Daily Archives: December 10, 2006

Barron’s Digest December 11,2006 Issue

Stocks: (MEL)(STN)(ASCA)(PNK)(PENN)(ISLE)(INTU)(MDT)(NT)(GHS)(TRB)(GCI)(LEE)(JRC)(ACL)(VOD)(PFE)(EDS)(DIS)(AAPL)

Mellon and Bank of New York have announced a merger and Barron’s had suggested that there needed to be an event to unlock Mellon value. The bank’s shares, currently at $42 could be trading at $50 by early 2008.

Deals to buy-out casinos are multiplying. Station Casinos is being bought for a 20% premium.Other casinos that could be bought are Pinnacle, Penn National Gaming, and Isle of Carpi.

Intuit is getting into the business of providing service to online banks by buying Digital Insight. It allows the company to get into the area of providing software for small business applications beyond finance Morgan Stanley sees the shares rising to $38 up from just over $30 now.

Medtronic is working on innovations for wireless telemetry which allows patients to be monitored everywhere they go. This would be on top of the company’s implantable defibrillator business. The company trades at a multiple similar to Boston Scientific and St. Jude Medical but has better cash flow. The stock is up to $53, but there are some investors that think it could go to the $60s as new products are released.

Wall St. has not liked telecom equipment company Nortel. But, the company has been cutting costs and building its core businesses. The shares have been flat for three years but could jump by over a third in the next year as the restructuring of the company takes hold.

Gatehouse Media is a newspaper company with rising shares and a large dividend. Its shares have been outperforming those of companies like Gannett, Journal Register, Lee, McClatchy and The Tribune. But, investors should be careful about being attracted by the large dividend. Based on earnings and cashflow, the stock has become expensive.

Wall St. is down on shares of Alcom because of short term concerns regarding its implantable lenses for cataract patients. As baby boomers reach their 60s, the company’s market should grow, and shares could rise from the current $113 to near $140.

Vodafone is improving its prospects by increasing its wireless assets in emerging countries like Turkey and South Africa.

Is Pfizer going to recover? They face the prospect of a number of their drug patents running out in 2011, but that gives them some time. But, the company has five drugs in late stage development and says that this number will double by 2009. The company also has the cash to raise its dividend.

EDS is a company in the new world economy that trades at old world multiples. The company recently bought into an Indian outsourcing company with 20,000 workers. Operating profits climbed from 2.5% last year to 4% of sales this year and should rise to 6.3% next year.

Disney has filed a patent for a streaming video device which is interesting due to its close ties with Apple. It appears that the two companies may be cooperating on the mobile video front. Consumers may soon be watching Disney video on Apple handsets.

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

Posted on: December 10, 2006 – 8:27 pm in Press Digest

No Catching Google For Microsoft Online

Microsoft’s MSN and other online businesses used to be a pretty big deal. They sat at the top of the pack with AOL and Yahoo!. That was before social networking and video sharing and…. Google.

Microsoft has brought in new blood to try to resurrect it fallen online operations. But it may take more than a transfusion to get the operations back on their feet.

There is some concern at Microsoft that it allowed itself to be overly focused on how its online software, like mapping, functioned and let marketing go to hell.

Microsoft really has three online initiatives and they may not be able to all exist together. There is the old portal business that competes with the likes of AOL and Yahoo!. There is a home grown search engine that competes though not very well, with Google. And there is the Microsoft Live business that helps tether users of Windows and Office to MSFT to get additional interoperability and functions for the software that is installed on PCs.

It could be argued that the search feature is core to the online connection to Office and Windows users. Search is an essential function for users of operating system and productivity software. It is part of the overall efficiency of the internet. So, search and Live can probably live together and be part of the same overall operation.

The leaves MSN which has little to offer beyond what users get from AOL and Yahoo!. Since most of the services from these "portals" are free, MSN has to count on advertising revenue to fuel its income. And, as Yahoo! investors have found out recently, that is easier said than done. Whether the model will work for AOL, which is dropping its fees to subscribers in favor of trying to create a larger audience for advertisers, is still to be determined.

Microsoft has two promising online business and a portal operation that is running far out of first place in that segment of the market.

Maybe AOL or Yahoo! would buy MSN. It is hard to see what Microsoft should do with it.

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

Posted on: December 10, 2006 – 5:58 pm in Internet

More Oil Gets Freed Up

Congress has finally passed a bill that will allow oil companies to drill for the 1.26 billion barrels of oil that sit below the Gulf of Mexico south of the Florida panhandle.

Although drilling will not begin for at least a couple of years, the new law will open up a part of the Gulf that has been closed for 25 years.

If there is more trouble in the Middle East or in other unstable regions, it will be nice to have a supply to help offset interruptions in supply. Oil may be down from $72 to $62 over the last few months, but it may not stay there.

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

Posted on: December 10, 2006 – 3:41 pm in Oil & Gas

Is Telecom TV Bad For Cable’s Business?

Stocks:  (TWX)(VZ)(CMCSA)(CVC)(T)

I would appear that when two companies offer TV and other services over lines into the home, prices drop a lot. According to the American Consumer Institute, the drop is 27% over five years.

Which means, oddly enough, that the new telecom fiber-to-the-home initiative from Verizon and AT&T may not be good for big cable like Time Warner and Comcast, but is may also be bad for the telephone companies.

The competition for "triple play" customers who get voice, broadband and TV in one package has been written about for a couple of year. Now that telephone companies are putting down fiber, they can offer TV along with voice and broadband. Verizon says it will have four million TV customers by 2010.

But, going back to the folks at the American Consumer Institute, they reckon that competition between phone and cable comanies could save consumers $10 billion a year. That is $10 billion that someone is not getting in revenue. It means a price war. With cable already in the ground for years, and Verizon spending $18 billion to put in its own network, price cutting will hurt that last guy in the most.

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

Posted on: December 10, 2006 – 3:34 pm in Telecom

Citi’s M&A Addiction

Stocks: (C)(JPM)(BAC)(PUK)

There is no amount of bad press or investor discontent that can keep Citigroup from buying new pieces to add to its empire. Now that the rumors of a Bank of America tie up with Barclsys has died down, Citi can rest, at least of the time being, with the knowledge that no financial institution will be larger that it is. And, perhaps it is getting even larger.

After recently buying controlling interest in a bank in China, late word is that Citi is trying to buy UK online bank Egg, which is owned by UK insurance company Prudential. Prudential did Citigroup investors a favor and turned the offer down.

The odd thing about the potential deal is that Egg apparently loses money, but Citi was willing to pay $1.9 bllion for the chance to own it. Perhaps that is one reason why Citi’s shares are up about 7% this year while Bank of America’s have risen well over 20%.

The market want Citi to make what it has work.

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

Posted on: December 10, 2006 – 3:20 pm in Banking

GlaxoSmithKline May Benefit from Weak U.S. Dollar

GlaxoSmithKline (GSK) is a pharmaceutical stock which has outperformed the S&P with less volatility, and which may also benefit if the U.S. Dollar continues to weaken against European currencies. And as a kicker, Glaxo may be less affected by political developments and regulatory issues in America than some of its competitors. Less than half of GSK’s sales of pharmaceuticals occur in the U.S.A.

GSK has a diversified array of proprietary pharmaceuticals including several blockbusters such as Betnovate, Relafen, and Zantac, and they also have a substantial stable of popular over-the-counter consumer products. They are big on vaccines and oncology products, and it seems likely they are less threatened by competition from generic pharmaceuticals than certain other pharmaceutical concerns.

The shares currently yield 3.4% and the company has quite a good history of increasing the dividend regularly.

In the aftermath of the U.S. elections, the ADRs sank into the middle of their 52-week trading range, then gapped higher when the dollar began to fall sharply against the British Pound and the Euro. The shares have pulled back this week, but I think that once the gap is filled, the next big move is likely to be up.

http://biohealthinvestor.com/

Posted on: December 10, 2006 – 11:32 am in Biotech

Biotech & Medical Venture Deals Roundup

From BioHealth Investor

by Adam Rubenstein

NeoVista, Inc. (Fremont, CA), an ophthalmic device company focused on the treatment of age-related macular degeneration, has raised $41M in Series C funding. Essex Woodlands Health Ventures led the deal along with MPM Capital and previous investors SV Life Sciences, Versant Ventures, The Carlyle Group and Accuitive Medical Ventures.

Quinnova Pharmaceuticals, Inc., a specialty dermatological reformulation pharmaceutical company focused on innovative dermal drug delivery platforms, has completed a $13.6M Series A round of financing. Participating in the round are Thomas, McNerney & Partners, H.I.G. Ventures and an investor syndicate led by Omnivest (Bermuda) Ltd.

Ampla Pharmaceuticals, Inc. (La Jolla, CA) has raised $5.47M in Series A funding. Still operating in stealth mode the company website is currently unavailable. Investors include Integra Ventures, Advent International and Crabtree Ventures

Aushon BioSystems (Burlington, MA), which provides microarray-based tools, instrumentation and services for life science research, drug discovery/development and clinical diagnostics, announced they have closed their Series A $7.78M financing. North Bridge Venture Partners led the deal.

http://www.biohealthinvestor.com/

Posted on: December 10, 2006 – 11:30 am in Biotech