Monthly Archives: December 2006

Jobs And His Options (AAPL)

A report filed by Apple with the SEC says that Steve Jobs was aware of certain option grants that had "favorable" terms and made recommendations for some of these. He did not get a financial benefit.

It is s bit of lipstick on the pig.

Apple will restate financials from 2004 to 2006.

Jobs would appear to have known enough to put himself in harm’s way with investigators. But, he is Steve Jobs, and that is unlikely to happen. Good for him.

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

Posted on: December 29, 2006 – 6:35 am in Hardware

Microsoft Gets Into The Car Business

Stocks:  (F)(MSFT)(SIRI)

Microsoft CEO Steve Ballmer is from Detroit. But, the software company’s plan to help Ford put services like e-mail into cars seems a bit off.

The new system will allow Ford customers to have hands-free wireless and to get e-mail and download music. The plan is that all Ford vehicles will eventually have the service.

Boeing tried to set up a similar service for planes, but that one did not work. Of course, someone else would be flying the planes while passengers are online.

The problem with the new joint venture is that services like Sirius already cover most of the music portion of the program. Cell phone companies already offer hands-free service.

Who is going to read e-mail while driving and live to tell about it?

Nice product. Limited market.

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

Posted on: December 29, 2006 – 6:29 am in Software

Europe Markets 12/29/2006 BP Down, Siemens Up

Europe markets were moderately mixed.

The FTSE was off .4% to 6,219. BP was down .9% to 566.5. BT was down .9% to 303.75. Reuters was flat at 443.5. Vodafone was down .5% to 141.25

The DAXX was off a fraction to 6,611. DeutscheBank was down .3% to 101.5. Deutsche Telekom was flat at 13.88. Siemens was up 1.5% to 75.95.

The CAC 40 was up .2% to 5,542. Alcatel was up .3% to 10.94. ST Micro was down .1% to 14.05. Vivendi was down .1% to 29.6.

Data from Reuters.

Douglas A. McIntyre

Posted on: December 29, 2006 – 6:19 am in International Markets

AT&T’s Soft Offer (T)(BLS)(GOOG)(VG)

AT&T got a little scared over the FCC delay of its BellSouth merger? Nope

The big phone company said it would make certain concessions like offering stand alone DSL and ‘Net neutrality" for two years so that companies like Google would not be asked to pay higher prices to the company because their volume of traffic is so expensive.

The high-speed service offer is seen as helping companies like Vonage, who need the network for their service.

For a company the size of AT&T/BellSouth, the offer is very, very modest. Whether the FCC sees it as that is another matter.

But, if the federal agency has real concerns about the impact of the merger on consumers and busines customers, it should not bite on such small bait.

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

Posted on: December 29, 2006 – 6:09 am in Telecom

Media Digest 12/29/2006 Reuters, WSJ, NYTimes, Barron’s, FT

According to Reuters, AT&T has made a number of concessions to get the FCC to approve its merger with BellSouth. They would include offering low priced DSL service.

The Wall Street Journal writes that private equity firms are exploring a deal for Alltell, the fifth largest phone company in the US.

Reuters writes that Verizon plans to improve its cables from the US to Asia after an earthquake disrupted internet traffic in the Asian region.

Reuters also reports that US Air has repeated that it will let its offer for Delta stand.

The Wall Street Journal writes that March&McClennan agreed to sell its mutual fund arm, Putnam, to Power Corp of Canada.

The WSJ also reports that Sprint is closer to chosing Nokia as the third network equipment provider for its nationwide WiMax roll-out.

The WSJ writes that Ford and Microsoft will launch a service that will bring wireless service into cars including phone connectivity and e-mail.

The New York Times writes that Apple’s delayed annual reports is expected to have details about the company’s option backdating and its CEO Steve Jobs.

The FT writes that the Tokyo stock market’s rise in 2006 extends a bull market that now dates to 1989.

Barron’s reports that shares of Halliburton looked reasonably priced and could continue to do well.

Douglas A. McIntyre

Posted on: December 29, 2006 – 6:00 am in Press Digest

Asia Markets 12/29/20006 Toyota Up, China Unicom Down

Asian markets were mixed with the Shanghai Composite up sharply.

The Nikkei rose a fraction to 17,226. Hitachi rose 1.8% to 742. NTT rose 2.8% to 586000.

Softbank fell 1.7% to 2315. Sony rose .2% to 5100.

Toyota rose 3.6% to 8200

The Hang Seng fell .2% to 19,965. China Netcom fell 3% to 20.85. China Unicom fell 8.4% to 11.4. HSBC fell .1% to 142.6.

Th KOSPI was closed.

The Straits Times rose rose .8% to 2,986.

The Shanghai Composite was up 4.2% to 2,675.

Data from Reuters.

Douglas A. McIntyre

Posted on: December 29, 2006 – 5:45 am in International Markets

Analyzing NYSE (NYX)

By Yaser Anwar, CSC of Equity Investment Ideas

  • ON tuesday the majority of Euronext shareholders voted to approve the Euronext’s merger with the NYSE Group. Each Euronext share will be exchanged for 0.980 shares of a new company, NYSE Euronext, plus 21.32 euros approximately $28.13 in cash.
  • NYX shares will each be exchanged for one full share of the new NYSE Euronext. One change from the original proposal is that the board of directors will consist of 11 Europeans and 11 Americans, rather than a majority of Americans.
  • I believe the company has made solid progress in recent months on several fronts, including announcements for headcount reductions, reduction of floor exposure, price increases, and the removal of price caps.
  • In addition, the roll out of Hybrid continues on track (to be completed by the end of December) and should enable incremental volume growth in 07 and 08. From the stock price it is clear that The Street’s confidence continues to grow in management’s ability to generate higher than initially expected cost savings as it integrates Archipelago and Euronext and further rationalizes its own business.

    Looking to Network with People in the Financial Industry
    | Connect with me on Linked In or email me yaser AT yaseranwar.com |

  • With Euronext shareholders approving the merger, I believe the regulatory hurdles won’t be much of a problem, if any at all. How so? Thanks to my prior formal email relationship with the GS analyst for this sector, he referenced an example to illustrate the point to me- "while the Dutch Finance Minister has not granted final approval, earlier this week, the NYSE released the text of a letter indicating that this approval is likely."
  • Moving on to the recent changes in pricing NYX eliminated monthly fee cap of $750K for NYX listed trades, impacting 7 firms accounting for approximately half of the exchange’s total volume, the largest being NDAQ. In addition, NYX also increased its flat fee to $0.0275 from $0.0250/100 shares. Based on current volume, new pricing changes equate to approximately $6m in incremental monthly revenue.

According to ML- Near-term revenue upside is neutralized by new pricing/fee structure for specialist community that eliminates specialist commissions in favor of a new revenue sharing structure with the NYSE (along with modest fee breaks for specialists). Thus, the elimination of commissions paid directly by exchange users to specialists provides the NYSE with some measure of cover to institute price hikes without necessarily increasing costs to the end-user, at least immediately.

  • The terms of the new pricing schedule the NYSE will provide specialists with $53m during a transitional period over the next six months before revenue sharing commences on June 1, 2007. If I understand correctly revenue sharing calculation is based on specialist participation and individual stock specialist market share, which makes precise calculation some what difficult.
  • While Josh was a little skeptical about the current multiple, we agreed that with the success of the Euronext merger, NYX will definitely seek more acquisitions in options, derivatives and even foreign exchanges to fuel its growth.
  • The Trade: If I was an institutional trader I would- short NDAQ debt & hedge myself with credit derivative swaps. Furthermore, put on a pair trade comprising of a long position in NYX & short NDAQ (70-30% short) with a couple of LEAPS on NYX and buy NDAQ 27.5 March puts. NDAQ will come under pressure to make a bid for LSE, now that NYX is successful with its merger. With the recent positions taken in LSE, by HFs, being higher than NDAQ bid, NDAQ will be forced to pay up. Furthermore, With its deteriorating debt (recent debt rating cuts vs. NYX hardly has any) NDAQ price will come under pressure, especially if we see a correction.

http://www.equityinvestmentideas.blogspot.com/

Posted on: December 29, 2006 – 5:33 am in Exchange

If Trucks Aren’t Carrying Anything, Who’s Buying Anything?

By William Trent, CFA of Stock Market Beat

Several times we have commented on the transportation names, both for their own investment merits and as an indicator of overall economic activity. Since anything sold from any store is transported there by truck, a slowdown in trucking means stores are seeing no need to stock up. Barry Ritholtz makes that point when discussing the latest American Trucking Association tonnage data at The Big Picture | Truck Tonnage Plummets:

November 2006 marked the single worst month for for-hire truck tonnage since the last recession,” said ATA Chief Economist Bob Costello. “Both the month-to-month and year-over-year decreases indicate that the economic slowdown is in full gear. The most troubling number is the 8.8 percent contraction from November 2005, despite the fact that year-over-year comparisons are difficult due to the very robust volumes during the same month last year. One month certainly doesn’t make a trend, but if we continue to see year-over-year reductions of similar magnitudes in the next couple of months, it could indicate a greater economic slowdown than economists are projecting at this point.”

Naturally, a tonnage slowdown is bad news for truckers. Investors who are into the relative game, can play the non-asset based names like Landstar (LSTR) and CH Robinson (CHRW). Those who simply prefer positive absolute returns may want to steer clear of the whole group.

Disclosure: Author holds put options on FedEx (FDX) and Union Pacific (UNP) and is short put options on Landstar (LSTR).

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;

http://stockmarketbeat.com/blog1/

Posted on: December 29, 2006 – 5:29 am in Economy

US Stock market Wrap (DEC 28, 2006)

DJIA    12,501.52; Down 9.05 (0.07%)
NASD    2,425.57; Down 5.65 (0.23%)
S&P500    1,424.73; Down 2.11 (0.15%)
10YR-Bond    4.69%; Up 0.036
NYSE Volume    1,469,536,000
NASD Volume    1,237,134,000

Consumer confidence unexpectedly showed a higher reading of 109.0 in December from the Conference Board and existing homes sales posted a 0.6% rise in November.  This was a prime example of a low volume holiday trading session.

Apple (AAPL) was the focal stock of the day with shares falling 0.8% to $80.87 after the Financial Times reported that STEVE JOBS was involved in unapproved options dating back to 2000 or 2001 for 7.5 million shares that were later turned in.

Goldman Sachs (GS) fell 0.5% to $200.80 after it raised a $6.5 Billion infrastructure fund.

TASER International (TASR) ran uyp 4.1% to $7.81 after it announced another $2.3M in follow-on orders from customers.

Benihana (BNHNA) rose a sharp 12.8% to $29.77 after Sanders Morris harris raised its rating of the sushi and Japanese steak house operator to a Strong Buy and noted it as a single best idea, making this the research call of the day.

Ford (F) fell 1% to $7.50 on various reports from researchers expecting another dismal month of sales (get ready for more of the same).

Encysive ((ENCY) fell a sharp 23% to $4.49 after the FDA extended a review for its Thelin product.

CDC Corp (CHINA) rose 11% to $9.37 after Oppenheimer started the company with a Buy rating.

Recent IPO Fuwei Films (FFHL) rose a sharp 34% to $17.50 on positive talk on the street.

Openwave (OPWV) rose almost 8% to $9.52 after an activist shareholder holds more than 10% of the float and a proxy contest.

AsiaInfo (ASIA) rose 19% to $7.83 after a contract upgrade from China Telecom.

Jon C. Ogg
December 28, 2006

Posted on: December 28, 2006 – 4:19 pm in Market Close

Cramer’s Surprising Stance on Home Depot

In the PART 3 of Cramer’s "EVEN MORE BULLISH ON THE DOW" Cramer noted several more companies in the DJIA 30. 

He did discuss Home Depot (HD-NYSE) and while he noted almost every dislike from management and stores, he thinks it could rally $10 if housing turns around.

Cramer has been an anti-Nardelli-ite just like me, and you can CLICK HERE to see why I noted that Nardelli is in the TOP 10 CEO’s THAT NEED TO GO.  I have been amazed that Nardelli generated so many emails sent to me, but I have received many emails from current and ex-ployees describing how the company has changed for the worse.  In fairness and objectivity I have also received at least one email saying he is personally a gracious and kind person, but my stance is really how Wall Street perceives him and that the stock would instantly jump up if he would step down. 

The main criticism of Nardelli that was sent to me that I did not note in my stance in the previous stories was Nardelli’s policies taking away all the incentives for employees to think like small business owners.  There were also some obvious disgruntled employees that  felt his pay package was at their expense.

Jon C. Ogg
December 28, 2006

Posted on: December 28, 2006 – 10:08 am in Cramer, Economy, Housing, Management Change

Goldman Sachs Launches a $6.5+ Billion Infrastructure Fund

Goldman Sachs (GS-NYSE) has raised its ‘first’ GS Infrastructure Partners fund with more than $6.5 billion in committed capital. This is Goldman Sachs’ first fund dedicated to making infrastructure investments and will make such investments globally.  The fund will seek investments in infrastructure sectors including transport infrastructure, such as toll roads, airports and ports as well as regulated gas, water and electrical utilities.

The press release keeps saying this is the first of its kind.  Are there going to be more?  They have already been involved in recent financings, so this isn’t exactly virgin territory.  It already has commitments to Associated British Ports and Kinder Morgan and the fund will be managed in New York and London.

The co-heads of the group noted in the press release: Steven Feldman and William Young said "With the success of this fundraising, we have the capital to create and pursue large-scale investment opportunities while achieving portfolio diversification."  This is utilizing the firm’s expertise in Private Equity and in Real Estate Investing to the n-th degree.

While the Fund is global, the focus will be on larger investment opportunities in developed markets without political barriers and unknowns mostly in the EU and North America. Goldman Sachs has committed approximately $750 million on its own and the balance will be from pension funds, insurance companies and banks.

Goldman Sachs has a current market cap of almost $91 Billion and controls more global assets and trading volume than many developing nations in the world.

Jon C. Ogg
December 28, 2006

Posted on: December 28, 2006 – 9:31 am in Uncategorized

Analyst Notes (DEC 28, 2006)

As you can tell, most analyst calls are thinning out and research departments are quieting down until next week.

AUDC started as Accumulate at ThinkEquity.
BBI reitr Buy at Soleil.
BMR started as Overweight at Morgan Stanley.
CBOU reitr Underperform at Piper Jaffray.
CHINA started as Buy at Oppenheimer.
KED started as Buy at Merrill Lynch.
ONT started as Buy at ThinkEquity.
TSN reitr Underperform at Wachovia.

Goldman Sachs noted on STEEL SECTOR: NOVEMBER steel imports were 3.389 million tons, down 13% sequentially on preliminary Census data.  GS notes that declining imports and domestic production discipline have already reduced domestic STEEL supply by more than 10% since the estimated SEPTEMBER peak.  Imports peaked at 4 million tons a month in July-August and have declined 20% since then.  GS expects decline below 3 million tons per month over next seberal months.  While this is lower steel consumption and usage, GS believes the declining inventories will let investors to better recognize sustainability of the steel cycle.

by Jon C. Ogg

Posted on: December 28, 2006 – 8:32 am in Analyst Calls

Pre-Market Stock Notes (DEC 28, 2006)

(AAPL) Apple’s options that were given to Steve Jobs in 2001 were reportedly falsified and were unapproved by the board, but he later surrendered those options as unexercised (Financial Times); Apple down 3%.
(ABMD) Abiomed indicated up after showing fake heart and other heart products on CNBC.
(AKAM) Akamai filed to sell 2.6M shares of stock for holders (may be refiling).
(ARO) Aeropostale positive IBD article.
(ARRY) Array Biopharma files IND for ARRY-520 for tumor regression
(ASIA) AsiaInfo won support system upgrade pact from China Telecom.
(CBF) CBRE Realty filed to sell 20M shares for holders.
(CMVT) Comverse Tech received notice of default because of filing delays.
(GS) Goldman Sachs raised $6.5 Billion for an infrastructure fund to purchase ports, utilities, and others.
(IBM) IBM & Siemens win a $9B German military IT order.
(KLAC) KLA Tencor noted that a board member Jon Tompkins (former chjairman) resigned immediately from the board; no explanation was given.
(LCC) US Air announced it now has roughly 1/2 of its fuel hedged.
(ONNN) On Semi repuirchasing $70M worth of stock from holder.
(PFE) Pfizer’s Viagra patent upheld in China; won over 2 fiorms who were violating patents.
(QGLY) Quigley announced mixed results in herpes keratitis.
(SAI) SAIC wins $53M order.
(SAP) SAP CFO sees double-digit growth according to German papers.
(SI) Siemens & IBM win a $9B German military IT order.
(TASR) Taser got another product liability case dismissed.
(WMT) Wal-Mart problems could continue to slow growth in 2007 according to WSJ.
(WOOF) VCA Antech set 2007 guidance at $1.27-1.31 (after options) and revenues of $1.05-1.08B; both are in-line.
(ZOLL) Zoll Medical receives marketing clearance for Defibrillator in Canada.

by Jon C. Ogg

Posted on: December 28, 2006 – 8:22 am in Pre-Market Activity

The Marker Still Loathes Shaprper Image (SHRP)

The coverage ratio in Sharper Image for shares held short it 37 days. In December, shares short totalled over 3 million and the stock trades an average of under 82,000 shares a day.

The Nasdaq has warned Sharper Image that it is outside of listing requirements, again. The stock was near $20 two years ago. It now trades just above $9.

Sharper Image same-store sales dropped 27% in November added to a long list of sharply down year-over-year comparisons. Sales for the ten months ending November 30 dropped 22% to $359 million.

It is hard to imagine things getting worse, but it seems that the smart money thinks it will.

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

Posted on: December 28, 2006 – 8:07 am in Short Interest

JetBlue Gets A Vote Of Confidence (JBLU)

Short interest in Jet Blue fell 12.2 million shares to 39.1 million in December. And, that is after the stock has run from $9.25 to $14.62 in the last three months.

What gives? The industry as a whole is improving with falling fuel prices, higher ticket prices and more customers. And, Jet Blue is being expecially aggressive in capitalizing on the trend. It has added  nearly 15% to the number of seats it has available in Q4 and plans to increase that again by between 11% and 14% next year.

Calyon Securities recently upped Jet Blue from "neutral" to "add" based on the belief that management can return the airline to ongoing profitability.

It looks like the market does not want to bet against that.

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

Posted on: December 28, 2006 – 7:38 am in Short Interest

Things Go From Bad To Worse At Earthlink (ELNK)

Earthlink is a dog of a stock. It has gone from almost $12 two years ago to $7.15  And that is after a small run-up over the last few weeks. Some on Wall St. are betting that the rally will fizzle. Short interest in the stock for the month of December rose 4.3 million shares to 17.2 million.

Earthlink is trying to change itself from an ISP to a provider of WiFi for cities. Earthlink has even set up a partnership with Google to build out WiFi in San Francisco.

As it tries to morph into a new business, Earthlink’s financial results have been poor. Some in the market think that will continue.

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

Posted on: December 28, 2006 – 7:26 am in Short Interest

Shorts Get Smart About Amgen (AMGN)

Amgen is a weird stock. The company had excellent news during the year, capped by FDA approval of its Vectibix cancer drug. But the stock trades at $68.46, closer to its 52-week low of $63.52 than it high of $81.24. Short interest in the stock fell 6 million shares to 27.6 million in December.

Amgen suffers from the malaise that has hit all Big Pharma and biotech companies. Generics are going to put them out of business. Bulls would counter that Amgen has five major drugs in the pipeline that should yield extremely strong results.

Amgen’s board has authorized a $5 billion share buyback.

Maybe Wall St. is getting a message.

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

Posted on: December 28, 2006 – 7:15 am in Short Interest

Europe Markets 12/28/2006 BT Down, Siemens Up

Stocks:  (BCS)(BP)(BT)(GSK)(PUK)(RTRSY)(UL)(VOD)(BAY)(DCX)(DB)(DT)(SI)(ALU)(AXA)(FTE)(V)

Markets in Europe were off slightly at 7 AM New York time.

The FTSE was down .2% to 6,234. Barclays was up .2% to 736.5  BP was down .9% to 569.5. BT was down 1.1% to 308. GlaxoSmithKline was down .3% to 1340. Prudential was .8% to 699.5. Reuters was down .6% to 442.5. Unilever was down .3% to 1422. Vodafone was down .8%  to141.75.

The DAXX was down .1% to 6,606. Bayer was down .7% to 40.64. Daimler was flat at 46.93. DeutscheBank was off slightly at 101.83. Deutsche Telekom was flat at 13.91. Siemens was up 1.1% to 74.92.

The CAC 40 was down .2% to 5,529. Alcatel Lucent was down .1% to 10.95. AXA was down .1% to 30.69. France Telecom was down .5% to 20.9. ST Micro was down .6% to 14.02. Vivendi was down .9% to 29.54.

Data from Reuters

Douglas A. McIntyre

Posted on: December 28, 2006 – 7:04 am in International Markets

Dell Gets The Benefit Of The Doubt (DELL)

The short interest in Dell fell 6.2 million shares to 35.6 mllion shares in December. Dell fell.

What happened? A couple of things, perhaps.

Dell has brought in former American Airline CEO Don Carty to become Dell CFO and Vice Chairman. Carty has been on the PC-maker’s board. Carty is now just one step from the CEO’s throne, and current chief Kevin Rollins in on thin ice. His firing would almost certainly send the stock up, at least short term. Short term enough to worry shorts.

Dell is also seen as benefitting from Microsoft’s new Vista OS. If Vista sells 90 million units next year, as research firm IDC projects, sales of more powerful PCs to run the new system will almost certainly follow.

Good news for Dell, at last?

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

Posted on: December 28, 2006 – 6:35 am in Hardware

Shorts Look For A Turn Up In Yahoo!

Stocks:  (YHOO)(GOOG)

It would be hard to tell from the company’s stock price, but there is an increasing bet among investors that Yahoo!’s shares could swing up. Short interest in the stock fell 6.2 million shares to 78.1 million in December. Are the shares oversold? Ask a market technician.

Yahoo!’s stock traded at $32 six months ago. It now trades at just above $25.

Weak Q3 results and management turnover have not helped build confidence, so Yahoo!’s fans have to count on the new Panama intiative to get Wall St. ginned up about the stock. Panama is meant to match Google in the lucrative arena of getting targeted ad revenue from internet search results.

The company knows that the new software has to be a hit, and it is begging the media to pay attention to early results.

Maybe someone is listening.

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

Posted on: December 28, 2006 – 6:25 am in Internet