Cramer Features Brazil Stock Pick: (RIO-NYSE/ADR)

Cramer on MAD MONEY tonight also went over his Best of Breed picks in Brazil. Cramer says it is Nirvana down there with high growth and decent inflation. The election there was electing a socialist who is becoming a great quiet capitalist. He said that the situation in Brazil merits that investors need to be there.

CVRD-Companhia Vale do Rio Doce (RIO-NYSE/ADR) just bought Inco, and this is a great company for Cramer. He said the stock was beaten up for the acquisition of Inco, but he thinks it is highly accretive and it should have been bought instead of sold off. He also likes the cost containment they are doing, and he thinks the estimates are toolow for 2007. He said BHP & RTP are the stocks that are popular now with money managers, but he thinks money managers will turn this into a core holding soon. He isn't calling it a double, and investors need to know that it already has a $61.8 Billion market cap. He thinks there may be 1 or 2 months before the street switches its stance.

Jon C. Ogg
October 31, 2006

Cramer on MAD MONEY Calls Hansen Natural a Scary Stock

On tonight on MAD MONEY Cramer gave a stock to avoid as a scary stock on Halloween. He said that Hansen Natural (HANS) is that scary stock. He said even after the sell-off it is up 150% and it has nothing proprietary about it.

For a Backgrounder with Cramer on HANS: On September 13, 2006 Cramer gave the same call saying its trajectory made it a broken stock. It closed at $29.76 back then, but a duelling analyst call with a big upgrade the next morning caused it to rise 10% immediately.

HANS shares closed up 1.3% at $31.75 today, but fell 2.3% after-hours to $31.00 after Cramer panned it.

HANS will report earnings next week, but he thinks you need to get out before the report. He reminded about the 20+% drop after last earnings. He also said that Budweiser even took over its distribution.

Jon C. Ogg
October 31, 2006

Baidu.com Down More After Earnings

Sometimes beating earnings just isn't good enough. If you owned Baidu.com (BIDU) going into earnings today you know what that means. BIDU posted EPS of $0.37, $0.10 better than the $0.27 estimate. Revenues beat also at $30.3 million, but not by as wide of a margin with consensus revenues at $30.2 million. The revenue guidance was the disappointment with the company saying $34 million to $35 million was expected, but consensus is $36.25 million.

The sad thing is that this was the springloaded year, because its revenues were up 170% year-over-year and earnings were up essentially tenfold.

The street was already nervous ahead of the report, because shares of BIDU were down 9%, or -$8.72, to $87.28. Shares are down another -4.2% to $83.65 in after-hours trading. Its 52-week trading range is $44.44 to $96.67, although it looks like shortly after the open today it had traded as high as $99.00.

BIDU still carries a triple-digit P/E on a trailing basis. If you use the $83.65 after-hours price and company meets the $0.91 EPS target for 2006 and the $1.70 target for 2007 it has forward P/E's of 91.9 for 2006 and 49.2 for 2007. We would have adjusted the EPS target up except for the guidance miss on revenues.

Baidu.com is still listed as the #4 site as far as web traffic out of Alexa's Top 500.

Jon C. Ogg
October 31, 2006

Market Wrap (Oct. 31, 2006)

DJIA 12,080.73; Down 5.77 (0.05%)
NASDAQ 2,366.71; Up 2.94 (0.12%)
S&P500 1,377.94; Up 0.01 (0.00%)
10YR-Bond 4.6060% ; Down 0.067
NYSE Volume 2,712,865,000
NASD Volume 1,888,631,000

The Conference Board said its October consumer fell to 105.4 from 105.9 the month before, and that was well under the 107.7 consensus estimate. The 10-year treaury was 6 basis points lower on the weak number and on concerns after Wal-Mart's weak sales numbers yesterday. Oil remained lower after doubts prevailed that OPEC will really cut any production.

Eastman Kodak (EK) traded up 2.7% to $24.39 after its losses narrowed to $37 million.

IBM (IBM) Rose 0.9% to $92.33 after it added $4 Billion to its share buybacks.

SiRNA (RNAI) essentially doubled with a 95% gain to $12.63 after Merck announced it would acquire the company for $1.1 Billion.

Martha Stewart (MSO) rose 4% to $21.05 after the media company posted narrower losses and higher revenue additions.

(UARM) Under Armour beat earnings, although its guidance was somewhat under what many were hoping for. UARM fell 0.8% to $46.35.

Biogen-Idec (BIIB) rose a sharp 8% to $47.60 after it beat earnings with $0.60 EPS vs $0.48 estimates.

(NVAX) Novovax traded up 9%to $4.47 after the CDC said it would evaluate its bird flu vaccine.

Proctor & Gamble (PG) fell 0.66% to $63.39 despite slightly beating bottom-line numbers. The street was cautious on its revenues and profit taking prevailed.

UAL (UAUA) fell 2% to $35.94 after its $190 million in net income was actually a tad lighter than expectations at $1.40 EPS vs $1.43e.

Hansen Natural (HANS) rose 1.3% even after it received a stock options inquiry regarding options from 1996 to the present.

IAC/Interactive (IACI) rose almost 4% to $30.98 after the company posted $0.35 EPS vs. $0.33 estimates.

Entrust (ENTU) rose 4.4% to $3.76 after winning a data protection pact from Expedia.

DivX, Inc. (DIVX) fell 10% to $22.84 after beating revenue projection, but profit taking hit the shares and valuations at well-over 10-times revenues.

Vonage (VG) actually beat revenue projections and gave a Q1 2008 for its first anticipated real profitable quarter; VG fell 7% to $6.88 after the bears won today's argument.

CBRL Group (CBRL) rose 2.8% to $43.91 after it agreed to sell its Logan's Roadhouse unit outright to a private equity venture rather than pursue an IPO as it had originally planned.

Maidenform Brands (MFB) rose 2.5% to $22.15 after it filed to sell 7.8 million shares for selling holders.

Qwest Communications (Q) fell 4.2% to $8.63 despite beating earnings expectations.

Trammel Crow (TCC) rose a large 24% to $48.75 after CB Richard Ellis agreed to acquire the company.

Cisco (CSCO) replaced Ciena (CIEN) on Goldman Sachs Conviction Buy List; CSCO rose 0.95% to $24.13 and CIEN fell 0.5% to $23.51.

Earnings tomorrow morning: CI, CLX, COL, DB, DVN, GRMN, MMC, MYL, PRU & TWX.
Wednesday we have weekly oil inventories at 10:30 AM EST.

Jon C. Ogg
October 31, 2006

Cramer on the Elections (10/31/06)

On CNBC's STOP TRADING segment around 2:55 PM EST today, Jim Cramer discussed what he heard senators say ahead of the elections today.

Cramer said a GOP win would be a surprise. If the GOP actually won you would want to go back into oil, defense and pharma names.

Cramer is worried about Alliant Techsystems (ATK). He said they are the largest bullet maker and if we leave Iraq suddenly that iw would be bad for them. If you think we stay the course in Iraq, they would be good to own.

Cramer also worried about health cost names. He said he also wasn't worried about Sallie Mae (SLM) because First Marblehead (FMD) trades up and up.

Jon C. Ogg
October 31, 2006

Nierenberg Investment Raises Stake in RadiSys (RSYS) to 11.1%, Still Thinks Stock Dramatically Undervalued

From 13D Tracker

In an amended 13D filing on RadiSys Corp. (Nasdaq: RSYS), Nierenberg Investment disclosed an 11.1% stake (2.37 million shares) in the company. This is up from the 2.06 million share stake the firm disclosed in a quarterly filing with regulators.

The firm disclosed the last time they bought a large block of RSYS was one year ago, on October 28, 2005, when RSYS' fourth quarter guidance caused the share price to swoon. The firm bought 300,000 more shares on October 27, 2006.

Quoting from their amended 13D, filed November 9, 2005, which they said remains true, the firm said:

"RSYS is a dramatically undervalued growth company which possesses a fortress balance sheet, an impressive board of directors, a strong management team, and a business model which generates a stunning amount of positive cash flow.

The stock market has trouble valuing this company. Because RSYS is a micro-cap, not many analysts trouble to understand it. Moreover, RSYS' business, on the surface, is not easy for some people to understand. What "advanced embedded computing" means is not intuitively obvious. There are few, if any, pure play public companies with which to compare RSYS. RSYS' revenues are highly concentrated, with its top five customers generating 72% of sales in the most recent quarter. This means that quarterly revenues are inherently lumpy.

Wall Street's obsession with linear short term results causes it to undervalue dramatically the fundamental shareholder value which is being created at RSYS. Those who look out three to five years, like venture capitalists do, see value in a very different way than those who only look out three months."

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

Ilia Lekach Lowers Stake in eCom Ventures (ECMV) to 4%

From 13D Tracker

In an amended 13D filing on eCom Ventures, Inc. (Nasdaq: ECMV), Ilia Lekach disclosed a 4% stake (120K shares) in the company. This is down from the 9% stake he disclosed in a past filing (07/02).

According to traders who know the stock, Lekach's selling has undeservedly punished the stock over the past six months, but the stock has moved higher recently as word circulated Likach was nearly done selling.

While Lekach has been selling his stake in the company, eCom Ventures' controlling shareholder Glenn Nussdorf has been buying up shares of Lekach's company Parlux Fragrances (Nasdaq: PARL).

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

Nabi (NABI) Holder Third Point LLC Files Preliminary Consent Statement to Remove Board Members, Discloses Unsuccesful Settlement

From 13D Tracker

Nabi Biopharmaceuticals (Nasdaq: NABI) 9.5% holder Third Point LLC filed a preliminary consent statement to remove Chairman Thomas H. McLain and other directors from the Board of Directors (Harvey, Hudson, Davis, Castaldi)

Third Point said it will nominate Mr. Aryeh, Todd Davis, Stephen Kasnet, Timothy Lynch and Stuart Oran to be appointed by the remaining members of the Board to fill any vacancies created by the removal of directors.

In a related 13D filing, Third Point also disclosed an exchange between a Third Point representitive and the company which resulted in an unsuccesful settlement agreement.

From the 'Purpose of Transaction' section of the 13D filing:

"On October 26, 2006, Mr. Aryeh contacted Mr. McLain to clarify fundamental issues regarding NABI-HB raised on the Company's earnings conference call held the prior day. Mr. Aryeh also advised Mr. McLain that he had agreed to be a nominee of the Third Point Reporting Persons, and that he regretted that the Company's dispute with many of its largest stockholders had come to such an impasse. Later that day, Mr. McLain reached out to Mr. Aryeh and proposed that Mr. Aryeh act as an intermediary to attempt to reach a settlement with the Third Point Reporting Persons. With the consent of the Third Point Reporting Persons, Mr. Aryeh again proposed a settlement offer substantially on the terms previously proposed on September 29, 2006. Discussions continued on October 27, 2006 and ended without an agreement because the parties could not agree on the composition of the strategic action committee (the "SAC"). The Company insisted that the SAC be a committee of five members, consisting of three current Board members and two of the Third Point Reporting Persons' nominees, and the Reporting Persons agreed that the SAC could be a committee of five members if there were a mutual agreement on the fifth member. The Reporting Persons proposed that the SAC be established with four members - two designated by the Board and two of the Management Company's nominees - and that the four members, by majority vote, would choose a fifth member from among the current Board members and, failing agreement in good faith, that the four members would seek to agree in good faith on an independent person not currently on the Board to be added to the Board and the SAC. The discussions ended because the Company required that the fifth member of the SAC be another current member of the Board. Subsequently, on October 30, 2006, the Reporting Persons and the Company renewed discussions, but no settlement has been reached and significant differences between their respective positions remain."

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

Investors Prefer Coke Over Pepsi in October

Unless Coca-Cola (KO) manages a corporate blunder in the next few hours, it will be KO that has won the investor taste test challenge over Pepsi (PEP) for the month of October.

KO closed September 29 at $44.68, and was at $46.75 on last look. KO is up from an adjusted closing price at the close of 2005 after dividend of $39.46 and nominally closing at $40.31.

PEP closed September 29 at $65.26, and was down $0.33 on the day at $63.20 on last look. PEP is up from an adjusted closing price at the close of 2005 after dividend of $58.26 and nominally closing at $59.08.

Both companies did fairly well on earnings this month.

Two weeks ago KO posted $0.62 EPS vs $0.59 est. and revenues $6.45 Billion instead of almost $6.2 Billion. It even showed a 5% increase in its case volumes. After earnings Merrill Lynch added KO to its Focus One List. Ko also announced price hikes for its orange drinks because of rising orange juice prices.

Almost 3 weeks ago PEP also beat earnings with $0.88 EPS and Revenues of $8.95 Billion, compared to estimates of $0.86 and $8.8 Billion respectively. It also reaffirmed at least $2.98 fiscal EPS, and $2.98 happens to be the consensus estimate. At recent meetings, PEP has announced intentions to consolidate its Frito Lay network and put EPS growth at 7%.

Jon C. Ogg
October 31, 2006

Oracle Needs to Keep the Customer Satisfied

By William Trent, CFA of Stock Market Beat

We have discussed Oracle’s (ORCL) acquisition strategy several times, and believe it is the correct path for the company. However, the devil is always in the details, and with an acquisition strategy the details include making sure customers of both the parent and the acquired company remain satisfied.

As ComputerWorld reports, Oracle is having mixed success on that front.
Some Siebel CRM users interviewed at the Oracle OpenWorld user conference here last week said Oracle has been slow to provide details on its pledge to integrate Siebel and Oracle products and to reveal its long-term plans for its CRM product lines.

She said Oracle executives have given mixed messages about the future of the Siebel middleware products. Depending on Oracle’s plans, EDS may have to replace the Siebel middleware with software from Oracle, Reeves noted. “It’s an open question for the future,” she said.

Reeves said she hopes that Oracle moves to ease the migration to new versions of its tools. The process is now quite costly, mostly because EDS has to customize each new version, she said.
“Easing that migration and helping customers upgrade without significant financial drain is very important,” Reeves said.

At this point, it sounds like they aren’t so much ready to switch vendors as anxious to learn what improvements may be planned and how that might affect their own implementation plans. However, integrating software is a complicated process (IBM, Accenture and others make billions each year helping companies do it) and it may be unfair to expect a detailed roadmap so quickly. On the day-to-day service front, Oracle appears to be doing a much better job.
A couple of Siebel users said that Oracle’s services operation has equaled and in some cases exceeded that of the former Siebel Systems Inc.

Richard Napier, business development manager at InFact Group, a software consulting firm and systems integrator in Plano, Texas, said software patches and upgrades are easier to locate on the Oracle Web site than they had been on Siebel’s.

“In all our dealings with Oracle, we notice better communication, more efficiently handled service requests and basically more information” than Siebel offered, he said.

As long as the integration road map is worth the wait, Oracle should manage to pull everything together.

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/

NYMEX IPO That Much Closer

NYMEX, the New York Mercantile Exchange, has filed what may be its last amended S-1 filing ahead of its IPO. It is selling 6 million shares at what they have listed as a $52.00 proposed maximum offering price. It lists 4.89 million shares as being sold by the exchange, and shareholders are selling 1.11 million shares. There are also an additional 900,000 shares set for the over-allotment.

NYMEX will trade under the ticker "NMX" on the NYSE. J.P.Morgan and Merrill Lynch are listed as the lead underwriters; co-managers are listed as Banc of America, Citigroup, Lehman, and Sandler O'Neill.

We first covered the original filing back on July 17, 2006 and just on October 18 noted that the CME/CBOT merger was probably the catalyst for the NYMEX hurrying its IPO.

Jon C. Ogg
October 31, 2006

DivX Gets Dusted on Its First Public Earnings Release

DivX, Inc. (DIVX) is selling off after the company reported its earnings last night. The company posted quarterly consolidated revenue of $15.4 million, an increase of 83 percent from the third quarter of 2005. Net income in the third quarter of 2006 was $3.1 million, or $0.10 per diluted share, compared to net income of $763,000, or $0.02 per diluted share, in the third quarter of 2005. Stock-based compensation charges for the third quarter totaled $526,000 compared to $58,000 for the same quarter a year ago.

"We are very pleased to enter the public markets with a strong third quarter," said Jordan Greenhall, CEO and co-founder of DivX, Inc. "DivX continues to change the way that people experience media. Our success is shown by our expansion into new devices, partnerships and geographies, while our existing partners continue to grow their use of DivX technology. With more than 180 million downloads and over 50 million DivX Certified devices shipped worldwide, we believe that we are at the forefront of an exciting market opportunity."

The company also generated $3.5 million in new cash this quarter from operations.

DivX (DIVX) is trading Down 11.8% at $22.40 after the earnings. It appears that the street is doing some basic revenue calculations and determining that over 10-times revenues may be a bit steap.

DIVX was one of the recent Cramer calls that essentially went up about 30% on what can be attributed to his touting the stock as "The next Level 3" after he ran shares of LVLT up after it signed a supply pact with YouTube. Now before you go blame Jim Cramer for the weakness this morning and say yet another one of his picks is down huge overnight, he did initially call it a Buy well under even this lower level today, and he only took a week or two before he said to ring the register with it up so much in a short period of time.

DIVX is a very recent IPO and has a $18.00 to $26.74 trading range since its IPO.

DIVX also has a distribution pact with Google, and that contract's current end-date is said to be coming up very soon.

Jon C. Ogg
October 31, 2006

Mainframe Madness (IBM)(HPQ)(DELL)(SUNW)(UIS)

Almost everyone in the tech world figured that mainframes had given way to huge clusters of cheap servers. Think again.

IBM's mainframe revenue was up 25% last quarter. Although mainframe revenue at the computer giant was only about $2.3 billion out of $65 billion, the purchase of a mainframe leads the customer to buy boat loads of software and maintenance. Long tail.

IBM has been busy resurrecting the mainframe with programs to market the expensive computers to smaller businessses. The revenue figures show that the move is working.

The news is good for Unisys and other, smaller mainframe companies. But, if the trend grows, it may not be so good for Sun, Hewlett-Packard, and Dell who make a great deal of their money from inexpensive servers.

Although there has been little news from IBM about building a class of computer between the mainframe and the low-end server, it is worth keeping an eye out.

Digital Equipment Corporation, now gone the way of the buffalo, made a huge business out of selling mid-range computers, called mini-computers during the 1960s, 1970s, and 1980s.

DEC was eventually bought by Compaq which was swallowed by Hewlett-Packard, which lost CarliaFiorini her job. But, just because she is gone it does not mean that the mainframe is.

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

Google Acquires JotSpot, Wiki's Just Went Mainstream

If you are reading this, you probably already know what a Wiki is. People who read blogs often know about wiki's. A wiki is simply a web-based location where multiple co-workers, partners, collaborators and the like can collaborate and conduct live editing. Wikpedia is the oldest and largest wiki on the web, and it has thousands of conent creators. Most giant public Linux projects are also constructed on wiki's at some point.

This is the answer to endless chains of email regarding projects, and wiki's have still only pierced a small percentage of the marketplace compared to email, websites, and blogs. Most wiki's are stored externally, but probably 95% or more of the business or collaborative sort are held in password and access approved access.

Google (GOOG) is acquiring a wiki-creation and hosting service called JotSpot, although terms have not been disclosed. JotSpot has some free versions and some subscription versions. New registrations will be suspended temporarily until the integrations have been switched over to Google's systems.

The company has been described as a start-up, although it is one of the original wiki-spaces for the web. JotSpot is thought to be ahead of other wiki creation sites because it allows more than just text. It allows richer media and multimedia files to be stored to the likes of documents and spreadsheets.

It appears as though Google is planning to turn the subscriber services into free services, and will incorporate JotSpot into its current offerings in the near future.

If Google is going to incorporate this for free into its current mix, it has more than a ton of work ahead. Google has been having many issues with its Blogger on the front-end and on the back-end. JotSpot and other wiki services do serve a great function, but anyone who has used a wiki for more than their own notes can confirm that this newer collaboration tool has a long way to go before businesses can readily rely on wiki's. This looks like the next natural migration and when you include the photo storage abilities, YouTube, Blogger, JotSpot, and Google Base you can see the beginning of a very powerful business platform.

Jon C. Ogg
October 31, 2006

Vonage Indicated Up After Earnings

Vonage (VG-NYSE) has released earnings and revenues this morning. Quarterly revenue more than doubled to $161 Million. Non-GAAP adjusted loss from operations was -$53 million in the quarter, down 12% from the prior quarter and down 18% from the year-ago quarter. Net loss for the quarter was $62 million, or $0.40 per share, an improvement of 16% from a net loss of $74 million, or $1.16 per share, in the prior quarter and from $66 million last year.

It added 204,591 net subscriber lines in the third quarter, which is almost 1 million adds in the last 12 months. Vonage finished the quarter with 2,057,844 lines in service, an increase of 11% sequentially and 94% above the year-ago level. Total subscriber lines were 2,057,844 at September 30, 2006, versus 1,853,253 at June 30, 2006 and 1,061,786 at September 30, 2005.

Average monthly telephony services revenue per line for the quarter was flat sequentially at $26.33 and up $1.49 from the third quarter 2005. On a year-over-year basis, positive shifts in customer mix to premium calling plans and the introduction of an Emergency 911 Cost Recovery fee contributed to a 6% net improvement in average monthly telephony services revenue per line.

Direct margin as a percentage of revenues increased to 64% in the third quarter 2006 versus 62% in the second quarter 2006 and 54% in the year- ago quarter. Direct cost of telephony services fell $0.66 sequentially to $6.86 on a per line basis and declined $1.70 from $8.56 in the year-ago quarter.

Total marketing costs were 57% of revenues, or $91 million, in the third quarter 2006 versus 63% of revenues, or $90 million, in the second quarter 2006 and 80% of revenues, or $59 million, in the year-ago quarter. Marketing costs per gross subscriber line addition were $254 for the third quarter 2006, an increase of 6% from the second quarter 2006.

Average monthly customer churn increased to 2.6%, up from 2.3% in both the second quarter 2006 and the year-ago quarter. The increase is attributable in part to the rapid growth in subscriber lines throughout 2006 and resulting impact on customer care.

The Company is reaffirming guidance on the following metrics:
- Fiscal Year 2006 Total Revenue: $600 to $615 million
- Fiscal Year 2006 Marketing Expense: $360 to $380 million
- Second Half 2006 Direct Margin(% of Total Revenue): 62% to 65%
- Second Half 2006 Adjusted SG&A(% of Total Revenue): 39% to 41%
- Positive Adjusted Operating Income as early as Q1 2008

The Company is updating subscriber line guidance:
- Fiscal Year 2006 Ending Subscriber Lines: 2.2 to 2.3 million

There are several metrics that the Bears can use against the company, but the initial indication is up on VG shares. The volume is still too thin to hang any firm figures on. Since the company is showing numbers that can be lived with, you should have a lot of "chat room" related traders moving the stock back and forth today. VG had over 5 million shares listed as its short interest as of October, down from almost 5.8 million shares.

This is a stock that the street is still somewhat in the guessing game on for many of the normal metrics used by analysts. It is of course known it is still fairly young company that has now only 2 earnings reports as a public company, and calling it a controversial and poor after-market IPO would be understatements.

The bears can focus on rising churn and rising marketing costs per subscriber, but so far the street has chosen to look alsewhere. So far it looks like traders are focusing on the early 2008 positive adjusted operating income, and that (with its burn rate) may be the main focal point in what has been such a battleground stock.

Jon C. Ogg
October 31, 2006

More Trouble For Citigroup: Goldman Gets Into Loans

Stocks: (GS)(BAC)(JPM)(C)

It looks like Goldman Sachs wants to be your banker, at least if you are in the private equity business. It the recent private equity purchase of Texas Genco, Goldman put up $2.5 billion in loans to the buyout firms involved.

Goldman rank 7th in "top arrangers of high risk corporate loans" for the first three quarters of 2006. That was well below JP Morgan, Bank of America, and Citi. But, with Citi's problems in its retail business, it does not need another headache.

Citi's corporate and investment banking revenues are already under pressure. And, the company's stock performance has hurt the market's belief that management can turn the big bank into an earnings machine.

The contrast in stock prices tells a lot of the story. Over the last six months, Citi's stock is flat. Goldman's is up almost 20%.

Ouch.

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

CBRL Selling Logan's Roadhouse Instead of IPO

CBRL Group (CBRL) is a stock that has not been without criticism and not gone without volatility. The company had faced many internal pressures in the last year, although it has managed to get back closer to its highs over just the last 3 months.

CBRL has been in a long process of spinning off Logan's Roadhouse as its own standalone company in an IPO. We even covered the actual filing from the company back on July 14.

This morning, that has been thrown out the window. CBRL has opted to just sell the Logan's Roadhouse unit rather than go through an IPO and a full divestiture to shareholders. A New York-based private equity firm called Bruckmann, Rosser, Sherrill & Co., Inc. and a Los Angeles-based affiliate of Canyon Capital Advisors formed an affiliate group called LRI Holdings to acquire Logan's Roadhouse.

Logan's currently operates 143 and franchises 25 restaurants in 20 states. Total consideration in the transaction is $486 million, subject to approvals and contingencies. CBRL itself had a market cap of $1.32 Billion based on yesterday's close. More information can be found on the company and on the merger at the company website.

Jon C. Ogg
October 31, 2006

Pre-Market Stock News (Oct. 31, 2006)

(ADM) Archer Danields $0.61 EPS vs $0.56e.
(AEP) Amer Electric Power $0.99 EPS vs $0.99e; sees Fiscal 2006 $2.65-2.80 vs $2.73e.
(AGEN) Antigenics -$0.24 EPS vs -$0.22e.
(AGR) Agere Systems $0.30 EPS vs $0.24e.
(AL) Alcan $1.22 EPS vs $1.23e.
(ASV) ASV Inc. $0.19 EPS vs $0.28e.
(BIIB) Biogen-Idec $0.60 EPS vs $0.48e; raised fiscal guidance. R$703.5M vs $682M(e).
(BJS) BJ Services $0.76 EPS vs $0.75e.
(CBRL) CBRL is Selling its Logan's Roadhouse unit for $486 million.
(CEO) CNOOC reported revenues up 25% on higher gas prices in China/world.
(EK) Eastman Kodak reported a loss instead of a gain, but that included items.
(ENTU) Entrust gets a pact to secure information and identities for Expedia.
(ETR) Entergy $1.83 EPS vs $1.81e.
(GBX) Greenbrier $0.76 EPS vs $0.63e.
(GPI) Group 1 Auto $1.10 EPS vs $1.03e.
(GW) Grey Wold $0.25 EPS vs $0.26e.
(HAL) Halliburton sets $15 to $17 range for KBR.
(HRVE) Harvey Electronics CEO resigned.
(HSII) Heidrick & Struggles $0.60 EPS vs $0.55e.
(IACI) IAC/Interactive $0.35 EPS vs $0.33e.
(INTU) INtuit notified that SEC ended its option probe and will seek no recommendations of action.
(INTX) Intersections $0.15 EPS vs $0.12e.
(IRM) Iron Mountain $0.20 EPS vs $0.21e.
(JOE) St. Joe $0.18 EPS vs $0.11e, but that is before $0.10 in restructuring charges.
(KNDL) Kendle International $0.35 EPS vs $0.34e.
(LEXG) Lexicon Genetics -$0.20 EPS vs -$0.25e.
(LYO) Lyondell 10M share secondary priced at $25.50.
(MAS) Masco $0.60 EPS vs $0.58e.
(MFB) Maidenform filed to sell 7.8 million shares of stock for holders.
(MS) Morgan Stanley is reportedly taking a 15% stake in Avenue Capital, a distressed debt specialty firm.
(NXTM) NxStage Medical -$0.34 EPS vs -$0.37e.
(OSK) Oshkosh Truck $0.66 EPS vs $0.72e.
(PG) P&G $0.79 EPS vs $0.78e.
(PLUG) Plug Power announced new government contracts.
(PNC) PNC $1.28 EPS vs $1.25e.
(Q) Qwest $0.09 EPS vs $0.07e.
(RCII) Rent-a-Center $0.51 EPS vs $0.49e.
(RNAI) SiRNA gets acquired by Merck.
(RRA) RailAmerica $0.18 EPS vs $0.21e.
(SCLN) SciClone -$0.03 EPS vs -$0.05e.
(TCC) Trammel Crow is being acquired for $49.51 by CB Richard Ellis.
(UARM) Under Armour $0.32 EPS vs $0.25e; sees 2007 revenues above its own growth target.
(UBS) UBS missed earnings expectations overseas because of trading revenues.
(UTHR) United Therapeutics $0.79 EPS vs $0.53e.
(VC) Visteon -$1.38 EPS vs -$0.80e; includes items and unsure if comparable because revenues were slightly ahead.

Select Analyst Calls (Oct. 31, 2006)

ABN cut to Reduce at Deutsche Bank.
ALEX cut to Neutral at JPMorgan.
APCC raised to Hold at Citigroup.
BEAS reitr Buy at Jefferies.
BORL cut to Neutral at B of A.
BRL raised to Buy at Citigroup.
BSX started as Outperform at Credit Suisse.
CHAP started as Neutral at Goldman Sachs.
CCU cut to Mkt Perform at Wachovia.
CKFR reitr Buy at Jefferies.
CMA cut to Underweight at Prudential.
CSCO replacing CIEND on Goldman Sachs Conviction Buy List.
CVC cut tpo Mkt Perform at Wachovia.
DGIN reitr Buy at Jefferies.
ECLP cut to Mkt Perform at FBR.
ESLR cut to Hold at Jefferies.
HDIX started as Buy at Deutsche Bank, started as Outperform at Piper Jaffray.
HRZ raised to Overweight at JPMorgan.
ICE added to Goldman Sachs Conviction Buy List.
KSS cut to Hold at AGEdwards.
MCHX cut to Underperform at RBC.
MDT started as Neutral at Credit Suisse.
MPWR cut to Mkt Perform at Raymond James.
MYL cut to Hold at Citigroup.
NILE cut to Underperform at Piper Jaffray.
ORCC reitr Buy at Jefferies.
ORCL reitr Buy at Jefferies.
PMTI cut to Neutral at Merriman Curhan.
PNX cut to Sell at Merrill Lynch.
POT raised to Buy at Merrill Lynch.
RVBD started as Neutral at Goldman Sachs, started as Buy at Deutsche Bank.
SBL cut to Neutral at Baird.
STJ started as Underperform at Credit Suisse.
STT raised to Overweight at Prudential.
THC cut to Sell at Deutsche Bank.
TSS cut to Hold at AGEdwards.
VOL started as Neutral at Goldman Sachs.
VZ cut to Neutral at UBS.
WCRX started as Neutral at Goldman Sachs, started as Overweight at Morgan Stanley, started as Neutral at JPMorgan.

October 31, Best Of 24/7 AM Edition

Counterfeit Microsoft: What's It Worth?

Microsoft (MSFT) launched 55 legal actions around the world in an attempt to get software dealers to stop selling counterfeit versions of their software.The world's largest software company says that it wants the behavior ended, but it does not say what it is costing the company now.

A recent study by the European Union says that up to 7% of worldwide commerce is based on pirated goods. That would be $300 million in lost revenue in total.According to the latest Microsoft 10-Q, the companies two big software divisions, client and server brought in $5.8 billion in the quarter, so an annual run rate of over $23 billion. If the piracy rate of those software products is 7%, Microsoft loses over $1.6 billion a year.

That's real money.



Trans-Fat Range Wars: McDonald’s And Starbucks

Stocks: (MCD)(SBUX)(YUM)

New York City is thinking of setting a ban for restaurants that sell foods with trans-fats and Kentucky Fried Chicken is not going to sell food containing the stuff.

That opens the door to the question about what the really big food and beverage chains will do about the “bad health” issue of trans-fats and what it will cost them to fix Trans-fats are unsaturated fats that can clog your arteries, and perhaps are killing consumers left and right.McDonald’s and Starbucks, with their donuts, cookies, and hamburgers are apparently stuffed with trans-fats.

It poses two problems for the huge chains. First, there is a cost to replacing menu items with new foods. Trans-fat foods have a longer shelf life. They are cheaper than products made with content like butter. They also require less refrigeration. If you have a business with thousands of outlets, changing a lot of the “eats” over to a healthier fare could be damned expensive.

The other problem is the tobacco company/car company issue. Smokers sue cigarette companies for giving them cancer and heart disease. And, of course, the State of California is suing the auto manufactures for polluting the air.

People may now think that Starbucks and McDonald’s have poisoned them with trans-fats, knowingly cutting short the customer’s lives by filling their bodies with sludge. It has premature heart attacks and strokes written all over it.

KFC does not have much to lose. They are fairly small and comparatively poor next to Starbucks and McDonald’s.It has to end up in court. Everything else does.



As The US Goverment Give Up On Royalties, Big Oil Needs Some Chaos

Stocks: (XOM)(CVX)(COP)The US Government surrendered without lifting a finger. Its case that Chevron underpaid for use of federal land to pump gas in the Gulf of Mexico was dropped.

Oil and gas companies are mandated to pay part of their sales for product brought out of land owned by the government. But, the calculations are fuzzy.

Big oil stands to add to its profits if the feds don't push for a higher rate of royalty. What's it worth? Perhaps several hundred million dollars.

But, it is a small gift. With falling oil prices, it will not make up from the likely drop in profits at Big Oil. Inventories are still rising. The fears that Saudi production could be hurt by terrorists is receding. And, OPEC's plan to cut production seems to have no teeth.

Ah, for a little, tiny war. Not one in which anyone gets hurt, mind you. Or, a little coup d'etat. Just something to grab the headlines for a day or two.

Of course, higher oil prices are not the only reason that Big Oil has had larger profits, but, there must be some reason that the stock prices of these companies are up an average of 40% over the last two years. But, that number was closer to 70% for Exxon just a few months ago. Before oil prices came down from over $70 to under $60.

Oil prices are now hostage to whether there is any chaos in the world events that would change oil prices. Threats of attacks on oil facilities in Saudi Arabia recently pushed prices up. But, it did not last. Oil companies need an event that no sane person would wish for. Mayhem.

Hard to say if it will come.

There is no evidence that oil executives are warmongers or anarchists. But, that does not mean that a touch of chaos isn’t helpful to raising the price of oil.

Counterfeit Microsoft: What's It Worth?

Microsoft launched 55 legal actions around the world in an attempt to get software dealers to stop selling counterfeit versions of their software.

The world's largest software company says that it wants the behavior ended, but it does not say what it is costing the company now.

A recent study by the European Union says that up to 7% of worldwide commerce is based on pirated goods. That would be $300 million in lost revenue in total.

According to the latest Microsoft 10-Q, the companies two big software divisions, client and server brought in $5.8 billion in the quarter, so an annual run rate of over $23 billion. If the piracy rate of those software products is 7%, Microsoft loses over $1.6 billion a year.

That's real money.

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

Viacom Rattle's YouTube's Cage (VIA)(GOOG)(TWX)

Viacom wants YouTube to take down some of the entertainment company's intellectual property. The stuff it copyrights. Things like the Stephen Colbert show. Hard to sell them in re-runs when they are available on the web for free.

So, the dance between Google, the new owner of YouTube, and the big content companies continues.

The maneuvering for earning money off video on the web is just beginning. But, YouTube would be making a mistake to assume that the Time Warners and Viacoms of the world need it. They have set up websites of their own. YouTube videos of their content draws away audiences that might go to those sites and watch video ads or click on banners. A lot of $$$ are involved. And, copyright infringement can be an ugly business.

Google may have bitten off more than it can chew.

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

IBM Leaves The US, Gingerly

IBM is setting up development centers in India and China. Its global procurement center has already be relocated to China.

The two new centers will help IBM build its service-oriented architecture business "which makes it easier for businesses to quickly find information stored in different formats."

The India facility will focus on solutions for healthcare. The China-based operation will work on government and bank solutions.

What happened to locating these jobs in the US? IBM now has 43,000 employees in India. That number is likely to grow. And, while IBM keeps it headquarters in the US, there seems to be a dearth of announcements about adding facilities here.

IBM has benefited from its new service-oriented strategy. On the basis of a strong financial performance in Q3, the companies stock has gone from $74 in July to the current $92, right at its 52-week high.

Let's hope that IBM's US-based employees made a lot of money on their stock options. They may need it for early retirement.

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

As The US Goverment Give Up On Royalties, Big Oil Needs Some Chaos

Stocks: (XOM)(CVX)(COP)

The US Government surrendered without lifting a finger. Its case that Chevron underpaid for use of federal land to pump gas in the Gulf of Mexico was dropped. Oil and gas companies are mandated to pay part of their sales for product brought out of land owned by the government. But, the calculations are fuzzy.

Big oil stands to add to its profits if the feds don't push for a higher rate of royalty. What's it worth? Perhaps several hundred million dollars.

But, it is a small gift. With falling oil prices, it will not make up from the likely drop in profits at Big Oil. Inventories are still rising. The fears that Saudi production could be hurt by terrorists is receding. And, OPEC's plan to cut production seems to have no teeth.

Ah, for a little, tiny war. Not one in which anyone gets hurt, mind you. Or, a little coup d'etat. Just something to grab the headlines for a day or two.

Of course, higher oil prices are not the only reason that Big Oil has had larger profits, but, there must be some reason that the stock prices of these companies are up an average of 40% over the last two years. But, that number was closer to 70% for Exxon just a few months ago. Before oil prices came down from over $70 to under $60.

Oil prices are now hostage to whether there is any chaos in the world events that would change oil prices. Threats of attacks on oil facilities in Saudi Arabia recently pushed prices up. But, it did not last. Oil companies need an event that no sane person would wish for. Mayhem.

Hard to say if it will come.

There is no evidence that oil executives are warmongers or anarchists. But, that does not mean that a touch of chaos isn’t helpful to raising the price of oil.

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

Europe Market Report 10/31/2006 ST Micro, Daimler Up Sharply

Markets in Europe were slightly higher at 5.45 AM New York time.

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

The FTSE was up .3% to 6,142. Barclays was up .9% to 711.5. BP was down .3% to 590. BT was down .6% to 277.25. Prudential was up 1.1% to 648. Reuters was down .4% to 446.5. Vodafone was up 1.1% to 135.5. Unilever was up .7% to 1317.

The DAXX was up .4% to 6,284. Bayer was up .2% to 39.27. Daimler was up 2.3% to 44.63. DeutscheBank was up .1% to 98.46. Deutsche Telekom was down .3% to 13.46. SAP was up 1.1% to 157.25. Siemens was up .3% to 71.25.

The CAC 40 was up .1% to 5,368. Alacatel was up 1.2% to 10.16. AXA was up .7% to 29.86. France Telecom was up .4% to 20.5. ST Micro was up 2% to 13.55. Vivendi was up 1.2% to 30.33.

Data from Reuters

Douglas A. McIntyre

Trans-Fat Range Wars: McDonald’s And Starbucks

Stocks: (MCD)(SBUX)(YUM)

New York City is thinking of setting a ban for restaurants that sell foods with trans-fats and Kentucky Fried Chicken is not going to sell food containing the stuff.


That opens the door to the question about what the really big food and beverage chains will do about the “bad health” issue of trans-fats and what it will cost them to fix Trans-fats are unsaturated fats that can clog your arteries, and perhaps are killing consumers left and right.

McDonald’s and Starbucks, with their donuts, cookies, and hamburgers are apparently stuffed with trans-fats. It poses two problems for the huge chains. First, there is a cost to replacing menu items with new foods. Trans-fat foods have a longer shelf life. They are cheaper than products made with content like butter. They also require less refrigeration. If you have a business with thousands of outlets, changing a lot of the “eats” over to a healthier fare could be damned expensive.

The other problem is the tobacco company/car company issue. Smokers sue cigarette companies for giving them cancer and heart disease. And, of course, the State of California is suing the auto manufactures for polluting the air.

People may now think that Starbucks and McDonald’s have poisoned them with trans-fats, knowingly cutting short the customer’s lives by filling their bodies with sludge. It has premature heart attacks and strokes written all over it.

KFC does not have much to lose. They are fairly small and comparatively poor next to Starbucks and McDonald’s.

It has to end up in court. Everything else does.

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

Comcast 1, Verizon 0 (CMCSA)(T)(VZ)(BLS)

Wall St. liked Verizon’s cell phone numbers, but the broadband part of their earnings sent a shudder through investors.

While the company put on 1.9 million new cell customers, broadband subscribers only rose by 448,000.


With Verizon and it rival Cingular (owned by AT&T and BellSouth) continuing a history of strong wireless sales, the good news is already baked into the stock prices.

But, the shadow of Comcast’s huge cable broadband network must disturb the sleep of Verizon management. Their lack of progress with adding their own broadband customers is a sign that the cable companies are not just holding their own. With cable’s ability to offer voice-over-internet, TV and broadband, the phone companies have to play catch-up.

Verizon is betting the ranch on improving its broadband to the home system by upgrading it to fiber. Old news. But, the initiative has only brought in 118,000 customers, although it service is in its early stages.

Comcast flanked the phone companies by adding a large number of broadband subscribers and voice over IP users. VoIP customers rose 483,000 in the last quarter compared with the same period a year ago.


Verizon may be a wireless powerhouse, but its foray into consumer broadband is still lagging, and, with its huge investment in fiber, that cannot continue.

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

Click Fraud Blues

Stocks: (GOOG)(YHOO)(F)

Whenever someone says that want an audit, good things rarely lie ahead. Several of the nation’s largest advertisers want the large internet sites to give a better accounting of their audiences and validity of users clicking on text ads. And, why not? Click fraud has been an issue on the internet for some time.


But, now companies like Kimberly-Clark and Ford want an army of auditors looking over the shoulders of the Googles and Yahoo!s of the world. If there is a finger on the scales, they want to know about it.

Of course, for old media, this is nothing new. Television audiences have been measures for decades. The Audit Bureau of Circulations has checked newspapers and magazines, and has sometimes found that publishers are cheating.

If big newspapers can do it, why can’t large websites?

For a company like Google, where virtually all of the news is good, it is hard to imagine that something might come out of left field to undermine the revenue growth of the company’s hugely successful AdSense platform.

But, bad news does have a habit of catching up with good.

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

Ask.com Is Going Nowhere: Barry Diller’s Fantastic Journey

Stocks: (GOOG)(TWX)(YHOO)(IACI)

Ah. To believe that anything is possible. That’s the ticket.

Shares of IAC/Interactive have done well this year, up almost 15%. Odd for an internet stock, although the company also owns big TV commerce channel Home Shopping Network. But part of IAC’s appeal is that it owns No. 5 search engine Ask.com.

According to Comscore, Ask.com has between 5% and 6% of the US search engine user market. Google is over 45%, followed by Yahoo! at 28%, and Microsoft at 12%.


It would appear that Google will hold its lead, at least until Hell freezes over. Search is critical to the strategies of Yahoo! and Microsoft.

Microsoft can’t stumble in search. For the new Microsoft Live suite of products to work, its search function has to be more and more widely used. And, the company is making the case that they can close the ground between themselves and the two leaders to anyone who will listen: "We believe the search business is still in its infancy, and we’re upping our game with cutting edge features like best of breed Local and Image search, along with practical tools that give people more control to help them better find what they’re searching for," a company spokesperson told BetaNews.

Yahoo! is also in a position where it cannot afford to lose any more of its search share. With Google cutting deals with companies like MySpace to provide search features, a marginalization of Yahoo! search would put the last nail in the big portal’s coffin.

Ask.com may be a nice product. But IAC does not have the audience or balance sheet to mount a real campaign to catch the companies ahead of it. According to the company’s last 10-Q, IAC has operating income of $81 million in the last quarter. Retailing was almost half of the company’s business. Ticketing, lending, real estate and teleservices businesses made up nearly another 30%. That means that Ask.com is not a very large business, and if it is strategic to IAC, it does not show in the numbers.

Ask.com might be a nice toy for IAC, but that is all it will ever be.

Could TI Get A Break? How About AMD Or Intel?

Stocks: (INTC)(TXN)(AMD)(MSFT)

If a stock or group of related stocks falls far enough, you can always find someone on Wall St. who thinks they are cheap. The new darling of that crowd is Texas Instruments.
The argument is not completely without merit. Sales of devices that use chips from TI may improve, but, they may not. Cell phone sales are actually projected to grow less than 10% worldwide next year down from over 20% in 2006. Total cell phone sales may approach one billion units for the current year, but Texas Instruments needs that market to keep a torrid pace.

If TI’s core markets like cell phones and consumer electronics devices do not move up sharply, the stock is not exactly cheap. It trades at about $31 now. But, over the last two years, it has been as low as $21. It could still fall a fair amount to stay in its 24-month range. Its performance over that stretch has been about the same at the S&P 500, which means it is up about 20%.

The case for Intel and AMD having better 2007s is also built on a reasonable foundation. Microsoft Vista will need powerful chips so that PCs can take advantage of all of the new OS’s features. But, price wars have hurt margins at the x86 producers, and there is not reason to assume that the trend will simply disappear because Vista needs better chips. Dell, Lenovo, and Hewlett-Packard are not inclined to pay any more for components than they have to.


AMD may not need a lot of good news to recover. At it current level of about $21, it is off by half from its 52-week high. Investors assume that Intel’s new dual core and quad core products are going to hurt AMD’s PC and server share. But, if the No.2 maker of x86 products shows that it can gain some of the market without further margin erosion, the stock might get some of its groove back.

It is unlikely that Intel and AMD would both go up at the same time. What Intel loses, AMD tends to gain. And the same holds true in both directions. Intel is also beaten down. In the summer of 2005, the stock was close to $29. It now trades at $21, so a sliver of good news could move it up.

The chip companies may do better in 2007. But, there would have to get some breaks that hardly fall into the “sure thing” category.

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

Media Digest 10/31/2006 Reuters, Wall Street Journal, New York Times

Stocks: (MNST)(IBM)(MSFT)(SNE)(VIA)(GOOG)(BP)(F)(VZ)(COP)

According to Reuters, IBM will set up two new IT centers in China and India, highlighting the importance of the regions for future growth.

Reuters writes that Microsoft is filing 55 suits around the world to prevent software dealers from selling counterfeit products.

Reuters also reports that the US Justice Department is investigating Sony for possible antitrust violations in the SRAM markets.

Reuters also writes that Viacom has asked YouTube to take down certain material to which Viacom owns the rights.

The Wall Street Journal reports that BP's decision to defer upgrading its facility may have contributed to a deadly explosion at one of its Texas facilities in 2005.

The Wall Street Journal writes that Ford will cut it North American production by as much as 12% in the first half of 2007.

The Wall Street Journal also reports that Verizon's net rose 2.8% on strong wireless sales, but broadband subsription growth was week.

The New York Times writes that the US has dropped a bid to collect royalties from Chevron which could save oil companies hundreds of millions of dollars.

The New York Times also writes that the founder of Monster has resigned from the company's board as its investigates options back-dating.

Douglas A. McIntyre

Asia Markets 10/31//2006 Creative Technology, NTT Down, Singapore Air Up

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

Asian markets were up modestly.

The Nikkei rose .3% to 16,399. Canon was flat at 6270. Credit Saison was down 3% to 4230. Daiwa Securities was down 1.7% to 1327. Fuji Film was down .2% to 4340. Hitachi was down 2% to 675. Honda was up .2% to 4140. Japan Air was down .4% to 223. Mazda was up 2.1% to 791. Mitsubiishi Electric was up 1.9% to 1020. NEC was down .3% to 602. NTT was down 2.2% to 589000. Docomo was down 1.1% to 179000. Sharp was up 1.2% to 2085. Softbank was down 2.8% to 2560. Sony was up .2% to 4850. Toshiba was down .4% to 740. Toyota was down .7% to 3440. Yahoo Japan was down .9% to 45500.

The Hang Seng was .2% to 16,324. Cathay Pacific was up 1% to 16.98. China Mobile was up 1.4% to 63.2. China Netcom was down .7% to 13.82. HSBC was flat at 146.8. PCCW was up .6% to 4.77.

The KOSPI was up .6% to 1,365.

The Straits Times was up .1% to 2,694. Creative Technology was down 7.1% to 10.4. Singapore Air was up .7% to 15.2.

The Shanghai Composite was up 1.6% to 1,838.

Data from Reuters.

Douglas A. McIntyre

Analyzing Rogers Communications (RG)- A Near Duopoly

By Yaser Anwar, CSC of Equity Investment Ideas

Nikhil Hutheesing, editor of Forbes Wireless Stock Watch, recommends buying shares of Canadian cable company, Rogers Communications (RG).


Toronto-based Rogers does business in four segments: cable, wireless, media, and telecom. The $18 billion company was founded in 1920 and currently provides cable television service, high-speed Internet access, and cable telephony service to more than one million customers in Canada. It also owns 314 video stores.


Rogers’ operating profit grew by 31% in the second quarter on a 29% rise in revenues, led by a 57% growth in sales at the cable division. Over the past four quarters, Rogers has produced $1.56 billion in operating cash flow on $7.54 billion in sales.


Shares of Rogers trade in the US, and had changed hands for as little as $36.62 on April 3 of this year. They’ve since advanced 54% and hit a new 52-week high on Friday, closing at $56.98, or 44.5 times expected 06 EPS of $1.28.


Even with that kind of a multiple, Rogers sports a modest 0.46 price-earnings growth (PEG) ratio, indicating that shares are relatively cheap if the company achieves the 30% annualized growth over the next five years that analysts have forecasted.


Hutheesing believes there are good reasons to be optimistic about Rogers. “Rogers represents one of the few full service communication plays available to investors,” he says. “In the U.S., no similar company exists. There are cable TV companies that offer high speed Internet access and Voice-over-IP telephone service. There are also wireless service providers like Cingular and Verizon Wireless that offer cell phone service and broadband 3G service and telecom companies that provide Internet access via DSL. In Canada, Rogers Communications offers customers all of these ”options.”


The company’s communications portfolio is comprehensive and, Hutheesing points out, it’s doing business in a fertile market. “Besides its extraordinary wealth of assets, Rogers operates in a market with greater growth opportunities than exist in the U.S., because the market for wireless is only about 50% penetrated in Canada compared to 70% in the U.S.,” says Hutheesing. “So its growth rates will be higher than companies such as Sprint Nextel and Verizon Wireless.


Hutheesing originally recommended Rogers in May of 2006 but remains a bull at today’s prices. “Rogers is moving aggressively on all fronts and plays a key role in Canada's communication systems, and I think the company's shares offer impressive upside ahead.”
Yaser's Take: I've resided in Canada for almost two years now. Over here you either use Rogers for your cable TV, internet & communication (Landlines and/or mobiles) needs or you use Bell.


Unlike the US, where you have- Comcast, AT&T, Verizon, Cingular etc, these two companies, Bell & Rogers, have the lion share of the market, a duopoly you can say.


From a consumer's point of view this gives you less choice, but from a shareholders' perspective you couldn't ask for more. There are a couple of small companies which seek to full-fill your cable and cellular needs, but lack the economies of scale that Bell or Rogers have.

http://equityinvestmentideas.blogspot.com/index.html

A Quick Take On Harley Davidson (HOG)

By Yaser Anwar, CSC of Equity Investment Ideas

With the repurchase of 21+ million shares, $1+ billion, in 05 & almost 10 million shares in 2006, one can indeed say management has done a terrific job thus far.


Not only that, investors can expect further stock repurchases and dividend hikes as management utilizes FcF. This is a Warren Buffet type of company. From the past couple of years, management has been continuing a series of payout boosts (from 8% in 01 to 18% so far). In the 2nd Q, HOG increased its quarterly dividend by nearly 17%.


Last year the company had a short-term earnings blip and the stock fell 10 points, would have been a great buying point. That's exactly what Bill Nygren, one of the top value investors, of OakMark Fund (OAKLX) did. OakMark is one of HOG's Top Mutual Fund Holders.

http://equityinvestmentideas.blogspot.com/index.html

Cramewr's MAD MONEY: Positive on Tobacco and Chevron After Election

Last night on CNBC's Mad Money, Cramer discussed the tobacco industry in a positive light. He thinks there is a pretty good buy list: Altria (MO), Reynolds (RAI), Vector (VGR), UST (UST), and Carolina Group (CG).

Cramer also said he thinks in California that PROP 87 will pass that makes oil companies in California fund outside alternative energy. He thinks it will hurt oilcompanies and thinks Chevron (CVX) has the most exposure. He thinks if that happens you will want to Buy Chevron (CVX) after the election and after they cut numbers.

Cramer also interviewed the CEO of Rite Aid (RAD), and ended up saying that RAD is the one for those who can tolerate high speculation.

Jon C. Ogg

Cramewr's MAD MONEY: Positive on Tobacco and Chevron After Election

Tonight on CNBC's Mad Money, Cramer discussed the tobacco industry in a positive light. He thinks there is a pretty good buy list: Altria (MO), Reynolds (RAI), Vector (VGR), UST (UST), and Carolina Group (CG).

Cramer also said he thinks in California that PROP 87 will pass that makes oil companies in California fund outside alternative energy. He thinks it will hurt oilcompanies and thinks Chevron (CVX) has the most exposure. He thinks if that happens you will want to Buy Chevron (CVX) after the election and after they cut numbers.

Cramer also interviewed the CEO of Rite Aid (RAD), and ended up saying that RAD is the one for those who can tolerate high speculation.

Jon C. Ogg
October 30, 2006

Rackable Avoids Getting Racked

After seeing the headlines come across on Rackable Systems (RACK), it seemed the stock should itself have gotten racked. But the company's guidance and large short interest helped it trade up after-hours.

RACK posted EPS $0.19 and revenues of $80.5 Million, versus estimates at $0.20 and $84.6 million.

The guidance for Q4 and for 2007 saved the company. Next quarter Revenue is projected to be in the range of $100 - $110 million and EPS at $0.25 to $0.27, compared to $94.3 million and $0.23 estimates. Fiscal 2007 Revenue is projected to be in the range of $475 to $525 million on EPS of $1.28 to $1.40, versus $455 million and $1.28 estimates.

Third quarter gross margin was negatively impacted by rapid price increases in component pricing, specifically DDR memory. The company expects gross margins to improve in the fourth quarter and for the full year 2007.

RACK shares traded up 6% to $30.85 in after-hours trading, and it closed up 2% to $28.89 in regular trading ahead of earnings. RACK's 52-week trading range was noted as $13.80 to $56.00. Some 20.5% of its float, or 5.649 million shares, are listed in the short interest for October.

Jon C. Ogg
October 30, 2006.

Market Wrap (October 30, 2006)

DJIA 12,086.50; Down 3.76 (0.03%)
NASDAQ 2,363.77; Up 13.15 (0.56%)
S&P500 1,377.93; Up 0.59 (0.04%)
10YR-Bond 4.6730% ; Down 0.002
NYSE Volume 2,218,156,000
NASD Volume 1,724,181,000

Verizon (VZ) beat earnings, but profit taking too the stock down 3% to $37.65. Cramer said it was a Buy after the drop.

American Power Conversion (APCC) rose 26% to $30.02 after it agreed to a $31 buyout from Schneider.

Yahoo! (YHOO) rose 2.4% to $25.95 after Merrill Lynch started it as a Buy.

Both Sirius (SIRI) and XM Satellite (XMSR) fell after each announcing high-end auto deals today. SIRI closed down 1.5% at $3.79 and XMSR closed down 4.5% at $11.40.

Point Therapeutics (POTP) closed up 19.2% at $1.49 after positive osteosarcoma results.

Qualcom (QCOM) closed down 1% at $36.74 after the EU is investigating overcharging cell phone makers for its CDMA.

Blackrock (BLK) rose 3.7% to $155.00 after it missed earnings on net charges for the Merrill Lynch operations, but gace a solid outlook.

Applied Digital (ADSX) Closed up another 10% at $2.47 after adding more sales personnel at its Digital Angel.

Emisphere Tech (EMIS) fell 23% to $6.77 on mixed drug results for diabetes.

Tenet Healthcare (THC) closed down 10.5% at $7.42 after it gave another earnings warning.

Taro (TARO) closed down 9.4% at $10.88 after the resignation of its CFO amid an investigation.

Google (GOOG) closed up 0.3% at $476.57 after removing copyrighted materials off of YouTube.

Trustreet Properties INc traded up 35% to $16.97 after an acquisition by GE Capital.

You can expect the earnings onslaught to resume tomorrow. As far as beating or missing earnings estimates, CNBC gave the following numbers with 63% of the S&P 500 Index companies having already reported earnings: 74% above, 11% Met, and 15% were under.

Jon C. Ogg

Cramer: Verizon is Back from the Dead

In CNBC's STOP TRADING segment, Cramer was discussing a DJIA component stock that is back from the dead. Cramer was saying that Verizon (VZ) is that name. He said the 4.5% and spin-off of Yellow Pages makes this a BUY right here down $1.43 on earnings. He thought the numbers were great. He said management has delivered, and this management is underpaid compared to the other CEOs. He says wireless is the key to the company.

Cramer also noted Comcast (CMCSA) positively again.

Cramer likes Comcast better than Verizon, but the two can be split.

On Yahoo! (YHOO) Cramer discussed the strong performance from Merrill Lynch calling it a Buy. Cramer thinks Panama will help, but he still thinks management needs to be changed at Yahoo!.

Jon C. Ogg
October 30, 2006

The Street Looks Forward to KBW's IPO Next Week

KBW, Inc. is on the IPO docket for the week of November 6 to November 10. 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. It plans to offer 6.5 million shares at a range of $19-$21, giving the deal a proposed market cap of $609 million on $130 million raised in share sales.

The underwriters include KBW and Merrrill Lynchas lead underwriters; and co-managers are 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.

The deal looks pricey if you use backward metrics, but if you believe in the company for 2007 and beyond it starts to look like a far better deal. Even though the pricing seems aggressive, it is priced better than it really looks. Initial indications from the street points to strong demand from the street on the IPO at the current terms.

Jon C. Ogg
October 30, 2006

Horsemen Stocks Maintain Most Actives Leadership; Most Actives Under-$5.00

As you will see the volume in raw shares has flip-flopped again to the Horsement stocks. The low priced most actives are just slow today and the bigger-cap leaders are regaining some of their losses posted on Friday after Goldman Sachs reported that Motherboard orders in SE Asia were falling off of a cliff because of severe oversupply. Here is the data today, and all the Horsement stocks are trading higher.

Ticker	Price	Change	Volume
FNSR	$ 3.72	$ -	3,935,366
LVLT	$ 5.39	$ 0.19	23,183,560
SIRI	$ 3.79	$ (0.06)	12,541,853
SUNW	$ 5.55	$ 0.05	30,537,352
PMCS	$ 6.61	$ 0.20	3,472,708
CNXT	$ 1.89	$ (0.02)	5,517,452
CHTR	$ 2.29	$ -	9,520,394
Total			88,708,685
NASDAQ	2357.61	6.99	1,012,627,000
Ticker	Price	Change	Volume
INTC	$ 21.25	$ 0.15	22,041,732
MSFT	$ 28.66	$ 0.32	23,734,034
CSCO	$ 23.94	$ 0.22	26,470,850
AAPL	$ 80.43	$ 0.02	11,564,583
ORCL	$ 18.38	$ 0.28	16,137,161
Total			99,948,360

Jon C. Ogg
October 30, 2006

Market Turns Its Back on Sirius and XM Premium Auto Deals

Sirius Satellite Radio (SIRI) and XM Satellite Radio (XMSR) have each issued high-end deal announcements today, although neither deal will add a significant number of net subscribers.

Sirius (SIRI) has announced that Bentley Motors will use Sirius exclusively in the 2007 models. "All vehicles equipped with SIRIUS will include a lifetime subscription to the service, which will enhance each Bentley's individual customization and give each customer a new vehicle experience," said Andrew Stuart, CEO for Bentley Motors Inc.

XM (XMSR) has also announced that Porsche will use XM Radio as its sole supplier for satellite radio systems starting in 2007. "XM has the technology and content that is consistent with Porsche's commitment to providing our customers the best possible driving experience," said Peter Schwarzenbauer, President and CEO, Porsche Cars of North America. "We are very pleased to be expanding our partnership with XM."

The street doesn't seem to care because the deals will be small add-on deals incrementally. Both stocks are trading lower with Sirius (SIRI) down 1.8% at $3.78 and with XM Satellite (XMSR) down 5.7% at $11.27.

Jon C. Ogg
October 30, 2006

Citigroup's Broken Game Plan (C)(BAC)

Almost everyone else has taken a swipe at Citigroup recently, so why not add the British egg-head weekly The Economist. The paper did not spare Citi’s feelings.

The paper made two critical points. One is that Citi's overseas consumer banking operation is going nowhere. Earnings for the unit are flat. While Citi has a lot of branchs outside the US, it does not have critical mass in most countries.

The second issue is Citi's consumer bank at home. In the US, several banks like Bank of America have more offices than Citi.

In short, Citi may be big in consumer banking, but it is not a concentrated share in any one place. Not enough to give it scale.

Citi's management is simply focusing in the wrong units. The company's investment bank and corporate lending units are areas where the bank can pack some muscle.

Indeed, areas of the bank like trading have been strong performers although they can be very cyclical. Wealth management has been a recent bright spot for the big bank. So, it remains mystifying why management would focus on a flagging consumer unit, no matter how large, instead of businesses that are doing well.

Investors are getting more impatient by that day. Citi's CEO may not have a lot more time to show that his strategy is working.

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

RLR Capital Partners Raises Stake in Infocrossing (IFOX) to 6.2%

From 13D Tracker

In an amended 13D filing on Infocrossing, Inc. (Nasdaq: IFOX), RLR Capital Partners disclosed a 6.2% stake (1.34 million share) in the company. This is up from the 5.1% stake (1.08 million shares) the firm disclosed in its original 13D filing in June. In the original filing the firm disclosed a letter sent to the company regarding prior meetings with the company and forthcoming value creating strategic and capital structure opportunities. Also in the original filing, the firm said they believe shares of IFOX are "substantially undervalued."

The stock is up from the mid-$10 level when the firm disclosed the letter, currently trading at $12.45. According to calculations, the firm paid an average price of $11.06 each for its shares.

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

The Grinch Stole Yahoo!'s Christmas

Merrill Lynch upgraded Yahoo! from "neutral" to "buy" on the theory that the stock has fallen far enough and that the holidays will help salvage the big internet company's poor performance. Merrill also thinks that 2007 could be helped by Yahoo!'s new advertising search platform. It seems a little late to be upgrading Yahoo!.

If its last quarter is any indication, it may have better numbers in Q4, but not compared with Google, and possibly not compared to it own Q4 in 2005. The problem facing Yahoo! is that it is losing share in the search market and that its display ads are dropping in key categories.

Christmas is not going to turn that around. Google's AdSense product has such a huge lead inthe marketplace that even if Yahoo! builds a better mouse trap, there is no guarantee that advertiser will automotically go to the work to move to a new product. It is much like Google's foray into online payments. PayPal from EBay has not lost much, if any, share to it. As a matter of fact, PayPal was the big earnings winner for Ebay last quarter.

Santa is not giving Yahoo! anything this year. Except, maybe, a lump of coal.

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

Capella Education IPO Terms Set

Capella Education Co. has set its proposed IPO terms of 4 million common shares being offered at a $17.50 and $19.50 per share range.

The Minneapolis-based provider of online post-secondary education services via the Internet will trade trade under ticker CPLA on NASDAQ. It is the for-profit parent company of Capella University, an accredited online academic institution. Capella University offers undergraduate and graduate degree programs in business, technology, education, human services and psychology, and currently serves more than 16,000 enrolled adult learners from all 50 states and more than 63 countries.

The current expected IPO time frame is for next week. Credit Suisse is serving as the lead underwriter; and co-managers are listed as Banc of America, Piper Jaffray, and Stifel Nicolaus.

Shareholders include Forstmann Little, Technology Crossover Ventures, Insight Venture Partners, and Cherry Tree Ventures. More information can be found at the www.capella.edu or www.capellaeducationcompany.com websites.

Jon C. Ogg
October 30, 2006

Opnext IPO Filing: Optical Components Carve-Out From Hitachi

Opnext Inc., a maker of optical components, has filed for an IPO given a $150 million nominal value for registration purposes. The Eatontown, N.J.-based supplier plans to trade on the Nasdaq under ticker symbol OPXT.

Goldman Sachs is serving as the lead underwriter; and co-managers are listed as J.P.Morgan, CIBC World Markets, Cowen & Co, and Jefferies. Hitachi is the company’s primary shareholder because it is the former parent. Clarity Partners and Cross-Atlantic Capital are also said to be holders. The actual timing of the IPO is not yet determined. The company is still losing money, but does more than $150 million in revenues.

More information on the company can be found at the www.opnext.com website. There is also a great Q&A page giving more information at http://www.opnext.com/suppt/faq.cfm URL.

It is very hard to call Hitachi (HIT) a great backdoor play into this IPO, even though the street is rewarding new technology IPOs with high premiums. That is because the HIT ADR's give the company a net value of $19.5 Billion in the equivalent of Japanese Yen. That does NOT merit a trade just as a backdoor play. Others may treat HIT as undervalued or at a huge discount, but we are only evaluating this event in the sense of exploring HIT as a Backdoor Play. The current price on HIT ADR's is roughly $59.00, and it has a trading range of $55.74 to $76.57 over the last 52-weeks in the thinly traded ADR's.

Jon C. Ogg
October 30, 2006

The New York TImes Falls Further Behind (NYT)(NWS)

It is not enough that The New York Times company has been bleeding circulation and advertising revenue and that online operations cannot make that up. Now there is further evidence that it cannot hold circulation in it home market.

The latest figures for daily newspaper circulation show the New York Times down 3.5% for the six month period ending September 30 dropping to 1,086,798.. The other key NYT property, The Boston Globe, did even worse. Circulation there fell 6.7% to 386,415.

Moving onto the list of the top five circulation dailies in the US is the NY Post. It now ranks ahead of papers like The Chicago Tribune and Washington Post.

The New York Times better look over its shoulder. News Corp's NY Post might be gaining on them

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

Sony Goes To The Mattresses (SNE)(AAPL)(TWX)

Like a mob boss trapped by federal agents in a farm house, Sony has decided it needs to go to the mattresses.

The company now admits that its Playstation3 platform and burning PC batteries recall are going to be legacy problems. Sony needs to turn elsewhere for growth.

But, by signalling which parts of the company might make up for problems with its gaming platform, Sony may be taking the risk of making promises to Wall St. that it cannot keep. For a second time.

Where is Sony pointing for relief? Its movie studio and consumer electronics businesses.

The big Japanese conglomerate is risking its growth on two notably fickle industries. Sony Pictures has done very well this year, with films like "The Da Vinci Code" , but, as studios like Warner Bros have showed recently success one year does not necessarily roll into the next.

Consumer electronics is also a tough and crowded market. IPod. Samsung. Toshiba. It's a long list.

Now that Sony has telegraphed its punches, it better deliver.

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

Select Analyst Calls (Oct. 30, 2006)

AAP started as Underweight at JPMrgan.
AMP raised to Neutral at B of A.
AZO started as Underweight at JPMorgan.
BIIB raised to Peer Perform at Bear Stearns.
CAR cut to Hold at Soleil.
CRS raised to Outperform at Bear Stearns.
CX raised to Buy at Merrill Lynch.
ENR started as Underweight at Morgan Stanley.
END started as Overweight at JPMorgan.
HLND started as Overweight at Lehman.
IR cut to Hold at Deutsche Bank.
JNS cut to Sell at Goldman Sachs.
KLAC raised to Outperform at RBC.
KOF raised to Equal Weight at Lehman.
KOMG raised to Buy at Deutsche Bank.
LLL raised to buy list at Goldman Sachs.
LMT raised to Buy at Goldman Sachs.
LNET cut to Hold at Soleil.
LVS started as Buy at Deutsche Bank.
NOVN cut to Sell at Soleil.
NVLS cut to Sector Perform at RBC.
OSG cut to Sell at Citigroup.
ORLY started as Neutral at JPMorgan.
PSUN raised to Neutral at JPMorgan.
SHW started as Equal Weight.
SSCC raised to Buy at B of A.
WFMI cut to Sector Perform at RBC.
WSH raised to Overweight at Morgan Stanley.
YHOO raised to Buy at Merrill Lynch.

Pre-Market Stock News (Oct. 30, 2006)

(ANSV) Anesiva delayed some testing results for 2 or 3 weeks with the FDA.
(APCC) American Power Conversions up $6.29 after getting $31 buyout offer from French mkaer of power back-ups.
(ARJ) Arch Chemicals $0.30 EPS vs $0.29e.
(BLK) Blackrock $1.06 EPS vs $1.14e; unsure if items in number.
(CCO) Clear Channel Outdoors $0.09 EPS vs $0.07e.
(CCU) Clear Channel Communication $0.38 EPS vs $0.37e.
(CSCX) Cardiac SCiences extended GE pact.
(DCO) DCO $0.40 EPS vcs $0.34e.
(FPL) FPL Group $1.15 EPS vs $1.07e.
(GERN) Geron -$0.15 EPS vs -$0.16e.
(HOC) Holly Corp authorized up to $100 million for stock buybacks.
(IFSIA) INterface filed to sell 5 million shares of common stock.
(KIM) Kimco Realty $0.56 EPS vs $0.6e.
(LOW) Lowe's up 1% afterCramer said it has bottomed and should be bought.
(LYO) Lyondell filed to sell 10 million shares of common stock.
(MCEL) Millennium Cell -$0.04 EPS vs -$0.05e.
(NRGN) Neurogen starts phase II studies on insomnia patients.
(PMTI) Palomar Tech trading up afgter Cramer said it can still be bought to make some money.
(QCOM) Qualcoom reported that a court has enjoined Broadcom from using Qualcomm's patent.
(RIN) Rinker rejected offer from Cemex as it wants more cash.
(RSG) Repbublic Services $0.58 EPS vs $0.51e.
(SKYW) Skywest $0.63 EPS vs $0.63e.
(SYY) Sysco Foods $0.37 EPS vs $0.36e.
(VZ) Verizon $0.68 EPS vs $0.66e.
(WMT) Wal-Mart said OCT retial sales look up only 0.5%.
(WSSI) Webside Story names new CEO; said it will meet or beat previous guidance.

Radio Stocks Runs Like A Scalded Dog

The word is that video killed the radio star. Seem that way. YouTube. AOL Video. Yahoo! Video, MovieLink, IPTV.

:Might as well bury radio and sing “Danny Boy”.

Thing is, radio won’t die. At least not shares in radio companies.

Last week Sirius shares took a big run from $3.68 to $3.95 in one day. The NBA started on Sirius, but there was no big news there.

XM had an even bigger move over the course of a trading day. It jumped from under $10 to $11.95. The company made an announcement about some convertible securities, but nothing that would seem to move the stock almost 20%.


Traditional radio giant Clear Channel also made an impressive move from $31.52 on last Tuesday to $35.46. The company’s management indicated it might be willing to consider a private equity buy-out.


It may be that nothing will come of the action, but at least some of Wall St’s big money is looking at radio again. Maybe it’s because it hasn’t gone away and stocks in the sector have gotten so cheap. Sirius has not been this low since late 2004. XM has not been this low since 2003. Clear Channel has come up some, but its but, its August low of $27.17 is as low as the stock has been since 2002.

XM and Sirius still lose a lot of money. But, there is a segment of the investing community that believes that they are growing fast enough to become profitable before they have to raise more money. Clear Channel had an operating profit of almost $1.5 billion in 2005 on revenue of $6.6 billion.

High definition TV may be great, but try watching it while you are driving.

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

Airbus Hands Boeing The Keys To The Plane (BA)

The smoke signals have been rising above the horizon for some time now. Emirates Airlines has dropped orders for the ten Airbus 340s it was buying and will go with the Boeing 777 instead. Emirates is also sending some of its folks to Airbus to see whether the European airplane manufacturer will ever actually build the 380 super-jumbo jet. If the visit goes badly, Boeing could pick up some 747 orders as well.

When Boeing announced earnings recently, its stock dropped from about $84 to $80.. Investors were trading the past instead of the future. Never a good thing.

Boeing earnings were down, partly because the company closed its airplane broadband unit. However, sales were up as were airplane deliveries. Boeing also raised guidance for next year.

The folks on Wall St. wanted a little more than Boeing had to offer, and refused to trade the shares higher. Maybe it will take Airbus shutting down for them to see the orders coming Boeing’s way.

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

Wal Mart Moves Toward Negative Growth (WMT)(TGT)

Someone came up with the term “negative growth” because the word “shrinking” seemed to mundane. No matter. Wal-Mart is very close to shrinking and negative growth here in its home market. After saying it might grow 2% to 4%, then recently revising that to 1.3%, Wal-Mart could only muster a .5% same-stores sales figure. For all we know that could be revised downward as it was in another recent month.

Despite revamped stores and discounting holiday goods, Wal-Mart may be reaching the end of it growth phase in the US. It may simply have too many stores, too much market share, and too much competition from other large retailers like Target. There are, of course, large online retailers like Amazon who did not even exist a decade ago.

According to the company's 10-Q, in its last full quarter Wal-Mart’s international sales grew from $14.2 billion last year to $18.6 billion, about 32% compared to 6% in the US. Operating income for the unit grew from $799 million to $977 million. Wal-Mart US stores had operating income of over $4 billion, so international has a ways to go to catch up. But, it will have to try.



Since Wal-Mart has exited the South Korean and German markets, overseas growth may be a lot tougher.

But, no matter. The “negative growth” may be starting for the huge retailer’s US operations.

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

Sun Micro, Almost Good Enough (SUNW)(HPQ)(IBM)(DELL)

Sun Microsystems is one of those companies that gets applause when is loses less than it used to. Imagine what would happen if it made money. It’s a queer world, but Sun’s modest progress is earning it some fans.

Sun’s stock has made an impressive move from $3.82 in July to $5.50 last week. That’s 43% in under four months, and it may be a little bit over done.

Sun did have a pretty good quarter. Revenue rose 17% to $3.189 billion. Net loss was $54 million. A year ago the number was $123 million.

Some analysts are buying into a big comeback at Sun.

Sun has acquired some companies like Storage Technologies and See Beyond, so not all of the company’s growth is “organic” to use a slick business school phrase. It certainly makes the revenue growth less impressive.

Sun’s biggest problem is that its core server business competes with companies like IBM, Dell, and Hewlett-Packard. The breadth of their product lines and the size of their sales staffs make every piece of shares Sun goes after subject to equal interest from larger companies with stronger balance sheet.

A 43% return is a hell of a thing. Just don’t count on its happening again.

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

Car Mini Mills (TM)(GM)(DCX)(F)

Stocks: (TM)(GM)(F)(DCX)

Back when Big Steel was crushed like a roach by slowing demand from Detroit and cut rate product from Japan, some manufacturing genius came up with the idea of the min-mill. Companies like US Steel were having trouble keeping their large mills open due to high overhead and labor costs. Most of the large mills are gone now, and companies like Nucor product steel in much smaller facilities.

The New York Times has a modest proposal. Now the US car companies are losing share, perhaps they could “down size” and resort to more specialized manufacturing facilities like many car companies have in Europe. None of the car companies in Europe has a dominant share, so most have resorted to modest complexes. Companies like BMW do not make a large number of cars compared to Detroit, so for the luxury car company, it makes sense. Toyota only focuses on one car segment in Europe, so modest facilities do the job for them as well.

There are, of course, some items that may have been lost in the translation of European practices. For starters, the UAW, which has seen its membership shrink almost every year as GM and Ford try to cut costs, will have to draw a line somewhere on employment. Fewer, smaller factories may not be a hit with labor.

Also, Detroit has shown no interest in cutting the number of model lines it produces. Having fewer and smaller factories would probably mean having fewer product lines. GM is not taking any of its brands off-line, even loser like Saturn. And, Ford still has Mercury, so no sign of cutting there.

The other problem Detroit has in moving in the “niche” direction is that the Japanese are coming. They are coming in a way that is even worse than it has been as they take share from the US companies on American soil. Beyond the manufacturing facilities already in the US, word from Japan’s Mainichi newspaper is that douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Europe Market Report 10/30/2006 Bayer, Reuters Down

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

Markets in Europe are down at 5.15 New York time.

The FTSE is off .6% to 6,125. BEA is off 1% to 410.25. Barclays is off .1% to 706. BP is down 1.2% to 595. British Air is down 1% to 457.25. BT is down .4% to 280. Diageo is up .2% to 978.5. GlaxoSmithKline is down .6% to 1402. Prudential is down .9% to 625. Reuters is down 1.8% to 443. Unilever is down .6% to 1307. Vodafone is off .4% to 133.75.

The DAXX is off .8% to 6,216. BASF is down .9% to 68.29. Bayer is off 1.5% to 39.01. DaimlerChrysler is off .9% to 42.9. DeutscheBank is down .8% to 97.75. Deutsche Telekom is down .4% to 13.46. SAP is down .9% to 154.57. Siemens is off 1.1% to 70.45.

The CAC 40 is off .9% to 5,348. Alcatel is off .8% to 9.96. AXA is down. 1.2% to 29.61. France Telecom is down .9% to 20.36. ST Micro is down .7% to 13.25. Thomson is down 1.5% to 13.36. Vivendi is up a fraction at 29.8.

Data from Reuters.

Douglas A. McIntyre

Media Digest 10/30/2006 Reuters, Wall Street Journal, New York Times

Stocks: (IBM)(LEH)(WMT)(SNE)

According to Reuters, IBM and Lehman Bros are teaming up to invest in a number of public and private companies in China.

Reuters said that Sony will try to improve profits from its movie and consumer electronics businesses to offset losses from its PlayStation 3 gaming product.

The Wall Street Journal writes that France's Schneider Electric has offered to buy US power parts supplier American Power Conversion in a $6.1 billion deal.

The Wall Street Journal reports that Wal-Mart posted poor US same-store sales of .5% in October.

The New York Times writes that some executives may have back-dated options to avoid huge tax consequences.

The New York Times also writes that advertiser want internet firms to hire auditors to check clicks and viewer at websites to combat click fraud.

The New York Times reports that the BBC website will begin taking online ads. The move is opposed by some users and BBC employees.

Douglas A. McIntyre

Asia Markets 10/30/2006 KDDI Up, Canon, Honda Down Sharply

Asian markets were down sharply.

The Nikkei fell 1.0% to 16,352. All Nippon Air was down 2.1% to 457. Bridgestone was down 4.3% to 2440. Canon was down 3.4% to 6270. Daiwa Securities was down 2.8% to 1350. Fuji Film was down 2.2% to 4350. Hitachi was down 1.7% to 145. Honda was down 3.2% to 4130. Japan Air was up .4% to 224. KDDI was up .3% to 727000. Mazda was down 3.6% to 775. NEC was down 1.6% to 604. NTT was down 2.1% to 602000. Docomo was flat at 181000. Sharp was flat at 2060. Softbank was up .8% to 2655. Sony was down .8% to 4840. Toshiba was down 3.4% to 743. Toyota was down 1.6% to 6980. Yahoo Japan was down 3% to 45900.

The Hang Seng was closed.

The KOSPI was down 1% to 1,356.

The Straits Times was down 1.4% to 2,692.

The Shanghai Composite was up .1% to 1,810.

Data from Reuters.

Douglas A. McIntyre

Cramer: PMTI

Cramer then went over an old idea that is still working. Sometimes good ones at highs keep going. He went over Palomar Medical Tech (PMTI).

He hasbeen positive on this numerous times and he thinks the vanity of today isdriving this. He said he has been on it since $34.00 andnow it is $48. He said if you have been there the whole time you could take some off the table. He said the shorts didn't cover either.

Cramer thinks the new laser will get FDA approval for home use, and thebears do not think the FDA will approve it. He said they also getback-streams of revenues from competitors after the won patent cases againstthem. He said trades at 30 times earnings and has over 30% growth.

He says that even 30% above his initial call he thinks this can make you madmoney.

Jon C. Ogg

Whither Tech Spending?

By William Trent, CFA of Stock Market Beat

Merrill Lynch recently said tech should outperform, based on:
A pickup in tech industrial production

Firming order books
Improving capacity utilization
Global exposure
70% of earnings reports beating estimates

While we don’t dispute any of the points Merrill makes, we would note that the capacity utilization is likely to drop when all of the semiconductor equipment on order starts getting installed.

However, the bearish argument goes beyond nit-picking to the data Merrill chose to ignore. For example, Friday’s GDP report shows a continued slide in spending on equipment and software.

Likewise, while Thursday’s durable goods report showed a modest uptick in orders for computers and electronic products, shipments were down from a year ago.

And the decline is being led by semiconductors, as we have been predicting (and which further supports our assertion that the new equipment will hurt capacity utilization. What’s more, semiconductors are the only reported segment that does not report orders, backlog or inventory. So the overall order pickup may be misleading if semiconductor orders are tailing off.
Bulls will counter that the US GDP and durables reports do not reflect the global economy (see Merrill’s fourth point.) But the counter-argument to that is that they reflect a very large portion of the global economy, and the portion that typically leads the way when it comes to the economy.

We are still hopeful that Microsoft’s Vista operating system will spur overall tech spending. But we also think it is important to listen to both sides of the story.

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/

Further on Yankee Candle

From Value Discipline

David Phillips at 10-Q Detective is an excellent equity analyst who provides consistently diligent and thorough reviews of corporate events and governance matters. He has just written up in this post a recent 8-K for Yankee Candle (YCC.)

As I had suggested yesterday, the conflicts that exist between management serving its own interests in a takeover and the minority shareholders that have hired them can result in a sense of unfairness. Just as the business is hitting on all cylinders, it becomes someone elses' vehicle to ride.As David points out, management has provided itself with substantial severance packages so long as the Change in Control event occurs by April 1, 2007.

David is quite correct in his suggestion that this puts a very high probability on the successful closing of this deal in the first quarter of 2007.

http://www.valuediscipline.blogspot.com/

The Monday Edition: A Look At- 1) Housing, GDP & Consumer Spending 2) Earnings 3) Gold & 4) Four Major Global Markets.

From Yaser Anwar, CSC of Equity Investment Ideas

As usual the Monday edition is long, but I promise to add value to your investment outlook. Thank you in advance for your time and patience.

HOUSING, GDP & CONSUMER SPENDING

Fears that the US housing market crash will deflate global economic growth and commodity markets have grown in recent months. Housing starts have plunged, unsold housing inventories have piled up, and prices have had severe declines. Given that home equity withdrawals have financed a huge portion of US consumer spending growth in recent years, a housing market crash has the potential to eat away at the GDP, which it has done.


The GDP came in at the lower level, 1.6%, well below expectations. The culprit of this low number was a 17+% drop in residential investment spending. Housing alone took 1.1% off GDP growth. Net exports subtracted 0.6% from growth in the 2nd Q.


With the Big 3 automotive production plans looking lean for 4th Q, this could lead to substantial build up in inventory, which was only a touch lighter in 3rd Q, could increase as a drag on growth in the quarter ahead. On the positive side, business and government spending functioned as the source of growth. But business capital spending is unlikely to accelerate from here as the profit share of GDP begins to erode due to a slowing economy.


Neither cheaper gas nor cheaper homes (30 year pricing lows!) should send holiday sales on a rocketing path upwards. Since consumers did not pull back spending during periods of high energy prices in the past two summers, I believe consumers will remain buoyant about spending. That being said, I doubt that we will see any further acceleration in spending, even though the receding energy prices should improve household cash flows.


The high share prices of consumer discretionary stocks (retail sector especially) mean the risks of disappointment have now increased. This is evident by the downside risks due to high short interest in the sector.
EARNINGS

The average EPS growth for the S&P 500 stands at approximately 12% and positive surprises outnumber negatives by 5:1. For the S&P 500, analysts are expecting 10% 3Q growth, up from 8% since the start of October but down from almost 13% last quarter. Of those reporting, more than 71% have come in better than analyst expectations while only about 10% have fallen short of Street consensus. (Source: Zacks)
GOLD

According to the World Gold Council’s latest publication, the long-term outlook for gold remains positive due to a combination of rising wealth levels and favorable demographics, among other factors. However they published some conflicting data such as- Jewelry demand in India and the Middle East was down 43 percent year on year and 32 percent, respectively, according to the World Gold Council.

GLOBAL GROWTH- CHINA, EUROZONE, HONKONG & ISRAEL

While the US is slowing down, growth continues to advance at an exorbitant pace in China and the rest of developing Asia, OPEC countries and Russia. For the most part, that growth is not dependent on exports to a potentially vulnerable US economy. Last year China produced 6.5 million motor vehicles without exporting a single car to the US market.


Exports to the US account for only 8% of China’s GDP (vs. 30%+ for Canada) , and mean significantly less for other rapidly growing economies like Russia or India. Despite a marked deceleration in US global GDP growth to approximately 2% next year, global economic growth will continue at a robust 4%, more than sufficient not only to sustain today’s level of commodity prices but to push some, energy prices to record highs.


The economic picture in Europe is brighter than it is in North America. For the first time in more than half a decade, Eurozone GDP growth outpaced America’s in Q2 of this year.


Domestic demand appears to be stronger in the big Euro players this time around, with Germany’s IFO index close to 15-year highs while its industrial production is growing at around 5% YOY. The rest of the Eurozone’s industrial sector is following a similar course, with region-wide production tracking a healthy 4%+ growth rate.


Property and banking sectors in Hong Kong should benefit from Fed's decision to leave interest rates unchanged amid moderate pace of US economic expansion.


The last market I’d like to inform you about is Tel Aviv, Israel. The market comprises of some of the best upcoming technology companies, yet investors continue to shun it due to geopolitical tensions. According to ETF Connect, Israel’s ETF is trading at a 10% discount to underlying assets. With a forward and trailing PE of 5, I urge you to consider it.

I hope you found my analysis and thoughts insightful. Thank you and take care.

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

Harbinger Capital and Salton (SFP) Enter Confidentiality Agreement Which Could Lead to Merger

From 13D Tracker

In an amended 13D filing after the close on Salton Inc. (NYSE: SFP), 15.54% holder Harbinger Capital disclosed that on October 26 they entered into a confidentiality agreement with the company. The agreement follows an recent disclosure that on October 19, the fund sent a letter to the company proposing a merger between Salton and Applica (NYSE: APN), a small household appliances company they recently acquired.

On Monday, Salton announced they would explore strategic alternatives, which they said could include a sale or merger of the company.

Salton is a distributor of small appliances, home decor, and personal care products, best known for its George Foreman grill.

Shares of Salton surged 15.2% last Friday and another 24.7% on Monday following the Harbinger proposal and the company's willingness to consider a sale. The stock is flat today.

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

Former UBS Star Trader Takes 6.5% Stake in Cheniere Energy (LNG)

From 13D Tracker

In a 13D filing on Cheniere Energy Inc. (AMEX: LNG), SRM Global Master Fund disclosed a 6.5% stake (3.55 million shares) in the Company.

In a pretty standard disclosure, SRM said it intends to review their investment in CNG on a continuing basis and may engage in discussions with management concerning the business and future plans.

SRM Global was recently launched by Jon Wood, a former star trader at UBS AG, who according to an article from Bloomberg, helped the bank earn $2.4 billion over a six-year span. The report said Wood never lost money for clients during his 16 years at UBS, according to a marketing document sent to prospective investors. Wood's fund was one of the most anticipated of the year and quickly raised over $3 billion.

Shares of Cheniere Energy, a developer of liquid natural gas-receiving terminals, are trading at $26.50 --- near a 52-week low of $24.72 and well off the 52-week high of $44.40.

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

Cramer: FDA Approval Stock?

Cramer then went over an old idea that is still working. Sometimes goodones at highs keep going. He went over Palomar Medical Tech (PMTI). He hasbeen positive on this numerous times and he thinks the vanity of today isdriving this. He said he has been on it since $34.00 andnow it is $48. Hesaid if you have been there the whole time you could take some off thetable. He said the shorts didn't cover either.Cramer thinks the new laser will get FDA approval for home use, and thebears do not think the FDA will approve it. He said they also getback-streams of revenues from competitors after the won patent cases againstthem. He said trades at 30 times earnings and has over 30% growth.He says that even 30% above his initial call he thinks this can make you madmoney.Jon C. Ogg

Weekend Edition: Surprising Analyst Call of the Day: Krispy Kreme

The largest Analyst Impact Call goes to Krispy Kreme (KKD) today. Yes, the troubled doughnut company that hasn't made proper SEC filings for as long as anyone cares to remember. KKD is up 8% at $9.97 before noon today. It gapped up to about $9.60 from a $9.24 close yesterday, and it has hardly looked back.Prudential's analyst Howard W. Penney initiated coverage of Krispy Kreme at an "Overweight" rating (just like Krispy Kreme eaters) with a 12-to-18 month price target of $15. Prudential believes that the high brand loyalty and its business model will help to create strong cash flows and high return on investment. The analyst also expects the company to file its way-late financial statements by October 31. It is embattled in a criminal investigation and more shareholder suits than you would want to discuss.Whatever diet fad comes out tends to go against Krispy Kreme. It doesn't matter if you try Atkins, South Beach, NutriSystems, Herbalife, restricted calorie, heart healthy, or any of them. Krisp Kreme gets hit by every diet out there, except maybe for the Pigging Binger Plan.The stock is still down well over 80% from its old highs, but it is up over 130% from the $3.91 recent lows in the last 52-weeks. The 52-week high for KD is $12.11.Jon C. Ogg

Weekend Edition: Hertz Finally Sets Its IPO Terms

Hertz, one of the largest auto and equipment rental companies, has finally set its IPO terms. We have known this deal was coming, it just boiled down to WHEN and WHAT terms. Now we know the WHAT with some 88.235 million shares being set at a range of $16 to $18 per share. The offering looks to be some $1.41 Billion on the low-end, and almost $1.6 Billion raised if the deal prices at the high-end. The original filing was given only a $1 Billion nominal amount, but it isn't clear if that was just for filing calculations or if there was a bump on preliminary demand. The total offering will be $1.8 Billion if all over-allotment shares are taken. The WHEN should be in the coming weeks.Hertz is going to trade (this time) under the ticker "HTZ" on the NYSE. The lead underwriters are Goldman Sachs, Merrill Lynch, Deutsche Bank, J.P.Morgan and Lehman Brothers; and co-managers are set as Morgan Stanley, Credit Suisse, UBS, and Wachovia.Hertz has a long and somewhat humorous history of being public and being a controlled company. It was bought out from Ford Motor (F) in December of 2005 for around $15 billion by Clayton, Dubilier & Rice: Carlyle Group and Merrill Lynch Global Private Equity; although Ford had filed for it to come public before that in June of 2005. Ford spent a stent as a public company under Ford for a while, but it March of 2001 Ford re-acquired the 18.5% of the stock that was outstanding. It had gone public under the HRZ ticker back in 1997. Before that it was part of the Park Ridge Corporation (venture of Ford and ex-management), and Ford acquired it in 1994. Back in the 1960's it became part of the RCA Corporation, and was its own listed company in the 1950's after being under GMC. It was formed as an amalgamation of operations in the early 1920's and General Motors bought it in 1926.In case you didn't notice, Hertz has been a bride passed around the neighborhood. It looks like the parent couldn't control the daughter and sold her off, then she was lost in a poker match, then sold off again, then reacquired after a makeover, then a collector wanted her, and now she's going to be made available to the public again.Here is what we posted back in July on the upcoming IPO.Naturally the private equity guys are going to get their cut before the IPO. They are going to take out roughly a $426.8 million special dividend before the IPO. As of June 30, 2006 the company had $13.94 Billion listed as debt from leases and borrowed funds. After the IPO including over-allotments the current holders will still hold 67.5% of the common stock. The company posted first half of 2006 results as $3.827 Billion revenues and a reported net loss of $33.3 million. Before interest and depreciation, Hertz has an implied EBITDA income of actually over $1.2 Billion. You can find more data in the SEC Filing with the hitorical data.She's been around before, but it looks like the street still has a twinkle in its eye for her.Jon C. Ogg

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Comcast Is Still Beating The Phone Company

Companies like AT&T are trading near their highs. T trades at $34.33 up from $23.35 earlier this year. Verizon, even with concerns about its huge $21 billion investment in fiber-to-the-home, trades at $38.30, at its 52-week high and up from a low of $30.

Maybe Wall St's enthusiasm for these stocks should be more tempered.

Comcast is rolling like thunder. The company's triple-play of phone, TV, and broadband is having unusual success. Comcast and its brothers in the cable business like Time Warner cable expect to have eight million voice-over-IP customers by the end of the year. The telecom giants, which want to challenge cable's TV franchise with IPTV over fiber and DSL have about 100,000 nationwide subscribers to that type of service. Too big a differnce to bridge. Maybe.

Things could get worse for the phone companies. Only 4% of the 40 million homes that Comcast passes with its lines have VoIP. Cox cable, which has been in the cable phone business longer, has that number up to 20%. That may be a blueprint for Comcast's future.

Comcast's stock is also near a 52-week high at $38.76, up from its low of $25.35. With its current advantages, it may be able to sustain that price or even take it higher.

Maybe the telecom stocks won't trade at a premium much longer.

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

Weekend Edition: AMD Challenges Intel To Get Back In The Game

Stocks: (AMD)(INTC)(ATI)(NVE)

AMD is close to closing it purchase of graphics chip company ATI Technologies. The No. 2 x86 company is already making plans. By 2009, the joint firm plans to make chips that combine AMD processing power with ATI graphics features. The chips will be relatively inexpensive, perhaps 50% less than current models made for PCs.

The move marks another shot in the ever-excalating war between AMD and Intel. Intel is out with its new Core 2 Duo chip which many reviews claim is faster that the current generation from AMD. Intel is also introducing a four core chip for servers. AMD has been taking server share from Intel for a couple of years, and now has over 20% of that market.

PC makers are hungry for less expensive chips. Margins at companies like Dell are squeezed each time they move prices down to take share from rivals like Hewlett-Packard and Lenovo. Of course, each of these companies is compelled to reviews it prices as well.

A chip from AMD that allows PC manufactures to lower prices but keep operating profit high should be a huge success, especially if these chips have graphics components that will help run the new generation of software, including Microsoft's Vista.

Intel is working on chips that will communicate with one another over laser connections, but this will be of more use in the server market.

If AMD's new chips are ready in a little over two years. Intel better get moving again on the R&D front. It may need help from smaller chip firms like Nvidia. Or, an acquisition of one of these graphics firms.

More M&A?

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

Weekend Edition: Worldwide, Microsoft Still Has An Edge On The Web

New global audience statistics from comScore show the Microsoft still has an edge in total unique visitors to its web sites each month based on September 2006 figures. But, that may not last long.

Worldwide, the web had 726.7 million visitors in the age group over 15. Microsoft sites had 505.5 million unique visitors, followed by Yahoo! Sites at 480.6 million and Google Sites at 457.5 million. But, new Google acquisition YouTube has 81 million, a jump of 12% from the previous month. Google may be in the lead when October worldwide numbers hit.

It is somewhat stunning how far other major companies lag. The Time Warner Network had 2187.8 million in September, less than half of what the leaders boast. Fox, which includes MySpace, sits at 117.8 million.

The new numbers do point out one important thing, especially for Microsoft and Yahoo!. While Google dominates many things on the internet, it does not dominate everything.

If MSN and Yahoo! can build features that allow them to be more competitive than Google, or if they can do an M&A transaction to get a set of properties like Barry Diller's IAC's Ask.com Network, they could stay in the race. Ask had 112.8 million unique visitors worldwide in September.

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

Cramer's Daily Picks

Tonight on Jim Cramer's MAD MONEY, Cramer said that Lowe's (LOW) has
bottomed, and he thinks you have to buy. He said that their earnings are 3
weeks away.

He said that the SEC went to REG FD in 2000, and that took away all the
advantage of hedge funds. He said you can now look at it the same way a
hedge fund would. You have to work bottom up and see how the suppliers are
doing what they senfd there. Top down you have to look at the strength of
the consumer and their spending.

He said a lot of hedge funds got short LOW when Stanley Works discussed high
inventories. He thinks that may be a mistake. He said Black & Decker rose
$4.00 on strong earnings, and they reported slim inventories.

He said on month ago Masco also gave cautious numbers, as did American
Standard, and as did Sherwin Williams. He said that Fortune Brands came out
and said the remodelling market was still doing well and that they gave a
good signal.

On the macro part, he said his checks with homebuilders make it look like
the worst has been seen. He also said you don't have to have a bottom in
homebuilders alone to buy LOW.

He thinks Lowe's (LOW) has bottomed out and now needs to play catch-up to
the rest of retail. Lowe's (LOW) closed down 0.98% at $30.34 today, but was
back up to $30.67 after he discussed LOW in after-hours trading. Its
52-week trading range is $26.15 to $34.85.

Cramer also said he thinks Caterpillar (CAT) has bottomed out and that is a
Buy.

Jon C. Ogg
October 27, 2006

Weekend Edition: Ford Drives Alone

Carlos Ghosn of "I will run GM for you" fame, says that a time-up with Ford is not in the cards, at least not for now. That's too bad. Ford could use a friend. It has not seen the kind of turnaround that appears to be taking root at GM.

With recent negative credit watches from agencies Fitch and Standard & Poor's, Ford's debt could move further into junk bond territory. That means the credit analysts think a bankruptcy is more likely, and that Ford may run low on cash next year. With a Q3 loss of $5.8 billion and more losses ahead Ford could use a friend, especially if Ghosn could get Nissan and Renault to chip in a few dollars for a piece of Ford. The Ford family may be concerned enough about the future value of their shares that they could go along with letting some or all of the control in the No. 2 US automaker go to someone else.

Ford's European operations could dovetail nicely with Renault. And, without a dealer network in the US, Renault could use the Ford dealer footprint to relauch its cars in the US.

Ford could also use Nissan's factory capacity in the US to close some of its own facilities, and that might give it leverage with the UAW.

But, it isn't going to happen. And Ford needs it to happen now.

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

Weekend Edition: Is Sony Just Average?

Stocks: (MFST)(SNE)(TWX)(NWS)(VIA)

When Sony had the Walkman and the Watchman and Playstation first appeared, the company was viewed as the premier consumer electronics company in the world. Sony was on the cutting edge. It was the innovator.

Perhaps that crown has passed to Apple. Maybe even Microsoft with its Xbox succees. And, perhaps, Nintendo.

Sony has lost the crown, and it probably will not get it back.

Sony lost $175 million in the quarter that just ended. Its recall of faulty PC batteries was partially to blame. The company also said its game division was in real trouble. Sony has already started cutting prices of its new Playstation3, and Playstation portables are not selling well.

Oddly enough, rival Nintendo said that its profit for the last six months was up three-fold as sales of its DS game machine did well. Very well. And, Sony's Japanese competitor is about to come out with its new Wii game platform.

Sony is in some shacky businesses now. At least for them, their game platform business is doing poorly and now will rely on acceptance of the Playstation3. With real competition from Nintendo and Microsoft, success is not a lock.

Building PC batteries in another rough business. Not only can they catch on fire and cause massive recalls, but the PC business is no longer growing as fast as it once did.

Of course, Sony owns one of the major movie studios, Sony Pictures Entertainment. But, the studio business in notoriously fickle and faces challenges from online video and piracy. And, Sony has to compete with large, well-funde companies like Viacom, News Corp, and Time Warner.

Sony was once the envy of the corporate world. That may be gone for good.

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

Weekend Edition: Comcast Is Still Beating The Phone Company

(CMCSA)(TWX)(T)(VZ)
Companies like AT&T are trading near their highs. T trades at $34.33 up from $23.35 earlier this year. Verizon, even with concerns about its huge $21 billion investment in fiber-to-the-home, trades at $38.30, at its 52-week high and up from a low of $30.

Maybe Wall St's enthusiasm for these stocks should be more tempered.

Comcast is rolling like thunder. The company's triple-play of phone, TV, and broadband is having unusual success. Comcast and its brothers in the cable business like Time Warner cable expect to have eight million voice-over-IP customers by the end of the year. The telecom giants, which want to challenge cable's TV franchise with IPTV over fiber and DSL have about 100,000 nationwide subscribers to that type of service. Too big a differnce to bridge. Maybe.

Things could get worse for the phone companies. Only 4% of the 40 million homes that Comcast passes with its lines have VoIP. Cox cable, which has been in the cable phone business longer, has that number up to 20%. That may be a blueprint for Comcast's future.

Comcast's stock is also near a 52-week high at $38.76, up from its low of $25.35. With its current advantages, it may be able to sustain that price or even take it higher.

Maybe the telecom stocks won't trade at a premium much longer.

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

Weekend Edition: Amazon’s Bezos: Still Crazy After All These Years

Amazon is a company built on a mad premise which was followed by a number of more crazy ideas that were bolted onto the company as time passed. The most outrageous part of the entire enterprise is that it worked. Selling books online, competing with bookstores, managing huge inventories. Shipping product all over the world.

The fact that Amazon's earnings were good is old news.

But, the company did the improbable up against companies like Barnes & Noble, and more recently Wal-Mart and NetFlix (DVDs), Best Buy (computers and consumer electronics), Kroger and Safeway (food), and almost anyone who sells anything anywhere. The company has even started a movie download busness. In this business it gets to compete with Apple, Disney, and Movielink.

Amazon's audacity comes from its founder Jeff Bezos. He is the only person to have ever run the company. Bezos is chairman. He is president. He is CEO. The next person on the ladder is a senior vice president. Who probably makes no decisions. It is the world according to Bezos.

Amazon's stock has gone through periods when it was as hated as any public company in America. It's shares were at $61 in 1998. Bezos made the cover of Time. By 2003, the stock traded at $16.

At most companies, Bezos would be taken away in a straight-jacket. But, the place is basically his, no matter what the other shareholders think.

His audacity and willingness to take on any competitor, not matter how large, with his online model, has earned him a company with sales moving past $10 billion a year. One that is still growing like a weed.

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

Weekend Edition: Wal-Mart Does Its Best

Wal-Mart's CEO says the company is doing its best.

Slow sales are unacceptable. But, maybe lower gas prices and Wal-Mart holiday discounts will bring the faithful back. The company will simply not accept its poor performance of 1% same-store sales growth.

Wal-Mart also said the it will rely on fewer suppliers and give out larger orders. This should help the company get its hands around ethical problems and quality standards.

It would seem pretty late in the game for one of the world's largest companies to say the a lack of growth in its home market and working on supplier quality problems are Job 1.

Wal-Mart's stock is not only flat over the last five years. Shares in rival Target are up 85%.

The excuses are so late as to be laughable.

As Sean Connery says in the film "The Rock", "Losers always whine about their best..."

Wal-Mart needs to replace apologist H. Lee Scott as CEO.

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

Weekend Edition:Starbucks: Let A Thousand Flower Bloom

During the cultural revolution, Chaiman Mao said that China should let a thousand flowers bloom. He wanted the country's cultural reach to extend from one end of the country to another.

Now, it would appear that the dead leader has competition from Starbucks. The big coffee company has stated that it will have thousands of stores in China as part of its march to hit 40,000 stores worldwide.

Each journey must begin with just one step, so Starbucks is buying 90% of Beijing Mei Da Coffee Co., which operates 60 Starbucks on the mainland. Starbucks has a total of 190 stores there.

It remains to be seen whether Starbucks will run into some of the problems that Wal-Mart has had. In particular, the state backed labor union has rounded up all of the Wal-Mart workers and passed out union cards.

Instead of labor benefits, maybe Starbucks could just offer free latte.

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

This Week on StockHouse

Friday, October 27, 2006By Sean Mason
Uranium prices could be set to soar according to Venture Friday columnist Don Whiteley, who wonders if "peak uranium" is far away.
Also on StockHouse this week:
StockHouse launched a new daily feature this week. Sean Mason reports on news that moved small and micro-cap stocks in the Canadian Small- and Micro-Cap Stock Report.
Buzz on the BullBoards this week encompassed exploration companies and trust issues. Sean Mason's column featured discussion about mining technologies, income trusts, and speculating on drill results.
Gold juniors with the right stuff are the subject of this week's StockHouse Q&A.
This week's StockHouse Top Five discloses the week's most-visited stories, forums and tools.
StockHouse was proud to launch its brand new IPO Digest, from 24/7 Media columnist Jon Ogg. The digest is a review and preview of the week's new stock offerings.
Metals and mining
Mongolia is hot for mining issues, says columnist Danny Deadlock in Microcap Monday, citing Rio Tinto's recent investment in Ivanhoe Mines. He's looking at a junior that explores for uranium.
Uranium is also the subject of this week's Venture Friday column by Don Whiteley. Is "peak uranium" so far away?
Some metals in particular are seeing sharp increases in price, thanks to a supply/demand imbalance. Uranium is one such metal, but Luke Burgess believes demand for high-quality manganese ore should drive producer prices higher in Pure Metals.
Meanwhile, the gold price could move even lower according to columnist Michael Berry in Discovery Investing.
But, opposing opinions are what makes a market. Steven Saville argues long-term trends, like the bull market for gold, end when valuations reach extremes.
And, in Best of the Blogs, Editor Keri Korteling describes one blogger's view on miners as value investments.
Financial health
A slow and steady approach can bring investment success, according to this week's Publisher's Notebook. Executive Editor and Publisher Darin Diehl gets to the heart of a conservative strategy in an interview with Pat McKeough.
Securities Sleuth Mark McNair, meanwhile, helps readers understand securities class action litigation in Investor Basics Part I.
And, James E. Young gives a simple seminar showing simple moving averages can help identify the trend on Technical Thursday.
In addition, Financially Fit editor Nancy Zambell tackles the confusing alphabet soup of retirement savings vehicles in Part 2 of her Retirement Planning series.
Big money in tiny stocks?
The Micro-cap Spotlight shines on Clinical Data, a biotech stock where news flow justifies its "strong buy" rating.

By viewing any material on or distributed by Stockgroup and its Information Providers you agree to both the following disclaimer, and the full disclaimer that can be viewed here.

http://www.stockhouse.ca/index.asp

Cramer on MAD MONEY: Likes LOW, CAT, PMTI

Tonight on Jim Cramer's MAD MONEY, Cramer said that Lowe's (LOW) has bottomed, and he thinks you have to buy. He said that their earnings are 3 weeks away.

He said that the SEC went to REG FD in 2000, and that took away all the advantage of hedge funds. He said you can now look at it the same way a hedge fund would. You have to work bottom up and see how the suppliers are doing what they senfd there. Top down you have to look at the strength of the consumer and their spending.

He said a lot of hedge funds got short LOW when Stanley Works discussed high inventories. He thinks that may be a mistake. He said Black & Decker rose $4.00 on strong earnings, and they reported slim inventories.

He said on month ago Masco also gave cautious numbers, as did American Standard, and as did Sherwin Williams. He said that Fortune Brands came out and said the remodelling market was still doing well and that they gave a good signal.

On the macro part, he said his checks with homebuilders make it look like the worst has been seen. He also said you don't have to have a bottom in homebuilders alone to buy LOW.

He thinks Lowe's (LOW) has bottomed out and now needs to play catch-up to the rest of retail. Lowe's (LOW) closed down 0.98% at $30.34 today, but was back up to $30.67 after he discussed LOW in after-hours trading. Its 52-week trading range is $26.15 to $34.85.

Cramer also said he thinks Caterpillar (CAT) has bottomed out and that is a Buy.

Cramer then went over an old idea that is still working. Sometimes good ones at highs keep going. He went over Palomar Medical Tech (PMTI). He has been positive on this numerous times and he thinks the vanity of today is driving this. He said he has been on it since $34.00 andnow it is $48. He said if you have been there the whole time you could take some off the table. He said the shorts didn't cover either.

Cramer thinks the new laser will get FDA approval for home use, and the bears do not think the FDA will approve it. He said they also get back-streams of revenues from competitors after the won patent cases against them. He said trades at 30 times earnings and has over 30% growth.

He says that even 30% above his initial call he thinks this can make you mad money.

Jon C. Ogg
October 27, 2006

Market Wrap (Oct, 27, 2006)

DJIA 12,090.26; Down 73.40 (0.60%)
NASDAQ 2,350.62; Down 28.48 (1.20%)
S&P500 1,377.34; Down 11.74 (0.85%)
10YR-Bond 4.6750%
NYSE Volume 2,405,400,000
NASD Volume 2,186,806,000

The market was a bit weak early on the weak first look at the GDP reading of only 1.6% for Q3, compared to 2.0% estimates. Goldman Sachs killed chip stocks and the NASDAQ after their chip analayst in Asia issued a report saying that motherboard demand and orders may be falling off of a cliff.

On the Goldman report Intel (INTC) fell 3% to $21.10 and AMD (AMD) fell 2.9% to $20.86, Broadcom (BRCM) fell only 0.6% to $29.19, SanDisk (SNDK) fell 4% to $48.08, and the Semiconductor HOLDRs (SMH) fell 2.55% to $33.50.

Chevron (CVX) gained 0.27% to $67.68 after beating earnings, but had been up over $68.00 at new highs earlier in the session. The Oil Service HOLDRs (OIH) fell 2.4% to $134.77.

Thestreet.com (TSCM) fell another 9.8% to $9.36 after Avondale downgraded the shares today.

Krispy Kreme (KKD) rose 6% to $9.80 after Prudential started it with an Outperform rating.

Optium Corporation (OPTM) rose 12% to $19.60 after its IPO debut.

Rinker Group (RIN) rose 33% to $71.10 on a takeover offer from Cemex (CX), and CX fell 4.5% to $30.55.

Vertex (VRTX) closed up 17.6% at $40.66 after posting positive trial results regarding its hepatitis C drug.

Microsoft (MSFT) managed to hang on to close down only $0.01 lower at $28.34 after its earnings yesterday.

Sun Microsystems (SUNW) gained another 2.6% to $5.50 and put in new recent highs after it beat earnings again.

Red Hat (RHAT) gained 5% to $15.63 after it announced another share buyback after losing so much yesterday because it will now have Oracle competing against it.

Charter Communications (CHTR) rose another 8% to $2.29 after yesterday's rise.

XM Satellite (XMSR) rose almost 13% on the day to $11.94.

3Com (COMS) rose another 3.3% to $4.89 after more reports that private equity bids for its H-3C joint venture with Huawei may be in the $1.5 to $2.0 Billion range.
Netgear (NTGR) rose 16% to $27.48 after it beat earnings.

Mannatech (MTEX) closed down 16% at $14.94 on word of an Attorney General probe in Texas.

Celestica (CLS) closed down some 13%at $10.16 after its Q4 outlook was tepid.

Have a great weekend!!!!!

Jon C. Ogg

How Would Cramer Evaluate His Own Holdings of TheStreet.Com Stock?

If you were Cramer, how would you evaluate your 2+ million share holdings in TheStreet.com (TSCM)?

TheStreet.com (TSCM) did in fact meet EPS estimates and beat the revenue consensus yesterday morning, but its shares have rolled over and died. TSCM posted $0.11 EPS as expected and posted $12.9 million in revenues instead of the $12.45 million.

Unfortunately its subscription revenue growth was disappointing to some. It posted some 49% gains year-over-year, but only 3% sequentially. 3% sequentially for the Summer quarter of Spring is actually not that big of a sin if you consider that retail clients tend to not care about the markets in August and much of July. They call it the Summer Doldrums for a reason. But we are talking about a growth stock, and the calendar may not help.

But…..there are those that feel the company plans to shift to a new model that emphasizes advertising revenue over subscription revenue, at least somewhat. This may be a signal that the company feels it is going to get more cancellations or that it just won't get much more growth. Its advertising revenues were $3.7 million, or 28.6% of total revenues. It also made an acquisition of Weiss Ratings for a total cash layout of $3.2 million. It even has a $0.025 cash dividend each quarter, which is over a 1% yield now that the shares have dropped.

If Cramer's ratings fall sharply, it definitely will have an impact on TheStreet.com subscriptions. MediaWeek pointed out that Cramer's ratings were still up 9% last month, but it was apparently only 1 of 3 mentioned that posted gains. Now as we get closer to elections, the election cycle may draw away from non-political shows.

We also had a downgrade today on TSCM shares from Avondale, who cut its previous "market outperform" rating down to "market perform." The price targets on the street are still up around $13.00, but traders look like they are bracing for more potential cuts.

So, how would Cramer evaluate his own TSCM stock?

Before getting into estimates, please understand that it is thinly covered and there are some interpretations that have to be made to estimates. The street is looking for $0.45 EPS in 2006 and $0.60 in 2007, BUT it is thinly followed. TSCM has a trailing P/E ratio of 27 and it is projected to post 33% growth for 2007. It is roughly 100% EPS growth for 2006 though. On his PEG model of P/E over growth he would say a current P/E of 27 and forward growth (27/33) only generates a ratio of 0.8181. Maybe, he'd say "buy buy buy" on a nominal basis. The problem is that with a semi-switch in business focus means that the street has to take this on faith for actually more than one or two quarters. It is also worth noting that the P/E was considerably higher before this price drop in the last 2 days. That is the market making adjustments.

The current Short Interest for October was also about 3.9 million shares, and those look like they became profitable trades that haven't created a wave of short covering yet.

So the numbers can say all they want, and now many are scratching their heads. In the last year after Cramer started MAD MONEY, TSCM shares have gone from under $4.00 to over $13.00. Now they are back at $9.33 after a drop of $1.05 so far today and after a drop of $1.80 yesterday. This also looks like it broke under its 200-day moving average now.

He won't ever comment on TSCM because he can't say much, and is likely barred from discussing it. But it would sure be neat to see if we could overlay another identical situation. Unfortunately there isn't one.

Maybe Cramer would say "buy" and maybe he'd say "sell." According to the latest filing seen Cramer's direct share ownership in TSCM was 2,016,413 shares, but that is from outside info and meant for reference only. If that number is accurate, the post-earnings drop has cost him just under $5.75 million so far.

As far as how Cramer stands with the street, that is a controversy. Message boards flare up when a Cramer pick comes out, some with praise and some are venomous. Some love him, some hate him. I personally know traders that have made money going with him on many of his picks, and others that have made money shorting his calls after they pop. That is why I find it funny that people try to do a "Cramer Performance Track Record" because he can be used for trading opportunities either way. If you like the logic then buy, if you disagree completely with him then sell. Love him or hate him, but that makes a market.

Jon C. Ogg
October 27, 2006

Cramer on "Stop Trading" (Oct. 27, 2006)

Cramer on CNBC's STOP TRADING segment discussed motherboard sales falling as being the reason for the market drop. He noted the Semiconductor names being weak, but Cramer said he sees a lot of profit taking today. He doesn't want to put too much into the sell-off, but he has to acknowledge it.

He thinks it pays for companies to be cautious, but the street doesn't want to be there if it rolls over. Cramer then said it's the PC's causing the weak semiconductor area.

Cramer then discussed Denny's (DENN) in the food plays. He thinks that the company is the problem, not the food environment. The consumer is avoiding Denny's in favor of others, instead of the consumer not spending as the company suggested.

Jon C. Ogg
October 27, 2006

Symantec's Chart Got Even Worse

The Symantec (SYMC) chart after-hours on Wednesday after its earnings was screaming "Problems!", and that held the course yesterday. After it broke under $20.00 the red flags went up, but it got even worse.

I noted that it had to go up to $20.00 or get within sniffing distance of it (within a few cents) and would need to demonstrate at least some gumption that it would stabilize. That didn't happen and it never really came close to happening. Yesterday they opened at $19.60, meaning it would require a 2% recovery from the open, which would have been recovering just over 1/3 of the 5.5% they last from close to open. On a bad reaction and on no one coming out in defense with conviction, that is difficult at best. It printed as high as $19.76, but closed down at $19.49. It was also on about triple the volume. So it closed lower, and closed lower with some conviction.

The other shoe dropped last night when McAfee (MFE) beat and MFE stock traded up 8%. So now you may have anecdotal evidence outside of the chart that the company may be losing position or may not be in control of their destiny as much as the street wants. Even though the bar was set low for Symantec and even though they could have diffused this a tad better, they goofed.

They even had a more apologetic tone in the wording and didn't really manage guidance well with explanations. That is a bad spot for a long-term turnaround growth stock. Personally I am more of a fundamental oriented pundit than I am a technician, but any fundamentalist that doesn't refer to charts and doesn't use a chart for inference is just as blind as a pure technician that will never think about reason and outlooks when looking at a chart.

Maybe you can try to blame a weak marker with DJIA down 52 points and NASDAQ down 20.83, maybe you can blame a weaker GDP number at only 1.6%, and maybe not. Right now this chart doesn't care. SYMC is trading down another 2.5% at $18.99 today and traded as low as $18.85. There isn't yet a reason to make any bold predictions that the stock will go back to the $15 and $16 handles, but there is also no reasoning evident signaling that the stock is back over $20 in the immediate future.

Jon C. Ogg
October 27, 2006

Surprising Analyst Call of the Day: Krispy Kreme

The largest Analyst Impact Call goes to Krispy Kreme (KKD) today. Yes, the troubled doughnut company that hasn't made proper SEC filings for as long as anyone cares to remember. KKD is up 8% at $9.97 before noon today. It gapped up to about $9.60 from a $9.24 close yesterday, and it has hardly looked back.

Prudential's analyst Howard W. Penney initiated coverage of Krispy Kreme at an "Overweight" rating (just like Krispy Kreme eaters) with a 12-to-18 month price target of $15. Prudential believes that the high brand loyalty and its business model will help to create strong cash flows and high return on investment. The analyst also expects the company to file its way-late financial statements by October 31. It is embattled in a criminal investigation and more shareholder suits than you would want to discuss.

Whatever diet fad comes out tends to go against Krispy Kreme. It doesn't matter if you try Atkins, South Beach, NutriSystems, Herbalife, restricted calorie, heart healthy, or any of them. Krisp Kreme gets hit by every diet out there, except maybe for the Pigging Binger Plan.

The stock is still down well over 80% from its old highs, but it is up over 130% from the $3.91 recent lows in the last 52-weeks. The 52-week high for KD is $12.11.

Jon C. Ogg
October 27, 2006

Hertz Finally Sets Its IPO Terms

Hertz, one of the largest auto and equipment rental companies, has finally set its IPO terms. We have known this deal was coming, it just boiled down to WHEN and WHAT terms. Now we know the WHAT with some 88.235 million shares being set at a range of $16 to $18 per share. The offering looks to be some $1.41 Billion on the low-end, and almost $1.6 Billion raised if the deal prices at the high-end. The original filing was given only a $1 Billion nominal amount, but it isn't clear if that was just for filing calculations or if there was a bump on preliminary demand. The total offering will be $1.8 Billion if all over-allotment shares are taken. The WHEN should be in the coming weeks.

Hertz is going to trade (this time) under the ticker "HTZ" on the NYSE. The lead underwriters are Goldman Sachs, Merrill Lynch, Deutsche Bank, J.P.Morgan and Lehman Brothers; and co-managers are set as Morgan Stanley, Credit Suisse, UBS, and Wachovia.

Hertz has a long and somewhat humorous history of being public and being a controlled company. It was bought out from Ford Motor (F) in December of 2005 for around $15 billion by Clayton, Dubilier & Rice: Carlyle Group and Merrill Lynch Global Private Equity; although Ford had filed for it to come public before that in June of 2005. Ford spent a stent as a public company under Ford for a while, but it March of 2001 Ford re-acquired the 18.5% of the stock that was outstanding. It had gone public under the HRZ ticker back in 1997. Before that it was part of the Park Ridge Corporation (venture of Ford and ex-management), and Ford acquired it in 1994. Back in the 1960's it became part of the RCA Corporation, and was its own listed company in the 1950's after being under GMC. It was formed as an amalgamation of operations in the early 1920's and General Motors bought it in 1926.

In case you didn't notice, Hertz has been a bride passed around the neighborhood. It looks like the parent couldn't control the daughter and sold her off, then she was lost in a poker match, then sold off again, then reacquired after a makeover, then a collector wanted her, and now she's going to be made available to the public again.

Here is what we posted back in July on the upcoming IPO.

Naturally the private equity guys are going to get their cut before the IPO. They are going to take out roughly a $426.8 million special dividend before the IPO. As of June 30, 2006 the company had $13.94 Billion listed as debt from leases and borrowed funds. After the IPO including over-allotments the current holders will still hold 67.5% of the common stock. The company posted first half of 2006 results as $3.827 Billion revenues and a reported net loss of $33.3 million. Before interest and depreciation, Hertz has an implied EBITDA income of actually over $1.2 Billion. You can find more data in the SEC Filing with the hitorical data.

She's been around before, but it looks like the street still has a twinkle in its eye for her.

Jon C. Ogg
October 27, 2006

I Would Not Own Green Eggs or Yellow Trucks

By William Trent, CFA of Stock Market Beat

We told you now is not the time to own a truck. Continuing the trend this earnings season, truck-owning YRC Worldwide (formerly known as Yellow) expects margins to be hurt by a slowdown in shipping.YRC Worldwide 3Q Profit Rises 12 Percent: Financial News - Yahoo! Finance
Transportation company YRC Worldwide Inc., whose brands include Yellow Transportation and Roadway, said Thursday its third-quarter profit rose 12 percent on lower expenses, as revenue edged up 3 percent.But the company issued a disappointing outlook, sending its shares down 41 cents to $38.79 in aftermarket trading. They closed up 39 cents at $39.20 in regular Nasdaq trading.

For the full year, YRC projects a profit of $5.45 to $5.55 per share on revenue of about $10 billion. In July the company had projected year earnings of $5.65 to $5.85 per share on revenue of $10 billion.

That is a $0.20 per share guidance reduction with just one quarter left in the year. Next year’s EPS could be $1.00 or more less than current estimates bake in. As we said before, trucks cost money even when they aren’t being used. As the economy slows, those companies like CH Robinson (CHRW) and Landstar (LSTR) that get their capacity from independent contractors on an as-needed basis have lower overhead expenses and remain profitable. If the economy slows much further, Yellow’s guidance reductions will be even larger. 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/

Corning Updates LCD Market

By William Trent, CFA of Stock Market Beat

Corning Q3 2006 Earnings Call Transcript - SeekingAlpha
Let me now update you on the supply chain as specifically the panel inventory situation in more detail. As I mentioned earlier, we believe there was an important improvement in the panel inventory levels during Q3. This improvement is a result of seasonal and market demand and strong annual shipments. I will table my comments on the end market just a moment. I’ll start with panel shipments, as a reminder our working assumption was been a substantial portion of the panel inventory in the supply chain, was a time when these panel makers although clearly LPL had also been public about their own inventory levels. Taiwanese panel makers have reported monthly panel shipment data through Q3 and the news has been very encouraging. Many have reported record shipments in July, August and September.Inventory levels have fallen in Q3, the number of day’s inventory and probably Q1. Inventory reduction combined with seasonal demand improved with Q3 as a result of the substantial improvement in materialization rates. We believe the Taiwanese on average increased their fab utilization rates which were in the 55% range in June, 70% in July, 85% in August, and 90% in September.

Although clearly not every company is operating at that level, we believe that the average utilization rate for the Taiwanese panel makers is now equal to where it was in March. Obviously the most encouraging sign has been the strong last volume we experienced in the Q3 and our expectations for Q4 based on customer orders, which I’ll talk about a few minutes.
Now let me walk you though the end market trends in Q3. As always I would like to stress we don’t have perfect information. We use a variety of sources ranging from services that are available to use, such as display research, along with retail tracking vendors, our own discussions with customers as well as our own models. With that in mind you should also note that the following data has been derived from the aggregate of industry sources that are considered at this time to be preliminary estimates. Final data for Q3 will not be available for another month or so. Be clear the data we reference relates to shipments from PC manufacturers, television set makers to the retailers.

In summary the preliminary data indicates that the end market shipments were in line with our expectations for Q3 and on track for all three primary applications, notebooks, monitors and televisions.

Starting with notebooks, about 19.6 million were shipped in Q3, in line with our expectations. This was an 11% increase over the notebook shipments in Q2. We believe the penetration of notebook computers of all computer sold in Q3 was 36% and consistent with Q2.

Moving to LCD monitors, about 32 million were shipped in Q3 compared to 13 million in Q2. We believe the penetration of LCD monitors inched up from 79% in Q2 to 82% in Q3. For LCD televisions about 10 million were shipped in Q3 also in line with our expectations. This represents an 11% increase over Q2 shipments of 9 million. More importantly is that the penetration of LCD television into the color television market was an estimated 21% for Q3. As a reminder these percentages are preliminary at this time. You may recall during our last conference call, we estimated LCD television penetration to be 19% in Q2. After reviewing the final data we conclude the penetration was actually 21%. Based on this trend and the expected strong seasonal demand we believe LCD television penetration may be as high as 25% in Q4, an average of 22% this year.

Frankly, that television penetration is higher than we expected. While that may sound like good news, to us it indicates there is less room for further growth over the long term. At the current rate of capacity expansion the market could mature in a year or two. And given the 20% (or higher) annual price declines, the revenue growth won’t match the penetration gains. 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/

IPO Alert: Optium (OPTM)

Optium (OPTM) priced its 5.2 million share IPO at$17.50, above the $13.50 to $15.50 range. Morgan Stanley and Credit Suisse were the lead underwriters, with Cowen and Jefferies listed as the co-managers.

The company is a technology supplier of high-performance optical subsystems that perform transmission and switching functions in long-haul, metro and access telecom and cable TV networks.

In the most recent period measured the company has become profitable with a trailing $69 million in revenues. It will now have slightly more than an implied market Cap of $500 million.

Jon C. Ogg
October 27, 2006

Pre-Market Stock News (Oct. 27, 2006)

(AKAM) Akamai Tech $0.24 EPS vs $0.22e; stock fell 1%.
(ALSK) Alaska Communications $0.20 EPS vs $0.13e, it is also evaluating investment alternatives.
(ARTC) Arthrocare $0.31 EPS vs $0.29e.
(AT) Alltel $0.60 EPS vs $0.64e.
(AVID) Avid Tech $0.42 EPS vs $0.39e.
(AYE) Allegheny Power $0.56 EPS vs $0.53e.
(BHI) Baker Hughes $1.09 EPS vs $1.08e.
(BLDR) Builders First $0.60 EPS vs $0.72e.
(CAH) Cardinal Health $0.78 EPS vs $0.76e.
(CB) Chubb $1.37 EPS vs $1.22e.
(CEG)Constellation Energy $1.56 EPS vs $1.28e.
(CHE) Chemed $0.48 EPS vs $0.47e.
(CLS) Celestica $0.18 EPS vs $0.16e; R$2.4B vs $2.24B(e).
(COHU) Cohu $0.19 EPS vs $0.13e.
(COLM) Columbia Sportswear $1.67 EPS vs $1.61e.
(CPWR) Compuware $0.07 EPS vs v$0.07e; although revenues look light.
(CRTX) Critical Therapeutics filed to sell 7+ million shares.
(CSH) Cash America $0.42 EPS vs $0.41e.
(CTV) CommScope $0.64 EPS vs $0.61e.
(CVH) Coventry $0.92 EPS vs $0.92e.
(DECK) Deckers Outdoor handily beat earnings and raised guidance; stock up 10%.
(DELL) Dell noted as having value to Barron's.
(DO) Diamond Offshare $1.19 EPS vs $1.26e.
(DRIV) Digital River $0.41 EPS vs $0.38e.
(DSCM) Drugstore.com -$0.03 EPS vs -$0.04e.
(DTAS) Digitas fell 2% after missing earnings expectations.
(ELK) ElkCorp missed earnings significantly and guided much lower.
(ELX) Emulex $0.25 EPS vs $0.24e.
(EMN) Eastman Chemical $1.24 EPS vs. $1.14e.
(EXAR) Exar adds $16 million to its existing share buyback plan.
(FRNT) Frontier Airlines $0.06 EPS vs $0.04e.
(FTEK) Fuel Tech positive IBD article.
(GNW) Genworth Financial $0.66 EPS vs $0.71e.
(GPS) Gap says outlet division president left the company.
(HIG) Hartford Insurance $2.30 EPS vs $2.25e.
(IDXX) Idexx Labs $0.76 EPS vs $0.69e.
(IOM) Iomega $0.02 EPS vs $0.02e.
(IR) Ingersoll Rand $0.85 EPS vs $0.86e.
(IRBT) iRobot beat earnings and guided lower-end of range higher.
(ISIL) Intersil COO is leaving the company.
(ISRG) Intuitive Surgical $$0.45 EPs vs $0.41e.
(ITT) ITT $0.77 EPS vs $0.76e.
(IVGN) Invitrogen $0.87 EPS vs $0.78e.
(IWOV) Interwoven $0.12 EPS vs $0.10e.
(KCI) Kinetic Concepts $0.67 EPS vs $0.66e.
(LGND) Ligand sold its DelMar California HQ for some $40+ million.
(LPNT) Lifepoint $0.62 EPS vs $0.59e.
(MDRX) Allscripts Health $0.19 EPS vs $0.19e.
(MFE) McAfee $0.36 EPS vs $0.30e.
(MHK) Mohawk Ind. $1.88 EPs vs $1.78e.
(MSFT) Microsoft beat earnings, but lowered guidance becaus eof pushouts on Vista revenues from vouchers; stock traded down but then went up to flat marginally.
(MSTR) Microstrategy $1.32 EPS vs $1.19e.
(NOVN) Noven and Shire-SHPGY released positive data on the ADHD for kids 6-12 years old.
(NTGR) Netgear $0.35 EPS vs $0.30e.
(OLN) Olin $0.44 EPS vs $0.37e; unsure if comparable.
(ONNN) On Semi $0.23 EPS vs $0.21e.
(OPLK) Oplink $0.17 EPS vs $0.14e.
(OPTM) Optium 5.2M share IPO priced at $17.50, above the range.
(OPWV) Openwave $91.2M R$ vs $87.9M(e).
(ORB) Orbital Science $0.14 EPS vs $0.15e; sees $0.50-0.60 EPS vs $0.61e for year; revenues were a tad ahead.
(ORCC) Online Resource & Comm. filed to sell 13 million shares of common stock.
(OS) Oregon Steel $1.79 EPS vs $1.34e.
(PDE) Pride International $0.52 EPS vs $0.41e.
(PKI) Perkins Elmer $0.30 EPS vs $0.26e.
(PLAY) Portal Player $0.13 EPS vs $0.12e.
(RDYN) Replidyne -$0.22 EPS vs -$0.31e.
(RIN) Rinker Group trading up 21% as Cemec offers to buy the company.
(ROP) Roper Ind. $0.56 EPS vs $0.54e.
(RVBD) Riverbed Tech -$0.02/R$24.6M vs -$0.05/$21.5M(e).
(SLXA) Selexa received a positive article in Business Week.
(SOHU) Sohu.com $0.17 EPS vs $0.16e.
(SUNW) Sun Micro -$0.01/R$3.19B vs -$0.04/$3.20B(e).
(TBL) Timberland $0.82 EPS vs $0.75e.
(UEIC) Universal Electronics received a positive article in Business Week.
(VAS) Viasys Healthcare receives FDA marketing approval for Avea Nasal system.
(VLCM) Volcom $0.42 EPS vs $0.39e.
(VRTX) Vertex -$0.42 EPS vs $0.47e, showe dpositive hepatitis C data on Telaprevir.
(VVUS) Vivus -$0.13 EPS vs -$0.14e.
(VTR) Ventas $0.64 EPs vs $0.58e.
(WEBX) WebEx $0.35 EPS vs $0.35e; stock fell 7% on light revenues.
(WU) Western Union received a positive article in Business Week.

Select Analyst Calls (Oct. 27, 2006)

AAI cut to Peer Perform at Bear Stearns.
ACV cut to Neutral at JPMorgan.
AEZV started as Outperform at CIBC.
AHL cut to Equal Weight at Lehman.
ALSK cut to Neutral at JPMorgan.
ANDE started as Neutral at B of A.
ANF started as Outperform at Bear Stearns.
APA cut to Neutral at Credit Suisse.
AZN cut to Peer Perform at Bear Stearns, cut to Neutral at Credit Suisse.
BDK cut to Neutral at UBS.
BFAM cut to Neutral at B of A.
BJRI cut to Neutral at Merriman Curhan.
CLS cut to Sector Perform at CIBC.
CNMD raised to Mkt Perform at Piper Jaffray.
DECK raised to Outperform at Cowen, cut to Mkt Perform at Piper Jaffray.
DTPI cut to Underperform at Wavhovia.
DWA raised to Buy at Merrill Lynch.
EYE raised to Buy at Citigroup.
FIS raised to Overweight at JPMorgan.
FMD cut to Neutral at JPMorgan.
GG raised to Outperform at RBC.
GGC cut to Sell at Citigroup and Merrill Lynch.
GISX cut to Hold at Soleil.
GSK cut to Neutral at Merrill Lynch.
GYMB cut to Mkt Perform at FBR.
GVA cut to Peer Perform at Bear Stearns.
IGT raised to Overweight at Morgan Stanley.
IRBT cut to Mkt Perform at Raymond James.
ISRG cut to Hold at Jefferies.
IVGN cut to Hold at Citigroup.
KKD raised to Buy at Prudential.
LTD started as Outperform at Bear Stearns.
LYO cut to Neutral at JPMOrgan.
MCD maintained buy but removed from conviction buy list at Goldman Sachs.
MEDI raised to Hold at Citigroup.
MHK cut to Neutral at UBS.
NKTR cut to Underweight at Morgan Stanley.
NLY cut to Neutral at Merrill Lynch.
NSC cut to Hold at Citigroup.
OCN cut to Hold at Jefferies.
OPEN cut to Neutral at JPMorgan.
OPWV cut to Neutral at Merriman Curhan.
PEIX started as Sell at B of A.
PLAY cut to Hold at Soleil.
RTN cut to Mkt Perform at FBR.
SBYN cut to Mkt Perform at FBR.
SRDX started as Buy at ThinkEquity.
SWFT cut to Sell at B of A.
THI added to Goldman Sachs Conviction Buy List.
TROW raised to Buy at AGEdwards.
URBN started as Underperform at Bear Stearns.
VSE started as Neutral at B of A.
YUM cut to Neutral at Goldman Sachs.

Sony's Light Dims As XBox Soars (SNE)(MSFT)

Microsoft's earnings had some bad news for Sony. MSFT says that it will ship 10 million units of its new Xbox 360 by the end of the year.

In the meantime, Playstation sales are falling. And, the Playstation3 product is delayed until after Christmas.

While Microsoft's stock has rallied on its improved fortunes with Xbox and the anticipated introduction of its new Vista operating system (MSFT is up from under $22 in June to the current $28), Sony has dropped from $52 to $42 over the same period. The recall of the PC batteries that it provides to companies like Dell has hurt the Japanese giant, but the perception that it can no longer make products that have huge consumer demand has taken an even greater toll.

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

Oracle's Cut-Rate Deal (ORCL)(RHAT)

Oracle is getting into the Linux operating system business. Linux is open-source software that is "free". It cost money to program it for certain applications, but the "kernel", the heart of the application has been written by "volunteers" who have built the operating system over time.

Several companies offer Linux applications for large businesses including public company Redhat. Oracle is obviously a much bigger company. Oracle's revenue last year was almost $12 billion. Redhat's was under $300 million.

Oracle's move has hit Redhat's stock hard. It now trades at below $15. In May, it hit almost $33.

The strange thing about Oracle's initiative is that it will offer support for Linux products at 50% of its normal support fees. But, IT managers love Redhat. They rank its No.1 for "vendor value". The same survey ranks Oracle 39 out of 41 companies measured.

Oracle may be offering discounts, but, with poor perception of its value to IT managers, its success is not a lock.

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

AutoNation Car-Jack's Detroit's Earnings (DCX)(GM)(F)

AutoNation is the largest car dealer network in the US, and they have some bad news for the Big Three. You sent us too many cars.

In Q4, a critical quarter in the turnaround fortues for GM, Chrysler, and Ford, AutoNation is going to cut its orders 30% for the current Q which ends December 31.

The US automakers now have two choices, and they fall into "the lesser of two evils" category.

One option is to cut production in the first half of 2007, and hope that inventories fall as cars on the dealer lots are sold without immediate replacements. That means more idle capacity.

The other option is the Detroit standby of incentives. Zero percent financing for the first decade of ownship. Or, maybe $5,000 cash back. Or, a free Toyota hybridwith the purchase of a US-made SUV or pick-up.

Chrysler is considering restructuring its entire US operation and it is sending German executives to help. There are even rumors that Daimler may sell its US unit.

Any good news in Detroit. Not now.

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

Altria: Smoke Gets In Your Eyes (MO)(KFT)

Almost everyone was happy about Altria's earnings and the fact that it is finally planning to spin out its food operations, Kraft, to shareholders. But, that is not what will drive the tobacco companies fortunes in the future. It is the pending liability suit over "light" cigarettes. The suit could represent a $200 billion risk to the tobacco companies, but they temporarily dodged a bullet as the courts appealed a ruling that plantiffs could have class-action status.

Tobacco suits have been a big problem in the past, but Altria has won the suits brought against it that claimed to have induced people to smoke whily lying about the health risks. The new suits take a different line of attack. They claim that "light" cigarettes were marketed on the premise that they posed fewer health risks to the smoker and that this marketing ploy was not entirely true.

Moody's, the credit rating agency, which has to take the legal environment into account in its ratings of the world's largest tobacco firm has upgraded Altria in the last several days.

Investors can only hope that Moody's is right. The $200 billion at stake is a lot of money.

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

Ford Looks To China, Too Bad It Won't Work

Stocks: (HMC)(F)(GM)(TM)

Bill Ford says that the company that bears his family's name can look to Asian sales to help offset the disaster of its North American operations. In the first nine months of 2006, Ford's sales in China more that doubled compared to the same period in 2005.

Ford's problem in China is simple. It has all the same competitors in China that it has in North America, plus some players who are local. Ford's optimism about the world's most populated country in the world is based on a false assumption which is that he can do better against his rivals in China than he does in his home market of the United States.

VW sold almost 525,000 vehicles in China the first nine months of the year. GM sold 645,000 vehicles there. Honda's sales for the period were 226,000. And, Toyota's were 203,000. Ford lagged with under 115,000 units in the first nine months.

With Ford well behind the other car companies in the large Asian market, Mr. Ford has to be able to do the math. China won't save him.

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

Spint's WiMax Bet Gets Bigger (S)(VZ)(MOT)(INTC)

Sprint had some pretty raw earnings, as expected. Net profit was off 52% to $247 million. The company added 233,000 net new customers in its wireless business, but this was down from 708,000 the previous quarter.

Wall St. was a bit relieved and Sprint's shares rose slightly.

Because its larger rivals like Cingular and Verizon are adding to their larger bases of cell users much faster than Sprint is, the mergered operation of Nextel and Sprint needs to come up with some advantage to lure more share.

It would appear that it will have to be WiMax. Sprint believes that the $3 billion it is spending to build out a WiMax network over the next two years will bring wide and seamless broadband phone coverage to its subscribers before its rivals can complete their 3G networks.

Intel and Motorola has been the largest backers of the WiMax standard, and they have a number of phone companies around the world from Ireland to India in trials for the new technology.

Sprint does not have much else to rely on. Cingular should announce that it added about 1.4 million new subsribers in the last quarter, and that means the Sprint is losing ground.

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

Europe Market Report 10/27/2006 GlaxoSmithKline, Reuters Down, Deutsche Telekom Up

Stocks: (BEA)(BCS)(BP)(BAB)(BT)(GSK)(PUK)(RTRSY)(UN)(UL)(BAY)(DCX)(DB)(BT)(SAP)(SI)(ALA)(AXA)(FTE)(TMS)(V)

Markets in Europe were narrowly mixed at 5.25 AM New York time.

The FTSE was down .2% to 6,172. BEA Systems was down .4% to 412.5. Barclays was up .2% to 710.5. BP was down .7% to 602.5. British Air was down .4% to 460.75. BT Group was up .7% to 279.75. Diageo was up .5% to 983.5. GlaxoSmithKline was down 2.5% to 1414. Prudential was down .5% to 636.5. Reuters was down 1.1% to 455.5. Unilever was down .2% to 1313. Vodafone was up 1.3% to 134.5.

The DAXX was up .1% to 6,292. BASF was up .8% to 69.08. Bayer was up .5% to 40.62. DaimlerChrysler was down .3% to 43.2. DeutscheBank was up .4% to 98.9. Lufthansa was off 1.3% to 17.78. Deutsche Telekom was up 1.5% to 13.4. SAP was down .8% to 156.1. Siemens was down .4% to 71.24.

The CAC 40 was down .3% to 5,419. Alcatel was down .5% to 10.05. AXA was down .1% to 30.24. France Telecom was up .9% to 20.28. Mittal Steel was down 1.5% to 33.16. ST Micro was up .8% to 13.33. Thomson was down .4% to 13.54. Vivendi was down .5% to 29.63.

Data from Reuters.

Douglas A. McIntyre

Media Digest 10/27/2006 Reuters, Wall Street Journal, New York Times

Stocks: (MSFT)(BAC)(SUNW)(GM)(F)(DCX)(XOM)(AN)(AET)(BMY)(S)

According to Reuters, Microsoft earnings rose 11% in the quarter just reported.

Reuters writes that Bank of America management has said it is upbeat about its commercial lending operation.

The Wall Street Journal writes that civil fraud claims are being filed against former Delphi executives.

Reuters reports that Sun Microsystems narrowed its loss on revenue growth in its just reported quarter.

Reuters also reports that securities analysts are cautious about GM's recovery as the car company burns cash at a rate not indicated in its P&L statements but found in reported cash flow information.

The Wall Street Journal writes that AutoNation, the big car dealer network, will order 30% fewer cars from Chrysler, GM and Ford this quarter due to an inventory glut.

The Wall Street Journal reports that Exxon's net rose 5.7% to $10.49 billion.

The Wall Street Journal writes that Aetna profits rose 28%.

The New York Times reports that Shell posted strong quarterly profits.

The NYT also reports that Bristol-Myers Squibb quarterly report shows that generics are taking its market share.

The NYT also writes that Sprint reported a 52% decline in quarterly profits.

Douglas A. McIntyre

Media Digest 10/27/2006 Reuters, Wall Street Journal, New York Times

Stocks: (MSFT)(BAC)(SUNW)(GM)(F)(DCX)(XOM)(AN)(AET)(BMY)(S)

According to Reuters, Microsoft earnings rose 11% in the quarter just reported.

Reuters writes that Bank of America management has said it is upbeat about its commercial lending operation.

The Wall Street Journal writes that civil fraud claims are being filed against former Delphi executives.

Reuters reports that Sun Microsystems narrowed its loss on revenue growth in its just reported quarter.

Reuters also reports that securities analysts are cautious about GM's recovery as the car company burns cash at a rate not indicated in its P&L statements but found in reported cash flow information.

The Wall Street Journal writes that AutoNation, the big car dealer network, will order 30% fewer cars from Chrysler, GM and Ford this quarter due to an inventory glut.

The Wall Street Journal reports that Exxon's net rose 5.7% to $10.49 billion.

The Wall Street Journal writes that Aetna profits rose 28%.

The New York Times reports that Shell posted strong quarterly profits.

The NYT also reports that Bristol-Myers Squibb quarterly report shows that generics are taking its market share.

The NYT also writes that Sprint reported a 52% decline in quarterly profits.

Douglas A. McIntyre

Asia Markets 10/27//2006 Japan Air, Honda Up, Softbank Down

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

Asian markets were largely down.

The Nikkei was off .9% to 16,669. Bridgestone was down 1.4% to 2550. Canon was off 2.4% to 6490. Fuji Film was down 2.6% to 4450. Fujitsu was down 3.1% to 997. Hitachi was down .1% to 701. Honda was up 2.6% to 4270. Japan Air was up 2.8% to 223. KDDI was down 1.9% to 725000. Mitsubishi Electric was down 2.5% to 1025. NEC was down 1.3% to 614. NTT was up .7% to 615000. Nissan was up 2.5% to 1424. Docomo was down 1.1% to 181000. Sharp was down .2% to 2060. Softbank was down 1.9% to 2615. Sony was up 1.2% to 4880. Toshiba was down 1.1% to 769. Toyota was down .1% to 7090. Yahoo Japan was up .2% to 47300.

The Hang Seng was down .4% to 18,284. Cathay Pacific was up 1% to 16.84. China Mobile was down 1.4% to 61.7. China Netcom was up 1.8% to 13.88. HSBC was down .2% to 146.8. PCCW was up .6% to 4.74.

The KOSPI was down .3% to 1,369.

The Straits Times was down .3% to 2,734.

The Shanghai Composite was down .2% to 1,807.

Data from Reuters.

Douglas A. McIntyre

MMI Investments Discloses 6% Stake in Paxar (PXR)

From 13D Tracker

In a 13D filing on Paxar Corporation (NYSE: PXR), MMI Investments disclosed a 6% stake (2.46 million shares) in the Company.

MMI said it intends to review and evaluate the investment on an ongoing basis and may determine to increase, decrease, or dispose of its holdings of Common Stock. As a part of such review and evaluation, they may communicate with the Company's management, directors and other shareholders.

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

Gateway (GTW) Holder Firebrand Demands Decisive Action

From 13D Tracker

In an amended 13D filing on Electro Scientific Industries Inc. (Nasdaq: ESIO), Nierenberg Investment Management disclosed an 9.4% stake (2.74 million shares) in the company. This is up from the 8.3% stake the investment firm disclosed in a past 13D filing.

The firm said they continue to believe that there is a substantial gap between ESIO's current market value and its intrinsic value.

The firm disclosed a recent conversation with the Chairman and a separate conversation with the CEO, CFO, and the company's Director of Corporate Development and Investor Relations.

The firm said they believe that the combination of more proactive communications with the investment community and increased director ownership of ESIO stock could ultimately drive ESIO's share price closer to the company's intrinsic value.

From Item 4 of the Filing: Purpose of Transaction:

The reporting persons acquired the shares because we continue to believe that there is a substantial gap between ESIO's current market value and its intrinsicvalue. We believe this valuation gap persists even though the company has finemanagement, a fine board, a sound business strategy, leading market shares inits major business units, an attractive long term growth rate, and a fortress balance sheet.

In a friendly and constructive spirit, we have recently shared several ideas with the company in the hope that these ideas might, over time, help close the gap between ESIO's market and intrinsic value. This dialogue occurred in two conversations, summarized below, subsequent to ESIO's annual shareholder meetingof October 5, one with the Chairman of the Board of Directors and the other with the CEO, CFO, and the company's Director of Corporate Development and Investor Relations.

In our conversation with the Chairman, we noted that, according to ESIO's most recent proxy statement, none of the company's outside directors owned out rightany shares of the company's stock. We also expressed our belief that the financial community appears to attribute little value to ESIO's approximately$7.50 per share in cash when valuing the company. Finally, we noted how challenging it is for the company to earn a mid teen's return on equity (whichwe consider achievable) when half the company's equity sits on its balance sheet in cash and marketable securities which earn only a 5% pre-tax return.

We suggested to the Chairman that the ESIO board consider mandating that each outside director ultimately, over a period of time, hold a significant personal investment in the company's shares, which could be purchased in the open market or earned through board service in lieu of cash fees. We believe large director shareholding could more closely align the interests of the company's directors and shareholders and perhaps heighten urgency about driving ESIO to attain amid-teens return on equity. We believe that doing this could help close the gap between ESIO's market and intrinsic value.

Our separate conversation with the CEO, CFO and Director of Corporate Development and Investor Relations pertained to several other investors' apparent disappointment with ESIO's recently reported quarterly results. Duringt he company's earnings conference call, several investors expressed surprise and displeasure with the company's revenue guidance, both relative to their expectations and to the company's prospective shipments. This negative reaction was unfortunate because it appears to us that ESIO's several years of investing heavily in Research & Development is beginning to pay off in new products, increased customer penetration, market share gains, improved revenue growth, and widening margins.

The purpose of our conversation, however, was to suggest to management that the shareholders' disappointment with the company's revenue guidance was neither unreasonable nor unforeseeable. After all, investors have two fundamental preferences: they prefer linear growth over lumpy growth and they hate surprises.

Legitimate investor expectations about linear revenue growth create a challengefor ESIO for three reasons: (1) many ESIO products carry seven figure pricetags, which means that small variations in the number of units shipped in aquarter can drive significant near term revenue fluctuations; (2) ESIO sells to a highly concentrated set of customers, which means that small near term variations in ordering by a single customer can drive significant near term revenue fluctuations; and (3) ESIO is introducing many big ticket new products which customers will test thoroughly before accepting and paying for the products.

Therefore we advised ESIO management that they should bend over backwards to remind investors that these innocent factors can cause meaningless near term fluctuations in sequential revenue growth while the company can neverthelessremain on a healthy 15% + long term growth trajectory. In addition, we suggested that ESIO management consider guiding and characterizing financial results lessby individual quarter and more in terms of multi-quarter moving averages which could help smooth over insignificant near term fluctuations. Our belief is that such proactive investor communication could avoid the disappointment which occurred in the most recent earnings call.

In conclusion, we believe that the combination of more proactive communications with the investment community and increased director ownership of ESIO stock could ultimately drive ESIO's share price closer to the company's intrinsic value.

Sign-Up for E-Mail Alerts on ESIO (Free) and 13D Filings (Premium Only)

posted by Lon at 11:59 AM 0 comments

Gateway (GTW) Holder Firebrand Demands Decisive Action
In an amended 13D filing with the SEC on Gateway (NYSE: GTW) after the close, 10.7% holder Harbert Management/Firebrand disclosed a letter sent to the company on October 25 regarding actions it desires that the board of directors take. Specifically, the firm urged Gateway to de-classify its board, eliminate its shareholder rights plan and appoint three Firebrand designees to the board.

The group said, "As the scale of our share purchases suggests, we believe the opportunity to increase shareholder value is dramatic. However, we also believe it is perishable and demands decisive action on the part of the Board. We are troubled that the Board appears to lack the sense of urgency to address the Company's challenges and capitalize on its opportunities. A company with a great brand and channel strength, but 5.5% gross margins, requires a Board whose oversight and experience can aid in the development and articulation of a strategy to improve margins. We believe that continued inertia at the Board level is unacceptable. If, working together, we cannot leverage these assets, then they should be put in the hands of an organization that can (i.e., the Company should be sold)."

A Copy of the Letter:

Dear Rick and Ed:

I hope this letter finds the two of you well. The discussions we have had overthe last two months have confirmed our original thesis: there is nothing wrongwith Gateway that can't be fixed with what's right with Gateway. We believe there is a great deal of common ground and that we share a workable vision of how shareholder value can be restored.

As the scale of our share purchases suggests, we believe the opportunity to increase shareholder value is dramatic. However, we also believe it is perishable and demands decisive action on the part of the Board. We are troubled that the Board appears to lack the sense of urgency to address the Company's challenges and capitalize on its opportunities. A company with agreat brand and channel strength, but 5.5% gross margins, requires a Board whose oversight and experience can aid in the development and articulation of a strategy to improve margins. We believe that continued inertia at the Board level is unacceptable. If, working together, we cannot leverage these assets,then they should be put in the hands of an organization that can (i.e., theCompany should be sold). To that end, we are requesting that the Board do thefollowing:

- Appoint three Firebrand designees to the Gateway Board of Directors;

- Redeem the Company's shareholder rights plan ("Poison Pill"); and

- Call a special meeting of shareholders for the purpose of adopting an amendment to the Company's certificate of incorporation to declassify the Board.

The Board's skills set should reflect its needs. We believe the addition of three Firebrand designees will bring much needed domain expertise inbrand and design to the boardroom that can immediately aid management's efforts to create customer differentiation and improve margins. In addition, staggered boards and poison pills are relics of a by-gone era; weapons of mass entrenchment that do nothing but hamstring shareholder value.

The steps we have outlined above reflect our continued enthusiasm and resolve to work with the Board and management for the benefit of all Gateway shareholders. We request a response by October 31, 2006 to confirm your intention to comply with our requests. If we do not hear from you, we will take your silence as a sign of unwillingness to work together and will pursue these matters on our own, through the calling of a special meeting or otherwise.

As always, I'm reachable at XXX-XXX-XXXX or XXXX@firebrandpartners.com

Regards,

Scott Galloway

Firebrand Partners

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

Pardus Capital Buys Another 2M Shares of Visteon (VC), Bringing Stake to 15.6%

From 13D Tracker

In a 13D filing this morning on Visteon Corp. (NYSE: VC), Pardus Capital disclosed a 15.6% stake (20 million shares) in the company. The fund bought 2 million shares between 10/24 and 10/25 at prices from $7.50 to $7.85.

In a past filing, Pardus Capital said it continues to engage in discussions from time to time with the company and has raised the possibility of an individual suggested by them joining the board.

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

Yankee Candle...Darn, It's Going Away

From Value Discipline

Yankee Candle (YCC) announced yesterday that it had agreed to be acquired for $34.75 per share in cash. Quoting the release:



The Yankee Candle Company, Inc. ("Yankee" or the "Company"; NYSE:YCC) today announced that it has entered into a definitive merger agreement under which an affiliate of Madison Dearborn Partners, LLC ("MDP"), a leading private equity investment firm, will acquire all of the outstanding shares of Yankee for approximately $1.4 billion in cash. The total value of the transaction, including assumed debt, is approximately $1.7 billion. The Board of Directors of Yankee has approved the merger agreement and has resolved to recommend that Yankee's shareholders adopt the agreement. The transaction, which is expected to close in the first quarter of 2007, is subject to approval by Yankee's shareholders, as well as other customary closing conditions, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.


It is interesting to note that this is its second equity buyout...the company was acquired by Forstmann Little back in 1998 before being taken public in 1999.



Readers may remember our previous post on Yankee Candle where we highlighted our positive views on the company.



Results have been gratifying since that time, largely a function of the aggressive buyback of shares that the company has pursued. As of the end of the quarter, the weighted average of fully diluted shares was 40.08 million shares as compared to 44.22 million shares a year ago and about 54.5 million shares back in 1999 upon initial IPO.



The company appears to be firing on all cylinders with retail sales (including the Illuminations acquisition) up 25%. Yankee retail stores appear to have turned the corner with same store sales up 8%, the third consecutive quarter of improvement. Wholesale sales were up about 11%, well above expectations. The only rain on the parade that I could discern was a build in inventories, up about 27% in line with sales. Bank debt was up about $103 million.



On a TTM basis, the business is “smoking” with an ROE of 106% and a return on invested capital of about 25%. Pity that management and Madison Dearborn will be reaping the results! It is important to remind you and myself that the takeover is still subject to various approvals by regulators and shareholders. But the likelihood seems strong.



Not an idle backhanded comment from yours truly. For those who purchased at the IPO back in 1999 at $18, you have earned a compound return of merely 8.75% as of yesterday, demonstrating the dangers of investment bankers bearing initial offerings. For those who have looked for Mr. Market to provide them better entry points, the stock is up 57% from the day prior to the announcement July 25th, 2006 that the company was reviewing its strategic alternatives.



As one shareholder observed in yesterday’s conference call, “Good luck. Dearborn is probably getting a good deal. I think the worst times are behind you and you’ve got good times ahead.”



As I have observed before, takeovers may be short term gratification but long term, are a pain in the butt. Just when you get to know the business and returns are accelerating, it gets taken away and you have to look for another idea. There are worse problems admittedly, for example when you really don’t have a handle and management is absconding with the cash flow, but this company was a little jewel.



Disclaimer: I, my family, and many clients currently own a position in Yankee Candle.

http://www.valuediscipline.blogspot.com/

Interview With Roger Ehrenberg, Former CEO of Deutsche Bank Advisors and Managing Director at Citigroup

By Yaser Anwar, CSC of Equity Investment Ideas

It used to be that investment bankers generated a majority of the revenue at the banks & brokerage houses, but ever since the collapse of the Tech bubble in 2000, we have seen a shift to trading desks generating majority of the revenue versus the investment banking division.

To talk about this shift and other industry related topics such as; Derivatives, Risk Controls & Hedge Funds, I conducted an interview with Roger Ehrenberg, former CEO of Deutsche Bank Advisors, wholly-owned subsidiary of Deutsche Bank, and Managing Director at Citigroup.

Roger led a 130-person team that managed over $6 billion in capital through a twenty-strategy hedge fund platform with offices in New York, London and Hong Kong. Strategies deployed included managed futures, statistical arbitrage, merger arbitrage, event, fundamental long/short, systematic long/short, relative value, special situations, convertible arbitrage, foreign exchange and credit.

Roger currently runs Monitor 110, which aims to aid institutional investors generate alpha through the myriad of information available on the internet in a time-sensitive & tickerized manner.



Wall Street Talk with Yaser Anwar

Guest: Roger Ehrenberg, President and Chief Operating Officer, Monitor 110, Inc.

________________________________________
1) Y: How do you explain this shift in revenue generation?

R: Three principal reasons: (1) most banks have excess capital that can be deployed; (2) trading, order management and risk management technologies have evolved to the point where they can scale; and (3) firms adapted to the shrinking equity calendar by re-purposing traders from customer flow towards proprietary trading.

2) Y: In your opinion, what portion of it was related to the demise of the Tech bubble & the boom in commodity markets followed by the stock market?

R: I wouldn’t limit the boom in proprietary trading to commodities. I think if I was to put percentages by the three reasons listed above they would be 30% excess capital, 20% improved technologies and 50% need to find other ways to generate returns.

3) Follow-up Q: Would we have to see another bubble, similar to the Tech bubble in 2000, for investment bankers to take the lead?

R: I don’t think so, I think the Banking vs. Trading revenue split is a cyclical phenomenon, and that the next big boom in Banking revenues will arise from the tons of restructuring business to be had after some of these highly leveraged private equity-driven deals fail.

4) Y: When markets go sour, traders can still generate alpha by going short, where as investment bankers aren't so fortunate, since an economic downturn constraints M&A activity, would you agree? If not, please explain.

R: While an economic downturn may dampen M&A activity, it can turbocharge restructuring activity. Further, running a short book is very, very difficult, made particularly so by the fact that down markets don’t move straight down. Traders can still get carried out during a secular bear market being short as sudden, violent rallies can force massive short covering that only drives near-term share prices even higher. It makes for an ugly, ugly picture.

5) Y: Even though trading desks account for majority of the revenue, the average trader still makes a lot less than an average investment banker, why this discrepancy when traders generate more revenue than investment bankers?

R: I don’t think this is a game of averages. Rock star traders make way more money than rock star bankers at Wall Street firms, much less hedge funds. I would argue that investment banking is actually “flatter” by its nature than trading, since it is possible to be a competent banker but not a star (and collect a healthy but not stratospheric paycheck) while this is really impossible in trading (merely competent traders don’t last long – they can lose you money fast).

6) Y: Recently you commented on Credit Suisse's $120 million loss on derivatives, "Sometimes risky bets pay off. Sometimes they don't." Do you think risk controls were not followed closely enough to limit the loss?

R: This is neither a judgment myself nor anyone can make from the outside. As I stated, this loss is certainly within the expected range of outcomes for a firm the scale of a CS. Whether or not the magnitude of the loss was due to poor risk management is impossible to know without more facts.

7) Follow up Q- You headed Deutsche Bank's Global Strategic Equity Transactions Group which won Institutional Investor magazine’s “Derivatives Deal of the Year” award in 2000. Could you briefly talk about the risk controls in place to avoid CS like calamities?

R: I wouldn’t call the CS loss a calamity. I would call it an undesired outcome. All firms have very strict risk guidelines for their proprietary trading operations, as well as for the “back books” run by those in the customer-driven flow trading businesses. In my experience large losses either arise from a conscious decision to push risk limits, or a gapping market which causes steep losses for those on the wrong side. In either case, these possible outcomes are modeled and reflected in the risk budget for these businesses, so in the absence of fraud or a rogue trader losses on the order of the one sustained by CS should happen every so often. We’ve all got to calm down about this. Either trade risk and acknowledge the risks or get out of the business. It’s that simple.

8) Y: On Sep. 20th 06 your blog, Information Arbitrage, you addressed the Amaranth situation & said; "Even increasingly sophisticated risk management systems and processes are insufficient to stop this behavior (Proprietary traders making inappropriate risk-reward gambles since it's the "house's money") from happening from time to time." As someone who managed a 130-person team with $6 billion in capital at DB Advisors LLC, What else needs to be done?

R: Senior Management taking responsibility. In the case of Amaranth it wasn’t a rogue trader that caused the losses, it was an institutional breakdown at the highest levels of the firm that allowed a risk position of that scale to live on for months. Instances of rogue traders will always happen, and the improving real-time risk monitoring of trading desks’ exposures help to mitigate the likelihood of its occurrence. But this is not what happened with Amaranth. It was just terribly poor risk management and decision-making on the part of those running the firm.

9) Y: What computers did to typewriters, ATMs did to tellers and Andy Kessler thinks will do to doctors, in his latest book 'The End of Medicine'. Will Automated Quantative Strategies do the same to Fund Managers?

R: No. I am a big proponent of quantitative trading strategies, and believe there is significant alpha to be captured via top-performing statistical arbitrage programs. That said, what will evolve is a balance between quant traders and fundamental traders, since when too much capital flows into either arena returns are squashed and capital flows in the other direction. This is the nature of diversification and optimizing the use of capital across the investment landscape.

10) Y: You recently talked about pension funds being a train wreck on your blog- Would you be for or against regulation to prevent another Orange County like incident?

R: While I am generally in the camp of market-driven regulation, I really think that pension funds can give rise to externalities due to the breadth and lack of sophistication of their constituencies. Time and time again, pension funds do stupid things with other people’s money. It is both irritating and represents a colossal breach of fiduciary duty. There probably should be some standards relating to “expertise,” similar to a retail investors’ requirement to have certain levels of experience and net worth in order to trade more complex (or naked) option strategies. Otherwise, pension funds should be compelled to use fund-of-funds or other skilled allocators to construct their portfolios. Because some, when left to their own devices, make very poor decisions. And if it just impacted the pension fund manager that would be one thing. But it effects potentially thousands of people, which makes the current model unacceptable.

11) Y: Amaranth Advisors, the most recent hedge fund blow-up, had a 3-year lockup period. Should there be a rule to supersede such lockup periods, when funds move away from their initial strategies and risk controls?

Note to readers: In Amaranth's case the fund was supposed to be a "multi-strategy" fund but due to lack of diligence and management oversight they placed 50% of their assets in natural gas trades, which led to their demise.

R: No. Amaranth abided by its fund document, I believe. What they may have done is misrepresent the steps they were taking to mitigate risk while raising money. None of this has to do with their document. If investors don’t want to be subject to a 3 year lock-up then don’t invest in funds with 3 year lock-ups. If investors don’t want a fund to have the ability to put 50% of its capital in natural gas, then don’t invest in such a fund. Investors in Amaranth are culpable as well, and should look at themselves in the mirror before making another investment in a fund with a loose document and a long lock-up.

12) Y: It is my understanding that you’re quite happy with how Christopher Cox is running the SEC. What are the necessary steps the SEC needs to take to ensure investor safety when it comes to hedge funds- Increase the net-worth limit, requirements of greater transparency and/or a self-regulating hedge fund body?

R: I think Commissioner Cox has done a solid job to date. I think the crux of the work that needs to be done relates to the definition of “accredited investor.” One of those commenting on my blog, Jack Doueck of Stillwater Capital, made the point that the rules are not designed to see if an investor can sustain a loss but to serve as a measure of one’s sophistication. He is right. And I don’t think the rules are sufficient in today’s day and age to weed out the unsophisticated from the lot. And this is bad. Otherwise, I think the self-regulatory system, coupled with the SEC’s ability to investigate issues whenever they feel there is a problem and the federal bank and broker/dealer regulations covering prime brokers are sufficient to maintain a safe and orderly market.

13) Y: Hedge funds have an inherent incentive to take on huge risks in hopes of huge payoffs; the compensation structure is designed that way, since hedge fund managers have practically nothing to lose in the event their bets go sour. Add to this the fact that few hedge funds have been able to generate returns that justify their pay. Hence you may ask yourself- why play the hedge fund game at all?

R: The hedge fund game, as you say, is a good game if you know what you are doing and a potentially fatal game if you don’t. There is no question that hedge fund returns exhibit negative skewness, akin to a manager selling optionality in the hopes of not getting hit in order to enhance returns, but then having a long tail of negative outcomes when some of this does, in fact, come to pass. That said, excellent managers can allocate capital wisely, build deep benches of talent, generate returns that are less correlated than vanilla asset classes and generate true alpha. The problem is figuring out which managers will outperform. This is why, in the absence of immense in-house sophistication, hedge fund investors should use seasoned fund-of-funds (that are not too diversified) or advisors to construct solid portfolios. Or, alternatively, don’t invest in the asset class at all. There is no harm in acknowledging a lack of expertise in hedge funds and avoiding investment; attractive diversified portfolios don’t necessarily require them. The real harm comes when investors pretend they have expertise in an area that they don’t, potentially hurting themselves and others in the process.

13) Y: You seem to enjoy blogging and after 17 years in M&A, Derivatives and Trading, when can we expect “The Memoir of Roger Ehrenberg” published?

R: When I do something that is worthy of a memoir. I’ve got a ways to go, my friend.

Y: Thank you very much for your time & insights Mr. Ehrenberg. Good luck with Monitor110 and your other ventures.

R: And best to you as well, Yaser.


For more information on Roger Ehrenberg and/or Monitor 110, visit his blog Information Arbitrage and Monitor 110’s corporate website, respectively.

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

Cramer Gives a Triple Buy to ConAgra (CAG)

Cramer said this was once a joke, but now he gives a "Triple Buy" to ConAgra (CAG). He said it is a joke of a company on the street, but it is $0.50 within its 52-week high. He thinks it is worth a second look and he thinks "Buy, Buy, Buy."

Cramer said that all of these brands jumbled together were a problem with the past management. He said the company thought it was a food company, but they are a brand company. The brands have to be managed but no one knew how to manage brands there. They took a brand-god named Gary Rodkin from Pepsi, and he knows how to run a brand.

Cramer said that analysts don't know how to account for brands in between the P/E ratios and how the brand can be worth more. He said that

The analysts are very negative with 3 sells, 4 holds, and 2 buys. He said that the estimates are too low and the street is going to have to catch up.

Jon C. Ogg

Cramer Thinks Buffalo Wild Wings Is Hot Sauce

Cramer also discussed a situation where he wondered if it was too late, or the end of the beginning. Buffalo Wild Wings (BWLD) rose a huge 20% after earnings and it is still a Buy at $50.00. He said it is even more of a Buy at $50 than it was at $42, and even though that sounds weird it is true.

He said its small $500 million market cap and small float of only 7.4 million shares. He said there were many shorts going into the earnings. Cramer said if you are very conservative or nervous then this is a "Don't Buy!". The company doesn't give quarterly guidance, and they don't set targets.

Cramer did a taste test and said the Buffalo Wild Wings are hotter than Hooters and they are branding themselves as a family wings place. He said this is a family friendly place you can eat wings at Sober and with kids....unheard of previously. He says the sauce is the difference from this and others because they have 14 sauces and only 24% of sales actually came from wings. He said this is a regional to national story. They are in 36 states with only 400 stores, but most are in the Midwest. He said you even get more growth here than you do with Panera.

Cramer said you better only buy on limit orders and on pullbacks, and again said not to buy it in after-hours.

Jon C. Ogg

As Predicted, Microsoft Earnings Were Just Noise

Microsoft initially fell almost 1.5% after the company beat earnings, but lowered guidance for the current quarter. The shares then moved down only about 0.4% in after-hours activity. The report showed $0.35 EPS vs $0.31e, but as we noted earlier the backward quarter should have been irrelevant and you have to look past even the current quarter because of the issues. The company lowered guidance for the current quarter, but that is also something that was not a huge shocker if you realize that the company could have been up or down by a significant amount if you take the trifecta of Zune, Vista, and Xbox360 competition into play.

The important issues are as follows:

Kevin Turner, chief operating officer at Microsoft said, "As we look to the upcoming releases of Windows Vista, the 2007 Microsoft Office system and Exchange Server 2007, we are excited about these products and believe they will deliver unprecedented levels of business value to our customers."

Next quarter guidance: Revenue is expected to be in the range of $11.8 billion to $12.4 billion, which reflects approximately $1.5 billion of revenue deferrals that will be captured in the fiscal third quarter as noted below. Operating income is expected to be in the range of $2.9 billion to $3.1 billion, which reflects approximately $1.5 billion of deferrals noted below. Diluted EPS expected to be $0.22 to $0.24, which includes an $0.11 per share impact for deferrals noted below. Forget that quarter, look out further.

Full-year guidance: Revenue is expected to be in the range of $50.0 billion to $50.9 billion. Operating income is expected to be in the range of $19.1 billion to $19.5 billion. Diluted earnings per share are expected to be in the range of $1.43 to $1.46. The estimates are $1.44 EPS and $50.25 Billion in revenues. This is actually in-line, but what do you do if you think the company was being conservative.

They now have sold 6 million Xbox 360 units.

Whitney Tilson of the Tilson Focus Fund just said the same thing on a CNBC interview that we noted earlier about this being a transition quarter and that the main products have not even hit the market yet.

The media isn't really treating this properly because they don't know how to interpret events as well, or at least that is my opinion. So now the real issue is going to boil down to the street fighting over if the company is backing off strong opinions or if it was just being conservative.

Jon C. Ogg

Microsoft Earnings Shouldn't Matter, It's the Forward Projections & Body Language

I had looked at all the different metrics and was thinking about how messy this last quarter being reported today and how messy the results for next quarter may look. In fact, this last quarter doesn't even matter.

It doesn't even matter what the revenues differential looks today like because of the calendar fourth quarter (Q2 for the company) from the $1.5 Billion in revenues that will have to officially be pushed out to the quarter that Vista officially becomes available. You cannot place too much faith in any "consensus" projections for today or next quarter. The street is looking for $0.31 EPS and Revenues of $10.75 Billion, but you can make the exact same argument as to why these could be blown-out or why they could be way off. Today is noise. It doesn't matter if MSFT are up 10% or down 10%, at least not as far as the press release for this quarter is concerned. It is going to boil down entirely to what the company shows in its body language and whether or not they expect to be a monster in 2007.

The vouchers for an Operating System upgrade were set to begin today, and after visiting BestBuy.com's VISTA SITE it shows how you will get the free upgrade when it becomes available.

Most of the true business developmental changes are not yet known as far as what to expect in sales and in units.

Microsoft's Zune is launching on November 14 for $249.00, and that is their response to Apple's iPod. We should get to hear what the initial store demand translates to in units, but we still have to take a lot of this on faith.

Microsoft won't have any Xbox 360 competition formally until November when the Sony PS3 and the Nintendo Wii gaming consoles launch.

There is also the online efforts that the company needs to re-grasp. The new Internet Explorer launch is said to be the first unofficial-official prelude to a Vista operating system world.

Microsoft has been under pressure to use its cash, and in the last quarter it returned $3.8 Billion in August via a self tender for shares. It still has more cash on the books than it does for its entire buyback plan. We probably won't see any note on it, but it would be nice to see if the company ever plans to "cash in" on its past investments in all of the outside public companies stock that it holds.

Since MSFT will not be able to count their operating system sales as formal sales until the Windows Vista launch date, all that will really be the focus is Units implied from the vouchers in the next quarter. Windows Vista for business is launching this year and Windows Vista for retail and small business will not be ready until the end of January 2007. Now if for some reason there is much of a delay (which is not expected) then look out, but the company has taken every step to debunk that notion.

All that matters today as far as we are concerned is the future and the dominance. If they give great confidence and are highly positive then it wins. If they are mousey and apologetic or act unsure then they will get hit. That's why I don't care what the earnings and revenues will show for last quarter and partially for new quarter we are already in.

Jon C. Ogg

Cramer Thinks Buffalo Wild Wings Is Hot Sauce

Cramer also discussed a situation where he wondered if it was too late, or the end of the beginning. Buffalo Wild Wings (BWLD) rose a huge 20% after earnings and it is still a Buy at $50.00. He said it is even more of a Buy at $50 than it was at $42, and even though that sounds weird it is true.

He said its small $500 million market cap and small float of only 7.4 million shares. He said there were many shorts going into the earnings. Cramer said if you are very conservative or nervous then this is a "Don't Buy!". The company doesn't give quarterly guidance, and they don't set targets.

Cramer did a taste test and said the Buffalo Wild Wings are hotter than Hooters and they are branding themselves as a family wings place. He said this is a family friendly place you can eat wings at Sober and with kids....unheard of previously. He says the sauce is the difference from this and others because they have 14 sauces and only 24% of sales actually came from wings. He said this is a regional to national story. They are in 36 states with only 400 stores, but most are in the Midwest. He said you even get more growth here than you do with Panera.

Cramer said you better only buy on limit orders and on pullbacks, and again said not to buy it in after-hours.

Jon C. Ogg
October 26, 2006

Cramer Gives a Triple Buy to ConAgra (CAG)

Cramer said this was once a joke, but now he gives a "Triple Buy" to ConAgra (CAG). He said it is a joke of a company on the street, but it is $0.50 within its 52-week high. He thinks it is worth a second look and he thinks "Buy, Buy, Buy."

Cramer said that all of these brands jumbled together were a problem with the past management. He said the company thought it was a food company, but they are a brand company. The brands have to be managed but no one knew how to manage brands there. They took a brand-god named Gary Rodkin from Pepsi, and he knows how to run a brand.

Cramer said that analysts don't know how to account for brands in between the P/E ratios and how the brand can be worth more. He said that

The analysts are very negative with 3 sells, 4 holds, and 2 buys. He said that the estimates are too low and the street is going to have to catch up.

Jon C. Ogg
October 26, 2006

As Predicted, Microsoft Earnings Were Just Noise

Microsoft initially fell almost 1.5% after the company beat earnings, but lowered guidance for the current quarter. The shares are now only down about 0.4% in after-hours activity. The report showed $0.35 EPS vs $0.31e, but as we noted earlier the backward quarter should have been irrelevant and you have to look past even the current quarter because of the issues. The company lowered guidance for the current quarter, but that is also something that was not a huge shocker if you realize that the company could have been up or down by a significant amount if you take the trifecta of Zune, Vista, and Xbox360 competition into play.

The important issues are as follows:

Kevin Turner, chief operating officer at Microsoft said, "As we look to the upcoming releases of Windows Vista, the 2007 Microsoft Office system and Exchange Server 2007, we are excited about these products and believe they will deliver unprecedented levels of business value to our customers."

Next quarter guidance: Revenue is expected to be in the range of $11.8 billion to $12.4 billion, which reflects approximately $1.5 billion of revenue deferrals that will be captured in the fiscal third quarter as noted below. Operating income is expected to be in the range of $2.9 billion to $3.1 billion, which reflects approximately $1.5 billion of deferrals noted below. Diluted EPS expected to be $0.22 to $0.24, which includes an $0.11 per share impact for deferrals noted below. Forget that quarter, look out further.

Full-year guidance: Revenue is expected to be in the range of $50.0 billion to $50.9 billion. Operating income is expected to be in the range of $19.1 billion to $19.5 billion. Diluted earnings per share are expected to be in the range of $1.43 to $1.46. The estimates are $1.44 EPS and $50.25 Billion in revenues. This is actually in-line, but what do you do if you think the company was being conservative.

They now have sold 6 million Xbox 360 units.

Whitney Tilson of the Tilson Focus Fund just said the same thing on a CNBC interview that we noted earlier about this being a transition quarter and that the main products have not even hit the market yet.

The media isn't really treating this properly because they don't know how to interpret events as well, or at least that is my opinion. So now the real issue is going to boil down to the street fighting over if the company is backing off strong opinions or if it was just being conservative.

Jon C. Ogg
October 26, 2006

Market Wrap (Oct, 26, 2006)

DJIA 12,163.66; Up 28.98 (0.24%)
NASDAQ 2,379.10; Up 22.51 (0.96%)
S&P500 1,389.08; Up 6.86 (0.50%)
10YR-Bond 4.721%
NYSE Volume 2,737,266,000
NASD Volume 2,301,620,000

The markets responded positively on weak economic news today, one day after the FOMC kept rates steady and gave us their official "inflation is still worrisome" rhetoric.

The Commerce Department reported median prices for New Homes sold in September was $217,100, a drop of -9.7% from September 2005. It was the lowest median price for a new home since 2004 and the sharpest yearly decline since 1970. Yet KB Homes (KBH) rose 1.5% to $46.30, D.R.Horton (DHI) rose 2.2% to $24.50, and Pulte Homes (PHM) rose 1.4% to $32.66. They rose on lower inventories.

Exxon Mobil (XOM) almost earned $10 Billion in the quarter. Its shares rose 0.9% to $71.62 after it posted EPS at $1.77 compared to $1.59 estimates.

Home Inns & Hotels Management (HMIN) had a killer IPO. We noted it would be a good one, but this one blew the doors of the hinges. It priced 7.9 million shares above the range up at $13.80, but it closed up at $22.50 on the day.

Renovis (RNVS) fell a massive 75% to $3.43 after its stroke study in phase III with AstraZeneca was cancelled after failing to meet primary endpoints. AtraZeneca (AZN) fell a sharp 7.5% to $61.38 with RNVS.

NighhHawk Radiology (NHWK) rose a sharp 11% to $20.85 after pricing its telegraphed 5.5 million share secondary offering at $18.50.

Sony (SNE) saw its ADR's in the US trade up 3.9% to $42.36 after it posted earnings in Japan.

Bristol-Myers Squibb (BMY) fell 0.5% to $24.52 despite beating earnings with $0.22 EPS vs $0.20 estimates and even after giving higher guidance. Unfortunately generic Plavix caused a sharp 65% drop in its bottom-line.

Sirius (SIRI) rose 5.2% to $3.84 after launching a new NBA line-up product. XM Satellite (XMSR) also rose 3.9%.

Arena (ARNA) gave back almost 5% to close at $15.52 on profit taking after the company posted its expected loss.

Comcast (CMCSA) rose 3% to $40.00 after handily beating earnings estimates after a powerful Triple Play win from its cable operation.

Time Warner (TWX) closed up at 0.81% at $19.99, and it went over $20.00 today for the first time since May 2002.

Kellogg (K) rose 1.1% to %50.19 after its profit rose 3%.

Harman (HAR) rose 19% to $105.50 after it blew past earnings estimates again.

Harris Corp (HRS) fell 2.6% to $43.99 after posting what appeared good earnings.

Kanbay (KBAY) rose 14% to $28.60 after it is being acquired for $29 per share.

Clear Channel (CCU) rose over 9% to $35.48 after it hired Goldman Sachs to evaluate alternatives, after we noted what Faber said about the Mays family being receptive to an LBO now.

Tribune (TRB) rose 2.3% to $33.79 after the company has more private equity firms circling.

Despite Sprint NexTel (S) posting lower numbers, its positive guidance and WiMAX forecasts helped shares rally 6.6% to $18.90.

GM (GM) fell a sharp after Merrill Lynch gave it a mid-day downgrade to Sell.

JetBlue Airways (JBLU) rose 3.3% to $12.05 after the company won a route into Chicago's O'Hare....hope you guys enjoy wind and flight delays there.

Jon C. Ogg
October 26, 2006

David Faber Discusses His Ongoing Buyout Stories

David Faber on CNBC today said that the private equity firms are circling tribune (TRB), but the deal might not come at much of a premium to current prices. He said that there has to be a feeling that some of the newspaper erosion has slown down or ended (which is unlikely), and that is what would have to be justified at current prices. He also noted that the private equity firms also have to have an exit strategy down the road. Shares of Tribune (TRB) are up 2.6% at $33.87

He also noted that the Mays family has still been entertaining interest after Clear Channel (CCU) announced that it had hired Goldman Sachs to evaluate alternatives and to increase shareholder values. He earlier discussed how some of the private equity firms that are interested in ClearChannel could even have some FCC issues because they are involved in the acquisition of Univision (UVN). CCU shares are up 9.3% at $35.36.

Jon C. Ogg
October 26, 2006

Cramer Discusses Elections

Today on the STOP TRADING segment on CNBC, Jim Cramer was trying to bogey the US mid-term election results in the House & Senate and make a market inference on his thoughts.

First he discussed hedge funds and the perception on the street. He said they are only out for themselves, not the public perception.

Cramer said that the market thinking the Dem's will win the election is why the drug and defense names are weak liek drugs and LMT, but....

He likes L-3 (LLL) because he thinks homeland security will be OK even if that is the case.

He was also positive on Comcast (CMCSA) after their great quarter. He said he is not taking profits here.

Cramer thinks Arris (ARRS) will go even higher because they will be the secret winner off of Comcast cap-ex.

Jon C. Ogg
October 26, 2006

Microsoft Earnings Shouldn't Matter, It's the Forward Projections & Body Language

I had looked at all the different metrics and was thinking about how messy this last quarter being reported today and how messy the results for next quarter may look. In fact, this last quarter doesn't even matter.

It doesn't even matter what the revenues differential looks today like because of the calendar fourth quarter (Q2 for the company) from the $1.5 Billion in revenues that will have to officially be pushed out to the quarter that Vista officially becomes available. You cannot place too much faith in any "consensus" projections for today or next quarter. The street is looking for $0.31 EPS and Revenues of $10.75 Billion, but you can make the exact same argument as to why these could be blown-out or why they could be way off. Today is noise. It doesn't matter if MSFT are up 10% or down 10%, at least not as far as the press release for this quarter is concerned. It is going to boil down entirely to what the company shows in its body language and whether or not they expect to be a monster in 2007.

The vouchers for an Operating System upgrade were set to begin today, and after visiting BestBuy.com's VISTA SITE it shows how you will get the free upgrade when it becomes available.

Most of the true business developmental changes are not yet known as far as what to expect in sales and in units.

Microsoft's Zune is launching on November 14 for $249.00, and that is their response to Apple's iPod. We should get to hear what the initial store demand translates to in units, but we still have to take a lot of this on faith.

Microsoft won't have any Xbox 360 competition formally until November when the Sony PS3 and the Nintendo Wii gaming consoles launch.

There is also the online efforts that the company needs to re-grasp. The new Internet Explorer launch is said to be the first unofficial-official prelude to a Vista operating system world.

Microsoft has been under pressure to use its cash, and in the last quarter it returned $3.8 Billion in August via a self tender for shares. It still has more cash on the books than it does for its entire buyback plan. We probably won't see any note on it, but it would be nice to see if the company ever plans to "cash in" on its past investments in all of the outside public companies stock that it holds.

Since MSFT will not be able to count their operating system sales as formal sales until the Windows Vista launch date, all that will really be the focus is Units implied from the vouchers in the next quarter. Windows Vista for business is launching this year and Windows Vista for retail and small business will not be ready until the end of January 2007. Now if for some reason there is much of a delay (which is not expected) then look out, but the company has taken every step to debunk that notion.

All that matters today as far as we are concerned is the future and the dominance. If they give great confidence and are highly positive then it wins. If they are mousey and apologetic or act unsure then they will get hit. That's why I don't care what the earnings and revenues will show for last quarter and partially for new quarter we are already in.

Jon C. Ogg
October 26, 2006

Tech Most Active Review: The Low Priced Stocks Have Resumed Control

Usually around earnings season, you see the "Horsemen" take the focus. Right now that isn't the case. Today after the close we have both Microsoft (MSFT) and Sun Micro (SUNW) report, so with the ridiculous number of shares that may trade around SUNW tomorrow it is probably going to be hard for the Horsemen to again compete with the Smaller Low Priced Most Aactives. MSFT will be the last of the Horsement to report earnings, so it is possible that the smaller names may again take the leadership. We'll have to see. We recently lost JDSU because of its reverse split trickery, and CIEN did the same the month before.

So far today, the smaller more actives are winning on raw share volume, but still nowhere close on raw dollar terms. It is also pretty hard not to notice how all of the lower-priced stocks are UP on the day and the Horsemen stocks are mixed. Here is a review of the actives:

Ticker	Price	Change	Volume
FNSR	$ 3.73	$ 0.04	3,226,746
LVLT	$ 5.42	$ 0.03	27,223,992
SIRI	$ 3.68	$ 0.03	13,554,144
SUNW	$ 5.32	$ 0.02	33,384,094
PMCS	$ 6.49	$ 0.01	2,059,858
CNXT	$ 1.98	$ 0.11	12,329,114
CHTR	$ 2.10	$ 0.21	35,870,704
Total			127,648,652
NASDAQ	2,360.18	$ 3.82	1,178,900,000
Ticker	Price	Change	Volume
INTC	$ 21.73	$ 0.01	21,390,444
MSFT	$ 28.23	$ (0.08)	27,514,524
CSCO	$ 24.14	$ (0.15)	17,697,946
AAPL	$ 82.05	$ 0.37	7,754,305
ORCL	$ 18.67	$ 0.05	15,458,348
Total			89,815,567

Jon C. Ogg
October 26, 2006

Most Drug Stocks Reacting Poorly to Results Today

Tickers: RNVS, AZN, BMY, ARNA, GSK, MRK, CELG

Renovis (RNVS) is demonstrating just how fun it can be when you are essentially a one-trick pony in a development pact with a Big Pharma company in phase III studies that fails to produce results. Its phase III study with AstraZeneca (AZN) to treat strokes failed to meet endpoints and is being terminated. RNVS shares are down a whopping 73% to what some feel is under the cash value of the company, but it will stilll have excessive burn rates; and AZN shares are down 7.7% to $61.25.

Bristol-Myers Squibb (BMY) is in a rough spot with its shares off another 1.3% at $24.35. They beat earnings estimates at $0.22 EPS vs. $0.20 estimates, but generic Plavix chewed their profits down 65% from last year and the company is still essentially leaderless.

Arena (ARNA) failed to impress the street, but it looks like a "Sell the news" or profittaking reaction more than anything. The stock is up huge since Cramer has been touting it and there is still a pending securities shelf that the company has not taken advantage of yet, and the company is still just a development stage company. ARNA is down 4.7% to $15.53.

GlaxoSmithkline ADR's (GSK) are trading down 2.8% at $54.54. It actually beat earnings and raised guidance, but it is lower after delaying its cervical cancer drug. It even announced an $11 Billion equivalent share buyback plan.

Merck (MRK) was initially up after GSK's delay in a competitor to Merck's Gardisil for cervical cancer vaccine, but even its shares are down 0.3% at $45.95.

Celgene (CELG) reporting $0.15 EPS vs. $0.14 estimates and revenues also came in ahead at $244.8 million vs. $230 million estimates; and it is one of the few drug-biotech names up with is shares up an impressive 9.5% to $48.30.

Jon C. Ogg
October 26, 2006

Harris Firing on All Cylinders

By William Trent, CFA of Stock Market Beat

Radio technology specialist Harris Communications (HRS) reported solid earnings and raised its full-year guidance. A review of the conference call indicates that the company is firing on all cylinders after nearly becoming a one-trick (defense) pony.

Harris started its new fiscal year with an excellent Q1. Posting outstanding revenue and earnings growth. Revenue for the Q1 was $947 million, a 25% increase compared to the prior year quarter. Organic revenue growth continued at a very strong 18%. Orders in the Q1 increased 53% to $1.1 billion significantly outpacing revenue and setting the stage for a continued growth throughout fiscal year 2007.

Government communication systems revenue was $459 million, 6% higher compared to the prior quarter as revenue increased across the department of defense, civil programs and technical services business areas.

RF communications. RF began 2007 with a very strong quarter, revenue was $264 million, an increase of 54% over the prior year.

Microwave had revenue and orders growth and strong operating performance once again in the quarter. Revenue increased to $94 million, 24% above the prior year. This is the seventh consecutive quarter that orders are been higher than sales and we continue to built order backlog.

Revenue in the broadcast communication segment was $140 million. And that’s up 59% compared to the same quarter a year ago. Revenue benefited from our prior year acquisitions of Leitch Technology, Optimal Solutions, and Aastra Digital Video. Excluding the acquisitions, revenue was about flat with the prior year.

The government communication systems and RF communications segments sell primarily to the Department of Defense, while the other two segments consist primarily of commercial customers. Back in 2000 the business was evenly split between government and commercial, but the communications bubble and 9/11 attacks shifted the mix to 80% government. Due largely to the acquisitions, the business is regaining some of its prior balance as commercial customers are back to 34% of total sales. The pending acquisition of Stratex Networks will further improve the balance.

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/

Plantronics: Don’t Fight the Tape?

By William Trent, CFA of Stock Market Beat

After posting a solid quarter due to strong margins, headset maker Plantronics (PLT) shares were up more than 8%, despite issuing poor guidance for the December quarter. Their EPS guidance of $0.25-$0.30 (after stock expense) on revenue of $205-$215 million compares to consensus estimates of $0.40 EPS on $228 million revenue. According to Yahoo! Finance:

Shares of Plantronics Inc. jumped more than 8 percent Wednesday, the day after the maker of communications headsets posted a solid fiscal second quarter with earnings above Wall Street’s expectations.Plantronics said the quarter’s earnings beat expectations thanks to a stronger product mix and lower expenses, even as revenue was in the middle of the company’s July outlook.

Baird analyst Reik W. Read upgraded the company despite its lower-than-expected third-quarter guidance.

Read upgraded Plantronics to “Outperform” from “Neutral,” thanks in part to “the positive revenue and margin trends” in the company’s call center and office segment, which accounts for 57 percent of total sales.Read said in a note to investors the company’s lower third-quarter guidance is due mainly to weakness in Altec.

We have also said that the key to Plantronics success lies in the office and call center market, which is why we (and the rest of the market) were so exasperated by their purchase of a consumer business (Altec) and excessive advertising spend, which management addressed in the conference call:

We did pull back; what we had found was that the overall adoption in the category was not appearing to rise as much as we had hoped….

So, we really scaled back a fair amount of that marketing, and put more effort into longer cycle innovation that we think can ultimately create a more compelling value offering, reduce some of the negatives. But having said that, there were still areas in the marketing that we thought were attractive… where we thought we were gaining some traction, and so we’ve narrowed our focus into those areas.

Which leads us to the crux of the issue: is now the time to buy? In our June valuation piece we said:

Therefore, although today’s valuation appears low, we will not be buyers again until it is lower still, or until we see evidence that the free cash flow is once again improving. A 3.6 percent free cash flow yield just doesn’t cut it when CDs are paying five percent.

With marketing spend down and margins up, the free cash flow improvement seems likely to follow. And with the ticker rising even on “bad” news, now probably isn’t the time to fight the tape.

http://stockmarketbeat.com/blog1/

Hot IPO Alert: Home Inns & Hotels Management (HMIN)

Home Inns & Hotels Management (HMIN) priced its 7.9 milion share IPO at $13.80 per share. That is actually the same number of shares, but the pricing was well above the $10 to $12 range. There were prior indications of a higher price and higher number of shares, but it is always easier to sell the same number of shares at a higher price than it is to bump up the share count. Credit Suisse and Merrill Lynch are the lead underwriters and Deutsche Bank was a listed co-manager.

Home Inns was founded in 2002 and began opening economy class hotels in 2003. As of the filing date it had or expected to have approximately 82 hotels, 63 leased and self managed and another 19 franchised. The leased and self managed hotels account for roughly 97-98% of revenues. It has contracts for some 57 more units in the next year. Some 24 of those will be franchised, but it makes you wonder if they aren't better off doing the lease and self-manage route. It takes an upfront fee for a franchise plus 5%-6% of the sales at each franchise for the branding and the networking of the reservations and support systems. The franchise units sound a lot like Best Western here on a much smaller scale, but maybe that isn't fair.

You can click for a mapping of its hotel locations here.

The company isn't without risk. It has been sacrificing profits and cashflow for growth, and with all the rapid construction in China you could imagine a myriad of issues that could delay its growth plans and cause financial impacts. SARS and bird flu scares could always come back up in China, or whatever the next pandemic scare happens to be. They could have power issues, building material shortages, building permit delays, accidents, and the like. They are also unproven as a long-term operating company and it isn't known how well their reservation and support network is running. There is also the factthat since it leases rather than owns that they will have to suddenly have to choke up substantially higher rent costs down the road that could have the same effect as a fuel hedge expiring or a large balloon note coming due that wipes out all of a company's cash. Outside of that, the deal had no troubles selling.

The company has been growing rapidly rather than focusing on profitability. The niche is right, and the formula sounds right. Now it is just up to the company to demonstrate that they can be profitable. This is the first IPO of its kind, and if this goes well you could see many more smaller hotel chains in China (or India for that matter) try to conduct and IPO as well. It will not be that surprising at all if this IPO trades even higher out of the chute since the share count wasn't boosted. The company has an English website here.

Jon C. Ogg
October 26, 2006

Pre-Market Stock Notes (Oct. 26, 2006)

(AAI) Airtran -$0.05 EPS vs $0.04e.
(ABT) Abbott Lab showed positive XIENCE coated stent results.
(ACHN) Achillon 4.5M share IPO priced at $11.50, under the range.
(ACV) Alberto Culver $0.74 EPS vs $0.70e; sets special $25 dividend.
(AET) Aetna trading up 5% after beating earnings higher guidance.
(AZN) AstraZeneca $1.01 EPS vs 0.98e, but stock down $5 after discontinuing its stroke treatment drug.
(BG) Bunge $1.40 EPS vs $1.41e.
(BMY) Bristol Myers $0.22 EPS vs $0.20e.
(CCU) Clear Channel is evaluating alternatives to enhance shareholder value.
(CMCSA) Comcast $0.26 EPS vs $0.20e. Revenues $6.43 Billion vs $6.41B(e).
(CRGN) Curagen -$0.29 EPS vs -$0.34e.
(CRR) Carbo Cermaics $0.55 EPS vs $0.58e.
(CSGP) Costar $0.25 EPs vs $0.18e.
(ECIL) ECI Telecom $0.09 EPS vs $0.10e.
(FMD) First Marblehead $2.23 EPS vs $2.06e.
(GSK) GlaxoSmithkline earnings rose 15% overseas; announced an $11 Billion share buyback plan.
(HCR) HCR Manor Care$0.60EPS vs $0.59e.
(HMIN) Home & Inns Hotels Management 7.9M share IPO priced at$13.80, above range.
(HOT) Starwood beat earnings but unsure if they are comparable.
(HTV) Hearst Argyle $0.18 EP vs $0.16e.
(KBAY) Kanbay gets acquired for $29 per share by Cap Gemini.
(KEM) Kemet $0.12 EPs vs $0.11e; announced $160 million convertible note sales, announced 425M share buyback.
(LIZ) Liz Claiborne $0.96 EPS vs $0.99e.
(LKQX) LKQ $0.19 EPS vs $0.19e.
(LNCE) Lance $0.25 EPS vs $0.31e.
(MBI) MBIA $1.55 EPS vs $1.45e.
(MEDI) Medimmune -$0.30 EPS vs -$0.30e.
(MGLN) Magellan $0.54 EPS vs $0.47e; signed some management pacts with Cigna.
(MS) Morgan Stanley is investing some $3 Billion in the coming years into carbon trading initiatives.
(NHWK) Nighthawk Radiology 5.5M share secondary priced at $18.50.
(ODFL) Old Dominion Freight Line $0.54 EPS vs $0.53e.
(OMX) Office Max $0.56 EPS vs $0.55e.
(PENN) Penn National Gaming $0.47 EPS vs $0.50e.
(RATE) Bankrate.com $0.21 EPS vs $0.23e; R$19.5M vs $20.35M(e).
(RGC) Regal Entertainment $0.20 EPS vs $0.18e; filed to sell 8.2 million shares for holders.
(RNVS) Renovis stock trading down 75% after it announced negative Phase II stroke study results with AZN.
(RTN) Raytheon $0.71 EPS vs $0.65e.
(S) Sprint Nextel $$0.32 EPS vs $0.33e; R$10.5B vs $10.49B(e).
(SEPR) Sepracor beat EPS significantlt, but unsure if EPS is comparable; R$289.3M vs $275.5M(e).
(STA) St. Paul Travelers $1.46 EPS vs $1.28e.
(STRA) Strayer Education $0.44 EPS vs $0.40e.
(SYMC) Symantec traded down 7% after earnings and guidance were both a tad short of estimates; stock back under $20.
(TOC) Thomson $0.61 EPS vs $0.57e.
(TRH) Transatlantic Holdings $1.61 EPS vs $1.50e.
(ULBI) Ultralife Batteries R$24.4M vs $26.2M(e).
(XOM) Exxon Mobil $1.77 EPS vs $1.59e.

Select Analyst Calls (Oct. 26, 2006)

ADTN started as Buy at First Albany.
AEE cut to Hold at Citigroup.
AFFX raised to Neutral at UBS.
AMZN started as Buy at B of A $45 tgt.
APPB cut to Underperform at Jefferies.
ARRY started as Outperform at Baird.
BER raised to BUy at BB&T.
BKI cut to Hold at Citigroup.
BOBJ raised to Buy at Citigroup.
CHS raised to Overweight at Prudential.
CVC cut to Hold at Citigroup.
CVD cut to Peer Perform at Bear Stearns.
CWTR started as Neutral at UBS.
DTE cut to Underperform at Credit Suisse.
EBAY started as Buy at B of A with $40 tgt.
FORR cut to Mkt Perform at William Blair.
FPL cut to Hold at Citigroup, cut to Hold at Jefferies.
GOOG started as Buy at B of A $597 tgt.
GSIC startred as Buy at B of A $23 tgt.
INFA started as Hold at Citigroup.
ISE cut to Sector Perform at CIBC; cut to Neutral at B of A.
KOMG raised to Outperform at Bear Stearns.
LSS cut to Hold at Jefferies.
MUR cut to Reduce at UBS.
OMM raised to Outperform at Bear Stearns.
OSIP cut to Underweight at Lehman.
PNRA started as Neutral at JPMorgan; reitr Outperform at FBR.
POT raised to Neutral at JPMorgan.
PTIE cut to reduce at UBS.
RHAT cut to Neutral at Credit Suisse.
SPWR started as Outperform at Raymond James.
TSCO cut to Peer Perform at Thomas Weisel.
WBMD started as Neutral at B of A.
YHOO started as Buy at B of A $34 tgt.

Worldwide, Microsoft Still Has An Edge On The Web

New global audience statistics from comScore show the Microsoft still has an edge in total unique visitors to its web sites each month based on September 2006 figures. But, that may not last long.

Worldwide, the web had 726.7 million visitors in the age group over 15. Microsoft sites had 505.5 million unique visitors, followed by Yahoo! Sites at 480.6 million and Google Sites at 457.5 million. But, new Google acquisition YouTube has 81 million, a jump of 12% from the previous month. Google may be in the lead when October worldwide numbers hit.

It is somewhat stunning how far other major companies lag. The Time Warner Network had 2187.8 million in September, less than half of what the leaders boast. Fox, which includes MySpace, sits at 117.8 million.

The new numbers do point out one important thing, especially for Microsoft and Yahoo!. While Google dominates many things on the internet, it does not dominate everything.

If MSN and Yahoo! can build features that allow them to be more competitive than Google, or if they can do an M&A transaction to get a set of properties like Barry Diller's IAC's Ask.com Network, they could stay in the race. Ask had 112.8 million unique visitors worldwide in September.

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

Ford Drives Alone (F)(GM)

Carlos Ghosn of "I will run GM for you" fame, says that a time-up with Ford is not in the cards, at least not for now. That's too bad. Ford could use a friend. It has not seen the kind of turnaround that appears to be taking root at GM.

With recent negative credit watches from agencies Fitch and Standard & Poor's, Ford's debt could move further into junk bond territory. That means the credit analysts think a bankruptcy is more likely, and that Ford may run low on cash next year. With a Q3 loss of $5.8 billion and more losses ahead Ford could use a friend, especially if Ghosn could get Nissan and Renault to chip in a few dollars for a piece of Ford. The Ford family may be concerned enough about the future value of their shares that they could go along with letting some or all of the control in the No. 2 US automaker go to someone else.

Ford's European operations could dovetail nicely with Renault. And, without a dealer network in the US, Renault could use the Ford dealer footprint to relauch its cars in the US.

Ford could also use Nissan's factory capacity in the US to close some of its own facilities, and that might give it leverage with the UAW.

But, it isn't going to happen. And Ford needs it to happen now.

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

Is Sony Just Average?

Stocks: (MFST)(SNE)(TWX)(NWS)(VIA)

When Sony had the Walkman and the Watchman and Playstation first appeared, the company was viewed as the premier consumer electronics company in the world. Sony was on the cutting edge. It was the innovator.

Perhaps that crown has passed to Apple. Maybe even Microsoft with its Xbox succees. And, perhaps, Nintendo.

Sony has lost the crown, and it probably will not get it back.

Sony lost $175 million in the quarter that just ended. Its recall of faulty PC batteries was partially to blame. The company also said its game division was in real trouble. Sony has already started cutting prices of its new Playstation3, and Playstation portables are not selling well.

Oddly enough, rival Nintendo said that its profit for the last six months was up three-fold as sales of its DS game machine did well. Very well. And, Sony's Japanese competitor is about to come out with its new Wii game platform.

Sony is in some shacky businesses now. At least for them, their game platform business is doing poorly and now will rely on acceptance of the Playstation3. With real competition from Nintendo and Microsoft, success is not a lock.

Building PC batteries in another rough business. Not only can they catch on fire and cause massive recalls, but the PC business is no longer growing as fast as it once did.

Of course, Sony owns one of the major movie studios, Sony Pictures Entertainment. But, the studio business in notoriously fickle and faces challenges from online video and piracy. And, Sony has to compete with large, well-funde companies like Viacom, News Corp, and Time Warner.

Sony was once the envy of the corporate world. That may be gone for good.

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

Symantec Can Cry About Something Other Than Microsoft

MSFT)(SYMC)

Hand Symantec the crying towel again. It's earnings stank. Profits were up 20% at the security software company, but that was below was Wall St. wanted. The company also complained the its sales in Europe were poor. The company has a profit of $123 million dollars, but the results drove the stock down 7% after hours.

Symantec had already begun to drop from its recent high of $22. It closed at $20.78 yesterday. Maybe investors were thinking the quarter would be off. The stock could lose another $1.50 today. Easy.

Symantec has been complaining that the security software in Microsoft's new Vista operating system will hurt sales of it Norton anit-virus software. It has asserted that the new features in Vista constitute part of Microsoft's effort to rule the world. Antiturst. Monopoly.

One of the problems with their lament is that the Vista software is not even widely available. So, perhaps the security softare firm should wait and see if its ability to see the future is as good as the company believes it is.

There is also the issue that Symantec is doing poorly all on its own. It can't blame that on Microsoft. But, it could try.

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

Comcast Is Still Beating The Phone Company (CMCSA)(TWX)(T)(VZ)

Companies like AT&T are trading near their highs. T trades at $34.33 up from $23.35 earlier this year. Verizon, even with concerns about its huge $21 billion investment in fiber-to-the-home, trades at $38.30, at its 52-week high and up from a low of $30.

Maybe Wall St's enthusiasm for these stocks should be more tempered.

Comcast is rolling like thunder. The company's triple-play of phone, TV, and broadband is having unusual success. Comcast and its brothers in the cable business like Time Warner cable expect to have eight million voice-over-IP customers by the end of the year. The telecom giants, which want to challenge cable's TV franchise with IPTV over fiber and DSL have about 100,000 nationwide subscribers to that type of service. Too big a differnce to bridge. Maybe.

Things could get worse for the phone companies. Only 4% of the 40 million homes that Comcast passes with its lines have VoIP. Cox cable, which has been in the cable phone business longer, has that number up to 20%. That may be a blueprint for Comcast's future.

Comcast's stock is also near a 52-week high at $38.76, up from its low of $25.35. With its current advantages, it may be able to sustain that price or even take it higher.

Maybe the telecom stocks won't trade at a premium much longer.

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

AMD Challenges Intel To Get Back In The Game

Stocks: (AMD)(INTC)(ATI)(NVE)

AMD is close to closing it purchase of graphics chip company ATI Technologies. The No. 2 x86 company is already making plans. By 2009, the joint firm plans to make chips that combine AMD processing power with ATI graphics features. The chips will be relatively inexpensive, perhaps 50% less than current models made for PCs.

The move marks another shot in the ever-excalating war between AMD and Intel. Intel is out with its new Core 2 Duo chip which many reviews claim is faster that the current generation from AMD. Intel is also introducing a four core chip for servers. AMD has been taking server share from Intel for a couple of years, and now has over 20% of that market.

PC makers are hungry for less expensive chips. Margins at companies like Dell are squeezed each time they move prices down to take share from rivals like Hewlett-Packard and Lenovo. Of course, each of these companies is compelled to reviews it prices as well.

A chip from AMD that allows PC manufactures to lower prices but keep operating profit high should be a huge success, especially if these chips have graphics components that will help run the new generation of software, including Microsoft's Vista.

Intel is working on chips that will communicate with one another over laser connections, but this will be of more use in the server market.

If AMD's new chips are ready in a little over two years. Intel better get moving again on the R&D front. It may need help from smaller chip firms like Nvidia. Or, an acquisition of one of these graphics firms.

More M&A?

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

Europe Market Report 10/26/2006 France Telcom, Deutsche Telekom, Vodafone, BT Up Sharply

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

Markets in Europe were up modestly at 5.30 AM New York time.

The FTSE was up .4% to 6,240. Barclays was down .1% to 712. BP was up .3% to 1033. British Air was up .8% to 463.25. BT was up 2.5% to 281.75. GlaxoSmithKline was down .3% to 1507. Prudential was up .1% to 641.5. Reuters was up 1.4% to 459. Unilever was up .3% to 1322. Vodafone was up 1.7% to 133.75

The DAXX was up .5% to 6,298. BASF was up 1.5% to 68.51. Bayer was flat at 40.56. BMW was up 1% to 45.73. DaimlerChrysler was up .4% to 43.41. DeutscheBank was up .5% to 98.8. Deutsche Telekom was up 2.5% to 13.27. Siemens was up .7% to 71.64.

The CAC 40 was up .6% to 5,453. Alcatel was up .6% to 10.22. AXA was up .3% to 30.5. France Telecom was up 4% to 20.18. ST Micro was up 1.1% to 13.32. Vivendi was up .5% to 29.72.

Data from Reuters.

Douglas A. McIntyre

Media Digest 10/26/2006 Reuters, Wall Street Journal, New York Times

Stocks: (GTW)(SNE)(GM)(ORCL)(DCX)(MO)(KFT)

According to Reuters, Shell's Q3 profits beat forecasts.

Reuters writes that Sony had a Q2 loss on recall of PC batteries. Rival Nintendo showed a sharp increase in profits.

Reuters reports that GM was able to post better Q3 numbers, but it recovery is still in the early stages.

The Wall Street Journal reports that the SEC is investigating 27 mutual fund companies that may have taken kick-backs from outside service contractors.

The Wall Street Journal writes that Gateway is under pressure to change its by-laws which may lead to a proxy fight.

WSJ also reports that Oracle will support Linux software in its new products.

The New York Times reports that executives at Daimler refuse to deny a possible spin-off of its Chysler unit.

The NYT also writes that Altria is coming closer to a sping-off of Kraft.

Douglas A. McIntyre

Asia Market Report (October 26, 2006) China Mobile, NEC Up, Sharp Down

Stocks: (CAJ)(HIT)(FUJ)(HMC)(NIPNY)(NTT)(DCM)(SNE)(TM)(CHL)(CU)(PCW)(HBC)

Asian markets were up sharply,

The Nikkei was up .7% to 16,812. Bridgestone was up 2.8% to 2585.. Canon was up 1.7% to 6650. Hitachi was down .1% to 702. Fuji Film was up .4% to 4570. Honda was up 2.2% to 4160. Japan Tobacco was down 1.7% to 509000. Mitsubishi Motors was up 3.9% to 217. NEC was down 2.7% to 622. NTT was up .7% to 611000. Docomo was up 1.7% to 183000. Sharp was down .2% to 2065. Sony was flat at 4820. Toshiba was up 2.4% to 778. Toyota was up .6% to 7100. Softbank was up 2.9% to 2665. Yahoo Japan was flat at 47200.

The Hang Seng was up 1% to 18,345. Cathay Pacific was down 1.2% to 16.7. China Mobile was up 3.8% to 62.6. China Unicom was up 3.4% to 8.63. HSBC was flat at 147.1 PCCW was down .2% to 4,71.

The KOSPI was up .2% to 1,374.

The Straits Times was up .9% to 2,738.

The Shanghai Composite was up .2% to 1,811.

Data from Reuters.

Douglas A. McIntyre

Integral Systems (ISYS) Lower After Sales Process Proves Fruitless, Large Holder Wants Buyback

From 13D Tracker

Shares of Integral Systems, Inc., (Nasdaq: ISYS) are under pressure today after providing an update on its review of strategic alternatives.
The company said its efforts, which have been focused principally on a possible sale, have not resulted in any proposal. Therefore, the company said it has decided to explore other strategic alternatives to maximize stockholder value while still exploring a sale.
In a 13D filing after the close on Integral Systems, 12.1% shareholder Mellon HBV Alternative Strategies LLC disclosed a letter to the company dated October 22nd asking the company to consider a "broad range of alternatives". The firm suggested a Dutch auction to buyback a significant amount of its common stock.
Shares of Integral Systems are 11.6% lower to $27.94 in mid-day action Wednesday.
A Copy of the Letter:

To the Board of Directors:

As an alternative to the efforts of Integral Systems, Inc. to pursue anoutright sale, Mellon HBV Alternative Strategies LLC ("MHBV") asks that youconsider a broad range of alternatives to enhance shareholder value. As theCompany has a substantial amount of cash and unutilized debt capacity, webelieve a Dutch auction whereby the Company would buy back a significant amountof its common shares at or above current market prices would serve the goal ofenhancing shareholder value. Based on our understanding of current marketconditions, we are confident that the Company would find lenders willing tofinance such a buyback.

We believe a significant buyback would reflect the Company's belief in theinvestment value of its shares, while also providing a liquidity opportunity forthose of the Company's shareholders that may be interested in selling someportion of their position.

As you know, MHBV on behalf of affiliated investment funds and separatelymanaged accounts over which it exercises discretionary authority may be deemedthe beneficial owner of in excess of 1.3 million shares of Company common stock.As the Company's largest shareholder, we confirm that we would support effortsto explore alternative means of enhancing shareholder value, including thepossible pursuit of a Dutch auction style self tender or other significant stockbuyback program.

William F, Harley, III
Chief Executive Officer
Mellon HBV Alternative Strategies LLC

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

Gazit-Globe Discloses 9% Stake in Mills Corp (MLS), Wants to Invest Up to $1.2B

From 13D Tracker

In a 13D filing on The Mills Corporation (NYSE: MLS), Gazit-Globe Ltd. disclosed a 9% stake (5.1 million shares) in the Company.

Gazit-Globe's said its goal is to recapitalize what it views as a struggling Mills Corporation, and that it is prepared to "invest up to $1.2 billion into Mills.

Chaim Katzman, Gazit-Globe's chairman, said, "At this point it is clear to us that an outright sale of the company is not in the best interests of shareholders. We're urging the Mills' board of directors in the strongest terms possible to consider our recapitalization proposal" He also said, "We believe Mills can and should be rebuilt, and not sold."

In the Gazit-Globe's Septermer 29th proposal to Mills the company said, "Based upon our extensive review of the currently available public information, and, as discussed below, our in-depth property analysis, we are prepared to recapitalize the Company by investing new capital in the form of common stock. The cash amount would be up to $1.2 billion at a price per share of $24.50. This new common stock would be classified as Series B and would entitle Gazit to a majority of the seats on the Company’s board. The new common stock would also be convertible into the currently outstanding series of common stock. This new investment would be in addition to our current holdings of the Company's common stock. "

Gazit is a real estate investment company that trades on the Tel Aviv Stock Exchange. The company operate their business in North America and Europe mainly through a 41% ownership of Equity One, Inc. (NYSE: EQY) and large ownership stake in First Capital Realty, Inc. and Citycon OYJ.

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

Cadence Business Model Like Selling Maps to Miners

By William Trent, CFA of Stock Market Beat

Frequently it is said that those who made the most money during the San Francisco gold rush (the 1849 one, not the Internet boom) were those who sold the shovels. A similar analogy for the semiconductor industry would point to the equipment makers. However, as we have noted often, eventually the miners won’t need any more shovels either. That’s why Cadence Design Systems (CDNS) points to a better business model still.

According to Reuters.com:
Chief Financial Officer Bill Porter said many companies involved in the microchip industry had trimmed their forecasts for the rest of this year, citing weak demand and an uncertain consumer spending picture. However, he said, Cadence was somewhat immune to those forces since its products were used by research and development teams, not factories.”A lot of what we see in the industry has to do with inventory levels and pricing, but we have been able to see consistent R&D activity and spending,” Porter said.

So, they are confirming what we’ve been saying but claim they are immune to it. Their 9% growth year/year is far lower than the semi equipment makers’ recent 70% gains, but is likely far steadier. We’ll call them the map makers. Helping the miners find their way to riches, or at least pointing out the best places to dig. And of course, R&D creates a mixed bag for the semiconductor makers themselves. A hot new product could fill up some of the excess capacity, but could also make the existing inventory piles obsolete. But still, better at least not to be piling it higher.

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/

Stock Upgrades, Downgrades & Earnings To Consider

By Yaser Anwar, CSC of Equity Investment Ideas

Upgrades & Downgrades

Comcast "buy" target price raised


Analysts at Deutsche Bank Securities maintain their "buy" rating on Comcast Corporation (CMCSA). The target price has been raised from $40 to $47.


In a research note published yesterday, the analysts mention that the company is likely to report its 3Q06 phone and data net additions above the consensus. The analysts expect Comcast to have witnessed a better-than-expected ramp for digital phones. The performance of the digital TV services segment is tracking above expectations, Deutsche Bank Securities adds.
Halliburton "outperform" estimates raised

Analyst Kurt Hallead of RBC Capital Markets maintains his "outperform" rating on Halliburton Company (HAL), while raising his estimates for the company. The target price is set to $50.


In a research note published yesterday, the analyst mentions that the company is likely to witness market share gains, following the confirmation of the KBR timing. Halliburton would undertake an IPO of nearly 20% of KBR by end-2006 and spin-off the remainder by April 2007, provided the SEC review is finalised in the forthcoming few weeks, the analyst says.


The EPS estimates for 2006 and 2007 have been raised from $2.12 to $2.14 and from $2.66 to $2.71, respectively.
Dell downgraded to "sell"

Analyst Robert Jakobsen of Jyske Bank downgrades Dell Inc (DELL) to "sell."

In a research note published yesterday, the analyst mentions that Gartner's PC market survey indicates a 7% increase in PCs sold globally during 3Q06 due to the upcoming launch of Windows Vista. Dell’s PC sales increased by only 4% y/y due to a decline in unit sales in the US, as compared to the higher-than-market growth posted by the company during 2Q06, Jyske Bank adds.

Earnings

DaimlerChrysler 3Q profits plunge


DaimlerChrysler AG (DCX) Wednesday announced a 37% decline in its third-quarter profits, amid losses at its American arm, Chrysler Group.


The Stuttgart, Germany-based company said its net income in the three months plummeted to €541 million, from €855 million in the year-ago quarter. DaimlerChrysler’s overall sales declined almost 8% to around €35.2 billion.


The Chrysler group recorded an operating loss of €1.16 billion in the third quarter. DaimlerChrysler said in a statement, "The operating loss was primarily the result of a decrease in worldwide factory unit sales, an unfavorable shift in product and market mix, and negative net pricing," while adding that the US market environment continued to be challenging.


The company is maintaining its earnings projection for 2006 on account of the robust performance of its Mercedes and truck divisions.

Amazon.com 3Q net income dips 37%

Internet retailer Amazon.com Inc (AMZN) Tuesday announced a decline in its net income for the third quarter, citing increased spend on technology and content as the reason. The company’s results for the quarter, however, beat the average analyst expectations.


The company said that its net income for the third quarter ended September 30 dropped 37% to $19 million or 5¢ per share, from $30 million or 7¢ in the year-ago period. The net profits, however, beat the average expectations of the Wall Street analysts.


The company said that its net profits were adversely affected by a 42% increase in its technology-related expenses in the third quarter, which jumped to $172 million from $121 million a year ago. Amazon.com said that its sales rose 24% to $2.31 billion from $1.86 billion in the same period a year earlier.


The company narrowed its sales guidance for the full year to $10.35 billion-$10.68 billion, from its previous guidance of $10.15 billion-$10.65 billion.


Sources: Bloomberg, Earnings & Newratings

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

Analyzing Nike (NKE) & Sanofi Aventis (SNY)

By Yaser Anwar, CSC of equity Investment Ideas

Nike has surpassed its industry as well as the consumer discretionary sector in terms of ROIC. NKE has sustained a 19% or greater return for each of the past four years, which is very good.


I see a significant opportunity for Nike to penetrate the women's footwear and sports apparel markets, as brand sales to this gender represent about 20% of total Nike brand sales.


Another positive about NKE is the share repurchases under a new four year, $3 billion stock repurchase program. This should reduce the share count by 4% to 5%.


I'm always happy to see positive use of FcF by management. In NKE's case the uses of free cash flow in recent years have been a 19% increase in the cash dividend in early 06, as well as ongoing share repurchases. Cash flow per share has been constantly on the rise by double digit % each year for the last 4-5 years.


Consumers show no signs of slowing down, this bodes well for NKE too.

Sanofi Aventis (SNY)

SNY has done well when it comes to its financials. Net cash generated from operations totaled $7.8 billion in 05.


After asset disposals of $820 million and dividends of $1.9 bn, FcF was $5.1 bn. This massive FcF will allow SNY to increase R&Ds & hopefully increase dividends.


According to management, SNY had realized cumulative merger synergies of close to $1.7 billion through its merger with Aventis, equal to 87% of total expected synergies.


Management also has done to reduce net debt drastically ($11.7bn from 17bn), another good use of the massive FcF.


SNY's pipeline is wicked good too. SNY has a strong presence in treatments for thrombosis with its Plavix receptor, and Lovenox low molecular weight heparin. SNY is also strong in the anti-diabetes class with Lantus, the largest selling insulin in the US, and Amaryl, an oral treatment of type 2 diabetes.

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

Analyzing Express Scripts (ESRX) Earnings & Market's Reaction

By Yaser Anwar, CSC of Equity Investment Ideas

Express Scripts reported accelerating earnings growth while generic penetration jumped 200 basis points. This was completely ignored as the coming changes to the AWP (A national average of list prices charged by wholesalers to pharmacies.) benchmark dominated investors thinking. I think the fears may be a bit too exaggerated.
"Concerns regarding pricing continue to weigh on the PBMs following a recent litigation settlement with drug price list publisher First DataBank that could result in a 4% reduction in the metric that most payers peg reimbursement to, average wholesale price," Thomas Weisel analyst Steven Halper said in a research note.

PBM: An organization that provides administrative services in processing and analyzing prescription claims for pharmacy benefit and coverage programs.

In the quarter, Express Scripts generic penetration rate grew to a record 58.3%, up 200 basis points sequentially and a staggering 380 basis points higher than the prior year. This quicker than expected growth in generic penetration paired with the an increase in mail order provided Express Scripts with a strong EBITDA of $229.5 million, a 27% increase YoY.


Amid accelerating earnings, Express Scripts’ third quarter report was clouded by management’s reluctance to give clear insight regarding potential changes to AWP and the PBM pricing structure.


ESRX's volume was down for the quarter, with total adjusted claims of 125.1 million, compared to 129.5 million adjusted scripts in 06. ESRX's shift away from retail claims continued, with retail volume of 93.2 million, a 3.8% sequential decline and an 11.7% decrease over the prior year.


The integration of the specialty acquisition is a bit behind schedule. Tougher implementation than anticipated slowed earnings and included a one-time bad debt charge of $4m.


Overall PBM operations ran smoothly with accelerating generic penetration producing accelerating earnings. The specialty business underperformed in the quarter as integration fell behind.


ESRX's gross profitability once again rose. 3Q06 gross margin was 8.64%, a 48 basis point sequential rise and 102 basis points higher than the prior year. Gross margin benefited from increased generic and specialty utilization, lower retail volumes, and increased home delivery.

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

Symantec Falls On Its Own Sword

Symantec pulled a bad one. You may need to ask what the acronyms are, but FUBAR and SNAFU may be what they did to themselves. Honestly, this doesn't look all that bad on the surface if you just talk about a growth company that has been in the dreggs for a long time. You have to look past the news.

Here is what the news was:

Revenues grew 20% year over year to $1.26 Billion and earnings more than doubled to $0.26 EPS before options and items. The problem is that they were supposed to post $1.29 Billion and $0.27. The company earlier forecast on its own that it would have $1.27 Billion revenues and that it would post $0.26 to $0.27 on EPS. The company gave forward guidance of $0.14-0.15 GAAP EPS and $0.29 to $0.30 non-GAAP EPS and revenues of $1.32 Billion to $1.35 Billion. The street is looking for expectations at $0.295 or $0.30 and $1.35 Billion. It reaffirmed fiscal targets of $1.06 to $1.16 EPS and $5.1 to $5.3 Billion versus estimates of $1.12 and and $5.33 Billion.

"Our results for the September quarter met the low end of our expectations. With the most challenging part of the fiscal year behind us, I believe our business remains healthy and we are poised to achieve our full-year financial targets," said John W. Thompson, chairman and chief executive, in a statement.

So, let's look further into this.

The problem is that the company was in the midst of finally regaining trust from the investment community, and the street thought the numbers would be fairly easy to beat. You can talk about news all day long, but the chartists may be out tomorrow en-masse saying "AH HAH!" and pointing things out. They broke their chart is what they will say. And they may have broken something that was barely mended. It may even be the formation of the wrong end of a head and shoulders, if you believe in classic chart patterns.

We'll have to see if anyone can give this a nudge, but if there is no outside help to nudge the stock then they hosed themselves. Since Symantec bought Veritas they broke their great path upward and broke their chart. But now the rest of the street has been making storage add-on purchases and it doesn't seem so bad of a strategy. In September SYMC holders FINALLY saw the stock get back over $20.00 and it stayed above $20.00 every day. They finally had gotten out of a long-term downtrend, things seemed good inside the company, and even the knit-picky chartists were looking as though they were ready to be positive.

They didn't fall on their own sword so fatally that the stock looks ready for new lows, but they probably spooked any chartist that was bullish before this afternoon. IF they are lucky, and now it may be a big if, then those shares may get back over $20.00. If it gets within sniffing distance of it within a few pennies and can stay there without a meltdown, then there may be some safety. But if it stays under that mark and doesn't get back over it in a hurry then those chartists are going to have a really good case that the chart is broken.

Shares of SYMC closed down $0.01 at $20.78 in regular trading. Then the report came out and their troubles started. As I started writing this the shares were down at $19.70, down $1.08; but at the time it went to post after doing some other work the shares had slipped to $19.25 in after-hours.

It would be nice to see if this stock could get out of the dead money category, but I don't have any dogs in the fight.

Jon C. Ogg

Cramer Likes Brinker (EAT)

Cramer discussed Brikner (EAT).

It owns Maggiano's Chili's, On the Border, and macaroni Grill. Cramer said that EAT jumped $7 on declining same-store-sales yesterday. He said it looked nutty on the surface, but the estimates were much lower. Cramer doesn't think that this was short covering. He thinks it was a conversion story and you should buy the stock. Betting against casual dining in this environment is just wrong. He thinks most casual dining stocks are going to beat numbers in this environment. Cramer said this was just a "hold you hand quarter" and that is ok. He said EAT is NOT a growth story like an AMZN. He said it has accelerating growth for 2007 of 14%, butit trades at only 17-times earnings. He said it is cheap on a growth basis, but he said it is a cost-cutting play as well.

EAT closed down 1.2% at $45.93 in regulartrading, but they were up 1.3% at $46.54 in after-hours after Cramer touted the stock.

Jon C. Ogg

Cramer Slams Amazon.com

Cramer was discussing that Amazon.com (AMZN) saw its profit slip over 30% butthe stock gained over 10%. Cramer said that when you see this it makes it hard to understand, but he said it makes sense if you think like a Mad Man like Cramer. He said he has been a hater of Amazon for a long time. He said that so many were betting against it that they now HAVE to love the quarter. He thinks a lot of the pop is short covering because they had 14% of the float short. Cramer said the company didn't change the long-term picture, but they spooked the shorts because of the near-term. Cramer said if you owned it you can go to the cash register and ring it. But Cramer said he stands by his long-term prediction that it isn't good and he screamed "WE WILL BURY YOU!" He even said it is buying revenue and the company will go lower. Cramer thinks Amazon's management is focused elsewhere and even brought up Bezos building a spaceport. He said the expansion into every aspect of retail isn't working because it is just too big. It trades too expensive at twice its growth rate. He thinks he isn't wrong on Amazon, the longs just got lucky. He ended saying "If you ask me, you don't want to go near it."

AMZN traded up 12% to $37.68 in regular trading, but it fell 0.8% to $37.38 after Cramer slapped it.

Jon C. Ogg

Symantec Falls On Its Own Sword

Tonight, Symantec (SYMC) looks all about the charts........

Symantec pulled a bad one. You may need to ask what the acronyms are, but FUBAR and SNAFU may be what they did to themselves. Honestly, this doesn't look all that bad on the surface if you just talk about a growth company that has been in the dreggs for a long time. You have to look past the news.

Here is what the news was:

Revenues grew 20% year over year to $1.26 Billion and earnings more than doubled to $0.26 EPS before options and items. The problem is that they were supposed to post $1.29 Billion and $0.27. The company earlier forecast on its own that it would have $1.27 Billion revenues and that it would post $0.26 to $0.27 on EPS. The company gave forward guidance of $0.14-0.15 GAAP EPS and $0.29 to $0.30 non-GAAP EPS and revenues of $1.32 Billion to $1.35 Billion. The street is looking for expectations at $0.295 or $0.30 and $1.35 Billion. It reaffirmed fiscal targets of $1.06 to $1.16 EPS and $5.1 to $5.3 Billion versus estimates of $1.12 and and $5.33 Billion.

"Our results for the September quarter met the low end of our expectations. With the most challenging part of the fiscal year behind us, I believe our business remains healthy and we are poised to achieve our full-year financial targets," said John W. Thompson, chairman and chief executive, in a statement.

So, let's look further into this.

The problem is that the company was in the midst of finally regaining trust from the investment community, and the street thought the numbers would be fairly easy to beat. You can talk about news all day long, but the chartists may be out tomorrow en-masse saying "AH HAH!" and pointing things out. They broke their chart is what they will say. And they may have broken something that was barely mended. It may even be the formation of the wrong end of a head and shoulders, if you believe in classic chart patterns.

We'll have to see if anyone can give this a nudge, but if there is no outside help to nudge the stock then they hosed themselves. Since Symantec bought Veritas they broke their great path upward and broke their chart. But now the rest of the street has been making storage add-on purchases and it doesn't seem so bad of a strategy. In September SYMC holders FINALLY saw the stock get back over $20.00 and it stayed above $20.00 every day. They finally had gotten out of a long-term downtrend, things seemed good inside the company, and even the knit-picky chartists were looking as though they were ready to be positive.

They didn't fall on their own sword so fatally that the stock looks ready for new lows, but they probably spooked any chartist that was bullish before this afternoon. IF they are lucky, and now it may be a big if, then those shares may get back over $20.00. If it gets within sniffing distance of it within a few pennies and can stay there without a meltdown, then there may be some safety. But if it stays under that mark and doesn't get back over it in a hurry then those chartists are going to have a really good case that the chart is broken.

Shares of SYMC closed down $0.01 at $20.78 in regular trading. Then the report came out and their troubles started. As I started writing this the shares were down at $19.70, down $1.08; but at the time it went to post after doing some other work the shares had slipped to $19.25 in after-hours.

It would be nice to see if this stock could get out of the dead money category, but I don't have any dogs in the fight.

Jon C. Ogg
October 25, 2006

Cramer Likes Brinker (EAT)

Cramer secondly discussed Brikner (EAT).

It owns Maggiano's Chili's, On the Border, and macaroni Grill. Cramer said that EAT jumped $7 on declining same-store-sales yesterday. He said it looked nutty on the surface, but the estimates were much lower. Cramer doesn't think that this was short covering. He thinks it was a conversion story and you should buy the stock. Betting against casual dining in this environment is just wrong. He thinks most casual dining stocks are going to beat numbers in this environment. Cramer said this was just a "hold you hand quarter" and that is ok. He said EAT is NOT a growth story like an AMZN. He said it has accelerating growth for 2007 of 14%, butit trades at only 17-times earnings. He said it is cheap on a growth basis, but he said it is a cost-cutting play as well.

EAT closed down 1.2% at $45.93 in regulartrading, but they were up 1.3% at $46.54 in after-hours after Cramer touted the stock.

Jon C. Ogg
October 25, 2006

Cramer Slams Amazon.com

Cramer was discussing that Amazon.com (AMZN) saw its profit slip over 30% butthe stock gained over 10%. Cramer said that when you see this it makes it hard to understand, but he said it makes sense if you think like a Mad Man like Cramer. He said he has been a hater of Amazon for a long time. He said that so many were betting against it that they now HAVE to love the quarter. He thinks a lot of the pop is short covering because they had 14% of the float short. Cramer said the company didn't change the long-term picture, but they spooked the shorts because of the near-term. Cramer said if you owned it you can go to the cash register and ring it. But Cramer said he stands by his long-term prediction that it isn't good and he screamed "WE WILL BURY YOU!" He even said it is buying revenue and the company will go lower. Cramer thinks Amazon's management is focused elsewhere and even brought up Bezos building a spaceport. He said the expansion into every aspect of retail isn't working because it is just too big. It trades too expensive at twice its growth rate. He thinks he isn't wrong on Amazon, the longs just got lucky. He ended saying "If you ask me, you don't want to go near it."

AMZN traded up 12% to $37.68 in regular trading, but it fell 0.8% to $37.38 after Cramer slapped it.

Jon C. Ogg
October 25, 2006

Cramer Slams Amazon.com

Cramer was discussing that Amazon.com (AMZN) saw its profit slip over 30% butthe stock gained over 10%. Cramer said that when you see this it makes it hard to understand, but he said it makes sense if you think like a Mad Man like Cramer. He said he has been a hater of Amazon for a long time. He said that so many were betting against it that they now HAVE to love the quarter. He thinks a lot of the pop is short covering because they had 14% of the float short. Cramer said the company didn't change the long-term picture, but they spooked the shorts because of the near-term. Cramer said if you owned it you can go to the cash register and ring it. But Cramer said he stands by his long-term prediction that it isn't good and he screamed "WE WILL BURY YOU!" He even said it is buying revenue and the company will go lower. Cramer thinks Amazon's management is focused elsewhere and even brought up Bezos building a spaceport. He said the expansion into every aspect of retail isn't working because it is just too big. It trades too expensive at twice its growth rate. He thinks he isn't wrong on Amazon, the longs just got lucky. He ended saying "If you ask me, you don't want to go near it."

AMZN traded up 12% to $37.68 in regulartrading, but it fell 0.8% to $37.38 after Cramer slapped it.

Jon C. Ogg
October 25, 2006

Market Wrap (Oct. 25, 2006)

DJIA 12,134.68; Up 6.80 (0.06%)
NASDAQ 2,356.59; Up 11.75 (0.50%)
S&P500 1,382.22; Up 4.84 (0.35%)
10YR-Bond 4.775%

Today didn't feel like a Fed day. The FOMC did not make any rate changes, but still took the "inflation is still at the higher-end of our range." Existing home sales posted yet another lower level, making six months now.

Amazon.com (AMZN) was a real winner of the big-caps trading Up 12% to $37.68 after beating earnings and guiding to a level the street liked, even though the nay-sayers still came out in full force.

GM (GM) fell 4% to $34.71 after posting a smaller loss after you back out tax gains and items from GMAC's finance operations. DaimlerChrysler stock conversely rose 4.5% to $54.68.

Level 3 (LVLT) fell 4.7% to $5.39 after pricing $600 million in notes.

GateHouse Media (GHS) priced its IPO at $18.00 and was so well received it rose to $21.17; and this whole time you thought newspapers were dead.

Eagle Rock Energy (EROC) gave a poor IPO. It priced its offering at $19.00, already at the low-end of the range, and then falling down to $18.00.

Ikanos (IKAN) fell 6.6% to $7.58 after its CEO left the company.

Apple (AAPL) closed up 0.8% at $81.68 despite more articles about iPod and iTunes hacks.

Applied Digital (ADSX) rose a sharp 31% after getting an implantable chip patent for the Digital Angel.

Lifecell (LIFC) fell a sharp 25% to $23.83 after it lowered guidance.

Altria (MO) gained 2,8% to $82.10 after beating earnings and setting January as the KFT spin-off date.

Corning (GLW) fell 8.8% to $21.10 after it was downgraded to Neutral at UBS.

KLA-Tencor (KLAC) rose 8% to $49.59 after beating earnings.

Seagate Tech (STX) rose 6% to $22.43 after the street was more than comfortable with its earnings.

Semiconductor buying today fuelled the Semiconductor HOLDRs (SMH) up 2.1% to $34.04.

F P L Group (FPL) rose 3.3% to $49.77 after its Constellation deal was terminated.

Forest Labs (FRX) fell another 2.7% to $48.08 after halting its stroke trial. Where is Billy Squier whan you need him?

Novatel Wireless (NVTL) fell 9.1% to $8,43 after the street shrugged over its earnings.

(SWK) Stanley Works fell almost 7% to $47.98 after it warned.

Jon C. Ogg
October 25, 2006

Cramer on Stop Trading: (10/25/06)

Today on the STOP TRADING segment on CNBC, Cramer discussed the market on the statement from the Fed. He said oil and gasoline seemed to matter more.

Cramer is not worried about the Fed making NO change, but he knows we are Fed dependent and doesn't want more hikes. If they hike company performance may not matter. If the fed is out of the way Ford (F), Norfolk Southern (NSC) can rally.

Cramer said Boeing (BA) was disappointing today.

Today was more of a "cover the Fed day" than a stock picking day.

Jon C. Ogg
October 25, 2006

Missing The Point On Boeing (BA)

Boeing released earnings today, and they were not so hot. The stock got knocked down 3% to just north of $81.

Investors did not like the fact that net income fell 31% to $694 million. Part of this was due to a write-off of the company's airplane broadband unit. The company also saw earnings from its defense unit drop.

Wall St. is not giving enough weight to the company's commercial aircraft success. Revenue at that unit rose 45% to $6.7 billion.

Boeing is flogging Airbus, and that is likely to continue with the success of Boeing's Dreamliner and the delays in the Airbus 380 super-jumbo. These delays, now nearly two years beyond plan, are likely to help Boeing sell the new version of its 747, and old plane that is being upgraded for more passenger seats.

The market seems to underestimate how much trouble Airbus is in. Boeing's stock has dropped from its 52-week high of $89.58 to $81.23, where it trades today.

Boeing's share of the commercial airplane market is going to grow more than most investors expect. Good news. But, not travelling fast.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does own securities in companies he writes about.

Following Up on the iPod and iTunes Hack: It May Actually Help Apple

Because of all the earnings out there, the story regarding another iPod and iTunes hack has been in the backseat. There is an interesting story out on Apple (AAPL) regarding a hack on the iTunes and iPod restrictions, although this is sort of a continuation and follow-on article to what Doug McIntyre already wrote this week. It seems that now more is known and the ramifications are clearer. About an hour before the open today the Associated Press ran a story discussing an Apple iPod and iTunes hack.

This is regarding notorious source code breaker Jon Lech Johansen, or "DVD Jon," who previously broke the code for encrypting DVD and other downloads. Now this is on FairPlay.

So while iPod and iTunes are exclusive, this cracked code allows users to bypass the inter-dependability and turned it into interoperability. He reverse engineered the code. Apple may not like this one red bit, and you can bet their attorneys are going to block this all they can. But the issue here is that Apple touted itself for years as the alternative system, yet now the iPod/iTunes dominance has taken what used to be the Win-Tel alliance (Microsoft-Windows and Intel-Pentium) alliance to a new modern day extreme.

Yes, this gets into a controversial area. Everyone loves their MP3 players (if that term isn't old-school already), and iPod users take this to the extent that it is THE must-have fashion accessory.

"DVD Jon" has set up an entity named DoubleTwist Ventures to capitalize off this and other efforts. As noted, Apple isn't going to like this one red bit. But at the end of the day they have already established dominance to the point that if they open up some of the hardware and download systems as interoperable instead of inter-dependable it may actually help the company.

This is obviously very controversial territory. In no way is this meant to be an endorsement of hackers or copyright violations. But entirely closed systems and incompatibility is something that the public doesn't want to last forever. Apple has already established itself as THE leader here and that probably won't change any time soon: PERIOD. For a while last year Audible.com (ADBL) was almost giving away MP3 audio/video players to those who signed up for long-term contracts, yet iPod/iTunes still rules the roost and finding Audible.com subscribers isn't exactly an easy task. Go ask Napster.com (NAPS) how well their "Own Nothing" campaign of just leasing unlimited music went, since now the company is trying to find a buyer for the entire company. Microsoft's (MSFT) Zune is still yet an unknown entity and SanDisk (SNDK) just felt the wrath of the demanding stock markets on its margins and outlook.

Apple is not going to like this, but this won't be the death of Apple's stranglehold iTunes and iPod have on music downloads in any real way. If the hack (or shall we call it a 'workaround') actually does get to legally stand, the funny thing is that it could actually work favorably for Apple because they have created such fanatical brand loyalty. Time will tell.

Jon C. Ogg
October 25, 2006

Silence is Golden for KLA-Tencor

By William Trent, CFA of Stock Market Beat

Shares of semiconductor equipment maker KLA-Tencor (KLAC) surged nearly six percent in after-hours trading following the release of this press release:
KLA-Tencor Corporation today announced that its revenue for the quarter ended September 30, 2006, the first quarter of fiscal 2007, was $630 million, compared to $579 million for the fourth quarter of fiscal 2006 and $484 million for the first quarter of fiscal 2006.”We had strong performance this quarter as semiconductor manufacturers continue to invest in process control for 65nm production and 45nm development,” stated Rick Wallace, chief executive officer of KLA-Tencor. “Our products and services deliver the most advanced process control technology to help our customers shorten their development, ramp faster and increase their yields.”

What it won’t help their customers do is control the inventory glut. ST Microelectronics (STM) and Intel (INTC) have woken up to the need to curtail capacity expansion. When the other semi makers do the same, orders are likely to fall off quickly. Meanwhile, although 30% growth year/year is certainly better than most of the tech universe, we have noted frequently that revenues for the semiconductor equipment industry as a whole have been growing at twice that rate in recent months.

Is KLA-Tencor losing share? We won’t find out on the conference call, where CFO Jeffrey Hall said:
Before I turn the call over to Rick, let me remind you that as we’ve previously announced, we are in the process of restating our financial statements and expect to record non-cash, share-based compensation charges that are not anticipated to exceed $400 million. Let me also remind you that as a result of the pending restatement we are you unable to provide detailed GAAP or non-GAAP financials for the quarter ended September 30, 2006.

On this call we will not be able to provide any specifics about our gross margin, operating expenses, inventory, taxes, or other item that might be affected by share-based compensation.
With little to talk about, KLA-Tencor is benefitting from a misplaced faith that no news is good news. In fact, we think their accounting do-over will soon be the least of their problems. 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/

Ingram Micro: Bland but Better

By William Trent, CFA od Stock Market Beat

According to Yahoo! Finance:
Computer products distributor Ingram Micro Inc. (IM) on Tuesday said third-quarter earnings rose 21 percent, buoyed by solid performances in North America and other regions.Sales were $7.51 billion, up 8 percent from $6.96 billion posted in the year-ago period.

Since we believe most investors still view tech as a double-digit growth industry, eight percent is slowish. But it is lots better than the 4% at leading reseller CDW (CDWC) or the meager growth coming out of tech industry bellweathers IBM and Xerox. Unfortunately, it seems to us that Ingram is the exception this quarter rather than the rule. 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/

CSG Systems: Any Growth Comes Free

By William Trent, CFA of Stock Market Beat

CSG Systems (CSGS) provides billing services to large cable and satellite operators. It is a boring, slow-growth business, as evidenced by their latest earnings report:
Total revenues for the third quarter of 2006 were $98.5 million, an increase of five percent when compared to $94.1 million for the same period in 2005.

Now, given that we have been berating slow-growth companies left and right, you might think think we aren’t too pleased with this type of result. Au contraire! Unlike those other firms, CSG Systems is a cash cow, throwing off about $100 million in free cash flow each year. With an enterprise value of $1.16 billion, that means it is trading at about 11-12x free cash flow.

Seen another way, the cash available to give shareholders each year is about 8.5-9.0% of the company’s value. Since the company does return that cash (primarily in the form of share buybacks) it is fair to consider this an investment that will pay 8% or 9% return without any growth. Since we don’t expect much more than that from the market as a whole, this stock looks like the market is pricing it for no growth at all. That five percent growth they gave shareholders was free of charge.

Of course, it is possible that the cash flow will actually decline, rendering the above analysis moot. But the same could be said of any company, and CSG has strong relationships with its major customers. While we wouldn’t ignore the possibility, we don’t see it as being any more likely for CSG Systems than for Xerox, IBM or anyone else.

With all the crazy private equity deals being considered, it’s a wonder this company is still public. Of course, with its planned buyback program the company may just go private one share at a time.

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/

Not the Time to Own a Truck

By William Trent, CFA of Stock Market Beat

Yahoo! Finance reports:
C.H. Robinson Worldwide Inc., (CHRW) which provides transportation and logistics services, said Tuesday third-quarter earnings grew 30 percent as gross profit grew across all segments. Revenue rose 15 percent to $1.71 billion, from $1.49 billion last year.

Like Landstar (LSTR), CH Robinson is a trucking company that doesn’t own trucks. Instead, it relies on independent truck owners to carry the loads it sources. And like Landstar it was able to turn a nice revenue increase into an equally nice earnings increase (for Landstar we are talking about revenues excluding their hurricane relief efforts last year). This contrasts with traditional truckers like Arkansas Best (ABFS) which increased revenue by 11% but had its shares beaten up when the company reported that volume was slowing.

CH Robinson shares are up in after-hours trading though they also saw the volume slowdown.

In their press release they noted:
Our growth in truck net revenues slowed as the quarter progressed. While gross profit margins were consistent throughout the quarter, volume growth slowed. A significant amount of the volume in the second half of 2005 was driven by a robust spot market. In the third quarter and through the first three weeks of October 2006, we have not seen the same level of spot market demand.

The thing is, trucks are expensive. When they sit idle, the owner still has to make payments on it (even if only in the form of non-cash depreciation expense.) Maintenance costs also don’t entirely go away, though they are reduced some. When revenue slows down or drops, the fixed portion of maintaining a vehicle fleet weighs on earnings.

For the non-asset based transportation providers like Landstar or CH Robinson, these expenses fall to the independent contractors. So while there may be less profit due to less revenue it will still be more profit than there would have been if they had to maintain a fleet.

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/

GateHouse Media IPO Pricing.....and who said newspapers were dead???

GateHouse Media (GHS) priced 13.8 million shares at a price of $18.00 in its IPO set for today. That 13.8 million shares was above the initial 11.5 million shares planned in the filing and the pricing was at the top of the $16.00 to $18.00 range.

Goldman Sachs and Wachovia were the lead underwriters; and co-managers were listed as Bear Stearns, Allen & Co, and Lazard.

So who says newspapers are dead? GateHouse is a "local" specialist printing and online companies for local newspapers and online content. It has some 75 daily newspapers with 405,000 paid subscribers, 231 weekly newspapers with total paid circulation of 620,000 and free circulation of 430,000. It owns 117 local shopping free ad-only magazine/papers with circulation reaching 1.5 million; and it owns 230 locally-focused web sites. In 2005 the company lost almost $10 million on $205 million in revenues.

Jon C. Ogg
October 25, 2006

Sirius And XM: The Beatings Will Continue Until Morale Improves

Sirius and XM took some serious pounding in the October short interest report.

The short interest in Sirius is already massive, 142.4 million shares. And, that rose 12.9 million from September. XM's number was up 3.6 million shares to 33.9 million. So, short bets on the companies rose at a rate of nearly 10% month-over-previous month.

Short interest often accumulates at companies near their highs. Microsoft's short interest rose 22.8 million shares in October to 97.4 million. But, its stock has gone from $21.50 in June to almost $29, right