, and RIM has defined enhanced procedures and controls to address issues of this nature. All figures in U.S. dollars.

Jon C. Ogg

Weekend Edition: HP Keeps Moving

"H-P Proves It Isn't Slowing Down"

H-P (HPQ) today announced it has signed a definitive agreement to acquire Canadian-based VoodooPC, a leader in high-performance and personalized gaming computer systems.

Before getting too far into the acquisition, this at least shows the company can still operate on developments while it is in the midst of a corporate PR crisis.

HP will form a separate business unit within its Personal Systems Group focused on the gaming industry. VoodooPC co-owner Rahul Sood will become chief technologist for the unit and co-owner Ravi Sood will become the unit's director of strategy. Both will report to Phil McKinney, who will become general manager of the gaming business unit while maintaining his current role as chief technology officer of HP's Personal Systems Group. HP plans to maintain VoodooPC's current distribution model and brand name along with its marketing, sales, support and development operations.

"HP is already a market leader in two of the three major segments in the gaming market by providing industry-leading workstation solutions for game development and powering the largest online game services," said Todd Bradley, executive vice president, Personal Systems Group, HP. "We're absolutely thrilled to welcome VoodooPC, gaming industry pioneers and the premier name in gaming, to the HP team. Together with VoodooPC's leadership and influence, HP will have the expertise to become the leader in the gaming customer segment."

The acquisition is expected to close by November 2006. Terms of the deal were not disclosed.

HP obviously isn't too worried about this pre-texting and spying ruining their future, and it is obvious that VoodooPC isn't too worried about it either. This is the exact strategy that Dell (DELL) employed when it announced it was acquiring Alienware in March of this year.

This should at least put some of the cool-ness factor into H-P for the gaming crowd.

Jon C. Ogg

Weekend Edition: Bare IPO

"Bare Escentuals IPO is a Hit"

Bare Escentuals IPO Priced Higher, and Then Some
Bare Escentuals (BARE) is an IPO we noted earlier about being met with strong demand. There was talk of aprice above the range this week, but it cam in much higher than the range. BARE priced at $22.00 for 16 million shares, well above the $15.00 to $17.00 range.

Weekend Edition: Western Digital To Be Bought?

"Why Western Digital Should Be Acquired"

Western Digital (WDC; $18.20) has been up earlier this week on hopes of a buyout. It began the week around $17.00 and traded just over $18.50 on Wednesday before coming back down. Its shares tried a brief rally earlier today, but it seems that has slowed. A buyout of Western Digital makes sense, although a different scenario makes more sense than rumors that have gone around this week.

Western Digital (WDC) is one to watch in the wave of ongoing mergers and private equity buyouts. In the game of pure hard drives for PC's it and Seagate (STX) are the last of the big independents domiciled in the US, and Western Digital is far behind Seagate. Maxtor used to be there in the space, but Seagate took them out in an acquisition this last May. Western Digital acquired Read-Rite assets in 2003. Disk drive makers do their best to make comparing apples to apples difficult, but historically Western Digital has been thought of as the "value purchase" for hard drive while Seagate has been viewed as the premium brand. If you go in and start comparing prices at Best Buy and again at CDW you will see the pricing differences.

Seagate is significantly larger with a market cap of some $13.3 Billion compared to Western Digital's market cap of $4 Billion. WDC trades at a mere 10.4 P/E ratio (pre-options issues) and if analyst forecasts for fiscal Jun-07 are correct it has a forward P/E of 10.1 and a forward P/E for Jun-08 of merely 9.1. These estimates may change based on the options review. Keep in mind that these can change any time a company speaks and we are going into earnings season in two to three weeks. StarMine rates Bear Stearns and Citigroup as the two top 5-star rated firms covering the stock; and Bear Stearns downgraded the stock in July to Peer Perform and Citigroup downgraded the shares earlier in September to a Hold. Bear Stearns' Andrew Neff hinted as this company being the next logical acquisition in the space, but that was before he downgraded the stock.

This stock has been hovering in a tight range of $16.50 to $18.00 for most of the last two months and its 52-week trading range is $11.25 to $24.70.

The company's new smaller personal and portable storage devices have helped the company ramp up sales in each of the last 3 years and they are projected to post $4.85 Billion for Jun-2007 and $5.15 Billion in Jun-2008 fiscal years. It is very difficult to accurately compare WDC's balance sheet and operating results now that Seagate and Maxtor have just folded into one report, but WDC spends about 6.6% of its revenues toward research and development. Its options review has been an issue. The company has delayed its annual report, and based on comments that some options backdating existed you should just assume there will be restatements.

The open interest in the options is not indicative of an impending merger as the closest strikes only show open interest of 17,000 for October and 5,300 for November. That is only indicative of 2.3 million shares on a fully leveraged basis, and average daily volume in the stock is 3.3 million shares. This month's short interest showed a reading of 9.6+ million shares short, down from 10.1+ million shares short in August.

The rumors out there earlier in the week actually had rumors that Seagate was the would-be acquirer. Since our FTC and DOJ in the U.S. haven't blocked a single merger in years this may be possible for Seagate to get it done, but you should expect PC makers and others to raise hell. The problem I have in a merger of this magnitude is that Seagate wouldn't just dominate the domestic disk drive market, it would own it outright and could put a real squeeze on lower-price PC makers and on consumers. The recent debt offering of Seagate may have fuelled these rumors, and 1 of 100 other possibilities could have fuelled it.

This company actually looks like a private equity firm could pursue it, and if the company wants to sell itself it should go the private equity route. It has a cheap enough "P/E yield," it has essentially no serious long-term debt and it has enough cash and current assets that a private equity acquirer could pay themselves a hell of a dividend after the acquisition. A private equity firm would also have no anti-trust issues, while Seagate should. If Seagate makes an offer, it is quite possible a private equity buyer would consider upping the ante. There are several firms that could do this. Groups like Bain, KKR, Silver Lake, Blackstone, and others could do this in a club deal or individually. The premium on this probably will not be a mega-premium deal because they do not have to worry about rewarding many shareholders that are deeply buried in the name. This stock traded much higher back in 1997, but that is nearly a decade ago and what the stock traded at back then should be as relevant as gold to a dead man.

The company also has already launched its newer wave of personal and portable storage devices, so it is not as dependent on lower-cost internal and external storage devices. That may actually help keep some of the R&D costs at bay, and high R&D costs at most technology companies typically keep private equity firms and other private groups from being interested. It even has factories, so it is not entirely fables like so many other technology companies.

One of the larger overseas competitors could fairly easily try to acquire the company. That is an unknown as to which it would be, but Hitachi, Fujitsu, Toshiba, and Samsung could all pursue the company if they wanted.

Management may be a mixed bag for a potential deal, but that can go either way. It has a relatively young management team compared to many other technology companies that have been around this long, and they are well paid. The top 5 institutional holders also hold about 32% of the stock as of the last filing dates.

There are risks and Seagate isn't the only competitor. The options review and 10-K delays could create further problems. The company could get hosed if Seagate and Maxtor decided to lower apples to apples product costs to PC makers and to the consumer. It competes against Hitachi, Fujitsu, Toshiba, Samsung Electronics, and Seagate. They could develop internal issues, and so on.

The risks here seem reasonable for the rewards, and it is honestly surprising why no one has tried. There is no way to know if the company will meet, beat, or miss estimates next month and it is very likely that the company will only show revenues and promise to show earnings post-options at a later date. This options issue is actually part of why the stock is cheap, and a private equity firm can take advantage of that malaise better than a US-domiciled public company.

This is actually able to be hedged with options as well. The $17.50 Puts for Jan-07 are listed at $1.50, for November they cost $1.00, and they cost $0.45 for October.

On the surface it seems like there is no reason to not have this on the Bait Shop AND on the Technology Value List. There are always risks, but this seems like a very ripe candidate for a deal in a consolidating world.

Jon C. Ogg

Weekend Edition: Viral Video

"....even if MySpace is worth $20 Billion and before Mark Cuban hosesYouTube"

Pondering Viral Video and Social Networking Valuations
All of the recent Organic video and social networking announcements should make the buyout or acquisition valuations for both YouTube and Facebook seem ludicrous more than they should validate the valuations each is/was seeking. Cisco (CSCO) and Yahoo! (YHOO) have already taken some initiatives that could either make those two viral growth companies either valued much lower. Viacom (VIA) needs to do something, but they should focus on start-ups that are not in the 9-digit handles. Before giving the full synopsis of the potential deals, we need to show the layout and the most recent data from July's comScore reading (yes, we know it is July data).

NewsCorp's (NWS) MySpace is the leader in social networking and is actually big in videos as well.

Microsoft (MSFT) spin off Wallop said Tuesday it was starting service and will compete head on with MySpace and Facebook. Wallop starts with $13 million in backing from Microsoft, Norwest Venture Partners, Bay Partners and Consor Capital. This is just after MSFT lached its Live.com service.

Yahoo (YHOO) has acquired San Francisco start-up Jumpcut, the online video editing company, for an undisclosed amount.......according to Venture Beat.

Cisco Systems (CSCO) has recently announced its video comprehensive digital media system.....

Google (GOOG) has its video sharing....

Time Warner's (TWX) AOL has its UnCut and new open video search initiative.....
http://uncutvideo.aol.com/Main.do

About 106.5 million people, 3/5 of US Internet surfers, watched an online video in July, according to comScore.

Does anyone remember TheGlobe.com (TGLO-OTC)?

Yahoo was listed as #1 with 37.9 million people initiating 812,000 video streams. MySpace was listed as #2 with 37.4 million people initiated 1.5 million streams. YouTube was ranked #3 in the list of video properties on free content. Time Warner's network (including AOL) ranked #4, and Microsoft sites were listed #5.

One other noteworthy situation is that comScore said adding Adobe's (ADBE) Macromedia Flash video increased the number of online video viewers between 10 percent and 20 percent.

YouTube was reportedly not going to accept anything under $1.5 Billion, and that is after it secured Level 3 (LVLT) as its nationwide broadband provider and after it signed terms with Warner Music. Mark Zuckerberg's social networking site Facebook was reportedly in talks with Yahoo! or another for a $900 million or $1 Billion deal.

If you take this all at face value it essentially leaves Viacom (VIA) as the last man standing. The company has signaled that it wants to go more into web content, and it very much needs to. They have to make acquisitions and they have to do it soon. They have said the intent is to rapidly identify companies as they are emerging, or at least that was my understanding.

The problem is that if Viacom goes out and tries to buy a Facebook or YouTube, then they will be overpaying if it is anywhere close to current expectations from these kids. These kids that started the two companies do not yet know their business models yet, and the street hasn't figured out the model yet either. Neither will replace the overall dominance of other services, even if their traffic is actually up among the top sites. The truth is that this video is going to be around, but it will likely not replace all web models out there. Personally I run 4 monitors, watch numerous updating pages, monitor some feeds, and have kept up to 4 different news channels before. BUT, the thought of monitoring a dozen video feeds simultaneously seems numbing and honestly as worthless as gold to a dead man. I may have to eat those words one day and will accept the hickey if I am wrong, but I doubt that will be the case.

These kids that created YouTube and Facebook have created a service and deserve to be rewarded for it, but they do not deserve at all to become Billionaires. If someone pays the current and most recent asking prices for either one of those then they can expect to get a call from me asking them to buy the London Bridge. There are literally almost NO barriers to entry in this field, and it is cheaper to grow it organically. Quite literally you can create a start-up for this with all licensed and leased technology in very little time. With the compression now available even the bandwidth costs out there are not going to be murderous, and that is likely true if if Cramer is correct about a bandwidth shortage coming soon.

I thought Murdoch's acquisition of MySpace was brilliant and I thought News Corp (NWS) stock was a steal around the time he initiated that buyout this time last year and the street was criticising him. I recently noted that maybe Yahoo! should consider YouTube instead of Facebook previously because of the price, and while I think YouTube has more value I cannot think of the need to fork over over $900 million, $1 Billion, or $1.5 Billion for either one of these companies for any reason on earth.

Here are the top 25 sites tracked by Alexa in overall US-related web-based traffic based on the traffic information available as of today:

1. Yahoo!

2. Google

3. Myspace
Social Networking Site.

4. Microsoft Network (MSN)
Dialup access and content provider.

5. EBay
Person to person auction site, with products sorted into categories.

6. Amazon.com
Amazon.com seller of everything

7. Craigslist.org
Online community

8. YouTube
YouTube is a way to get your videos to the people who matter to you. Upload, tag and share your videos worldwide!

9. Wikipedia
Free encyclopedia built collaboratively using Wiki software.

10. Go.com
A searchable directory, news, stocks, sports and free e-mail.

11. CNN - Cable News Network
Includes US and international stories and analysis, weather, video clips, and program schedule.

12. Live.com
part of Microsoft

13. AOL
America On Line's portal, offering search, shopping, channels, chat and mail.

14. Blogger.com
Free, automated weblog publishing tool that sends updates to a site via FTP.

15. Thefacebook (facebook.com)
An online directory that connects people through social networks at colleges. FAQ, news coverage, schools covered, and terms of use.

16. Microsoft Corporation
Official homepage of Microsoft Corporation

17. Comcast.net

18. The Internet Movie Database imdb.com
Features plot summaries, reviews, cast lists, and theatre schedules.

19. The New York Times
Online edition of the newspaper's recent content with searchable archives for a fee.

20. Flickr
Picture galleries available with social networking, chat, groups, and photo ratings.

21. MapQuest
Find directions for and explore towns and cities worldwide. Display addresses on a map, view nearby businesses, get driving directions and maps, and plan a trip with city information. Also includes aerial photographs of selected areas.

22. Weather.com
Offers forecasts for cities worldwide as well as radar and satellite maps. Also includes news stories and allergy information.

23. Digg
Technology focused news site where the stories are chosen by community members rather than editors.

24. Apple Computer, Inc.
Apple's main homepage.

25. About.com
A network of sites where visitors can find many targeted topic areas, each one managed by a personal guide; part of New York Times.

Jon C. Ogg

Market Wrap (Sept. 29., 2006)

DJIA 11,679.07; Down 39.38 (0.34%)
NASDAQ 2,258.43; Down 11.59 (0.51%)
S&P500 1,335.85; Down 3.30 (0.25%)
10YR- Bond 4.633%

Today was the end of the quarter, and it felt like the big fund mark-ups and window dressings took place earlier in the week. We had flat economic numbers that didn't show a runaway inflation with +0.3% income, +0.1% spending, core PCE +0.2%, core PCE yr/yr was +2.5%. The Chicago purchasing managers index was 62.1, making the weak Philly Fed reading early this week irrelevant. University of Michigan Confidence Reading was 85.4, which is compiled by students and has been referred to as the country club housewives' confidence index.


Research in Motion (RIMM) blew past numbers and raised guidance, so shareholders blew off its statement that internal options investigations would lower past earnings. RIMM closed up 19% at $102.65.

An article where president Bush pledged to increase alternative fuels spending caused rallies in small alternatives: Capston (CPST) +12% at $1.40; Quantum Fuels (QTWW) +14 %at $1.98; and Active Power (ACPW) +27% at $2.50.

Bare Escentuals (BARE) priced its IPO at $22.00, well above the $15 to $17 range; it closed at $27.15.

Shutterfly (SFLY) priced its IPO at the top of its range at $15.00; it closed up at $15.55.

H-P (HPQ) rose 2% after Mark Hurd alleved fears on Capitol Hill that the company was rotten to the core.

Dell (DELL) fell 0.5% to $22.84 after adding another 100,000 laptop batteries to its recall.

Labopharm (DDSS) lost 22%to close at $5.65 after the FDA did not give it an approval.

Sanders Morris Harris (SMHG) fell 11.7% to close at $12.51 after it had to price its 5 million share secondary well under current market prices.

Advanta (ADVNB) fell 1.8% to $36.90 despite rumors that Citigroup may be interested in the $1 Billion company.

Acorda Therapeutics (ACOR) rose over 5% to $9.15 on the day after Piper Jaffray raised its rating to an Outperform. ACOR had over a 300% rise this week on its MS studies.

AZZ Inc (AZZ) rose 14% to $36.50 after beating earnings handily and raising guidance.

Thai Fund (TTF) rose almost 5% to $9.90 on hopes out of Thailand.

Have a great weekend!!!!

24/7 Wall St.

Bait Shop: Western Digital (WDC)

Western Digital (WDC; $18.20) has been up earlier this week on hopes of a buyout. It began the week around $17.00 and traded just over $18.50 on Wednesday before coming back down. Its shares tried a brief rally earlier today, but it seems that has slowed. A buyout of Western Digital makes sense, although a different scenario makes more sense than rumors that have gone around this week.

Western Digital (WDC) is one to watch in the wave of ongoing mergers and private equity buyouts. In the game of pure hard drives for PC's it and Seagate (STX) are the last of the big independents domiciled in the US, and Western Digital is far behind Seagate. Maxtor used to be there in the space, but Seagate took them out in an acquisition this last May. Western Digital acquired Read-Rite assets in 2003. Disk drive makers do their best to make comparing apples to apples difficult, but historically Western Digital has been thought of as the "value purchase" for hard drive while Seagate has been viewed as the premium brand. If you go in and start comparing prices at Best Buy and again at CDW you will see the pricing differences.

Seagate is significantly larger with a market cap of some $13.3 Billion compared to Western Digital's market cap of $4 Billion. WDC trades at a mere 10.4 P/E ratio (pre-options issues) and if analyst forecasts for fiscal Jun-07 are correct it has a forward P/E of 10.1 and a forward P/E for Jun-08 of merely 9.1. These estimates may change based on the options review. Keep in mind that these can change any time a company speaks and we are going into earnings season in two to three weeks. StarMine rates Bear Stearns and Citigroup as the two top 5-star rated firms covering the stock; and Bear Stearns downgraded the stock in July to Peer Perform and Citigroup downgraded the shares earlier in September to a Hold. Bear Stearns' Andrew Neff hinted as this company being the next logical acquisition in the space, but that was before he downgraded the stock.

This stock has been hovering in a tight range of $16.50 to $18.00 for most of the last two months and its 52-week trading range is $11.25 to $24.70.

The company's new smaller personal and portable storage devices have helped the company ramp up sales in each of the last 3 years and they are projected to post $4.85 Billion for Jun-2007 and $5.15 Billion in Jun-2008 fiscal years. It is very difficult to accurately compare WDC's balance sheet and operating results now that Seagate and Maxtor have just folded into one report, but WDC spends about 6.6% of its revenues toward research and development. Its options review has been an issue. The company has delayed its annual report, and based on comments that some options backdating existed you should just assume there will be restatements.

The open interest in the options is not indicative of an impending merger as the closest strikes only show open interest of 17,000 for October and 5,300 for November. That is only indicative of 2.3 million shares on a fully leveraged basis, and average daily volume in the stock is 3.3 million shares. This month's short interest showed a reading of 9.6+ million shares short, down from 10.1+ million shares short in August.

The rumors out there earlier in the week actually had rumors that Seagate was the would-be acquirer. Since our FTC and DOJ in the U.S. haven't blocked a single merger in years this may be possible for Seagate to get it done, but you should expect PC makers and others to raise hell. The problem I have in a merger of this magnitude is that Seagate wouldn't just dominate the domestic disk drive market, it would own it outright and could put a real squeeze on lower-price PC makers and on consumers. The recent debt offering of Seagate may have fuelled these rumors, and 1 of 100 other possibilities could have fuelled it.

This company actually looks like a private equity firm could pursue it, and if the company wants to sell itself it should go the private equity route. It has a cheap enough "P/E yield," it has essentially no serious long-term debt and it has enough cash and current assets that a private equity acquirer could pay themselves a hell of a dividend after the acquisition. A private equity firm would also have no anti-trust issues, while Seagate should. If Seagate makes an offer, it is quite possible a private equity buyer would consider upping the ante. There are several firms that could do this. Groups like Bain, KKR, Silver Lake, Blackstone, and others could do this in a club deal or individually. The premium on this probably will not be a mega-premium deal because they do not have to worry about rewarding many shareholders that are deeply buried in the name. This stock traded much higher back in 1997, but that is nearly a decade ago and what the stock traded at back then should be as relevant as gold to a dead man.

The company also has already launched its newer wave of personal and portable storage devices, so it is not as dependent on lower-cost internal and external storage devices. That may actually help keep some of the R&D costs at bay, and high R&D costs at most technology companies typically keep private equity firms and other private groups from being interested. It even has factories, so it is not entirely fables like so many other technology companies.

One of the larger overseas competitors could fairly easily try to acquire the company. That is an unknown as to which it would be, but Hitachi, Fujitsu, Toshiba, and Samsung could all pursue the company if they wanted.

Management may be a mixed bag for a potential deal, but that can go either way. It has a relatively young management team compared to many other technology companies that have been around this long, and they are well paid. The top 5 institutional holders also hold about 32% of the stock as of the last filing dates.

There are risks and Seagate isn't the only competitor. The options review and 10-K delays could create further problems. The company could get hosed if Seagate and Maxtor decided to lower apples to apples product costs to PC makers and to the consumer. It competes against Hitachi, Fujitsu, Toshiba, Samsung Electronics, and Seagate. They could develop internal issues, and so on.

The risks here seem reasonable for the rewards, and it is honestly surprising why no one has tried. There is no way to know if the company will meet, beat, or miss estimates next month and it is very likely that the company will only show revenues and promise to show earnings post-options at a later date. This options issue is actually part of why the stock is cheap, and a private equity firm can take advantage of that malaise better than a US-domiciled public company.

This is actually able to be hedged with options as well. The $17.50 Puts for Jan-07 are listed at $1.50, for November they cost $1.00, and they cost $0.45 for October.

On the surface it seems like there is no reason to not have this on the Bait Shop AND on the Technology Value List. There are always risks, but this seems like a very ripe candidate for a deal in a consolidating world.

Jon C. Ogg
September 29, 2006

DISCLAIMER: Information has been taken from sources deemed reliable, but no assurances can be made to the accuracy of any figures, claims, or opinions. This is for informational purposes only and is not to be interpreted as investment advice or a recommendation to buy or sell securities. It is the sole responsibility of each individual to do their own research and form their own opinions. Neither 24/7 Wall St., LLC nor its officers assume any responsibility or liability for investor gains or losses, and neither holds any material knowledge that any merger in any form will occur. The writer of this does not hold any securities in the companies mentioned, and has not been compensated by outside parties to portray this situation in any particular manner.

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Cramer on STOP TRADING (9/29/06)

On STOP TRADING on CNBC at 2:55 PM EST, Jim Cramer said he is tired of hearing the market is expensive.

He said ConocoPhilips (COP) and steel names are cheap at 5 or 6 times earnings, but names like Coca Cola (KO) isn't.

On tech stocks, Cramer said he thinks it positive on techs. He thinks Cisco (CSCO) at 18 times earnings is too low. Cramer thinks many estimates are too low.

Cramer also is sticking by General Motoros (GM) and a $40 target. He thinks Tracinda is buying more and he thinks Ford (F) will have earnings explosions into next year.

Jon C. Ogg
September 29, 2006

Will Q4 Be Strong Yet Again?

Fourth quarters in recent years have been strong periods for the equity market, but I wanted to put some hard numbers behind my recollections. I went back all the way to 1990 and calculated the S&P 500's performance for each of the last sixteen fourth quarters. The results were even stronger than I had remembered.

Fourteen of the last sixteen years have produced positive S&P 500 returns in Q4. The mean return for the period since 1990 has been 6.5%. The average gain in the positive years is 8.0%, while the average loss in the negative years is only 4.5%.

Does this mean investors should be 100% equities going into October? Surely some will do just that based on these statistics, but I am being more cautious. The market has had a very, very strong third quarter and I want to protect some of those gains.

Stocks simply feel overbought currently. With the average fourth quarter producing a 6.5% gain since 1990, I am going to have to take "the under" and say this year will be less impressive than average. On the bright side, I'll be thrilled if I'm wrong!

http://www.peridotcapitalist.com/

Will Lampert Bail on AutoZone (AZO)?

From 13D Tracker

In an amended 13D filing after the close yesterday on AutoZone, Inc. (NYSE: AZO), Eddie Lampert's hedge fund ESL Partners, which is a 30.99% holder (22 million shares) of the stock, noted the news that Mr. Lampert would step down from the Board of Directors of the company, in order to devote more time to other duties at ESL and Sears Holdings (Nasdaq: SHLD).

Yesterday, shares of AutoZone were under pressure as rumors surfaced Lampert's fund would start to liquidate the position. The rumors were abound even though Mr. Lampert stated in the press release, "I plan to remain involved with the company, and ESL currently plans to remain a significant shareholder in AutoZone for the foreseeable future."

I guess one could view the word "significant" as meaning a 5% or 10% holder, not a 31% holder.

Wording in the SEC filing certainly leaves the door open for a sale. The disclosure notes that "Filing Persons (ESL) may acquire additional Shares; may sell all or any part of their Shares pursuant to Rule 144, in privately negotiated transactions or in sales registered or exempt from registration under the Securities Act of 1933; may distribute Shares to various of their partners or may engage in any combination of the foregoing."

This wording is not new and is a pretty standard disclosure, so in and of itself is not an indication that Lampert is bailing. But speculation on Lampert's next move have been rife lately, with talk centering on the hedge fund guru accumulating stakes in Home Depot (NYSE: HD) or Gap (NYSE: GPS).

Using funds from a sale of all or part AutoZone would surely give Mr. Lampert some play money to throw around.

http://www.13dtracker.blogspot.com/

Can The Wall Street Journal Say "Opps"?

Stocks: (DJ)(GM)

The front page of today's Wall Street Journal is one of the first on which they have run advertising. Page One has been strictly devoted to news for many years.

But, wouldn't you know it, starting off on a new venture ends up being an embarrasment. Below the fold on the right is an article on GM titled "Kerkorian Aims to Boost GM Stake In Bid to Add Pressure on Wagoner". Right below it, an ad for GM's new 100,000 mile warranty. The headline of the ad: "A New Level Of Confidence". Maybe they should send it to Kerkorian and tell him to keep his money.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Further Implications on the Talk America Buyout

We have already covered this Talk America (TALK) acquisition yestrerday and last week, so this will likely be the last note on the company.

This Talk America (TALK) that was recently given a buyout offer from Cavalier Telephone is up above even the new-higher $9.00 bid submitted yesterday by Sun Capital Securities Group. This traded above that level yesterday on the potential raised-bid for the company from Cavalier.

Here are the guts of the SEC Filing this morning to help determine if a new-higher-higher bid may be forthcoming:

On September 28, 2006, Talk America Holdings, Inc. received an unsolicited letter from Sun Capital Securities Group, LLC proposing "to purchase for cash all of the outstanding shares of Company Common Stock for $9.00 per share," subject to the terms and conditions set forth therein, including Sun Capital's satisfactory completion of due diligence. A copy of the Letter is filed as Exhibit 99.1 to this Report and the foregoing summary of the terms thereof is qualified in its entirety by reference thereto.

Also on September 28, 2006 and in response to the receipt of the Letter, the Company's Board of Directors, as permitted by an exception to the general "non-solicitation" terms of the Agreement and Plan of Merger, dated as of September 22, 2006 (the "Merger Agreement"), among the Company, Cavalier Telephone Corporation and Cavalier Acquisition Corp., made the necessary determinations in respect of the Letter and the proposal contained therein so as to permit the Company to furnish information about the Company to Sun Capital and its representatives pursuant to a confidentiality agreement with Sun Capital and to participate in discussions and negotiations with Sun Capital in respect of its proposal. The Company does not know whether any further or other proposal will be forthcoming from Sun Capital and the Company's Board of Directors has made no determination in respect of the proposal contained in the Letter or any other proposal of Sun Capital other than the limited determinations described above.

Here is a full link to the Sun Capital stake and offer.

BACKGROUNDER

Sun Capital Partners, Inc. is a leading private investment firm with more than $3.5 Billion under management. It focuses on leveraged buyouts, equity, debt, and other investments in market-leading companies that can benefit from its in-house operating professionals and experience. Sun Capital affiliates invest in companies which typically have the number one or two market positions in their industry, long-term competitive advantages, and significant barriers to entry. The company has made 10 new transactions this year, and made 5 add-on investments. Sun Capital has offices in Boca Raton, Los Angeles, New York, London, and Shenzhen.

MARKET ACTION

This stock has just crossed into new higher territory than yesterday's highs. The 52-week high on TALK is $10.20, and the company was just at its 52-week lows earlier in September. What a difference a couple of weeks can make. Sun Capital Securities is a subsidiary of Sun Capital Partners, Inc. and the subsidiary is already a 13.9% stake holders in TALK.

IMPLICATIONS
If the Sun Capital's mantra is accurate and their intentions are not just to get a higher buyout price, then it is obvious that the price of poker just went up. The company now has a $292 Million market cap, and it may be an issue for Cavalier to do this much more. Cavalier itself could actually be a longer-term candidate for a deal now, or it is possible that Sun will do this acquisition to repackage it for another Telco down the road. At $275 million, $9.00 per share in cash, the stock is trading at a decent premium to the deal. Based on some remedial calculations it would seem as though a bid of $9.75 to $10.00 could come without breaking the bank, but then what happens while the deal is waiting to be closed. It is obvious that TALK will sell for a higher price than the Cavalier $8.10 bid, but this probably won't end up being sold at much higher than $10.00. The company has been profitable in the past, but profits have been dwindling. So while it seems obvious that this is going to sell at a much higher price than $8.10, it may not be worth the risk at $9.60 plus compared to the new $9.00 bid.

The other top 3 large holders appear to be Eton Park Capital, Barclays, and Dimensional Fund Advisors. We will probably not get to hear anything from these fund management groups today, and this is a smaller company for those fund managers. At this point and based on past buyouts it would seem prudent to cut and run. We are in the midst of an unprecedented private equity craze and this is a fairly small price tag for any serious buyer, so anything is probably in the realm of possibilities.

Jon C. Ogg
September 29, 2006

Think Equity Thinks Little of DELL

By William Trent, CFA of Stock Market Beat

You may not have noticed, but computer maker DELL has not exactly been hitting the ball out of the park lately. Well, investment boutique Think Equity Partners has noticed, and is so concerned they believe DELL will miss guidance they didn’t even give.

According to CNet News.com:
Think Equity Partners believes Dell will have to preannounce poor earnings once again, as it deals with a host of issues, including the market, the recall, executive defections, a SEC investigation into its accounting practices, and the loss of marketing support from Intel as a result of its decision to adopt Advanced Micro Devices’ chips.

Even though Dell hasn’t issued guidance for its current quarter, it’s likely to try to slip the bad news in among the other earnings reports that will arrive in mid-October, analysts said in the report.

Now that is an earnings surprise! Of course, when you don’t give earnings guidance anything should qualify as a surprise. As far as DELL’s woes, we were a little curious as to what why and particularly why now these became a concern.

For example:
The market. We assume Think is thinking about the market for computers as opposed to the stock market. To some extent, though, both are outside DELL’s control. Today’s personal computer buyer is the consumer rather than big business, and we would no more penalize DELL for that than we would Oracle. It just isn’t their customer.

The recall. With similar recalls now issued by Lenovo/IBM, Apple, Toshiba, and pretty much anybody else who makes laptops, it is hard to call this a concern for one company in particular.

Executive defections. The way things are going, we could use at least one more of these.
SEC investigations are never a buy signal. But with “SEC options investigation” turning up “about 9,390,000″ results in a Google search, again we don’t see the company-specificity on this.

Last but not least, we have the AMD switchover and the question of whether the market share to be gained by offering AMD chips offsets the margin losses from foregone marketing support. While we assume somebody at DELL did the math, given their recent performance we are unsure whether they have anyone at the firm who can properly do the math - so we’ll let Think Equity Partners have this one.

Still, the last point has us more than a little confused at the fact that Think’s semiconductor analyst downgraded AMD on concerns of collateral damage. We guess it goes back to who was doing the math. If DELL loses its subsidy but doesn’t sell any AMD processors anyway, then it would indeed be bad for both companies.

Disclosure: Author is short DELL put options, a position that reflects a neutral to bullish outlook on DELL common stock.

The author may hold a position in the securities discussed. A current list of the author's holdings is available here.

http://stockmarketbeat.com/blog1/

Energy Beat - Debunking the Bear Case

By William Trent, CFA of Stock Market Beat

Barry Ritholtz recently expressed his dissatisfaction with the explanations being bandied about in the media as to why oil prices have fallen:

Here is a short list of the most common current explanations circulating in MSM:

1. More Supply coming online;
2. Reduction of global terror threat;
3. Cooling of hostilities between Israel and Lebanon
4. Seasonally weak demand, as Hurricaine season ends;
5. Iran cooling inflammatory rhetoric

I find these some of the mainstream explanations unsatisfying. At the risk of creating a strawman (only to knock it down), let me put forth my top 5 list:

1. Fast money rotating out of commodities and into tech;
2. Cooling economy consuming less energy;
3. No major supply disruption from weather or Middle East;
4. Psychology peaked earlier in year; (see Business Week Cover Story)
5. Stretched consumer shifts behavior;
6. And lastly, the Weak Strong US Dollar (Crude is priced in greenbacks)

We agree with Barry that each of these can pretty easily be explained away, as we do here:

Supply coming on line takes years. What new supply could have come on line that was not anticipated three months ago?
Just because they will let you take some of the liquids back on the plane now doesn’t mean the terror threat is any lower.
Israel and Lebanon don’t exactly have much oil - no oil supply was disrupted during their skirmish and it did not create any particularly unusual demand, so why would it have any effect on price (which was rising for years before the skirmish started?)
Seasonality is a valid point but certainly a very temporary one. It is long-term supply/demand balances that sent oil to $78, and those haven’t changed.
Iran? Isn’t this sort of the terror/Israel arguments tied together? Iran either wants to sell oil or it doesn’t. We’re betting on the former and think they are selling as much (or nearly so) as they can produce and that this won’t change any time soon.
Amaranth certainly suggests there was some speculation on the way up, but also suggests that (post their pop) there may be limited downside remaining.
The economy would have to cool to zero percent growth for the next five years for technology and substitution to offset the normal demand increase attributable to growth. If that is your forecast, fine (although I hope you are wrong.) Otherwise, your outlook for oil should be consistent with your economic outlook.
Psychology? Perhaps it had an impact on price, but it sure doesn’t affect supply or demand much. Unless you can quantify the impact on price, how do you know the current price is any more correct than last month’s?
Stretched consumer: See #6 above.
Dollar: Ditto.
So with the easy explanations as easily tossed aside, how about something with more meat? John Mauldin recently reposted a Charles Gave article on his site. Its basic tenet that oil prices will be brought back down due to substitution and new technology is beyond reproach. As far as the timing, however, we found it to be long on optimism and short on consistency. Consider:

1- The return of king coal: In WWII, the Germans (who were long coal and short oil) refined processes to make gasoline out of coal. This old process has been perfected and is now a source of energy in South Africa. Why is this important? Because there is more coal in North America or Australia than there is oil in the Middle East. The problems in using coal have historically been a) ecological issues (which can be solved with some money) and b) costs (using/moving coal is not as economic as low oil prices).

2- The exploitation of tar sands or bituminous coals in Canada, the US, and yes, Venezuela. Here, once again, the technology exists and the extraction costs are roughly US$30/bl. The production build-time is roughly around three to four years. The big hang-up is the shortage of technicians. Such shortage problems can however be solved after a few years (time of schooling/training) or, by enticing retired technicians to come back.

The company that converts South Africa’s coal into fuel is Sasol (SSL) and is on our Watch List. During the last few months they have not opened vast new capacity, nor even announced plans to start building vast new capacity. In fact, the recent decline in oil prices has hit Sasol and the tar sands producers harder than it hit traditional suppliers because these processes are only profitable when oil prices are as high as they have been recently. Given the long lead times for building the plants and extracting these resources, companies naturally want some degree of comfort that the price will not fall significantly below current levels for some time. The recent price decline reminded them why they did not start building these plants five years ago, and is unlikely to encourage them to start building them now.

The article continues:

3- The emergence of new technologies to recover more oil out of old and decaying oil fields. With the price of oil where it is, it makes a lot of sense to invest substantially to try and optimize the output from any individual well. In the past 25 years, we have seen the average extraction at existing wells climb, thanks to technology, from 25% of known reserves to 40% of reserves. Norway has set a target of 65% to 70% recovery for a good part of its reserves and is already achieving that in some fields. Where do the improvements come from? Technological progress!

Once again, technological progress that has not occurred overnight. If it took 25 years to increase extraction to 40% it is likely to take as long for it to reach 65%.

4- The possibility to produce oil/ethanol out of agricultural products. On this very topic, the best summary we have read of the issues at hand was produced recently by our friend Mark Anderson, the editor of the SNS newsletter. We lift his work below shamelessly: “Ethanol is a liquid fuel, currently produced from corn… Now here’s the rub: there is a debate about whether it actually takes more energy to create a gallon of ethanol than the energy contained in a gallon of ethanol. According to Report No. 814 from the Office of the Chief Economist of the U.S. Department of Agriculture, corn ethanol contains 1.34 times the energy required to manufacture it….

There are longer-term solutions. In a period of about five years, we could be producing ethanol in quantity from cellulose. Cellulose is found in a variety of plant material, including the stalks of the corn plant. The process for production of ethanol from cellulose does not require large amounts of hydrocarbons and is, therefore, much less expensive. If the federal government continues to provide large subsidies for corn-derived ethanol, however, we are in effect providing a disincentive to make capital investment in cellulose technology. The corn lobby will fight tooth and nail, but in the end, democracy, just like the free market, has a way of doing what is right and sensible (usually, after trying out all other options). In this case, that would see cellulose derived ethanol become widely available in the marketplace.

Well, call us in five years when the cellulose plants are up and running. In the meantime, with a 1.34 energy output/input ratio the best ethanol can do is cut fuel consumption 34% - and that is assuming there is that much excess corn produced, that the plants can be built, that the increased demand for corn doesn’t make it even less profitable, and so on.

6- Prices & Substitution

High energy costs are not impacting just oil. We have witnessed a stupendous rise in the price of all forms of energy through the substitution effect. And here technology is also making huge leaps. Let us, again, go through a few examples:

* Nuclear power. There are two main problems with nuclear plants. The first is that building a plant takes a long time (though the Chinese are definitely not wasting any time on that issue). The second issue is the disposal of the nuclear waste. But this is where the exciting news lies: we have recently read reports highlighting that the volume of the waste in the new French reactors is a tenth of what it was in the old reactors. This implies that the amount of space needed to store the waste is much smaller, and the arguments of the anti-nuclear green lobby further reduced.

* Production of energy at the individual and local levels: everywhere we go, especially in Europe (where the price of energy, on top of being very high, is also heavily taxed), we find new and interesting forms of energy production: in Scandinavia geothermal energy (one drills in the rocks, and gets the heat coming from below); in France, a massive movement towards heating pumps (exchanging heat between a source of water and the atmosphere - in fact, after a brutally hot summer in Provence, I am biting the bullet and having such a system installed in my Avignon house); in Denmark, there are quite a lot of wind turbines; in Spain, you can see solar panels on a growing number of roofs. All these systems enjoy huge tax breaks, and, once they are put in, they are here to stay; markets lost for oil, for ever.

By themselves, none of the above factors is sufficient. And the rate of substitution from oil to these new sources of energy is excruciatingly slow. For example, if one had the bad luck of installing an oil boiler in one’s house three years ago, one is not going to change now. The capital costs are simply too high. But taken together they are significant and will change for ever the demand for oil or natural gas used to heat or cool houses, factories, or office buildings.

This is indeed the meat of the article, but there is nothing to say that this can happen any time soon. With a ten-year lead time to build nuclear plants, we just don’t see it making a sizable dent any time soon. Then, apart from the environmental issues, Gave offers the reason why it may not help even then:

Our 19th century world was dominated by coal. Our 20th century was dominated by oil. It is our firm belief that the 21st century will not be dominated by oil. It will be dominated by electricity; and oil will become a marginal energy. This simple truth might help explain why, since 2001, uranium has not had a single down month, and since 2003, uranium has never traded down for even a single day, regardless of what was happening to oil prices.

With uranium prices rising so much, why even bother? It sounds like it won’t do much to make energy cheaper, which is after all the point. In fact, there may not even be enough uranium out there to support much additional demand. As far as substitution consider that the median age of vehicles in the US is 9 years. If you assume that hybrids improve fuel efficiency by 50% over their gas-only counterparts, even if 100% of new car sales were hybrids it would take 18 years to fully replace the vehicle fleet and reduce fuel consumption by 50% overall (assuming demand doesn’t continue to rise.) Based on a more realistic (but still wildly agressive relative to today’s sales levels) assumption that 10% of new vehicle sales will be hybrids, the annual demand reduction is less than 0.3%. Color us unimpressed.

With that off our chest, some stories affecting individual companies recently:
Statoil STO) strikes gas at Barents Sea Well

Pension and endowment funds aren’t giving up on commodities yet.

ConocoPhillips Confirms North Sea Discovery - Oil and Gas Online

Helix names new CEO
Disclosure: Author owns shares of United States Oil Fund (USO). The author may hold a position in the securities discussed. A current list of the author's holdings is available here.

Shutterfly IPO Prices at High-End of Range

Shutterfly (SFLY) priced its 5.8 million share IPO at $15.00 per share, at the higher-end of the $13.00 to $15.00 range.

We had been critical of this IPO early on and then noted that the street had been warming up to the terms of the IPO. Here is the last article with links to the financial data and prior notes.

Jon C. Ogg
September 29, 2006

Bare Escentuals IPO Priced Higher, and Then Some

Bare Escentuals (BARE) is an IPO we noted earlier about being met with strong demand. There was talk of aprice above the range this week, but it cam in much higher than the range. BARE priced at $22.00 for 16 million shares, well above the $15.00 to $17.00 range.

HERE is the article from Monday with all of the details.

Jon C.Ogg
September 29, 2006

Pre-Market Stock Notes (Sept. 29, 2006)

(ACN) Accenture $0.39 EPS vs $0.38e.
(AH) Armor Holdings gets $46+ million in new orders from the Army.
(AZZ) AZZ beat earnings and raised guidance.
(BARE) Bare Escentuals 16 million share IPO priced at $22; above the $15 to $17 range.
(BCRX) BioCryst announces positive results from Peramivir human clinical data.
(BLTI) Biolase received notice from FDA that it has addressed recent concerns from a September 5, 2006 warning letter.
(DDSS) Labopharm gets FDA approvable letter fpr Tramadol, but not an approval; stock trading down over 20%.
(ESIO) Electro Scientific $0.23 EPS vs $0.19e.
(GPN) Global Payments beat earnings and raised guidance.
(GT) Goodyear positive article in Business Week.
(HPQ) H-P acquired gaming PC maker in Canada called VoodooPC for undisclosed terms.
(JCG) J. Crew announced 3 directors have resigned.
(LMT) Lockheed Martin gets $1.4 Billion US Air Force support contract.
(MIR) Mirant announced a $100 million share buyback plan.
(NURO) NeuroMetrix positive article in Business Week.
(OFSI) Omni Financial 3.3 million share IPO priced at $9.50.
(PFE) Pfizer gets drug for anti-smoking approved in Europe.
(PNC) PNC gets positive article in NYTimes.
(PNR) Pentair announced $100 Million share buyback.
(RIMM) Research in Motion trading up 19% after beating earnings and raising guidance.
(RSTI) Rofin Sinar gets positive article in IBD.
(SFLY) Shutterfly priced its 5.8 million share IPO at $15.00.
(SMHG) Sanders Morris harris 5 million share secondary priced at $12.50.
(SMOD) Smart Modular $0.19 EPS vs $0.18e.
(STLD) Steel Dynamics gets positive articlein Business Week.
(SWFT) Swift lowered guidance.
(TEVA) TEVA PHARMA says Copaxone treatement was effective.
(TIBX) Tibco trading down 6% as revenues were slightly under plan, cut to Hold at Citigroup..
(YHOO) Yahoo! announced service pact for bundling on H-P PC's.

Select Analyst Calls (Sept. 29, 2006)

ABG started as BUy at Deutsche Bank.
ACOR raised to Outperform at Piper Jaffray.
ANCX started as Outperform at KBW.
ASN started as Buy at UBS.
BEBE started as Buy at Soleil.
CB cut to Hold at AGEdwards.
CHE cut to Hold at Deutsche Bank.
CHKP cut to Equal Weight at Lehman.
CLP started as Buy at UBS.
CREL raised to Overweight at JPMorgan.
CRM cut to Underperform at FBR.
CTCM raised to Overweight at JPMorgan.
EMC cut to Hold at AGEdwards.
GWW started as Neutral at Goldman Sachs.
HIG cut to Hold at AGEdwards.
KFT cut to Underweight at Morgan Stanley.
LAMR cut to Peer Perform at bearStearns.
LTD started as Buy at Soleil.
MCBI cut to Mkt Perform at KBW.
ODSY cut to Hold at Deutsche Bank.
PD cut to Peer Perform at Bear Stearns.
SHW cut to Equal Weight at Morgan Stanley.
SWFT cut to Neutral at JPMorgan.
TIVO started as Peer Perform at Bear Stearns.
TKP cut to Sell at Goldman Sachs.
TXN cut to Sell at ThinkEquity (yesterday call maybe).
USNA cut to Hold at AGEdwards.
WAL cut to Sector Perform at RBC.
ZIPR started as Outperform at JMP Securities.

Starbuck's: The Department Store (SBUX)(GMCR)(BGP)(BKS)

Word is that Starbuck's will begin selling books, which is perhaps the beginning of a competition with Barne & Noble and the struggling Border's.

The coffee retailer now sells breakfast sandwiches, lunch, fruit drinks, coffee cups, and music. That may not even be an exhaustive list.

The theory behind selling more items is that each customer has more to buy than a cup of coffee and the yield-per-visitor goes up. That may or may not be true.

What also may or may not be true is that music and book stores have started selling coffee. Barnes & Noble sells Starbuck's in many of its stores. But, investors have to wonder whether the book chains might move to to another brand like Green Mountain Coffee Roasters which is highly unlikely to become a retail competitor.

As Starbuck's moves onto the turf of companies that are currently partners, it needs to worry about whether they will push back.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Is Google A $200 Stock That Trades At $400?

Google had net income of $721 million last quarter, its best quarter of the last four. At eBay, the best quarterly number over that same period was $279 million. Of course, the holidays make their business more seasonal. At Yahoo! the best of the last four Qs was net income of $632 million. At Amazon, the number was $199 million.

Google’s market cap is about $124 billion now. Yahoo!’s runs about $35 billion. eBay weighs in at $40 billion. Amazon at $13 billion. So, Google is worth 41% more than the other three combined.

Of course, Google’s revenue almost doubled last year, to $6.1 billion. At Yahoo! revenue has not doubled since 2004, when it was up 120%. eBay almost doubled revenue in 2003, and came close again in 2004. Amazon has not grown that fast since 2000.

Obviously, Google gets a huge market premium for its spectacular growth being in a more recent period than the rest of the companies. Based primarily on anticipation of future increases in revenue and operating income, Google trades at about 15 times sales. At Yahoo!, the number is 5.7 times. At Amazon, the number is only 1.5 times, but their big growth year was six years ago. The eBay ratio of sales to market cap is 7.3 times.

Virtually all of Google’s revenue comes from key word advertising. Internet advertising has been growth at an extremely rapid rate, but a recent study from the Internet Advertising Bureau says it is slowing. While US internet advertising was up 37% in the first half of 2006 compared to the same period in 2005, it only grew by 5.5% from Q1 2006 to Q2.

Predicting whether internet ad revenue growth will continue to slow is impossible. Obviously Yahoo! has suffered recently from the perception that some of its major ad categories are not doing well. It is too early to tell whether this will spill over into other internet companies.

One thing is certain. When Wall St. gets a whiff of slower growth, stock prices stumble. Yahoo! is a case in point. This year its price has gone from over $43 to $25. In late 2004, eBay traded at over $58. Today, it changes hands at $26.

Google’s day is coming. In the June quarter, revenue jumped to $2.456 billion from $1.385 billion in the same quarter a year ago. Another double. But, with overall web ad revenue growing at less than 40%, Google is too big to gain enough market share to overcome the overall trend.

And, when the trend is not your friend, eBay and Yahoo! would indicate that a company’s market cap can fall by half.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Can Advertising Revenue Save XM? (XMSR)(SIRI)

Satellite radio has had a rough road. But, advertising revenue could change that. There is a broad perception that satellite radio is commercial-free. But, that is only true on some channels. The new Oprah show carries commercials and some of them are large marketers including like Target, Dove and Snapple.

According to XM, the company did $20 million in revenue in 2005. The previous year the figure was $8.5 million.

XM’s revenue run rate is about $1 billion a year. Advertising is clearly an extremely small part of this. But, XM has not had Oprah before. As here syndicated TV show and magazine have proven, she is a tremendous draw for marketers.

With an operating loss of $100 million a quarter, and a slowing subscriber base that may only reach 8 million by the end of the year, XM needs a hand. The market for advertising revenue on radio is still huge. Citadel Broadcasting, a modest-sized public radio company did $420 million in revenue last year. The company owns 153 FM and 58 AM stations. The company had an operating profit of $143 million last year.

Over the air radio has lost a great deal of it momentum to satellite radio. But, with its stock But, with its stock down from over $36 a little less than a year ago to $13 now, XM hardly looks like it has taken the momentum torch from the old line broadcast companies. Rival Sirius is doing no better. In December, its stock traded near $8. It is now below $4.

A hybrid model of paid subscribers and advertising is what may save XM’s bacon. The Oprah channel is not just an experiment. It may be XM’s future.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Europe Market Report 9/29/2006 Alcatel, BMW, Reuters Up

Stocks: (BCS)(BP)(BAB)(BT)(GSK)(PUK)(RTRSY)(VOD)(BAY)(DCX)
(DB)(DT)(SAP)(SI)(ALA)(AXA)(FTE)(V)

Markets in Europe was up at 5.15 AM New York time.

The FTSE gained .4% to 5,995. Barclays was up 1.3% to 678.5 BP was flat at 587. British Air was up .7% to 437.5. BT was up 1.3% to 267. GlaxoSmithKline was down .4% to 1419. Prudential was up .9% to 649. Reuters was up 1.2% to 436. Vodafone was up 1% to 123.25.

The DAXX was up .6% to 6,025. Bayer was up 1% to 40.14. BMW was up 1.2% to 42.25. DaimlerChrysler was up .4% to 39.66. DeutscheBank was up .8% to 95.76. Deutsche Telekom was up 1.1% to 12.58. SAP was up .2% to 158.33. Siemens was up .5% to 68.99.

The CAC 40 was up .7% to 5,284. Alcatel was up 1.3% to 9.66. AXA was up .8% to 29.53. France Telecom was up 1.2% to 18.19. ST Micro was up .5% to 13.82. Vivendi was up .5% to 28.49.

Data from Reuters.

Douglas A. McIntyre

Media Digest 9/29/2006 Reuters, WSJ, NYT

Stocks: (F)(DCX)(GM)(HPQ)(RIMM)(MSFT)(EBAY)(IMCL)

According to Reuters, Ford Motor will cut 2,000 jobs from its credit operations, about one quarter of its US staff for the unit.

Reuters writes that DaimlerChrysler is close to a deal with China's Cherry Automotive to make cars for sale in the US.

Reuters, writes that Lenovo/IBM, the big PC maker, will recall 526,000 notebooks due to problems with the batteries, joing Dell and other manufacturers with the same issue.

Reuters writes that Carl Icahn is trying to remove six directors from the Imclone board.

The Wall Street Journal reports that Kirk Kerkorian want to buy up to six million more shares in GM, moving his stake from 9.9% to 12%.

WSJ writes that Hewlett-Packard will buy Voodoo Computers and start a gaming division.

WSJ also reports that RIMM, maker of the Blackberry, saw its net rise 27% in the most recent quarter.

According to The New York Times, Microsoft's new Zune will be priced at $249.99, similar to rival Apple iPod.

The NYT reports that eBay may have an appeal as an acquisition for Microsoft, but many feel the deal is unlikely.

Douglas A. McIntyre

Asia Markets 9/29//2006 Nissan Down, Softbank, Sharp, Nippon Mining, Honda Up Sharply

Stocks: (CAJ)(FUJ)(HMC)(NTT)(DCM)(SNE)(TM)(CHL)(CHU)(HBC)(PCW)

Markets in Asia were mixed with the Nikkei up.

The Nikkei was higher by over .6% to 16,128. Bridgestone was down .4% to 2385. Canon was up 1.1% to 6160. Daiwa Securities was up .2% to 1378. Fuji Photo was down .4% to 4310. Fujitsu was up 1.7% to 974. Honda Motor was up 1.8% to 3970. Nippon Mining was up 2.5% to 835. Nippon Sheet Glass was up 2.4% to 555. NTT was down .9% to 580000. Nissan was down .8% to 1323. Docomo was down .5% to 182000. Sharp was up 3.8% to 2025. Sony was down .8% to 4780. Softbank was up 7.3% to 2445. Toshiba was up .7% to 766. Toyota was up .3% to 6420.

The Hang Seng was down .3% to 17.479. Cathay Pacific was down 1.4% to 15.78. China Mobile was flat at 54.9. China Unicom was down 1.7% to 7.65. HSBC was up .1% to 142.1. PCCW was down .8% to 4.76.

The KOSPI was flat at 1,371.

The Straits Times was down .4% to 2,558.

The Shanghai Composite was up .9% to 1,752.

Data from Reuters.

Douglas A. McIntyre

Potential Tribune Break-Up Puts The New York Times On The Hot Seat

The Tribune Company has buckled under the pressure of its large shareholders and is hiring Merrill Lynch and Citi to look at “strategic alternatives”. Over the last two years, as the economics of the newspaper industry have gotten worse, Tribune’s stock has dropped from over $44 to under $30. Rumors of a potential break-up and auction of the company’s assets have driven the price up to $32 recently, but the shareholders want more. At this point, it appears that the old newspaper chain may go the way of Knight-Ridder.

The management at The New York Times has been under less overt pressure because the heirs of the founding family own shares that control the company’s board. And, one member of the family serves as the company’s chairman. But, the immunity may only last so long. The company’s shares traded just below $42 two years ago. They recently closed below $22.

Revenue growth at the company’s newspaper and broadcast groups are flat at best. The company’s small internet operation, About.com, is growing, but is a tiny part of total revenue. The internet operations of the newspapers, lead by nytimes.com, have not been able to take up the slack of falling advertising and subscription revenue at the print editions.

With its market cap down to $3.3 billion, about one time sales, The New York Times is running out of options. Buying a large internet property to offset dropping sales at its traditional media properties is probably out of the question. The company does not have enough chips to play in that game. Selling the broadcast properties or About.com might gain some time, but does not solve the company’s enduring problems.

In all likelihood, someone other than current management will have to do that.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

iPass (IPAS) Holder Shamrock Wants to Inspect Books

From 13D Tracker

In an amended 13D filing earlier today on iPass Inc. (Nasdaq: IPAS), 14% holder Shamrock Activist Value Fund said on September 27, 2006 they submitted a demand to inspect the books and records and other documents of iPass with respect to the February 15, 2006 merger with GoRemote Internet Communications.
The hedge fund said the purpose of the demand is to investigate possible mismanagement, misrepresentation by management of cost savings associated with the merger with GoRemote, misrepresentation by management of an integration plan with respect to the merger with GoRemote, waste of corporate assets, lack of due care and appropriate due diligence by the Company’s Directors and senior management when evaluating the proposed merger with GoRemote.

Shamrock said, "We believe the Company’s financial results following the GoRemote merger, indicate either serious Company management and director failures, or misleading disclosures, or both, and thus warrants our review."

A Copy of the Letter:

"Bruce K. Posey, Corporate Secretary
iPass Inc.
3800 Bridge Parkway
Redwood Shores, California 94065


Re: Inspection of Books and Records

Dear Mr. Posey:

Shamrock Activist Value Fund, L.P. (the “Stockholder”), is the beneficial owner of shares of common stock of iPass Inc., a Delaware corporation (the “Company”), which are held of record by Lehman Brothers, Inc., for the account of Stockholder (see Attachment 1 hereto, which is a true and correct copy of what it purports to be). Pursuant to 8 Del. C. § 220, Stockholder hereby demands to inspect and copy (in person or by attorney or other agent), during the usual hours for business, the following books and records and other documents of the Company (the “Books and Records”):

1. All reports, memoranda and other materials prepared by the Company or for the benefit of the Company by outside investment banking, consulting or accounting firms in connection with the Company’s merger with GoRemote Internet Communications covering the period from January 1, 2004 through February 14, 2006.

2. All minutes, notes or other records of meetings of the Company’s Board of Directors or any meeting of any other Company subcommittee or ad hoc committee comprising any directors of the Company relating to the Company’s merger with GoRemote Internet Communications.

3. All materials prepared for any meeting (or for any participant in any such meeting) described in paragraph (2) hereof of the Board of Directors, a subcommittee or adhoc committee.

4. All materials prepared by the Company detailing management’s proposed integration plan for the Company’s merger with GoRemote Internet Communications covering the period from October 1, 2004 through September 15, 2006.

The purpose of this demand to inspect the Company’s Books and Records is to investigate possible mismanagement, misrepresentation by management of cost savings associated with the merger with GoRemote, misrepresentation by management of an integration plan with respect to the merger with GoRemote, waste of corporate assets, and lack of due care and appropriate due diligence by the Company’s Directors and senior management when evaluating the proposed merger with GoRemote.
This request is predicated on, among other things, the following:

(i) The Company’s Chief Executive Officer, Ken Denman, made a presentation to the Credit Suisse First Boston Small/Mid Cap Software Conference on December 15, 2005 that described on Page 4 “immediate cost savings” and stated on Page 8 that “operating and cost saving synergies are substantial” from the proposed merger.

(ii) During the six month period following the acquisition, Mr. Denman indicated that total iPass operating expenses in the quarter ended June 2006 were approximately equal to the combined operating expenses of iPass and GoRemote in the quarter ended December 2005 prior to the merger (August 8, 2006 Company conference call). The immediate and substantial cost savings indicated by Mr. Denman in his December 2005 presentation noted in (i) above had not materialized by June 30, 2006.

(iii) Management indications that the merger would be accretive in the first full quarter of combined operations. This did not occur.

(iv) After completion of the merger, the following suggest that management had a limited integration plan: (i) until our letter to the Company in May 2006, there was no plan to effect the restructuring announced on May 25, 2006, (ii) as of August 2006, the GoRemote web-site directed “dissatisfied iPass customers how to convert to GoRemote services”, and, (iii) shortly after the closing of the transaction, John Thuma, the head of the supposed integration, left the company.

We believe the foregoing indicate either serious iPass mismanagement and director failures or misleading disclosures, or both, and thus warrants our review of the above requested books and records.

Stockholder will bear the reasonable costs incurred by the Company in connection with the production of the information demanded. Please advise David K. Robbins of Bingham McCutchen LLP, 355 South Grand Avenue, Los Angeles, California 90071, (213) 680-6400, within five business days after receipt of this letter, when and where the requested materials will be available for inspection. The undersigned hereby authorizes David K. Robbins of the law firm of Bingham McCutchen LLP and his respective partners, associates, employees and any other persons to be designated by him, acting together, singly or in combination, to conduct the inspection and copying herein demanded.

Very truly yours,

Shamrock Activist Value Fund, L.P.

Michael J. McConnell
Vice President"

http://www.13dtracker.blogspot.com/

Metropolitan Capital Said Cyberonics (CYBX) Statements Were Misleading

From 13D Tracker

In an amended 13D filing on Cyberonics Inc. (Nasdaq: CYBX), major stockholder Metropolitan Capital Advisors and The Committee for Concerned Cyberonics, Inc. Shareholders disclosed a letter sent to the company on September 28, 2006 to "set the record straight" on what they say was a number of misleading statements made in a press release issued by the Company last evening.

The firm said, contrary to statements by the company, they do not desire a "costly and disruptive proxy contest", but wish to replace a minority of its insular board with their nominees, who they say will provide shareholders with the independent voice in the boardroom that this Company so desperately needs.

The group also said on September 22, 2006, Bedford delivered a letter to the Company requesting its stockholder list in connection with the the groups planned solicitation of proxies. The group also said on September 27, 2006, they, together with Mssrs. Nestler and Rosenthal, filed with the SEC their preliminary proxy materials in connection with the solicitation of proxies with respect to the election of Mssrs. Schwarz, Nestler and Rosenthal to the Board of Directors of the Company at its 2006 annual meeting. They said Cyberonics has not yet announced the date of its 2006 annual meeting.

A Copy of the Letter:

"September 28, 2006
The Board of Directors
Cyberonics, Inc.
100 Cyberonics Boulevard
Houston, Texas 77058

Gentlemen:


In the interest of setting the record straight, we want to respond to a number of the misleading statements made in the press release issued by the Company last evening. We are addressing our letter to the Board as a whole because we are unable to determine from the press release the source of the quote contained in the release.

The press release said that the Company met with representatives of Metropolitan Capital on June 9, “in an effort to reach a cooperative solution.” In fact Cyberonics’ representatives, Ms. Westbrook and Ms. Frank but not Mr. Cummins, met with us and many other investors, separately, in a series of meetings organized by Piper Jaffray, in an effort to support your flagging share price. The only portion of our meeting that might be construed as “an effort to reach a cooperative solution” with us took place when the Company’s PR consultant asked us what we wanted. We responded that we wanted the Company to replace a minority of the existing Cyberonics board members with our nominees and to commit to implement long overdue corporate governance reform. It is highly misleading to imply that a special meeting took place to discuss our concerns and suggestions.

The remainder of the June 9 meeting involved the Company’s CFO, Pam Westbrook, walking us through the Company’s investor presentation (We notice that the Company’s investor presentations have been removed from the investor relations portion of the Company’s website. Does this mean that investors should no longer rely on the information in those presentations or is it simply the Company’s strategy to make it more difficult for investors to see the many examples of the Company over-promising and under-delivering?).

The Company press release says that shortly after the June 9 meeting “the Cyberonics Board invited Metropolitan Capital to submit the credentials for their director nominees to the Board’s outside search firm…. Rather than proceeding in a cooperative fashion to the benefit of the company and its shareholders, however, Metropolitan Capital has decided to pursue a potentially costly and disruptive proxy contest.” The depiction of the facts in this instance is also highly misleading because we had already provided all the information with respect to our nominees required by the Company’s advance notice provisions in the by-laws. After the June 9 meeting, we did not hear from the Company again until receiving a letter from the Company’s general counsel on July 25 (nearly two months after we provided notice to the Company of our nominations, along with the required information about our three nominees) that asked for further information about our director nominees. We responded with the requested additional information the very next day. In contrast, over the course of the last month our calls to Mr. Cummins and Ms. Westbrook have not been returned.

To be sure, we do not desire a “costly and disruptive proxy contest.” What we want is for the Company to replace a minority of its insular board with our nominees, who will provide shareholders with the independent voice in the boardroom that this Company so desperately needs, and for the Company to commit to implement necessary corporate governance reform.

As the Company professes a commitment to the highest standards of shareholder democracy, and as today is the one year anniversary of the last annual meeting of the Company’s shareholders, we reiterate the request we made earlier this month—inform the shareholders of the date of the 2006 annual meeting.
A true commitment to shareholder democracy must begin by providing shareholders with their most fundamental right—the right to choose directors that will represent their interests.

Respectfully yours,

Karen L. Finerman President

Jeffrey E. Schwarz Chief Executive Officer"

http://www.13dtracker.blogspot.com/

Friendly's CEO Resigns; Largest Shareholder Requests Seats

From Gannon On Investing

On Thursday, Friendly Ice Cream Corp (FRN), announced CEO John L. Cutter had resigned. It was not immediately clear whether Mr. Cutter had been forced out.

I mention the possibility that Mr. Cutter was forced out, because Friendly's largest shareholder, Sardar Biglari, included this disclosure in a 13-D filed approximately one week before Mr. Cutter's resignation:

"The Reporting Persons have consulted with the Chairman of the Board of Directors and management of the Issuer concerning the business, operations and future plans of the Issuer, and are seeking seats on the Board of Directors for Mr. Sardar Biglari and Dr. Philip L. Cooley. "

The reporting persons are The Lion Fund L.P., Biglari Capital Corp., Sardar Biglari, and Western Sizzlin Corp (WSZL). They own 12% of Friendly's outstanding shares.

The two notable entities are The Lion Fund, a hedge fund run by Mr. Biglari, and Western Sizzlin, a public company engaged in the operation and franchising of restaurants.

Western Sizzlin

Biglari (and others) effectively took control of Western Sizzlin during late 2005 and early 2006. Individuals controlling more than a third of the company's shares replaced the existing board. Below is the description provided in Western Sizzlin's most recent annual report:
"In November 2005, we added three members to out Board of Directors, namely Sardar Biglari, Philip L. Cooley, and Paul D. Sonkin. Subsequently, in March 2006, six of the incumbent directors, namely Paul C. Schorr, III (our former chairman), A. Jones Yorke, J. Alan Cowart, Jr., Pat Vezertzis, Jesse M. Harrington, and Roger D. Sack, resigned from the Board. At that same time, Mr. Sonkin indicated that he would not stand for re-election at the 2006 annual meeting of stockholders."

The Lion Fund

The Lion Fund is managed by Sardar Biglari, 29. Philip Cooley serves as one of the fund's directors. Biglari was a student of Cooley's at Trinity University. The Lion Fund was launched just over five years ago – although Biglari apparently operated the fund with his own money for about one year before welcoming new investors.
Here are two short (old) articles from the San Antonio Business Journal discussing The Lion Fund:
Lion Fund Loses its Roar
Fund Posts Solid Growth

Sardar Biglari

Biglari has an interesting story. He started an Internet Service Provider while still quite young; then, went on to found The Lion Fund. He frequently cites Warren Buffett as an investing influence. His letter to shareholders (as Chairman of Western Sizzlin) certainly bears a resemblance to Buffett's own annual letter.
Read Biglari's Letter to Western Sizzlin Shareholders

StreetInsider.com (among others) reported this story. That story prompted this post.

http://www.gannononinvesting.com/

Goldman Sachs (GS) On Fire

By Yaser Anwar, CSC of Equity Investment Ideas

Goldman Sachs, Wall Street's Gold Standard, is on fire. Not only did it report stellar results, the stock has crossed crucial resistance at 169.5 by closing one point up today at 170. I'd like to quote some excerpts from two good WSJ articles:

In "Goldman Sachs Leads Pack Of Investment Banks in Asia"

Wall Street titan Goldman Sachs Group Inc. was the top-earning investment bank in Asia excluding Japan in the first nine months of the year, with estimated revenue topping $224 million, according to capital-markets data provider Dealogic PLC.


China-related fees jumped to $681 million from $416 million a year earlier because of huge initial public offerings and M&A deals. UBS earned $108 million in China, followed by Goldman Sachs with $98 million and Bank of China International with $72 million.


Goldman Sachs was also the top earner of equity revenue for the region, earning $170 million and advising on $20 billion of deals. It was followed by UBS with $145 million, after the bank worked on deals valued at $19 billion. Equity-related income is up 31% over a year earlier, Dealogic said.

In "Goldman to Reap Handsome Profit On Chinese IPO"

When China's biggest bank completes one of the world's largest stock offerings ever, one Wall Street firm stands to make buckets of money -- and not because it is managing the deal.


It is because in May, Goldman Sachs Group Inc. invested $2.58 billion for a 5.75% stake in Industrial & Commercial Bank of China, the broker's single-largest investment of all time. When ICBC, as the bank is known, lists its shares on the Hong Kong and Shanghai stock markets next month, the value of Goldman's stake could double based on current demand for the offering.


Goldman's profits in ICBC are all on paper because under its agreement the firm can't sell the shares for three years. And its investment made it lose out on a substantial underwriting opportunity. Based on the 2.5% underwriting fee charged on China's other jumbo bank IPOs, the five investment banks managing the international portion of the transaction could divvy up as much as $350 million in fees.


With ICBC, Goldman is looking to forge a closer relationship with the country's biggest bank by assets, which claims 2.5 million corporate customers and 150 million personal customers across 18,000 branches.


In 1994, Goldman and Morgan Stanley each invested $35 million in Ping An Insurance (Group) Co. Last year, the two rivals sold their combined 9.91% stake for $1 billion.


"For a U.S.-based investment bank to align itself strategically with one of the major players in China, that's a great relationship," says Glenn Schorr, an analyst at UBS AG in New York. "In the worst case, they make a boatload of money on it."


In the worst case? Wow, that is one worst case scenario I like! I can only imagine the best case then.

http://www.equityinvestmentideas.blogspot.com/

Kansas Fed President Thomas Hoenig's Inflation & Economic Expectations

By Yaser Anwar, CSC of Equity Investment Ideas

Thomas Hoenig, President of Kansas City Fed says inflation has peaked. According to Hoenig; inflation will stabilize for the rest of the year and will then decline.


"The inflation numbers will stabilize and then continue to come down," Hoenig told an economic forum sponsored by the Tenth Federal Reserve District. Hoenig predicted "a 'very modest, but very steady' downtrend in the core consumer price index toward 2%," reports Reuters.


Core inflation is presently at 2.9%, higher than the Fed’s comfort zone & close to 10 year highs like I reported on September 18th, 2006. Hoenig's core inflation expectations are between 2.5-2.8%. According to Hoenig, "Actions we have taken in the past, in the 1st half of this year are still working their way through the economy."


Hoenig also says that despite uplift in economic growth at the beginning of next year, the economy will grow below potential. Hoenig says the US growth potential is 3% but that the economy will slow to 2-2.5% in the second half of the year and improve to 2.5-3% early next year.


"There is some slack in the economy," commented Hoenig. Hoenig says that the cooling housing market and the cumulative effect of 17 interest rate hikes are weighing on the economy. Housing and energy, according to Hoenig, are the two wildcards that may derail the economy.


The combination of falling inflation and low economic growth could lead to interest rate cuts next year just as the bond market expects. Hoenig, who will have a vote in the Fed in 07, stands behind the decision to stand pat on interest rates.

http://www.equityinvestmentideas.blogspot.com/

Analyzing Yahoo's (YHOO) distribution deal with HP (HPQ)

By Yaser Anwar, CSC of Equity Investment Ideas

Yahoo and HP partner to offer Yahoo search and services

Yahoo and HP announced a partnership to offer easy and customized access to Yahoo search and services on HP consumer desktop and notebook PCs. The agreement covers North America and Europe. HP is the number two global PC vendor.
Terms vary by region- covers start page, toolbar, & IE

Beginning immediately, HP computers sold in NA will come preloaded with a co-branded toolbar and Yahoo will be set to the default search engine in the next version of Internet Explorer .


In Europe, HP computers will come preloaded with a default Yahoo start page. Europe will not get the co-branded toolbar or Yahoo IE default, and North America won't get the custom start page.
Deal Implications

As with previous deals (Google & Dell, Yahoo & Acer), I believe the deal involves both revenue sharing as well as per-install fees.


While investors should be encouraged to see Yahoo aggressively pursue distribution, the economic impact remains uncertain. Given the likely costs, it is now even more imperative that Panama is on time.

http://www.equityinvestmentideas.blogspot.com/

RIM's Good Job

Research-in-Motion (RIMM) traded up some 15% after-hours. The company beat its estimates handily and raised guidance. The stock closed at $86.06, down 0.16%, and is trading up to around $99.00 and $100.00 in after-hours.

The stock initially slid because there was a delay in the call announced, but the results are being viewed as far better than the restatement announcement.

QUARTER:
Revenue for the second quarter of fiscal 2007 was $658.5 million, compared to estimates of $648+ million. Revenues were up 7.4% from $613.1 million in the previous quarter and up 34.4% from $490.1 million in the same quarter of last year. It posted preliminary net GAAP EPS of $0.74 and pro forma was $0.77 vs. $0.71 estimates.

The revenue breakdown for the quarter was approximately 72% for handhelds, 19% for service, 6% for software, and 3% for other revenue. Approximately 705,000 BlackBerry subscriber accounts were added in the quarter. At the end of the quarter, the total BlackBerry subscriber account base was approximately 6.2 million.

GUIDANCE:
Revenue for the third quarter of fiscal 2007 ending December 2, 2006 is expected to be in the range of $780-$820 million. Subscriber account additions in the third quarter are expected to be approximately 800,000. GAAP earnings per share for the third quarter are expected to be in the range of 88-95 cents per share diluted. Adjusted earnings per share for the third quarter, which excludes regular stock option expense of approximately $4.5 million, are forecast to be in the range of 90-97 cents per share diluted. ESTIMATES are $0.78 EPS and $699+ million in revenues.

RESTATEMENT:
RIMM announced today that the Audit Committee of RIM's Board of Directors, comprised solely of independent directors, is completing a management-initiated, voluntary review of RIM's historical option granting practices. The Audit Committee has made a preliminary determination that GAAP accounting errors were made around the administration of certain historical stock options granted from fiscal 1998 to present, and has made a preliminary determination that a restatement of RIM's historical financial statements will be required to reflect this. Although the review is ongoing, it is currently expected that the potential effect of such restatement will be to increase the amount of non-cash charges associated with past option grants and thereby reduce the amount of the Company's previously reported GAAP earnings by an aggregate amount of approximately $25-45 million over the period since the Company's IPO in 1997. The Company has voluntarily informed the SEC and the OSC about its internal review of its stock option grants. The Company does not at present anticipate a material adjustment to current or future fiscal years' operating results, including the preliminary Q2 operating results reported today in its separate earnings press release, and RIM has defined enhanced procedures and controls to address issues of this nature. All figures in U.S. dollars.

Jon C. Ogg

Hewlett Packard Courts Video Gamers With VoodooPC Acquisition

H-P (HPQ) today announced it has signed a definitive agreement to acquire Canadian-based VoodooPC, a leader in high-performance and personalized gaming computer systems.

Before getting too far into the acquisition, this at least shows the company can still operate on developments while it is in the midst of a corporate PR crisis.

HP will form a separate business unit within its Personal Systems Group focused on the gaming industry. VoodooPC co-owner Rahul Sood will become chief technologist for the unit and co-owner Ravi Sood will become the unit's director of strategy. Both will report to Phil McKinney, who will become general manager of the gaming business unit while maintaining his current role as chief technology officer of HP's Personal Systems Group. HP plans to maintain VoodooPC's current distribution model and brand name along with its marketing, sales, support and development operations.

"HP is already a market leader in two of the three major segments in the gaming market by providing industry-leading workstation solutions for game development and powering the largest online game services," said Todd Bradley, executive vice president, Personal Systems Group, HP. "We're absolutely thrilled to welcome VoodooPC, gaming industry pioneers and the premier name in gaming, to the HP team. Together with VoodooPC's leadership and influence, HP will have the expertise to become the leader in the gaming customer segment."

The acquisition is expected to close by November 2006. Terms of the deal were not disclosed.

HP obviously isn't too worried about this pre-texting and spying ruining their future, and it is obvious that VoodooPC isn't too worried about it either. This is the exact strategy that Dell (DELL) employed when it announced it was acquiring Alienware in March of this year.

This should at least put some of the cool-ness factor into H-P for the gaming crowd.

Jon C. Ogg

Hewlett Packard Courts Video Gamers With VoodooPC Acquisition

H-P (HPQ) today announced it has signed a definitive agreement to acquire Canadian-based VoodooPC, a leader in high-performance and personalized gaming computer systems.

Before getting too far into the acquisition, this at least shows the company can still operate on developments while it is in the midst of a corporate PR crisis.

HP will form a separate business unit within its Personal Systems Group focused on the gaming industry. VoodooPC co-owner Rahul Sood will become chief technologist for the unit and co-owner Ravi Sood will become the unit's director of strategy. Both will report to Phil McKinney, who will become general manager of the gaming business unit while maintaining his current role as chief technology officer of HP's Personal Systems Group. HP plans to maintain VoodooPC's current distribution model and brand name along with its marketing, sales, support and development operations.

"HP is already a market leader in two of the three major segments in the gaming market by providing industry-leading workstation solutions for game development and powering the largest online game services," said Todd Bradley, executive vice president, Personal Systems Group, HP. "We're absolutely thrilled to welcome VoodooPC, gaming industry pioneers and the premier name in gaming, to the HP team. Together with VoodooPC's leadership and influence, HP will have the expertise to become the leader in the gaming customer segment."

The acquisition is expected to close by November 2006. Terms of the deal were not disclosed.

HP obviously isn't too worried about this pre-texting and spying ruining their future, and it is obvious that VoodooPC isn't too worried about it either. This is the exact strategy that Dell (DELL) employed when it announced it was acquiring Alienware in March of this year.

This should at least put some of the cool-ness factor into H-P for the gaming crowd.

Jon C. Ogg
September 28, 2006

Cramer's MAD MONEY, a re-run....Top 10 Retailers

Cramer's MAD MONEY was a re-run from earlier this year.

Top 10 Retail Picks, keep in mind that this was a re-run show while he was in Georgetown.

He likes the regional to national stories, and some that are so well run, and some concepts great for growth. He said they can all make you money about "when you buy them when they are on sale." Cramer once again was stipulating you buy these when they go on sale.

His prior list of these was Best Buy (BBY), Lowe's (LOW), CostCo (COST), Men's Warehouse (MW), Federated (FD), Sears (SHLD, JCPenney (JCP), Cold Water Creek (CWTR), Starbucks (SBUX).

RIM's Good Job

Research-in-Motion (RIMM) is trading up some 15% in after-hours trading. The company beat its estimates handily and raised guidance. The stock closed at $86.06, down 0.16%, and is trading up to around $99.00 and $100.00 in after-hours.

The stock initially slid because there was a delay in the call announced, but the results are being viewed as far better than the restatement announcement.

QUARTER:
Revenue for the second quarter of fiscal 2007 was $658.5 million, compared to estimates of $648+ million. Revenues were up 7.4% from $613.1 million in the previous quarter and up 34.4% from $490.1 million in the same quarter of last year. It posted preliminary net GAAP EPS of $0.74 and pro forma was $0.77 vs. $0.71 estimates.

The revenue breakdown for the quarter was approximately 72% for handhelds, 19% for service, 6% for software, and 3% for other revenue. Approximately 705,000 BlackBerry subscriber accounts were added in the quarter. At the end of the quarter, the total BlackBerry subscriber account base was approximately 6.2 million.

GUIDANCE:
Revenue for the third quarter of fiscal 2007 ending December 2, 2006 is expected to be in the range of $780-$820 million. Subscriber account additions in the third quarter are expected to be approximately 800,000. GAAP earnings per share for the third quarter are expected to be in the range of 88-95 cents per share diluted. Adjusted earnings per share for the third quarter, which excludes regular stock option expense of approximately $4.5 million, are forecast to be in the range of 90-97 cents per share diluted. ESTIMATES are $0.78 EPS and $699+ million in revenues.

RESTATEMENT:
RIMM announced today that the Audit Committee of RIM's Board of Directors, comprised solely of independent directors, is completing a management-initiated, voluntary review of RIM's historical option granting practices. The Audit Committee has made a preliminary determination that GAAP accounting errors were made around the administration of certain historical stock options granted from fiscal 1998 to present, and has made a preliminary determination that a restatement of RIM's historical financial statements will be required to reflect this. Although the review is ongoing, it is currently expected that the potential effect of such restatement will be to increase the amount of non-cash charges associated with past option grants and thereby reduce the amount of the Company's previously reported GAAP earnings by an aggregate amount of approximately $25-45 million over the period since the Company's IPO in 1997. The Company has voluntarily informed the SEC and the OSC about its internal review of its stock option grants. The Company does not at present anticipate a material adjustment to current or future fiscal years' operating results, including the preliminary Q2 operating results reported today in its separate earnings press release, and RIM has defined enhanced procedures and controls to address issues of this nature. All figures in U.S. dollars.

Jon C. Ogg
September 28, 2006

Activist Target Friendly (FRN) Gets Boosts After CEO Leaves

From 13D Tracker

Friendly Ice Cream Corp. (AMEX: FRN), a stock that has been the target of activist investor Sardar Biglari of The Lion Fund, is getting a pop today after the company announced that President and Chief Executive Officer John L. Cutter resigned to pursue other interests.

It is not clear if Cutter was forced out, but investors are liking the news.

Biglari recently said he is seeking two seats on the Board of Directors. At last count, Biglari's fund owned 12% of Friendly's shares outstanding.

Shares of Friendly are up 5% in afternoon action Thursday.

http://www.13dtracker.blogspot.com/

Market Wrap (Sept. 28, 2006)

DJIA 11,715.25; Up 26.01 (0.22%)
NASDAQ 2,270.02; Up 6.63 (0.29%)
S&P500 1,338.89; Up 2.30 (0.17%)
10YR-Bond 4.626%

Today we were really just spending another day trying to take out the DJIA highs. We had Q2 final GDP revised down to +2.6%, but look at the period. Q2 is as relevant as gold to a dead man now.

Shares of Align Technology (ALGN) rose a sharp 48% too $11.56 after it settled an existing patent case with OrthoClear that had gone against it.

DivX (DIVX) continued its post-Cramer run by closing up another 8% at $23.35.

Crocs (CROX) rose 0.1% at $33.93 after it was added to the S&P Small Cap 600 Index.

Smith International (SII) rose 2.7% to $38.40 after it was added to the S&P 500 Index.

Time Warner (TWX) fell today on a transitionary downgrade from JPMorgan and closed down 2.1% at $18.20.

Talk America (TALK) rose 12% to $9.35 after it received a buyout offer yesterday.

Threshold Pharma (THLD) rose 12.8% to $2.82 after receiving an FDA Orphan Drug Designation from the FDA.

Chindex (CHDX) rose a sharp 17% to $13.42 after launching its first PPO health insurance plan in China.

Riverbed (RVBD), a recent IPO, manged to climb another 8.9% at $18.57.

eBay (EBAY) rose 4% to $28.41 after it settled a group of "protecting the consumer" cases from over 20 Attorneys general.

Despite several H-P (HPQ) former insiders pleading the 5th and refusing to answer questions over the recent illegal spying they conducted, HPQ shares managed to close up 1.6% at $35.96.

Amgen (AMGN) fell 0.8% to $71.54 the day after its colorectal cancer drug received approval yesterday; Imclone (IMCL) fell again by 0.8% at $28.51 after word came out that Amgen's drug would be 20% less.

NVIDIA (NVDA) fell 1.9% to $29.57 after ThinkEquity cut to Sell.

Novatel (NVTL) fell a sharp 17% to $9.63 after ThinkEquity and Cowen downgraded the stock.

Sorry for so many Cramer posts of the same initial story earlier today. There was a posting script error that caused multiple posts.

Jon C. Ogg
September 28, 2006

Cramer's STOP TRADING (9/28/06): Buy Steel Stocks

Today on CNBC's STOP TRADING segment on CNBC, Jim Cramer was speaking from Georgetown.

Cramer said the WSJ article that called steel stocks (inventories at plants and mills, not equity) rising is false. You would sell these if there was a glut but he said the WSJ was wrong.

He noted Oregon Steel (OS), Allegheny (ATI), Nucor (NUE), US Steel (X).

He said Reliance Steel (RS) is the best and his favorite in the group.

He said the UBS report responsible for this drop in the names is wrong.

He also noted that Altria (MO) is going higher and thatthe analyst calling for $93 may be being too conservative, and that judge that ruled to certify the class action is wrong and will be overturned.

Jon C. Ogg
September 28, 2006

On a New High and an Old Price

From Gannon On Investing

One of the comments to my previous post, The Human Index, prompted this post.
As the Dow flirts with a new high (and the financial media tests everyone's patience), it's worth remembering how far the average investor has fallen and why. In this post, I discuss how far the fall has been.

As for why – that's a topic that underlies everything written on this blog. Investing is about the price paid and the value received. If valuation seems a dry topic in the abstract, it's worth remembering the real world cost of ignorance.

Once again, I quote from Graham. I've used this quote before. It's my favorite Graham quote. It's also the best thing you can learn from this blog (I've bolded two phrases of immeasurable importance):

“…the influence of what we call analytical factors over the market price is both partial and indirect – partial, because it frequently competes with purely speculative factors which influence the price in the opposite direction; and indirect, because it acts through the intermediary of people’s sentiments and decisions. In other words, the market is not a weighing machine, on which the value of each issue is recorded by an exact and impersonal mechanism, in accordance with its specific qualities. Rather should we say that the market is a voting machine, whereon countless individuals register choices which are the product partly of reason and partly of emotion.”

The view of the market to the average investor isn't really comparable to the view of the market to the average dollar. Individuals don't have their assets distributed evenly across the various equity issues available in the major public markets. A lot of individuals who have held every share they had six years ago are nowhere near where the Dow is today, because they own the wrong Dow stocks and they own very poor performing non-Dow stocks.

List A
Eastman Kodak (EK)
General Motors (GM)
Intel (INTC)
Microsoft (MSFT)
Home Depot (HD)

List B
Altria (MO)
Caterpillar (CAT)
United Technologies (UTX)
Boeing (BA)
Exxon Mobil (XOM)

Which did more people own in 2000, List A or List B? Which do more people own today? And, in 2000, which list did people think would perform better?

List A is the worst performing Dow stocks since the last high; List B is the best performing Dow stocks.

Other notable issues include Disney (DIS), McDonald's (MCD), and Coca-Cola (KO). These are the kind of stocks people would love to buy and hold forever. They are sentimental favorites. They are also below where they were trading at the last high – although, they are about in the middle of the pack for Dow stocks.

So, I'd have to say the Dow doesn't really measure the performance of individual investors' accounts at all. There's a selection bias for individuals that isn't reflected in the DJIA. Obviously, there are also some popular stocks that aren't part of the Dow.

Recently, internet stocks are the best example. Generally, they've performed miserably.
To reinforce the point, I'll include a chart. Here's a chart of two indexes and two stocks.

The Indexes: Dow, NASDAQ

The Stocks: Cisco (CSCO), Berkshire Hathaway (BRK.B)

I choose Cisco and Berkshire, because they have roughly the same market cap today and both are really, really big companies that aren't in the Dow.

See a chart showing Berkshire, Cisco, the Dow, and the NASDAQ since the last Dow high.

My point: the market looks a lot different if you planned to buy and hold Berkshire, Cisco, the NASDAQ, or the Dow at the last high for the Dow.

Unfortunately, when I think back about the people I know who had previously had no interest in the market and then started buying in 1998 and 1999, they didn't mention Berkshire. They did mention Cisco. They didn't mention the Dow. They did mention the NASDAQ.

While this unscientific study of mine is necessarily arbitrary and backward looking, I should point out that I refrained from mentioning stocks where the business itself turned out to be an utter failure. I picked a stock (Cisco) where if you bought all your shares in January 1997 or January 1998, you're about even with where you'd have been if you'd bought shares in Berkshire in January '97 or '98 – (in both cases, you're whipping the indexes).

But, you had to buy in January of '97 or '98, not in January of '99 or 2000. That's the problem. So, in a lot of ways we aren't near the levels of 2000.

There's also one other point: the dollar is worth a whole lot less.

Your stocks may be quoted at the same number of dollars; but, those dollars aren't exchangeable into the same house, college education, or blissful retirement. That's the kind of things your stocks are supposed to buy you. That's why the average American owns stocks. Americans have been told to save, index, and hold. Those who did that during the millennium bubble lost a lot of ground over the last six years (mostly in the form of time).

So, we're really a lot farther from those crazy days than it first appears.

Most investors are six years closer to death – and none the richer.

http://www.gannononinvesting.com/

P/E Wave Meme Meets Wall Street Journal

By William Trent, CFA of Stock Market Beat

We have frequently expressed our belief that stock market valuations are undergoing a long-term contraction. Although many interpret this to mean that we expect lower values (as in a decline in major benchmarks) that doesn’t have to be the case. From 1968-1982 the market traded more or less sideways because the valuations (multiples paid on earnings) declined about as fast as the earnings themselves grew.

Now the theory has gone about as mainstream as you can get, with SeekingAlpha’s summary of the Wall Street Journal indicating that the most famous source of market news has a story on the topic.

How Price/Earnings Will Impact the Dow: Financial News - Yahoo! Finance

Can stock prices continue to rise? Two potential bullish resolutions: 1) Earnings soar, taking prices with them. This is unlikely; we have already seen four consecutive years of strong earnings growth, and profits margins are at record numbers. 2) Earnings remain stable, but investors fork-out ever-higher prices to buy-in to their favorite stocks, driving P/E up. This is similar to what happened in the 1994-2000 run up. But then, a) long-term interest rates were plummeting — today it seems unlikely they can fall much more, and b) there was an insatiable hunger to get into the markets — since dampened by the aftertaste of the ensuing bear. Says Byron Wien, chief investment strategist at Pequot Capital Management, “My view is that both earnings and interest rates will be pushing against you.”

Our point exactly.

The author may hold a position in the securities discussed. A current list of the author's holdings is available here.

http://stockmarketbeat.com/blog1/

An Ongoing Thorn in the Side of eBay & PayPal

There was an interesting press release out of eBay (EBAY) that was just released. It underscores some of the problems that EBAY faces as a stock, because theis issue is going to continue to plague the company.

SUMMARY OF RELEASE

"PayPal Announces Settlement Agreements"

PayPal signed an agreement with 28 United States Attorneys General: will shorten and streamline its user agreement and communicate more information relating to its protection programs.

To cover the cost of the investigation, PayPal will pay $1.7 million to the Attorneys General representing Alabama, Arizona, California, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Louisiana, Maryland, Minnesota, Mississippi, Nebraska, Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Vermont, Washington, and West Virginia.

Reached a preliminary settlement agreement with a proposed class of PayPal customers in an action pending in U.S. District Court in Brooklyn filed in 2005 on behalf of a class alleging that PayPal did not clearly communicate information about its consumer protection programs related to specific types of transactions.

The settlement fund will total $3.5 million less admininstrative and legal fees.

PayPal is not admitting any liability for any of the allegations in the two cases.

ONGOING ISSUES

eBay's PayPal has some serious flaws and these are always an issue. I have not been personally burned, but it sure appears that there is account snooping and a definite risk of accounting hijacking. There are routine emails that get sent out as phishing attempts, and these are getting good enough that an active PayPal user or eBay user that is a little less than organized or a little more trusting could easily becoem a victim.

The company needs to be far more proactive in its pursuit of those who week to defraud PayPal and eBay users. The phishing attempts that started coming out in the spring of this year started the wave of complicated attempts to defraud. The company needs to routinely go after more of the criminals and publicize thatthey are out seeking them. The same can be said for credit card companies who aren't pursuing blatant credit and identity theft in a manner other than just reimbursing a victime, but that is another story.

EBAY stock has sold off a tad since the announcement, but this news today is probably not a "big stock mover" piece. The underlying issue has been an ongoing thorn in the side of the company and has underminded the opinion of some investors in the company. If the company could allocate more funds to actually go after the fraudsters with some conviction it might actually impress the public and at least restore some confidence.

That is my opinion, and that is the opinion of some others I have spoken with.

Jon C. Ogg
September 28, 2006

Cable Versus Idiots: Comcast Battles Google And Apple

xiStocks: (CMCSA)(GOOG)(AAPL)

Comcast is beginning to worry about video on the web. A recent study by Convergence Consulting indicates that the audience for online video is getting larger than the one that cable TV delivers. Although web video sites have not figured out a way to capture "cable like" ad dollars, it may only be a matter of time before ad money starts to migrate to these sites in earnest. Products like video iPods from Apple will also fragment the market and cut viewership of cable and broadcast TV.

The irony of the problem, of course, is that Comcast supplies much of the broadband infrastructure that allows video to be watched over the internet. In the debate over net neutrality on of the arrows in Comcast's quiver is that it supplies the means for video sites to grow and take ad dollars from cable. Perhaps Comcast should get a cut for their help.

There are two solutions to Comcast's problem One is to offer more of its video on demand so that viewers do not have to be in front of the tube at a fixed time. The other is to open their own websites and move programming online. The trouble with this is that Comcast has to get permission from the content creators to put the programming on the internet. Comcast may also have to give them a piece of the action.

Comcast has mainstream programming. Tons of it. Hundreds of channels. Movies. Sports. Weather. Local TV. It does not have the one thing that video sharing sites have. Idiots lip-syncing "I Want It That Way" by The Back Street Boys.

Viral video is largely produced by buffons who have nothing else to do with their time. The programming cost is close to nothing. And hundreds of millions of viewers watch it.

Cable can't compete with boobs.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Sun Capital Securities Offers to Acquire Talk America (TALK) for $9/Share

From 13D Tracker

In a 13D filing on Talk America Holdings Inc. (Nasdaq: TALK), 13.9% holder Sun Capital Securities said it delivered a letter proposing to acquire in an all-cash merger transaction all outstanding shares of Common Stock at $9.00 per share.

Sun Capital said it has sufficient capital to complete the transaction without external financing.

Last Friday, Talk America agreed to be acquired by privately-held Cavalier Telephone & TV for $8.10 per share in cash.

A Copy of the Letter:

Attention: Mr. Edward B. Meyercord, III
Chief Executive Officer, President and Director

Gentlemen:

Reference is made to the Merger Agreement dated September 22, 2006, among Talk America Holdings, Inc. (the “Company”), Cavalier Telephone Corporation (“Cavalier”) and Cavalier Acquisition Corp. (“CAC”), whereby, upon the terms and subject to all of the conditions precedent expressed therein, CAC would be merged with and into the Company (the “Merger”), and all holders of the Company’s Common Stock, $.01 par value (the “Common Stock”) would receive $8.10 per share in cash (the “Merger Agreement”). All capitalized terms used and not expressly defined herein are used herein with the meanings assigned in the Merger Agreement.

We have read carefully and are familiar with all terms and conditions of the Merger Agreement (including, in particular, those set forth in Sections 3.20-3.22, 4.8, 5.2-5.5, 6.1-6.3 and 7.1-7.3 thereof). We also are familiar with the terms of the Rights Agreement dated August 19, 2006, as amended, between the Company and Stocktrans, Inc., as Rights Agent.

We herewith submit to you our proposal to acquire the Company on terms and conditions more favorable, from a financial point of view, to holders of the Common Stock, than the transactions contemplated by the Merger Agreement. Specifically, we hereby propose to acquire for cash all outstanding shares of Common Stock at approximately $9.00 per share in a single-step merger transaction (although we remain flexible with respect to transaction structure and the related timing of execution to the extent you determine an alternative structure is in the best interests of the Company’s stockholders).

Our proposal represents an approximately 11% premium to the Common Stock Consideration. We presently have sufficient capital to complete the transaction without external financing.

As more fully outlined below, subject to our completion of a maximum 30-day period of confirmatory due diligence, including our review of all schedules to the Company’s representations and warranties set forth in the Merger Agreement, we would be prepared to negotiate and execute definitive transaction documentation substantially similar to the Merger Agreement. Please know that this proposal is presented on an entirely consensual basis, and we would work only directly through the Company’s Board of Directors, senior management and your professional advisors. As detailed in this proposal, Sun Capital and its affiliates are prepared to execute immediately with the Company a confidentiality agreement of the type referred to in the proviso to Section 5.5(a) of the Merger Agreement.

By way of introduction, Sun Capital (www.SunCapPart.com), and the affiliated Sun Capital Securities Group, LLC (“Sun Capital”), based in Boca Raton, Florida (with offices in New York, Los Angeles, London and Shenzhen), is one of the most prominent and active private investment firms in the U.S. focused principally on sponsored management buyouts, acquisitions and investments in market-leading companies. We are quite well-positioned to submit this proposal. Sun Capital presently owns approximately 13.92% of the outstanding Common Stock based on transactions reflected in Sun Capital’s Statement of Beneficial Ownership on Schedule 13D and our Section 16(a) reports filed today with the Securities and Exchange Commission and furnished directly to you.

Sun Capital has more than $3.5 billion of equity capital under management and acquires majority interests in companies through its private equity fund, Sun Capital Partners IV, L.P. with $1.5 billion of committed equity capital, and makes investments in equity, debt and other securities of companies through Sun Capital Securities Fund, with more than $1.3 billion of committed equity capital. Sun Capital’s affiliates are authorized to invest more than $800 million of capital in any one transaction. With a team of more than 100 professionals with significant operational and transactional experience, to date, Sun Capital’s affiliates have invested in more than 130 companies, with aggregate sales in excess of $30 billion, since our inception in 1995.

Sun Capital has been the most acquisitive private equity firm in the U.S. over the past four years, consummating 80 acquisition and investment transactions from 2002-2005, including 30 acquisitions in 2005 and 24 acquisitions thus far in 2006 (including the just completed privatization of Marsh Supermarkets), and was recently listed in a leading M&A trade publication as the fifth most acquisitive company of any kind in the U.S.

Based on (i) our proven track record of acquiring businesses; (ii) our expedience in closing transactions (generally within 30 days from inception), including going-private transactions; (iii) our significant capital resources which enable us to provide consummation certainty; (iv) our lack of any financing contingency; and (v) our decisive and fair approach to business, we believe that Sun Capital is the ideal firm to execute the acquisition of the Company on terms superior to the pending Merger.

In addition, given our current portfolio holdings in the telecommunications sector, along with the extensive time and resources already allocated to reviewing the Company, its end markets and competitive landscape, Sun Capital is, subject only to our completion of Company-specific confirmatory due diligence, well-prepared to complete our proposed acquisition of the Company. Furthermore, this transaction has received all internal Sun Capital approvals and consents.


Specifically, we are pleased to submit to the Company the following proposal:


Overview of Proposed Transaction

All-Cash Consideration. Sun Capital proposes to purchase for cash all of the outstanding shares of Company Common Stock for $9.00 per share (based on the Company’s public filings which reflect approximately 31.1 million shares of Common Stock outstanding on a fully diluted basis using the treasury method). As stated above, we propose that the transaction be structured as a single-step merger (although we remain flexible with respect to transaction structure to the extent an alternative structure is feasible and in the best interests of the Company’s stockholders). Our proposal represents an approximately 11% premium to the pending Common Stock Consideration.

No Financing Contingency. Equity financing for this transaction will be provided by one or more of Sun Capital’s affiliated funds (“Funds”). As stated above, with more than $3.5 billion in capital presently under management and the ability to invest over $800 million in any single transaction, Sun Capital currently does not need to nor does it intend to partner (or “club”) with any other equity financing sources or co-investors with respect to this transaction. Financing for the proposed transaction (including all fees and expenses) would be fully committed by Sun Capital and affiliated funds at the date definitive transaction documentation is executed by the Company.

Due Diligence. Upon execution of a confidentiality agreement, Sun Capital’s confirmatory due diligence would need to be completed to Sun Capital’s satisfaction. Such due diligence would include meetings with management and outside auditors, and a review of the Company’s books, records and legal documents by Sun Capital and its professional advisory team. Such confirmatory due diligence would be completed in a maximum period of 30 days and definitive documentation would be completed in tandem with that time frame.

Management. It is Sun Capital’s current preference and intention to retain incumbent senior and middle management who desire to remain with the Company and join our team. It is our intention to offer appropriate cash and/or equity incentive compensation, and to provide appropriate retention programs and welfare benefits.

Execution Speed. Sun Capital and its professional advisors are prepared to commence due diligence immediately following execution with the Company of a confidentiality agreement. Immediately thereafter, Sun Capital would begin good faith discussions and negotiations with the Company and the Board and definitive transaction documentation would be prepared and finalized contemporaneously.

No Regulatory Delays. As a U.S.-based private equity firm with no foreign control persons, we do not anticipate any delays in obtaining requisite regulatory approvals for the proposed transaction, including HSR, FCC and state commission licenses. Sun Capital will work collaboratively with the Company to obtain such approvals, including making all necessary filings immediately following the signing of a definitive transaction agreement. Subject to other customary closing conditions, we would anticipate closing a transaction as promptly as possible.

Selected Transactions

Sun Capital has substantial experience acquiring and operating publicly-traded companies. As such, we have an in-depth knowledge of the unique public-to-private transaction process. Please see Appendix A hereto for a select list of publicly-traded companies in which we have acquired a majority position or have privatized.

Sun Capital is uniquely positioned to execute transactions within a 30-day time frame due to our dedicated staff of approximately 100 people with significant transaction experience and a decisive approach to business. Sun Capital has a demonstrated track record of closing transactions in an expeditious manner. Appendix B hereto contains a sample of transactions Sun Capital completed from 2002 through 2006, each of which closed in approximately 30 days.

We welcome the opportunity to meet with your Board and your professional advisory team as promptly as practicable. We believe that we can amply demonstrate to you the seriousness of our commitment to execute the transaction outlined in this proposal and our ability to deliver to your stockholders maximum superior value — $9.00, subject only to our reasonable confirmatory due diligence investigation of the Company.

I look forward to speaking with you promptly. In the meantime, if you have any questions please do not hesitate to contact me directly at 561-962-3408.


Sincerely,


Sun Capital Securities Group, LLC

Michael H. Kalb

Managing Director

http://www.13dtracker.blogspot.com/

Kerkorian's Tracinda Interested in Acquiring 12M More GM Shares

From 13D Tracker

In an amended 13D filing on General Motors Corporation (NYSE: GM), Kerkorian's Tracinda said it sent a letter to G. Richard Wagoner, Jr., Chairman of the Board of Directors of General Motors, in which Tracinda indicated that, consistent with Amendment No. 6 to the Schedule 13D, it is interested in acquiring approximately six million shares of General Motors common stock and may consider acquiring up to an additional six million shares.

Tracinda continues to believe that a strong opportunity exists in a potential alliance between General Motors, Renault and Nissan and that there should be strong General Motors Board involvement in the analysis of such a potential alliance, including the utilization of independent advisors.

Tracinda currently owns 56 million shares of GM, or 9.9%.

A Copy of the Letter:

Dear Mr. Wagoner:

In keeping with Tracinda’s desire to have an open relationship with General Motors, we want to let you know that, consistent with statements included in our Schedule 13D filings, Tracinda is interested in acquiring approximately six million shares of GM’s common stock in the open market and may consider acquiring up to an additional six million shares.

As you are aware, because GM owns interest in various insurance, banking, trust and industrial loan companies, Tracinda could be required to satisfy various state and federal rules and regulations prior to any such acquisition, since it would result in Tracinda owning 10% or more of GM’s outstanding common stock.

We are seeking the cooperation and support of the Company and its management in connection with these filings and any related proceedings, as we believe additional investment by Tracinda in GM would be viewed positively by investors, and your support will maximize the likelihood of obtaining regulatory approval.

We welcome the opportunity to discuss this matter further with you if you so desire.

Very truly yours,
TRACINDA CORPORATION

http://www.13dtracker.blogspot.com/

Kerkorian Wants More GM, A Return Before His 100th Birthday

Kirk Kerkorian want more GM shares. Buying them will put him over 10% as a shareholder, so he will have to get the customary waivers. He may get a return during his lifetime. Mr. Kerkorian was born in 1917, and its not getting any younger.

Kerkorian says that one of the reasons he wants the shares is that he believes that an alliance with Nissan and Renault, currently under discussion, will help the company.

But, he is making the deal harder to do. GM's shares will almost certainly hit their 52-week high of $33.50 on the news. And, GM's CEO has already asked Nissan and Renault for "tribute" to cover the disparity in value among the three companies. Carlos Ghosn, head of Nissan and Renault, has been taking his case to the press, often a sign of weakness. He says that the companies need the alliance to fend off Japanese car giant Toyota.

Kerkorian is clever. He is pressuring GM to make a deal with Ghosn or futher improve its operating margins. Kirk wins either way. Buying more GM shares ups the pressure on management, which has already taken $9 billion a year out of costs. Based on August sales figures, GM may also be stabilizing sales in the US.

With GM's stock up over 60% this year and still rising, Kerkorian may make a ton on his GM investment. He doesn't really need the money.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies he writes about.

Keefe, Bruyette & Woods IPO Still On Track

KBW, Inc. is still planning to come public via an IPO. For those who are not familiar with the name KBW this is the parent of Keefe, Bruyette, & Woods, a stellar investment bank that tends to focus on the financial sector.

The underwriters include KBW, Merrrill Lynch, Banc of America, Fox-Pitt Kelton, JMP Securities, Thomas Weisel, BNY Capital, and FTN Midwest.

430 people as of June 30, 2006, including 101 in investment banking, 151 in sales and trading and 82 in research; it covers 489 companies under research.

-U.S. registered broker-dealer, Keefe, Bruyette & Woods, Inc.;
-U.S. registered investment advisor, KBW Asset Management, Inc.;
-Keefe, Bruyette & Woods Limited, an investment firm authorized and regulated by the U.K. Financial Services Authority.

The firm specialized in the bank and thrift sector; and expanded the financial services sector: insurance companies, broker-dealers, mortgage banks, asset management companies, mortgage REITs, consumer and specialty finance firms, financial processing companies and securities exchanges. It also expanded from the United States into Europe with a European-focused team in the London office.

It provides research, sales & trading, investment banking, and fixed income services.

KBW posted 2005 revenues combined at $307.8 million and net income was listed at $17.4 Million on an after-tax basis. For the first 6 months of 2006 the company posted revenues of $193.1 million and after-tax net income of $14.8 Million. As of June 30, 2006 it carried Assets of $622 million and total operating liabilities of $340 million.

The company has the traditional range of risks listed in the prospectus for the company, including the equivalent comments that its real assets walk out the front door and go home every night. In truth, unless they have hidden and buried ghosts that aren't known this IPO will be well received. It is hard to call that before you start to see some price indications, so we will wait to see the financial details before we blindly go out with an open endorsement.

This is a financial IPO we are looking forward to.

Jon C.Ogg
September 28, 2006

Can Amgen Leave The Dog House? (DNA)(AMGN)

Share of Amgen, the huge biotech firm, have been off lately. Way off.

The stock traded near $85 last November, but dropped to $66 in mid-August. The shares now fetch about $72. Rival Genentech's performance has been better for the entire 52 weeks.

But, Amgen may start to move back up again. The company's new colon cancer drug, Vectibix, has been approved by the FDA. Jefferies & Company says the drug could eventually drive revenue of $2 billion a year, if it is approved for treating other cancers. But, the firm retains it rating of "hold" on the stock. Friedman Billings still has the company rated "underperform".

The rating are odd because Amgen has a lot going on including trial of a drug to treat conditions that are side-effects of bone lose. The major knock against the company would appear to be competition that is probably coming from generic biologic drugs that could hurt Amgen's sales.

The company still has the look of a winner. Revenue rose from $8.8 billion in 2004 to $12.4 billion in 2005. Operating income was up from $3.3 billion to $4.8 billion year-over-year. Revenue growth has averaged about 14% year-over-year the last four quarters.

Compared to competitor Genentech, Amgen would appear to be undervalued. Genentech's market cap is about $88 billion, over 11 times sales. Amgen's market cap is $84 billion, only 6.4 times sales. Should the spread be that great? Probably not.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Pre-Market Stock Notes (Sept. 28, 2006)

(ACOR) Acorda up 1% on thinner pre-market volume after huge spike on Monday and Tuesday.
(ALGN) Align Tech trading UP 30% pre-market on reaching pact with OrthoClear on litigation.
(ALNY) Alnylam gets a $23 million infectuous disease pact from US government.
(AMGN) Amgen's colorectal cancer drug received FDA approval yesterday minutes before the close.
(AZO) Autozone said Eddie Lampert will not stand for re-election to the AZO board of directors.
(CBRE) CBRE Realty Group 9.6 million share IPO priced at $14.50, lower price and lower share count.
(CROX) Crocs added to S&P Small Cap 600 Index.
(CSC) Computer Sciences led-team gets $3.7 Billion contracts from health office in UK.
(EGLT) Eagle test is selling 5.5 million shares in secondary offering.
(EXEL) Exilixis filed to sell 9 million shares of common stock.
(GM) GM & Renault talks are going to be extended over ongoing talks of an alliance, but the street is thinking GM may be wanting too much.
(FDO) Family Dollar $0.26 EPS vs $0.23e.
(HPQ) H-P's general counsel Ann Baskins resigns; Hurd and Dunn testify today.
(ICFI) ICF International 4.67 million share IPO priced at $12.00, under the price range.
(LCUT) Lifetime Brands lowered annual EPS guidance.
(MIK) Michaels Stores puts revenues at high-end of range.
(NWS) NewsCorp makes 2 newspaper acquisitions.
(NYX) New York Stock Exchange trading up pre-market as Cramer said he was wrong to say Sell and it should be bought.
(PWER) Power One is making an acquisition of a Magnetek unit.
(RECN) Resource Connection $0.30 EPS vs $0.26e, unsure if gains in number.
(RMD) Resmed moves up to S&P Mid Cap 400 Index.
(SI) Smith International moves up to S&P 500 Index.
(STM) STMicro could be a takeover target according to online reports.
(SUNW) Sun Micro acquired private Neogent for undisclosed terms.
(SYMC) Symantec said Microsoft is abusing its operating system monopoly.
(THLD) Threshold Pharma gets FDA Orphan drug designation for pancreatic cancer.
(TWX) Time Warner down 1% after JPMorgan downgrade; also cuts Warner Bros. Internet unit in L.A., with 19 employees laid off.
(ZHNE) Zhone lowered revenue guidance.

Select AnalystCalls (Sept. 28, 2006)

ALA started as Overweight at Prudential.
AMD cut to Sell at ThinkEquity.
AMGN started as Underperform at Credit Suisse.
AN raised to Outperform at Bear Stearns.
APC started as Overweight at JPMorgan.
BIIB started as Neutral at Credit Suisse.
DIGE started as Buy at Deutsche Bank.
DNA started as Neutral at Credit Suisse.
DOX cut to Equal Weight at Morgan Stanley.
ENER reitr Buy at Jefferies.
LNC cut to Neutral at Credit Suisse.
MKC cut to Neutral at Merrill Lynch.
NOVL started as Overweight at JPMorgan.
NTES cut to Neutral at Credit Suisse.
NVDA cut to Sell at ThinkEquity.
PETM cut to Mkt Perform at Piper Jaffray.
RECN raised to Outperform at JPMorgan.
SKS raised to Buy at B of A.
SNV cut to Mkt Perform at Piper Jaffray.
STEC raised to Overweight at Lehman.
TKC raised to Buy at Merrill Lynch.
TLAB Started as Neutral at Prudential.
TWX cut to Neutral at JPMorgan.
VRTX raised to Buy at Merrill Lynch.

Verizon At The World Series Of Poker (VZ)(TWX)(CMCSA)

Verizon is travelling to Las Vegas for the World Series of Poker. The company will put every chip it has into the fiber-to-the-home pot. And, it will either walk away as champion or be forced to leave the game.

Verizon will spend almost $23 billion on its fiber network. The program will eventually pass 18 million homes.

The big phone company is betting that it can take a large chunk of the "'triple play" revenue from the cable giants like Time Warner Cable and Comcast. The ability to bundle TV, broadband, and phone service into on offering for consumers is viewed by many telecom and cable firms as the Holy Grail of services for residential customers. Billions of dollars of revenue are at stake.

Unlike some of its sister phone companies, Verizon is not taking a gradual approack to installing fiber.

Verizon is a big company. Last year it has operating income of $14.8 billion on revenue of $83.1 billion. But, the company already has $32 billion in long-term debt.

Investors were concerned about the plans and drove Verizon's shares down 3% to $36.78. Like most US phone companies, Verizon stock has been rising. It has a 52-week high/low of $38.00/$29.13.

While the market digests Verizon's huge commitment to its new strategy, its shares may take a long breather.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Litigation Nation: Sue Everyone (SBUX)

The owner of a small coffee shop sued Starbuck's for anti-competitive practice. The suit alledges that Starbuck's paid above market rent to get exclusive rights to sell coffee in certain locations. The suit was filed in California.

Also in the nations largest state, the attorney general has filed suit against six big car companies for polluting the air. The emission harmed the infrastucture and the health of the state's citizens. The car companies are being blamed for global warming consequence.

And, of course, a federal judge has allowed a class action suit to go forward by plantiffs who claim that "light" cigarettes were just a little trick to make people think it was healthier to smoke if the product had the "light" label. The large tobacco companies have won virtually all of the previous actions blaming them for smoking-related illnesses.

The labels on the cigarettes that claimed that smoking would kill smokers did not seem to matter to the court. The state of California made no attempt to ban cars with dangerous emissions. The local coffee merchant was not open to paying above market rent to get better locations.

Perhaps as summer wanes, and fewer people can vacation and go to the beach, the need for excitement has found its new home in the court system.

A small prediction. The plantiffs will win none of these.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own secutities in any of the companies that he writes about.

Europe Market Report 9/29/2006 Brambles, ICAP, MAN, Mittal Steel Up

Stocks: (BCS)(BP)(BT)(GSK)(PUK)(UN)(UL)(VOD)((BAY)(DCX)(DB)(DT)
(SI)(ALA)(AXA)(FTE)(V)

European markets were modestly higher at 5.25 AM New York time.

The FTSE was up .5% to 5,949. Barclays was up .4% to 668. BP was up 1.3% to 586.5. Brambles was up 4.1% to 487.25. BT was flat at 260.25. GlaxoSmithKline was flat at 1426. Hanson was up 2.4% to 738.5. Icap was down 3.1% to 504.25. Prudential was up .9% to 642.5. Reuters was down 1.7% to 425.75. Unilever was down .1% to 1324. Vodafone was down .8% to 120.5.

The DAXX was up .1% to 5,994. BASF was down .6% to 62.95. Bayer was up .5% to 39.18. DaimlerChrysler was down .6% to 39.58. DeutscheBank was down .4% to 94.96. Deutsche Telekom was down .4% to 12.39. MAN was up 3.6% to 65.55. SAP was up 1% to 158.1. Siemens was up .7% to 69.07.

The CAC 40 was up .2% to 5,254. Alactel was up .7% to 9.66. AXA was flat at 29.4. France Telecom was down .4% to 17.9. Mittal was up 2.9% to 27.62. ST Micro was up 2.9% to 13.73. Vivendi was down .7% to 28.31.

Data from Reuters.

Douglas A. McIntyre

Media Digest 9/29/2006 Reuters, WSJ, NYT

Stocks: (GM)(F)(DIS)(WMT)(NOK)(NWS)(VZ)(FD)

According to the Wall Street Journal, GM and Renault agreed to talk about a possible alliance until a deadline on October 15.

The WSJ say Disney unit ESPN Mobile will shut down. Instead of branded phones, ESPN will probably license its content to other big carriers.

The WSJ writes that Wal-Mart will cut benefits to new workers promoting a low-premium, high-deductible plan.

The WSJ writes that Nokia is increasing its effort to launch phones that will play music and allow users to watch video. The company spends about $1 billion a year to develop high-end multimedia phones.

According to Reuters, MySpace could be worth close to $15 billion in three years measured in terms of the value created for its parent News Corp.

Reuters writes that Verizon will spends a total of about $23 billion to build out its fiber-to-the-home initiative. Some analysts are concerned that this will sharply increase the phone company's capital spending next year.

According to the New York Times, if Carlos Ghosn, head of Nissan and Renault, cannot strike a global alliance with GM, he may approach Ford.

The New York Times writes that Carl Icahn is putting about $500 million into the stock of retailer Federated.

Douglas A. McIntyre

Asia Markets 9/29/20006 Sharp Down, Softbank, Yahoo Japan Up

Stocks: (CAJ)(FUJ)(NIPNY)(NTT)(DCM)(SNE)(TM)(CHL)(CN)(HBC)(PCW)

Asian markets were mostly higher.

The Nikkei was up .5% to 16,025. Bridgestone was up 2.1% to 2395. Canon was up 3.1% to 6090. Fuji Photo was flat at 4330. Itochu was 2.1% to 915. Misubishi Estate was up 2.4% to 2525. NEC was down .8% to 655. NTT was up .3% to 585000. Nissan was up 1.2% to 1334. Docomo was up 1.7% to 183000. Osaka Gas was up 2.2% to 413. Sharp was down 3.5% to 1950. Softbank was up 3.2% to 2280. Sony was down .8% to 4820. Toshiba was up .7% to 761. Toyota was up .5% to 6400. Yahoo Japan was up 2.6% to 43750.

The Hang Seng was up .3% to 17,569. Cathay Pacific was down 1.5% to 16.02. China Mobile was flat at 55.1. China Netcom was up 1.6% to 14. HSBC was up .2% to 142.1. PCCW was up .4% to 4.8. Swire Pacific was down 1% to 82.2.

The KOSPI was up .8% to 1,371.

The Straits Times was up .3% to 2,566.

The Shanghai Composite was up .7% to 1,737.

Data from Reuters.

Douglas A. McIntyre

Arnhold and S. Bleichroeder Urges Emmis (EMMS) Board to Reconsider Sale to CEO at 40% Premium

From 13D Tracker

In a press release today on Emmis Communications Corp. (Nasdaq: EMMS), 1.7% holder (650K shares) Arnhold and S. Bleichroeder noted that in a recent 13D filing Emmis Chairman and CEO Jeffrey Smulyan disclosed that after withdrawing his $15.25 buy-out offer for Emmis on August 4, 2006, he engaged in exploratory discussions with the Special Committee regarding the "potential reinstitution of a proposal at a price of $16.80 per share in cash." The filing indicated these discussions ended on or around August 31, 2006.

The investment firm notes that a price of $16.80 represents a premium of 40% to the average closing price of Emmis shares on the five trading days prior to the date of this 13Dfiling.

Arnhold and S. Bleichroeder said the Board's apparent decision not to pursue a transaction at a premium of this magnitude was simply not in the best interests of shareholders. The firm urged the Board to take whatever actions necessary to revive discussions with Mr. Smulyan and proceed expeditiously toward a definitive agreement with him and a shareholder vote on the matter.

http://www.13dtracker.blogspot.com/

Pirate Capital Raises Stake in P.H. Glatfelter (GLT) to 5.7%

From 13D Tracker

In a 13D filing on P.H. Glatfelter Company (NYSE: GLT) this morning, Pirate Capital disclosed a 5.7% stake (2.55 million shares) in the company. This is up from the 1.6 million share stake the firm disclosed in a quarterly filing with regulators.

Pirate said they intend to review their investment on a continuing basis and may engage in discussions with management, the Board of Directors, other shareholders of the company and other relevant parties concerning the business, operations, board composition, management, strategy and future plans.

Glatfelter is a global manufacturer of specialty papers and engineered products.

Pirate Capital, one of the most well-known activist hedge funds, recently came under SEC scrutiny for failing to promptly disclose changes in material holdings, including OSI Restaurant (NYSE: OSI) and FreightCar America (Nasdaq: RAIL) - positions the hedge fund closed out.

http://www.13dtracker.blogspot.com/

Talk America (TALK) Holder Flagg Street Capital Said $8.10/Share Deal Does Not Reflect Full Value

From 13D Tracker

In an amended 13D filing on Talk America Holdings Inc. (Nasdaq: TALK), 9.11% holder Flagg Street Capital said they are seriously concerned that the proposed transaction with Cavalier does not reflect the best possible price reasonably available, and we are confident that other large shareholders share our concerns. We therefore look forward to a sale of the Company at a price that does reflect its full and fair value, whether to Cavalier or another buyer.

Last Friday, Talk America agreed to be acquired by privately-held Cavalier Telephone & TV for $8.10 per share in cash.

A Copy of the Letter

"September 27, 2006

Board of Directors
Talk America Holdings Inc.
12020 Sunrise Valley Drive
Suite 250
Reston, VA 20191
Attention: Edward Meyercord


Gentlemen:
We are writing to you in connection with the announcement last Friday that you entered into an agreement for Talk America to be acquired by Cavalier for $8.10 per share in cash. In this respect, we wish to note at the outset that we agree with the conclusion implicit in that announcement that a sale of Talk America at this time is the best alternative for maximizing value for shareholders. However, we are seriously concerned that the proposed transaction with Cavalier does not reflect the best possible price reasonably available, and we are confident that other large shareholders share our concerns. We therefore look forward to a sale of the Company at a price that does reflect its full and fair value, whether to Cavalier or another buyer.

We also note that we filed a Schedule 13D on August 22nd and thereafter discussed with management whether Talk America should add a stockholder representative to its Board of Directors in order to ensure that maximizing shareholder value was the sole motivation in agreeing to any sale and that shareholder interests were otherwise observed; yet you nevertheless proceeded to announce a deal before you provided any formal response to our stated concerns. We therefore wish to ensure that this transaction is in your stockholders’ interests and represents the highest price reasonably attainable for the Company.

Our concerns in relation to the Cavalier transaction include whether:

• the price proposed to be paid actually reflects the fair value of the Company. We estimate that the proposed merger values Talk America at approximately 3x pro forma EBITDA (including synergies). By comparison, recent acquisitions in the CLEC space have been completed at 9-12x pro forma EBITDA;

• you ran a comprehensive sale process in which you contacted the full range of buyers that are likely to be interested in acquiring the Company and would be able to pay the best price, including granting them reasonably adequate time and access to information to formulate an offer;

• the Company was actively shopped before entering into the merger agreement; or, if not, that there were value-maximizing reasons not to do so, as well as why the merger agreement does not contain a so-called “go-shop” provision during which “go-shop” period only a substantially reduced break-up fee would be payable if a higher bid were to emerge;

• (1) you will be filing a Rule 13E-3 Transaction Statement in relation to the proposed merger and making all of the additional disclosures that are required in relation such a “go-private” transaction, including detailed disclosure of the projections on which Cavalier based its price, or (2) you have an adequate explanation as to why no such filing is required;

• the Board was incentivized to seek the highest possible price despite the lack of shareholder representation as noted above. In addition, we remain concerned that potential conflicts may exist in the form of: (1) the change of control and other payments and benefits that will accrue to the Company’s senior management by virtue of the transaction, and (2) the deal struck by Talk America’s CEO to become CEO of Cavalier at closing of the transaction, including the financial and equity incentives to be granted to him by Cavalier (and to any other members of the Company’s senior management or the Board); and

• a significant portion of the fees payable to Blackstone in exchange for its services are structured as “success” and/or “opinion” fees contingent on completion of the deal and delivery of its fairness opinion, particularly given our concerns about the deficiency of the proposed price.
We realize that Talk America has not yet filed a copy of its proxy statement which will include more details about the transaction. As such, we will reserve judgment on a number of issues (including the questions outlined above) until we get this additional information.

Should you wish to discuss any of these issues or the transaction generally, please feel free to give me a call.


Best regards,


Jonathan Starr
Managing Member"

http://www.13dtracker.blogspot.com/

Analyzing Newmont Mining's (NEM) Recent Cut Back of Expectations & Contemplating NEM's Future

By Yaser Anwar, CSC of Equity Investment Ideas

NEM cut back sales expectations for 06 and said it anticipates further declines until new projects come on line in 08 and 09.


NEM trimmed its 06 gold sales expectations to a range of 5.6 million ounces to 5.8 million ounces from a previously estimated range of 5.9 million ounces to 6.2 million ounces.


NEM blamed the shortfall on the dispute over its interest in a joint venture in Uzbekistan, lower production in Ghana due to nationwide power shortages, and the expected sale of its Holloway mine in Canada.


Last month, An Uzbek court declared bankrupt Newmont's local joint venture, likely ending the NEM's gold operations in Uzbekistan. Newmont has accused Uzbek authorities of trying to seize its part of the venture and said it plans to challenge the Uzbek government's action through international arbitration.


About 35% of NEM's equity gold sales in 05 came from the US, 27% from Peru, 25% from Australia/New Zealand, 6% from Indonesia, and 7% from other operations. As of the last reporting date: approximately 54% of NEM's total long-lived assets were located in the US, with the balance located in Peru, Australia, Indonesia, Ghana, Canada, Mexico, Bolivia, Turkey and Uzbekistan.


For 07, NEM expects gold sales of between 5.2 million ounces and 5.6 million ounces, again as the result of the joint venture issue and lower production from its Yanacocha operations in Peru. Costs related to sales next year are also expected to increase 20 to 25%, NEM said, mostly from higher costs at Yanacocha.


NEM said it doesn't expect an increase in gold sales until its operations in Nevada, Ghana and Australia reach full production in 08 and 09.


Global gold production is dominated by a relatively small number of large producers such as Anglogold Ashanti Ltd, Barrick Gold, Gold Fields Limited, Freeport McMoran Copper & Gold, Harmony Gold, Newmont Mining, and Rio Tinto. The industry is also comprised of a small number of exploration companies and small to mid-size gold producers.


NEM also said that an anticipated gain of $295 million in the 3rd Q related to the sale of an oil property in Canada and the divestiture of a project in Indonesia would be partially offset by the $94 million in costs related to the Uzbekistan venture.


YTD through September 22, the S&P Gold Index fell 17.3%, which compared to a 5.5% increase for the S&P 1500 Stock Index and a 12.1% rise in spot gold. Predicated on my expectation for less rapidly rising costs for energy and raw materials along with higher revenue per ounce, investors can look for increased operating profits and operating earnings of around $1.80-83 level in 06.

http://www.equityinvestmentideas.blogspot.com/

Analyzing Coach's (COH) Market Share & Growth Potential

By Yaser Anwar, CSC of Equity Investment Ideas


Handbags are fashion statements, and women everywhere pay big dollars to carry the latest ones, be it: Jimmy Chu, Fendi, Gucci, Marc Jacobs etc. One handbag isn't enough. Women have had even more incentive to load up on handbags when fashionistas everywhere deemed it inappropriate to go out without your handbag matching your shoes.
I continue to see ample opportunities for COH as it further penetrates the estimated $4.8 billion US market for luxury handbags and small leather goods. Japanese luxury consumers provide significant growth potential as well.


Investors can expect COH to double its market share there to about 15% by 2010. With expectations of 20% sales growth in 07 driven by store expansion, a low double digit increase in same store sales for US retail locations, about $475 million in Japan-based sales, and a 15% gain in the indirect channel.


Coach has an array of products, from, of course, handbags to wallets, briefcases, outerwear, belts and shoes. It’s targeting the younger, hipper generation with iPod cases and letter charms.


I see favorable sales and earnings prospects for COH, which, in my opinion, warrant a premium valuation to peers. Same store sales advanced 21% in 06 vs 18% in 05 and 17% in 04. With 12% at retail and 32% in factory. As COH adds new categories, I think product diversification, increased store traffic and purchases at higher average prices will support a five-year EPS compound annual growth rate of 25%.


Coach’s average handbag retails for $250. But its new Legacy collection, which will be introduced in October, will average $325 a bag. To keep consumers always interested, Coach has been continually launching new collections. Its latest, released in July, is the Signature Stripe, which features lightweight, reversible handbags with a bold stripe and the interlocking C signature pattern.


Let me fill you in on it's market share. Coach is the "numero uno" luxury accessories brand in the US, with an estimated 23% share of this $4.8 billion market in $100 handbags.


This sub-segment of the handbags & accessories market grew at an estimated 17% pace in 05, following a 30% YoY gain in 2004, and 23% in 2003. COH was able to outpace industry growth and add an estimated five market share points in the 02-05 period, as it executed its five pronged multi-channel growth strategy.


The Japanese consumer makes up about 40% of the global luxury handbag market. COH estimates that it currently has 8% of the domestic Japanese market and aims to increase its share to 15% over the next five years by opening new stores.


Coach recently announced a 23% increase in net sales for its fiscal year, along with a 38% increase in net income. And with a goal of increasing its share of the US upscale handbag and women’s small leather goods market to 33 percent in the next several years, investors should continue to see substantial growth from Coach.


COH is pursuing two key strategies to strengthen its leadership position and build lasting market share: increase global distribution emphasizing its NA and Japanese direct retail distribution and improve productivity.


Over the next three years, COH plans to add 100 North American retail locations, bringing the total to over 300 locations. In Japan, COH is implementing a multi-channel model similar to that of the U.S. COH believes North America can support approximately 400 locations, and Japan, at least 180.


COH management has four initiatives to maximize productivity: 1) Intensify awareness as a gift resource 2) Develop under penetrated categories and emphasis new usage occasions 3) A merchandise strategy that provides the opportunity to graduate stores from core to fashion and fashion to flagship and enhance store service levels.

http://www.equityinvestmentideas.blogspot.com/

Cramer's MAD MONEY Recap (Sept. 27, 2006)

On Cramer's MAD MONEY tonight, Cramer said we are going to all-time highs in the market. Cramer actually hosted NY Giants Kicker Jay Feely to discuss the market and opportunities. He is actually a series 7 licensed person and Cramer said he is financially savvy as he didn't go into the NFL right out of school.

He has mutual funds in there and he also has some speculation so you stay interested. He keeps 10% or so in under $20.00 stocks, but he likes to take his cost basis out when it runs too much. He even discussed that the NFL is going into Medical Savings Accounts (HSA's).

Cramer was looking at exchange raising to see which markets put you in the black. Cramer said he did a mistake by saying Sell on NYSE (NYX). He said even after today's pullback after it has run up he thinks it is actually going higher. Cramer said he was thinking backwards instead of forwards on the exchanges. Cramer said a viewer convinced him he was wrong. Of the 14 analysts that cover the NYSE, 12 are neutral because of the specialist system and because of dependence on people. He says he is going positive and against them even though it currently has low profit margins. Cramer said NYSE can cut costs by firing the specialists. He thinks they could trim off $600 million in costs if they get tough. Cramer says some good news is not yet inn the expected numbers.

If you want to see what I said about Specialists before on some recent concerns, here it is.


Cramer said NYX could be a $100.00 stock. He says it has to close Euronext exchange, so buy some now and then buy some NYX after the terms of the deal are announced. NYX traded up 2.3% to $72.90, although the stock closed down 2.8% or $2.05) in regular trading at $71.25.

Pondering Viral Video and Social Networking Valuations

All of the recent Organic video and social networking announcements should make the buyout or acquisition valuations for both YouTube and Facebook seem ludicrous more than they should validate the valuations each is/was seeking. Cisco (CSCO) and Yahoo! (YHOO) have already taken some initiatives that could either make those two viral growth companies either valued much lower. Viacom (VIA) needs to do something, but they should focus on start-ups that are not in the 9-digit handles. Before giving the full synopsis of the potential deals, we need to show the layout and the most recent data from July's comScore reading (yes, we know it is July data).

NewsCorp's (NWS) MySpace is the leader in social networking and is actually big in videos as well.

Microsoft (MSFT) spin off Wallop said Tuesday it was starting service and will compete head on with MySpace and Facebook. Wallop starts with $13 million in backing from Microsoft, Norwest Venture Partners, Bay Partners and Consor Capital. This is just after MSFT lached its Live.com service.

Yahoo (YHOO) has acquired San Francisco start-up Jumpcut, the online video editing company, for an undisclosed amount.......according to Venture Beat.

Cisco Systems (CSCO) has recently announced its video comprehensive digital media system.....

Google (GOOG) has its video sharing....

Time Warner's (TWX) AOL has its UnCut and new open video search initiative.....
http://uncutvideo.aol.com/Main.do

About 106.5 million people, 3/5 of US Internet surfers, watched an online video in July, according to comScore.

Does anyone remember TheGlobe.com (TGLO-OTC)?

Yahoo was listed as #1 with 37.9 million people initiating 812,000 video streams. MySpace was listed as #2 with 37.4 million people initiated 1.5 million streams. YouTube was ranked #3 in the list of video properties on free content. Time Warner's network (including AOL) ranked #4, and Microsoft sites were listed #5.

One other noteworthy situation is that comScore said adding Adobe's (ADBE) Macromedia Flash video increased the number of online video viewers between 10 percent and 20 percent.

YouTube was reportedly not going to accept anything under $1.5 Billion, and that is after it secured Level 3 (LVLT) as its nationwide broadband provider and after it signed terms with Warner Music. Mark Zuckerberg's social networking site Facebook was reportedly in talks with Yahoo! or another for a $900 million or $1 Billion deal.

If you take this all at face value it essentially leaves Viacom (VIA) as the last man standing. The company has signaled that it wants to go more into web content, and it very much needs to. They have to make acquisitions and they have to do it soon. They have said the intent is to rapidly identify companies as they are emerging, or at least that was my understanding.

The problem is that if Viacom goes out and tries to buy a Facebook or YouTube, then they will be overpaying if it is anywhere close to current expectations from these kids. These kids that started the two companies do not yet know their business models yet, and the street hasn't figured out the model yet either. Neither will replace the overall dominance of other services, even if their traffic is actually up among the top sites. The truth is that this video is going to be around, but it will likely not replace all web models out there. Personally I run 4 monitors, watch numerous updating pages, monitor some feeds, and have kept up to 4 different news channels before. BUT, the thought of monitoring a dozen video feeds simultaneously seems numbing and honestly as worthless as gold to a dead man. I may have to eat those words one day and will accept the hickey if I am wrong, but I doubt that will be the case.

These kids that created YouTube and Facebook have created a service and deserve to be rewarded for it, but they do not deserve at all to become Billionaires. If someone pays the current and most recent asking prices for either one of those then they can expect to get a call from me asking them to buy the London Bridge. There are literally almost NO barriers to entry in this field, and it is cheaper to grow it organically. Quite literally you can create a start-up for this with all licensed and leased technology in very little time. With the compression now available even the bandwidth costs out there are not going to be murderous, and that is likely true if if Cramer is correct about a bandwidth shortage coming soon.

I thought Murdoch's acquisition of MySpace was brilliant and I thought News Corp (NWS) stock was a steal around the time he initiated that buyout this time last year and the street was criticising him. I recently noted that maybe Yahoo! should consider YouTube instead of Facebook previously because of the price, and while I think YouTube has more value I cannot think of the need to fork over over $900 million, $1 Billion, or $1.5 Billion for either one of these companies for any reason on earth.

Here are the top 25 sites tracked by Alexa in overall US-related web-based traffic based on the traffic information available as of today:

1. Yahoo!

2. Google

3. Myspace
Social Networking Site.

4. Microsoft Network (MSN)
Dialup access and content provider.

5. EBay
Person to person auction site, with products sorted into categories.

6. Amazon.com
Amazon.com seller of everything

7. Craigslist.org
Online community

8. YouTube
YouTube is a way to get your videos to the people who matter to you. Upload, tag and share your videos worldwide!

9. Wikipedia
Free encyclopedia built collaboratively using Wiki software.

10. Go.com
A searchable directory, news, stocks, sports and free e-mail.

11. CNN - Cable News Network
Includes US and international stories and analysis, weather, video clips, and program schedule.

12. Live.com
part of Microsoft

13. AOL
America On Line's portal, offering search, shopping, channels, chat and mail.

14. Blogger.com
Free, automated weblog publishing tool that sends updates to a site via FTP.

15. Thefacebook (facebook.com)
An online directory that connects people through social networks at colleges. FAQ, news coverage, schools covered, and terms of use.

16. Microsoft Corporation
Official homepage of Microsoft Corporation

17. Comcast.net

18. The Internet Movie Database imdb.com
Features plot summaries, reviews, cast lists, and theatre schedules.

19. The New York Times
Online edition of the newspaper's recent content with searchable archives for a fee.

20. Flickr
Picture galleries available with social networking, chat, groups, and photo ratings.

21. MapQuest
Find directions for and explore towns and cities worldwide. Display addresses on a map, view nearby businesses, get driving directions and maps, and plan a trip with city information. Also includes aerial photographs of selected areas.

22. Weather.com
Offers forecasts for cities worldwide as well as radar and satellite maps. Also includes news stories and allergy information.

23. Digg
Technology focused news site where the stories are chosen by community members rather than editors.

24. Apple Computer, Inc.
Apple's main homepage.

25. About.com
A network of sites where visitors can find many targeted topic areas, each one managed by a personal guide; part of New York Times.

Jon C. Ogg
September 27, 2006

Sun Micro Buys More Identity Management

Sun Microsystems, Inc. (SUNW) and private Neogent, Inc. announced that they have entered into a definitive agreement pursuant to which Sun will acquire Neogent, an identity management services automation company based in Austin, Texas.

Sun's market-leading identity management solutions and Neogent's deployment automation toolset will help Sun enterprise customers improve identity management implementation times while reducing implementation costs and better address compliance requirements for regulatory, security and privacy issues such as the Sarbanes-Oxley Act, the Health Insurance Portability and Affordability Act (HIPPA), Homeland Security Presidential Directive-12 and the Gramm-Leach-Bliley Act.

"Acquiring Neogent will expand Sun's resources and talent for architecture and project oversight in the rapidly growing identity business. Customers and partners will see dramatically increased speed and accuracy in the deployment of identity services on the Solaris(TM) OS and other popular operating systems, leading to a faster return on their software investment," said Peter Weber, senior vice president, Services Group, Sun Microsystems. "With Neogent's innovative deployment methodologies, identity projects which could have taken customers over a year may now be completed in as little as 45 days, giving Sun a significant advantage over the competition."

Based on years of experience with the Sun Java Systems Identity Management Suite, Neogent developed its Velocity Identity Package (VIP) to reduce deployment time, ultimately providing customers with a scalable, cost effective solution. Implementations from other identity management vendors often take over a year, but with Neogent's VIP, customers may complete their projects in as little as 45 days. The recently updated VIP product is believed to be the first to combine user provisioning with identity auditing, bridging the gap between IT security and auditors internally and externally, to stay in compliance with critical wide-ranging local, state and federal regulations.

The transaction is subject to customary closing conditions and is expected to be completed in the second quarter of Sun's 2007 fiscal year. The terms of the deal were not disclosed as the transaction is immaterial to Sun's earnings per share.

Microsoft's Xbox Fans Cheering, Things to Watch For Gaming Investors

Master Chief is....Peter Jackson?

At the X06 conference in Barcelona, Spain the Xbox team showed many developments, all of which are going to be good for gamers AND items which should turn Microsoft's Xbox franchise into a net-net profit center for Microsoft (MSFT). To date the Xbox unit has been a net money-loser for the company. I have said that the street acronym of Microsoft as "Mister Softie" should be changed to "Master Chief," and that is even more true after looking over today's news and reviews for the Xbox franchise at the X06 conference.

"Lord of the Rings" mega-film series creator Peter Jackson has teamed with Microsoft to launch a development studio and collaborate on a new "Halo" game.

Jackson is also producing a big screen "Halo" movie. He and Microsoft to create Wingnut Interactive to focus exclusively on video games, and its first untitled game will be set in the "Halo" universe. Wingnut will work with Bungie Studios, which created the franchise and is currently working on "Halo 3." Halo 3 is set for release next year, and as a big personal fan of the game franchise hopefully this one won't be delayed like the company's Vista operating system.

Besides Halo 3, Wingnut is supposed create another game that will focus on attracting non-gamers to gaming. Microsoft-owned Ensemble Studios also revealed it has been working on a game set in that universe: "Halo Wars," which is said to be a real-time strategy game for the Xbox 360.

The announcements came Wednesday at Microsoft's annual X06 event, held in Barcelona, Spain. There is no word of financial terms and it is not disclosed if Microsoft will invest in Jackson's company. Microsoft said the Xbox360 peripheral player will go on sale in the U.S. in mid-November for $199.99, and it will come with a HD-DVD version of Jackson's film "King Kong." This is a corporate strategy geared directly to mess with Sony and even Nintendo as they release their new consoles. Xbox 360 has more than 5 million units sold and the company said it is on track to sell 10 million by the end of the year.

Sony's PlayStation 3 launches in November, but the street is criticising it as late and not as good. The PS2's market share was roughly 70 percent of the global console market, and with the launch of Nintendo's new Wii around the same time and with the Xbox360 price cut and some exclusives it is being questioned about the prospects of Sony maintaining such an outright dominance.

Part of the key to Sony's success has been having exclusive deals with game makers such as Take Two Interactive (TTWO), but that is not the case this go-round. Microsoft today announced Take Two will offer Xbox 360 players of "GTA 4" two exclusive, downloadable episodic add-ons within months of the game's release. Take Two confirmed the upcoming title "Bioshock," which wowed critics earlier this year at E3, would be console-exclusive to the 360.

id Software and Microsoft announced a downloadable Doom title for the Xbox Live Marketplace that is actually a port of Ultimate Doom, including that game's fourth episode, "Thy Flesh Consumed."

This downloading of games is something we will have to monitor and something we have to monitor VERY closely for the investing community that trades video game stocks and the peripherals around it. If studios can start selling downloads direct, it could have major implications for retailers such as GameStop (GME), Best Buy (BBY), and even Amazon.com (AMZN). That is not to mean it is a threat yet, but it is something the retailers need to strike with publishers. These games would be nothing if it was not for the sales efforts of the retailing chains that depend on these sales, so you would think the retailers would secure their future with game publishers. I personally have a strategy for the stores to fight this if the publishers try to go around them, but this is still a ways out.

Electronic Arts (ERTS) has showcased the following for Xbox360: FIFA 07, Need for Speed(TM) Carbon, Tiger Woods PGA TOUR® 07, NBA LIVE 07, NHL(TM)07, Half Life 2 and SUPERMAN RETURNS(TM): THE VIDEOGAME.

Here is the full release from X06 for you to peruse, but it looks like 2006 and 2007 are going to be good Xbox years.

Jon C. Ogg
September 27, 2006

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Market Wrap (Sept. 27, 2006)

DJIA 11,689.24; Up 19.85 (0.17%)
NASDAQ 2,263.39; Up 2.05 (0.09%)
S&P500 1,336.59; Up 0.25 (0.02%)
10YR-Bond 4.594%

Oil was a wild day and the market digested mixed news about good consumers and bad consumers. Stocks saw profit taking as oil prices rebounded. An increase in new home sales had helped investors shrug off a weak durable goods report earlier in the session.

ExxonMobil (XOM) closed up 1% at $67.13, but had been down at $66.14 at one point today.

DivX (DIVX) rose a large just three days after its IPO because Jim Cramer said it was mispriced and could be the next Akamai opportunity.

Genentech (DNA) also rose 4.6% to $83.34 and Walgreens (WAG) rose 0.3% to $45.26 on Cramer's comments from last night.

Time Warner (TWX) closed down $0.01 because of very late day selling to close at $18.59 on some 58 million shares.

Hewlett-Packard (HPQ) fell 0.8% to $35.39 after its chief legal counsel left the company and on word that Moody's had placed the "review for a credit upgrade" decision on hold due to its ongoing woes.

Amgen (AMGN) rose 1.9% to close at $72.14 at the very end of the day as the FDA approved its advanced colorectal cancer treatment; Imclone for 2% to $28.75 on this news as it may compete against Erbitux.

Frontier Oil (FTO) rose 3.4% to $27.06 after Bank of America raised the sector to a Buy and after Seven Eleven dumped Venezuela's CITGO as its fuel supplier for calling President Bush the Devil. FTO is said to be one of the suppliers that will get the business.

Red hat (RHAT) choked up and fell 23% to $20.21 on more than 62 million shares after it gave an earnings warning last night.

GM (GM) rose some 2.7% to $32.28 after word that it was seeking some $7 Billion from Carlos Ghosn for it to enter a partnership. Ford (F) fell 4.8% to $8.00.

Bearing Point (BE) fell 8% to $7.78 as it will miss a filing date and is in default of its credit pacts.

Acorda (ACOR) gave back a large amount of its two day exponential profits by falling some 18%, or $2.00, to close at $9.00.

Jon C. Ogg
September 27, 2006

Cramer on STOP TRADING (9/27/07); says ACI & MEE could get acquired

Jim Cramer on today's STOP TRADING segment was one where he essentially said KEEP TRADING.

Last night he was calling for a "mom-back," essentially a "back up the truck and buy" bias on the entire market and he has been positive on particularly techs and drug stocks as they lead the market higher.

He said it is the most stealth bull market he has seen. He said may 11 was essentially the peak of oil, now is bouncing and he thinks it may go lower. He thinks oil stocks have been trying to find a bottom. He thinks the market rally has legs.

He says the estimates are too low.

Arch Coal (ACI) is one that is too far off and he has noted it as a buyout from an oil company down the road. He also noted Massey (MEE). He said these are both too cheap.

Jon C. Ogg
September 27, 2006

Predicting Stocks That Will Beat and Miss Estimates Ahead of Earnings Season

Stock Tickers: SAIA, UHS, CINF, F, HET, BRC

StarMine is an analyst tracking service we like to review and to refer to. This service is essentially an analyst "of the analysts' predictions and they monitor analysts' track records on the calls they make. They break it down by sector, but more importantly they break it down by individual stocks. Based on the "5-star" rating of certain analysts in a given stock, StarMine actually goes out and derives its own earnings prediction for companies that may exceed or miss the street estimates ahead of each earnings season. This is the sort of behavior we have done on many select names in the past, but they do it on most of the liquid stocks out there.

If you can believe it we are essentially within 3 weeks of the next earnings season that will begin in the second week of September and go into full-tilt earnings season mode in the 3rd and 4th weeks of September.

Today on CNBC StarMine gave some interesting predictions around 1:55 PM EST on CNBC. The gave a short list of 3 companies that they felt would exceed estimates and 3 they felt would miss. They use who they deem as the best 5-star analyst for each stock.

We have each StarMine prediction noted as Consensus estimates, Brokerage 5-star analyst prediction, and by the implied StarMine estimate based on a blend of the two. We took this one step further by including today's stock price, its dollar gain/loss so far today, and we even provided an adjusted 52-week trading range to show if it was at the high-end or low-end of each range.

The ones that StarMine thinks will BEAT estimates:

SAIA Inc. (SAIA) $0.63 consensus; Morgan Keegan at $0.67; so StarMine is predicting $0.66.
SAIA $32.29, up $0.01; 52-week trading range $14.70 to $34.04.

Universal Health (UHS) $0.62 consensus; $0.64 at B of A; so StarMine is predicting $0.63.
UHS $60.10, up $0.41; 52-week trading range $44.50 to $59.84.

Cincinati Financial (CINF) $0.72 consensus; Keybanc $0.76; so StarMine is predicting $0.74
CINF $48.20, down $0.05; 52-week trading range $39.91 to $48.55.

The ones that StarMine thinks will MISS estimates:

Ford (F) -$0.53 consensus; Citigroup is far lower on it; so StarMine predicts -$0.70.
F $8.12, down $0.29; 52-week trading range $6.06 to $10.04.

Harrah's (HET) $1.00 consensus; Calyon is lower; so StarMine is predicting $0.97.
HET $65.66, up $1.01; 52-week trading range $57.29 to $83.33.

Brady (BRC) $0.61 consensus; R.W.Baird is 0.50; 0.56 is StarMine.
BRC $35.34, up $0.13; 52-week trading range $26.98 to $42.79.

Last quarter they were 3 for 3 on positives on Wesco (WSO), Investment Technology Group (ITG) and IntercontinentalExch (ICE). Not all stock prices followed with higher prices but ITG & ICE were noted well. We look forward to tracking these predictions. Please keep in mind that StarMine only chose 6 names here, and that is a fraction of their stock coverage universe. Here is a link to view a snapshot of their subscriber services.

Jon C. Ogg
September 27, 2006

Has the Housing Bubble Burst?

From Peridot Capitalist

All I've heard recently in the financial media is that the housing bubble has finally burst. It's really quite comical. First of all, there was never a housing bubble. Everyone just threw around the bubble term because we had experienced one in Internet stocks a few years back and it was easy to categorize a very strong housing market as a bubble.

It's true that the housing market of the last five or six years was one of the strongest we have had in this country. The same can be said of the broad stock market from 1982 to 2000. We had the biggest equity bull market ever. However, it was not a bubble for all stocks, only one sector of the economy. Technology and telecom names fell by 90, 95, even 100 percent.

Outside of tech though, there was no bubble in stocks. The S&P 500 fell 50% when the "bubble burst" but the Nasdaq fell 80% and tech made up 30% of the index. As a result, half the S&P 500 loss was from tech stocks. Without the bubble, the market would have been down 25%. That classifies as a bear market, not a bubble.

Markets don't experience bubble every five or ten years. It's a much rarer phenomenon than that. People are also calling the bull market in commodities as a bubble. It's not. It's a bull market. Markets are cyclical and when they rise they do so very quickly, but bull markets and bubbles are not synonymous terms.

So, yes, the housing market is very weak, but let's stop saying how the bubble is bursting. The mean home price in the U.S. remaining flat for only rising 1 or 2 percent does not classify as a bubble bursting. Not even a 20% drop in housing prices on the coasts qualifies. That's just a bear market, which is what typically follows a bull market. When housing prices in certain markets fall by 90% or more, then we can start calling it a bubble. Not going to happen.

http://www.peridotcapitalist.com/

Icahn Seeks to Buy $113.4-$500M More Federated Department (FD) Shares

From 13D Tracker

In a press release, Federated Department Stores, Inc. (NYSE: FD) said that it has been notified by investor Carl Icahn that he plans a filing under the Hart-Scott-Rodino Antitrust Improvements Act for clearance to acquire $113.4 million to $500 million of additional shares in Federated.

"We're glad Mr. Icahn sees value in our company and is increasing his investment," said Terry J. Lundgren, Federated's chairman, president and chief executive officer. "While our stock hit an all-time high four times in the past three weeks, we continue to see significant opportunity ahead as we maximize the Macy's and Bloomingdale's brands nationwide."

http://www.13dtracker.blogspot.com/

Reports Ackman's Pershing Square Plans to Buy More Than $2B in McDonald's (MCD) Stock

From 13D Tracker

According to reports from Bloomberg, McDonald's Corp. (NYSE: MCD) investor Bill Ackman's, through his Pershing Square Capital fund, plans to buy more than $2 billion of the stock and may wage a proxy fight to pressure the company to take various actions to raise the stock price.

Earlier in the month, McDonald's said it was notified that three investment funds managed by Pershing Square Capital Management L.P. or its affiliates planned to file on or about August 15, 2006 necessary notifications under the Hart-Scott-Rodino Antitrust Improvements Act to acquire in excess of $793.8 million of McDonald's common stock.

Last year, Bill Ackman pushed the company to spin off 65 percent of its company-owned restaurants in a stock offering. Ackman later backed off after the company said it would take a number of steps to improve value including a $1 billion buyback and licensing 1,500 restaurants. Ackman was also instrumental in getting Wendy's International (NYSE: WEN) to make aggressive changes, including spinning off its Tim Horton's (NYSE: THI) chain.

This morning, McDonald's boosted its dividend nearly 50% to an annual rate of $1 per share and said they expect to return at least $10 billion to shareholders through dividends and share repurchases in 2006 through 2008.

Shares of McDonald's are 1.3% higher to $39.56 in early action Wednesday, a new 52-week high.

http://www.13dtracker.blogspot.com/

Parlux (PARL) Holder Glenn Nussdorf Says Perry Ellis License Sale Not in Best Interest

From 13D Tracker

In an amended 13D filing on Parlux Fragrances Inc. (Nasdaq: PARL), Glenn H. Nussdorf disclosed a 10.5% stake (1.9 million shares). On September 26, 2006, Mr. Nussdorf sent a letter to the Board of Directors of Parlux indicating his position that the proposed sale of the company's Perry Ellis license to Victory International (USA) LLC is not in the best interests of the comapny and is such a significant sale of assets that shareholder approval may be required.

Recently, Glenn Nussdorf was granted approval to purchases of more than fifteen percent (15%) of PARL's outstanding shares.

Glenn Nussdorf with his brother Stephen Nussdorf own 37% of E Com Ventures, Inc. (Nasdaq: ECMV) and together with their sister Arlene Nussdorf, control Model Reorg, Inc.

A Copy of the Letter:

Members of the Board of Directors
Parlux Fragrances, Inc.
3725 S.W. 30th Avenue
Ft. Lauderdale, FL 33312

Gentlemen:

As you know, Lillian Ruth Nussdorf and I are major shareholders of Parlux Fragrances, Inc. (“Parlux” or the “Company”) holding, at present, approximately __% of the outstanding shares of the Company. As indicated our Schedule 13D filing, I may seek to influence or serve on the Board of Directors of the Company or designate nominees for election to the Board. In view of the fact that I am actively considering these actions in the foreseeable future, I strongly urge the Board to act in a fully informed and deliberate manner and not take any action that is inconsistent with the interests of the Company's stockholders.

In its Form 8-K filing and August 16th press release, the Company announced that it has “entered into a letter of intent to sell its Perry Ellis fragrance rights to Victory International (USA) LLC (“Victory”) for a total of up to $140 million: $120 million for the fragrance rights and up to $20 million for inventory”. In my view, this proposed transaction is contrary to the best interests of the Company and its stockholders for several reasons:

1. I have investigated the available information regarding Victory’s financial wherewithal to consummate a transaction of this nature and to perform its obligations thereunder. As described in the Company’s press release, this transaction would require Victory to pay $20 million at the outset and then make subsequent payments totaling $24 million per year (in $2 million monthly installments) for the next five years. I have set forth below the financial information that Victory has reported to Dun & Bradstreet:


Sales Net Profits Net Worth
12/31/05 $25,999,000 $ 121,000 $775,000

12/31/04 $23,326,000 $ 175,000 $654,000

12/31/03 $22,630,000 $2,361,000 $477,000


These numbers, on their face, do not appear to support such a payment obligation, even with the additional income generated from the sale of Perry Ellis fragrances. Moreover, there is no indication in the Company’s disclosures as to whether Victory has obtained the financing necessary to fund its obligations to the Company. It is likely that this transaction would transfer a significant and valuable asset of the Company without adequate assurances that its value would be realized, potentially resulting in a tie-up of the Perry Ellis brand while the Company attempts to retrieve the brand from Victory in the event of a failure by Victory to perform its financial obligations to the Company.

2. I have asked my regular attorneys, Edwards Angell Palmer & Dodge LLP, to review the Perry Ellis license, which is publicly available, and based on their [preliminary] review, I believe that the license does not permit a transaction of this nature without the consent of the licensor – who are the owners of the Perry Ellis trademark. Indeed, given that the proposed sale is to a non-affiliate and it constitutes, in effect, the sale of the Perry Ellis brand, it is questionable whether such consent would be given or whether any significant cost would be incurred by the Company to obtain such consent.

3. The proposed transaction constitutes a sale of the Company’s principal asset, since sales of the Perry Ellis line over the past several fiscal years have ranged from 81% to 41% of the Company’s total sales. In view of the significant contribution to sales [and profitability] of the Perry Ellis asset, I believe that its sale might well require approval of the Company's stockholders under Delaware General Corporation Law Section 271, which requires that stockholders vote on and approve a sale of all or substantially all of a company's property and assets. In any event, in view of our stated intentions, [as well as the views of other large stockholders with whom we have spoken], it is contrary to the best interests of the Company, and also contravenes principles of responsible management and good corporate governance, to proceed hastily with a transaction which could adversely impact stockholder value and expose the Company to a myriad of issues and problems.

We have retained as special counsel the firm of Skadden, Arps, Slate, Meagher & Flom LLP to advise us in connection with our investment in the Company and our available options relating thereto. I again urge the Board to proceed prudently, deliberately and in accordance with law in considering the proposed transaction. If the Board or management take any action that is detrimental to the Company or inconsistent with the best of interests of stockholders, we intend to take all actions necessary to hold each director or executive officer accountable and personally liable.

In view of the urgency of this matter, we are available to meet with members of the Board immediately and would like to do so as soon as possible, wherever and whenever is most convenient for the members of the Board.

I look forward to hearing from you promptly.

Very truly yours,

Glenn H. Nussdorf

http://www.13dtracker.blogspot.com/

SuttonBrook Capital Makes Good In AnorMED (ANOR) Investment

From 13D Tracker

In a 13D filing on AnorMED Inc. (Nasdaq: ANOR), SuttonBrook Capital disclosed a 6.36% stake (2.7 million shares) in the Company. This is up from the 450K stake the firm disclosed in a quarterly filing with regulators.

SuttonBrook said it paid a total of about $25 million for its shares, about $9.40 per share.

Yesterday, Millennium Pharmaceuticals, Inc. (Nasdaq: MLNM) agreed to acquire AnorMED for $12 per share, which represented approximately a 21 percent premium over the closing price of AnorMED's shares on September 25, 2006.

Other small biotech companies SuttonBrook is making big bets in include: Neurocrine Biosciences Inc. (Nasdaq: NBIX), Ligand Pharmaceuticals Inc. (Nasdaq: LGND), Medicure Inc. (AMEX: MCU) and Threshold Pharmaceuticals Inc. (Nasdaq: THLD)

From the 'Purpose of Transaction' section of the filing:

"As part of the ongoing evaluation of this investment and investment alternatives, the Filing Persons and their affiliates may consider any or all of the following: (a) the acquisition by any person of additional securities of the Company, or the disposition of securities of the Company; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; (c) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries; (d) any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board of directors; (e) any material change in the present capitalization or dividend policy of the Company; (f) any other material change in the Company's business or corporate structure; (g) changes in the Company's charter or bylaws or other actions which may impede theacquisition of control of the Company by any person; (h) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) causing a class of equity securities of the Company to become eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended; or (j) any action similar to any of thoseenumerated above.

In addition, from time to time, the Filing Persons and their affiliates may hold discussions with the Company, other stockholders of the Company, or potential acquirers of the Company regarding the matters described in subparagraphs (a) through (j) above."

http://www.13dtracker.blogspot.com/

On The Human Index

From Gannon On Investing

As the Dow approaches a new all-time high (the record close was 11,722.98), now would be a good time to take a break from the financial news found on your televisions, in your newspapers, (and yes) even on your computers.

A new high is an empty headline. I'm not writing to tell you that; you already know that. What you may not fully appreciate is just how arbitrary an index the Dow Jones Industrial Average really is.

Most notably, it's no longer very industrial. Only about one of every three stocks in the Dow is involved in what might be considered an old-line industrial (heavy manufacturing, extraction, etc.) business. A lot of the Dow components are involved in totally different businesses such as consumer products, health care, and technology. For the most part, these businesses are usually a lot less tangible. The businesses are mostly asset-light; their future prospects are mostly company specific.

Today, the extent to which the common stocks of the thirty companies move together may have more to do with their shared classification as "Dow" stocks than with the future prospects of the underlying businesses.

On April 8, 2004 some changes were made to the Dow. These weren't the first changes – and they won't be the last. Such changes add to the arbitrary nature of the index, especially in the short-term.

Generally, the changes have been motivated more by who needs to go than by who needs to come in. Discarded Dow components can usually blame a dying industry for their exit. Sometimes, a rapidly dwindling market cap helped.

The April 2004 changes involved three spots in the index and six stocks.

Departures: AT&T (T), Eastman Kodak (EK), and International Paper (IP)

Arrivals: Verizon (VZ), American International Group (AIG), and Pfizer (PFE)

Please note that AT&T is now back in the Dow. In November 2005, SBC Communications, which was itself born from the 1984 divestiture agreement between AT&T and the Justice Department, changed its name to AT&T after acquiring that company. It also adopted the ticker symbol associated with that name (T). As a result, a chart of the new AT&T does not reflect the fortunes of the old AT&T.

So, I will provide a link to a chart that shows the other five stocks involved in the 2004 Dow reshuffle:
See a chart of EK, IP, VZ, AIG, and PFE from April 1, 2004 to September 26, 2005

(Note: The actual changes to the index occurred on April 8, 2004; however, these changes had been announced by April 1, 2004).

I also added the S&P 500 to the chart to reinforce the obvious – none of these stocks has fared particularly well. In fact, since the changes, they've all basically underperformed the S&P 500. With the exception of Kodak (and Verizon for a very short time), none of the stocks have even managed to trade above the share price they had at the time of the reshuffle.
Is this just a coincidence?

As a rule, reshuffling an index through human intervention is likely to produce odd (and unexpected) coincidences.

The Dow is made up of a small number of companies. These companies tend to be very high-profile businesses. They are also high-profile stocks. Usually, they were high-profile stocks before they entered; but, obviously, being added to the Dow only increases investor interest in their fortunes. Any human intervention is likely to reflect the (current) biases of investors and the financial media.

The result? A very human index.

http://www.gannononinvesting.com/

Detroit Ostrich Farm: Jaguar Not For Sale? (F)

Jaguar is not for sale. Neither is Land Rover. Volvo is not for sale, either.

Ford Motor company said today that it does not plan to sell its premium brands. Not now, anyway.

Ford's premier auto group, which includes these brands, lost $162 million in the second quarter of this year. It is reported that Jaquar may have lost over $1.4 billion last year.

BusinessWeek says Land Rover makes a small profit.

It is difficult to see the advantage of owning these brands. If Ford wants to collapse some of them in with Lincoln, there might be some logic. Lincold does not have a good sedan. Volvo and Jaquar do. The L3 Land Rover gets poor rankings in JDPowers. The Volvo SUV is well-regarded.

If Ford is going to roll together some of its high-end brands, elimate dealers and cut out models that do not sell well, it makes some sense. But, with the company on the ropes, keeping all of them is a disasterous mistake.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Bracing For The Largest IPO Ever: Industrial & Commercial Bank of China Ltd.

China's largest bank, the Industrial & Commercial Bank of China Ltd., has shown its planned date for its long-awaited IPO. The price will be determined on October 23 and it should debut for trading on October 27, 2006, assuming there are no major market changes. Its stock will initially only be listed in Hong Kong and Shanghai. This may make it hard for US and European retail investors and many US-only institutions to participate in what appears to be the world's biggest initial public offering ever.

"ICBC" hopes to raise up to an equivalent of $19 billion and if this amount is raised it would break the IPO record of $18.4 Billion raised in the 1998 IPO in Japan's mobile phone operator NTT DoCoMo.

Before any over-allotments over subscriber indications, "ICBC" plans to issue 13 billion A shares priced in Chinese currency in Shanghai and 35.39 billion H shares. The actual price range is not indicated, but that is equal to 14.8% of its share capital. The company has indicated that up to 16.7 percent of total capital could be raised if the subscriptions come in higher than expected. If these numbers are accurate on the base amount, it would put the overall equivalent market cap of "ICBC" at roughly $128 Billion. That number may not be accurate because of share discrepancies, but there is over 1 month yet to figure out the comparative details.

PRIOR CAPITAL RAISED

"ICBC" already plans to sell IPO shares worth $3.5 billion to strategic investors from government investment agencies from Kuwait, Qatar and Singapore. It also received a commitment in June from China's social security fund to invest an equivalent of $2.25 Billion in the bank. Another group of global financial powerhouses including Goldman Sachs, American Express and Allianz AG invested about $3.78 Billion back in January, 2006. That totals over $9.5 Billion raised so far in capital this year alone, and not all of that may be on the prospectus by the actual IPO date. "ICBC" listed assets of 6.5 trillion Yuan ($800 billion) as of the end of 2005.

EXCHANGES AND MARKETS

Hong Kong has its own financial system and mainland regulators treat it as a foreign market even though it is Chinese territory. This does open it up more easily to foreign investors, but most individuals and many smaller institutions in the US do not have access to any foreign accounts other than trading US-listed ADR's and GDR's. It appears as though 3/4 of the funds raised would come from Hong Kong.

COMPARED TO OTHER CHINESE & GLOBAL BANKS:

The country's second-biggest lender, Bank of China (#2), raised $11.2 billion in May, 2006 with an IPO in Hong Kong. China Construction Bank (#3) raised $8 billion in October, 2005. We were supposed to already have the IPO for the Agricultural Bank of China (#4), but its IPO was delayed because it has to get its books in order after its bad loans are higher than any normal banking standards.

China's banks are modernizing as they prepare to meet Beijing's December deadline of opening their market to foreign competitors under its World Trade Organization commitments. Interestingly enough, some ownership and license regulations have been restricted in recent months, so the true degree of "opening up to foreign competitors" may be somewhat overstated. Bank of America recently sold its Hong Kong and Macau retail and commercial operations to China Construction Bank.

If the $128 Billion is accurate, and we stress the IF, here is how it compares to the other large financial institutions with banking operations you know quite well (in market caps): Citigroup (C) $247 Billion; Bank of America (BAC) $242 Billion; J.P.Morgan (JPM) $163 Billion; UBS AG (UBS-ADR) $116 Billion; Mitsubishi UFJ Financial (MTU-ADR) $122 Billion; Banco Bilbao Vizcaya Argentaria (BBV-ADR) $77 Billion; Allianz AG (AZ-ADR) $71 Billion; Lloyds TSB plc (LYG-ADR) $56 Billion; Royal Bank of Canada (RY-ADR) $56 Billion; ABN AMRO NV (ABN-ADR) $55 Billion; Deutsche Bank (DB-ADR) $54 Billion.

You can see that this massive IPO will garner a lot of discussions in global circles, but because of the share listings it is going to be difficult for most US individuals and smaller institutions to participate directly in this IPO.

Jon C. Ogg
September 27, 2006

Longer-Term Implications of FoxHollow's Pact With Merck

FoxHollow Technologies.Inc. (FOXH) is trading up this morning by over 20% pre-market because Merck (MRK) is expanding its pact for atherosclerosis of the legs in its quest to treat peripheral artery disease. FOXH is at $34.00 on over 250,000 shares, up from its $27.25 close and now closer to the mid-point of its $20.37 to $54.04 trading range of the last 52-weeks. FOXH had 2.9 million shares, or 16% of the float, in its short interest for September and it trades only 373,000 per day on average.

We have the guts of this release below, but please read further to the implications:

Merck will acquire a stake in FoxHollow with the purchase of $95 million in common stock at $29.629 per share, representing approximately an eleven percent stake in the company;

Merck will pay $40 million to FoxHollow over four years in exchange for FoxHollow's agreement to collaborate exclusively with Merck in specified disease areas;

Merck will also provide a minimum of $60 million in funding to FoxHollow over the first three years of the four year collaboration program term as royalties.

It was in September 2005 that FoxHollow and Merck announced the first pharmaceutical-medical device partnership.

The expanded collaboration remains focused on the analysis of atherosclerotic plaque collected from patients treated with FoxHollow's SilverHawk(TM) Plaque Excision System.

"For the first time in any pharmaceutical company's history, we have the ability to capture and evaluate atherosclerotic plaque from thousands of patients," said Peter S. Kim, Ph.D., president of Merck Research Laboratories. "Our first year of collaboration with FoxHollow has given us novel insights into cardiovascular disease, and we're very pleased to enlarge our relationship today to continue this focus on cardiovascular disease while including other important disease areas as well."

"We hope our collaboration will lead to the development of novel, individualized cardiovascular therapies," noted Richard C. Pasternak, M.D., vice president of Cardiovascular Research, Merck Research Laboratories, who has worked closely with FoxHollow in the past year. "We look forward to the expansion of what has been a most productive partnership with FoxHollow."

IMPLICATIONS

OK, saying this is a big deal for FoxHollow would be, um, stating the obvious. What is even more important is that this shows the expansion of Big Pharma. It is no secret that the drug companies have been in the soup over drug problems and it is no secret that many blockbuster drugs (over $1 Billion in annual sales) are coming off patent this year and next. We will stop short of saying that this will ultimately lead the Big Pharma drug companies acquiring the medical device companies. It does increase the chances of further pacts between device makers and drug companies, and if you take this two steps further it does at least increase the chances that deals could be struck. This won't begin the instant inclusion of a bunch of device makers into our BAIT SHOP of takeover candidates, but if you read what we said before on Biomet (BMET) and what we said in August on Medtronic (MDT) it may give a bit more insight into what the landscape is looking like.

So far most of the Big Pharma names like Merck (MRK) and Pfizer (PFE) have avoided combining the drug operations with medical device operations; and PFE recently announced the sale of its consumer products line to J&J (JNJ). J&J is the one company that is the exception to this as it is the culmination of consumer products, medical devices, and pharmaceuticals. This is not the first such collaboration out there between drug companies and device companies, but it certainly will not be the last.

FOXH is not currently a member of our BAIT SHOP of takeover candidates.

Maybe we are getting a few steps ahead of the current situation. Right now Wall Street is selling companies on the "Focus on core operations" model for conglomerates to “de-conglomerize”, but this cycle changes over and over and you know the bulge bracket firms will be reselling many spun-off operations back to prior parents and competitors in a few years time. That is part of the great game.

Jon C. Ogg
September 27, 2006

Pre-Market Stock Movers and News (9/27/06)

(AEHR) Aehr Test Systems $0.09 EPS vs $0.08e; only 1 est; also announced a $4 million order.
(ATU) Actuant $0.79 EPS vs $0.78e; but had a $0.14 charge and $0.17 gain.
(BIOM) Biomira finalized terms for $100M shelf registration.
(CBE) Cooper Ind. puts EPS at higher-end of range.
(DBRN) Dress Barn trading up 5% after posting $0.35 EPS vs $0.31e.
(DIVX) DivX trading up 8% after Cramer called it the next Akamai and said it is a buy after it was an underpriced IPO.
(DNA) Genetech up 1% on Cramer comments saying should be at year highs instead of year lows.
(EVEP) EV Energy Partners IPO of 3.9 million shares priced at $20.00.
(FUL) HBFuller $0.39 EPS vs $0.34e.
(HPQ) Hewlett-Packard senior counsel Kevin Hunsacker is leaving the company.
(JBL) Jabil trading up 10% after posting R$3 Billion vs $2.85B(e) and sees next quarter $3.1 to $3.3 Billion vs $3.08 Billion.
(LGF) Lions Gate Films entered 3 year pact with After Dark Films.
(LJPC) La Jolla Pharma announced progress in its lupus Phase III studies reinitiated.
(MCK) McCormick $0.42 EPS vs $0.36e.
(MDCC) Molecular Devices lowered guidance.
(MRK) Merck won another Vioxx suit in federal court.
(MSFT) Microsoft entered into live concerts to promote live webcasts.
(NAT) Nordic American Tanker raised guidance; filed to sell 5 million shares of common stock.
(NEM) Newmont Mining sees gold sales slightly lower before increased projects.
(OSCI) Oscient filed to sell $100 million in securities.
(OSUR) Orasure Tech started its initial studies for FDA approval for its OraQuick HIV test.
(PAYX) Paychex $0.35 EPS vs $0.34e.
(PRX) Par Pharma CEO is leaving the company.
(RHAT) Red Hat trading down over $4.00 pre-market after cutting net and cash flow targets.
(RUTH) Ruth's Chris put this quarter revenues at $58.0 to $58.2 million (vs. $60.55 M est.);
full year 2006 reiterating previous comparable sales +5.5% to 6.5% and EPS $0.89 and $0.93 (vs. $0.91e).
(SFUN) Saifun entered license pact with NEC overseas.
(SVA) Sinovac announced first sales of its Anflu flu vaccine after approval.
(VTNC) Vitran lowered guidance.
(WAG) Walgreens up1.8% pre-market after Cramer says it is a Buy after misunderstood from teh street.
(WOR) Worthington Industries $0.48 EPS vs $0.53e.

Select Analyst Calls (Sept. 27, 2006)

ADCT started as Buy at Citigroup.
ALSK cut to Neutral at Merrill Lynch.
AMTD/ET estimates trimmed at Goldman Sachs.
BOL started as Neutral at Prudential.
BRLC started as Outperform at R.W.Baird.
CECO cut to Underweight at Lehman.
ECIL started as Buy at Citigroup.
EPE cut to Equal Weight at Lehman.
FNSR started as Buy at Citigroup.
FTO raised to Buy at B of A.
GPS raised to Overweight at Morgan Stanley.
HLTH cut to Mkt Perform at Piper Jaffray (maybe yesterday's call).
INTC reitr Buy at Jefferies.
MHGC started as Outperform at JPMorgan.
NHY raised to Outperform at CSFB.
NKE cut to Outperform at CIBC.
RHAT cut to Neutral at Prudential, cut to Hold at Jefferies.
SUN raised to Buy at B of A.
TSO raised to Buy at B of A.
VLO raised to Buy at B of A.

Do The Shorts Think Dell's Death March Is Over?

Stocks: (DELL)(HPQ)(SUNW)

Short interest in Dell dropped 4.2 million shares in September to 43.3 million. Maybe Dell has had enough and could make a little turn North.

Over the last year, the stock has dropped from $34.50 to $22.72. It has had a tiny rally since it was below $20 in July.

Most investors think that the air has gone out of the PC ballon and that Dell's poor execution and bad customer service has hurt the company. It has also lost share in the critical server market. However, it is still the No. 1 PC manufacturer, and the management is acutely aware of its problems. The CEO knows he only has a certain amount of time to improve things, or founder Michael Dell will be pressured to replace him

Dell's stock is also cheap It trades at .9 times sales and has a P/E of about 18. Hewlett-Packard's P/E is 21 and it trades for 1.1 times sales. Even server company Sun Micro, a stock kicked around like a soccor ball for the last several years, trades at 1.4 times sales.

Dell may be down, but it may not be out. If so, some of the short sellers are making a wise decision.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

The Shorts Head Back To Level 3 (LVLT)

Investors do not have to look back many months to find a time when the short interest in Level 3 was well above 100 million shares. That number got down to 84.8 million in August, but jumped up to 99.1 million in September.

Level 3 has been something of a a sub-$5 darling. Until it topped $5. But, from early 2004 to early 2006, Level 3 traded below $5, and, quite often traded over 20 million shares a day.

The stock now trades at $5.46, fairly near it multi-year high of $6.

After three years of falling revenue and massive operating losses. Level 3 broke through in the last quarter. Its revenue hit $1.53 billion, the third quarter of sequential top-line growth, and, after many quarters of losses, operating income hit $4 million. A small but important victory.

Level 3's stock has gotten expensive, at least by historical measures. After falling below $3.50 in early August, the stock is up 56%. The company did sign online video portal YouTube as a customer. YouTube uses huge amounts of bandwidth moving video across the internet, but it is unclear how much money this represent. Level 3 also handles VoIP traffic for a number of companies.

The other trend helping Level 3 is that bandwidth, which was dirt cheap from the internet bubble until recently, has risen in price as demand rises due to more audio, data, and video running across the web.

Does Level 3 have a promising future. Probably, yes. Has the stock gotten ahead of itsself. Some shorts think so.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does now own securities in companies that he writes about.

Qwest Goes Shopping? (Q)(BLS)(VZ)(T)(BT)

In the opinion of The New York Times, Qwest, the big phone company, has enough cash to buy something. Qwest has $1.8 billion in cash.

But, Qwest does not have its own cell-phone business the way AT&T and Verizon do. It also does not have the billions of dollars that Verizon is investing in fiber-to-the-home which may allow it to compete with the cable guys for multi-channel TV and broadband.

No, Qwest's big load of cash makes it a takeove target. With a market cap of $17.1 billion, all that cash helps another company pay to buy Qwest. The company's stock may make it seem expensive because it is up from $3.80 to $8.98, but over the last six months, AT&T stock has done even better. Another stock that has done nearly as well is British Telecom.

Qwest's better balance sheet does not mean it will go shopping, as the Times suggests. It means it will be shopped and the buyer may not be based in the US.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

GM: Render Unto Caesar...

Stocks: (F)(GM)

And, so it goes. With Renault and Nissan more anxious to build a three-way partnership with GM than GM is, the big American car company has asked for a multi-billion cash compensation based on the fact that the North America partner brings more to the table than the Japanese or European ones do.

With Nissan losing share in its own home market of Japan and Renault without a dealer network to sell cars in the US, GM is probably right.

Carlos Ghosn, head of Renault and Nissan, waited to long to press the GM board. GM has now taken $9 billion a year out of its annual costs, and its stock is up almost 60% this year. GM's business is also growing quickly in markets like Russia. The company's market share was also up in August in the US market.

With GM demanding tribute in exchange for forming a partnership, it is time for Nissan and Renault to catch a cab across town to Ford. If they have cabs in Detroit.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Nasdaq Short Interest, September 2006

These are figures for short interest in stocks listed on Nasdaq. Numbers compare September 15, 2006 with August 15, 2006.


Largest Short Positions:

Sirius Satellite 129.5 million shares, up 12.2 million
Level 3 99.1 million shares, up .4 million
Yahoo! 87.2 million, down 5.1 million
JDS Uniphase 85.8 million, up 1.7 million
Microsoft 74.6 million, up 1.7 million
Intel 69.2 million, down .1 million
Charter 65.6 million, down .5 million
Cisco 62.3 million, up 6.9 million
Oracle 60.3 million, up 6.5 million
JetBlue 54.6 million, up 1.2 million
eBay 49.0 million, down 2.4 million
Comcast 46.4 million, up 3.2 million
Amazon 43.6 million, up 3.4 million
Dell 43.3 million, down 4.2 million
Starbucks 35.2 million, up .5 million
Take Two 34.2 million, up .9 million
Sun 32.7 million, down .4 million
Apple 32.3 million, up 4.0 million
Finisar 31.2 million, up .2 million
XM Satellite 30.2 million, up 1.4 million
Conexant 29.8 million, up .5 million
Brocade 28.7 million, up 10.5 million

Largest Increases:

Level 3 14.3 million to 99.1 million
Brocade 12.2 million to 28.7 million
Cisco 6.9 million to 62.3 million
Oracle 6.5 million to 60.3 million

Largest Decreases:

Genesis Micro down 5.9 million to 4.6 million
Yahoo! down 5.1 million to 87.2 million
TDAmeritrade down 4.5 million to 10.6 million
Dell down 4.2 million to 43.3 million
Novell down 3.5 million to 11.7 million


Coverage Ratio:

SCO Group 261 days
Intergr Alarm 123 days
Bnk Ozarks 60 days
ZipRealty 58 days
ParkerVision 55 days

Sources: NASDAQ and WSJ

Douglas A. McIntyre

Europe Market 9/29/2006 Vodafone, AXA Up

Stocks: (BCS)(BP)(BT)(GSK)(PUK)(RTRSY)(UN)(UL)(VOD)(BAY)(DB)
(DT)(SAP)(SI)(ALA)(AXA)(FTE)(V)

Markets in Europe were sharply higher at 5.20 AM New York time.

Th FTSE was up 1.1% to 5,937. Barclays was up 1.7% to 675.5. BP was up 1.2% to 578. BT was up .5% to 259.75. GlaxoSmithKline was down .2% to 1429. Prudential was up .6% to 630. Reuters was up 1.3% to 442. Unilever was up .1% to 1317. Vodafone was up 1.7% t0 121.

The DAXX was up .5% to 5,992. Bayer was down 1.1% to 38.85. DeutscheBank was up 1.4% to 95.51. DaimlerChrysler was up 1% to 39.88. Deutsche Telekom was down .3% to 12.39. SAP was up 1.7% to 157.1 Siemens was up .7% to 68.65.

The CAC 40 was up .6% to 5,249. Alacatel was down .2% to 9.53. AXA was up 1.1% to 29.55. France Telecom was up .1% to 17.96. ST Micro was down .2% to 13.28. Vivendi was up .4% to 28.54.

Data from Reuters.

Douglas A. McIntyre

Media Digest 9/29/2006 Reuters, WSJ, NYT

Stocks: (INTC)(AMD)(GM)(HMC)(VOD)(MRK)(BSX)(JNJ)(TWX)

According to Reuters, a federal judge has dismissed a large portion of AMD's antitrust claims against Intel.

The Wall Street Journal writes that GM will seek billion of dollars in investment capital if Renualt and Nissan was a three-way global automotive alliance.

Reuters reports that Honda will rollout a luxury brank in China.

Reuters writes that Vodaphone will sell its own branded 3G phones. Hauwei Technologies of China will supply the handsets.

The WSJ writes that a federal jury cleared Merck of reponsibility in another Vioxx liability trial. It was the 1oth case involving the drug to go to a jury vote.

Johnson & Johnson has sued Boston Scientific over its failed bid for Guidant, which Boston Scientific bought. J&J claims that a leak of confidential information ruined its bid, according to the WSJ.

Microsoft will begin to broadcast live music events online to bolster its MSN unit.

The New York Times writes that Qwest has built up enough cash so that it may be able to make a significant aquisition.

The NYT reports that a deal set up byTime Warner unit AOL to broadcast live concerts has dissolved after 14 months.

Douglas A. McIntyre

Asian Markets 9/27/2006 China Mobile, Sony, Daiwa Securities Up Sharply

Stocks: (CAJ)(FUJ)(HIT)(HMC)(NIPNY)(NTT)(SNE)(TM)(CHL)(CHN)(HBC)(PCW)

Asian Markets were sharply higher.

The Nikkei was up 2.5% to 15,948. Bridgestone was up 1.7% to 2345. Canon was up .2% to 5910. Daiwa Securities was up 4.6% to 1998. Fuji Photo was up 3.1% to 4330. Hitachi was up 2.1% to 684. Honda was up 1.8% to 3870. NEC was up 3.6% to660. NTT was up 2.5% to 583000. Sharp was down 1.2% to 2020. Sony was up 3% to 4860. Softbank was up .9% to 2210. Toshiba was up 3% to 756. Toyota was up 2.1% to 6370.

The Hang Seng was up 1.1% to 17,501. Cathay Pacific was up 1.1% to 16.26. China Mobile was up 3.1% to 55.15. China Netcom was up 1.5% to 13.88. HSBC was up .9% to 141.8. PCCW was down .8% to 4.77.

The KOSPI was up 1.2% to 1,360.

The Straits Times was up 1% to 2,551.

The Shanghai Composite was up .7% to 1,725.

Data from Reuters.

Douglas A. McIntyre

Services Beat

By Willaim Trent, CFA of Stock Market Beat

The Conference Board said its index of U.S. consumer confidence rose more sharply than expected in September to 104.5, up from an upwardly-revised 100.2 in August, as energy costs fell and job prospects improved slightly. This throws a modest kink into the consumer slowdown thesis, so we took a look around to see what other anecdotal evidence might be indicating. In short, it seems like buyouts are the buzzword rather than any overall economic outlook.

TheStreet.com thinks hedgies may be looking to talk Watch List member Guitar Center (GTRC) into going private.

It’s pretty clear to me what Sageview wants management to do: Don’t go into too much debt trying to double or even quadruple the number of stores; rather, take on debt to reduce shares, cut costs and perhaps even go private.

Why go private now? The company has a $1.5 billion enterprise value and cash flow of $180 million, so it trades at a multiple of eight over cash flows and is experiencing growth, albeit not double-digit. In other words, it could take on a lot more debt and comfortably pay it down. This is perfect for an LBO firm looking to help management take it private, even at a premium of up to $50-$55 per share.

Makes sense to us.

Why can’t Valassis (VCI) and Advo (AD) just get along?

Sounds like Liberation Investments wants to “liberate” Multimedia Games (MGAM).

H&R Block shares plunge on loss provision (we warned you about those provision accruals!)

Consumers continued to spend at a stronger-than-expected pace in August as lower gasoline prices helped spur spending in other areas, pushing up retail sales by an unexpected 0.2 percent, a government report showed. Of course, Barry Ritholtz says we should read the fine print. Those strong home theater sales at Best Buy are spurred by 36-month zero-interest financing. But if you hit month 37, watch out! 24% interest - back-dated to the time of purchase!

The author may hold a position in the securities discussed. A current list of the author's holdings is available here.

http://stockmarketbeat.com/blog1/

Nabi (NABI) Holder Third Point LLC Seeks Consent Solicitation To Remove Chairman McLain and Possibly Others

From 13D Tracker

In an amended 13D filing on Nabi Biopharmaceuticals (Nasdaq: NABI), 9.5% holder Daniel Loeb's Third Point LLC said it intend to conduct shortly a consent solicitation in order to remove Chairman/CEO Mr. McLain and possibly one or more other directors from the Board of Directors. Loeb said the company refused to comment on whether it is moving toward a strategic alternatives process or whether some other decision was taken by the Board. The hedge fund has been encouraging the Company and its Board of Directors to explore strategic alternatives in order to maximize value for all shareholders.

From the 'Purpose of Transaction' section of the filing:

"Over a period of approximately seven months, the Reporting Persons have encouraged the Company and its Board of Directors to explore strategic alternatives in order to maximize value for all shareholders. The Reporting Persons have repeatedly expressed to the Company and the Board their belief and concern that the Company's "cash burn" rate is too high and its strategic plan is too risky for the Company to continue with "business as usual." Of particular concern to the Reporting Persons are that the Company does not appear to have been receptive to interest from prospective buyers of the Company or its component assets, and the possibilities that the Company may have to sell valuable assets at inadequate prices or enter into dilutive equity-linked financings in order to follow through on its business plan.

On September 14, 2006, in advance of a Board meeting scheduled for the following day, the Reporting Persons once again called upon the Board of Directors to expand its investment bankers' mandate to allow them to explore all ways to maximize the value of the Company's assets. Since that Board meeting, the Company has refused to comment on whether it is moving toward a strategic alternatives process or whether some other decision was taken by the Board.

As a result, the Reporting Persons intend to conduct shortly a consent solicitation in order to remove Mr. McLain and possibly one or more other directors from the Board of Directors. In conjunction with this solicitation, the Reporting Persons also intend to solicit consents in favor of a proposal requesting that one or more individuals named by the Reporting Persons be added to the Board to fill any vacancies created by the removal of directors.

Under the Delaware General Corporation Law (the "DGCL") and the Company's Certificate of Incorporation (the "Certificate"), the shareholders of the Company are entitled to act by written consent to remove directors of the Company. The written consent procedure to remove directors operates outside of annual or special meetings of shareholders and may be undertaken at any time. Although a provision of the Company's Bylaws (the "Bylaws") purports to limit the removal of Company directors to instances of "cause" and to require a 75%vote of the shareholders to effect such a removal, the Reporting Persons believe that this Bylaw provision is invalid and ineffective because it conflicts with the DGCL. Under the DGCL, except in cases not relevant to the Company and except where the right is limited in the Certificate (not the Bylaws), the Company's shareholders have a right to remove any or all Company directors, without cause, by the vote of the holders of a majority of the shares of Common Stock outstanding. The Certificate does not restrict this statutory right of the shareholders to remove directors of the Company by majority vote and without cause.

The Reporting Persons believe, however, that under the DGCL and the Bylaws, the remaining members of the Board of Directors, and not the shareholders, have the right to fill any vacancies created by the removal of directors. Accordingly, the Reporting Persons also intend to solicit consents, at the same time as consents are solicited for the removal of Mr. McLain and possibly one or more other directors, in favor of a resolution of the shareholders of the Company calling on the Board to fill the vacancies with individuals who will be named by the Reporting Persons at the time of the consent solicitation.

In connection with the consent solicitation, Third Point LLC and certain of its affiliates intend to file a consent statement with the Securities and Exchange Commission (the "SEC") to solicit stockholders of the Company with respect to the removal of Mr. McLain and possibly one or more other directors from the Board of Directors. THIRD POINT LLC STRONGLY ADVISES ALL STOCKHOLDERS OF THE COMPANY TO READ THE CONSENT STATEMENT WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION, INCLUDING INFORMATION RELATING TO THE PARTICIPANTS IN ANY SUCH CONSENT SOLICITATION. SUCH CONSENT STATEMENT, WHEN FILED, AND ANY OTHER RELEVANT DOCUMENTS WILL BE AVAILABLE AT NOCHARGE ON THE SEC'S WEBSITE AT www.sec.gov

http://www.13dtracker.blogspot.com/

Industrial Metals Outlook

By Yaser Anwar, CSC of Equity Investment Ideas

Prices for industrial metals, adjusted for inflation, are closely correlated to global industrial activity.


Inflation-adjusted industrial-metals prices were in a bear market from 1989 to 2001, when prices plunged 62%. Since then, real metals prices have doubled, although the gains have been off a low base.


In fact, over the last 20 years, real metals prices have only increased 1.2% annually. Today’s high metals prices may not be supported by fundamentals; G7 industrial production has tapered off after rebounding from its 2001 lows.


While industrial growth outside the G7, particularly in China, is helping to boost demand for industrial metals, the prices may be too high, especially if demand declines amid rising global interest rates.

http://www.equityinvestmentideas.blogspot.com/

Analyzing Oracle & Profiting From Long ORCL/Short SAP Spread Trade

By Yaser Anwar, CSC of Equity Investment Ideas

Oracle reported non-GAAP total revenues of $3.7 billion, 26% YoY, which was above street estimates. Results were driven by another quarter of solid applications license growth, upto +80% YoY and an unexpectedly strong contribution from database technology +15% YoY.


On an organic basis, Oracle reported applications growth of 47% YoY, after posting over 50% growth & over 30% growth in 3Q of 06, hence Oracle has turned a corner with their applications business .


Siebel license revenue of $32 million was a bit below analyst expectations and the overall applications license revenue of $228 million was below The Streets $231 million estimate.


However, Oracle continues to see very strong growth in their middleware products, +56% YoY, and database license revenues accelerated to 10% YoY growth, pushing the total database technology license line to $565 million +15% YoY


ORCL also noted they would no longer be breaking out the contributions of database and middleware in this revenue line going forward. Support revenues crossed the $2 billion mark in the quarter, continuing their solid growth and beating street estimates, as Oracle consolidated results of iFlex into their results for the first time.


The inclusion of iFlex revenue stream, heavily weighted towards consulting, did have a negative effect on margins. Non-GAAP gross margins of 73.4% were down and management estimated iFlex to have been 1% point dilutive to operating margins in the quarter.


That being said, Oracle still managed to see an increase in non-GAAP operating margins in the quarter, to 36.0% versus our 33.5% Street estimates. Stronger top line and higher margins allowed Oracle to report EPS of $0.18, which was ahead of consensus estimates ranging from $0.13 to $0.16.


Fundamentals appear to favor Oracle for the remainder of 2006, as SAP has to show accelerating growth in 2nd half of 06 to hit expectations, while Oracle has outperformed expectations in their toughest quarter.


At the same time, SAP still trades at a premium to Oracle on the PE multiple basis. I believe investors can short SAP & go long Oracle. This way investors can be hedged & profit from the spread trade if they believe ORCL will outperform more than SAP for the remaining 2006.

http://www.equityinvestmentideas.blogspot.com/

Why The Market Has Been Rallying

By Yaser Anwar, CSC of Equity Investment Ideas

1) As the overall market has risen, there have been very few earnings warnings. In a bull market the Nasdaq usually leads the other indexes. The Nasdaq has been boosted by strong earnings in Oracle & Apple, to name a few. FedEx, GM & Merck (which got approval in a lawsuit after hours + AMD's lawsuit against Intel was not valid, hence another rally tomorrow?) for the Dow. Many flagship stocks with erratic earnings are becoming so optimistic that the analysts are getting worried.

2) Falling oil prices, a slower housing market, and falling inflation numbers (such as the Philly Fed survey but core CPI & health care inflation remains high) have all but eliminated the justification for another rate hike. Which is why we saw the market rally on the decision by Fed boss Bernanke's decision to leave rates unchanged.

3) Other than that- The April tax surplus was almost $119 billion where $58 billion was expected. With the economy growing GDP at 3%, the government is collecting an incredible amount of taxes. So much so, both the House and the Senate want to continue to cut taxes. So they’re extending the dividend relief and the capital gains tax cuts through 2010 and they installed the alternative minimum tax relief.

4) Even the trade deficit was about $5 billion better than expected thanks to a sliding dollar and soaring U.S. exports. How often have you heard about U.S. exports soaring? And yet, that’s exactly what is happening. Not to forget the strong consumer confidence yesterday.

5) Add in corporate profits up 28.5% in the past year, the fastest YoY growth in 22 years & investors expect to see the Dow march to 12,000.

6) In the end, the sentiment coming into September was also negative. With short interest close to 5 year highs, that also sparked a contrarian rally.

http://www.equityinvestmentideas.blogspot.com/

Cramer on MAD MONEY (9/26/06) Says BUY Walgreens and DivX

Tonight Cramer on MAD MONEY, Cramer wanted to note that this is a high-five type of market and we have a broad-based rally where almost everything is rallying. Cramer says the market is not done going up, and this rally is based extra because commodity prices are falling. Cramer said it is good for all companies consuming natural resources for their products. He is giving the market a Booyah Buy.

Cramer said that Walgreen's (WAG) has been condemned for the wrong reason and the jury is wrong. It is not a broken stock and is not a broken company. He calls WAG a "mom-back" buy. He says the Wal-Mart $4 generics and the lower-margins and the potential store growth slowing are worries that are wrong and overblown. It trades at 22 times next year's earnings and is growing at 16%. Cramer says the $5 stock could really be a $72 stock. Cramer shotdown the Wal-Mart program as a PR campaign and said that some of Walgreen prices are actually under that of Wal-Mart.

Cramer on a call-in said that the charts showing a breakout are right and you need to be in Tech stocks and Drug stocks as they will lead the market higher. He did say sell Barr Labs (BRL) in another call-in.

A Broken tech IPO that has been overlooked. Cramer said DivX (DIVX) was overlooked. He said it rose 17% after the IPO and you should buy this company with limit orders. He said the video compression and decompression. He said 18% of their business is with Google (GOOG). He said Google pays them a fee when people download videos. He said DIVX is sexy as there may even be a bandwidth glut. Cramer said the fundamentals and the numbers are a thing of beauty. He thinks the operating margins may be so big he wants to do a mom-back. He thinks there could be 93% gross margins in 2003. It has doubled revenues for 6-years so it has accelerated revenue growth. He even compared it by saying it could be the next Akamai (AKAM). He said it has $4 cash and no debt per share and it was overlooked. DIVX traded up 8% on this.

Jon C. Ogg

Cramer on MAD MONEY (9/26/06) Says Buy Genentech (DNA)

Cramer also came out positive on Genentech on MAD MONEY in his screenings he ran. He thinks it is too low and surprised it is close to 52-weeks instead of at 52-week highs and says it is the best next to Schering Plough (SGP). He said the street is too focused on Avastin, and he said the over-focus on the FDA is keeping the lid on it. He likes the 25% growth. Cramer says it has multiple FDA decisions coming up and he thinks the FDA will back the new uses for Rituxan and Herceptin. He thinks these could drive it higher short-term, but he thinks even if not in short-term it is going higher long-term.

Cramer on MAD MONEY (9/26/06) Says Buy Genentech (DNA)

Cramer also came out positive on Genentech on MAD MONEY in his screenings he ran. He thinks it is too low and surprised it is close to 52-weeks instead of at 52-week highs and says it is the best next to Schering Plough (SGP). He said the street is too focused on Avastin, and he said the over-focus on the FDA is keeping the lid on it. He likes the 25% growth. Cramer says it has multiple FDA decisions coming up and he thinks the FDA will back the new uses for Rituxan and Herceptin. He thinks these could drive it higher short-term, but he thinks even if not in short-term it is going higher long-term.

Cramer on MAD MONEY (9/26/06) Says Buy Genentech (DNA)

Cramer also came out positive on Genentech on MAD MONEY in his screenings he ran. He thinks it is too low and surprised it is close to 52-weeks instead of at 52-week highs. He said teh street is too focused on Avastin, and he said the over-focus on the FDA is keeping the lid on it. He likes the 25% growth. Cramer says it has multiple FDA decisions coming up and he thinks the FDA will back the new uses for Rituxan and Herceptin. He thinks these could drive it higher short-term, but he thinks even if not in short-term it is going higher long-term.

Cramer on MAD MONEY (9/26/06) Says BUY Walgreens and DivX

Tonight Cramer on MAD MONEY, Cramer wanted to note that this is a high-five type of market and we have a broad-based rally where almost everything is rallying. Cramer says the market is not done going up, and this rally is based extra because commodity prices are falling. Cramer said it is good for all companies consuming natural resources for their products. He is giving the market a Booyah Buy.

Cramer said that Walgreen's (WAG) has been condemned for the wrong reason and the jury is wrong. It is not a broken stock and is not a broken company. He calls WAG a "mom-back" buy. He says the Wal-Mart $4 generics and the lower-margins and the potential store growth slowing are worries that are wrong and overblown. It trades at 22 times next year's earnings and is growing at 16%. Cramer says the $5 stock could really be a $72 stock. Cramer shotdown the Wal-Mart program as a PR campaign and said that some of Walgreen prices are actually under that of Wal-Mart.

Cramer on a call-in said that the charts showing a breakout are right and you need to be in Tech stocks and Drug stocks as they will lead the market higher. He did say sell Barr Labs (BRL) in another call-in.

A Broken tech IPO that has been overlooked. Cramer said DivX (DIVX) was overlooked. He said it rose 17% after the IPO and you should buy this company with limit orders. He said the video compression and decompression. He said 18% of their business is with Google (GOOG). He said Google pays them a fee when people download videos. He said DIVX is sexy as there may even be a bandwidth glut. Cramer said the fundamentals and the numbers are a thing of beauty. He thinks the operating margins may be so big he wants to do a mom-back. He thinks there could be 93% gross margins in 2003. It has doubled revenues for 6-years so it has accelerated revenue growth. He even compared it by saying it could be the next Akamai (AKAM). He said it has $4 cash and no debt per share and it was overlooked. DIVX traded up 8% on this.

Jon C. Ogg
September 26, 2006

Market Wrap (Sept. 26, 2006)

DJIA 11,669.39; Up 93.58 (0.81%)
NASDAQ 2,261.34; Up 12.27 (0.55%)
S&P500 1,336.34; Up 9.97 (0.75%)
10YR-Bond 4.585%

With the S&P and DJIA sniffing up against highs again, you have to wonder about how strong the demand is for shares recently. Consumer confidence rose to 104.5 instead of 103, although hosuing prices showed yet more decline. The Federal Reserve Bank of Richmond that showed the region's economy strengthened this month, undermining the notion that the Philly Fed reading's drop was not indicative of the entire US.

The most active stock on the NYSE by far was Time Warner (TWX) with it trading a whopping 65 million shares and closing up 2.5% at $18.60 after Cramer last night said that the analyst calls and what he sees in the restructuring making TWX a straight shot to $26.00..

Eagle Materials (EXP) fell 10.3% to $35.23 because of it giving an intra-day earnings warning for the year, even though the street should have learned to factor it in. Another gypsum wallboard player USG (USG) fell 3.4% with it and closed down at $47.02.

Lennar (LEN) issued an earnings warning, but it closed up 0.1% at $46.95.

Harrah's (HET) fell 4% to $64.65 on a J.P.Morgan downgrade.

Yesterday's exponential MS-related gainer, Acordia (ACOR) rose another massive 29% to $11.00 on 24.5 million shares.

Teva (TEVA) closed down 0.2%at $33.85 after hosting its first branded drug meeting with Wall Streetanalysts today.

Bob Evans Farms (BOBE) actually rallied 0.5% to close at $30.30 after long-time board member and recent Chairman Robert E.H. Rabold died of a heart attack on Monday.

Sharper Image (SHRP) rose 10.25% to $10.33 after its founder was removed as CEO and replaced with turnaround specialist Jerry Levin. The other good news is that we won't have to see his ugly kid on TV commercials any longer.

Major tech names continued their surge higher with intel (INTC) up 2.8% at $19.96, Cisco (CSCO) up 1.1% at $23.50, Oracle (ORCL) up 1.2% at $18.19, Microsoft (MSFT) up 1.1% at $27.25, and Apple (AAPL) up 2.6% at $77.74. You have to wonder how much of this has been quarter-end window dressing.

Chinese medical device maker Mindray Medical (MR) rose to $17.55 after its IPO priced at $13.50.

eBay (EBAY) rose more than 5% to $27.67 in a strong market and on word that it may sell its Chinese operations or pursue other mergers in China.

ADC Telecom (ADCT) rose 2.8% to $14.61 after securing an order from T-Com.

Goldman Sachs (GS) finally broke its up-streak with a whopping $0.01 loss on the day to close at $168.68.

Crocs (CROX) rose 4.7% to $33.66 afgter Cramer touted the show on last night's MAD MONEY.

Jon C. Ogg
September 26, 2006

Intel Thumps AMD (INTC)(AMD)

On news that Intel will introduce a new quad core chip, AMD's stock is off almost 3% to $26. And, it should be. The chip will be available for servers in two months and PCs early next year. The PC version will run 70% faster than the current product.

AMD has been gaining share from Intel lately and now has well over 20% of the x86 chip market. But, improved products and price cuts from Intel may keep AMD's market share from moving above its current high water mark.

AMD has been talking big, but the company may have been premature is forecasting that it would have 40% of the x86 server market by 2009.

Wall St. is not buying the AMD "all brag and no fact" forecasts for it market share growth.

Over the last six months, Intel's shares have been fairly flat. AMD's are down more than 20%. The market appears to think that AMD can't make its number.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Should Eagle Materials Really Trade Much Lower?

We just had an earnings warning out of Eagle Materials Inc. (EXP). The company put its fiscal 2007 EPS guidance at $3.80 to $4.20, down from $4.40 to $4.70 previously offered. The street was at $4.55, and that consensus estimate already came down once in the last 60 to 90 days.

Shares of EXP fell initially by 8% before buyers came in and some quick short covering, but now it is trading down some 11% at $34.87. Its 52-week low is $33.00 and the high over the same period is $74.55. This takes it back to the post Labor Day lows.

The reduction in annual earnings is primarily attributable to the accelerated decline in housing starts, which has led to weakened business conditions in its Gypsum Wallboard and associated paper businesses. Eagle also reaffirmed its earnings guidance for the second quarter of its fiscal 2007 ended September 30, 2006, of $1.30 to $1.40 per diluted share.

Outside of the gypsum wallboard and associated paper operations, it sells cement

What you have to wonder about is how much of this either WAS or SHOULD HAVE BEEN known. The actual homebuilders have been pulling out of options held on speculative property contracts and the home numbers have been showing a slowdown in mass on about every matrix followed.

Recently homebuilders and most related companies have been guiding lower and lower with regularity (many of them on more than one occasion) and the street had already factored in even lower numbers. And then they have been rallying. Just today, Lennar (LEN) warned and its shares have been up most of the day. They are essentially flat now.

USG (USG) has also traded lower by 3% to $47.23 on the Eagle Materials sympathy trade. USG has a 52-week range of $43.68 to $121.70. We'll have to see if Cramer can come back out and pump us USG again.

Maybe both of these will trade lower still, but you sure have to wonder if the market is always as good of a discounting mechanism as we have been led to believe.

Jon C. Ogg
September 26, 2006

Cramer on STOP TRADING (9/26/06)..BUY SHLD & LOW

Cramer on his STOP TRADING segment on CNBC at 2:45 PM EST today said the weak storm season could be a boon for two stocks:

He says start buying Lowe's (LOW). He said go back to August 8 on Target (TGT) and cramer said the "growth is over" conversations and he doesn't believe it.

He is also out saying Buy Sears (SHLD) as it will start making money. He said it is a cash generator and they are having a good quarter.

Jon C. Ogg
September 26, 2006

Smaller More Actives Lose to Mega-Large Caps

PMC-Sierra's (PMCS) earnings warning may be to blame, but the smaller actives group is being pulled lower today. This pertains to the most actives under or around the $5.00 usual suspects. Most of these are also lower on what can be described as a flattish day in tech land. It appears that investors are still seeking the safety of large caps that are key leaders and behemoths.

NASDAQ 2,249.16; Up 0.09 (0.007%)
NASDAQ Total Volume: 1,136,310,000

Ticker	Price	Change	Volume
FNSR	$ 3.73	$ 0.27	9,701,014
JDSU	$ 2.20	$ -	19,517,908
LVLT	$ 5.43	$ 0.08	17,811,468
SIRI	$ 3.90	$ (0.05)	14,123,514
SUNW	$ 5.06	$ (0.07)	24,512,016
PMCS	$ 5.97	$ (0.58)	21,388,318
CNXT	$ 1.88	$ (0.04)	18,747,390
CHTR	$ 1.51	$ (0.04)	1,896,292
Total			127,697,920

Compared to the normal behemoths:

Ticker	Price	Change	Volume
INTC	$19.61	$0.20	39.9M
CSCO	$23.27	$0.04	32.8M
ORCL	$18.00	$0.03	31.6M
MSFT	$27.20	$0.25	26.8M
AAPL	$77.20	$1.45	22.3M
Total			153.4M

CVR Energy Inc Files for IPO

CVR Energy Inc. has filed to come public via an IPO and plans to raise up to $300 million. No underwriters are listed in the initial prospectus, but it is tied to several public companies and was formed as part of affiliated financial transactions with subsidiaries of Goldman Sachs. CVR is an independent refiner and marketer of high value transportation fuels and a premier producer of ammonia and urea ammonia nitrate fertilizers. It is one of seven petroleum refiners and marketers in the "Coffeyville supply area" (Kansas, Oklahoma, Missouri, Nebraska and Iowa) and claims to be the lowest cost producer and marketer of ammonia and urea amonia nitrate in North America at current resource prices.

Its petroleum business includes a 108,000 barrel per day complex full coking sour crude refinery in Coffeyville, Kansas. it has 3 more supporting operations: 1) a crude oil gathering system serving central Kansas and northern Oklahoma; 2) storage and terminal facilities for asphalt and refined fuels in Phillipsburg, Kansas; and 3) a rack marketing division supplying product directly to customers located close to Coffeyville and Phillipsburg and at throughput terminals on Magellan Midstream Partners L.P.’s refined products distribution systems. CVR makes bulk sales into the mid-continent markets via Magellan and into Colorado and other destinations utilizing the product pipeline networks owned by Magellan, Enterprise Products Partners LP and Valero LP. Its nitrogen fertilizer business is supposedly the only operation in North America that utilizes a coke gasification process to produce ammonia.

The company was formed via acquisitions tied to affiliates Goldman Sachs and affiliaters of Kelso & Company.

FINANCIAL PERFORMANCE:

CVR posted combined net sales of $1.7 billion, $2.4 billion and $3.0 billion and combined Adjusted EBITDA of $119.6 million, $252.1 million and $357.4 million for the Fiscal years ended December 31, 2004 and 2005, and the trailing twelve months ended June 30, 2006, respectively. For the fiscal years ended December 31, 2004 and 2005 and the twelve months ended June 30, 2006, its petroleum business contributed 76%, 74% and 81%, respectively, of combined operating income, with substantially all of the remainder contributed by its nitrogen fertilizer business.

DESCRIPTION OF THE COMPANY OUT OF THE FILING:

Our refinery is one of only seven refineries located in the Coffeyville supply area within the mid-continent, a region where demand for refined products exceeded refining production by approximately 24% in 2005.

Since June 2005 we have significantly expanded the variety of crude grades processed in any given month and have reduced our acquisition cost of crude relative to WTI by approximately $2.00 per barrel in the first half of 2006 compared to the first half of 2005.

We operate a complex full coking sour crude refinery. Our complexity allows us to optimize the yields of higher value transportation fuels, which currently account for over 95% of our liquid production output. From 1995 through the first half of 2006, we have invested approximately $300 million to modernize our oil refinery and to meet more stringent U.S. environmental, health and safety requirements.

We have identified and developed several significant capital projects with an estimated total cost of approximately $400 million primarily aimed at (1) expanding refinery capacity, (2) enhancing operating reliability and flexibility, (3) complying with more stringent environmental, health and safety standards and (4) improving our ability to process heavy sour crude feedstock varieties.

Our nitrogen fertilizer plant is the only one of its kind in North America utilizing a coke gasification process to produce ammonia, and has significantly lower feedstock costs than all other predominantly natural gas-based fertilizer plants. We estimate that we would continue to have a production cost advantage in comparison to U.S. Gulf Coast ammonia producers at natural gas prices as low as $2.50 per million Btu. This cost advantage has been more pronounced in today’s natural gas price environment, as the reported Henry Hub natural gas price has fluctuated between $4.50 to $15.00 per million Btu since the end of 2003. The sustaining capital requirements for this business are low compared to its earnings and are expected to be in the range of $3 million to $5 million per year compared to operating income of our nitrogen fertilizer segment of $71.0 million for the combined twelve months ended December 31, 2005.

Our senior management team averages over 28 years of refining and fertilizer industry experience. Mr. John J. (Jack) Lipinski, CEO, has over 34 years experience in the refining and chemicals industries, and prior to joining us in connection with the acquisition of Coffeyville Resources in June 2005, was in charge of a 550,000 bpd refining system and a multi-plant fertilizer system. Mr. Stanley A. Riemann, COO, has over 32 years of experience, and prior to joining us in March 2004, was in charge of one of the largest fertilizer manufacturing systems in the United States. Mr. James T. Rens, CFO, has over 15 years experience in the energy and fertilizer industries, and prior to joining us in March 2004, was the chief financial officer of two fertilizer manufacturing companies. Our management team has made significant and rapid improvements on many fronts since the acquisition of Coffeyville Resources and has succeeded in increasing operating income and shareholder value.

Our objective is to continue to increase economic throughput for our operating facilities, control manufacturing expenses and take advantage of market opportunities as they arise.

In conjunction with the acquisition of our business by Coffeyville Acquisition LLC, on June 16, 2005, Coffeyville Acquisition LLC entered into a series of commodity derivative arrangements, or the Cash Flow Swap, with J. Aron & Company, or J. Aron, a subsidiary of The Goldman Sachs Group, Inc., and a related party of ours. Pursuant to the Cash Flow Swap, sales representing approximately 70% and 17% of then forecasted refinery output for the periods from July 2005 through June 2009, and July 2009 through June 2010, respectively, have been economically hedged. The derivative took the form of three New York Mercantile Exchange, or NYMEX, swap agreements whereby if crack spreads fall below the fixed level, J. Aron agreed to pay the difference to us, and if crack spreads rise above the fixed level, we agreed to pay the difference to J. Aron. The Cash Flow Swap was assigned from Coffeyville Acquisition LLC to Coffeyville Resources, LLC on June 24, 2005.

OWNERS:

After the offering Affiliates of Goldman Sachs and Kelso & Co. will own interests in the company.

Highbridge Capital Raises Stake in Takeover Target Banta (BN) to 5%

From 13D Tracker

In a 13D filing after the close yesterday on Banta Corp. (NYSE: BN), Highbridge Capital disclosed a 5% stake (1.2 million shares) in the company. This is up from the 30K share stake the hedge fund disclosed in a quarterly filing with regulators. Highbridge Capital said it may or may not engage in discussions with management of the Company and/or any potential acquirer of the Company concerning the business, operations and future plans of the Company.

Cenveo (NYSE: CVO) has been been trying to acquire Banta since August, and recently raised its offer to $47 per share. Banta said it will review the new offer, after turning away past offers.
Banta recently approved payment of a special cash dividend of $16.00 per share. The dividend is payable November 21, 2006, to shareholders of record on November 10, 2006.

From the 'Purpose of the Transaction' section of the filing:

"Depending on various factors including, without limitation, the terms of Cenveo, Inc.'s proposal to acquire the Company and any other offers or developments that may occur relating thereto, the Company's financial position and business strategy, the price levels of the shares of Common Stock, conditions in the securities markets and general economic and industry conditions, the Reporting Persons may in the future take such actions with respect to their investment in the Company as they deem appropriate including, without limitation, voting their shares of Common Stock to support or oppose the acquisition of the Company, tendering into an offer to purchase the Company's Common Stock, purchasing additional shares of Common Stock or any of the Company's debt or equity securities, selling or otherwise disposing of some or all of their shares of Common Stock or any of the Company's debt or equity securities, short selling or otherwise hedging some or all of their shares of Common Stock or any of the Company's debt or equity securities, in each case, in the open market or in privately negotiated transactions or otherwise, or changing their intention with respect to any and all matters referred to in this Item 4."

http://www.13dtracker.blogspot.com/

Will Microsoft Buy Yahoo! At A Discount?

One of Microsoft's major problems is that MSN still lags behind Yahoo! and Google in search. ComScore puts Google's share at just below 44% with Yahoo! just below 29% and MSN at just below 13%. And, MSN has been losing share. Combined Yahoo! and MSN would have a share about equal to Google's.

Google still trails Yahoo! and Microsoft in terms of total monthly page views, so the battle is not entirely over, but Google's tremendous revenue growth is based on its power to deliver a huge audience of targeted and relevant search results. Based on the current share of that market, it would seem improbable that Yahoo! or Microsoft will catch Google, even it they improve their search technology.

Microsoft has launched its new digital advertising solutions initiative and Yahoo! plans to upgrade its core search technology, but that project has been running late.

Microsoft has a number of reasons to want to see Google knocked down a notch. Google's distribtion of everything from free spreadsheets to free small business services threates to undermine part of the core revenue base at Microsoft. The launch of Microsoft Live Search is almost certainly aimed at blunting Google's progress.

But, for Microsoft, all of this may be too little to late. And, Yahoo! seems to fare worse in the internet search and advertising market as each day passes.

There have been rumors for some time that to solve their mutual problems, Microsoft might buy Yahoo!. Whatever cultural issues existed that might block the move, valuation was always a problem. But, Yahoo! is down from a little under $44 earlier this year to under $25 now. And, oddly enough, at $27.20, Microsoft is nearing its best price since late 2004.

Yahoo!'s market capitalization has fallen to $34.5 billion. The company has about $2.5 billion in cash and short-term securities and $750 million in debt. That brings the cost to acquire the company as low as $33 billion. Yahoo!'s twelve-month trailing revenue is almost $6 billion and cash flow from operating activities is approximately $1.7 billion. So, Microsoft would have to pay a little over five times revenues and twenty times cash flow.

Expensive. Maybe.

It depends on what value Wall St. would give to such a potentially huge strategic advantage in its war with Google, not to mention Yahoo!'s already profitable and still growing business.

Microsoft's market cap is now up to $271 billion. Cash and short-term investments are over $33 billion. Cash flow from operating activities is over $14 billion a year.

In short, with all the complaints about what MSFT will do with its cash, it could come close to buying Yahoo! without talking to a banker.

For a number of years, Microsoft has suffered from the perception that it cannot do anything beyond making operating system and server software. They have been good businesses, great businesses, but the company's move into the internet portable business, game platforms, and software for mobile devices has not drawn much applause from the investment community.

With the Xbox platform receiving a more favorable impression from the market, Microsoft is beginning to trade like a company that investors believe has some market upside. Taking the lead in internet audience and pulling equal with Google in search could cement that.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Semi Equipment Orders Don’t Get Better Than This

By William Trent, CFA of Stock Market Beat

Eric Savitz points to research from JPMorgan’s Jay Deanha anticipating higher orders for semiconductor equipment.

He says that, driven by orders from Samsung, Hynix and Nanya, “we expect most equipment suppliers, particularly memory centric ones, to deliver the high end or better orders relative to third quarter guidance and better-than-currently anticipated fourth quarter booking guidance.
Apparently Deanha believes that, somehow, a semiconductor industry growing sales at approximately 10% over last year can support equipment orders even higher than the current 70% year/year growth rate, despite August marking the eighth consecutive month that equipment orders grew faster than underlying demand for semiconductors.

Despite Microsemi’s sneak announcement.

Despite Maxim’s miss.

Despite Silicon Labs’ warning.

Not to mention Analogic, Microchip, or Xilinx.

Or Texas Instruments saying Asian cell phone chip inventories were high. Or Intel’s Days’ Inventory being at a multi-year high.

Somehow, in the midst of all this, Deanha believes the chipmakers need even more equipment? Please. As we said last week, we are probably near a turning point for semis. But if we are, it will be because they order less equipment and are thus able to bring supply back in line with demand.

The author may hold a position in the securities discussed. A current list of the author's holdings is available here.

http://stockmarketbeat.com/blog1/

Pardus Capital Raises Stake in Visteon (VC) to 14.1%, Recommends Person to Board

From 13D Tracker

In an amended 13D filing with the SEC on Visteon Corporation (NYSE: VC), Pardus Capital disclosed a 14.1% stake (18 million shares) in the auto-parts maker.

Pardus Capital said it continues to engage in discussions from time to time with management, the Board of Directors, other shareholders of Visteon and other relevant parties concerning, among other things, the business, operations, board composition, management, strategy and future plans of the company.

In the context of these discussions, Pardus Capital said it has raised with Visteon the possibility of an individual suggested by them joining the board, and have been informed that the company has taken this matter under advisement.

This morning, Visteon said it does not expect to meet the financial guidance targets announced on Aug. 1, 2006. The company currently expects second half product sales to be about 10 percent lower than first half product sales of $5.7 billion. The company cited reductions to second-half customer production levels, changing vehicle mix, and other cost factors that will challenge the company's financial results for the remainder of 2006. The stock is 5% lower in pre-open action.

http://www.13dtracker.blogspot.com/

Verizon's Downgrade (VZ)(BLS)(T)(CMCSA)

When a stock hits an investment bank's target price, the analyst can either raise the price target higher or cut the stock to a "hold". With Verizon near the firm's $38 price target, AG Edwards cut Verizon.

Verizon's stock has done well. It is up from a 52-week low of $29.13, and trades at $37.43, even after the downgrade. Other telecom stock like AT&T and Qwest have had similar runs.

In Verizon's case, Wall St. must wonder if there are any unspoken concerns at Edwards about the phone companies massive fiber-to-the-home initiative. Verizon is spending billions of dollars to convert its network to deliver higher speeds, but it is still unclear how much share they can get from cable operators like Comcast.

The reason that there may be caution about Verizon's stock price is that it is betting on fiber earlier than other AT&T/BellSouth and Qwest. They are, in essence, a canary in the coal mine. If the bird comes out health, Verizon may run higher. But, if uptake for the new service is slow, Verizon's share price is likely to be hurt. Perhaps badly.

Rochdale also downgraded Verizon last month, moving the stock from a "buy" to a "hold". The thinking among analysts is that the company's valuation will have to be proven out in the fiber trials.

Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in companies that he writes about.

Chinese Medical Device IPO: Mindray Medical Meets Strong Demand

Mindray Medical International (MR) has priced its 20 million share IPO at $13.50 per share, above the $10.00 to $12.00 indicated range. This Chinese medical device maker began developing products used to monitor vital signs for small- and mid-sized hospitals in China and now sells and manufactures ultrasound and diagnostic devices. It is deemed one of the leaders in all of its areas in China.

In 2005, the company grew its revenue 55% to $135 million. Its international sales have been growing at an annual rate of about 85% per year since 2003. Mindray will also launch its first color ultrasound monitor and a 5-part hematology analyzer. It is not just a Chinese story as the company is pursuing FDA approval in the US for more of its products and opening new sales offices in rapidly growing countries like India and Russia.

The majority of the IPO proceeds will go to opening is new HQ and manufacturing facility. That location goal is over $1 billion in revenue alone. This new higher price should give it an implied market cap in excess of $1.5 Billion.

The joint lead managers were listed as Goldman Sachs and UBS; co-managers were listed as J.P.Morgan, CIBC, Piper Jaffray, and First Shanghai Capital.

Jon C. Ogg
September 26, 2006

Changes Coming at eBay in China?

If reports out of China are "accurate," there could be some changes in eBay's (EBAY) China operations. The company is reportedly in its 5th round of negotiations with Tencent. There are questions about how much Tencent wants and it may be too high for what eBay is willing to shell out.

There is even a mention that eBay may sell its Chinese operations of eBay Eachnet, although that isn't clear if it is all or part. It also noted that Tencent may be an interested buyer.

This article is sourcing Sohu, so you will have to decide for yourself if there is any validity to it. It has happened on many many more times than a few that "rumors" on Asian online news sources that post freely to the public have been.....how do you say "Far from accurate"?

We'll check around to see if this has any legs to it, but it would be interesting if ebay really changes its efforts very much there.

Goldman Sachs has maintained its Buy rating in a seperate note this morning.

Jon C. Ogg
September 26, 2006

Acorda Gapping Up Again After a 282% Gain Again

Acorda (ACOR) is gapping up yet again pre-market. This stock was the small biotech that soared over 250% yesterday after it released positive multiple sclerosis study data. This was a day trader's dream with an average daily volume of about 29,000 shares trading over 23 million shares. The company had a mere $40+ million market cap on Friday and all of a sudden has a market cap of $166 million. It only opened at $6.00+ yesterday and closed at $8.50.

This morning it is trading up at $10.20 pre-market, about another 20% on over 1.5 million shares. This ACOR stock is potentially no longer "shortable" as many trading firms either did not or no longer have it available for shorts. That usually causes firms to do a mandatory covering of shorts and creates margin calls if certain small investors play this the way they used to.

You should probably expect analyst updated calls from Banc of America if they have not already come out with a call. B of A started it with a Buy rating and only a $5.00 target in early August when the stock was merely around $3.40. When these happen sometimes it is a downgrade and sometimes they play catch-up. The stock had lost 1/3 of its value since that call before this massive news propelled the stock up exponentially yesterday. It is likely that he'll take an "I told you so" route if he hasn't already and will probably not want to try to be a hero again in the name.

These exponential biotech gap-ups in a single day are always puzzling, and they always make you wonder who knew what and when.

Jon C. Ogg
September 26, 2006

Pre-Market Stock Notes (Sept. 26, 2006)

(AKS) AK Steel union workers rejected their new contract offers.
(AMSF) Amerisafe filed to sell 7.9 million shares of common stock.
(ANGO) Angiodynamics $0.12 EPS vs $0.10e.
(ARII) American Railcar Industries announces new orders to manufacture 1,000 tank railcars to American Railcar Leasing LLC.
(ARNA) Arena was given notice by Merck (MRK) that it was withdrawing from its atherosclerosis study, although it will continue evaluating the compound for other ailments; stock down 7%.
(AVID) Avid tech lowered guidance.
(BLTI) Biolase gets new laser pulse tech patent.
(CECO) CareerEducation CEo is stepping down.
(CEPH) Cephalon gets FDA approval for Fentora for cancer pain management.
(ENMD) EntreMed began Phase 1 study with its clinical-stage drug candidate MKC-1.
(EPCT) Epicept announced positive phase I studies with MYGN and will proceed to Phase II.
(EYE) Advanced Medical Optics lowered guidance.
(HLTH) Emdeon announced 52% majority stake sale of its business services unit.
(IMMC) Immunicon announced that they met the primary and secondary endpoints associated with its pivotal clinical trial in metastatic colorectal cancer.
(IPX) Interpool raised its annual dividend rate.
(JNJ) J&J's Cordis receives FDA approval to mkt Precise Nitinol Stent for clogged neck arteries.
(KFX) KFX is restucturing by naming its CEO to replace the chairman, announced a name change to Evergreen Energy as of September 29, 2006.
(LB) LaBarge awarded $8Million pact from Raytheon for Tomahawk missile. program.
(LEN) Lennar lowered guidance.
(LOW) Lowe's said current sales are below trend expectations.
(MERX) Merix stock down 20% after lowering EPS guidance.
(NSTK) Nastech Pharma was awarded a $1.9 million National Inst. of Health grant.
(NTBK) Net.Bank put guidance at lower end of range and said additional downside is possible.
(PDII) PDI was notified that GlaxoSmithkline will not renew its contract sales agreement after December 31, 2006; represented $65 million to $70 million of annual sales.
(PMCS) PMC-Sierra lowered guidance; stock down 7% pre-market.
(PNR) Pentair lowered guidance, names new president and COO.
(PRGO) Perrigo gets FDA ok for OTC Famotidine tablets.
(QGLY) Quigley Corp following positive data showing QR-333 to be safe; to proceed with Phase IIb clinical trials.
(SIRI) Sirius introduced its new Stiletto 100 radio.
(SRR) Stride Rite $0.24 EPS vs $0.23e.
(TEVA) Teva hosts an analyst day for its branded drug program.
(VXGN) Vaxgen filed its restated 2003 annual report.

Cramer positive again on Time Warner (TWX) and said it isn't too late to buy as it is a straight shot to $26.00.

S&P INDEX CHANGES: WU-Western Union replacing ANDW-Andrew in S&P 500 Index as of FRI SEPT 29 close. ANDW replacing Cabot Micro-CCMP in S&P MID CAP 400 Index. Cabor Micro-CCMP moving down to replace BFT in S&P Small Cap 600 Index. IRC-Inland Real Estate replaces maverick Tube-MVK in S&P Small Cap 600 Index as of close on MON OCT 2. WEN-Wendy's staying in S&P 500 Index, but Tim Horton (THI) will "not" be added to the S&P Index at this time

Market Buys Oracle’s Bravado, Shorts SAP’s

By William Trent, CFA of Stock Market Beat

Last week we took a self-congratulatory victory lap when Oracle’s earnings confirmed our thesis from earlier this year. As Eric Savitz pointed out, we weren’t the only ones.

n the earnings press release, Oracle Chairman Larry Ellison said:

“SAP appears to be rethinking their strategy as they lose application market share to Oracle and confront the difficulties of moving their application software to a modern Service Oriented Architecture (SOA),” said Ellison in the release. “They’ve just announced that they are delaying the next version of SAP applications until 2010. That’s a full two years behind Oracle’s scheduled delivery of our SOA Fusion applications. And now [SAP CEO Henning] Kagermann is talking about an acquisition strategy to augment SAP’s slowing organic growth. These are major changes in direction for SAP.”

That would indeed be a change for SAP, which previously only imitated Oracle’s bad moves. However, SAP fired back with their own press release, saying:

Since January of 2003, SAP has consistently articulated and delivered on its vision for enterprise SOA following a course of organic growth combined with strategic acquisitions. SAP offers customers market-leading, enterprise SOA applications today while Oracle’s next-generation applications exist only in PowerPoint and won’t be delivered until 2008 or beyond.

Hmm… he said, she said. Who to believe? We’ll call in the ultimate judge, the market:

The author may hold a position in the securities discussed. A current list of the author's holdings is available here.

Select Analyst Calls (Sept. 26, 2006)

AUXL cut to Hold at Deutsche Bank.
AV started as Hold at Jefferies.
CECO raised to Neutral at UBS.
CLUB started as Outperform at RBC Capital.
CMCSA cut to Hold at AGEdwards.
CPHD cut to Neutral at UBS.
CSCO started as Buy at Jefferies (yesterday call likely).
CUK started as Buy at UBS.
CVC reitr Buy at Jefferies.
EAGL raised to Outperform at R.W.Baird.
EL started as Mkt Perform at Piper Jaffray.
EYE cut to Peer Perform at Bear Stearns, cut to Neutral at Prudential.
HET cut to Neutral at JPMorgan.
HUB started as Buy at Merrill Lynch.
IPAR started as Outperform at Piper Jaffray.
JCP cut to Underperform at Credit Suisse.
JTX cut to Underweight at Morgan Stanley.
JWN cut to Neutral at Credit Suisse.
KSS cut to Neutral at Credit Suisse.
LEA raised to Neutral at UBS.
MA cut to Hold at Soleil.
MERX cut to Underperform at Bear Stearns.
MU cut to Neutral at Credit Suisse.
OPWV reitr Outperform at CIBC, target raised to $12.00.
PJC cut to Mkt Perform at Wachovia.
RFMD reitr Sector Outperform at CIBC.
RTRSY cut to Neutral at Goldman Sachs.
TNB started as Buy at Merrill Lynch.
TTMI cut to Underperform at Bear Stearns.

RBC Capital cuts IT contractors sector: downgraded ACN, ACS, EDS, PER to Underperform.

Is The Economy Slowing?: Everyone Warns

Stocks: (LOW)(PMCS)(LEN)

PMC-Sierra and Lennar warned on financial result yesterday. Even Lowe's warned One is in the semiconductor business and one in housing. Another is in home improvement retail. But, Wall St. has to wonder if, as the warnings grow in number, whether the trend points to a larger economic trend.

Lennar said it saw no bottom to the housing market. Lowe's warning was based on the slowing house market.

PMC joins a parade of semi-conductors that have said results will drop.

All of these stocks are already at or near lows. PMCS has dropped from $13.77 to $4.78. It now trades at $6.10. Lowe's has dropped from a twelve month high of $34.85 to $26.15. Its low for the period is $26.15. Lennar has fallen from $66.44 to $46.88. It is further from its low of $38.66.

If you add these to the picture of lay-offs at companies as diverse as Intel and Ford, the picture appears to growing darker.

There is a point at which the number of jobs lost, the amount of equity leaving the home market, and the drop in overall stock prices will start to hit consumer buying and the perception that things are getting worse and not better. If so, a recession is not far off.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

As Lowes Warns Can Home Depot Be Far Behind (HD)(LOW)

Yesterday, Lowes said it would only make the low end of its numbers for 2006. Since Home Depot is larger and has been growing more slowly, Wall St. has to be concerned that its numbers may get worse.

Lowes said slow home sales and higher gas prices were to blame for the slowdown.

In the last fiscal year for the companies (January 30 fiscal) Lowes revenue grew 18.9% to 43.2 billion. Home Depot's revenue grew 11.5% to $81.5 billion. The difference in the growth rates has shown up in the stocks. Over the last two years, Lowes stock has gone up about 7% and Home Depot is down about 5%.

After it announcement, Lowes shares dropped over 2% after hours. The drop could be larger at Home Depot.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Cramer's MAD MONEY (September 25, 2006)...Buy TWX Again!!!!

Yesterday night on Cramer's MAD MONEY, Cramer discussed some lessons of what NOT to do and on how to get behind the best break-up story.

Cramer gave lessons to avoid blowing up like an Amaranth hedge fund:
1) individuals-Don't take too much risk.
2) individuals-Cramer says cut margin leverage and don't take on too much debt.
3) individuals-Even if you think you know more about the market, you can't act that way.
4) on money managers-Do you know what a money manager is doing with your money?
5) on money managers-is your manager properly diversified? Sector Funds usually get hit hard at some point and no more than 20% in any one sector.
6) on money managers-Who is your money manager for real? How did you find your money manager? and find out how well he did in bad times.

As far as how to play a great break-up: Cramer discussed Time Warner (TWX) and his call on 8/23. He noted today that two influential analysts from Bernstein and Morgan Stanley both upgraded the name and they are the ones that partially held it back. He said that cannot be coincidental. Cramer is back to calling Time Warner. He said it is a straight shot going to $26.00, and you should get in it if you haven't.

In a call-in Cramer told a woman who sold Berkshire Hathaway (BRK-B) to get back in it because he sees multiple years of good things coming from there.

Jon Ogg

Cramer's MAD MONEY (September 25, 2006)...Buy TWX Again!!!!

Yesterday night on Cramer's MAD MONEY, Cramer discussed some lessons of what NOT to do and on how to get behind the best break-up story.

Cramer gave lessons to avoid blowing up like an Amaranth hedge fund:
1) individuals-Don't take too much risk.
2) individuals-Cramer says cut margin leverage and don't take on too much debt.
3) individuals-Even if you think you know more about the market, you can't act that way.
4) on money managers-Do you know what a money manager is doing with your money?
5) on money managers-is your manager properly diversified? Sector Funds usually get hit hard at some point and no more than 20% in any one sector.
6) on money managers-Who is your money manager for real? How did you find your money manager? and find out how well he did in bad times.

As far as how to play a great break-up: Cramer discussed Time Warner (TWX) and his call on 8/23. He noted today that two influential analysts from Bernstein and Morgan Stanley both upgraded the name and they are the ones that partially held it back. He said that cannot be coincidental. Cramer is back to calling Time Warner. He said it is a straight shot going to $26.00, and you should get in it if you haven't.

In a call-in Cramer told a woman who sold Berkshire Hathaway (BRK-B) to get back in it because he sees multiple years of good things coming from there.

Jon Ogg

Carlos Ghosn Gets Desparate: GM, Ford, And Renault

Stocks: (F)(GM)(TM)

Carlos Ghosn is sending out all sorts of messages that talk with GM are progressing but the big US car company does not understand that it will be crushed by Toyota. Ghosn clearly wants to push GM and its board by talking to the press about the lack of progress in his talks with GM to create a global alliance with Renault and Nissan, two companies that Mr. Ghosn runs.

But, there may be more pressure on Mr. Ghosn than there is on GM. Renault has done fairly well in the market. It stock is down slightly from early summer, but has still done well over the last year. Nissan is another matter. Its stock is down from its early summer highs, and Toyota may be a real threat to the company.

In Japan, Nissan's home market, its sales were down 12.8% for the first seven months of 2006. Toyota's sales were flat in Japan for the period.

GM, on the other hand, has been able to take $9 billion in annual costs out of the company, and investors are convinced the the large US auto company has at least a fighting chance of being competitive in its home market. The market has voted in that direction, driving GM's shares up from a 52-week low of $18.33 to $30.60, fairly close to its annual high.

Ghosn is talking, but it appears that no one at GM is listening.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Google's Achille's Heel, Online Advertising

The growth of Google has depended almost complete on the increase in internet advertising, especially keyword search revenue. But, according to EMarketer, advertising revenue online will not grow as fast as it has in the past, slowing to a rate of 26.8% this year.

Another study from the Internet Advertising Bureau showed online revenue up 36% in the first half of the year, but second quarter revenue up only 5.5% over the first quarter. Search-related advertising grew faster than other categories, up 40%.

According to the Google 10-Q, revenue at the big search company went from from $1.384 billion in the second quarter of 2005 to $2.246 in the same quarter in 2006. For the first six months of the year, revenue rose from $2.641 billion to $4,709. Google makes a point in the document of saying that 99% of its revenue come from advertising keywords.

Yahoo! has already shown that large search companies are not immune from a slowing in internet ad revenue. But, Googles turn may be next.

The math of Google's growth is now set against the math of the overall growth of internet advertising. With new data in hand that online advertising revenue growth is slowing to 35% to 40% range, Google's growth rate of nearly 100% year-over-year must almost certainly come down. The company's share of online revenue is too large to support a theory that it can take huge revenue share from MSN, Yahoo!, AOL and the rest of the online advertising pot to make up for the slowing market.

At a price of over $400, Google's stock valuation is already at fifteen times revenue. And, the company's forward P/E is 31. The stock has run up from $370 in early August.

Google does not have to miss Wall St. estimates by more that a small fraction to undercut the stock's value.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Europe Market Report 9/26/2006 Alacatel, Siemens, Vodafone Up

Stocks: (BCS)(BP)(BT)(GSK)(PUK)(RTRSY)(VOD)(DCX)
(DB)(DT)(SI)(ALA)(AXA)(FTE)(V)

Stocks in Europe were higher at 5.30 AM New York time.

The FTSE was up .8% at 5,844. Barclays was up .8% to 664.5. BP was up .5% to 566.5. BT was down .8% to 256. GlaxoSmithKline was up .4% to 1428. Prudential was up 1.1% to 621.5. Reuters was down .6% to 429.75. Vodafone was up 1.5% to 117.25.

The DAXX was up .7% to 5,941. DaimlerChrysler was up .8% to 39.6. DeutscheBank was up 1% to 93.95. Deutsche Telekom was up .1% to 12.41. Siemens was up 1.5% to 67.7.

The CAC 40 was up 1% to 5,198. Alcatel was up 1.8% to 9.42. AXA was up .8% to 28.97. France Telecom was down .2% to 17.79. ST Micro was up 1.7% to 13.21. Vivendi was up .7% to 28.3.

Data from Reuters.

Douglas A. McIntyre

Media Digest 9/26/2006

Stocks: (IBM)(GM)(SBUX)(GOOG)

According to Reuters, a $200 billion class action suit over "light" cigarettes has been approved by the courts to go forward.

Reuters writes that IBM will bundle hardware, software and technical supports with products aimed at small and mid-sized business.

Reuters also reports that Starbucks has been sued for anti-competitive business practices that put one small coffee shop out of business.

The Wall Street Journal writes that a top Renault executive said that GM is not showing any "urgency" in talks with Renault and Nissan to s