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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/
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/
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.
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.
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
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.
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.
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
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
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! FinanceTransportation 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/
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