From Ticker Sense
Below is a list of the S&P 500 stocks that are trading the furthest above and below their 50-day moving averages. Two automakers (F and GM) and two electronics retailers (CC and BBY) made the list of most oversold.
From Ticker Sense
Below is a list of the S&P 500 stocks that are trading the furthest above and below their 50-day moving averages. Two automakers (F and GM) and two electronics retailers (CC and BBY) made the list of most oversold.
By Chad Brand of Peridot Capitalist
Late Monday drug giant Pfizer (PFE) announced a 21 percent increase in its annual dividend, to $1.16 per share. With the stock trading at $25 and change, the new current yield on the stock is a whopping 4.5 percent. I speculated about two weeks ago that investors should expect a bump in the payout of 15 percent, so the magnitude of this increase is a positive surprise from my perspective.
The share price of PFE is unchanged on this news, but is it indeed an immaterial event? I believe value investors will add to positions in light of the more than 20 percent boost to the dividend. Pfizer’s yield should not be equal to that of long-term treasury bonds, and the market will likely correct this.
Assuming investors’ demand for PFE increases, I would expect the yield to fall back toward the 4 percent level. This would put the shares of Pfizer at $29 each, about 12 percent above current levels.
Full Disclosure: Peridot owns shares of Pfizer
Keep in mind we do an analysis piece on every ipo before it hits the market. They’re all available to subscribers at http://www.tradingipos.com
This week’s is a promising little China ipo that debuted earlier today. Note that tradingipos.com does have a position in FFHL at approximately $8.55.
Happy Holidays from tradingipos.com!
2006-12-17
FFHL – Fuwei Films Holdings
FFHL – Fuwei Films Holdings plans on 4.3 million shares(assuming over-allotment) at a range of $8-$10. Maxim Group will lead underwrite the deal, with WR Hambrecht and Chardan Capital Markets co-managing. Post-offering FFHL will have 13 million shares outstanding for a market cap of $117 million on a pricing of $9. IPO proceeds will be invested in a new production line and to further FFHL’s technology and operations.
From the prospectus:
‘We develop, manufacture and distribute high quality plastic film using the biaxial oriented stretch technique, otherwise known as BOPET film (biaxially oriented polyethylene terephthalate). Our BOPET film is widely used in consumer based packaging (such as the food, pharmaceutical, cosmetics, tobacco and alcohol industries), imaging (such as masking film, printing plates and microfilms), electronics and electrical industries (such as wire and cable wrap, capacitors and motor insulation), as well as in magnetic products (such as audio and video tapes).’
FFHL, which commenced operations in 2003, believes they are one of the top BOPET manufacturers in China. FFHL sells to over 300 customers in China, The United States, Japan and Southeast Asia. Customers include some of the largest companies engaged in flexible packaging, including Alcan.
Printing film, stamping film and metallization film accounts for 65% of revenues. Specialty products such as anti-counterfeit film, laser holographic base film and single/double surface matte account for 15% of revenues. The largest segment of revenues comes from the packaged foods industry. Majority of sales are to packaged goods companies in the eastern section of China. Companies in China account for 80% of 2006 revenues, outside of China 20%. FFHL estimates that revenues outside of China will continue to increase as an overall % of revenues.
Not being an expert on BOPET, I’m going to quote from the prospectus on FFHL’s BOPET film:
‘BOPET is a high quality plastic film manufactured using the biaxial oriented stretch (transverse and machine direction) technique. Our advanced production process improves the physical properties of the plastic film such as its tensile strength, resistance to impact, resistance to tearing and malleability. The high dimensional stability of the film over a wide range of humidity and temperature fulfills the basic requirements for flexible packaging. The film is light-weight, non-toxic, odorless, transparent, glossy, moisture-resistant, and retains high barrier resistance, making it suitable for many forms of flexible packaging, printing, laminating, aluminum-plating and other processes. In addition, it retains high dielectric strength and volume resistance even at high temperatures, which are essential qualities for electrical and electronic uses. The three-layer structure of CBOPET gives the film added properties which enables us to develop high quality BOPET products…BOPET film is manufactured from polyethylene terephthalate (PET) resin, which is a petrochemical product. BOPET film is produced by melting the granulated PET resin and extruding it into a flat sheet. This sheet is stretched to 3.0 to 3.6 times its original length, and then horizontally to 3.6 times its width, before being heat-set and finally wound into reels.’
Products: 1)Printing base film used in printing and lamination; 2)Stamping foil base film used for packaging of luxury items to increase the aesthetic presentation of an item; 3) Metallization or aluminum plating base film used for vacuum aluminum plating for paper or flexible plastic lamination; 4)Laser holographic base film which may be used as anti-counterfeit purposes and can also be used in packaging to help enhance the aesthetic appeal of food, medicine, cosmetics, cigarettes and alcohol; 5) Matte film used for printing, metallization, stamping and transferring; 6) High-gloss film used for aesthetically enhanced packaging purposes. 6) Thick BOPET film to targeted to replace the the higher priced imported thick BOPET film. FFHL will commence manufacturing of thick BOPET film after ipo.
FFHL has a 100% market share in China for their Matte film and Laser Holographic base film.
As noted in #6, FFHL will be utilizing ipo monies to invest in new production lines capable of increasing the capacity of the production as well produce thicker films of 50 to 200 microns. FFHL expects to expand into the electrical and electronic film markets with these thicker films. Targeted will be thin film LCD screens. Currently much of the film used in LCD screens in China is imported. FFHL believes they can use their low cost production capabilities in China to manufacture and sell their new films cheaper then the imports.
FFHL is seeing an increase in their raw materials costs, namely polyethylene terephthalate(PET). Raw materials costs were 81% of total product costs through 6 months of 2006, up from 77% in 2005.
Financials
$2 1/2 per share in cash post-offering.
2 X.s book value on a $9 pricing.
Since inception in 2003, revenues have grown steadily…although revenues were flat year to year from 2004-2005. Revenues both years came in at approximately $43-$45 million US. Revenues have picked up in 2006, although the third quarter was relatively a weak one for FFHL.
Production utilization was approximately 87% in 2005.
2006 – Full year revenues appear on track for $51-$54 million, a 20% increase over 2005. Gross margins are rather slim at 23%. Due to rising costs of raw materials gross margins for ‘06 are actually down a bit from ’05’s 25%. FFHL has a very low tax rate currently. That should continue for the foreseeable future hitting no higher then 7% the next 3 years. Net margins for FFHL in 2006 appear as if they will be in the 15% range. Earnings per share for 2006 look to be in the $0.55 – $0.60 range. On a pricing of $9, FFHL would be trading 15-16 X’s 2006 earnings.
Looking into 2007, I would expect revenues to accelerate a bit more then 20% due to FFHL’s new production capacity coming on line. In addition FFHL will be manufacturing thicker film for the electronics industry, I would expect at least 25%-30% revenue growth in 2007. I would expect earnings per share to increase at approximately the same pace as revenues. I would not be surprised to see FFHL earn $0.75+ per share in 2007. If FFHL does earn $0.75 in 2007, at $9 it would trade 12 X’s forward earnings.
FFHL is a small Chinese microcap showing solid growth and ipo’ing at a very reasonable multiple. The initial market cap of $117 million on a $9 pricing really leaves a lot of potential longer term upside should FFHL continue to perform. I like the initial valuation here and recommend FFHL in range and a bit above.
From AAO Weblog
Seen Casino Royale yet? The hook is that it’s the first Bond movie in a freshening of the franchise. Instead of trying to extend the existing franchise under the same logical (maybe) framework as the previous Bond movies, this one starts over with James Bond in 2006 on his first mission. Result: one of the best Bond movies I’ve seen. And it seems like lots of ticket-buyers agree with me.
The “re-imagining” gimmick worked for Batman, in 2005. It worked for Superman earlier this year. Word is that it’s going to be applied to the original Star Trek franchise, too. (Ben Affleck as Mr. Spock? Just plain wrong, on soooo many levels.)
Taking its cue from the movies, it looks like UnitedHealth may be re-imagining its stock compensation as well.
In the whopping 8-K filed in conjunction with its investor conference, UnitedHealth supplies answers to some of the stock option questions investors have ached for. The results of their internal investigation by Wilmer Cutler Pickering Hale and Dorr are in, and they’re requesting “a consultation on certain interpretive issues with the SEC’s Office of the Chief Accountant.” What those interpretive issues might be aren’t clear – but if a firm revokes the reliability of its published financial statements from 1994 to 1996, you’d have to suspect that the number of financial statements to restate might be one of those issues you’d like to run by the SEC before you find out too late that you didn’t restate sufficiently far back. Continuing the movie analogy, that revocation effectively wipes out the old franchise, setting the stage for its “re-imagination.”
As for the amounts of the stock compensation to be revised:
“The Company analyzed the accounting impact under two methods: its former accounting method under APB 25, and its current accounting method under FAS 123R. Management estimates that the aggregate amount of pre-tax non-cash charges for stock-based compensation expense for the period 1994 – 2005 determined under APB 25, the Company’s former method of accounting, ranges from $1.5 billion to $1.7 billion.
On January 1, 2006, the Company adopted FAS 123R using the modified retrospective transition method, under which all prior period financial statements were restated to recognize compensation expense in the amounts historically disclosed under FAS 123. Under this current accounting method, management estimates that the aggregate amount of pre-tax non-cash charges for stock-based compensation expense ranges from $400 million to $600 million for the period 1994 – 2005 and from $25 million to $60 million for 2006.”
That’s where the bulk of the re-imagining comes in. If UnitedHealth restates all years from 1994 to 2005 with proper application of the compensation standard it chose to use during that period, the pre-tax compensation to be recognized is $1.5 billion to $1.7 billion. Presumably, it chose to use that method because it thought it could record less compensation expense than if it used the theoretically preferable method, Statement 123 and its sequel, 123R. (Yes, it’s a presumption. But that was pretty much the way stock compensation was considered by firms in that era.)
Now that the company has thoroughly vetted its option compensation practices for the period, it finds that its option compensation would be less under Statement 123R. Which one will it use?
The company was required to adopt Statement 123R on January 1, 2006. To its credit, the company elected to apply the modified retrospective method of adopting the standard, which would restate all periods presented in the financials as if 123R had been in effect. At that time, it’s doubtful that anyone considered that “restating all periods presented” would extend back to 1994. That wasn’t contemplated in the standard; now that the company might be facing that task, one wonders if they’ll go that route. And if the Office of the Chief Accountant will go for the idea.
One other interesting nugget from the company’s above disclosure: it says that the 1994 – 2005 pretax compensation under Statement 123R was in the range of $400 million to $600 million. Go back to the footnotes for the now-invalid 2005 10-K, to see what the unrecognized comp was under Statement 123 for just the prior three years: $160M in 2005, $132M in 2004, and $122M in 2003, for a total of $414 million aftertax compensation. Gross it up for a 35% assumed tax rate and you get a pretax figure of $637 million. That’s just for three years, not the entire period between 1994 and 2005. While Statement 123 and Statement 123R are different standards, the differences aren’t major in the areas of valuation and recognition. If UnitedHealth goes the route of re- imagining their performance for that period using Statement 123R, hopefully, they’ll have some really good disclosures about their calculations.
From BioHealth Investor
Biotechnology
HESKA CORPORATION [HSKA] +10.67%
IDERA PHARMACEUTICAL [IDP] +8.76%
NUTRITION 21 INC [NXXI] +8.00%
METABASIS THERAPEUTI [MBRX] +5.19%
CYTORI THERAPEUTICS [CYTX] +4.76%
Diagnostic Substances
IMMUNOMEDICS INC [IMMU] +11.11%
SYNOVICS PHARMACEUTL [SYVC.OB] +6.25%
AVALON PHARMACEUTIC [AVRX] +4.93%
PRESSURE BIOSCIENC [PBIO] +4.19%
BIOMODA INC [BMOD.OB] +3.45%
Drug Delivery
COLUMBIA LABS INC [CBRX] +3.05%
NOVADEL PHARMA INC [NVD] +2.61%
SKYEPHARMA PLC [SKYE] +2.53%
BIOVAIL CORP [BVF] +2.05%
FLAMEL TECH SA ADR [FLML] +1.37%
Drug Manufacturers
PLANET TECHS INC [PLNT.OB] +29.31%
ALEXZA PHARMACEUTICA [ALXA] +5.85%
KERYX BIOPHARM INC [KERX] +5.64%
REGENERX BIOPHARM IN [RGN] +5.50%
CORTEX PHARM INC [COR] +4.62%
Medical Appliances & Equipment
MEDICAL SOLUTION MGT [MSMT.OB] +260.00%
VNUS MEDICAL TECHNOL [VNUS] +9.01%
EMERGENT GROUP INC [EMGP.OB] +6.15%
ESCALON MED CP [ESMC] +5.12%
NORTHSTAR NEUROSCI [NSTR] +5.08%
Medical Instruments & Supplies
BIOTEL INC [BTEL.OB] +19.05%
TUTOGEN MEDICAL INC [TTG] +8.33%
PROTHERICS PLC [PTIL] +3.39%
EP MEDSYSTEMS INC [EPMD] +3.25%
CHINA MEDICAL TECH [CMED] +2.42%
Medical Laboratories & Research
MEDASORB TECHNOLOGS [MSBT.OB] +7.27%
BIO-IMAGING TECH [BITI] +2.47%
PACIFIC BIOMETRICS N [PBME.OB] +0.94%
ERESEARCHTECHNOLOG [ERES] +0.79%
LABORATORY CORP NEW [LH] +0.76%
By William Trent, CFA of Stock Market Beat
Circuit City swings to unexpected loss on price cuts – MarketWatch
Shares in Circuit City Stores Inc. (CC) fell sharply Tuesday after the company reported a surprise third-quarter loss, as price wars on flat-panel televisions and other consumer electronics eroded margins. Circuit City, which also lowered its expectations for the year, saw its shares fall as much as 19.8% to a 13-month low of $18.25 soon after the market opened.
How unexpected could it have been after Best Buy’s (BBY) report last week? Some investors need to wake up and smell the consumer slowdown.
The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Union Pacific (UNP) put options; Air Products (APD) put options; Nasdaq 100 (QQQQ) put options; FedEx (FDX) put options; Intuit (INTU) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Three Five Systems (TFS); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Landstar (LSTR) put options; Ceradyne (CRDN) put options; Dell (DELL) put options; Plantronics (PLT) put options
Stocks: (NWS)(TWX)(GOOG)(YHOO)
Rupert Murdoch. Never drawn. Never beaten. Not in the newspaper industry, cable programming, satellite TV, studios, and now, the internet.
Murdoch looks as old as Methusela and probably is. But, his purchase of MySpace has taken his internet properties, called Fox Interactive, out to a page view lead over the previous leader, Yahoo!. ComScore says that Fox Interactive had 39.5 billion page views in November. Yahoo! had 38.7 billion.
Yahoo! kept the lead in unique visitors at 129.9 million compared to 119.7 million for Time Warner sites which were in second place. It hardly matters. Yahoo! ’s margin in page views and unique visitors is disappeared.
Yahoo has recently announced a major restructuring of its management, but it does not address why the internet portal has not had success in expanding its audience in video sharing and online community sites thought acquistions or home-grown products. YouTube shows up in the ranking with 25.5 million unique visitors. Its new parent, Google, has 108.3 million. Facebook, a community site Yahoo! approached about acquiring hit 16.7 million unique visitors in November, and independent photo sharing site Photobucket hit 15.6 million. Yahoo! is already in the photo sharing business with its Flickr brand.
Yahoo! has lost its room to maneuver.
Time’s up.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
For awhile this year, it looked like Sony’s stock might never recover from its battery recalls and Playstation 3 delays.
But, things have started to move Sony’s way. After opening the year at $41, Sony’s stock got as low as $37.25. The shares are now back to about $43.
Sony has done a number of things to save its own hide, and some of them may be working. The company is working on a number of ways to get its studio content onto multiple platforms, including its own Playstation portable. Sony is even working with flash memory sticks that allow movies to be played on cell phones.
Sony may also benefit now that Sharp is producing blue laser diodes in greater number. The components are essential for next-generation DVDs, and lack of product has hurt holiday sales. Sony has its own production capability, but it is tied up with the PS3. As the Financial Times points out: "new standards are expected to generate billions in revenue for the technologies’ backers – led by Sony in the case of Blu-ray and Toshiba for HD-DVD" So, Sony’s payday in the DVD business should be getting better.
Perhaps the single most important development for Sony over the last few months is that the company is insisting that it will sell six million of the new PS3 by the end of March. That number had been in doubt as supplies of the platform were low for Christmas.
Sony has been burdened by ugly problems and doubts on Wall St. that management could get the company back into a reasonable competitive position in media and gaming. There are some signs, at least, the the company is on the right path.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Stocks: (JNJ)(BSX)(STJ)
It has only been a few days since Merrill Lynch said that Bank of America may be buying Barclays. The results were humiliating for Merrill. The Barclays denial was only faster than the one from B of A.
A good way for analysts to get their names in the media is to speculate about M&A targets and public company buy-outs. But, is it good analysis and is it responsible? Maybe not.
Merrill Lynch is saying that St Jude Medical, which makes medical devices, might be snapped up. The snapper is alledgedly Johnson & Johnson. The reason seems to be that JNJ wanted to buy Guidant, but Boston Scientific got there first. So, St Jude is the prized for finishing second. According to The New Yort Times the analyst said "Johnson & Johnson “likely has the greatest financial flexibility” to acquire St. Jude.
That’s great, but it does not say that JNJ has called St. Jude, talked to them, or that any deal is in the works.
It is, in essence, good PR for the analyst and a waste of time for Wall St.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Dell hired the former CEO of American Airlines to become the PC company’s CFO. Donald Carty is a Dell board member and has been mentioned in this column as a potential replacement for Dell CEO Kevin Rollins. Carty will also server as Vice Chairman of the board.
Carty may be helpful to Dell in navigating the accounting problems it has had. These have brought the attention of the SEC and Justice Department. But, more important, if Dell has one more bad quarter, Carty is in the house as CEO-in-waiting
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
After a glowing cover story in Barron’s recently, Nortel had something to live up to. The company, down so long that almost no one remembers when the company did well, Nortel signed at $2 billion deal today to provide equipment to Verizon for expanding the telecom’s internet broadband capacity. :
Although Alcatel-Lucent is the No.1 provider of CDMA equipment Nortel is in second place.
The entire wireless and router industry is going through a huge consolidation. Ericsson has just bought Redback Networks which makes broadband routers. The price was $2.1 billion. The Alcatel merger with Lucent has just been completed.
Some analysts are skeptical that Nortel can follow up on the 17% run the stock has taken. But, at $24.50 the stock still trades toward the low end of its 52-week range. And, if the industry consolidates further, Motorola might come calling.
Douglas A McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Northfield Labs (NFLD) just imploded after-hours. The company fell 20% at the end of the day on disappointing information chatter ahead of the review due today, but after the close it dropped them bomb. Shares are down another 50% at $5.60, and there are going to be some diappointed and really upset betters on this company.
PolyHeme(R) is the company’s one-hit wonder product: a human hemoglobinbased oxygen-carrying red blood cell substitute in the treatment ofseverely injured and bleeding patients when blood is needed but notimmediately available.
Because of discrepancies in theinitial data, the database will be unlocked and corrected prior tofinalizing the statistical analyses…..ouch. Northfield still provided the full results even though it is going to retool the data. The real problem isn’t that the data needs to be retooled. It is that the data doesn’t look good,and in fact it look atrocious. You can read the article here to see if you disagree, but this really looks like the end result is that PolyHeme(R) was all hype. The company has gone though untold millions of dollars and years of work look down the drain.
So much for that product. Too bad for the company because this has blockbuster potential if anyone can come up with a legitimate blood substitute. You have to consider how many blood banks in developing nations where medical screening isn’t available, and also battlefield settings where blood substitutes could make all the difference in the world.
Cramer has another Christmas play on MAD MONEY tonight. He called it the 12 days of Cramer, which is really 4 plays that work in Christmas without you knowing it on the ancillary plays:
Verifone (PAY): for point of sale machines (the ones at the grocery store) with 63% of POS (point of sale, not ‘piece of s…’ like on instant messengers) self swipers in the US. Valuation is cheap at barely 1-times growth and 25-times forward earnings.
Cramer’s other picks are going to be either later in the show or later in the week.
Jon C. Ogg
December 19, 2006
Cramer says you can learn from the dot.com bubble blow-ups and know how to avoid repeats in many hot stocks of today. A stock he likes is InnerWorkings (INWK). It’s up 87% since its August IPo. What Cramer is evaluating is if it has room to keep running or if it is overbought and hyped. The company is a printing services outsourced provider. They hook up 2700 printing companies with their customers and it is the new incartion of the cyber middle man with a regional to national play. That means its growth can’t be held in check. 60% of its clients are in Illinois and they are hiring more sales people.
The analysts are all four underwriters, so it hasn’t caught the attention of the street. There are 2 buys and 2 holds and Cramer said the next guy that picks up coverage 70% is held and will be free to sell in Feb 2007. He said if you buy it you may need to swap out of it and then back into it after that lock-up.
I personally remember this IPO as one that showed most of its growth because of acquisitions, but Cramer didn’t say that. It ran 15% at the IPO.
The end market for the company is huge and fragmented with printing. Cramer said the company’s proprietary software gives it an edge. Shares are up almost 5% at $17.60 after Cramer touted it, and its 52-week range is $9.60 to $18.58.
Jon C. Ogg
December 19, 2006
DJIA 12,471.32; Up 30.05 (0.24%)
NASDAQ 2,429.55 Down 6.02 (0.25%)
S&P500 1,425.52 Up 3.04 (0.21%)
10YR-Bond 4.599% Up 0.012
NYSE Volume 2,602,513,000
NASD Volume 1,922,578,000
PPI….Schme….Schpee..Schie….Don’t be spooked by inflation was the message of the day. If Thailand causing a mini-Asian Contagion was going to jeer US investors you would have never known it.
Circuit City (CC) fell 16.5% to $19.01 after missing estimates with a loss instead of a gain. If it sounds like Best Buy, the guys on the street sure didn’t know how to account for it.
Endeavor Acquisition (EDA) rose 15% to $8.70 after the company is acquiring American Apparel.
Northfield Labs (NFLD) fell 20% to $11.66 after concerns that the FDA won’t allow its blood substitute product.
Morgan Stanley (MS) rose 1.7% to $81.70 after beating earnings, but the Discovery Card unit spin-off was the real bonus.
Biogen-Idec (BIIB) fell 1.4% to $49.52 (had been -5%) after reports of 2 deaths from its Rituxan in a non-approved usage for Lupus.
Ford (F) rose 2% to $7.18 after Morgan Stanley raised the rating to Overweight, although Cramer called this flawed research.
Pfizer (PFE) rose 1.5% to $26.20 after naming its new CEO as Chairman and increasing the dividend.
Syntroleum (SYNM) soared 45% to $4.10 after a successful B-52 engine test for its fuel.
UST (UST) rose almost 2% to $57.94 after hiking its dividend and maintaining its buyback plan.
Hovnanian (HOV) fell 2% to $34.56 after forecasting a weak 2007 and a premium forward earnings multiple.
Gmarket (GMKT) rose 14% to $23.47 after Cramer said it was the ebay of Korea and beating them on that front and even noted it was cheap.
Melco PBL (MPEL) rose 13% to $21.55 in its IPO debut on 52+ million shares after its IPO scorched Wall Street as another hot casino operator play in Macau.
Jon C. Ogg
December 19, 2006
On today’s STOP TRADING segment, Cramer was baffled on research being bogus.
The recommendation on Ford (F) from Morgan Stanley on the Overweight rating is flawed. He said this could be painful if you just invest in the common stock.
On the emerging markets, cramer said there are many clowns in the emerging markets and other jokers that put it all on Red. You have to worry when governments intervene, and you have to be able to sleep at night. If you are up a lot, you have to take profits in that sector.
On Endeavor (EDA) and American Aparrel…Buyer Beware!
Jon C. Ogg
December 19, 2006
By Jon C. Ogg
December 19, 2006
There are some key Internet Search numbers out from Nielsen/NetRatings for November 2006, and we compared them to October for relevence (numbers rounded):
NOVEMBER 2006
Google 3.097 Billion searches, 31% YOY growth, 49.5% Share of Searches;
Yahoo! 1.518 Billion searches, 27% YOY growth, 24.3% Shares of Searches;
MSN/Live 515 million searches, -12% YOY growth, 8.2% Share of Searches;
AOL 389 million searches, 11% YOY growth, 6.2% Share of Searches;
Ask.com 159.6 million searches, 33% YOY growth, 2.6% Share of Searches
OCTOBER 2006
Google 3.022 Billion searches, 23% YOY growth, 49.6% Share of Searches;
Yahoo! 1.456 Billion searches, 30% YOY growth, 23.9% Shares of Searches;
MSN/Live 538.5 million searches, -8% YOY growth, 8.8% Share of Searches;
AOL 375 million searches, 1.9% YOY growth, 6.2% Share of Searches;
Ask.com 168 million searches, 25% YOY growth, 2.8% Share of Searches
So, if you wanted to try some generalities you would derive the following:
Google search market share percentages leveled off to a tiny 0.1% decline, but their searches are still growing and their dominance is set. Yahoo! grew search market share and grew searches. MSN is the one faltering here. AOL search is growing and based on the fact that the split AOL PAY versus FREE is farther behind us the strategy looks to be living up to expectations and market share is static. Ask.com is still alive but numbers are leaning in the wrong direction.
It is not reality nore entirely realistic to use a single month-over-month of comparative data, particularly as all these search engines are making their merger changes and as search habits change toward the end of each year. This is what will be in tomorrow’s Internet research reports though, so there is at least a heads up for you.
Jon C. Ogg
December 19, 2006
XM Satellite Radio (XMSR) and Sirius Satellite Radio (SIRI)……there can be only one.
Read carefully, because this is not a suggestion that one or both CEO’s need to leave immediately. This is a blueprint. The last CEO change suggestion is a tough one and in many ways is roughly the same call. One CEO is much more famous than the other, yet the lesser-known CEO currently is in better standing with the street. This is also more strategic suggestion than it is pondering. These competing companies need to merge and we urge them to pursue a merger before year-end so they can hide behind what the street is thinking will be bad holiday sales.
Doug and I already offered a brief indication and opinion two weeks ago about what a combined SIRI/XMSR would look like and what it could save, a week before other research notes pointed that direction. Lehman pointed out the synergies to the companies would be in the vicinty north of $9 for SIRI and north of $40 for XMSR, although that isn’t our call and those numbers are for the "beneficiary" party of the merger (which there can only be one). There are obvious regulatory issues that would have to be resolved and the combined companies would have to sign some future product pricings in blood, but the difference between a merger of these two and a merger of two other behemoths is how relevent these are to life. This isn’t exactly like the cable companies and the satellite companies all trying to merge into one conglomerate that controls all we see and hear. Unless you are on the road all the time, satellite radio companies are not exactly vital to the economic models out there. The best comparison is one of media to food & water, satellite radio would be considered chewing gum as far as the importance to survival. So what needs to happen?
Sirius’ (SIRI) Mel Karmazin and XM’s (XMSR) Hugh Panero are in a dead tie for who needs to go and depending on which month it is you have six of one and a half-dozen of the other. Please don’t take this the wrong way. It wouldn’t be good for either of these heads to step down immediately. XM & Sirius need to announce a merger first and then the contest can begin for the surviving face man. Remember, this is strategic and longer-term. If you want to can the famous guy then it’s Karmazin; if you want to boot the unknown then you pick Panero. We have been vocal that both XM and Sirius needed to do a lot more for shareholders since summer. XM has been doing a better job than Sirius in the last month. XMSR shares were down more than 50% for 2006 before recovering recently, and SIRI shares are just trying to hold onto a base here and are down almost 50% for the year.
What the companies could even try doing is make one of the CEO’s the head of the divestitures and responsible for the inevitable new product launches. Wall Street would probably accept that, particularly if you think of contingency and instant back-up plans if disaster ever struck. The CEO’s could even do a coin toss over who gets to be the face man. Both are considered deal makers on the street, so it isn’t that either is irrelevant. It isn’t like one or both have to look forward to feeding park pigeons for the rest of their days. But only one of these two can can remain as the CEO and front face man after the merger. The companies may never merge, but if they do not there are going to be more shareholder problems that are harder to model for TWO companies instead of one. People love their satellite radios and there is no denying that.
Wall Street (and 24/7 Wall St.) has already given the blueprint to the companies, now both CEO’s need to stomach some pride and pull the trigger.
Jon C. Ogg
December 19, 2006
This is part of "THE 10 CEO’s THAT NEED TO GO" series. Jon Ogg can be reached at jonogg@247wallst.com; he does not hold securities in the companies he covers.
Paul Jacobs of Qualcomm (QCOM) isn’t in front of the firing squad yet, but probation is probably closer than farther away………….
Paul Jacobs may not have too many more quarters at Qualcomm (QCOM) if things don’t get better soon. What happens when sons take over dad’s business? They are scrutinized and have to do better than pop ever imagined. That couldn’t be more true if it is a public company. Things haven’t gone to hell in a handbasket, but they aren’t exactly firing on all cylinders and Qualcomm isn’t a company that investors will accept mediocrity.
Look back to a Business Week article from Summer of 2005. Be careful what you wish for, because you might get it. If we take what he said at face value, then the bottom line might not be good enough for Wall Street. Qualcomm is a different company now than it used to be. Its patents are more challenged, its technology is deemed older and more constrained by many, its massive growth days are hard to replicate, and it might still be perceived as a family-dominant company. Irwin Jacobs is still Chairman and he is in his early 70’s. Paul is in his early to mid-40’s and has the CEO title. Its president is Steven Altman, who is an attorney; and it very recently named Sanjay Jha as the additional Chief Operating Officer of the company. It is hard to know if this recent COO post is the beginning of something or if it transitionary, and we certainly don’t want to go rumor mongering.
For the year-ended SEP 24 2006 QCOM’s revenues and net income from operations grew to $7.526 Billion and $2.47 Billion, up from $5.673 Billion and $2.143 Billion in 2005. Fiscal 2007 expectations from Wall Street are for revenues to post $8.5 Billion (company guided $8.1B to $8.6B) and Fiscal 2008 is expected to see revenues of $9.6 Billion (based on loose models that are highly subjective).
The issue is that the legal battles have heated up and the company is not quite as vocal and not quite as robust in presentations as it once was. It isn’t fair to expect them to post the same old growth rate expectations seen in years before, but the street models are still looking for growth. The company has current and expected WCDMA deals coming in Chin-dia and elsewhere that are expected to contribute greatly toward growth in 2007, 2008, and beyond; but the ongoing issues with Nokia and what may be a slower handset market in 2007 are hard to ignore. The company is also having patent cases that are not going in their favor (recent ITC patent ruling in favor of Broadcom), Nokia royalty payment cessations, recent commission investigations in Japan, and some guidance offered about 45 days ago that signals lower than expected revenue ahead that should further impact later year revenue models. It is also competing in more areas as each next-generation wireless and wired technologies are converging at rapid clip.
This is more than a year later from the CEO father to son transition, so it is probably too late to consider these recent misses as unearned runs for the pitcher. Paul asked to be judged by the bottom line, but for shareholders that translates to share prices. It is unlikely he would get the boot immediately and any real position change would probably be more transitionary rather than anything Machiavellian, so please don’t take this as a call for a drastic and ill-prepared demand. It isn’t exactly like Paul hasn’t gotten to take out some dynasty dollars either, so he won’t be in the poor house if he was nudged out.
The boutique "BUY" rating that was given this morning wasn’t any game-changer. The stock is still up about 10% from when Paul assumed control, but shares currently sit down close to 10% from the beginning of the year and down over 25% from the recent highs seen this may. The stock has gone up 10% since summer lows. The good news is that recent acquisitions of RF Micro’s Bluetooth assets and Airgo’s technology may all help it get back some lost ground in Bluetooth and Wi-Fi, plus acquisitions in other WiMax and speeds for mobile gaming and communications may all still help the company keep its mojo.
It may be too soon to call for an outright departure and the recent COO change may be the execution of some change. It is not fair to expect the exponential growth seen in years before, and that is not the point. But this issue over who is CEO may become more front and center if the company doesn’t show some improvements in the next couple of quarters. If the acquisitions that were dilutive to earnings do not look to pay off, we won’t be the only ones pointing out that the company may need fresh leadership.
Jon C. Ogg
December 14, 2006
This is part of "THE 10 CEO’s THAT NEED TO GO" series from 24/7 Wall St. Jon Ogg can be reached at jonogg@247wallst.com; he does not hold securities in the companies he covers.
Stock Tickers: CC, BBY, TWTR, RSH, RSC, CONN
Circuit City (CC) is an example of how there are still in today’s age perfect violations of the efficient market theory. Last week we saw a drop in Best Buy because of margin pressures and weaker earnings expectations. If you EVER see ‘weak’ Best Buy ‘anything’ you have to assume that Circuit City is as bad or worse. PERIOD.
BBY shares fell 5% on their news and were down another 4% between then and yesterday’s close; BBY is down another 1.5% pre-market today.
Circuit City is not where people go for fun like they do at Best Buy. It is where people go that want some of the consumer electronics with fewer distractions and less of a crowd than there is at Best Buy.
I don’t mean to slam Circuit City here, but this is an observation time after time and has been the case personally seen in more than 1 city. But the company posted a loss on guess what: Price Cuts. That is margin pressure from competitors. So what is the surprise? The company has a history of being a disappointment, and even though this proves the ineptitude of management this should have been expected. If Best Buyhas a sniffle, then Circuit City has a communicable disease. If Best Buy is blowing the doors off the hinges and going gangbusters, then Circuit City is likely to have a decent quarter.
So why is the market surprised? The company sales were mostly in-line at $3.1 Billion, a gain from 2005, but the -$0.09 EPS versus $0.06 estimates somehow managed to shock the street. This is just an example of why any professor or why any market pundit thinking the market is actually "the efficient market" where the market knows how to instantly adapt to all known and unknown information is a theory full of more holes than the inventor of the ice pick.
One thing to remember that as Circuit City shares fall more and more: the company does have an implied "private equity bid" out there. If you will recall the company received a private equity bid at $17.00 per share in cash from Highfields Capital Management LP back on February 11, 2005, back before private equity firms started buying everything under the sun. Circuit City ultimately rejected the bid as inadequate.
This stock is now going on a Watch List for the "BAIT SHOP," but we won’t be including it as an official name because including a stock into an "instant takeover candidate list" the same day there is atrocious news is historically not the right thing to do. So we’ll be keeping an eye on it for now. You can bet what you are sitting down on that some firms are really looking at crunching numbers for this pig of an electronics retailer.
CC shares are now down 14% pre-market at $19.50. The 52-week tradingrange WAS $21.99 to $31.54. Yesterday’s market cap was $4.04 Billion.When Best Buy (BBY) fell last week the shares fell about 6% and are nowdown 20% from there if this pre-market level holds.
Other laggard electronic retailers are RadioShack (RSH) and Tweeter (TWTR). Two of the regional electronics and appliances sellers are Conn’s (CONN) and Rex Stores (RSC).
Jon C. Ogg
December 19, 2006