Daily Archives: December 17, 2006

California Gets More Nutty (GM)(F)(TM)

The big car companies being sued by the Attorney General of Califonia for causing global warming, which harms state citizens and damages the infrastructure. Apparently no other states have followed with litigation because the damage is restricted to California. Now that nut case Jerry Brown is the new Attorney General, perhaps the state will reconsider.

GM, Ford, Toyota and others don’t want to wait. They are going into the federal court system to dismiss the suit on the grounds that, if California wants lower car emissions, it should rely on the national government to create and enforce better fuel-efficiency standards.

The suit may appear wacky on the fact of it, but, if the Attorney General in California prevails and federal cours allow the legal action against the car companies to continue, similar charges could be brought in other states.

Sort of reminds one of the tobacco and Vioxx suits. Big legal bills, and, maybe, big liabilities.

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

Posted on: December 17, 2006 – 7:39 pm in Autos

Detroit Loses More Ground (GM)(DCX)(F)

The average price of a new car from the Big Three dropped, again. Reuters quotes that Labor Department as reporting that new vehicle prices dropped .7% in November, the largest drop in over a year. Incentives for cars from GM, Ford, and Chrysler are now routinely in the $3,000 to $4,000 range.

One research group, CSM Worldwide, says that US auto sales will end up hitting a nine year trough in 2007.

All of that being said, the trouble, especially for Chrysler and Ford, is probably going to get worse. Chrysler has about 100,000 vehicles on lots that have not been ordered from dealers. Ford’s market share is estimated to be about 18% next year. With such a small piece of the North American market, it is not clear that Ford can cut enough costs to stay financially viable.

Smaller share of a smaller market. No good news here.

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

Posted on: December 17, 2006 – 7:27 pm in Autos

Chrysler Needs A Salesman (DCX)(TM)

Tom LaSorda, the CEO of Chrysler, says he will be his own sales and marketing director. The fellow who held the job until recently was sacked.

LaSorda says he will focus on dealer relationships and putting an end to building a large number of cars and trucks that don’t have dealer orders. Weird. Investors would think Chrysler could keep track of that. The orders come in, or they don’t. The vehciles get built on the number of orders. Maybe it’s magic.

Chrysler has about 100,000 cars and trucks sitting around that were not ordered. They are "unassigned" to use the wording of the Associated Press.

It is surprising that Chrysler did not go outside the organization to find someone who was not involved with the intial problem. How about James Lentz, the group VP of marketing at Toyota USA. That would be a good place to start.

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

Posted on: December 17, 2006 – 1:15 pm in Autos

Cable Companies Lobby For Mercy (CMCSA)(VZ)

Cable companies are getting very nervous that the FCC will make it much easier for the telecom companies to compete for home video subscription. And, the argument against cable may be convincing. Cable rates rose 93% from 1995 to 2005. Interestingly enough, Comcast’s stock has risen from $10 to $42 over that period.

Cable argues that when consumers bundle in broadband subscriptions and VoIP, prices for the services as a whole have dropped. Of course, many people don’t buy the bundle, so the point of view is self serving.

Cable’s lead in TV deliver to the home is gigantic. While Verizon will have just over 100,000 fiber-to-the-home video subscribers at the end of this year, Comcast already has 1.35 million VoIP subscribers.

The head of the FCC is rebuking the local authorities who grant licenses for TV-to-the-home for: "obstruct and in some cases completely derail" new attempts to bring video competition to an area, according to the Associated Press.

Cable should hope that the government does not begin to take away it leverage and allow telecom companies to move further into a market that the cable companies have owned for years.

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

Posted on: December 17, 2006 – 12:28 pm in Cable Companies

Will Lowe’s Come Back? Bear Stearns’ Nutty Theory

Stocks:  (LOW)(HD)

According to Barron’s, the analysts at Bear Stearns think that things are about to get much better at household goods retailer Lowe’s.  Bear Stearns has put a new target on the stock of $39. The stock trades at $31.39 now, and has a 52-week high of $34.85. To trade at $39, Lowe’s would have to hit an all-time high. This is for a stock that has underperformed Home Depot this year.

Part of Bear Steans’ argument is that 2007 comparisons to 2006 figures will be good, because 2006 numbers were weak, especially as the year went on. One would think most investors would see through this and look for absolute and not relative financial numbers.

The core of Bear Stearn’ thesis is that housing will stabilize as it moves into the second half of 2007. That may be true, but the evidence for the assertion is still very weak.

Lowe’s stock has already run from $28 in late September to its current price, an increase of about 25%. Is there another 25% in the stock to take it to the highest level since the company became public.

Probably not.

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

Posted on: December 17, 2006 – 12:04 pm in Retail

Will Dell Rule China? (DELL)(HPQ)

Dell has gotten a delisting notice from Nasdaq. Its share of the PC market is dropping.

Like many other US company’s maybe it will try to find the solution to its problems by expanding in China.

Late rumors are that Dell may be buying Beijing Founders PC operations. If Dell could combine this with its own PC operations there, it would have 23% of the market in a country where PC sales are still moving up rapidly.

If Dell can complete the deal, which is said to be worth $800 million to Founders, the US PC company could increase its ability to compete with HP, Lenovo, and Acer in the Asia-Pacifit market.

Dell needs the deal, very, very badly. If it can’t close, it is another bad sign for the company.

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

Posted on: December 17, 2006 – 11:50 am in Hardware

China Versus OPEC

The Chinese decided to invite all of the big energy consuming nations to Beijing. The idea behind the conference is to set up a common set of goals like conserving energy and finding alternative energy to cut dependence on oil.

Since much of the demand for oil that has helped push up oil prices is due to China, having the country host the conference was ironic and perhaps even desparate.

One of the US representatives perhaps stated the problem that the oil consuming economies have: “Even under the best circumstances, in my view, only a fraction of any nation’s projected needs can be met through direct ownership of reserves”. He was, in essence, saying that the conference was futile.

Good point.

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

Posted on: December 17, 2006 – 11:38 am in Oil & Gas

Yahoo’s Pipe Dream, Diller’s Decision

Stocks:  (IACA)(YHOO)(GOOG)(MSFT)

The editor at Fortune seem to think they have come up with a set of circumstances in which Yahoo! could catch Google in the search industry.

That’ll be the day.

Fortune wants its readers to believe that if Yahoo! and Microsoft team up in search, that with Yahoo!’ snew ad search technology, Panama, the combined entity might get close to Google in market share. Industry estimates are that Yahoo! has about half the number of advertisers that Google has.

The next part of the plan is that Ask.com, part of Barry Dillers IAC/Interactive put its search audience into the anit-Google pot. Ask has a deal with Google to run text ads that expires in 2007.

The process has several flaws. The first is that no one is sure that Yahoo! Panama is better that Google’s system. That won’t be known until it is in the market for some time. It is also not safe to assume that Google will keep its current platform without making its own major improvements.

Could Yahoo! pull MSN and Ask.com into a three-way partnership. Three ways is tough. Who runs it? What are the revenue cuts? Won’t Google come in and try to buy one of the partners out to prevent any alliance that might threaten it?

The editors at Fortune might want to find another topic.

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

Posted on: December 17, 2006 – 11:27 am in Internet

Eli Lilly’s Picking On Schizophrenics (LLY)

Picking on people with schizophrenia would seem to be very unfair. If it is a large corporation, the odds against prople with serious mental illness would really seem to be stacked against them.

Lawyers for patients who suffer from the awful disease have uncovered documents that show the Lilly played down the health risks of Zyprexa, the companies best selling drug for treating schizophrenia.The drug can cause weight gain and increase in blood sugar, both of which can cause diabetes.

The drug brings in $4.2 billion a year, so it is not hard to see why Lilly would try to dupe the mentally ill and their doctors.

According to the NY Times internal Lilly documents are "replete with references to Zyprexa’s importance to Lilly’s future and the need to keep concerns about diabetes and obesity from hurting sales"

At least the attorneys for these seriously ill people have a smoking gun.

And, at least Lilly is probably facing a major legal and PR disaster. Not good for the stock.

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

Posted on: December 17, 2006 – 7:49 am in Pharmaceuticals