Cramer was discussing the resurgence of knee braces on sports players. He noted that orthopedic companies are going after companies, which the journal also said this. He said linemen are wearing these even when they don't need to.
DJ Orthopedics (DJO) makes these and he has recommended this name before. He isn't talking about orthopedics in general, he is talking about bracing. the air brace followed by the knee brace will keep you out of knee surgery. He said DJO is a one-stop pure play on this and everyone wants to avoid surgery.
Cramer thinks this goes a lot higher. He thinks there is the potential for brand recognition and these could be mass sold now. They had to outsource from New Jersey to Mexico manufacturing, so earnings may rise and the estimates are all over. He thinks it will raise estimates all year. If you use $2.10 for 2007 earnings it is only 21 times 2007 earnings. He said the multiple is lower than BMET and others, but the growth rate is higher.
DJO closed down 0.6% at $44.43 in regular trading, but its shares rose over 3% after-hours to $45.89 after Cramer touted. The 52-week trading range for DJO is $26.69 to $44.84.
Cramer was discussing the resurgence of knee braces on sports players. He noted that orthopedic companies are going after companies, which the journal also said this. He said linemen are wearing these even when they don't need to.
DJ Orthopedics (DJO) makes these and he has recommended this name before. He isn't talking about orthopedics in general, he is talking about bracing. the air brace followed by the knee brace will keep you out of knee surgery. He said DJO is a one-stop pure play on this and everyone wants to avoid surgery.
Cramer thinks this goes a lot higher. He thinks there is the potential for brand recognition and these could be mass sold now. They had to outsource from New Jersey to Mexico manufacturing, so earnings may rise and the estimates are all over. He thinks it will raise estimates all year. If you use $2.10 for 2007 earnings it is only 21 times 2007 earnings. He said the multiple is lower than BMET and others, but the growth rate is higher.
DJO closed down 0.6% at $44.43 in regular trading, but its shares rose over 3% after-hours to $45.89 after Cramer touted. The 52-week trading range for DJO is $26.69 to $44.84.
Cramer Say's Disney Was No Mickey Mouse; He Likes It
On tonight's MAD MONEY show on CNBC, Cramer went over a stock gift because it went down for no reason.
First he noted the NYMEX (NMX) IPO. He said it isn't the ideal entry point, but you should only buy 1/4 of a position of whatever you want to buy now and add in as it drops down. But Cramer said the NYSE (NYX) should be the buy right here since the NMX is worth $12 billion and NYX is worth $14 Billion. NYX is bigger and better.
The stock that was down for no reason to Cramer is Disney (DIS). He said it is down $3 since earnings, but this is a buy. He thinks that DIS's first down move might not be able to be trusted. They didn't really do anything wrong. They didn't miss earnings or revenues, prime time did well, but the reason it fell was because the estimates were raised a lot ahead right before the company's quarter was announced. That created an artificial comparable confusion on the street, but it is firing on every cylinder and even them parks did wellfor DIS. He thinks movie costs are coming under control, although Pirates II was over $200 million and Pirates III will be expensive too. ABC and Disney channel ratings are going up. While the street thinks Disney can't grow like this forever he thinks that NASCAR will be a huge add for it in 2007.
DIS closed down 0.35% at $32.94 in normal trading today, but shares rose 1.3% to $33.38 in after-hours trading.
DJIA 12,342.56; Up 36.74 (0.30%) NASDAQ 2,445.86; Down 3.20 (0.13%) S&P500 1,401.20; Up 1.44 (0.10%) 10YR-Bond 4.607%; Down 0.048 NYSE Volume 2,625,847,000 NASD Volume 1,708,761,000
This marked the 6th consecutive record close for the DJIA today. Hardly anyone bothered noting that today was options expiration date for stock options. Japan's Nikkei closed down 0.45%; FTSE 100 in U.K. closed down 1.01%; Germany's DAX index was down 0.48%; France's CAC-40 closed down 1.20%.
The big deal of the day was the NYMEX (NMX) IPO. Almost nothing else came close to it in coverage. It was such a ridiculous IPO pricing at $59.00, because it opened at $120 out of the chute and closed at $132.99.
The homebuilding numbers tracked by permits and housing starts were just too weak to ignore at first, but they mostly recovered throughout the day. Lennar (LEN) closed down only -0.2% at $49.30, DR Horton (DHI)rose 0.6% to $25.10, and KB Home (KBH) rose 0.5% to $49.07.
Lower oil prices yet again didn't phase many key oil stocks with Exxon Mobil (XOM) rose 0.55% to $73.08 and Oil Service HOLDRs (OIH) rose 0.8% to $136.85.
Conor Medsystems (CONR) rose 18% to $32.68 after J&J (JNJ) offered $33.50 to acquire the company. SurModics (SRDX) rapidly fell on the deal because they coat the J&J Cypher stent now, but they issued a release stating they would still be used and so the stock ran up to close up 7.75% to $34.49.
H-P (HPQ) shares slid 1.25% to $24.94 despite beating EPS targets, as guidance is in-line.
After yesterday's earnings, Starbucks (SBUX) fell 5.1% to $37.42 because guidance was essentially the same as in its recent analyst meeting. Its revenues were deemed a tad light, but it was really large profit taking after a huge run.
Under Armour (UARM) rose 0.65% to $46.55 after Cramer last night said that it offered upside from current levels along with Nike (NKE).
Marvell Tech (MRVL) fell 2.9% to $19.04 after posting a sequential revenue decline.
Google (GOOG) was reiterated a Buy with a $600 target at Citigroup, but it never was able to crack $500.00. Its high was $499.85, and it closed up 0.58% at $498.79.
First Solar (FSLR) priced its IPO at $20.00 and closed up at $24.74.
Sony (SNE) saw its ADR's in the US trade up 2.1% to $40.79 as its long-awaited PS3 hit stores today.
Altria (MO) rose 1.7% to $85.01 after raising guidance and as its "lights" case appears to have permenently gone in its favor.
Foot Locker (FL) fell 2.7% to $23.27 after reporting a 2 percent decline in its third-quarter profit, and after the chances of a buyout are nearly gone.
Advanced Magnetics (AMAG) rose a sharp 29.8% to $57.00 after it reported promising results from a late-stage clinical trial for an iron-replacement therapy for chronic kidney disease patients.
None of this includes the plans of companies like Nissan, VW, or DaimlerChrysler. Not to mentions the locals.
Perhaps China is growing so fast that all of the major car companies can reach a share of 100% in the huge Asian country. But, if that doesn't work, someone is going to be disappointed.
You can count on it.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
On today's STOP TRADING segment on CNBC at 2:45 PM EST, Jim Cramer reviewed how to trade off the NYMEX (NMX) IPO today.
Cramer said the NYMEX (NMX) IPO is over-extended at +140%, but he says if it gets to $120 or $110 then you can buy some. He said something is wrong with this picture. He said there was a tremendous media sensation for the IPO and they did leave a lot of money on the table, but they got rich anyway.
He thinks NYSE (NYX) is far cheaper. He said it went a little nutty, but it is not a return to dot.com values.
Cramer also endorsed Sears Holdings (SHLD) again, just like last night. He thinks that Eddie lampert should be allowed to invest the funds because he is a great investor.
Cramer called Conor Medsystems (CONR) is a second rate company that J&J (JNJ bought after CONR missed its quarter. He wants to know why people aren't buying Boston Scientific (BSX). He thinks BSX is done going down and it could go to $18 ot $19 when he discussed it.
The Real Market for PS3: eBay, For More than $2,000
Stock Ticker: SNE
OK, we all have seen the media covering the swarms and swarms of young adults waiting in line at electronics stores around the country waiting to get their hands on the Sony Play Station 3. We had note dthat these were being listed for $2,000 and $3,000 for the voucher on eBay last month. Well, the consoles are going for north of $2,000 on eBay right now.
This is supposed to be THE big console with limited supply, but I can't get past reading about how many of the systems do not integrate well with most of the older games and how many defects or glitches there were in pre-reviews this week. It was also pretty shocking when I was in a GameStop store two weeks ago and asking about the console and the younger adult working there said to be sure to give this at least 3 large series of US shipments to the U.S. before buying it so that the first machines with all the glitches had been worked out and the returned systems were out of the system. I asked how long that would really be and the guy said "4 to 6 months." Now one thing that may trim that time down by a month or so is that these for now are being flown in by air freight, or at least so Sony claims. That was a stun to me what someone whose job is supposed to be to sell these systems.
Take a look at what these are selling for on real bids on eBay as of 2:22 PM EST Today after typing in "PS3" search on eBay items:
We have a couple deals to watch for next week, but since it is Thanksgiving week you can expected everything to come Monday night for Tuesday trading.
Most of the A-Team trading desks are vaceant either all of Wednesday ahead of thanksgiving or at least after the first hour. Friday is a joke of a trading day and to the best of my knowledge there has never been any syndicate deal "purposely" on that trading day in the US.
Two IPO's to watch are AerCap Holdings N.V. (AER) and Spirit Aerosystems (SPR).
Aercap (AER)is a Dutch holder of aircrafts it leases out, and it sells and leases parts, engines, and services. This is an awaited IPO for US investors for what looks to be 26.1 million shares (about 2/3 being sold by insdiders) at a $22.00 to $24.00 range. This offering is led by Goldman Sachs, Lehman, Merrill Lynch and Morgan Stanley.
Spirit erosystems (SPR) will also price Monday night. It has some 52 million shares coming at a range of $23.00 to $25.00. Spirit's IPO is being led by Goldman Sachs, Morgan Stanley, and Credit Suisse. Spirit AeroSystems was created in 2005 when Canadian investment group Onex bought Boeing's (BA) Wichita and Oklahoma assets in a $1.5 billion cash and debt transaction. Onex officials had said their plan was to take Spirit public within five years, but this is 1 year and some change as the market and economy accomodate now.
We also have two secondaries to watch, and these are also set for Monday night. Toyota MOtors (TM) has a potential offering next week, but there has actually been very little buzz ahead of the deal so that may or may not be the case. Details on that will have to wait until Monday. Infosys Tech (INFY) out of India is supposedly having a $1.5 Billion share sale in the secondary market, although this has been approved since the start of November for up to 30 million ADR shares to be sold, which is supposedly to increase ownership of Infosys in the U.S.
There are other deals on the books, but these are the important ones to watch. Stay tuned Monday and Tuesday.
After slamming the crummy pricing job from the underwriters on the NYMEX (NMX) IPO this morning, I did manage in my rant to forget to at least congratulate the NYMEX seat holders. They all had 90,000 shares per NYMEX seat, so they just got to add a substantial amount to their "soon-to-be" liquid net worth.
$120.00 was the opening print for NYMEX (NMX). While there may be cheers here from the floor, this is ludicrous and obscene as far as a mispricing. I am not referring to the valuation or the stock price in and of itself, because the market is the mechanism that initially determines a fair and current price. But what is ludicrous is that the lead underwriters in charge of pricing are relied upon by a company coming public to determine a fair and equal pre-set pricing. NYMEX was told that the fair price on that was $59.00, above the raised ranges. For the first print out of the chute to be $120.00 you can rest assured that NYMEX was just boinked and a lot of IPO cash just got left on the table.
Investors that take the risk in getting IPO allocations do not deserve a 100% return instantly out of the chute for the first print after an IPO pricing. There was no history there, and there is very little risk. If you were allocated IPO shares at $59.00 on NYMEX, then you are allocated IPO shares to enough IPO's that even when you factor in pigs thatfall 20% in a day you make out like a bandit.
I am not a socialist and don't even call out for more and more never-ending market reform to protect Grandma Jones, but when you see this it is obscene. No doubt about it. If you were James Newsome, the CEO of NYMEX, you have to act happy on the floor like he just did on a quick CNBC interview, but you know he is going to go back to his office and call those investment bankers more four letter words than can be thought of. If not, then it is because of shell shock.
There have been lawsuits over this practice in the past where on dot.com IPO's in 1998 to 2000 where shares priced at $28.00 as "the max the market can bare" and then the first print is $100.00 or more. Imagine how much the dot.com bubble may have been better contained if the street actually priced deals at a fair market price. Milton Friedman is the man I recall saying the equivalent of "money is worth whatever people think it is worth," but I bet right now he would be asking the underwriters how $59.00 on a well known commodity is instantly worth $120.00 or more.
I won't even go into how this also destabilizes a market on a stock and the related companies. You never know where this IPO will close today. It could close at $175.00 or it could close at $90.00, although these are just theoretical numbers at this point. Since the open, there was even a $152.00 print, although it is back at $135.00 as I load the story and prints have been all over the place.
The Dutch Auction route for IPO's has been slammed in the past, but this makes a better and better case for it if you are an established name brand coming public. W.R.Hambrecht and its OpenIPO mechanism have often not been well received by the public and the deals are snubbed by the bulge bracket firms because it denounces how they operate, but it is probably assumed that the Hambrecht investment bankers are calling any large company out there on the IPO docket right now pointing out how much money was just left on the table by sticking with the "Good Ol' Boys."
Shares of InterContinental Exchange (ICE) have traded in a $93.90 to $98.45 range today and shares of Chicago Mercantile Exchange (CME) have traded in a $533.50 to $546.98 range today. If you wonder why researchers sometimes point out that a monkey throwing darts at a board or randomly picking names can outperform actual stock pickers sometimes, this may demonstrate part of the theory.
There is no reason to beat a dead horse (or a dead money) over and over here, but I think the point has been made.
Intuit Inc. (Nasdaq:INTU - News) today announced its first-quarter 2007 revenue increased 19 percent over the year-ago quarter to $362.1 million. Growth was primarily driven by strong sales of its QuickBooks software and add-on solutions, payroll and payments. Approximately $20 million of first-quarter revenue was attributed to the September launch of QuickBooks 2007, which was about 30 days earlier than last year. Without this earlier launch, revenue growth would have been approximately 12 percent.
Forward-looking Guidance Intuit reaffirmed its previously-given revenue and earnings per share guidance for the second quarter of fiscal 2007 and provided operating income guidance for the first time. Intuit expects: * Revenue of $743 million to $760 million, or year-over-year growth of 0 percent to 2 percent.* GAAP operating income of $185 million to $204 million, and non-GAAP operating income of $211 million to $230 million.* GAAP diluted earnings per share, or EPS, of $0.34 to $0.37, and non-GAAP diluted EPS of $0.39 to $0.42.
Intuit also reaffirmed its previously given third quarter, fourth quarter, and full year fiscal 2007 guidance for revenue and earnings per share, details of which are available on Intuit’s Web site at www.intuit.com/about_intuit/investors/earnings/2006/.
The guidance was slightly below consensus expectations, but that’s what the consensus gets for making estimates outside the high end of management’s guidance range. We bought put options following our earlier article, and still own them. It’s another one of those things that worked the way we expected it to.
The author may hold a position in the securities discussed.
The author's current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion's Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion's Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options.
Revenues grew 7% year/year. That is not an exciting number, but at least it is better than someotherswehaveseen.
Inventories grew faster than sales, which management explained on the conference call thusly: Next, the balance sheet. HP’s inventory came in at $7.8 billion, up $873 million year over year and up $286 million sequentially. Inventory days of supply stands at 38 days, up from 35 days last year and down from 41 days sequentially. The year-over-year increase in inventory reflects volume growth, strategic buys and supply chain changes designed to optimize our cost structure. The sequential increase is in line with normal seasonality.
We’re still a little skeptical, but the explanation is within the bounds of reason. Again, while not a major concern it was nothing to brag about. Overall, we agree with the after-market response to the report. This was a decent but unspectacular quarter for Hewlett Packard.
The author may hold a position in the securities discussed.
The author's current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion's Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion's Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options.
When we last visited the oil patch, we found the arguments against higher oil prices lacking. It remains our view that demand for oil is rising at a faster pace than supplies of oil, and that the imbalance will be solved through the price mechanism. We don’t think the correction is even close to done.
The article states: The “peak oil” theory, stipulating that world oil production will soon peak and sharply decline, is flawed, according to an analysis by Cambridge Energy Research Associates (CERA).
Instead of a peak, CERA says, production is more likely to trace an “undulating plateau” that will last for a decade or more beyond 2030.
It seems of little consequence to us, as we believe demand will continue to rise without further drastic discouragement through higher prices. Whether supply is declining or flat, it will not keep pace with demand. The article continues: The CERA report contends that the often-cited Hubbert model, which patterns production as a bell curve, fails to recognize that recoverable reserve estimates evolve with time and are subject to significant change. The model also underplays the impact of technological advances. Although M. King Hubbert accurately predicted timing of the peak in US Lower 48 oil production in 1970, the CERA study says, he underestimated the peak rate by 20% and total cumulative Lower 48 production during 1970-2005 by 15 billion bbl.
Again, not exactly right is likely to be close enough for our theory to play out.
With the recent drop in prices, days of inventory made a run at breaking out of the long-term downtrend. However, the breakout failed and stocks remain low compared to long-term averages.
We’ll stick to our long position in the oil ETF (USO).
The author may hold a position in the securities discussed.
The author's current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion's Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion's Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options.
NYMEX (NMX) did price its long-awaited and well above average demand IPO. It priced 6.5 million shares at $59.00. The original terms were 6 million shares at $48.00 to $52.00, and then was bumped to 6.5 million shares with a higher $54.00 to $57.00 range. The deal was definitely set to price higher because of all the exchange hype, but it would seem that there is some money being left on the table here.
It is definitely discussed as having a premium to its above the already raised range, but the question remains as to how much higher. Some are thinking $5.00 higher, some $10.00 higher, and Jim Cramer even said he thinks it is a buy at $20.00 higher (from the $57 area anyway). The opening print will be one to watch regardless. The first indications were for $78 to $80, but who knows if that is right or real.
Sorry for the lack of a background on the NYMEX, but it has been covered so much that it would seem like it is from the Department of Redundancy Department.
InterContinental Exchange (ICE) is trading up 0.6% at $95.20 pre-market, and it is up from under $85.00 just last Friday. NYSE (NYX) is trading up 0.25% at $94.01 pre-market, although that is only about $1.00 than last Friday. The Chicago Mercantile Exchange (CME) is up 0.55% at $543.00 pre-market, and that stock was actually under $500.00 last Friday. NASDAQ (NDAQ) stock is flat pre-market at $36.45 and is actually in-line to under where it was last Friday. Some of these other exchanges have enjoyed some serious runs in the last week, so it makes you wonder what will happen to them after the NYMEX IPO prices.
Other potentially related shares that could get secondary or tertiary actions if this just gets ridiculous are the following: Investment Technology Group (ITG), eSpeed (ESPD), and International Securities Exchange (ISE), OptionsXpress (OXPS), MarketAccess (MKTX) and others.
Get ready for a wild day in exchange stocks trading.
US car executives cannot keep bragging about how well they will do in Asia. GM is now saying it believes it can raise its share in the region from 6.5% to 10% by 2010.
Those looking for a reason for the optimism won't find any. GM makes the statment but has nothing to back it up.
What GM wants Wall St. to believe that cars and small trucks that are bested by vehicles from Toyota and Honda in the US market will do better overseas. Toyota, Honda, VW, Nissan, Ford, Daimler and a pack of other companies want the share as much as GM does.
In 1995, GM's US share was nearly 33%. By 2005, it had fallen to just above 26%. And, Toyota is still gaining share in GM's home market.
Asia, of course, will be different. There GM's models will level Toyota, Honda, and local car company offerings.
When pigs fly.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
(ADSK) Autodesk revenues $457M vs $457.25M(e); guides inline; subscription revenues up 50%; stock rose 5%. (AME) Ametek gets positive radiation detection article from Business Week. (AMED) Amedisys 3M share secondary priced at $41.50. (ANN) Ann Taylor $0.54 EPS vs $0.52e. (AW) Allied Waste 33M share secondary priced at $12.75. (CHFN) Charter Financial announced self tender of 1M shares at $43 low and $52 high. (CONR) Conor Medsystems trading up 19%as J&J gives it a $33.50 buyout. (CPWM) Cost Plus -$0.53 EPS vs -$0.45e; sees Q4 $0.84-1.03 vs $1.09e. (CTRN) Citi Trends $0.20 EPS vs $0.16e. (DNA) Genetech wins additional breast cancer expanded use from FDA. (EGLT) Eagle Test Systems $0.44 EPS vs $0.36e. (EXEL) Exelixis billary tract tumor phase III study halted. (FSLR) First Solar 20M share IPO priced at $20.00. (GPS) Gap Stores $0.23 EPS vs $0.22e; (HAL) Halliburton noted positively in Barron's Online. (HIBB) Hibbett Sporting Goods $0.31 EPS vs $0.28e. (HPQ) Hewlett-Packard $0.68 EPS vs $0.64e; SEC formally investigates board over pre-texting scandal. (INTU) Intuit -$0.12 EPS vs -$0.12e. (ISIS) Isis Pharma gets positive drug article in Business Week. (MRVL) Marvell trading down 5% after results and guidance; still delaying quarterly filings. (NMX) NYMEX 6.5M share IPO priced at $59.00, above the alreadty raised $54 to $57 range. (NRF) Northstar Realty 16M share secondary priced at $14.95. (NWACQ) Northwest Airlines positive article as buyout candidate in Business Week. (ORH) Odyssey Re filed to sell 9M shares. (PLSB) Placer Sierra Banc losing #1 mortgage depositor by June of 2007; 12.6% of total deposits and 30.2% of non-interest bearing deposits. (RDY) Dr. Reddy's 12.5M share secondary priced at $16.00, yesterday's close was $16.45. (SBUX) Starbucks trading down 7% as revenues were a hair light and guidance was same as before. (SJM) J.M.Smucker $0.83 EPS vs $0.85e. (SVM) Service master holder reportedly asking company to seek a buyer. (VITA) Orthovita 7.7M share secondary priced at $3.25. (VQ) Venoco IPO priced 12.5M shares at $17.00, under the $19 to $21 range. (VTAL) Vital Images 3M share secondary priced at $31.00. (XIDE) Exide filed to sell 28M shares. (YHOO) Yahoo! buys BIX.COM (private) to allow users and advertisers to judge contests.
AAP raised to Buy at Oppenheimer. ADBE cut to Neutral at Oppenheimer. ADSK reitr Buy at Jeffeires. ALOG started as Hold at Jefferies. APSG started as Hold at Jefferies. AQR started as Buy at ThinkEquity. BOBJ cut to Hold at Deutsche Bank. CBF started as Mkt Perform at Wachovia. CCI raised to Outperform at RBC. CCRT started as Outperform at KBW. CFC started as Sell at Goldman Sachs. CFR raised to Outperform at Piper Jaffray. CNQR started as Buy at Deutsche Bank. COLM raised to Buy at B of A. CPWM cut to Underperform at Raymond James. DVAX raised to Outperform at Bear Stearns. FNM & FRE started as Neutral at Goldman Sachs. FORM started as Buy at Merrill Lynch. FUL raised to Overweight at JPMorgan. GOOG reitr Buy/$600 tgt at Citigroup. INFY started as Outperform at Wachovia. INTU cut to Mkt Perform at William Blair, cut to Accumulate at ThinkEquity. INWK cut to Equal Weight at Morgan Stanley. ITG raised to Overweight at JPMorgan. LPNT started as Hold at Citigroup. MEL raised to Overweight at Prudential. MDTH started as Buy at Deutsche Bank, started as Outperform at Wachovia. MNST cut to Hold at Citigroup. MRVL cut to Underweight at Prudential. NCC cut to Underweight at Prudential. NGG cut to Sell at Citigroup. NIHD started as Buy at Citigroup. REP cut to Reduce at UBS. SHMR cut to Sector Perform at CIBC. SYNT started as Outperform at Wachovia. THC started as Sell at Citigroup. TIN cut to Hold at Deutsche Bank. TLEO started as Buy at Deutsche Bank. UHS started as Buy at Citigroup. UNS started as Overweight at JPMorgan. WIT started as Mkt Perform at Wachovia. WSM cut to Hold at BB&T. WY cut to Hold at Deutsche Bank. WYNN cut to Hold at Citigroup. XLNX cut to Peer Perform at Bear Stearns. XOM cut to Mkt Perform at Bernstein. YHOO raised to Buy at Oppenheimer.
The ViOP bandwagon is getting fairly full. After early service like Ebay's Skype and Vonage signed on millions of customers, the cable companies (especially Comcast and Time Warner) found the ViOP was a good way to steal customers from their telecom competitors. It has worked so well that 5.1 million of the US VoIP subscribers as measured at the end of September took their service from cable providers. The total number of US customers rose to 8.2 million, up from 3.5 million a year ago.
One of the complaints about VoIP, especially early versions, is the customers needed a PC or special adapters to make the service work. The experience was different from simply picking up a telephone and dialing. Other knocks against VoIP is the it had no 911 service. That is changing. Of course, if electricity is off, VoIP doesn't work either. They are still working on that one.
Thomson, the big French electronics firm, is beginning to offer a new VoIP handset, made by GE. (One has to wonder why GE does not market the product on its own.)
Thomson's product will be sold to subsribers of SunRocket, a US VoIP service with 170,000 subscribers. The new device can simply plug into a high-speed internet line and it works as a normal phone would. If you have SunRocket service. Companies like Uniden already have similar products.
Why Thomson would market a phone exclusively with one of the smaller VoIP companies is puzzling. The firm is locking itself out of over 95% of the US market.
Thomson may be dumb, but VoIP is gaining ground like a house on fire, and that will continue.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
The ViOP bandwagon is getting fairly full. After early service like Ebay's Skype and Vonage signed on millions of customers, the cable companies (especially Comcast and Time Warner) found the ViOP was a good way to steal customers from their telecom competitors. It has worked so well that 5.1 million of the US VoIP subscribers as measured at the end of September took their service from cable providers. The total number of US customers rose to 8.2 million, up from 3.5 million a year ago.
One of the complaints about VoIP, especially early versions, is the customers needed a PC or special adapters to make the service work. The experience was different from simply picking up a telephone and dialing. Other knocks against VoIP is the it had no 911 service. That is changing. Of course, if electricity is off, VoIP doesn't work either. They are still working on that one.
Thomson, the big French electronics firm, is beginning to offer a new VoIP handset, made by GE. (One has to wonder why GE does not market the product on its own.)
Thomson's product will be sold to subsribers of SunRocket, a US VoIP service with 170,000 subscribers. The new device can simply plug into a high-speed internet line and it works as a normal phone would. If you have SunRocket service. Companies like Uniden already have similar products.
Why Thomson would market a phone exclusively with one of the smaller VoIP companies is puzzling. The firm is locking itself out of over 95% of the US market.
Thomson may be dumb, but VoIP is gaining ground like a house on fire, and that will continue.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Carlos Ghosn, the sell-proclaimed greatest car executive in history, is finding that linking up with a US partner for his Nissan/Renault combine has proved more difficult than he thought. Of course, Nissan is not in first place in Japan and Renault is not a major player in Europe, so perhaps Detroit is wary.
Ghosn now says that he is "not ready" to find a partner in the US. What he is not mentioning is that no one is taking. GM has turned him down. Ford seems prepared to go it alone, even if that plan leads to its demise. DaimlerChrysler does not need him. With large operations in the US and Europe, DCX is an unlikely partner.
Perhaps if Ghosn would stop watching the pot, it would eventually boil. He may have retired before that day comes.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
While Ford's Sales Double In China, Will It Be Around To Enjoy It
Stocks: (F)(GM)(TM)(HMC)
Ford is boasting that it will double sales in China, over and over again. But, the No. 2 car company in the US only sells about 100,000 cars in the big Asian nation. Rival GM will sell over 850,000 cars there this year.
Ford is still being bloodied in it home market, so the talk of China gains is whistling past the graveyard. Over the last decade, Ford's US share has dropped from 25.8% to 18.3%. During the same timeframe, Toyota's market share has rise from 13.3% from 7.4%. Honda's has risen from 5.4% to 8.6%.
Ford has actually predicted its US share will drop as low as 14%. Its $5 billion in annual cost cuts may bring North American operations to the point where they are cashflow positive, but that is a long way off. And, there is no guarantee that the company's forecast of a 14% bottom is accurate. Ford could hardly have predicted its current sales when it had almost 26% of its home market.
Ford management needs to shut-up about China. The company not be around to enjoy it progress there.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Wall St. took shares in Starbucks down by over 5% after hours as the company announced a 21% improvement in quarterly revenue to $2 billion. The company forecast that it would open 2,400 stores in the next twelve months. It also said that investors could expect another 20% increase in revenue.
Profits dropped 5.6% to $117 million, but this was due to changes in the company's accounting policies.
The key to the numbers was simple. Starbucks is still growin 20%. It grew 20% in fiscal 2005. It grew 21% in the recent quarter. It forecast 20% growth for next year. Off of an annual revenue run rate of $8 billion, the figure is extraordinary.
Starbucks has the stated and ambitious goal of eventually having 40,000 stores worldwide. At the end of this fiscal year, the figure was about 14,000, and, if the company's projections are right, that will be nearing 17,000 twelve months from now. Starbucks still has a reasonable chance of hitting its number within the next ten years.
Hewlett-Packard (HPQ) Earnings: Red Flag On Slowing Tech
The market was not unhappy about HP's earnings, but the applause was muted.
HP's revenue rose 7% in its fiscal Q4 to $24.6 billion. The company forecast that annual sales for its 2007 fiscal year would rise about the same amount to $97 billion.
HP's stock fell about 2% after hours to $39.60. The shares have been trading near their 62-week high.
Revenue at HP's big personal systems group, which sells PCs, rose 10% to $7.8 billion, and revenue was up 7% at HP's imaging and printing group, hitting $7.3 billion. But, therein lies the problem. These two units are almost $15 billion of the quarter's $24 billion plus in revenue. And, the growth at the operations are unimpressive.
In fiscal 2004, HP grew 9%. In fiscal 2005, revenue was up 9% again. Even with the share that the company is taking from Dell in the large PC market, HP's rapid growth is behind it, at least for now.
At $40, the stock is now rich. Morningstar carries a "fair market" value of $30 on the stock and suggests that investors consider selling when the stock is above $37.60. For a company that has lost much of its top-line growth potential, that is not unfair.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Hewlett-Packard (HPQ) Earnings: Red Flag On Slowing Tech
The market was not unhappy about HP's earnings, but the applause was muted.
HP's revenue rose 7% in its fiscal Q4 to $24.6 billion. The company forecast that annual sales for its 2007 fiscal year would rise about the same amount to $97 billion.
HP's stock fell about 2% after hours to $39.60. The shares have been trading near their 62-week high.
Revenue at HP's big personal systems group, which sells PCs, rose 10% to $7.8 billion, and revenue was up 7% at HP's imaging and printing group, hitting $7.3 billion. But, therein lies the problem. These two units are almost $15 billion of the quarter's $24 billion plus in revenue. And, the growth at the operations are unimpressive.
In fiscal 2004, HP grew 9%. In fiscal 2005, revenue was up 9% again. Even with the share that the company is taking from Dell in the large PC market, HP's rapid growth is behind it, at least for now.
At $40, the stock is now rich. Morningstar carries a "fair market" value of $30 on the stock and suggests that investors consider selling when the stock is above $37.60. For a company that has lost much of its top-line growth potential, that is not unfair.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Media Digest 11/17/2006 Reuters, Wall Street Journal, New York Times
Stocks: (QCOM)(DCX)(HPQ)(SBX)(SHLD)
According to Reuters, Delta is seeking the help of its creditors to fight off a bid by Delta Airlines to acquire the bankrupt carrier.
Reuters writes that the CEO of Qualcomm stated that investors in the company support its intellectual property legal fight although it has depressed the price of the company's stock.
Reuters, writes that DaimlerChrysler is still in talks with Chinese car manufacturer Cherry about building a subcompact car.
Reuters writes that HP profits went up four-fold due to year ago charges. Revenues rose 7% and beat estimates.
The Wall Street Journal reports that Sear Holding's profits tripled due to investments. Sales at its Sears and K Mart units were weak.
The Wall Street Journal also writes that a study by Harvard and Cornell indicates that 850 CEOs of public companies received incorrectly dated options which increased their pay an average of over 10%.
The New York Times reports that oil hit its lowest price in a year as the markets doubted the impact of OPEC production cuts.
The New York Times also writes that the profit as Starbuck's fell 5% due to new accounting methods. Revenue rose 20% to $2 billion.
The Nikkei was down .5% to 16,092. Bridgestone was up 1.4% to 2515. Canon was up 1% to 6310. Daiwa Securities was down 1.4% to 1263. Fuji Film was up 2.7% to 4590. Hitachi was up .6% to 707. Honda was up .2% to 4210. Japan Air was off 1.4% to 217. NEC was up 1% to 604. NTT was up 1.2% to 573000. Sharp was down .5% to 2030. Softbank was down 2.6% to 2245. Sony was up 1.3% to 4770. Toshiba was down .3% to 731. Toyota was up .3% to 7260. Yahoo Japan was down 3.6% to 40200.
The Hang Seng was up .2% to 19,183. Cathay Pacific was up 1.7% to 18.98. China Mobile was down 1.1% to 68.65. China Unicom was down 1% to 8.24. HSBC was up .4% to 147.2. PCCW was up 1.9% to 5.23.
It's the same old story with Sears Holdings (SHLD). In fact, I feel like I'm just repeating myself a lot. However, I have long been positive on the stock, and it is one of Peridot's top five holdings, so rather than ignoring it just for the sake of not sounding repetitive, I will likely continue to share my views on the company and the stock's investment merit.
In case you missed it, Sears reported Q3 earnings of $1.27 per share and sales of $11.94 billion. The revenue number was at the high end of estimates, and the earnings number included investment income of 42 cents per share. Excluding one-time charges and investment income, earnings did miss consensus estimates, which caused the sell-off in the stock.
Comments on the quarter across Wall Street were very predictable. Same store sales were down, which is bad and must be turned around at some point. Earnings were up on cost cutting, but such moves can't be maintained forever. Most analysts are ignoring the investment income when looking at the quarterly results, because they are unrelated to operating activities of the main retailing business.
It is my view, however, that ignoring the investment income is a mistake for investors. If an investment in Sears stock was merely a bet on the retail operations, then I can understand not caring about profits derived from investing excess cash. However, a large piece of the investment thesis behind SHLD has been, and will continue to be, Eddie Lampert's ability to allocate excess capital in order to earn returns that far exceed those of the retail business. There is a reason he changed the name of the firm to Sears Holdings. It's a holding company. There is more than just retail here.
Investors who are in Sears merely for the retail operations should probably move on to something else. SHLD will continue to report declines in same store sales and grow profits via cost cutting, share repurchases, and investment income. This will ultimately lead to a tremendous increase in shareholder value.
If, however, you are like me and are investing in this stock for the entirety of the operation, then you should stay with it despite today's decline. Sears is a holding company and will continue to boost shareholder value via multiple ways. In fact, as the company finds new avenues for allocating capital, they will become less and less reliant on Sears and Kmart than they already are. While this will draw criticism from many, especially retailing analysts, the end result will be a rising share price, which is really all that matters to me.
Full Disclosure: I own shares of Sears Holdings personally, and my clients do as well.
Interview With Steven Drobny- President, Drobny Global Advisors & Author of 'Inside The House of Money'
By Yaser Anwar, CFA of Stock Market Beat
An in-depth discussion pertaining to; Hedge Fund Industry- Implications of M&A boom on Hedge Funds, HFs as Asset Managers, Industry's Marketing Gimmicks, Risk/Reward Trade-offs, Regulation and Correlation to market. Investment banks taking positions in China, Emerging markets and more.
Steven Drobny is the engine behind Drobny Global Advisors. Steven has pushed the firm to new business areas, countries and clients bases. If you want to know who's who or what's what in global macro, ask Steven. To learn more about global macro hedge funds, read his book Inside the House of Money.
Before partnering with his namesake in 2000 (his name was already on the door!), Steven worked for Deutsche Bank in various roles, most recently in the Hedge Fund Group in London. While at DB, Steven also worked in the derivatives and trading groups in London, Zurich and Singapore. Prior to Deutsche, Steve was with AIG Trading in their Metals & Energy Trading Groups.
Steven Drobny also holds a Masters degree from the London School of Economics and a Bachelors degree from Bucknell University.
Wall Street Talk with Yaser Anwar
Guest: Steven Drobny, Author (ITHOM) & President, Drobny Global Advisors
1) Y: A recent trend in the industry has been- Hedge Funds as Asset Management Complexes [Note: DE Shaw's push into traditional asset management. Fortress & MAN Group already are asset management complexes]. If you're running a $5 billion fund, a 2% management fee brings in $100 million without any hassles. Say you're up another 10%, so that's another $100 million. Managers are disincentived to make money. What do you think needs to be done?
S: Nothing. The marketplace will define where investments are made and the fees charged for asset management. Investors are allowed to choose what they want and if they don’t like something they can vote with their feet. Remember, by definition, investors in hedge funds are required to be qualified investors. We are not talking about unsuspecting retail investors getting cold calls from their local stock broker. If performance does not stack up over time, there will likely be adjustments.
2) Y: In 2006, the hedge funds as a group have underperformed mutual funds and market indexes. With over 9K hedge funds seeking to generate alpha, a majority of which utilize the common strategies such as; Convertible Arbitrage & Long/Short Equity, don't you think the market is getting a little too overcrowded?
S: No I don’t. Again, investors that choose to invest with hedge funds are making a conscious decision. As long as that decision is educated, the marketplace should dictate the flow of capital. Whether the number is 900 or 9,000 or 90,000, the marketplace will ultimately decide.
The same thing applies to the different hedge fund strategies. Investors will choose based on performance. In the global macro space, hedge fund managers are at an advantage because of the breadth of their mandate. They are permitted to trade any asset class around the world.
As far as this year, hedge funds as a group are underperforming mutual funds and market indexes. And, this is a market environment in which you would expect that to occur because volatility across markets has collapsed. Long risk assets has been the trade of the year. So, investor portfolios, which are overwhelmingly long assets, have done well.
Hedge funds are meant to occupy a slice of a portfolio because they are traditionally uncorrelated and provide downside protection in volatile markets. The key is producing consistent positive absolute returns uncorrelated with other markets, and if hedge funds can do that, there will be a place for them in investor’s portfolios.
Follow-up question: Where do you see the hedge fund industry going?
S: The industry is going to be constantly evolving. Every six months the industry looks different from the prior six months. The hedge fund business is here to stay because it provides needed portfolio diversification and because it is very attractive from an employment standpoint due to it’s attractive compensation structure.
As long as that doesn’t change, hedge funds will continue to attract the smartest, most talented money managers, and at the end of the day investors are going to want access to that talent. So there always will be a hedge fund business, whether it grows, stabilizes, contracts or even converts into a total asset management business, remains to be seen.
The best comparison is with professional sports. If you are the best basketball player in the world, are you going to play in Italy? No. You’re going to play in the NBA for the highest bidder.
3) Y: When Alfred Jones started his hedge fund back in 1940, his purpose was to generate alpha by a long/short strategy, with returns uncorrelated to the markets. In the 80s and 90s, hedge funds did just that. Of late, HF returns seem increasingly correlated to the broad market indexes. Why do you think so?
S: It really depends on which market indices and which hedge fund strategies you are comparing. There are certainly managers and strategies that will look as if they are correlated to the broader equity markets at certain points. The key is whether they are correlated over time. Again, if managers or strategies fail to deliver, investors will adjust their portfolios.
4) Y: China has seen a large inflow of capital, especially into the financial sector. The major banks; Citigroup, BoA, Goldman, have all taken sizeable stakes in the Chinese financial sector. In other words, the herd seems to be too bullish. What do you make of this trend?
S: It is dangerous to assume the herd is always wrong. The truth is that the inflows into China are being limited by government restrictions. Perhaps the inflows would be much larger if the restrictions were limited.
The key is to ask, “Why are all of these institutions dedicating the time and energy into this market?” Then evaluate whether the opportunity is worth the attention. It seems to be a reflection of a booming, growing emerging market that has attracted capital for the long term.
5) Y: As hedge fund returns have come down over the years, their appetite for risk has rapidly increased. Your partner Andres Drobny (no relation) once said, "To make money and have value you have to have risk/reward parameters dominating what you do in markets."
With the recent debacles such as Amaranth & Archeus Capital (the most famous ones), do you think hedge funds are erring from the risk/reward scenarios, caused by narrowing of spreads (due to an overcrowded industry) and/or chartering in unseen territory?
S: First of all- the one thing the press gets wrong, is that Amaranth or Archeus are symptomatic of the HF industry. As you mentioned earlier there are about 9K hedge funds. We are talking about two funds.
Out of 9K hedge funds, there are going to be some good ones and some bad. The same applies to mutual funds and private equity funds. The key for investors is choosing the talented managers that have a good risk/reward framework and aren’t taking excessive leverage or risk in illiquid markets. At the end of the day, the onus is on the investors to choose and decide which hedge funds are the best out there.
Right now, we’re going through a pretty significant period of low volatility, low interest rates, and tight market spreads. There have been periods of time like this in the past and it typically unwinds back to a more volatile, riskier markets. The question is when and how do we get there and what the path looks like.
7) Y: In your book, Inside The House of Money, you interviewed some of the best traders in the world. Could you tell us one characteristic they all shared?
S: Humility. The popular image of big successful traders pounding their chest and always being right is really the guy that ends up out of the market after a couple of years when a secular or cyclical trend reverses. The best traders that have longevity, who have been through multiple market cycles and have consistently made money are very humble. They know that they are not smarter than the markets and to be in this game for the long term one has to be flexible.
8) Y: M&A activity has been steadily increasing in double-digits since 2002. It seems that 2006 will be the record year, beating the $3.327 trillion in global volume and $1.525 trillion in U.S. volume posted in 2000. With so much buying power, do you foresee another hedge fund strategy, dedicated to say such as LBO and/or PE financing, on the horizon other than Event driven strategies?
S: Perhaps. There will always be innovation in financial markets. Hedge funds are part of that process. Whether there is a different title to the strategy, who knows. Hedge fund strategy titles are mainly for marketing purposes. At the end of the day, what a hedge fund is supposed to do is- make money in any market environment regardless of their strategy.
That is what global macro is all about and has always been about. In terms of slicing and dicing the hedge fund business into smaller more finite, specific strategies, this has typically been a good way to raise money, especially in a world full of liquidity. If liquidity contracts, things may be very different.
9) Lately there has been a lot of chatter about regulating the hedge fund industry. What are your views on regulating the industry- Stricter oversight by the SEC and/or a self-regulating body?
S: The most successful hedge funds are running their business in such a way that is over and above what any regulatory government body would require. If regulation keeps out some of the frauds and scams, then that’s a good thing for the industry. Generally, regulation tends to increase costs with questionable benefit.
But, if regulation can be proven to boost investor confidence, then I am all for it. Again, the key is allowing investors to make educated decisions about their investments. Let the market work. If investors are not comfortable with the way their manager runs the firm, then they should not allocate the capital, regardless of what any government body does.
10) Y: In May, when the US markets were hit by a correction, most emerging markets followed it downwards and when the US markets regained their footing in August so did EM. I have a hard time imagining EM markets up if US markets are down 10% or so. What are your views on emerging markets?
S: EM presents tremendous opportunities just as any new market presents great opportunities. In terms of the US being down 10% and EM being up, it depends. I don’t think you can classify EM as one thing. China is very different from Russia, which is very different from India, which is very different from Brazil, so it depends on which market, what the different economies are doing, and the prospects.
For example: If the US market is down 10% but the US currency is down 50%, perhaps EM will be up, especially if you’re a US based investor. A large part of it depends on what your home currency is.
11) Y: Drobny Global Advisors is known for its unorthodox style of research advisory & investment conferences [Providing actual tradable ideas in a casual atmosphere with the audience concentrated among what’s considered “very smart money”]. You recently wrapped up a conference in Iceland, could you tell us a little about what was discussed?
S: Sure. The overall mood was mixed so the overall general feeling I took away from it was that we are at a major inflection point. Often at turning points, confusion reigns until the new trend is established.
Y: Steven, thank you very much for taking time out for this interview. Best of luck with DGA and look forward to the second edition of Inside The House of Money.
Last night on CNBC's MAD MONEY Cramer also went over one of his long-standing favorite retail plays: Sears Holdings (SHLD).
He implied that SHLD stock is no different than investing in a company with a hedge fund manager trying to make his stocks go up. After today's drop of almost $10.00 after earnings, Cramer said the stock is going back up. He says this is a gift. He did tell on himself that you have heard him back this stock again and again. He said the bears are harping on same store sales and on inventory build-ups. He said it isn't a screaming buy because of it being a great retail play and not because it is a turnaround story. He says this is an investment ultimately in Eddie Lampert.
He has been there for the last $140 of upside, but he thinks it is going much higher and it may be a baby Berkshire Hathaway. Even though it is expensive on multiples, it will get more expensive and Eddie Lampert is a winner. The company allows Eddie Lampert to invest the profits from Sears and K-Mart elsewhere where he sees fit. The company made $101 million off of outside investments. The street doesn't like that they can't evaluate Sears as a retailer, but Cramer does.
Last night on CNBC's MAD MONEY, Jim Cramer reviewed two stocks in the same sector that are both buys. He said which one you should own depends on your preference.
He said if a company has good management, that means they just aren't screwing up. Nike (NKE) and Under Armour (UARM) got lucky because Reebok screwed up by cutting marketing. Reebok's ad budget was only $7 million after Adidas bought them, and these two won as a result.
Cramer says that even though NKE and UARM are competing, they are different stocks for different investors. He says both are buys.
He says Nike (NKE) is the best for longer-lived investors that look for more stability and more predictability. He noted Under Armour (UARM) is the younger investor's stock that has a lot of room for growth down the road.
NKE trades cheaper, and is more defensive in nature trying toi preserve market share it has. UARM is a high-multiple stock that would crumble if the company messes up. Cramer said UARM's 31% market share could pass NKE's 36%, but UARM could take market share and NKE stock could still keep rising because they are different stories. He thinks UARM will take market share from Reebok since they aren't defending the brand. UARM is one that will get hurt bad if they ever miss an estimate by a penny, and NKE is the stable lion in the group.
UARM closed down 1.28% at $46.25 in regular trading, but shares are up almost 3% from teh close at $47.50 in after-hours trading. NKE closed down 0.25% at $95.23 in regular trading, but shares are up 0.9% at $95.92 in after-hours trading.
Genetech Wins FDA Approval For Herceptin For Breast Cancer
Genentech (DNA) announced that the FDA approved its Herceptin cancer treatment for an expanded use for adjuvant treatment of HER2-positive node-positive breast cancer. The studies showed a 52% reduction in the recurrence of breast cancer of some 3,500 patients in two Phase III studies and is the only targeted biologic therapy approved for use in adjuvant and metastatic HER2-positive breast cancer.
Adjuvant therapy is given to women with early-stage (localized) breast cancer who have had initial treatment - surgery with or without radiation therapy - with the goal of reducing the risk of cancer recurrence and/or the occurrence of metastatic disease. After three-and-a-half years in the study, 87 percent of women treated with Herceptin plus chemotherapy were disease free, compared to 71 percent of women treated with chemotherapy alone. A survival analysis conducted after patients had been followed for a median of 24 months showed a 33 percent reduction in the risk of death (based on a hazard ratio of 0.67), which is equivalent to a 49 percent improvement in overall survival.
DNA shares closed up 0.35% at $80.72 in regulartrading, but shares are up 0.9% at $81.45 in after-hours trading. DNA has a 52-week trading range of $75.58 to $100.20.
Autodesk (ADSK) just reported record quarter revenues of $457 million, just under the $457.25 million consensus estimate. It is not providing EPS because of the ongoing options review. ADSK closed up 1% at $27.00 in normal trading, but shares are up 6.4% to $39.35 in after-hours trading. The subscription revenues seem to be the game winner as the guidance seems in-line (although guidance may be conservative because of legal ramifications). ADSK 52-week trading range is $29.56 to $47.25.
There was a huge bright spot in what may be considered a slight beat with in-line guidance. Its subscription (recurring) revenues have now grown to $111 million, about 24% of revenues, and up 50% from last year. That is an impressive feat and has been one of the growth drivers to the company.
Total backlog was $352 million as of October 31, 2006, including $333 million of deferred revenues. Deferred subscription revenues increased $12 million sequentially to $275 million and there was $19 million of unshipped product orders at quarter end. Its DSO (days sales outstanding, or days to get paid!) also fell 1 day to 51 days.
There is also guidance (compared to street estimates) where available. Next quarter guidance: Net revenues for the fourth quarter of fiscal 2007 are expected to be between $490 million and $500 million ($495M estimate); following quarter guidance: Net revenues for the first quarter of fiscal 2008 are expected to be approximately flat with the fourth quarter of fiscal 2007. Fiscal 2007 guidance: For fiscal year 2007, net revenues are expected to be between $1.832 billion and $1.842 billion ($1.84B estimate). Fiscal 2008 guidance: For fiscal year 2008, net revenues are expected to be between $2.075 billion and $2.125 billion ($2.10 Billion estimates).
Starbuck's missed Wall St.'s revenue target and had poor earnings to boot. Some was due to changes in the company's accounting practices. Investors wanted revenue of $2.02 billion and the coffee retailer did $2 billion.
While the company's long range goal of hitting a total of 30,000 stores worldwide may not be in jeapordy, it may be set back a few days.
Starbuck's shares are off about 6% after hours to just above $37..
Douglas A. McIntyre can be reached at douglasamcintrye@247wallst.com. He does not own securities in companies that he writes about.
HP announced earnings after the close. Revenue rose only 7% to $24.6 billion. Non-GAAP operating income rose from $1.5 billion in the quater a year ago to $1.9 billion. Desktop sales were flat while notebook unit sales rose 24%. Revenue at the imaging and printing unit rose 7%.
Enterprise storage and server revenue rose 4% to $4.7 billion. And, services revenue rose 5%.
Looking at the results, Paul Meeks, a hardware analyst interviews on CNBC, believes that the results only merit a share price of $40 to $41, which is where the stock trades now.
The forecast for the next quarter is for revenue to be in the $24.1 to $24.3 billion range and for the next fiscal $97 billion.
While revenue and EPS were slightly ahead of Wall St. estimates, the figures hardly constitute a blow out quarter. After rising 40% this year, the shares may be taking a pause.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Tonight on CNBC's MAD MONEY Cramer also went over one of his long-standing favorite retail plays: Sears Holdings (SHLD).
He implied that SHLD stock is no different than investing in a company with a hedge fund manager trying to make his stocks go up. After today's drop of almost $10.00 after earnings, Cramer said the stock is going back up. He says this is a gift. He did tell on himself that you have heard him back this stock again and again. He said the bears are harping on same store sales and on inventory build-ups. He said it isn't a screaming buy because of it being a great retail play and not because it is a turnaround story. He says this is an investment ultimately in Eddie Lampert.
He has been there for the last $140 of upside, but he thinks it is going much higher and it may be a baby Berkshire Hathaway. Even though it is expensive on multiples, it will get more expensive and Eddie Lampert is a winner. The company allows Eddie Lampert to invest the profits from Sears and K-Mart elsewhere where he sees fit. The company made $101 million off of outside investments. The street doesn't like that they can't evaluate Sears as a retailer, but Cramer does.
Tonight on CNBC's MAD MONEY, Jim Cramer reviewed two stocks in the same sector that are both buys. He said which one you should own depends on your preference.
He said if a company has good management, that means they just aren't screwing up. Nike (NKE) and Under Armour (UARM) got lucky because Reebok screwed up by cutting marketing. Reebok's ad budget was only $7 million after Adidas bought them, and these two won as a result.
Cramer says that even though NKE and UARM are competing, they are different stocks for different investors. He says both are buys.
He says Nike (NKE) is the best for longer-lived investors that look for more stability and more predictability. He noted Under Armour (UARM) is the younger investor's stock that has a lot of room for growth down the road.
NKE trades cheaper, and is more defensive in nature trying toi preserve market share it has. UARM is a high-multiple stock that would crumble if the company messes up. Cramer said UARM's 31% market share could pass NKE's 36%, but UARM could take market share and NKE stock could still keep rising because they are different stories. He thinks UARM will take market share from Reebok since they aren't defending the brand. UARM is one that will get hurt bad if they ever miss an estimate by a penny, and NKE is the stable lion in the group.
UARM closed down 1.28% at $46.25 in regular trading, but shares are up almost 3% from teh close at $47.50 in after-hours trading. NKE closed down 0.25% at $95.23 in regular trading, but shares are up 0.9% at $95.92 in after-hours trading.
Genetech Wins FDA Approval For Herceptin For Breast Cancer
Genentech (DNA) announced that the FDA approved its Herceptin cancer treatment for an expanded use for adjuvant treatment of HER2-positive node-positive breast cancer. The studies showed a 52% reduction in the recurrence of breast cancer of some 3,500 patients in two Phase III studies and is the only targeted biologic therapy approved for use in adjuvant and metastatic HER2-positive breast cancer.
Adjuvant therapy is given to women with early-stage (localized) breast cancer who have had initial treatment - surgery with or without radiation therapy - with the goal of reducing the risk of cancer recurrence and/or the occurrence of metastatic disease. After three-and-a-half years in the study, 87 percent of women treated with Herceptin plus chemotherapy were disease free, compared to 71 percent of women treated with chemotherapy alone. A survival analysis conducted after patients had been followed for a median of 24 months showed a 33 percent reduction in the risk of death (based on a hazard ratio of 0.67), which is equivalent to a 49 percent improvement in overall survival.
DNA shares closed up 0.35% at $80.72 in regulartrading, but shares are up 0.9% at $81.45 in after-hours trading. DNA has a 52-week trading range of $75.58 to $100.20.
please ignore the previous ADSK first line as it improperly said "above"
Autodesk (ADSK) just reported record quarter revenues of $457 million, just under the $457.25 million consensus estimate. It is not providing EPS because of the ongoing options review. ADSK closed up 1% at $27.00 in normal trading, but shares are up 6.4% to $39.35 in after-hours trading. The subscription revenues seem to be the game winner as the guidance seems in-line (although guidance may be conservative because of legal ramifications). ADSK 52-week trading range is $29.56 to $47.25.
There was a huge bright spot in what may be considered a slight beat with in-line guidance. Its subscription (recurring) revenues have now grown to $111 million, about 24% of revenues, and up 50% from last year. That is an impressive feat and has been one of the growth drivers to the company.
Total backlog was $352 million as of October 31, 2006, including $333 million of deferred revenues. Deferred subscription revenues increased $12 million sequentially to $275 million and there was $19 million of unshipped product orders at quarter end. Its DSO (days sales outstanding, or days to get paid!) also fell 1 day to 51 days.
There is also guidance (compared to street estimates) where available. Next quarter guidance: Net revenues for the fourth quarter of fiscal 2007 are expected to be between $490 million and $500 million ($495M estimate); following quarter guidance: Net revenues for the first quarter of fiscal 2008 are expected to be approximately flat with the fourth quarter of fiscal 2007. Fiscal 2007 guidance: For fiscal year 2007, net revenues are expected to be between $1.832 billion and $1.842 billion ($1.84B estimate). Fiscal 2008 guidance: For fiscal year 2008, net revenues are expected to be between $2.075 billion and $2.125 billion ($2.10 Billion estimates).
Starbuck's missed Wall St.'s revenue target and had poor earnings to boot. Some was due to changes in the company's accounting practices. Investors wanted revenue of $2.02 billion and the coffee retailer did $2 billion.
While the company's long range goal of hitting a total of 30,000 stores worldwide may not be in jeapordy, it may be set back a few days.
Starbuck's shares are off about 6% after hours to just above $37..
Douglas A. McIntyre can be reached at douglasamcintrye@247wallst.com. He does not own securities in companies that he writes about.
DJIA 12,305.82; Up 54.11 (0.44%) NASDAQ 2,449.06; Up 6.31 (0.26%) S&P500 1,399.76; Up 3.19 (0.23%) 10YR-Bond 4.655% Up 0.04 NYSE Volume 2,738,514,000 NASD Volume 2,031,971,000
Today was another record high on the DJIA. We had another drop in Consumer Prices and natural gas innevtories coming out at another surplus helped fall $2.50 to $56.26. We learned of the death of famed economist (socio-economist) Milton Friedman today.
Dell (DELL) was the big shocker as it delayed earnings and said its SEC investigation has now gone to formal. DELL shares fell 2.5% to $25.10, but shares had been down 5% at one point.
Applied Materials (AMAT) fell 3.6% to $17.98 after it its EPS from operations were $0.30 versus $0.31 consensus estimates.
Clear Channel (CCU) rose 3.5% to $35.36 after receiving a $37.60 private equity buyout.
Readers Digest (RDA) rose a sharp 7% to $16.70 after getting a private equity buyout. And who says old media is dead?
Apple (AAPL) rose 1.9% to $85.61 after Cramer on MAD MONEY said the stock is not under any real threat for iPod dominance because of Microsoft's Zune launch and he said the stock is going to $100.00 by year-end.
Time Warner (TWX) rose 1.75% to $20.33 to another 52-week high close on optiosn activity on block volume today.
Irvine Sensores (IRSN) rose an unbelievable 123% to $2.39 after it said it won more than $16 million in new contract wins.
Rambus (RMBS) gained 30% to $21.72 on more speculation of an FTC resolution in its long-standing case.
Zoll Medical (ZOLL) rose a sharp 28% to $53.06 after its profit more than doubled.
The9 Ltd. (NCTY) rose 20% to $28.36 after beating earnings expectations from its Chinese "World of Warcraft" revenues.
Hott Topic (HOTT) rose 17% to $13.04 after beating earnings after yesterday's close.
Allot Communications (ALLT) rose to $13.81 after pricing its IPO at $12.00, above the $9.00 to $11.00 range.
KBR (KBR) rose to $20.75 after pricing its IPO at $17.00, at the top of its $15.00 to $17.00 range.
Hertz Global (HTZ) rose to $15.60 after it priced its IPO at $15.00, under the $16.00 to $18.00 range.
Evergreen Solar (ESLR) fell 4.5% to $8.53 after it filed to sell $250 million in mixed securities because of the crummy timing of this need to raise cash. They waited until it was close to the bottom rather than top of a longer-term range.
BEA Systems (BEAS) fell a sharp 16% to $13.13 after missing revenue projections after yesterday's close.
Cisco Systems (CSCO) rose $0.02 to $27.15 after it allocated another $7 Billion for share buybacks.
Lojack (LOJN) fell 4% to $15.51 after its CEO announced he would resign and work in a transition period for the already-named replacement from inside of the company.
Sears Holdinsg (SHLD) fell 5.5% to $169.26 after beating earnings estimates because of an earnings quality issue.
HP announced earnings after the close. Revenue rose only 7% to $24.6 billion. Non-GAAP operating income rose from $1.5 billion in the quater a year ago to $1.9 billion. Desktop sales were flat while notebook unit sales rose 24%. Revenue at the imaging and printing unit rose 7%.
Enterprise storage and server revenue rose 4% to $4.7 billion. And, services revenue rose 5%.
Looking at the results, Paul Meeks, a hardware analyst interviews on CNBC, believes that the results only merit a share price of $40 to $41, which is where the stock trades now.
The forecast for the next quarter is for revenue to be in the $24.1 to $24.3 billion range and for the next fiscal $97 billion.
While revenue and EPS were slightly ahead of Wall St. estimates, the figures hardly constitute a blow out quarter. After rising 40% this year, the shares may be taking a pause.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Cramer Thumbs Down on Pepsi (PEP); Positive on NYMEX IPO Again
On today's STOP TRADING segment on CNBC, Jim Cramer started on the snack topic.
Cramer said he is still anti-Pepsi (PEP) because of the snackfood business. Cramer said that Pepsi did address his comments, but the fat wars will clip their wings. Cramer said it is too little too late. He thinsk Pepsi (PEP) could fall to $55 (from $61.80 now). He said they aren't sitting still, but their 20-times earnings multiple could get cut down to 18-times earnings. Cramer said that from the May ramp you still don't want to go back into it.
NYMEX is going to price tonight. He said again that he would still pay up $20 for the stock after the IPO price.
There are numerous media reports today of the passing away of Milton Friedman, perhaps the greatest and most influential economist of the modern era.
There are genuinely too many ways to describe and too many things to properly credit him for. These are just some of the things I would credit him for, yet it is probably a disservice to him to keep the list so short:
Nobel Prize winner......
One of the greatest modern economists, if not THE greatest of modern economists......
Will have more name recognition as our time becomes history than Alan Greenspan could even aspire for......
Laissez-faire advocate......
Famous economic author......
Proponent of a more consumption tax basis.....
The reviver of money supply as the tool to increase or decrease economic output.....
Credited as one of the large proponents of free floating current exchange rates.....
Involved in the move toward changing military from a draft system to a volunteer for hire system.....
Even tied to the dropping of the gold standard to a market standard (I recall it as something like "money is worth whatever people think it is worth").....
In a summary, Milton Friedman will be missed. If any foreign government wanted to instill economic changes in the last 3 decades, Milton Friedman was at the top of the list of economists that would be used for consultation. This man transcended modern politics and was respected by many regardless of their political views.
Not all of his theories were loved, but whatever he said was listened to closely and evaluated before any criticism could be handily thrown back. If any of my credits to him are not factual, it is memory errors on my part. I cannot pay enough credit he is worthy of regardless of how much or how little I could say about him. His economic theories will be read about and used for future generations throughout the world.
According to TheStreet.com: Splinter said he expects Applied’s silicon business to grow by more than 10% in fiscal 2007, outpacing the broader industry.But executives warned of a “modest pullback” among customers in the current quarter.
Applied projected that sales will decline 5% to 10% sequentially in its fiscal first quarter. That suggests a revenue range of $2.41 billion to $2.28 billion, below the average analyst expectation of $2.46 billion.
When we wrote our plea for intervention, we noted that Mike Splinter called the bottom of the last slowdown for about 8 consecutive quarters, so what should we expect? Which brings us to a new (albeit slow-paced) drinking game. From now until there is actually a bottom in semiconductor equipment orders we will take a shot each time Splinter suggests that orders have/will bottom in the current/next quarter.
The author may hold a position in the securities discussed.
The author's current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion's Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion's Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options.
Bogeying Hewlett-Packard Earnings; Dell's Problems Act As A Gift
Stock Tickers: HPQ, DELL
Hewlett-Packard (HPQ) was given a gift with all of the problems at Dell (DELL) as far as what they have to show today. As for earnings, the street is looking for HPQ to post $0.64 EPS on revenues of $24.1 Billion. The street is also looking for EPS at $0.60 and revenues of $23.9 Billion for the quarter ended January 31, 2007.
The "pre-texting" scandal and invasions of privacy to protect its corporate leaks seems so far to be geared mostly to people who have left or been booted. We'll also get to see if the company is really using its $6 Billion allocated toward share buybacks.
It recently acquired VoodooPC to attack Dell's acquisition of Alienware to capture the premium high-end PC-gamer market. It also is heading more into the consulting and IT-side of the business after it completed the Mercury Interactive acquisition for some $4.5 Billion. The street has been guessing if the company will or will not make more acquisitions, so we'll have to look to see if they say more there on that front.
PC margins are still expected to grow from the 4% area now, despite the fact that this is already up since its Compaq acquisition. The company has regained its number one position as far as PC sales. The street is probably as confused as the public about how the release of Windows Vista at the end of January is going to affect all PC makers over the next quarter or two, so we may have to look at HPQ earnings for other metrics than the PC business and we'll have to treat it based on the overall "feel-good generalities" that the company gives us today.
Each quarter there is a hope that the printing & imaging operations will not be as dominant down the road (last quarter was $6.2 Billion out of $21.9 Billion total revenues and $884 million net income out of the entire $1.5 Billion non-GAAP net income).
The stock is up more than 15% since its mid-September lows, but shares are up 53% from the 52-week lows. While the stock is up within 2% of its yearly high put in earlier, its chart based on various technical indicators is surprisingly not saying that it is grossly overbought. The fundamental analysts are still more positive than negative on the name, but the average price target appears to be $42 to $43 on the stock.
It should be kept in mind that options expire tomorrow at the close of the market, but options traders appear braced for a move of roughly $0.85 to $0.95 based on current trading. There is also a net effect of left over contracts to the tune of only 12,000 or 13,000 options contracts in the closest put and call options that expire tomorrow, but there are actually just under 140,000 contracts in the open interest of the closest put and call options before you take the pairing off into consideration.
The company has to be thankful as could be since Dell dropped the SEC bomb today and delayed earnings. This may have at least taken some of the recent scandal news heat off of H-P, but now the media can focus more and more on how the overall restructuring plan is going since the same people that cover DELL and HPQ now only have to worry about what H-P says today. What ever the company says, they at least don't have to worry about Dell stealing their thunder tonight.
The company is projected to post revenue gains next year of close to 5% for Fiscal Oct. 2007 to roughly $96 Billion and expected to show EPS growth of about 13-14% to $2.48 or so for the same period. Now the street has to look ahead to that to see if the company can guide above that now that H-P is no longer just a turnaround and hotshot new CEO story promising headcount reductions and cost cutting measures.
Evergreen Solar's $250 Million Securities Shelf; Why Did They Wait So Long?
Evergreen Solar (ESLR) has made a filing with the SEC to sell up to $250 million in mixed securities, otherwise known as a shelf offering. The stock has fallen 2% pre-market because of the dilution that can occur, and its market cap is only $608 million as is. What is unbelievable here is the timing.
Yesterday the closed at $8.94, but its 52-week trading range is $7.27 to $17.50. Its shares are well off the highs from earlier in the year when alternative energy stocks and other energy stocks were much higher because of soaring oil prices. So what is amazing here is why the company waited this long with the stock close to its lows. I won't fault a company for going to the capital markets to take advantage of a situation to bolster a balance sheet, but when you do it AFTER your stock loses almost 50% from having a more than 200% gain the year before it seems foolish.
None of the name analysts that follow the stock expect profits any time soon, so it isn't as though the company could hang its hat on the fact that it was generating any massive cash flows. The Sept. 30 balance sheet lists total assets at $211 million, with $162.7 million in current assets; and showed total long-term and current liabilities at $223.7 million.
So now they are planning securities sales to the tune of $250 million. The securities shelf is general like many with a list of common stock, preferred stock, depository shares, warrants, and debt instruments listed as possible securities. Here is how it lists its own use of proceeds: the net proceeds from the sale of securities offered by this prospectus will be used primarily for manufacturing expansions associated with EverQ and other opportunities, as well as for general corporate purposes, including working capital. We may also use a portion of the net proceeds to fund possible investments in and acquisitions of complimentary businesses, partnerships, minority investments, products or technologies. Currently, other than our commitments with EverQ, there are no commitments or agreements regarding such acquisitions or investments that are material. Pending such uses, we plan to invest the net proceeds in highly liquid, investment grade securities.
While this is at least being used for expansion capital and for possible acquisitions down the road, the company should have known about this back after the stock was a screaming eagle rather than just another money-losing alternative energy play that has already seen its huge run. This is a company that I have actually liked in the past because solar power makes so much sense and they have a history of actually selling solar panels and systems, BUT this shelf offering is indicative of management that is not out to maximize shareholder value. While the street may price offerings at a discount if shares are deemed lofty, you at least capture the momentum of the time. Maybe the company didn't know it would definitely need the extra plant capacity earlier this year, but optimistic management would have at least tried to take advantage of a stronger alternative energy stock market when it was there instead of waiting until the sector had cooled off.
If you were grading based on the timing and net effect of this offering for current shareholders, management would get a "D" or an "F" grade here for the timing of this secondary. The company had a $90 million convertible shelf filing last December, and at least that was while the shares were on the way up. But this makes you wonder just what the company was thinking.
Will The Companies Bought By Private Equity Get Turned Back To The Shareholders
A novel class action suit is brewing. Shareholders in several public companies take private by big private equity firms like Blackstone and KKR say that these firms conspired to get good prices in the buy-outs. HCA, Harrah's and Univision are mentioned in the court documents and the suit is based, in part, on an investigation that the Justice Department is doing into potential cooperation among the large private equity operations.
If the plantiffs prevail or get far enough along to force a settlement, one of two things could happen. The private equity firms could pay shareholders a fee between the "fair value" of the public companies and what they paid for them as they were taken private. Or, they could give the companies back to the shareholders and take back the money they paid for the buyout.
Most shareholders would probably just like a little more money per share, but the private equity guys may not see it that way.
If a company is turned back to shareholders, they may do better over time. Any one of these companies could have a few good years and the share prices might rise. Riches for all.
On the other hand, any one of these companies could have a few bad years. Or, the stock market could take a sharp downturn. Then shareholders would lose buckets of money. Of course, then they could sue the management.
Note to shareholders of public companies being taken private: take the money and run.
Douglas A. McInyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Another Problem For Dell: Acer (DELL)(HPQ)(WMT)(AMZN)
Unlike most other PC manufacturers Acer is in high-growth mode. Acer's shipments last year went up 22%, a rate more than double the industry's. Acer's growth in the third quater of this year was also better than its rivals. In short order, Acer may pass Lenovo for third place among PC companies, putting it behind only HP and Dell.
Acer, based in Taiwan, has a fairly low cost base. This helps it sell inexpensive machines in markets like China and India.
But, what about the US. Acer now runs inserts in major US newspapers. Acer's share here is 3.3% but it has been rising. The company now has reselling arrangements with Wal-Mart, Best Buy, Office Depot, CDW, and Amazon.com. In other words, Acer PC are now widely available in the US. Although the company has not set up a direct marking internet operation in the US, it would not be surprising to see that over the next year.
Dell did not need to worry about anything else, but it has not worked out that way.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own shares in companies that he writes about.
Hertz Global (HTZ) and KBR (KBR) are two very different IPO's, although both come out from under a cloud.
Hertz (HTZ) priced its 88.2+ million share IPO at $15.00 per share, under the $16 to $18 range set by underwriters. This is being sold by the private equity consortium (Clayton, Dubilier & Rice, the Carlyle Group and Merril Lynch Global Private Equity) that bought it from Ford (F) just last year. The problem the street has is not so much with the overall operation of the company, but the structure is a real puker. Most of the proceeds are actually going back to the private equity firms (dividends) and the private equity consortium increased the debt structure since last year's acquisition. Until (assuming IF) this trades lower and has some seasonality behind the deal and gets some of the private equity ownership is sold off and diluted we will not evaluate the company for longer-term investors. This is also not the company's first pony ride so to speak. CNBC's Pisani just said he was surprised that the deal was weak from the floor of the NYSE this morning, but that shows you he isn't reading much ahead of these deals.
KBR (KBR) is FINALLY coming public. This is the engineering and contracting unit that is being spun off out of Halliburton (HAL) and the street has been hoping Halliburton would break this out for a couple of years or more. The pricing came at $17.00, at the top-end of the $15 to $17 range it had stated. This does not come without any fleas. It had to delay its IPO because of regulatary issues over no-bid contracts in the US, recently has had to delay its IPO a day because of demands out of UK regulators, and of course has much of its business operations tied to support contracts in Iraq. The street has perceived that this is actually coming out with an embedded call option of a "cleaner and leaner company" and Halliburton (HAL) shareholders may get the rest of the shares distributed directly to them. That may act as an overhang in the intermediate term, but longer-term investors appear willing to take a shot here with it being priced at a perceived 10% to 20% discount to peers.
China Mobile has almost 300 million customers. It also has plans about how it will get more. The CEO of the world's largest cell company want to make his phones a "Swiss Army knife that can do anything for you." Pretty cool. And, smart.
The company is offering a new music sharing service among phones with the help of News Corp. The company has also done an outstanding job of promoting text messaging and music downloads.
China Mobile is also looking outside its home markets for acquisitions in Asia, South America, and Africa. These are markets that will grow quickly and may not have well-funded and dominant local cell companies.
There may be a lesson in this for US cell companies like Verzion, Cingular, and Sprint. Doing well in the US may not be enough. Penetration of phones is fairly high in this country is fairly high. To let the Chinese take the market opportunities in emerging markets would be a mistake. No matter how big China Mobile is in its home market.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Semiconductor Industry Association Forecasts to 2009 Slightly Lower Than From June Projections
The Semiconductor Industry Association has forecast sales of $321 Billion by 2009.
The new annual forecast projects that sales will reach $248.8 Billion in 2006, up 9.4 from 2005. Back in June it had forecast $249.6 Billion in sales for 2006, so this new base rate for 2006 is a revised lower number and affects the projections for 2007 and beyond.
The SIA is also projecting roughly a 10% increase in 2007 to $273.5 Billion, slightly more than a 10% sales increase in 2008 to $303.4 Billion, and a 5.8% increase in 2009 to $321 Billion.
The numbers are actually slightly under the rest of the projections made back in June of this year. Back then it forecast 11% growth in 2007, 12% in 2008, and 4% in 2009 to a total of what was then estimated at $323 Billion.
Please also remember to perhaps take many of the SIA projections with a grain of salt, as many chip industry executives have cautioned on for years. They all support the industry, but they all have their own opinions of how the industry and their businesses are going and they are not going to share much of their private thoughts with the SIA.
(AAPL) Apple is a buy according to Jim Cramer on MAD MONEY as Zune is D.O.A. and not a threat to iPod. (ALLT) Allot Communications 6.5M share IPO priced at $12.00,above the $9 to $11 range. (AMAT) Applied Materials $0.30 EPS from operations vs $0.31e; stock trading down 2.7%. (AMSF) Amerisafe 7.8+ million share secondary priced at $11.75; closed at $12.05 yesterday. (ANDE) Andersons and marathon (MRO) will build an etahnolplant. (BEAS) BEA Systems trading down 10% after sales were slightly under street estimates. (BIG) Big Lots $0.07 EPS vs -$0.02e; unsure if comparable. (BRC) Brady $0.62 EPS vs $0.60e. (BTU) Peabody Energy replacing HCA in S&P 500 Index on date TBA. (C) Citigroup was won rights to bid $3.1 Billion to buy 85% stake in Guangdon bank in China. (CACH) Cache 1.875 million share secondary is today. (CCC) Calgon Carbon patent invalidated in Canada. (CCU) Clear Channel has reportedly reached a buyout with Thomas H Lee and Bain for $37.60. (CLE) Claire's Stores $0.39 EPS vs $0.38e. (CRM) Salesforce.com trading down 2%after options and expenses wiped out net earnings. (CSCO) Cisco authorized another $7 Billion for share buybacks. (DELL) Dell's SEC investigation becomes formal and now said revenues will be released by month end instead of today; stock down over 4%. (DENN) Denny;s CEo interviewed by Cramer on MAD MONEY; Cramer said it is a buy and could go from $4 to $6 soon. (DKS) Dick's Sporting Goods to replace BTU in S&P Mid Cap 400 index. (DWA) Dreamworks 11.5 million share secondary today priced at $26.80. (FL) Foot Locker boosted dividend after earnings. (GMCR) Green Mountain Coffee $0.19 EPS vs $0.17e. (GMTC) GameTech names new CFo. (GOOG) Google will replace HCA in S&P 100 Index on date TBA. (HNSN) Hansen medical 6.25M share IPO priced at $12.00, in the middle of the $11 to $13 range. (HRZ) Horizon Lines has 2.3 million share secondary. (HTZ) Hertz Global priced its 88+M share IPO at $15.00, under the $16 to $18 range. (IFX) Infineon reported narrower losses overseas. (KBR) KBR 27.8 million share IPO priced at $17.00, at the top of the $15 to $17 range. (LOJN) Lojack CEO has resigned. (NWY) New York & Co. $0.16 EPS vs $0.15e. (RA) Reckson getting $49 bid from Icahn and Macklowe. (SCHS) SchoolSpecialty filed to sell $125M in notes. (SHLD) EPS $1.27 vs $0.98, but was $0.82 after items. R$11.94B vs $11.82B(e); s-s-s -3% but consensus was -3.3%. (SPSN) Spansion 35 million share secondary priced at $13.75, versus $14.00 close; down from $15.25+ in last 5 days. (TTEK) Tetra Tech $0.20 EPS vs $0.18e. (TWMC) Transworld Ent. -$0.43 EPS vs -$0.38e. (TWX) Time Warner's AOL head Jonathan Miller is leaving the company and will be replaced by NBC's Randy Falco according to reports. (WSM) William Sonoma $0.29 EPS vs $0.24e;sees Q4 $1.03-1.09 vs $1.15e. (WTS) Watts Water 5 million share secondary priced at $40.00, compared to the $41.58 close yesterday. (WTSLA) Wet Seal $0.08 EPS vs $0.08e. (WYNN) Wynn is going to expand to a full second resort in Macau. (ZLC) Zales -$0.45 EPS vs -$0.46e. (ZUMZ) Zumiez fell 6% after missing sales expectations and guiding Q4 same as prior guidance. (ZVUE) HandHeld Entertainment announced free trading of its 3.2+ million PIPE shares from February; doubles float to about 6.3 million shares.
(AAPL) Apple is a buy according to Jim Cramer on MAD MONEY as Zune is D.O.A. and not a threat to iPod. (ALLT) Allot Communications 6.5M share IPO priced at $12.00,above the $9 to $11 range. (AMAT) Applied Materials $0.30 EPS from operations vs $0.31e; stock trading down 2.7%. (AMSF) Amerisafe 7.8+ million share secondary priced at $11.75; closed at $12.05 yesterday. (ANDE) Andersons and marathon (MRO) will build an etahnolplant. (BEAS) BEA Systems trading down 10% after sales were slightly under street estimates. (BIG) Big Lots $0.07 EPS vs -$0.02e; unsure if comparable. (BRC) Brady $0.62 EPS vs $0.60e. (BTU) Peabody Energy replacing HCA in S&P 500 Index on date TBA. (C) Citigroup was won rights to bid $3.1 Billion to buy 85% stake in Guangdon bank in China. (CACH) Cache 1.875 million share secondary is today. (CCC) Calgon Carbon patent invalidated in Canada. (CCU) Clear Channel has reportedly reached a buyout with Thomas H Lee and Bain for $37.60. (CLE) Claire's Stores $0.39 EPS vs $0.38e. (CRM) Salesforce.com trading down 2%after options and expenses wiped out net earnings. (CSCO) Cisco authorized another $7 Billion for share buybacks. (DELL) Dell's SEC investigation becomes formal and now said revenues will be released by month end instead of today; stock down over 4%. (DENN) Denny;s CEo interviewed by Cramer on MAD MONEY; Cramer said it is a buy and could go from $4 to $6 soon. (DKS) Dick's Sporting Goods to replace BTU in S&P Mid Cap 400 index. (DWA) Dreamworks 11.5 million share secondary today priced at $26.80. (FL) Foot Locker boosted dividend after earnings. (GMCR) Green Mountain Coffee $0.19 EPS vs $0.17e. (GMTC) GameTech names new CFo. (GOOG) Google will replace HCA in S&P 100 Index on date TBA. (HNSN) Hansen medical 6.25M share IPO priced at $12.00, in the middle of the $11 to $13 range. (HRZ) Horizon Lines has 2.3 million share secondary. (HTZ) Hertz Global priced its 88+M share IPO at $15.00, under the $16 to $18 range. (IFX) Infineon reported narrower losses overseas. (KBR) KBR 27.8 million share IPO priced at $17.00, at the top of the $15 to $17 range. (LOJN) Lojack CEO has resigned. (NWY) New York & Co. $0.16 EPS vs $0.15e. (RA) Reckson getting $49 bid from Icahn and Macklowe. (SCHS) SchoolSpecialty filed to sell $125M in notes. (SHLD) EPS $1.27 vs $0.98, but was $0.82 after items. R$11.94B vs $11.82B(e); s-s-s -3% but consensus was -3.3%. (SPSN) Spansion 35 million share secondary priced at $13.75, versus $14.00 close; down from $15.25+ in last 5 days. (TTEK) Tetra Tech $0.20 EPS vs $0.18e. (TWMC) Transworld Ent. -$0.43 EPS vs -$0.38e. (TWX) Time Warner's AOL head Jonathan Miller is leaving the company and will be replaced by NBC's Randy Falco according to reports. (WSM) William Sonoma $0.29 EPS vs $0.24e;sees Q4 $1.03-1.09 vs $1.15e. (WTS) Watts Water 5 million share secondary priced at $40.00, compared to the $41.58 close yesterday. (WTSLA) Wet Seal $0.08 EPS vs $0.08e. (WYNN) Wynn is going to expand to a full second resort in Macau. (ZLC) Zales -$0.45 EPS vs -$0.46e. (ZUMZ) Zumiez fell 6% after missing sales expectations and guiding Q4 same as prior guidance. (ZVUE) HandHeld Entertainment announced free trading of its 3.2+ million PIPE shares from February; doubles float to about 6.3 million shares.
ARB cut to Peer Perform at Bear Stearns. ARXT started as Buy at First Albany. ATMI cut to Neutral at JPMorgan. ATVI started as Peer Perform at Bear Stearns. BEAS cut to Sell at Merrill Lynch. CBRL started as Buy at SunTrust. CDL cut to Sell at B of A. CRL cut to Neutral at Goldman Sachs. CXR cut to Sell at B of A. DDE cut to Sell at Stifel Nicolaus. DG raised to Buy at B of A. ENDP raised to Outperform at RWBaird. ERTS started as Peer Perform at Bear Stearns. ETM cut to Sell at B of A. GR maintained buy but removed from Focus List at Merrill Lynch. JBLU cut to Reduce at UBS. LM raised to Outperform at Wachovia. NBIX raised to Peer Perform at Bear Stearns. NOVA raised to Buy at Deutsche Bank. PETM cut to Neutral at Goldman Sachs. SAH raised to Buy at Goldman Sachs. SFL cut to Sell at Citigroup. SMBI cut to Sell at Goldman Sachs. SUN started as Neutral at Prudential. THQI started as Peer Perform at Bear Stearns. TSO started as Neutral at Prudential. TTWO started as Underperform at Bear Stearns. VLO started as Neutral at Prudential.
Internet Ad Revenue Slows: Where Will MSN, Yahoo!, And AOL Go?
Stocks: (GOOG)(YHOO)(TWX)(MSFT)
Internet ad revenue grew 33% year-over-previous-year in the third quarter. It hit $4.2 billion for the three month period.
That is the headline and the Internet Advertising Bureau is sticking to it. But, from Q2 to Q3, the number was basically flat. Q2 internet ad money was $4.1 billion.
There are two ways to look at the numbers. One is that revenue is still growing at a reasonable pace. The other is that it is hardly growing at all. The figures from Q4 will tell the tale as holiday marketing dollars pour into all media, and the internet sees if it can post a strong pace over Q3 2006 and Q4 2005.
Quarter-over-pervious quarter numbers are actually fairly dismal. Old Terry Semel, CEO of Yahoo! says that the market is underestimating what will happen with internet marketing dollars as more money is spent on video and social networks. He had better hope so.
While Google is operating almost exclusively in the text based ad end of the internet, Yahoo!, AOL, and MSN has to fight for the banner and button ads that he been the mainstay of online marketing money for several years. Yahoo!'s stock has taken a beating as its revenue from advertising has slowed. The AOL move from subsription-based revenue to advertising depends on a robust market. Time Warner says it can increase ad revenue faster than the market as a whole. But, if the overall market is slowing, that may be cold comfort. Microsoft, which actually lost money in it online businesses last quarter will also depend on a strong online ad market to restart its efforts at MSN.
A rising tide lifts all ships. But, that only works if the tide is rising.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Markets in Europe were narrowly mixed at 6 AM New York time.
The FTSE was up .1%% to 6,236. Barclays was down .5% to 704. BP was up .3% to 598.5. BT was up .5% to 282.5. GlaxoSmithKline was up .2% to 1368. Prudential was down .7% to 657. Reuters was up .2% to 468.5. Unilever was flat at 1412. Vodafone was up .4% to 139.5.
The DAXX was down a fraction to 5,428. Bayer was down .1% to 40.23. DaimlerChrysler was up 2.2% to 48.56. DeutscheBank was down a fraction at 98.76. Deutsche Telekom was up .4% to 13.89. Siemens was up .1% ot 75.4. VW was up 1.9% to 85.85.
The CAC 40 was down .1% to 5,506. Alcatel was up 1.8% to 10.63. AXA was down .6% to 30.01. France Telecom was up .9% to 20.36. ST Micro was up .7% to 14.34. Vivendi was up .4% to 29.97.
XM Satellite Radio got a nice run-up in its stock yesterday. The company's shares moved from $14 to almost $14.80 and traded above $14.90 for part of the day.
The move added over $150 million to XM's market cap, which now stands just shy of $4 billon.
The uptick in the stock seemed to be based on an announcement that XM has launched its new GPS in some Nissan and Infiniti cars. The navigation system is nice, but the fact that it will be offered in Nissan Altima's is hardly big news.
Satellite radio investors have developed the kind of desparate behavior that is usually exhibited by people who have been without water in the desert for several days usually display.
XM's stock is still down from a 52-week high of $32, and even improved earnings have barely moved the stock.
The market appears to believe that satellite radio is last year's next big thing and Wall St. has moved on to things like the iPod and Xbox.
The question now is whether the two satellite radio companies can do anything to get back the interest of investors. Shy of a sharp acceleration in subscriber growth rates, probably not.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Who Will Replace Rollins At Dell? (DELL)(HPQ)(INTC)(MO)
The Vegas odds are that Kevin Rollins will be out as CEO at Dell. It may be a couple of months, but his fate may already be sealed.
The SEC has accelerated its investigation into Dell's accounting practices. The computer company is expected to reports improved results for the last quarter, but filing of financial data will be delayed while the probe goes on.
Dell has also lost the poll position as the largest computer manufacturer to arch-rival Hewlett-Packard.
Michael Dell, the company founder, must now be completely humiliated by what has happened to his company's reputation and position as one of the premier companies in the US.
If Rollins goes, who gets the job?
1. Michael Dell. The company's founder, he was CEO before Rollins. He may not want to make the time commitment to the several years it will take to get Dell back on top. He does not need the money.
2. Michael Miles. The former CEO of Philip Morris and a Dell board member. Tremendous experience in consumer marketing. Due to his age, a short-term prospect.
3. Todd Bradley. Bradley is the head of HP's personal systems group which includes PCs and technical work stations.
4. William Amelio. Amelio is a former Dell executive who is now CEO of Chinese PC giant Lenovo which tool over the PC operations of IBM.
5. Sean Maloney. Head of sales and marketing at Intel. He has an engineering and marketing background and in his current position works with every major PC and server manufacturer in the world.
Rollins is out. Count on it.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
GM is boasting that its sales in China will grow 15% next year, slightly faster than the overall growth rate in the Asian country. Great.
But GM's sales in China grew over 37% in the first nine months of 2006, so the projection would appear to be a significant slowing. GM sold over 645,000 vehicles in China during that period.
None of this will matter if GM cannot improve operations in it North America operations. And, Toyota is about to see what it can do to the largest's US car company's core product line, pick-ups. Toyota is investing $1.2 billion in a new plant in Texas to build its Tundra pick-up.
Car industry analysts see Toyota's move as a way to pressure margins in the key pick-up segment of Ford and GM's sales. Pick-ups not only have large sales volumes. They also are highly profitable.
GM can do what it wants in China. Its largest rival is coming from Japan to eat its lunch in the US.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Sprint and Microsoft have announced a strategic alliance to provide search functions on Sprint cell phones. Microsoft has been trying to get into this business in the US for some time. Microsoft is in a fierce competition with Google and Yahoo! to provide mobile search. The programs will be supported by advertising. Sprint and Microsoft will split the proceeds.
Microsoft rival Google already has deals with Vodafone and Japanese cell carrier KDDI, so the amount of mobile real estate available to search companies is already shrinking.
Some of the cell phone carriers like Alltel are avoiding using Microsoft, Google, and Yahoo! altogether. Alltel has done a deal with start-up JumpTap. Verizon has its own systems called VZ Navigation.
The deal with Sprint offers some affirmation the the No. 3 US cell operator still has a very valuable base for offering services from companies like Microsoft. And, Microsoft, which is desparate to flank Google and Yahoo! in mobile search gets a large footprint for its search offerings which are currently a distant third place on the web.
Two companies in third place. What does 3+3 equal?
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
According to Reuters, VW's stock is up on speculation that Porsche could make a bid for the entire company. Porsche is already the largest shareholder.
Reuters writes that Hertz IPO raised $1.32 billion.
Reuters reports that Vivendi's profits were lifted by its video game business.
Reuters also writes that Time Warner ousted the CEO of AOL and replaced him with a high ranking executive from NBC Universal.
According to the Wall Street Journal, US Airways offered Delta $8.67 billion for the airline which is still in Chapter 11.
The Wall Street Journal writes that Dell has announced that the SEC has stepped up its investigation into the computer makers accounting practices which will cause a delay in quarterly filing from the company.
The Wall Street Journal reports that GM will name a former AT&T financial official as its chief accounting officer after a series of financial restatements at the large car maker.
The Wall Street Journal also writes that Merck has won another federal trial over the affects of its painkiller Vioxx.
The Wall Street Journal also reports that Sprint will begin to offer local search on its phones. The system will be powered by Microsoft.
The New York Times writes that high doses of anemia drugs from Johnson & Johnson and Amgen are linked to heart attacks. Sales of the two drugs total about $9 billion a year.
The Nikkei was down .5% to 16,164. Bridgestone was down .8% to 2,480. Canon was up .2% to 6250. Daiwa Securities was down 1.2% to 1281. Fuji Film was down 1.8% to 4470. Hitachi was down .7% to 703. Honda was down 1.2% to 4200. Japan Air was down 1.3% to 220. NEC was down .3% to 598. NTT was up .5% to 566000. Sharp was down 1.4% to 2040. Softbank was down 1.1% to 2305. Toshiba was down .7% to 733. Toyota was down .8% to 7230. Yahoo Japan was down 1.5% to 41700.
The Hang Seng was up .3% to 19,154. Cathay Pacific was up 2.3% to 18.66. China Mobile was up 1.5% to 69.4. China Netcom was down 3.3% to 15.28. HSBC was down .7% to 146.6. PCCW was up 1.4% to 5.13.
Farallon Capital Discloses Confidentiality and Standstill Agreement with Mills (MLS)
From 13D Tracker
In an amended 13D filing on Mills Corp. (NYSE: MLS) 10.9% holder Farallon Capital disclosed a Confidentiality and Standstill Agreement with the company.
The firm said at the request of the Company and as a condition to being included in discussions about a possible strategic transaction (if any) involving the Company, they have agreed to be subject to the "standstill" arrangements.
Another 13F filing of interest. This one from one of the world's largest and most well respected hedge funds SAC Capital, which is run by Steve Cohen.
SAC is not a buy and hold type investor, so while interesting the stocks may not be good piggybacks:
Some positions closed out: FPL Group Inc. (NYSE: FPL) (sold 1.9M shares), Emulex Corp. (NYSE: ELX) (sold 2.3M shares), Laidlaw International Inc. (NYSE: LI) (sold 1.3M shares), Source Interlink Companies Inc. (Nasdaq: SORC) (sold 2.5M shares), Level 3 Communications Inc. (Nasdaq: LVLT) (sold 5.8M shares).
Some new positons: NTL Inc. (Nasdaq: NTLI) (added 2.5M shares), Tyco International Ltd. (NYSE: TYC) (added 1.45M shares), Pentair Inc. (NYSE: PNR) (added 1.3M shares)
Some raised positons: Business Objects SA (Nasdaq: BOBJ) (added 2.85M shares), Alcoa Inc. (NYSE: AA) (added 2.6M shares), Phelps Dodge Corp. (NYSE: PD) (added 482K shares)
Some lowered position: Inco Ltd. (NYSE: N) (cut 1.5M shares), International Paper Co. (NYSE: IP) (cut 2.6M shares), Time Warner Inc. (NYSE: TWX) (cut 5.6M shares).
While certainly not an activist investors, Warren Buffett's moves are always newsworthy:
Here are his latest from a quarterly 13F filing yesterday.:
The firm showed a new 10 million share position in Western Union Co. (NYSE: WU).
The firm raised its stake in USG (NYSE: USG) from 10.2 million shares to 16.7 over the quarter (already known through 13D). The firm raised its stake in Lowes (NYSE: LOW) from 780K to 7 million over the quarter. The firm raised its stake in Nike (NYSE: NKE) from 2.47 million to 4 million shares. The firm raised its stake in Iron Mountain Inc. (NYSE: IRM) from 5 million to 6 million.
The firm lowered its stake in Anheuser-Busch Companies Inc. (NYSE: BUD) from 43.5 million shares to 36.4 million. The firm lowered its stake in Target Corp. (NYSE: TGT) from 5.5 million to 746K. The firm lowered its stake in Ameriprise Financial Inc. (NYSE: AMP) from 23.9 million to 19.3 million over the quarter (already known from 13G, currently at 14.72 million). The firm lowered its stake in H&R Block (NYSE: HRB) from 11.4 million shares to 10.98 million shares.
Having had a chance to review the Analog Devices (ADI) conference call, we came away with a few observations. We’ll start with the commentary from CEO Jerald Fishman:
I think first and most importantly, for the full year of 2006, our sales to our broad base of industrial customers have increased 15% from 2005. Revenues from industrial customers for the year represented 42% of our sales, and industrial applications remained one of the most fragmented markets in the electronics industry.
Within this overall category that we call industrial products, sales to instrumentation customers was up 20% year over year, motor control was up 23% year over year, medical was up 24% year over year, power metering up 16%, and sales into defense applications increased 17%.
While sales to automotive customers increased only slightly last year, our newest products are designed into many new platforms that will begin to appear in 2007 and 2008 models.
This is in keeping with our take on Rockwell Automation (ROK), as well as today’s Econoday article. However, we are scratching our heads over his next comment:
Our sales to ATE customers increased 11% year to year, but ATE continues to be a very challenging market, as semiconductor capital spending still remains very choppy.
If they describe a market in which orders have been up about 60% from the previous year for the last six months as “choppy” we can’t wait to see how they describe the downturn we believe is looming.
Fishman also listed a number of factors that will impact the current quarter, including the fact that comparisons are affected by an extra week of selling time:
Our first quarter in 2007 will be influenced by a number of factors. Our opening OEM backlog for Q1 is down $11 million from the beginning of Q4 as the result of generally lower bookings during the quarter, primarily as a result of excess inventory in infrastructure, handset and automatic test equipment [inaudible] our customers.
While distribution bookings were also weaker in Q4, end market re-sales remain stable, indicating continuing firm demand from our broad base of industrial customers. Our end customer book-to-bill ratio was approximately 0.98 for the quarter.
Our lead times have decreased again during Q4, which would imply a greater percentage of our revenues will be derived from turns business, which is business that we booked and we shipped in the same quarter. I think this is very typical at this point in the cycle.
Our Q1 will also be a 14-week quarter, which occurs once every seven years to adjust for the fact that 52 weeks is slightly different than 365 days. This should provide a revenue boost which could offset the normal seasonality due to the holiday period that we usually experience.
Also, as mentioned in our press release, during Q1 we will record a $35 million revenue as a result of a recently completed license transaction. This will not be repeated in future quarters and will also be excluded from our non-GAAP measures.
As a result of all these factors, when you add them all up, our revenue plan for Q1 is in the range of $635 million to $670 million, which does not include the one-time $35 million license fee.
The extra week was the subject of a great deal of back-and-forth during the conference call, and likely explains why the market performance today is not as strong as the post-market trading yesterday seemed to indicate.
The author may hold a position in the securities discussed. The author's current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion's Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion's Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options.
Buffett’s Latest Portfolio Moves & Soros Takes Major Stake in AMD, Chipotle & Cisco
By Yaser Anwar, CSC of Equity Investment Ideas
Note: Dear Readers- The analysis below was taken from an email newsletter by MoneyNews.
Warren Buffett’s Berkshire Hathaway made some adjustments to its investment portfolio in the third quarter, reducing its stake in some and adding shares in others, according to regulatory filings with the Securities and Exchange Commission.
First, let’s look at the cutbacks: Target, Anheuser-Busch, and H&R Block.
Berkshire just disclosed its stake in Target at the end of October, buying 5.5 million shares or $268 million worth of the nation’s second largest discount retailer in the second quarter. But just as quickly, Berkshire sold off about 4.75 million shares, bringing its stake in Target to just 745,700 shares.
Target announced yesterday a 16 percent jump in third quarter profits to 59 cents per share, beating expectations. Analysts surveyed by Thomson Financial were expecting earnings to come in at 55 cents a share.
Berkshire sold 7.11 million shares in Anheuser-Busch, the world’s largest brewer, after making an initial investment of 44.7 million shares or 5.7 percent of the company last year. Berkshire’s remaining investment was 36.4 million at the end of September.
Berkshire cut its stake in tax preparer H&R Block, reducing shares to 10.97 million from 11.93 million. Now, let’s look at where the company added to its positions: Lowe’s, Nike, and Iron Mountain.
Berkshire made a significant increase in its stake in home-improvement retailer Lowe’s, boosting the amount of shares from 390,000 to 6.79 million. Lowe’s and Home Depot, Lowe’s main competitor, have both cut their earnings outlook in the face of the housing slump. Buffett owns 4.18 million of Home Depot stock, too. Apparently, Buffett thinks now’s the time to buy.
The company also hiked its stake in Nike, the world’s biggest athletic-shoe maker, from 2.47 million shares to 4 million shares. Berkshire added a million shares of Iron Mountain, the largest seller of records-management services, to its portfolio, raising its stake to 6 million shares.
Berkshire Hathaway also gained 10 million shares of Western Union as part of its spinoff from First Data Corp. in September. Soros’s hedge fund added to its equities position by taking major stakes in a few companies.
Soros Fund Management LLC increased its equities investments by 38 percent in the third quarter, investing nearly $2.9 billion, according to the filings. Soros bought a $20 million stake in Advanced Micro Devices (AMD) and an $11 million position in Chipotle Mexican Grill, which recently spun off from parent company McDonalds.
The fund also added to its position in Cisco Systems, bringing the investment to $30 million worth of shares from $2.4 million worth in the second quarter, a 1,150 percent increase in the stake.
Soros also decided that some energy companies are a bargain right now, while others are not. The Soros fund invested $42 million in Occidental Petroleum and $31 million in Valero Energy. However, the fund sold $15 million worth of shares in both Massey Energy Corp. and Pioneer Natural Resources.
Soros seemingly has mixed feelings about health-care companies too. His fund picked up $12 million worth of shares in health benefits company WellPoint, and sold $22 million worth of the iShares Nasdaq Biotech Index.
Soros also sold his entire $2.5 million stake in Yahoo, in favor of buying a $2 million stake in rival Google.
The hedge fund also invested $18 million in McData Corp’s convertible debt.
On October 23rd, I highlighted Rayoneir for its timberland assets. Since then the stock has barely moved & is still attractive. Here's why:
Rayonier owns 1.6 million acres of timberland in the southeastern US. University of Florida’s Food and Resource Economics Department, which issues the annual land-value survey, Timberland in Northeast Florida is worth $3,864 per acre. RYN also owns about 400K acres in Pacific Northwest, which at $2K an acre would be worth $800 million.
Right now, RYN has a market cap of $3.1bn, whereas I've calculated liquidation value of it's 1.6 mil acres at 3K/acre= $4.8 billon. Let's timber will fall in price so- 1.6mil acres at $2500/acre= $4billion. That's ignoring all it's other businesses and land in Australia and New Zealand. The reason I believe the Street is valuing the stock like that:
1) RYN has no earnings leverage to commodity paper prices, hence if paper prices were to rally, Rayonier could underperform its paper-heavy peers.
2) The Street is valuing Rayonier at roughly $2K per US acre, assuming its international operations in Australia & New Zealand, real estate, and paper mills are worthless.
3) As of late, housing starts are falling, which positively correlate with lumber futures/prices. Similarly, Lumber & Timber have a positive correlation. Hence, if housing market dwindles so does lumber & timberland. Hence the cheaper valuation.
4) RYN's exposure to Florida & portfolio of properties close to the beach in the southeastern (hurricane fears, which now seem to be subdued).
5) On Oct. 25th, management's outlook was mediocre (at least according to me). RYN expects 4th Q results to be less than the 3rd Q due to a drop in real estate sales.
I recommend getting into TOL back when it reported in August (24 then 28 now) because in my opinion the time to rotate back into housing and timber REITS/stocks is before the next Fed cut.
Yesterday HD rose even after it lowered guidance and missed estimates by 2 cents, because the street believed the next Fed move will be to cut rates.
In closing, I believe timber is a great investment. Why? From 1972-2001, an investor in timber saw average annual returns of over 14.5%. In other words, if you had invested $10,000 in timber in 1972, you'd be sitting on over half a million dollars right now .
And the best stock to make it with is RYN. Why? Due to the stable business, long-term outperformance of timber, attractive properties, almost 5% dividend yield & most importantly- The valuation. RYN trades at a 20% EV/EBITDA discount to PCL & as I mentioned in the last post, I believe it's (timber) land is also undervalued.
Cramer Says The Canadian Trusts Are Oversold, Buy the Canadian Oil Trusts
Cramer on MAD MONEY said you can now BUY the Canadian oil trusts after they took a huge beating from the Canadian tax changes.
Canetic Resource Trust (CNE) with a 19% yield; Enterra Energy Trust(ENT) with a 20% yield.
The Canadians allowed all TRUST shares to pass on a dividend TAX FREE, but the breaking of a campaign promise not to tax these trust as corporations was made. In 4 years there will be 35% of the dividends shaved off for Canadian taxes. He said the trusts fell 10% to 30% immediately on the news, which you know if you follow them.
He said the bounce started today and it will continue, but you are also getting a call option essentially free that the new Candian legislation will be stopped or changed.
He has 3 more that fit the bill. He thinks that these are huge dividend names Pengrowth (PGH), Baytex Energy (BTE), and Precision Drilling (PDS). They are all bouncing on big volume and these are all buys.
Cramer Says To Hell with Microsoft's Zune, BUY APPLE (AAPL)!!!!
On tonight's MAD MONEY segment on CNBC, Cramer went over a stock where it was hit because of competition. He said Microsoft (MSFT) just took aim at Apple (AAPL) with Zune's launch against iPod.
Cramer said "the Microsoft launch is officially being pronounced a dud!"...... That is not "dude". He thinks AAPl is a fantastic must own stock and the Zune he even noted as the "Edsel," an old Ford failed car launch that was a dud. He thinks the Zune colors stink and the Zune music store is also a dud. He also said that the fact that it is made by Microsoft, and kids and many others hate them.
He said the Zune is not Vista compatible. It is a rejiggered Toshiba and if they want to take on AAPL they should do a better design. Zune's rankings are also lower than expected. At Amazon.com this was only #12 yesterday on electronics and #7 today. If it was great on launch it would be #1.
Cramer said that AAPl has been impervious to this launch. HE said they still have a tiny market share, but they have 50% of market share with upper-end college students. He thinks their retail initiative is great and they are even testing Mac sales at Best Buy.
After Cramer said this AAPL traded up after-hours an additional 0.8% to $84.75, although it closed down 1.1% at $84.05 today. Cramer said he thinks AAPL is a $100.00 stock "By the end of the year."
Retailer Zumiez announced earnings that looked good on paper. Revenue for the period ending October 28 rose 43% to $82 million. Same store sales were up over 10%, but that slowed a bit from over 13% for the first nine months.
Net income for the three month period was $6.8 million. That was up from $5.3 million in the same quarter a year ago. Not much movement there.
Guidance was lackluster. "The company stated that it is maintaining guidance for fiscal 2006 to $0.66 to $0.67 in diluted earnings per share." Not much of an endorsement for Q4 action.
The stock was beaten to within an inch of its life on the news. It fell 13% almost immediately and was down to $27.30. The company's 52-week high/low is $38.85/$18.06.
There should be a lot of unhappy shareholders come this morning.
Cramer Says The Canadian Trusts Are Oversold, Buy the Canadian Oil Trusts
Cramer on MAD MONEY said you can now BUY the Canadian oil trusts after they took a huge beating from the Canadian tax changes.
Canetic Resource Trust (CNE) with a 19% yield; Enterra Energy Trust(ENT) with a 20% yield.
The Canadians allowed all TRUST shares to pass on a dividend TAX FREE, but the breaking of a campaign promise not to tax these trust as corporations was made. In 4 years there will be 35% of the dividends shaved off for Canadian taxes. He said the trusts fell 10% to 30% immediately on the news, which you know if you follow them.
He said the bounce started today and it will continue, but you are also getting a call option essentially free that the new Candian legislation will be stopped or changed.
He has 3 more that fit the bill. He thinks that these are huge dividend names Pengrowth (PGH), Baytex Energy (BTE), and Precision Drilling (PDS). They are all bouncing on big volume and these are all buys.
Cramer Says To Hell with Microsoft's Zune, BUY APPLE (AAPL)!!!!
Stock Ticker: AAPL
On tonight's MAD MONEY segment on CNBC, Cramer went over a stock where it was hit because of competition. He said Microsoft (MSFT) just took aim at Apple (AAPL) with Zune's launch against iPod.
Cramer said "the Microsoft launch is officially being pronounced a dud!"...... That is not "dude". He thinks AAPl is a fantastic must own stock and the Zune he even noted as the "Edsel," an old Ford failed car launch that was a dud. He thinks the Zune colors stink and the Zune music store is also a dud. He also said that the fact that it is made by Microsoft, and kids and many others hate them.
He said the Zune is not Vista compatible. It is a rejiggered Toshiba and if they want to take on AAPL they should do a better design. Zune's rankings are also lower than expected. At Amazon.com this was only #12 yesterday on electronics and #7 today. If it was great on launch it would be #1.
Cramer said that AAPl has been impervious to this launch. HE said they still have a tiny market share, but they have 50% of market share with upper-end college students. He thinks their retail initiative is great and they are even testing Mac sales at Best Buy.
After Cramer said this AAPL traded up after-hours an additional 0.8% to $84.75, although it closed down 1.1% at $84.05 today. Cramer said he thinks AAPL is a $100.00 stock "By the end of the year."
DJIA 12,251.71; Up 33.70 (0.28%) NASDAQ 2,442.75; Up 12.09 (0.50%) S&P500 1,396.57; Up 3.35 (0.24%) 10YR-Bond 4.615%; Up 0.047 NYSE Volume 2,857,269,000 NASD Volume 2,074,955,000
US Airways (LCC) rose some 16.75% to $59.46 after it made an offer to acquire Delta Airlines for some $8 Billion in stock and debt. Other airlines traded up in response to a consolidating industry: UAUA traded up 9% to $39.99, CAL traded up 12.6% to $43.21, AAI traded up 16% to $12.82, and JBLU traded up 7.4% to $15.13.
Emergent BioSolutions (EBS) was another dismal IPO that traded as a broken deal. It priced at $12.50, under the range and closed down even lower at $11.70.
Comverse Tech (CMVT) gave up a sharp 14% to $17.69 after the company disclosed accounting irregularities and problems on revenue recognition back to 2002, and that is after its ongoing options SNAFU.
CDC Corp (CHINA) traded up 10% to $7.80 after it outperformed earnings estimates.
Embrex (EMBX) traded up39% to $16.64 after Pfizer’s animal health unit acquired the company for $17 per share.
Trimeris (TRMS) rose 20% to $12.03 after the company realigned its focus on its HIV drug Fuzeon.
e-Future Information (EFUT) finally fell 31% to $29.89 after several days or parabolic gains after its recent thin volume IPO.
Tripos (TRPS) was the largest percentage loser by falling 60% to $0.62 after posting a loss and selling its discovery research unit.
SunTrust Banks (STI) rose 1.3% to $80.26 after the company announced a planned succession to its CEO, partly on thought that it could be acquired.
Grainger (GWW) rose 3.5% to $73.57 after it raised the guidance range to where the mid-point was above consensus estimates for fiscal 2007.
Prudential (PRU) rose 1.8% to $81.00 the day after it allocated $3 Billion to share buybacks.
Corel (CREL) fell 0.9% to $12.84 after Entrust (ENTU) filed a copyright infringement suit against the company.
StemCells (STEM) rose 5% to $3.34 after it was announced that the company performed its first neural stem cell transplant.
Vanda Pharma (VNDA) rose a sharp 52% to $14.90 after it posted positive insomnia treatment results for jet setters and those with infrequent sleep issues.
Sify Ltd. (SIFY) fell 2.2% to $9.47 after its CFO was leaving to pursue other interests.
Retailer Zumiez announced earnings that looked good on paper. Revenue for the period ending October 28 rose 43% to $82 million. Same store sales were up over 10%, but that slowed a bit from over 13% for the first nine months.
Net income for the three month period was $6.8 million. That was up from $5.3 million in the same quarter a year ago. Not much movement there.
Guidance was lackluster. "The company stated that it is maintaining guidance for fiscal 2006 to $0.66 to $0.67 in diluted earnings per share." Not much of an endorsement for Q4 action.
The stock was beaten to within an inch of its life on the news. It fell 13% almost immediately and was down to $27.30. The company's 52-week high/low is $38.85/$18.06.
There should be a lot of unhappy shareholders come the morning.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
On today's STOP TRADING segment on CNBC, Jim Cramer discussed how to play the potential Delta/USAir merger and the Blockbuster deals.
Jim Cramer said on NYSE (NYX) that the Deutsche Boerse was running scared. Cramer said the NYSE will be immediately accretive. He still thinks it is going to $250.00 down the road. He also thinks a deal with Taiwan or Tokyo will add huge to it.
Cramer also said NYMEX (NMX) will open at a huge premium.
He also noted the world gold demand and said that global industrial demand was the only growth area. He also said that foreign emerging banks have been demanding gold. He still likes Yamana Gold (AUY) because "they have gold out the ying yang!"
Cramer said he would buy UAL (UAUA) for any airline deal as it is the cheapest stock in the airline group as a whole.
On Blockbuster (BBI), Cramer said he hasn't cared about BBI so much. But after the Weistein exclusive deal and after they have really tried to do more things he thinks BBI shares could hit $6.00.
Value Act Capital Lowers Stake in Williams Scotsman (WLSC)
From 13D Tracker
In an amended 13D filing on Williams Scotsman International, Inc (NASDAQ: WLSC), Value Act Capital disclosed a 4.9% stake (2.1 million shares) in the company. This is down from the 2.52 million share stake the firm disclosed in an August 13D filing.
Spirent Communications (SPM) Rejects Large Shareholder Proposal for Board Representation
From 13D Tracker
Spirent Communications Plc (NYSE: SPM) said it considered and rejected a proposal from Sherborne Investors GP, LLC to remove the Company Chairman, the Chairman of the Audit Committee and the Chairman of the Remuneration Committee and to replace them with four Sherborne nominees.
The company said a Spirent Board proposed by Sherborne would comprise four Sherborne nominees (led by Mr Bramson of Sherborne who would become Chairman), one Lexa BV nominee, two independent non-executive directors and two executive directors.
The company said they offered Sherborne two seats on the Spirent Board, one as Deputy Chairman and one as Chairman of the Audit Committee, but this offer was rejected.
Sherborne has previously notified Spirent that it holds 130,250,000 shares in the Company, representing 14.68% of the issued share capital and Lexa BV has previously notified Spirent that it held 120,000,000 shares in the Company, representing 13.52% of the issued share capital.
Red Hat Gets A Break, Finally (RHAT)(NOK)(MSFT)(NOVL)
After being pounded in the market when its Linux solution was left out of Microsoft's alliance with alternative Linux shop Novell, Red Hat has finally gotten a break. Nokia has chosen Red Hat's Linux software system for it network server platforms.
While Red Hat has more market share in the Linus OS business than Novell, the deal, with its huge marketing support, boosted a flagging Novell.
Red Hat's stock has fallen from $32 in May to its current price of under $17. But, the stock may have run too far, too fast before that. It stood at under $11 in May 2005, so it had tripled in a year.
Wall St. should not forget that Red Hat is nicely profitable, and growing. In the last reported quarter ending August 31, the company did just shy of $100 million, and had an operating profit of over $9 million. Revenue had gone up each of the three immediate quarters.
Novell's deal with Microsoft may put it too close to the huge software company that many enterprise customers do not trust. Microsoft has made "land grabs" in the past, and companies like Nokia may elect to use Red Hat over the rival "Novell brought to you by Microsoft" Linux solution.
For Red Hat, not all the news is bad.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Now we get a similar assessment from CNNMoney: Moreover, since consumer purchases fuel two-thirds of the economy, these two months provide a vital temperature-taking of the overall health of the nation’s economy.Any significant slowdown in consumer spending immediately raises concerns that the economy as a whole will likely follow.
So how do things look so far? Despite the retail picture being a little muddy this year, analysts for the most part seem to agree that consumers are not yet shying away from shopping. They’re just becoming more cautious and more picky about where they shop.
Betting against the consumer is always a long shot. Sometimes they come in, but usually they don’t. Given the housing weakness, this may be the year for it. However, it’s not something we’ll put a lot of money on.
The author may hold a position in the securities discussed. The author's current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion's Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion's Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options.
We have a dual situation in Rambus (RMBS) today. The company is presenting at the UBS Global Communications and Technology Conference at 11:30 a.m. Eastern Time this morning and it has Federal Trade Commission oral hearings today at 2:00 PM EST.
This UBS Global Communications and Technology Conference event will be available through a webcast and can be accessed at Rambus' Investor Relations web site at http://investor.rambus.com/.
In another event, the Federal Trade Commission is meeting to consider oral arguments in the Rambus case. This meeting is set to adjourn to a closed session after the open session. The time is for 2;15 PM EST today and will be held at the FTC building at 600 Pennsylvania Ave. in Washington, D.C. The matters to be considered are two-fold in that oen is public and one is private. Portion Open to the Public: (1) Oral Argument in Rambus Incorporated, Docket 9302. Portion Closed to the Public: (2) Executive Session to follow Oral Argument in Rambus Incorporated, Docket 9302.
Please keep in mind that these hearings and public sections can change without notice, so there is always a shot that nothing will be mentioned at all on newswires today.
SYNOPSIS
While certain court cases have gone in Rambus' favor, the FTC is the body that has ruled against Rambus over it having created a monopoly by deceiving a standards-setting committee years ago. If the FTC stays on the anti-Rambus stance, then it could potentially create an environment that Rambus may have to pay back some of the back-royalties it collected and it could thwart many such royalty payments in the future.
Any adverse stance if you take it three steps further could be deemed by the street as a threat to the Rambus business model. Since Rambus does NOT manufacture chips and sell them on their own and since they are 100% reliant on negotiated royalties for use of their chip design, this is essentially just a royalty company that collects fees for using their designs. It would also give any defendant or plaintiff on the other side of Rambus a real leg to stand in future court cases.
While we have laid out the potential worst case scenario, it should be taken not as a prediction. In reality these cases tend to create a cap or a more stable royalty payment scenario rather than an outright elimination. With certain agreements in place it is now cheaper for certain patent and design licensees to just pay than it is to go in and risk punitive damages by refusing to abide by agreements and going to court to overturn an already-signed contract.
Since traders tend to shoot first and ask question later, if the bother, you could see some sudden moves in either direction today and not know why the stock moved. That is just another day in the market. As a reminder, RMBS stock options expire Friday (11/17/06) with the rest of the stock option expirations in US-traded public stocks. The company also already noted on Monday that it does not expect to file its quarterly results on time as it investigates stock options granting.
Embraer (ERJ) reported a sales and profit decline due to production problems with the ramp up of its 190 and 195 aircraft. The issue caused deliveries to fall to 30 aircraft from 41 over the same period last year. Embraer had warned about the problem, cutting its delivery forecast for this year to 135 planes from 145. But it raised its 2007 delivery estimate to at least 160 from 150.
Because of the fact that it appears to be timing-related (and of much lower magnitude than the issues at Airbus (EADS) investors appear inclined to shrug off the problems. Over the long run, we think Embraer is sitting in the sweet spot between the large planes nobody will want to fly on and the smaller turboprop planes nobody wants to fly on.
We think it is only a matter of time before some carrier decides to create an uber-Southwest (LUV) and launch non-stop regional jet service between large markets and middle tier markets that currently require a connection on the hub-and-spoke model airlines. That could really result in a new order boost.
The author may hold a position in the securities discussed. The author's current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion's Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion's Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options.
Looking at the e-Future Information Technology (EFUT) Exponential Gains & Trading Volume Spike
Stock Ticker: EFUT
The explosion in trading volume in Chinese micro-cap stock E-Future Information Technology (EFUT) has been mind-boggling. This was one of the stealth IPO's of only 1.1335 million shares that priced at $6.00. Here are the most recent closing prices with trading volume:
e-Future is the first Chinese software company listed in NASDAQ CAPITAL MARKET, and also the first software company in the front supply chain market. The underwriter was also an unknown firm called Anderson & Strudwick, Inc.
The company just made a press release yesterday before the open that they knew of no reason for the exponential performance. It said it has actually issued 2.6+ million ordinary shares to date.
Since October 30, 2006, the share price and trading volume of e-Future's ordinary shares has increased dramatically. On several trading days, e-Future's trading volume has been a multiple of its total outstanding ordinary shares. Yesterday's summary: e-Future is unaware of any business information underlying the increase in e-Future's per share price and trading volume.
Being a logistical supply chain software company in China obviously has its perks, but these strange performing IPO's can be a bit scary after many companies start showing their results. We aren't saying this is a sham, but these situations more often than not end up correcting themselves in time. This seems to be a classic thin volume explosion that turns into a mega-volume trading stock that is touted by many chat rooms and the day traders play the volume on the momentum alone.
EFUT shares are trading down 8% at $40.00 pre-market, but that is after closing up over $14.00 higher than the $29.49 close on Monday.
Microsoft has decided to set up free wireless internet in Portland. For everyone. The whole city. Google has looked at a similar initiative in San Francisco.
Since Microsoft is providing its IPTV platform to a number of telecoms like AT&T and Verizon, the move could eventually put it at odds with some of its largest customers.
Microsoft's free wireless broadband will be supported by advertising that will run at the top of the browser page. The big software company understands the process well since online advertising is already a large source of revenue for its MSN division.
But, free wireless broadband does not exactly help cable companies and telecoms who are selling broadband access over their networks. AT&T, Verizon, Comcast, and Time Warner Cable bring in a large portion of their revenue from broadband-to-the-home. It is always hard to compete with "free" expecially if the product is good.
While it is too early to tell whether Microsoft can turn a profit with ad supports wireless broadband, if it works in Portland traditional broadband suppliers could find that they have a new, very well funded competitor.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
(AA) ALCOA names new CFO effective Jan. 1, 2007. (ABG) Ashbury Auto filed to sell 3+ million shares for holders. (ADI) Analog Devices $0.39 EPS vs $0.40e. (ALXN) Alexion filed to sell 2.5 million shares of common stock. (ANF) Abercrombe & Fitch $1.11 EPS vs $1.11e. (ARM) Arvin Motor $0.40 EPS vs $0.40e. (BORL) Borland Software -$0.16 EPS and R$82.4M vs -$0.08/$77M(e). (CDCY) Compudyne $0.09 EPS vs $0.02e; unsure if comparable (CEP) Constellation Energy IPO priced 4.5M shares at $21.00, top of the $19 to $21 range. (CHINA) CDC $0.09 EPS vs $0.06e. (CMVT) Comverse found revenue recognition errors. (COBT) Cobalt settled with GlaxoSmithkline. (COCO) Corinthian Colleges $0.02 EPs vs $0.03e. (CRFT) Craftmade announced it will have charges as Lowe's discontinues orders. (CUZ) Cousins Properties announced a special $3.40 dividend. (DELL) Dell is acquiring private ACS in UK for consulting business for undisclosed terms, although it said it would be immaterial to financial results. (DIGE) Digene said its CEO is retiring. (DISK) Image Entertainment -$0.14 EPS vs -$0.07e; filed to sell shares. (EBS) Emergent Biosolutions IPO priced 5M shares at $12.50, under the $14 to $16 range. (GOOG) Google may be losing the president of its China operations according to Pacific Epoch reports. (HAL) Halliburton noted positively as the way to play the KBR IPO according to Cramer, but UK authorities are demanding a withdrawal of the unit IPO. (HH) Hooper Homes -$0.06 EPS vs $0.02e. (HTZ) Hertz's upcoming IPO was panned by Cramer on MAD MONEY. (LCC) US Airways is in proposed merger with Delta and will offer $8 Billion for stock and debt. (LZB) La-Z-Boy $0.06 EPS vs $0.02e. (MED) Medifast $0.11 EPS vs $0.09e. (NMX) NYMEX upcoming IPo was noted very favorably by Cramer on MAD MONEY. (NWS) News Corp is close to buying backing Liberty's 19% stake. (PBY) Pep Boys -$0.14 EPS vs -$0.05e. (PRU) Prudential approved $3 Billion for share buybacks. (SGR) Shaw Group COO resigned to take other position elsewhere. (SIFY) Sify CFO is leaving to take advantage of other opportunities. (SIL) Apex Silver Mines files to sell $200M in mixed securities. (SINT) SI Int'l filed to sell $150 million in mixed securities. (SPWR) SunPower is acquiring private PowerLight. (STEM) Stem Cells trading up 8% after performing first human neural stem cell transplant. (STI) SunTrust president/COO will replace current CEO effective January 1, 2007. (SVM) ServiceMaster may attract private equity buyers according to WSJ. (TAYD) Taylor Devices gapping up 14% pre-market on tsunami warning in Northern Japan. (TLB) Talbots $0.15 EPS vs $0.15e. (TRMS) Trimeris shares rose more than 15% after switching to FUZEON focus in Roche pact. (TWB) Tween Brands $0.58 EPS vs $0.57e. (TWX) Time Warner's Parsons said he is keeping AOL according to Bloomberg interview. (TYC) Tyco $0.51 EPS vs $0.49e, but that is backing out $0.12 gain; TYC will take $600 million in charges for restructuring to save $50M in 2007 and $200M in 2008. (VAS) Viasys gets FDA marketing approval for Sonara. (VLCF) Knightsbridge tankers $0.85 EPS vs $0.82e. (VNDA) Vanda Pharmaceuticals releases positive insomnia drug results and was interviewed on CNBC. (VRGY) Verigy $0.56 EPS vs $0.48e. (WNS) WNS $0.15 EPS vs $0.14e.
AMZN started as Buy at Soleil. ASH cut to Neutral at Credit Suisse. ATRS raised to Buy at Jefferies. BBBY cut to Underweight at JPMorgan. BORL cut to Underweight at JPMorgan. CAKE raised to Outperform at FBR. CMVT cut to Sell at Goldman Sachs. DAC started as Buy at Jefferies. DRIV started as Outperform at thomas Weisel. EIX raised to Buy at Goldman Sachs. FL raised to Buy at Merrill Lynch. GOOG started (renewed) coverage with Buy and $600 target. HD raised to Overweight at JPMorgan. MEL raised to Buy at B of A. MO raised to Buy at Goldman Sachs. QCOM reitr Buy at Jefferies. RLH cut to Mkt Perform at FBR. SKS raised to Buy at merrill Lynch. SPLS started as Hold at Soleil. SYK added to Focus List at Merrill Lynch. TELK cut to Underweight at Lehman. TXU cut to Neutral at Goldman Sachs. VNO added to Goldman Sachs' conviction buy list. VOD raised to Buy at Deutsche Bank.
The Stock Exchanges Vs. The Internet: Free Quotes For All
Stocks: (NYX)(NDAQ)(TWX)(YHOO)
The large internet sites that deliver financial news object to the fees that Nasdaq and the New York Stock Exchange plan to charge for stock quotes. It would appear, at first glance, that the fight is purely economic. The internet sites don't want to pay much for quotes because it adds to the content cost structure and makes it more expensive to offer services to draw visitors. The exchanges have a more acute problem. Data fees make up so much income for them that a lost of the fees might wipe out much of their operating profits. A look at the 10-Q for the NYSE Group shows revenue of $603 million for the September quarter. Data fees were over $57 million of that. The company's operating profit was almost $68 million. Those data fees are important.
The finanacial internet sites have some many visitors that it could cost them millions of dollars to offer real-time quotes to their users, and now the exchanges want to up the cost of that data.
But, the fights goes beyond revenue and profit.
The banks that pay huge transaction fees to the exchanges and the companies that also shell out huge sums for their listings may not be entirely happy with a system that makes quotes more expensive and, perhaps, less available to investors due to cost. Do Apple and GM really want the barrier to getting quotes on their stocks raised? Or, would they rather have as many investors as possible with access to the data? Not a difficult question to answer.
One can see listed companies putting pressure on exchanges to distribute live quotes for a little as possible, if not for free.
Another difficult matter is the question of monopoly. When the exchanges were non-profits is was more palatable for them to charge for quotes that were not available elsewhere. But, they are not "for profit" institutions and they have bought up all of the electronic trading platforms that could offer quotes outside the exchange system. There is now, in essence, only one game in town. In general, the government has not supported "for profit" monopolies, at least not for any extended period of time.
There is another important set of players in this game: the investment banks who pay transaction fees to the exchanges. In Europe, seven investment banks including Citigroup, Morgan Stanley, Goldman Sachs, and UBS, have said they are considering setting up their own trading platform to take volume away from the London Stock Exchange. Why? The banks believe that the fees that they pay to the exhange are too high. It may be more efficient to simply set up a competing system.
The internet war with the stock exchanges is likely to become much more complex. If listed companies and investment banks begin to assert their own interests, the exchanges could have more problems than those created by petitions from Yahoo! and AOL.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Markets in Europe were up modestly at 5.50 AM New York time.
The FTSE was up .4% to 6,214. Barclays was up .9% to 707. BP was flat at 593. BT was up 1.3% to 281. GlaxoSmithKline was up .7% to 1376. Prudential was up 1.2% to 658. Reuters was up .5% to 462.25. Unilever was up .3% to 1399. Vodafone was up 2.8% to 139.25.
The DAXX was up .5% to 6,420. Bayer was up .1% to 40.22. DaimlerChrysler was up 1.2% to 47.07. DeutscheBank was up .5% to 98.82. Deutsche Telekom was 1.8% to 13.81. Siemens was up .3% t0 74.9.
The CAC 40 was up .4% to 5,497. Alcatel was up 1.2% to 10.36. AXA was up .5% to 30.23. France Telecom was up 1.1% to 20.13. ST Micro was up 1.9% to 14.06. Vivendi was up .4% to 29.66.
Microsoft wants its customers and investors to know that the company is no longer a three-legged beast. It has added a fourth appendage, internet delivered software. Perhaps the only people on Wall St. who did not know this were those who have been away for a year.
The Microsoft push is clearly a reaction to Google's long-lived program to deliver services like spreadsheets, word processing and calendars over the internet with the software stored on servers and not the user's PC. Microsoft's new business will operate side-by-side with its desktop, server software and entertainment units.
The Microsoft program has one significant difference with Google's plans. Microsoft internet based software, dubbed Microsoft Live by the company, will work with software already installed on PCs.
Microsoft was somewhat circumspect about why it was taking the dual internet-delivered/desktop installed approach. Given Google's plan to have its products be "internet only" the hybrid approach of the world's largest software maker might be out of step.
The answer lies with the fact that Microsoft may think the Google strategy is the right one, the one that will eventually win, but MSFT cannot destroy it core business of Windows-on-the-PC overnight. With more than half of the company's revenue from that source, financial suicide is not an option.
Because Microsft is tethered so strongly to the past, and most move into internet based software services in a measured way, it may lose a great deal to company's like Google which have no legacy to protect.
That's bad news for Microsoft.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
According to Reuters, Bershire Hathaway added shares in Nike and Lowe's, but may have reduced positions in Anheuser Busch and Target.
The Wall Street Journal reports that Boeing may win up to $10 billion in new plane orders in the coming weeks as airline replace older planes.
Reuters writes that News Corporation believes that its operating profits will be up in double digits although advertising in it major markets will be flat. Fox, satellite holdings, and new media should drive the growth, the company said.
Reuters reports that Microsoft believes that web based software will be the most important development affecting the company over the next decade. However, MSFT believes that server delivered software will operate with software already loaded on the PC. This contrast with Google's model of delivering software strictly over the web.
The Wall Street Journal reports that Citigroup now seems to be the lead bidder for a $3.1 billion investment in China's Guangdong Development Bank.
The WSJ also reports that seven major investment banks in Europe are working on a stock trading system that could take trading from the London Stock Exchange. The banks include Goldman Sachs, Merrill, and Citigroup.
The Wall Street Journal writes that bankrupt car parts company Collins & Aikman will sell itself off to satify creditors.
The Wall Street Journal also writes that Home Depot had a 3.1% earnings drop and cut forecasts due to a soft housing market.
The New York Times reports that the president of the NBCUniversal television group is in talks to join Time Warner's AOL unit. Randy Falco might take over as CEO at AOL.
Markets in Asia were mixed with the Nikkei off and the Hang Seng up sharply.
The Nikkei fell .3% to 16,243. Bridgestone was down 1.2% to 2500. Canon was up .5% to 6240. Daiwa Securities was up 1.5% to 1296. Fuji Film was up 2.7% to 4550. Hitachi was up .3% to 708. Honda was up .2% to 4250. Isuzu was up 3.2% to 512. NEC was up 1% to 500. NTT was down 1.2% to 563000. Sharp was up .5% to 2070. Softbank was down 1.1% to 2330. Sony was down .4% to 4710. Toshiba was up .4% to 738. Toyota was up 1.3% to 3010. Yahoo Japan was down 1.7% to 42350.
The Hang Seng rose 1.1% to 19,093 to a record close. Cathay Pacific rose 3.9% to 18.24. China Mobile rose 2.6% to 68.35. China Unicom rose 1% to 8.34. HSBC fell .3% to 147.7. PCCW fell .2% to 5.06.
The CEOs of the Big Three went to the the CEO of the United States. They wanted to discuss their problems. The yen. Labor costs. Medical costs.
They left the White House saying that they did not ask the President for a bail-out. It is a bit like saying that you won't join the world's most exclusive golf club, Augusta National, home of The Masters. Of course you won't join. You haven't been asked.
The CEO's of The Big Three won't get help from the US government. It isn't offering any.
It is clear to all who want to look that the car industry is not critical to the economic health of the US. It was once, but the industry is now too small, employees too few people, and is too troubled. GM has recently cut 70,000 jobs and this is on top of cuts at it US competitors and a number of auto parts manufacturers,
In addition the industry exports little. And, its contribution to the GDP as gone the way of big steel. The US employment grow in the auto industry comes from Japanese companies building plants on America soil.
If the US government want this country to have a competitive auto industry again, it will have to give Toyota an incentive to move its headquarters from Tokyo to Detroit. Then, everyone in Michigan can learn Japanese.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Is McDonald's Smarter Than The Competition? (MCD)(BKC)(WEN)
McDonald's same store sales in October were not just good. They were much better than those of their direct competitors. But why? With more stories and higher market penetration, in theory smaller fast food retailers should be able to grow faster.
But, the theory does not work. McDonald's same store sales rose 5.5%. At Wendy's, the figure was a pitiful 1.2%. At Burger King, the figure was 2.6%. McDonald's also generate substantially more revenue per store than its rivals.
Wall St. often wants to look for complex reasons as to why one company does better than the competition, espcially in a large market like fast food. How can one company, with products similar to its rivals, do so much better?
Part of the reason is that McDonald's is not focusing on increasing its number of stores, especially in the US. It has worked on increasing its revenue yield per store. But, that explanation in-and-of-itself is inadequate.
It would appear that McDonald's offers a menu that is, very simply, more attractive than what Burger King and Wendy's have. The food is just as unhealthy any in the world. But, people like it more. McDonald's is like Toyota. It just has a "line up" that buyers like better.
If investors are looking for something more complex to give them comfort about the growing McDonald's fast food lead they won't find it.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Boston Scientific is acting like its business is OK again after a string of bad news. The company is boasting that sales will rise 11% to 21% in 2007. For investors to believe this, they need to buy into the fact that most of the integration risks of the company's $21 billion purchase of medical devices company Guidant is behing it.
Boston Scientific is also asking Wall St. to believe that sales of its drug-coated stents ,which keep clogged arteries open, will improve. It is forecasting that stent sales could be as high as $2.7 billion next year. But, a number of studies show that stents may actually increase clotting and cause heart attacks. No wonder the company's stock trades near its 52-week low with shares changing hands at about below $16, down from nearly $28 earlier in the period.
Now, the news gets worse. A study published in the New England Journal of Medicine says that, in many cases, stent implants may not help patients at all. Treatment with drugs may well be just as effective in many patients, making stents unnecessay. The finding are particular harmful to the future of Boston Scientifc's devices if their is a health concern associated with stent implants.
Boston Scientifc obviously wants investors to think the worst is behind it and that 2007 will be a strong year. But, the evidence keeps contradicting that.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Who can stop the Cisco express? In the recent quarter, the company produced a sales increase of 25% year-over-year and EPS was up 30%. With its purchase of Scientific Atlanta, that company now has a footprint for data and video deliver that runs from the router all the way into the living room. The company's shares trade near $27. With the exception of a brief spike in 2004, the company's shares have not traded this high at any point in the last five years. Smaller competitors like Juniper and Nortel have fallen hopelessly behind Cisco in their range of products and their revenue.
Motorola does not seem to be paying attention. The company recently bought Netopia and is building its business in wireless modems and routers so that it can add IPTV capability to its products in the distribution of video, voice and data. Motorola has been strong in the cable service area since it bought cable set-top company General Instruments. Netopia gives it access to the DSL delivered television markets.
AG Edwards thinks that Sprint's stock has gone as far at it can, at least for now.
Could be. The bank cut the phone company from a "buy" to a "hold" with a price target of $21. Sprint trades about $1 shy of that. The reasoning behind the change of heart is that Sprint's stock has moved up on speculation that the company may be bought by Comcast and, since the likelihood of that is small, the stock has had its run.
Compared to Verizon and Cingular, Sprint is a bit of a dog. Its subscriber churn rate is too high and its added fewer new subscribers in the last quarter. It trades below its 52-week peak of nearly $27 while most telecom stocks are at multiyear highs.
The Edward's analysis misses the point. There are only three significant cell phone players in the US, and Spint is one of them. As Morningstar points out, the Nextel component of the company is largely made up of corporate customers who are more likely to spend extra money for upgraded services like wireless data plans.
The reasoning that Spint will go no higher is based on the premise that the Sprint integration with Nextel will continue to go badly and the yield that the company gets from its 50 million subscribers will not improve.
Targetting Spint's price at $21 is also a statement that Spint's new WiMax build-out to create a broadband phone network will not be successful. The technology is already a succes in places like Korea and is being tested in a number of countries around the world. Intel, Motorola, and Samsung are making a large investment in the tech and believe that they will benefit from supplying infrastructure and handset for WiMax systems aournd the world.
Sprint and its allies may not become the dominant cell phone provider in the US, but the company could make a very good living from being No. 2.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Yesterday morning HD reported disappointing 3Q results. The stock was up over 4% in a strong market which has me thinking that
1) Possible rumors about an M&A activity or...
2) The Street thinks its found a bottom (which I kind of doubt)
...but the most likely catalyst seems to be...
3) The Fed comments about the economy & wholesale inflation is easing, raising hopes that the Fed will cut interest rates in early 07.
HD reported revenues of $23.1 bn, vs Street estimates of $23.4 billion, driven by a faster than anticipated deceleration in housing, absence of hurricane activity, commodity pricing, and softness in discretionary projects.
HD's comps fell 5.1% and 4th Q comps are expected to be down in the mid-single digits, while EPS is expected to decline 12%-16% YoY, leading to 4%-5% EPS growth for 06.
CEO Nardelli expects the housing decline to affect HD in 4Q'06 and into 2007. HD’s 3Q gross margin decreased 92 bps YoY to 32.6% due to a mix shift towards the lower-margin.
"Housing-related issues came faster and deeper than we thought," CEO Robert Nardelli said during a conference call. "They will pressure throughout all of '07, and we think there is deeper to go." With 10 consecutive months of declining housing turnover, the housing market is beginning to significantly impact HD’s results.
Management noted that, relative to other players in the home improvement sector, HD may feel more pressure from its exposure to the housing market, given its large number of stores in bubble markets in the Northeast, California, and Florida.
Management now expects earnings of $2.83 to $2.86 per share on revenue of approximately $91.29 billion. HD's previous guidance was for earnings to be at the low-end of its earlier guidance range of $2.99 to $3.10 per share on revenue of $92.92 billion to $95.36 billion and the current consensus earnings estimate is $2.96 per share on revenue of $92.42 billion for the year ending January 31, 07.
Sales in Mexico were strong during the quarter, with double-digit sales growth. According to management, Canadian sales also showed strength. Management also stated that it expects $1 billion in sales from its catalog and Internet business in 06. The home services segment grew 11.3% to $1 billion due to strong growth in countertops, HVAC, and exterior patio projects.
From 03 through 06, HD has had a 3-year CAGR of about 12% in sales. This sales growth has been a function of modest growth in SSS, new store additions, and acquisitions in the Professional market. Home Depot's ROIC has increased steadily over the past 5 years, to 20% in 06.
While some analysts believe that the worst is now behind HD, I'm not convinced. Based on trends in the housing market, I believe HD's results will likely get worse before they begin to improve.
With a stagnating housing market, a tough competitor gaining market share and slowing growth issues related to store saturation in the US market, investors should expect Home Depot shares to come under pressure.
Given the economic condition investors should expect a further deteriorating housing market over the next few quarters or more, alongside HD's issues of store saturation and intense competition. That being said, at a multiple of 11 for 08 EPS estimate, the shares trade at a discount to Lowe's (LOW) and a significant discount to the S&P 500.
Activist investors Carl Ichan made the following changes in a 13F filing from his Icahn Management LP unit:
New stakes: Cyberonics Inc. (Nasdaq: CYBX) 607K shares, Hilton (NYSE: HLT) 4.06 million shares, WCI Communities Inc. (NYSE: WCI) 1.66 million shares.
No longer holding: BJ's Wholesale Club Inc. (NYSE: BJ), BKF Capital (OTC: BKFG), Cimarex Energy Co. (NYSE: XEC), Pioneer Natural Resources (NYSE: PXD), Ryland Group Inc. (NYSE: RYL), Transocean Inc. (NYSE: RIG).
Raised stakes: Time Waner (NYSE: TWX) from 49.6M shares to 55 million shares, Take Two (Nasdaq: TTWO) from 800K to 2.9 million shares.
Cramer said the IPO to avoid this week is Hertz (HTZ). He thinks this can burn you. This is where the sellers of the IPo make a lot of money, but the new buyers can be left holding the bag. He thinks it can end up being just like the Seally (ZZ) IPO and he won't touch it with a pole.
He said the first thing is to do no harm. He won't use the Vonage (VG) or the Burger King (BKC) deal, but he thinks it will be a disappointment. This was sold to a private equity group for $15 Billion and the new sale is 27% being sold. They have increased the debt and knocked down earnings. The $16 Billion of the IPO, but over $900 million of the IPO is funding a special dividend and another $400 million is essentially another dividend. The 3 firms also have 7 of 9 board seats and this is one that you need to avoid.
He thinks it won't go above $20.00 after the IPO any time soon and the downside is just too hard to calculate.
We already saw Cramer endorese the KBR (KBR) IPO and even that he said Halliburton (HAL) was a cheaper and safer way to go.
The huge IPO of the week that Cramer then reviewed was the NYMEX (NMX), the owner of the New York Mercantile Exchange. He said the price was boosted from $48-52 to $54-57 and bumped the shares from 6 million to 6.5 million shares, and it is heavily oversubscribed. Cramer said he thought the company deserves every bit of it. The conventional wisdom is that no one thinks it will go down. He said the sentiment is right. Cramer thinks you should buy a piece of it because this may the most quiet bull market in various sorts of exchanges. He even went over the NYSE (NYX) as still up $5.00 from last week and it can more than double. Cramer said he doesn't know of any reason why this NYMEX is different. He said the numbers speak for themselves because income rose 150% on a 71% revenue gain, but if it prices in the mid-range it will only have a 30-times earnings multiple. That's too low for Cramer. He thinks the opening will be higher and he thinks you have to do limit orders. If it opens up $25.00 north of that he would still be a buyer, but if it opens up $15.00 he would buy Twice as much and if it is up only $5.00 then he would think it is a true gift. He said never do market orders and don't buy in all at once.
Because NMX boosted the range today it also impacted InterContinental Exchange (ICE) with it closing up 9% to $96.55.
Cramer Discusses Upcoming IPO's: KBR from Halliburton
Last night on Cramer's MAD MONEY on CNBC, Cramer went over upcoming IPO's on what to look for and what to avoid. He also said he doesn't want to get caught short this market.
KBR (KBR) Cramer said he has been covering this but it is selling 17%, stock is being sold by Halliburton (HAL). KBR is an engineering and constructuring company that builds plants, but it has a permanent dark cloud of negativity and more so now with the Democrats in charge of Congress. Cramer said it is coming very cheap to market because it may get hammered by new Congress or may lose Iraqi business. He said that is just not the right case. Cramer noted it has a $15 Billion backlog and will be valued at roughly $4 Billion in market cap. He thinks it is at a 20% to other engineering and consulting firms. Cramer said even if bad press continues the numbers will speak for itself. It is oversubscriber. He noted the way to play it was to play pin action in Halliburton (HAL). This has the lowest multiple and could get a valuation expansion in its multiples.
He still will review NYMEX (NMX), and Hertz (HTZ) in the coming segments.
Cramer said the IPO to avoid this week is Hertz (HTZ). He thinks this can burn you. This is where the sellers of the IPo make a lot of money, but the new buyers can be left holding the bag. He thinks it can end up being just like the Seally (ZZ) IPO and he won't touch it with a pole.
He said the first thing is to do no harm. He won't use the Vonage (VG) or the Burger King (BKC) deal, but he thinks it will be a disappointment. This was sold to a private equity group for $15 Billion and the new sale is 27% being sold. They have increased the debt and knocked down earnings. The $16 Billion of the IPO, but over $900 million of the IPO is funding a special dividend and another $400 million is essentially another dividend. The 3 firms also have 7 of 9 board seats and this is one that you need to avoid.
He thinks it won't go above $20.00 after the IPO any time soon and the downside is just too hard to calculate.
We already saw Cramer endorese the KBR (KBR) IPO and even that he said Halliburton (HAL) was a cheaper and safer way to go.
The huge IPO of the week that Cramer then reviewed was the NYMEX (NMX), the owner of the New York Mercantile Exchange. He said the price was boosted from $48-52 to $54-57 and bumped the shares from 6 million to 6.5 million shares, and it is heavily oversubscribed. Cramer said he thought the company deserves every bit of it. The conventional wisdom is that no one thinks it will go down. He said the sentiment is right. Cramer thinks you should buy a piece of it because this may the most quiet bull market in various sorts of exchanges. He even went over the NYSE (NYX) as still up $5.00 from last week and it can more than double. Cramer said he doesn't know of any reason why this NYMEX is different. He said the numbers speak for themselves because income rose 150% on a 71% revenue gain, but if it prices in the mid-range it will only have a 30-times earnings multiple. That's too low for Cramer. He thinks the opening will be higher and he thinks you have to do limit orders. If it opens up $25.00 north of that he would still be a buyer, but if it opens up $15.00 he would buy Twice as much and if it is up only $5.00 then he would think it is a true gift. He said never do market orders and don't buy in all at once.
Because NMX boosted the range today it also impacted InterContinental Exchange (ICE) with it closing up 9% to $96.55.
Cramer Discusses Upcoming IPO's: KBR from Halliburton
Tonight on Cramer's MAD MONEY on CNBC, Cramer went over upcoming IPO's on what to look for and what to avoid. He also said he doesn't want to get caught short this market.
KBR (KBR) Cramer said he has been covering this but it is selling 17%, stock is being sold by Halliburton (HAL). KBR is an engineering and constructuring company that builds plants, but it has a permanent dark cloud of negativity and more so now with the Democrats in charge of Congress. Cramer said it is coming very cheap to market because it may get hammered by new Congress or may lose Iraqi business. He said that is just not the right case. Cramer noted it has a $15 Billion backlog and will be valued at roughly $4 Billion in market cap. He thinks it is at a 20% to other engineering and consulting firms. Cramer said even if bad press continues the numbers will speak for itself. It is oversubscriber. He noted the way to play it was to play pin action in Halliburton (HAL). This has the lowest multiple and could get a valuation expansion in its multiples.
He still will review NYMEX (NMX), and Hertz (HTZ) in the coming segments.
DJIA 12,216.97; Up 85.09 (0.70%) NASDAQ 2,430.18; Up 23.80 (0.99%) S&P500 1,393.14; Up 8.72 (0.63%) 10YR-Bond 4.568%; Down 0.037 NYSE Volume 2,931,884,000 NASD Volume 1,881,414,000
Wholesale Inflation measured by the October PPI fell 1.6% because of falling energy prices. Core inflation on an ex-food and energy basis fell 0.9% for October. October retail sales were down 0.2% for October. We were set for yet another day of hitting resistance and selling off, but then Fed Governor Fischer spoke several buy programs came into the market. Fischer said as long as the housing market weakness remains contained to housing there is not much the fed can or should do. Since the markets took this to mean the fed was out of the game, the DJIA and S&P managed to gain to new highs.
Both retail giants Target and Wal-Mart rose on earnings: Target (TGT) rose 2.2% to $59.07 after posting EPS at $0.59 vs $0.55e; Wal-Mart (WMT) rose 2.9% to $47.67 after it showed EPS at $0.62 vs. $0.60 estimates.
Home Depot (HD) had opened lower after missing EPS estimates ($0.73 vs $0.75e), but managed to rise 4% to $37.91 with the broad market later in the day.
Golf Galaxy (GGXY) rose to 17% to $18.44 after Dick's Sporting Goods (DKS) announced it was acquiring the company. DKS also beat earnings and its shares closed up
DR Horton (DHI) rose 9.4% to $24.48 after the homebuilder posted earnings at $0.88 EPS vs $0.70e.
BJ's Wholesale Club (BJ) rose 4% to $29.76 after it beat earnings with $0.32 EPS vs $0.26+ estimates.
Agilent (A) gave up much of its recent gains today by falling 5.75% to $32.99 after it missed earnings expectation at $0.46 EPS vs $0.49e.
Cyberonics (CYBX) rose 20% to $21.34 after raider Carl Icahn disclosed he had purchased shares in the emerging medical device maker.
Intel (INTC) rose over 4% to $21.88 after Caris gave a positive report on the sector.
Nice Systems (NICE) rose 6% to $32.58 after it was raised to Buy at B of A and after the NY Transit System awarded it a security pact.
Cheniere Energy (LNG) rose 3.4% to $26.01 after Lehman initiation of coverage to an Outperform.
Microsoft (MSFT) closed down $0.02 at $29.22 after it formed an Interop Alliance for more interoperability of Windows and other client systems.
The InterContinental Exchange (ICE) gained 9% to $96.63 today as the price terms were hiked for its competing NYMEX IPO by 10% for later in the week.
Omnivision (OVTI), a BAIT SHOP MEMBER since September, rallied almost 8% to $17.70 on word that it could be acquired today.
Pier 1 Imports (PIR), a BAIT SHOP "Watch List" stock, rose 20% to $7.62 after Reuters reported that Jakup Jacobsen may want to acquire the rest of the company after it already purchased operations in the UK.
Timberland (TBL), a BAIT SHOP "Watch List" stock, rose 7.6% to $33.36 after the WSJ reported that it could be taken private.
Netopia (NTPA) rose 22% to $6.83 after Motorola agreed to acquire the stock for $7.00 cash per share.
Stent makers managed to dodge a real bullet as a report claiming that stents did not help reduce the risk of a heart attack: J&J (JNJ) rose 15 to $66.57, Boston Scientific (BSX) rose 0.4% to $15.93, Abbott (ABT) rose 1.15% to $46.18 and stent polymer coating maker SurModics (SRDX) rose 0.45% to $32.00.....although Angiotech (ANPI) fell 2.2% to $8.61.
Which Group of Analysts Will Be Right About Earnings?
By Chad Brand of Peridot Capitalist
Glancing over earnings estimates for the duration of this year and 2007, I noticed a very interesting dichotomy. Bottom-up analysts are still quite bullish on corporate profits, forecasting year-over-year growth in each of the four calendar quarters during 2007. Top-down analysts, conversely, are predicting annual declines in earnings beginning in Q3.
Which group will be correct? It's simply too early to know. I would tend to side more with bottom-up analysts in general, merely because they are basing their forecasts on what actual company management teams are saying, as opposed to merely taking a broad macroeconomic view of the world.
That said, I am worried that earnings growth will be difficult to maintain. Over the last couple of years a majority of the gain in S&P 500 earnings have come from the energy and materials sectors. As we head into next year, contributions from these groups could be minimal, if not negative. Commodity prices seemed to have peaked for the short term, and although I do think we are in the middle of a secular bull market in the group, there is no reason to think we could not see a breather in the run during 2007.
If energy and other commodity stocks find it difficult to grow earnings, other groups would have to see accelerating profit growth to make up the difference and continue to boom in corporate earnings. I can't really see what areas would be up to the task.
What is the implication for stock prices going forward? Depending on what earnings number one uses for the S&P 500, we are currently trading between 15 times (operating) and 16.5 times (GAAP) 2007 earnings estimates. Market bulls suggest that P/E multiples should expand given the outlook for economic and earnings growth. However, if corporate profits begin to see year-over-year declines in the back half of 2007, such multiple expansion is unlikely.
With multiples staying flat or declining, and profits peaking, it would be hard to make the case that stock prices have a lot of room to run next year. Perhaps that is why the S&P 500 seems to be having trouble breaking past recent highs in the 1,390 area. As it stands right now, I don't see the S&P breaking meaningfully above 1,400 in the short term until we have increaased confidence that a more bullish scenario could play out.
Buybacks...Some Terrific Insight from Information Arbitrage
From Value Discipline
Gretchen Morgenson of the NY Times recently wrote an article on, "Why Buybacks Aren't Always Good News.” Buybacks, per se, will only create value if the stock is purchased at prices below its intrinsic value. Buybacks should be viewed much as any other capital expenditure, will this expenditure produce value in excess of each dollar spent? Likewise, a company must attend to its operating needs first...will the spending on share buybacks impede the company's ability to maintain its competitive position?Buybacks completed at too high a price reward the sellers of the stock rather than the loyal shareholders who are left ehind. Buybacks in some cases seem to be in place simply to help support the stock. In some cases, such as Yankee Candle, they are a prelude to mopping up loose stock and essentially wrapping up the show.
The simplest test of the effectiveness of share buybacks is to look at the fully diluted share count after a share buyback program has been implemented. Has the share count been reduced, or is the share buyback merely sopping up stock created from employee options?
Some really terrific insight into the dynamics of share buybacks was recently posted in Information Arbitrage. This articulate discussion of share buybacks addresses the corporate finance reasons for undertaking such purchases (essentially, buying stock below intrinsic value increase the intrinsic value of what remains) as well as how GAAP handles such purchases. Reduced share count does NOT always equate to higher E.P.S. if its earnings that float your boat.
Buybacks should always be examined for their motives and their effect on the ultimate capital structure of the firm. Significant buybacks such as the Dutch auctions that we have witnessed in CBRL may not necessarily create a great deal of value. If the end result is a leveraged mess that is incapable of competing effectively, the CFO has traded the warm blood of equity for the cold reality of debt.
Disclaimer: Neither I, my family or clients have a current position in CBRL.
Major eCom (ECMV) Holders Nussdorfs Propose Acquisition of Model Reorg, A Company They Control
From 13D Tracker
In an amended 13D filing on eCom Ventures, Inc. (Nasdaq: ECMV), large holder Glenn Nussdorf with his brother Stephen Nussdorf, who together beneficially owned 45.34% of the stock, disclosed a proposal for eCom to buy Model Reorg, Inc. a company they control. The transaction proposed by Model would have the following terms:
1. Model would be acquired by the Issuer and would become a wholly owned subsidiary of the Issuer.
2. The outstanding common stock of Model would be converted into 6,396,649 shares of common stock of the Issuer.
3. Following this conversion, Glenn and Stephen Nussdorf would own an aggregate of 80.90% of Issuer’s outstanding common stock (assuming the conversion of the Subordinated Note held by them, but not assuming the exercise of outstanding options). The projected percentage ownership set forth in the Proposal Letter assumes the exercise of the options, but not the conversion of the Subordinated Note.
4. Inter-company amounts due from Model to Quality King Distributors, Inc. (“Quality King”) will be paid in cash to Quality King, or converted into preferred stock or debt of Model prior to the transaction. Any such cash payment by Model may be financed by its issuance of additional debt. Glenn and Stephen Nussdorf own two thirds of Quality King’s equity and their sister, Arlene Nussdorf, owns the balance. If any preferred stock is issued in satisfaction of this inter-company amount, it will be converted into an equal number of shares of the Issuer’s preferred stock having identical terms.
5. The Issuer, or one of its subsidiaries, will issue indebtedness to unrelated third parties to provide working capital.
6. The transaction will be subject to the satisfaction of certain conditions, two of which will be that the transaction is approved and recommended to the stockholders of the Issuer by an independent committee of the board, and that the transaction is approved by a majority of disinterested stockholders of Issuer.
According to a letter sent to eCom Ventures' Board of Directors, for the fiscal year ended October 31, 2006, the unaudited pro forma revenue of Model (giving effect to the acquisition of Jacavi) is expected to be $371 million.
Sedna Capital Discloses 5.65% Stake in Selectica (SLTC)
From 13D Tracker
In a 13D filing after the close on Selectica, Inc. (NASDAQ: SLTC), Sedna Capital disclosed a 5.65% (1.73 million shares) stake in the company.
Sedna said it currently does not have any plan or proposal which relate to or would result in the action enumerated in the instructions to Item 4, but may formulate such a plan or proposal in the future.
On today's STOP TRADING segment on CNBC, Jim Cramer reviewed a couple of ideas to make money.
On Graco (GGG), Cramer said the CEO is a great a tell. He said if it wasn't for Home Depot (HD) the stock would be up. The CEO reportedly said the worst drop in housing was behind. Cramer said Home Depot (HD) is its own problem and they are their own worst enemy. Cramer said he thinks Lowe's (LOW) will be able to climb from here.
Cramer said Target (TGT) can go higher as well.
He said American Standard (ASD) and Fotrtune Brands (FO) have bottomed.
Cramer also said the Big 3 even after meeting with Bush are just a srying situation and Toyota (TM) is the play there.
Cramer said to take the profit on Express Scripts (ESRX), so ring the register according to him.
The heads of each of the Big 3 Auto producers held general and prelininary discussions with President Bush today, but said this was very general and the start of what will hopefully lead to ongoing discussions.
-Richard Wagoner of GM -Tom LaSorda of Chrysler -Alan Mulally of Ford
They discussed currency imbalances as an issue. They specifically noted the Japanese Yen is significantly undervalued, which puts Japanese exporters at an unfair advantage over US auto makers.
The Big 3 said they also support renewable energy initiatives and went on to say that they could get half of their fleets to ethanol or dual-fuel compatible by 2012.
They also noted that a healthy auto industry was critical for a US economy. The Big 3 are at a competitive disadvantage from currency, regulations, costs, employee costs, and healthcare. The Big 3 also told Bush they were not looking for a bailout, at least that is what Mullaly said.
Since the year 2000, there have been something to the order of the Big 3 having 68% of auto sales in the US down to 57% last year, although those figures are paraphrased from earlier and may not be exact. One issue they did not really address about the currency is that some foreign owned auto makers like Toyota (TM) and Honda (HMC) are now making autos here in the US with non-UAW (United Auto Workers) US workers, so that currency issue may not be the real deal.
This is going to be just one of several ongoing areas that will run into the future on a US macroeconomic and systematic basis. US auto makers are generally shrinking right now and their market share is likely to follow that trend. There are still questions about the US auto industry as far as if 3 companies are genuinely needed down the road, but that is another controversial discussion for a later date.
By the sound of the short media conference after the discussions with President Bush, it seems that was indeed general and nothing solid was produced other than starting some dialogue.
Most Actives Review: As Directionless as the Market
As the market has hit some resistance and having a hard time going higher for the last couple of weeks, the trading volume has stayed with the Horsemen tech stocks and has dried up in the sub-$5.00 tech stocks. There has been very limited moves in the sub-$5.00 area and the volume is still with the large cap tech names.
There was a somewhat interesting IPO filing yesterday, although I am not that convinced that it is a GOOD interesting at this point. Salary.com has made its initial filing for an initial public offering yesterday.
The company has listed Thomas Weisel as the lead manager and co-managers are listed as follows: William Blair, Needham, Wachovia, and Pacific Crest.
The company's corporate offerings are for pay optimization and standardization based on job categories and based on regional data including experience and education. It also allows individuals to go in and conduct a pay search based on many criteria to make sure they are adequately paid market rates.
The company boasts some 7,000 corporate subscribers that covers some 10,000,000 employees. In its most recent 12 month period the company posted almost $17 million in revenues and had approximated losses of $3 million. There may be some seasonality to the company, so we won't go out on a limb asking how such deals are able to get done right now.
Microsoft One Step Further on Interoperability (Updated Version)
Please be advised we have deleted the first version of this story of Microsoft releasing a any updates on Mozilla's Firefox. We have not been able to confirm this and there are still some questions about the validity of the links. If we get any further details we will follow-up, but as for now the only development should be on the Interop Vendor Alliance with Microsoft and many others.
Microsoft (MSFT) appears to be living up to its opening of arms to open source and to interoperability today. Microsoft and other companies formed an Interoperability Alliance.
Today at Microsoft® TechEd: IT Forum 2006, Microsoft (MSFT) announced the formation of the Interop Vendor Alliance, a global cross-industry group of software and hardware vendors that will work together to identify opportunities for enhancing interoperability with Microsoft systems on behalf of their customers. Founding members of the alliance include Advanced Micro Devices Inc., (AMD), BEA Systems Inc. (BEAS), Business Objects (BOBJ), CA (CA), The Carbon Project, Centeris Corp., Citrix Systems Inc. (CTXS), GXS Inc., IP Commerce Inc., JNBridge LLC, Kernel Networks, Levi, Ray & Shoup Inc., Microsoft, NEC Corp. of America, Network Appliance Inc. (NTAP), Novell Inc. (NOVL), Q4bis, Quest Software Inc. (QSFT), Siemens Enterprise Communications, SOFTWARE AG, SugarCRM Inc., Sun Microsystems Inc. (SUNW), Symphony Services Corp., Xcalia, and XenSource Inc. Thgis comes on the heels of last week's SuSe Linux accord with Novell.
The stated goals are to encourage vendor collaboration to foster interoperability, enable scenario-based testing for interoperability, and to communicate vendor interoperability solutions to customers. More data on tha alliance can be found at the Interop Vendor Alliance at the http://www.interopvendoralliance.org website.
Please be advised that we wanted to update this story at NOON EST. We have not been able to find any confirmation of any browser updates from Microsoft for the Mozilla Firefox browser and there are discrepancies on links so we have removed it.
Wal-Mart Reacting Better Than Target on Retailer Earnings
This morning we got to see competing earnings reports from retail giants Wal-mart (WMT) and Target (TGT). In short, WMT is trying to hang on, and TGT is still growing. The same-store-sales (s-s-s) are also forecast to be up.
Wal-Marts EPS was 11% higher than Q3 2005 at $2.6 Billion, or $0.63 per share ($0.62 after tax ruling). Revenues were $84.5 Billion. Analysts were expecting $0.59 and $84.5B. The company also guided next quarter EPS $0.88 to $0.92 and Fiscal EPS $.85 to $2.89e. The retail behemoth also put Q4 s-s-s at +1% to +2%, which is only a week after it forecast flat s-s-s in November.
Target (TGT) posted earnings a 14% rise to $506 million and $0.59 EPS on revenues of $13.57 Billion. Analysts were looking for $0.55 and $13.58B. Target also maintained estimates November s-s-s +4% to +7%.
TGT shares are up 2.5% at $59.25 in pre-market activity; 52-week trading range is $44.70 to $60.34.
WMT shares are now up 3.5% at $47.95 in pre-market activity; 52-week trading range $42.31 to $52.15.
While Target (TGT) looked better overall and on the surface, Wal-Mart (WMT) was actually better as far as the bar having been lower and its relation to its 52-week highs. That is why WMT is up mor ethan TGT in pre-market activity.
(A) Agilent $0.46 EPS vs $0.49e. (ABT) Abbott Labs received FDA approval for expanded indications of Humira. (AEOS) American Eagle Outfitters $0.66 EPS vs $0.65e. (AH) Armor Holdings wins $32 million contract with Philadelphia. (ALXN) Alexio gets FDA priority review status for Soliris. (BJ) BJ's Wholesale $0.32 EPS vs $0.26e. (BKD) Brookdale Senior Living -$0.34 EPS vs -$0.29e. (BOBE) Bob Evans Farms $0.36 EPS vs $0.39e. (CMED) China MedTech $0.33 EPS vs $0.28e; filed to sell $100M in convertible notes. (DHI) DR Horton $0.88 EPS vs $0.70e; unsure if comparable b/c has items. (DHT) Double Hull Tankers $0.28 EPS vs $0.26e. (DKS) Dick's Sporting Goods $0.14 EPS vs $0.06e; buying Golf Galaxy. (EGLE) Eagle Bulk Shipping has a 2.5M share secondary. (ESLT) Elbit $0.45 EPS vs $0.42e. (EXFO) EXFO Electro started as Overweight at CIBC. (GGXY) Golf Galaxy is being acquired by Dick's Sporting Goods. (GI) Giant Foods $3.00 EPS vs $2.65e.] (GOOG) Google already closed the YouTube acquisition; total allocation was 3.217 million shares and option/warrants for 442,000+ shares. (HD) Home Depot $0.73 EPS vs $0.75; s-s-s -5.1%; sees FY EPS under target; stock trading down 3%. (HERO) Hercules has a 7.5M share secondary. (HGSI) Human Genome Science announced positive LymphoStat-B in Phase II studies. (IBAS) iBasis R$133.5M vs $132.5M(e); sees annual $510-520M vs $512M(e). (JNJ) J&J filed for up to $10 Billion in debt sales. (LORL) Loral Space filed for $500 million in securities mixed sales. (LWSN) Lawson approved $100M for stock buybacks. (MSFT) Microsoft's Zune hits shelves today to compete with iPod. (MOVI) Movie Gallery R$583M vs $555M(e). (MXRE) Max Re Capital $0.42 EPS vs $0.32e. (NTPA) Netopia being acquired by Motorola for $7.00 per share. (NTY) NBTY $0.54 EPS vs $0.42e; unssure if comparable. (QTWW) Quantum Fuel registered 10+ million shares for potential sale by holders. (REGN) Regeneron filed to sell 7+ million shares. (REVU) Princeton Review posted a loss instead of a gain. (ROC) Rockwood Holdings $0.29 EPS vs $0.33e. (SNH) Senior Housing filed to sell 5M shares of stock. (SKS) Saks $0.05 EPS vs $0.03e. (SPLS) Staples $0.36 EPS vs $0.36e, guiding toward higher end of range. (TBL) Timberland may be selling itself according to WSJ. (TGT) Target $0.59 EPS vs $0.55e; trading up 2% after maintaining 4-7% s-s-s gains. (TOA) Technical Olympic reported a loss after items. (VOD) Vodafone posts loss for first half on charges in Germany. (WCRX) Warner Chilcott announced it is licensing rights to Schering AG. (WMT) Wal-Mart $0.62 EPS vs $0.60e; said Q4 s-s-s will be +1 to +2%; stock up almost 2%.
ATHR cut to Buy at First Albany. BBT started as Buy at UBS. BEAS reitr Buy at Citigroup. BNG cut to Neutral at Merrill Lynch. BPFH started as Neutral at Merrill Lynch. BT cut to Peer Perform at Bear Stearns. CVNS cut to Hold at Stifel. DKS reitr Buy at B of A. FFIV started as Buy at B of A. HALL started as Outperform at KBW. HYGS downgraded at ThinkEquity. LNG started as Overweight at Lehman. LQDT cut to Sector Perform at RBC. LUV reitr Buy at Citigroup. LVS cut to Hold at Stifel. MRVL reitr Buy at Jefferies. NICE started as Buy at B of A. OCNW started as Outperform at Thomas Weisel. OPWV started as Hold at Soleil. S cut to Hold at AGEdwards. TLP cut to Mkt Perform at Wachovia. TSS started as Buy at UBS. TSRA cut to Neutral at First Albany. WIND reitr Buy at ThinkEquity. WYNN cut to Hold at Stifel. XRM cut to Neutral at RWBaird.
Yahoo! CEO Terry Semel says that internet advertising growth is underestimated. Video, social network, and mobile applications will grow faster than traditional banners and text ads.
Semel is probably right. His problem is that he is weak in these areas, especially video and social networking where News Corp's MySpace and Google's YouTube dominate.
Semel has been unwilling to make a big purchase to get himself in the game, and Yahoo!'s video offering is back in the pack with MSN and AOL. They may do well, but the big share of the market is elsewhere.
Semel's comments are actually a negative for Yahoo!. They show that the company is poorly positioned to get a piece of the segments that he claims will grow the most.
Maybe he will have better luck if he sells his company to Google. At least he could be part of the emerging online video ad market.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Intel has once again moved to take share back from rival AMD. In the process of releasing its new "four brains on a chip" Xeon processor, Intel is bringing out these next generation server chips several months before AMD releases its version.
The constant upgrades by both Intel and AMD now come so fast that they present an odd problem for companies like Dell and Hewlett-Packard who sell billions of dollars worth of servers each year to businesses around the world. Buy the new server with the new chip, or wait until an even better one comes out.
Of course, server upgrades are based in large part on when companies need a greater number of machines. Companies like Google are constantly expanding their "server farms" as they requires more computing power and storage for the zillions of web pages that need to be searched at served every day.
Software also plays a role. Some software is designed to run better on multiple core chips, so many companie upgrade to take advantage of the software/processor connection.
If both chip companies continue to release new and better products at the current, dizzying pace, it does open the question of whether the market will at some point say "enough".
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
The New York Time Company Struggles With Its Jewel
The New York Times Company (NYT) has more than its share of trouble. One of its largest shareholders want to change the voting rights of the company’s shares, probably to throw out the descendants of the founder, the Sulzbergers.
The company’s results have been poor, and this has shaved the share price by almost half, from $40 in early 2005 to just under $25 now. The stock has actually come up a bit as other media companies like the Tribune are stripped of their best clothes and left for dead.
A look at the NYT 10-Q shows that operating profit in the September period was $20.5 million, down from $39.4 million in the same period a year ago.
It is hard to tell whether the company’s newspapers actually make money. The segment called the News Media Group, which is the papers and their online counterparts, had an operating profit of $25.5 million during the last quarter. Revenue for the group is divided into advertising, circulation and “other”. Other revenue for the unit was $58.2 million. “Other” is probably revenue from online operations. NYT has another small internet operation called About.com. During the September quarter, it had revenue of $18.3 million and operating profit of $6.4 million. If the “other” revenue in the news group is indeed online operation and runs at a similar margin to About.com, it would put out roughly $20 million in operating income. That is, almost all the operating profit of the newspaper group.
Since the New York Times newspaper contributes most of the revenue for the News Media Group, its financial fate is critical to the company. It finds itself painted into a corner. Over the years, the daily has become a national paper.
In doing so, it has given up about 30% of its circulation in the New York City area and has taken on more readers outside the nation’s largest city. To keep these national readers, the Times must maintain a large newsgathering operation in the US and abroad. It is an editorial organization that a barely profitable print operation cannot afford, especially one that is experiencing ongoing circulation losses.
The New York Times is now the third largest paper in New York City as measured by circulation in the NY area. The New York Post and The New York Daily News are ahead of it.
A retreat to local coverage to cut editorial costs, which is something that is already happening at big dailies in Philadelphia and Los Angeles, may not help the Times. It would put off too many of the newly minted subscribers outside NY.
The Times can’t afford its current news budget, and it can’t afford to cut it.
Stange business.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Like most of the Big Pharma companies, Merck needs a winner. Wall St. is scared witless that generic drug firms like Teva will scoop up all of the customers as drugs come off patent.
With Wal-Mart and every corner store offering $4 prescriptions for generic drugs, the sun may be setting on operations like Merck.
Merck is trying to get its new painkiller, Arcoxia, out the door without physicians thinking it has health risks like the company heart-unhealthy drug Vioxx.
Arcoxia is already controversial and it is not even for sale in the US. Some doctors think the drug could be as dangerous as Vioxx. But, a study presented at the recent American Heart Association conference indicated that the drug was fairly safe. Only 1% of the people on the drug suffered a heart attack, stroke, or death within the first year.
Great odds if you are not the patient who died.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
GE wants investors to get excited about India. The big US conglomerate says that its revenue will grow 60% this year to $1.6 billion. GE has even said it is going to try to flog is people on the ground to get sales in India to $8 billion by 2010.
Oddly enough, no one seems to care. Even with all of the excitement, GE’s stock has come down from $36 a month ago $35.20. Maybe that is because with GE’s revenue worldwide runs about $150 billion, and investors have plenty of concerns to offset the happy India news.
Wall St.’s impression is that GE can put out a dozen press releases a day. The company still has businesses with next to know promise, lead by NBCUniversal. Dead wood compared to some of GE’s big industrial and infrastructure business.
Immeldt will have to sharpen the picture at GE or the shares are going to stay at $35.
Forever.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Dell’s stock was upgraded by Deutsche Bank based on the firm’s belief that it has “better visibility” into the company’s near term prospects. The new price target is $28. The stock trades at $25.50, so investors might argue that the slightly higher price does not show boundless confidence on Deutsche’s part.
It is hard to say what might go well at Dell, at least this year. For a stock that has been pounded in the press and on Wall St., Dell actually is trading OK. The stock has run from under $20 in July to over $25. The stock was, however, over $41 just a year-and-a-half ago.
Conventional wisdom says that Dell will bleed until Microsoft Vista comes out and pushes PC sales back up. During the holidays, Dell and its competitors will cut prices to bring in customers ahead of the Vista launch in early 2007. Some customers will simply pass and wait for the new Microsoft OS no matter how attractive the pricing is.
Looking over Deutsche Bank’s shoulder, Dell does not look so hot. At least not until next year.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
The last time anyone looked Airbus and its parent EADS were about to go down in flames. Fedex has cancelled a major order for the Airbus 380 super jumbo jet and other customers were threatening the same. The great scales of commerce were shifting in the direction of Airbus rival Boeing.
But, Airbus has finally gotten its A380 off the ground. It appears that the plan can even fly further that Howard Hugh legendary Spruce Goose, at one time the largest plane in the world.
The Airbus 380 has now flown from France to Korea without incident. Not even air sickness. Government agencies like the FAA can now certify the jet. This gets Airbus back on the road to getting the plane to customers like Singapore Airlines.
Boeing is hoping that Airbus customers who are sick of the delay will look at the newest version of the 747. And, the U.S. airframe giant may pick up a few dissatisfied customers.
Boeing is trading like a company about to get some big orders. It stock is just shy of $86, very near a 52-week high. The stock is up from $50 less than two years ago.
Boeing has had Airbus on the mat recently. But, at least the European aircraft firm is not grounded.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Accountants are not given enough credit for their senses of humor.
The Big Four firms, PwC, Deloitte, KPMG, and Ernst & Young, have suggested that corporations release a large portion of their financial and operating data in real-time. The technology for doing this, Extensible Business Reporting Language, already exists. The accounting firms are further suggesting that companies offer other key operational numbers like employee turnover and customer retention as well.
The proposed system may sound insane, but why should corporate reporting be different from any other form of information. Software and the internet have made vast quantities of data and news information at the touch of a figure.
Investing is a dicey business. Executives at public companies always know more than investors. Some investors believe that securities analysts get more information than the general public. Investment bankers and corporate customers often have insights into a public company’s progress that investors may not see for months.
You can order a car and groceries online. Why not up-to-date financial reports on your investment?
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
At the request of readers, below are the top 20 financial news sites, followed by their unique visitors in million for October,their reach of all internet users, their pageviews in millions and the average time spent per month by the average user.
For example, Yahoo! Finance had 13.744 million users raching 8.7% of all internet users with 645.207 million pageviews, and its users spent an average of 28.27 minutes on the site.
According to Reuters, Berkshire Hathaway has cut its stake in Ameriprise Financial from 9.8% to 6%.
Reuters writes that Microsoft's management is pushing its new Zune multimedia device's wireless capacity as an advantage over competing devices.
The Wall Street Journal writes that boot company Timberland is putting itself up for sale.
Reuters reports that British wireless company Vodafone reported earnings that topped analyst forecasts.
Reuters reports that IBM and China's Ministry of Education will work together to develop a service industry in the country.
The Wall Street Journal reports that Clear Channel, the largest radio company in the US, is weighing two bids for the company amid concerns that the company's top management may have a conflict of interest in the deal.
The Wall Street Journal reports that GE and Hitachi will work on jointly developing and maintaining nuclear power plants.
The Wall Street Journal also reports that some games developed for early versions of its Playstation platform will not work on the new Playstation 3.
The Wall Street Journal writes that the new versions of Tivo will allow for video sharing.
The Wall Street Journal also writes that major Asian chip companies are gambling that Microsoft Vista will increase demand for their DRAM chips. Samsung and Hynix Semi are increasing capacity.
The WSJ reports that Intel is launching its new Xeon chip which has four electronic brains. The product comes out before a similar chip from AMD, Intel's rival.
The New York Times writes that satellite dish companies are filling the void for broadband in rural areas. WildBlue and Highes Network Systems are providing most of the technology.
The New York Times also writes that Eddie Bauer will be acquired by two private equity firms.
Markets in Asia were up with the Nikkei rising sharply.
The Nikkei was up 1.7% to 16,290. Bridgestone was up 2.8% to 2530. Canon was up 1% to 6210. Credit Saison was up 4% to 4040. Daiwa Securities was up 3.4% to 2075. Fuji Film was down .2% to 4430 Fujitsu was up 2.9% to 947. Hitachi was up 1% to 706. Honda was down .5% to 4240. NEC was up 1% to 594. NTT was down .2% to 570000. Sharp was up 1.2% to 2060. Softbank was up 2.6% to 2355. Sony was up .9% to 4730. Toshiba was up 1.4% to 735. Toyota was up 1.4% to 7200. Yahoo Japan was up 1.3% to 43100.
The Hang Seng was up .1% to 18,878. Cathay Pacific was up 1.7% to 17.56. China Mobile was up 1.6% to 66.65. China Netcom was down 1.1% to 15.64. HSBC was down 1.4% to 148.2. Hutchison Whampoa was up .1% to 71.5. PCCW was up .6% to 5.07. Wharf Holdings was up 1% to 26.65.
Nabi Biopharmaceuticals (NABI) and Third Point LLC Reach Agreement
From 13D Tracker
Yesterday morning, Nabi Biopharmaceuticals (Nasdaq: NABI) and dissident shareholder Third Point LLC announced that they have reached a settlement relating to a potential consent solicitation.
Under the deal, Nabi Biopharmaceuticals has appointed two Third Point nominees, Jason Aryeh, founder and general partner of JALAA Equities, LP and Tim Lynch, president and CEO of NeuroStat Pharmaceuticals, Inc., to the company's board of directors. In addition, Nabi Biopharmaceuticals will establish a strategic action committee to continue the company's previously announced process of exploring strategic alternatives. The Third Point nominees' will sit on the five member committee.
As part of the settlement, Nabi Biopharmaceuticals has agreed to pay up to $250,000 of Third Point's expenses and Third Point has agreed that it will not commence a consent solicitation or a proxy contest prior to the company's 2007 annual meeting of shareholders.
Third Point CEO, Daniel S. Loeb, said, "We are pleased to be able to work constructively with Nabi Biopharmaceuticals with the shared goal of enhancing the value of the company."
Tomasello Raises Stake in WorldGate (WGAT) to 7.8%; Says Outside Directors Should Own Specified Number of Shares
From 13D Tracker
In an amended 13D filing on WorldGate Communications (Nasdaq: WGAT) today, Venezuelan investor Antonio Tomasello disclosed a 7.8% stake (3.15 million share) in the company. This is up from the 7.5% stake Tomasello disclosed in a 10/17 filing.
Tomasello is of the opinion that each of the company's outside directors should be required to own a specified number of shares of the Common Stock as a condition for continuing as a board member, saying that this would more closely align the interests of the directors and shareholders and benefit the company. Tomasello may propose such a requirement for adoption by shareholders at the next annual meeting.
Pirate Capital Lowers Stake in James River Coal (JRCC)
From 13D Tracker
In an amended 13D filing on James River Coal Company (Nasdaq: JRCC), Pirate Capital disclosed an 8.8% stake (1.475 million shares) in the company. This is down 14.1% stake the firm disclosed in a past filing. Recently, Pirate disclosed that Matthew Goldfarb, a James River Coal Board member, resigned from the hedge fund as part of its recent shake-up.
HealthCor Management Sends New Letter to ICOS (ICOS) Opposing Eli Lilly Takeover
From 13D Tracker
In an amended 13D filing on ICOS Corp. (Nasdaq: ICOS), 5% holder HealthCor Management, L.P. disclosed another letter sent to the company related to its view that the $32 per share merger agreement with Eli Lilly and Company (NYSE: LLY) significantly undervalues the company. The firm thinks the company is worth well in excess of $40 per share.
In its new letter sent to the ICOS board of director the group said, "The proposed purchase of ICOS by Eli Lilly is not an arm’s length transaction. The acquisition has not occurred in a market-based, competitive bid process. Therefore, in making its determination of fair value, we believe the Board of Directors must rely upon market-based comparables of similar transactions. We have clearly shown, in our initial communication to you, the flaws and distortions that are contained within the “Fairness Opinion” provided by Merrill Lynch. Without a competitive bid and without a “Fairness Opinion” that can be relied upon, the Board of Directors of ICOS is “flying blind” while trying to assess appropriate value."
In the letter, the firm noted the 101.6% premium Merck (NYSE: MRK) paid for Sirna Therapeutics Inc. (Nasdaq: RNAI); the 55.7% premium Abbott Laboratories (NYSE: ABT) paid for KOS Pharmaceuticals Inc. (Nasdaq: KOSP); and the 46.6% premium Genentech Inc. (NYSE: DNA) paid for Tanox Inc. (Nasdaq: TNOX). The firm compares this to the 18.2% premium Eli Lilly paid for ICOS.
A Copy of the Letter:
Dear Gentlemen:
HealthCor Management, L.P. (“HealthCor”) is the investment advisor to certain private investment funds that currently own 3,300,000 shares of ICOS Corporation (“ICOS” or the “Company”). This represents more than 5% of all ICOS common shares outstanding.1
On November 2, 2006, HealthCor stated in a letter delivered to ICOS our intention to vote against the proposed acquisition of ICOS by Eli Lilly & Company (“Eli Lilly”) at the upcoming shareholder meeting that was announced in the Company’s November 1, 2006 Proxy Statement.2 The reason we will take this action is that we believe that ICOS’ actual value is well in excess of $40 per share.
On November 3, 2006, we contacted the offices of Paul N. Clark, Chairman and Chief Executive Officer, and Michael A. Stein, Chief Financial Officer, to offer that we would travel to ICOS’ offices, at our expense, and discuss with management and the Board of Directors our valuation analysis and conclusions. On November 10, 2006, we again contacted the offices of both executives with the same offer.
We are concerned that ICOS has not directly responded to the serious issues we have raised especially in light of our repeated and unacknowledged offers to assist in the proper valuation analysis of the Company. We are attempting to communicate productively and in good faith with the Company’s management and the Board of Directors to openly discuss our concerns. Our objective is the realization of fair value for ICOS’ stockholders, not just incumbent management and the acquiring company, Eli Lilly.
The proposed purchase of ICOS by Eli Lilly is not an arm’s length transaction. The acquisition has not occurred in a market-based, competitive bid process. Therefore, in making its determination of fair value, we believe the Board of Directors must rely upon market-based comparables of similar transactions. We have clearly shown, in our initial communication to you, the flaws and distortions that are contained within the “Fairness Opinion” provided by Merrill Lynch. Without a competitive bid and without a “Fairness Opinion” that can be relied upon, the Board of Directors of ICOS is “flying blind” while trying to assess appropriate value.
Our analysis is based upon objective data sourced from independent investment analysts’ projections as well as from the information provided by the Company in its November 1, 2006 Proxy Statement. As set forth in the following table, since the announcement of the proposed merger with Eli Lilly, three additional transactions have been announced in the relevant healthcare universe. These transactions are all at premiums significantly higher than the premium in the Eli Lilly/ICOS transaction, as currently proposed. The Genentech, Inc. purchase of Tanox, Inc. is particularly important as there is an ongoing partnership on the target’s lead commercial product, Xolair. While ICOS’ management might believe that ICOS is a “captive target” for Eli Lilly and therefore unable to generate a fair price, the existence of a partnership did not prohibit Tanox, Inc. or Genentech, Inc. from agreeing on a fair price.
{TABLE)
We believe these additional transactions further support our case that ICOS’ actual value is well in excess of $40 per share.
We hope to hear from you so that we can have a productive discussion with you regarding the issues we have raised.
One of the most important aspects of value investing that one can learn is the value of a brand. Developing the unassailable franchise requires a lot of work. Tending and grooming the public image to keep a brand relevant and authentic is the most critical task that consumer product managements have before them.
Advertising is not an extravagance. Advertising can set off deep emotional triggers that motivate the consumer to buy from certain companies and not buy others. How does the company stand out amongst a sea of competitors. The best way is to have a memorable presence in the head of the consumer! Shareholders benefit from the results, a growing stream of revenues, improved pricing, stability in downturns, higher profitability, and lower cost of capital.
Advertising is viewed by most shareholders as an expense. In my view, it is a capital expenditure, not terribly different than building a factory or buying equipment to build revenues, but with a very special bonus attribute...a 100% write-off in year one! Rather than a prolonged schedule of depreciation, Uncle Sam participates in the deduction, all in that first year.
Here's a look at someone who is killing a brand, Adidas.
Reebok under Paul Fireman did a lot of squirrelly things, at times leaving its premier brands completely unsupported. Many times through the 90's, as a pain in the butt activist shareholder, I reminded Paul of his obligations to shareholders, not to mention numerous unkept promises. Even Paul, who took some time to catch on, learned his lesson.
Reebok became masterful in capturing the authenticity that Paul had proclaimed, but previously failed to support in its product design, its professional endorsements, and its advertising.
Here's a look at Reebok's advertising spend over the years:
2004 $137 million 2003 $150 million 2002 $131 million 2001 $144 million 2000 $108 million 1999 $106 million
Here is the marketing support that Adidas has brought to the brand in the first half of this year:
2006 $7 million
Reebok orders have plunged 14%. Profit margins are narrower than expected. Retailers are likely fuming. In a never ending battle for shelf space, cutting back on advertising spending destines brands to oblivion.
Adidas is stepping up spending for next year with an incremental $63 million in spending. Looks like Adidas is learning the lesson that Paul Fireman finally did in the late 90's.
Disclaimer: I, my family, and clients do not have a current position in Adidas.
I came across a really good post at Briefing.com pertaining to the US$ and economic outlook.
According to PIMCO-
"Carry trades will continue to support the dollar if-and only if-investors continue to establish new carry trades. But the Fed's pause in August makes new carry trades increasingly unlikely.
The Fed's decision to pause likely marked the end of its rate hike cycle and the beginning of a path toward rate cuts. With the Bank of Japan and European Central Bank still in tightening mode, short-term interest rates should converge and reduce or eliminate the carry benefits of holding dollar assets.
"A risk to this element of the case for a weaker dollar is the potential for stronger U.S. economic growth that leads the Fed to resume raising rates. However, we view this scenario as unlikely, primarily because of the ongoing slowdown in the U.S. housing market.
Housing and housing-related activity has been a major source of liquidity and credit creation funding U.S. economic growth in recent years. Thus, the slowdown in housing will have a broad and deep impact on U.S. growth and is the primary reason we expect real U.S. GDP growth to fall below trend over the next 12 months.
Slower growth in the U.S., particularly as other economies expand, should also contribute to a reduced foreign demand for dollar-denominated assets."
NVDA reported $821m and $0.39 vs Street estimates of $749mn, $0.34. Revenue strength was driven by a better than seasonal increase in desktops 15% QoQ, substantial growth in notebooks up 46% QoQ and robust chipset sales up 35% QoQ.
The company guided 4Q revenue to the upside 5% sequentially, which equates to roughly $862m vs The Streets forecast of $798m. Management expects sequential growth in desktop, notebook, and workstation. In addition, the company expects gross margins to increase roughly 100bp QoQ to roughly 43%.
NVDA's strengths can be seen in multiple areas, such as its robust revenue growth, solid financial position with reasonable debt levels by most measures, return on equity, impressive record of earnings per share growth and compelling growth in net income.
I feel these strengths outweigh the fact that the company is trading at a premium valuation vs. its peers. That being said- Investors should note that the January quarter is seasonally the strongest quarter of the year for NVDA.
On November 8, NVDA had a launch event for its widely anticipated next-generation desktop product the GeForce 8800 series. According to management, the 8800 series delivers two times the performance of its prior generation, addresses the HDTV market with its PureVideo HD Technology, and enhances performance through the use of DirectX10 and advanced shading technologies.
The strong rally in shares means The Street believes the new product introductions will likely boost NVDA’s already solid technology advantage, especially considering ATI isn’t likely to launch its next-generation product until sometime in 07.
NVDA announced its first Intel-based platform to enable the market for the GeForce 8800 series. I believe the introduction of NVDA’s first Intel-based reference motherboard design is indicative of a closer relationship with Intel in the future, which should begin generating meaningful revenue in 07.
I'm a little disappointed that management provided limited working capital insight pending resolution of its ongoing review of stock option practices. Cash increased from $850m to $1.17bn about $3.20 in cash. Inventory modestly decreased $5m QoQ to roughly $360 (or 70 days down from 87 days).
After experiencing outstanding growth for much of 2000, the industry was subsequently marked by a sharp downturn amidst weak market conditions for technology and the economy as a whole.
Improvements in the overall health of this backdrop bode well for the industry in late 2003. These ups and downs are nothing new for the Semiconductors & Equipment industry, which is highly cyclical in nature.
Cramer Says KB Homes (KBH) is a Buy Since Options Scandal is Mostly Behind
Cramer discussed the CEO having resigned from KB Homes (KBH). cramer has interviewed him before, but he says you have to go buy shares of KBH. Cramer said the options scandal pressures a stock down, then it inches up, and then on the resolution you have to buy. With the CEO resigning, that is now out of the way.
Cramer said that even if you back-date options you have to think you are looking out favorably on the company down the road anyway. If a CEO was willing to take stock over cash then you should be inclined to take his lead. He thinks at 1.25 times book value that is a very cheap price. It has almost no debt. It could be a takeover target because it is so cheap. Cramer thinks private equity buyers could do it, or even a Lennar (LEN).
KBH is widely and wrongly perceived as a California and Las Vegas homebuilder, but that isn't true. CA is now 31% of sales as they are in 13 states. When CA comes back, so will KBH. It also builds award winning neighborhoods. He said he didn't like it when the shares were super-high, but now closer to lows he likes it. He thinks right now is when you buy it.
As GM cuts production and Ford becomes a small company, Cramer thinks the US auto industry is fundamentally changing. He thinks Toyota Motor (TM-NYSE/ADR) is the investment in the US. Cramer said it is changing marketing efforts and there is a giant vacuum to fill in more sales with auto production cuts from US auto makers.
Toyota is also putting a car into NASCAR, which is very important. He said it is becoming more of an American car company and GM & Ford are essentially surrendering by shrinking their companies.
Ford and GM will have made 490,000 fewer cars this year and Toyota will be there to fill in the gap. TM makes 1.5 million cars here and sells 2.5 million cars here. Cramer thinks they'll be the biggest in America soon. Cramer also said Toyota has created more jobs here than almost anyone.
TM closed down 0.7% at $120.88 in regular trading, but traded up 0.4% to $121.30 in after-hours trading. Cramer has been positive on TM for many times, although this was his first recent entire-segment feature on the stock.
Cramer on last nigtt's MAD MONEY discussed a retail play that could make you money. He says Coldwater Creek (CWTR) is the new face of shopping on the Internet. It has figured out how to cater to the computer illiteracy of the Baby Boomer generation. They include live Q&A from real employees for shoppers online.
This shop caters to mostly wealthy women baby boomers and the website. Cramer says it has the retail triple play. It has a great catalogue business and great stores. It fits into the regional to national theme. It targets income levels of $75,000 and higher that are less price sensitive. 85% to 90% of its transactions occur at full retail price. They are targeting 500 stores, and Cramer thinks that is too low.
CWTR trades at 53.6 times earnings, but it trades about 34 times 2007 earnings and has 34% growth rates. The stock traded down 0.6% to $28.60 in regular trading, but it was up 3.6% to $29.63 in after-hours after Cramer noted the name.
Cramer Says KB Homes (KBH) is a Buy Since Options Scandal is Mostly Behind
Cramer discussed the CEO haviong to have resigned from KB Homes (KBH). cramer has interviewed him before, but he says you have to go buy shares of KBH. Cramer said the options scandal pressures a stock down, then it inches up, and then on the resolution you have to buy. With the CEO resigning, that is now out of the way.
Cramer said that even if you back-date options you have to think you are looking out favorably on the company down the road anyway. If a CEO was willing to take stock over cash then you should be inclined to take his lead. He thinks at 1.25 times book value that is a very cheap price. It has almost no debt. It could be a takeover target because it is so cheap. Cramer thinks private equity buyers could do it, or even a Lennar (LEN).
KBH is widely and wrongly perceived as a California and Las Vegas homebuilder, but that isn't true. CA is now 31% of sales as they are in 13 states. When CA comes back, so will KBH. It also builds award winning neighborhoods. He said he didn't like it when the shares were super-high, but now closer to lows he likes it. He thinks right now is when you buy it.
As GM cuts production and Ford becomes a small company, Cramer thinks the US auto industry is fundamentally changing. He thinks Toyota Motor (TM-NYSE/ADR) is the investment in the US. Cramer said it is changing marketing efforts and there is a giant vacuum to fill in more sales with auto production cuts from US auto makers.
Toyota is also putting a car into NASCAR, which is very important. He said it is becoming more of an American car company and GM & Ford are essentially surrendering by shrinking their companies.
Ford and GM will have made 490,000 fewer cars this year and Toyota will be there to fill in the gap. TM makes 1.5 million cars here and sells 2.5 million cars here. Cramer thinks they'll be the biggest in America soon. Cramer also said Toyota has created more jobs here than almost anyone.
TM closed down 0.7% at $120.88 in regular trading, but traded up 0.4% to $121.30 in after-hours trading. Cramer has been positive on TM for many times, although this was his first recent entire-segment feature on the stock.
Cramer on tonight's MAD MONEY discussed a retail play that could make you money. He says Coldwater Creek (CWTR) is the new face of shopping on the Internet. It has figured out how to cater to the computer illiteracy of the Baby Boomer generation. They include live Q&A from real employees for shoppers online.
This shop caters to mostly wealthy women baby boomers and the website. Cramer says it has the retail triple play. It has a great catalogue business and great stores. It fits into the regional to national theme. It targets income levels of $75,000 and higher that are less price sensitive. 85% to 90% of its transactions occur at full retail price. They are targeting 500 stores, and Cramer thinks that is too low.
CWTR trades at 53.6 times earnings, but it trades about 34 times 2007 earnings and has 34% growth rates. The stock traded down 0.6% to $28.60 in regular trading, but it was up 3.6% to $29.63 in after-hours after Cramer noted the name.
Dick's Sporting Goods (DKS) is paying $18.82 cash per share to acquire Golf Galaxy (GGXY). This was just lumped in with DKS earnings release scheduled for today. The deal is valued in the $225 million range, and its market cap as of the close was $172.5 million.
Golf Galaxy currently operates 61 stores in 24 states, ecommerce websites and catalog operations, and generated $250 million in sales during the last 12 months ended August 26, 2006.
GGXY is trading up 17% at $18.32 in after-hours, and that is after trading down 1% to $15.65 in regular trading. With DKS valued at $2.5 Billion, this is a small and easy deal for the company to digest. DKS traded up 0.3% in regular trading to close at $48.92, but it traded up 3.2% to $50.51 in after-hours trading.
Will they keep the name as Golf Galaxy? They probably know that Dick's Galaxy and Dick's Golf probably aren't the two best names.
DJIA 12,131.88; Up 23.45 (0.19%) NASDAQ 2,406.38; Up 16.66 (0.70%) S&P500 1,384.42; Up 3.52 (0.25%) 10YR-Bond 4.605% Up 0.019 NYSE Volume 2,361,259,000 NASD Volume 1,723,347,000
Isis Pharma (ISIS) rose 19% to $12.43 and was the clear winner of the active stocks today. It presented positive data for human trials on cholesterol treatments via injection once per week rathetr than via statin pills.
KB Homes (KBH) lost its CEO for backdating options. KBH actually rose 2% to $44.78.
Tribune (TRB) rose 1.3% to $32.46 after word surfaced that Gannett (GCI) and ex-AIG head Hank Greenberg may both also be interested in TRB.
Clear Channel (CCU) fell 1.7% to $34.24 after the bid deadline ended and CNBC's David faber said that a bid of over $37 was unlikely.
Deutsche Telekom (DT) sacked its CEO and already named a replacements; DT ADR's rose almost 2% to $17.24.
Intel (INTC) and General Electric (GE) Were both added to Citigroup's BUY LIST; INTC rose 2% to $21.00 and GE rose 0.5% to $35.36.
EMC (EMC) fell 0.7% to $12.61 after it filed to sell $3 Billion in debt securities.
Pre-Paid Legal (PPD) fell 5% to $40.86 after it repurchased 500,000 shares from insiders.
UAL (UAUA) rose 3.8% to $37.00 after the Chicago Tribune noted it could receive a leveraged buyout offer.
Theknot.com (KNOT) rose 7% to $23.71 after it posted $0.11 EPS vs $0.11e.
MasterCrad (MA) rose 8% to $96.55 after Jim Cramer on FRIDAY said on MAD MONEY that the stock could triple in 2 years.
Riviera Holdings (RIV) rose 4% to $21.14 after receiving a $21 buyout proposal.
Wynn Resorts (WYNN) rose 7.9% to $88.67 on a special $6.00 dividend.
Trump Entertainment (TRMP) rose 5.9% to $23.35 after Cramer said it offered an opportunity for traders and investors alike.
It is not entirely out of the question. Sprint has a market cap of $61 billion. Comcast's is $84 billion. That may be a show stopper. Does Comcast want to go to its shareholder's with that kind of dilution.
At the end of the day, Sprint is considered badly run, but it does have the third largest number of cell customers after Cingular and Verizon. The Cingular and Verizon technology networks give the phone companies an advantage once they get their fiber-to-the-home systems built out. At that point T and VZ can offer wireline voice, broadband, TV, and wireless phone service. Comcast does not have the wireless component. They partner with Sprint, but, if someone else buys the company, it could make things iffy for Comcast's wireless bundling.
Comcast has a huge lead now with 22 million customers already set up with one of its services. It is adding VoIP at a rapid pace. That has to sting the phone companies. And the telecom guys are still a couple of years away from having large fiber networks. In the meantime, Comcast gets more voice customers.
Sprint is also building a nationwide WiMax network with the help of Motorola and Intel, the bit WiMax champions. WiMax may not be the next big thing, but, if it ends up sending signals to cellphones, cars and home entertainment devices, it might come in handy for Comcast.
Sometimes a company gets bought because it would be to ugly to see it picked up by the competition. Sprint might fall into that bucket.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
As Democrats Attack Defense Spending, Warmongers Make Up The Difference
Stocks: (BA)(LMT)(NOC)
Investors in defense stocks are shaking in their boots. The concern is that the Democrats who know control both houses of Congress will cut weapons spending and bring back American troops from Iraq. The media has been quick to flag concerns that investors in companies like Lockheed Martin could get hurt.
But, fear not. From September 2005 to September 2006, sales agreements with foreign military interests hit $21 billion. That is more than double what it was a year ago. Considering that Lockheed Martin's total revenue last year was just above $37 billion, and it puts the number in some context. Pakistan place a $5 billion order recently for Lockheed F-16 jets. That's just one product from one company.
Canada and Australia recently ordered C-17 cargo planes from Boeing.
There have been bans on selling arms to some overseas countries, but many of those have been lifed. Lockheed, Northrup Grumman, and Boeing will probably benefit from a rise in orders next year that could easily exceed the $21 billion figure for the twelve months ending in September.
Lockheed's stock traded down right after the election.
Not to worry.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Sun has decided to make its software platform, Java, open source, not unlike the Linux OS that is marketed by Novell and Redhat. Microsoft recently teamed with Novell to distribute Windows with the Suse version of Linux.
Sun's argument for making Java open source is that it will be more attractive to customers and programmers. But, being free does not always drive adoption. There is a reason that Microsoft still owns the operating system business worldwide. Linux is free, but without a development path lead by one company, the software based can be hard to manage.
One thing that is for certain is that the market does not care. Sun's stock was up 1% on the news. The stock has been trading in a narrow range just above $5 for the last two months.
The market already senses that Sun's moves on software will not save the company. Sun has already open sourced its Solaris software, and the results have been hard to guage.
Sun is a server company, plain and simple. It recent growth has not been organic. It has come from the acquisitions of SeeBeyond and StorageTek. While this is not necessarily bad, it begs the question of what will happen to Sun's revenue next year when the comparisons include all of the acquired revenue.
Sun's new Niagara chip has gotten solid reviews and could help drive that company's core server operations.
But, for Sun's better server products to gain share, they have to get by offerings from Hewlett-Packard, IBM, and Dell first. They are larger companies that Sun and they will not make it an easy passage.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
The German government owns 33% of DT's shares, but recently private equity group Blackstone has taken a 4.5% stack. Private equity guys are the smartest people in the room, and they don't like their reputations hurt by losing money.
Deutsche Telekom owns T-Mobile, which has a foothold in the US but is behind Cingular, Verizon, and Sprint in wireless customers.
DT also has a big fixed-line business which is falling off like it had been for US telecoms like AT&T. The company also has T-Online which offers VoIP and broadband service.
Deutsche Telelom has a market cap of about $75 billion.
DT is an international company. According to Morningstar it gets 45% of its revenue from outside its home market and most of that comes from the US.
One of the reasons that DT's CEO was fired is that he has not been quick enough to cut costs. That implies that there is a lot more to be cut. If so, there is a reasonable chance margins could be improved.
DT has had a great deal of success cutting debt, as the WSJ has pointed out.
There is probably a good chance that Blackstone would like to see some profit out of its investment, and the German government might even go along.
There are not a lot of potential buyers. British Telecom? AT&T? Verizon?
AT&T has a market cap of $130 billion. The company has already bought BellSouth. It has huge wireless operations in the US, Cingular. These could be combined with T-Mobile.
How far-fetched? Ask Blackstone.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
We have looked at benefits outsourcing firm Hewitt Associates (HEW) several times, and each time we come away feeling like there is more risk than reward.
For example, back in August we said: Furthermore, the lack of profitability shows that Hewitt was too aggressive in pursuing contracts. As a result, investors should not expect the company to grow as fast as the historic results would suggest. This is already showing, with consulting revenues down 3% year-to-date.
And lo and behold, Hewitt misses again, according to Reuters.com Human resources services company Hewitt Associates Inc. (HEW.N: Quote, Profile, Research) on Friday reported weaker-than-expected quarterly earnings on higher expenses and investment in new services, sending shares down 2.3 percent.Earnings fell 43.3 percent to $22.9 million, or 21 cents per share, in Hewitt’s fiscal fourth quarter, compared with $40.5 million, or 37 cents per share a year earlier.
Analysts, on average, expected profit of 26 cents per share, according to Reuters Estimates. Revenue edged 0.9 percent lower to $727.6 million, compared with Wall Street forecasts for sales of $720 million.
Hewitt cited higher performance-based compensation in its outsourcing and consulting segments, and said the weaker-than-expected results reflected a “deteriorating” profit outlook for its human resources business process outsourcing (HR-BPO) contracts.The author may hold a position in the securities discussed.
The author's current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion's Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion's Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options.
Sometimes what seemed like a good idea yesterday seems like a bad one today. And sometimes people simply forget why they did something in the first place and make efforts to undo what has been done. For better or worse, some are suggesting that may soon happen in the form of a buyout of printer manufacturer Lexmark (LXK) by computer manufacturer Lenovo (LNVGY.PK)
Analysts hint at Lenovo buying Lexmark - Finance - www.itnews.com.au Printer sales in China are growing so strongly that local firms may attempt to buy control of a major foreign printer maker to ensure a stake in the domestic market and a slice of international sales.Sales of laser printers in China are expanding particularly fast, driven by business users, according to recent data from Lyra Research.Total laser revenue, including hardware, cartridges and media, is expected to surpass US$5 billion by 2010.
Analysts suggest that a Chinese firm might attempt buy a foreign printer manufacturer to jump-start local printer manufacturing.
US printer maker Lexmark is the most commonly named target for such an acquisition attempt. Giant Chinese PC vendor Lenovo is seen as the most likely buyer, perhaps as leader of a consortium, and almost certainly with government support.
Lenovo made headlines by buying IBM’s PC division, a deal that was completed 18 months ago. By buying a printer maker, Lenovo could match Hewlett Packard (HPQ) across all product lines. Since printers are generally more profitable than PCs, many consider the printer business to be one of HP’s key competitive advantages.
But the funny thing is, such a deal would simply bring Lexmark back to its roots (albeit under new management).
According to Lexmark’s website: Since our inception in 1991 as a spin-off of IBM, Lexmark has become a leading developer, manufacturer and supplier of printing and imaging solutions for offices and homes. Lexmark’s products include laser printers, inkjet printers, multifunction devices and associated supplies, services and solutions.
So Lenovo may end up reuniting Lexmark with its former parent. Whether having a child move back in after 15 years of independence will make for a pleasant family reunion will remain to be seen. The author may hold a position in the securities discussed.
The author's current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion's Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion's Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options.
Apple Takes IBM General Counsel for Stronger Intellectual Property Protection
Stock Tickers: AAPL, IBM
Apple (AAPL) has hired away the general counsel of IBM (IBM) for its own general counsel. Donald Rosenberg had been with IBM for some 30 years, but was just named general counsel at IBM back in early 2006. Prior to being the general counsel at IBM, he was the manager of IBM's litigation activities. Rosenberg will report to Steve Jobs with the title Senior Vice President & General Counsel.
Rosenberg brings a history of overseeing litigation, intellectual property protection, securities, Department of Justice and SEC negotiations, and policy.
While most articles are noting that he is joining weeks after Apple confessed that Steve Jobs knew of options irregularities, the focus here may be more sweeping than any single event. Most expect Jobs to escape the options probe without losing his head. This may be a more aggressive stance that the company is taking to protect its intellectual properties and to make easier negotiations with competitors and partners alike as the company has taken the lead in digital music and as it has been storming directly into all digital media.
Citigroup's (C) bid for China's Guangdong Development Bank has taken an interesting turn: IBM (IBM) has reportedly joined the bidding process for a 5% stake in Citigroup's venture to acquire the government-owned Chinese bank. Citigroup is seeking to get a combined 85% with its whole group of bidders for what has been noted as some $3 Billion. This would not have been possible in months and years before because of foreign ownership restrictions, but the loosening of financial institution ownership from foreigners was one of the compromises that China had to make to joing the World Trade Organization.
So what you have to wonder is just why an IT behemoth would want to own 5% of a Chinese public sector bank. You could draw the anaology that they are trying to conglomerize into more industries, or you can look at what it would gain. If you consider the IT business that is up for grabs in the Chinese and Southeast Asian banking sector it sort of takes a form that can be identified.
IBM and S1 (SONE) have a seperate announcement this morning. The two are partnering to offer a "Branch in a Box" solution for banks. This will allow new banks to keep from having a dedicated PC for each employee and they can pare back to virtual PC's per employee. If this can be determined to be strategic rather than just coincidental, then you begin to see what IBM is thinking. If it takes a stake in an ailing public-to-private bank, then maybe they can get a foothold for more and more banking IT contracts and even get this "Branch in a Box" rolled out in China.
This looks like it is more of a strategic play for the IT-side of the business rather than anything sinister like IBM changing from International Business Machine to International Banking Monster. So for now, this looks like IBM is just trying to make a small investment to secure more of a foothold into larger banking and financial institution IT contracts in China and Southeast Asia.
Hertz Global Holdings (HTZ) 88+ million share IPO at $16.00 to $18.00 range. lead underwriters are Goldman Sachs, Lehman, and Merrill Lynch. WEDNESDAY NIGHT PRICING. Largest IPO of the week.
First Solar (FSLR) set for 17.5 million shares at a range of $17.00 to $19.00; lead underwriters Credit Suisse and Morgan Stanley. LATE WEEK PRICING.
KBR, Inc. (KBR) set for 27.8 million shares at a range of $15.00 to $17.00; lead underwriters are Credit Suisse, Goldman Sachs, and UBS. LATE WEEK PRICING; spin-off from Halliburton (HAL).
NYMEX (NMX) set for 6 Million shares at $48.00 to $52.00; lead underwriters JPMorgan and Merrill Lynch. LATE WEEK PRICING. Deal expected to be hot as CBOT/CME merger and as NYSE going higher and NASDAQ in many venture discussions; low float expected to provide premium pricing.
(CCU) Clear Channel indicated up as bids for company ar reportedly due today. (CHINA) CDC Corp announced sale of $168 million in convertible notes. (CSCO) Cisco Systems is acquiring private Greenfield Networks for its packet processing circuits that power next generation metropolitan area networks. (DT) Deutsche Telekom names new CEO. (DVAX) Dynavax announced positive study results in Ragweed treatment. (EBHI) Eddie Bauer gets $9.25 buyout from Eddie B Holdings. (ELNK) Earthlink filed to sell $225M in notes. (EMC) EMC filed to sell $3B in notes. (FVRL) Favrille announced positive lymphoma study results. (GE) GE signed a global alliance pact for nuclear power plants and services with Hitachi (HIT). (HYTM) Hythiam noted cautiously in barron's. (ISIS) ISIS Pharma trading up over 20% after positive drug data on injectable cholesterol treatments for once/week treatment. (KBH) KBHomes CEO resigns after options backdating. (KNOT) Theknot.com $0.11 EPS vs $0.10e; R$18.5M vs $17.8M(e). (MA) MasterCard has a shot for a triple in 2 years according to Cramer on MAD MONEY. (MOT) Motorola signed pact to sell 12 million cell phones in China in 2007 with China Tel. (NAHC) Nat'l Atlantic Holdings $0.38 EPS vs $0.33e. (NRGN) Neurogen started Phase I trials for human obesity. (NVS) Novartis delays 3 month approvalfor Galvus for diabetes. (POOL) SCP Pool announced $100 million for share buybacks. (PPD) Pre-Paid Legal announced it repurchased 500K shares from insiders. (PRFT) Perficient filed to sell 1.3M shares for holders. (RIV) Riviera Holdings gets $21.00 buyout proposal. (SLXA) Solexa is being acquired by Illumina (ILMN) for $14 per share in stock for stock deal. (SNIC) Sonic Solutions gets DVD integration for future Wii units from Nintendo. (SUNN) Suntron settled litigation with Applied materials. (TARO) Taro Pharma received marketing approval in the UK for Etopan (TRB) Tribune may even get a bid from Hank Greenberg formerly of AIG according to NYTimes. (TRMP) Trump Entertainment has a good shot for investors and traders alike according to Cramer on MAD MONEY. (TSN) Tyson Foods -$0.15 EPS vs -$0.04e,although that number included charges. (WNR) Western Refining $1.30 EPS vs $0.75e; unsure if comparable. (WYNN) Wynn Resorts noted positively in Barron's. (UAUA) United Airlines could be subject of an LBO according to Tribune. (ZGEN) Zymogenetics reports positive Phase Ib results at the rheumatology conference with Serono (SRA).
AET removed from Goldman Sachs' conviction buy list. ATK raised to Buy at Thomas Weisel. BBBB raised to Buy at B of A. BLL started as Neutral at Goldman Sachs. CCK started as Buy at Goldman Sachs. CEPH raised to Outperform at CIBC. CKEC raised to Buy at Jefferies. CRM reitr Buy at B of A. E raised to Buy at Merrill Lynch. EP started as Equal Weight at Morgan Stanley. EQP started as Equal Weight at Morgan Stanley. ERIC raised to Outperform at RBC. ESRX raised to Overweight at JPMorgan. ESV cut to Underweight at Morgan Stanley. FDX started as Buy at Citigroup. GCI raised to Buy at Merrill Lynch. GI cut to Underperform at FBR. GMRK cut to Hold at AGEdwards. GRP raised to Overweight at Morgan Stanley. HUM raised to conviction buy list at Goldman Sachs. IFX cut to Reduce at UBS. NP cut to Hold at Citigroup. NWPX started as Buy at Jefferies. OCNW started as Buy at Jefferies. OI started as Sell at Goldman Sachs. PAAS raised to Sector Outperform at CIBC. RE added to JPMorgan Focus List. RFMD raised to Outperform at CIBC. SNDK cut to Neutral at UBS. SPI cut to Neutral at Merrill Lynch. SRP raised to Buy at Citigroup. THE raised to Overweight at Morgan Stanley. TMO started as Overweight at Lehman. UPS started as Buy at Citigroup. WCG raised to Buy at Jefferies. WSPI started as Outperform at FBR.
Citigroup makes changes to its recommendation list: deleted MCD, HON, JNJ; added INTC, ODP, GE.
After Microsoft w=has adopting a business model that may cut music companies in on the sale of its Zune hardware along with the traditional cut of content fees, the big software company is pushing another feature to grab share from Apple.
The Zune has the capacity to locate other Zunes and then share files with them wirelessly. The iPod cannot make this claim nor can any of its other rivals. The technology draws on features from Microsoft's earlier development of the Xbox game platform.
Many in the portable media player industry have written off the Zune as an expensive endeavor from Microsoft which is doomed to fail because of the iPod's huge distribution base. Of course, a similar case could be made regarding Japanese cars entering the US market in the 1960s.
Microsoft is changing the paradigm of what a portable music player can do and how its content partners can profit. This, at the very least, will put pressure on Apple to consider what it must do to keep its lead. As an analyst from Jupiter Media pointed out to BusinessWeek recently: "Close ties to the music industry could pay off for Microsoft in the short term with exclusive record industry deals. Companies such as Universal, for example, may grant Microsoft the rights to offer new releases earlier than rival services."
At this point, with Microsoft's marketing muscle behind it, the Zune may be changing the landscape for multimedia devices just enough to become successful and bleed Apple in the process.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Markets in Europe were slightly higher at 6 AM New York time.
The FTSE was up .3% to 5,228. Barclays was up .7% to 714.5. BP was off .8% to 593.5. BT was up 1.3% to 283. GlaxoSmithKline was up 1.2% to 1376. Prudential was up 2.4% to 553.5. Reuters was up .2% to 460. Unilever was up .1% to 1404. Vodafone was up 1.1% to 136.
The DAXX was up .5% to 6,391. Bayer was down .2% to 40.32. DeutscheBank was up .7% to 98.8. DaimlerChrysler was up .2% to 46.06. Deutsche Telekom was up 3.1% on the resignation of its CEO. Siemens was up .1% to 74.98.
The CAC 40 was up .8% to 5,491. Alcatel was up 1.1% to 10.36. AXA was up .9% to 30.58. France Telecom was up 1.3% to 20.01. ST Micro was up .5% to 13.71. Vivendi was down .1% to 29.88.
GM will spend a lot of time and effort promoting its new hybrid technology. The problem is that cars built using the new tech won’t be out for a few years, if at all. GM has not decided if the technology will be available in production cars
For a company trying to save $9 billion a year to get its North American operations back into the black, the effort would not appear to be well-spent. It actually appears to be a distraction. The new Consumer Reports survey of car reliability shows that, of the 45 least reliable cars, twelve were from GM. No other car company even came close.
Maybe GM’s executives can forget the problems of their expenses, falling market share, poor quality ratings, and $9 billion-a-year cost cutting if they spend enough time talking about hybrids that they can’t sell yet to a market that may not want to buy them.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Someone put LSD into the drinking water at GM. The big car maker’s Buick unit announced that it believes that it can get up to 40% of its new customers for the Enclave crossover SUV from Acura and Lexus. Acura is owned by Honda and Lexus is part of Toyota.
Toyota and Honda have owned GM in market share for several years now.
Acura’s recent growth in the US market has be fueled by sales of its SUVs and crossovers. Of course, they plan to willingly give a large portion of this market to Buick.
Lexus also showed sales gains in October. As part of the world’s most successful car company, the luxury brand is also likely to hand market share to Buick so that the GM unit can do better.
Recent sales at Buick have not even kept pace with GM’s overall numbers. In October GM’s total unit sales rose almost 22%. Buick was up a little over 15%.
There is something to be said for hoping to take shares from rivals who are doing better, but telling the press and the competition.
