Daily Archives: January 21, 2007

Sun Rises, Intel Turns The Tables On AMD

Sun Microsystems (SUNW) is planning to use Intel (INTC) chips in its servers. As if things were not already bad enough for AMD (AMD), which is Sun’s exclusive provider now.

How times change. For the last two years, AMD has boasted every time it picked up a new client from IBM to Dell. It share of the server market seemed to grow each quarter, and it now holds about 25% of the market with Intel holding the balance.

But, the cost to AMD has been considerable. As it has cut prices, its margins have fallen. The company recently warned that Q4 results would be disappointing. Intel has already reported mediocre results for the quarter ending December 31.

The market may be sensing the AMD’s market share increases are a thing of the past Since the beginning of the year, Intel’s shares are up over 2% and AMD’s are down 9%. Over a period of two years, AMD’s shares have done better than its larger rival, but the gap between the performance of the two stocks was at its widest a year ago and has now narrowed considerably.

AMD is slipping.

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

Posted on: January 21, 2007 – 10:35 pm in Semiconductor

The Shorts Move Out Of Sprint/NexTel

Things don’t get much more humiliating for a big public company than when the Wall Street Journal runs a piece that says the firm cannot hire a No.2 executive. SprintNextel (S) is also facing a 2007 with flat revenue and operating margin pressure.

Hard to imagine how things could get much worse. And, the stock price reflects that. In April, Sprint’s stock traded near $27. If the stock trades above $17 now, it is good news. But, short interest in the stock fell nearly five million shares to 58 million in January.

Anyone who thinks Sprint will go higher has to bet that management can move subscription growth from it current anemic position to a rate that parallels Verizon Wireless (VZ) and Cingular (T). That’s a tough act.

The other gamble in the stock is that the national WiMax network that Sprint is building will attract customers to its next generation wireless broadband network. With big players like Mototola (MOT), Samsung, and Intel (INTC) backing the technology, at least the company has put itself in the race.

Not everyone is willing to bet that Sprint will lose.

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

Posted on: January 21, 2007 – 6:37 pm in Short Interest

Exxon Mobil Short Interest Drops

January short interest in Exxon Mobil (XOM) dropped over 8 million shares in January to 50 million. Intuition might say it should go the other way. With the price of oil down from a peak of $78 last year to the $52 range, oil company profits are falling.

Chevron (CVX) and Conoco Phillips (COP) have already indicated that their Q4 06 numbers will not be spectacular and Thomson is estimating that oil company profits will drop between 7% and 37% in the quarter that just ended.

But, no every expert is convinced that oil will stay down. Commodities guru Jim Rogers still thinks oils is going to $100 a barrel, and soon. Car industry executives still think gas will go to $4 in the next decade.

One clue that Wall St. is reluctant to bet too heavily against Exxon is that its share price has not dropped very much. On a 52-week high/low of $79/$56.64, Exxon trades at $73.50.

It may be too soon to take the benefits of $50 oil to the bank.

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

Posted on: January 21, 2007 – 6:08 pm in Short Interest

What Happened To PayPal’s Traffic?

Maybe it is a coincidence. Google recently started to offer a $10 credit to e-commerce customers who use its CheckOut product. For a few days Google (GOOG) even highlighted the offer for its PayPal competitor on its home page.

At about the same time, traffic to Ebay’s (EBAY) PayPal site has dropped sharply. According to on line audience measurement service Alexa, PayPal has dropped from a three month average of being the 686th most visited site on the web to No. 1835. The drop is so sharp that it is even highlighted on Alexa.com’s homepage.

Anecdotal evidence? Perhaps.

According to a recent report by JP Morgan, PayPal is still the preferred on line payment system, by a lot. But, CheckOut has picked up 6% of the market in its first year. And, Ebay would probably like that share to be zero.

In short, Ebay would not seem to have much to worry about, yet. The matter of the drop in traffic to the PayPal site may remain a mystery. Unless, of course, Google’s product picks up more share with its $10 offer.

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

Posted on: January 21, 2007 – 5:48 pm in Internet

Are Broadcom and Marvell Better Off Together?

Broadcom’s (BRCM) stock dropped some when analysts speculated that it might not make components for the Apple iPhone (AAPL). Another tech company, Marvell Technology (MRVL) went up on rumors that it would supply parts. A day earlier, Broadcom’s stock was up on speculation that it would supply parts for the new phone.

Broadcom’s problems are broader than iPhone rumors.

The Los Angeles Times reported that the US Attorney and SEC are now looking into stock-option dating issues involving Broadcom’s two founders.

Broadcom’s shares were $50 in March, but have fallen to under $30 recently.

Given Broadcom’s position in the set-top, cell phone, wireless and VoIP markets, it is a bit of a surprise that the stock has fallen so much, but Texas Instuments (TXN) and Qualcomm (QCOM) put price pressure on in some of these markets. And, according to Morningstar, the shares are expensive by a number of measurements compared with its peer group. These include price-to-earnings, price-to-book, and price-to-sales.

Although Broadcom’s earnings data has not been given to the SEC for two quarters, market analysts do not seeing Broadcom’s earnings growing in the later half of 2006. And, the company said that 2007 would not have spectacular growth either.

Broadcom announce earnings on February 8. If the news is bad, and the stock moves back toward its 52-week low of $22, the company may become an attractive acquisition. If the stock goes that low, Broadcom’s market cap would be $11 billion and the company has over $2 billion in cash. The company’s revenue run rate is about $4 billion.

The company that would probably gain the most in hooking up with Broadcom is Marvell. The company is smaller, but the market gives it a higher multiple because of its growth and improving profits. The two companies are in closely related segments of the chip market and a combination would probably benefit from a savings of $200 million a year from a combined cost structure.

Braodcom’s IP and anti-trust fights with Qualcomm seems to be going its way. That could add some value to its products and value of its intellectual property.

Two good companies. Depressed stocks. High cost structures.

Makes a marriage?

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

Posted on: January 21, 2007 – 3:47 pm in Semiconductor

The Shorts Beat On Telecom Dog Qwest

Qwest (Q) is to small, took sickly, to compete. It does not have the emerging high-speed infrastructure of its larger brothers AT&T (T) and Verizon (VZ). Nor does it have their large wireless arms. VoIP companies as diverse as Comcast (CMCSA) and Vonage (VG) are bombarding the markets with offers for inexpensive, low cost telephone service. Short sellers seem to agree having added 17 million shares to the over 85 million share short position in the company as of mid-January.

Despite all of this, Qwest’s stock is fairly high, up over 40% over the last year. Some of this can probably be attributed to the rise in telecom and cable stocks in general. The huge demands for broadband and Internet-based data, audio, and video has sucked almost all of these shares higher.

But, does Qwest deserve to be up slightly more than AT&T since January of last year? Perhaps not given that it would appear that T has more going for it.

Almost anyone who can is going after Qwest’s big land line business, and, as a result, it is shrinking. But, the company has no plan to fill in the hole.

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

Posted on: January 21, 2007 – 1:03 pm in Short Interest

Short Sellers Signal Concerns About Ford (F)

Short interest in Ford Motor (F) was already extraordinarily high in December, but this month it rose over 30 million shares to sit at 175 million. The figure stands in contrast to Ford’s shares which have moved from $6.85 on December 13 to $8.30 on Friday. Perhaps as Ford inches toward it 52-week high more investors are willing to bet against further progress.

Ford’s new CEO has said that the company’s restructuring is ahead of schedule. And, lower gas prices could give a longer shelf life to gas guzzling vehicles in Ford’s SUV and pick-up product lines. Ford’s market share last year was 17.5% in the US, but the company has used a figure as low as 14% as a bottom point for sales before the company can begin to recover.

The Ford bet is a simple one. The company will almost certainly be able to fire enough people and close enough plants to hit its cost reduction targets. With $23 billion in new debt, the chances that the company will have cash problems this year or next seem fairly small.

But, the short community may have the feeling that, with Honda (HMC) and Toyota (TM) gaining market share in the US almost every month, that Ford cannot resurrect its unit sales in time to save 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: January 21, 2007 – 12:44 pm in Short Interest

Barron’ Digest January 21, 2007 Issue

Symantec (SYMC) has not been able to prove that its takeover of Veritas Software was a good deal. The company missed forecasts in the last quarter and will likley come under pricing pressure from Microsoft’s (MSFT) new anti-virus software.

Alcoa (AA) has announced a big share buyback and dividend hike. With demand for aluminum rising, the stock could as well.

The rift between the very wealthy and those with low incomes is growing. Stocks for the rich may outfperform those that have businesses that cater to the "cash strapped" Barron’s list of "Champagne Bucket" stocks:  American Express (AXP), Coach (COH), General Dynamics (GD), Fortune Brands (FO), Intercontinental Hotels (IHG), Las Vegas Sands (LVS), Life Time Fitness (LTM), Merrill Lynch (MER), MGM Mirage (MGM), Saks (SKS), Sotheby’s (BID), Tiffany (TIF), Nordstrom (JWN) Textron (TXT), and Whole Foods (WFMI). Stocks companies in the lower-income part of the market: Big Lots (BIG), Dollar General (DG), Family Dollar (FDO), EZCorp (EZPW), and First Cash (FCFS).

Share of Under Armour (US), one of the hottest companies in sports gear, have risen to $51 but may not be worth more that mid-$40s. The company has a 07 P/E of 53 compared to Oakley (OO) at 23.6, Nike (NKE) at 17, Hanesbrands (HBI) at 15.3, VF (VFC) at 14.7 and Adidas (ADS) at 14.1.

Some of the large institutional investors are beginning to reconsider the Clear Channel (CCU) LBO. They feel the stock could go higher without the transaction because the company’s radio business is worth more than the offer indicates.

Morgan Stanley is saying the new developments in retirement fund tax law should get Boomers more focused on equities that provide "both healthy yield and solid earnings growth." Among S&P stocks that would include US Bancorp (USB), Pfizer (PFE), Bank of America (BAC), AT&T (T), Citigroup (C), Wachovia (WB), Altria (MO), American Electric (AEP), Dominion Resources (D), Well Fargo (WFC), Mercj (MRK), TXU (TXU), Freddie Mac (FRE), General Electric (GE), PNC Financial (PNC), Chevron (CVX), PG&E (PCG), Genuine Parts (GPC), JP Morgan Chase (JPM), VF Corp (VFC), General Mills (GIS), Coca-Cola (KO), CBS (CBS), Marsh/McLennan (MMC),and BellSouth (BLS).

Barron’s investor round table continues. Among the participants Archie MacAllaster picks Lyondell Chemical (LYO), Hartford Financial (HIG), Arch Capital (ACGL), Capital One (COF), Corning (GLW), and Pioneer Natural Resources (PXD). Abby Cohen picks General Electric (GE), Royal Caribbean (RCL), Federated Department Stores (FD), Medlmmune (MEDI), Barr Pharmaceuticals (BRL), Baker Hughes (BHI) and Symantec (SYMC). John Neff picks Lyondell Chemical (LYO), Nabor Industries (NBR), YRC Worldwide (YRCW) and Citigroup (C).

Manor Care (HCR), the nursing home chain, is working on boosting "cash flow per bed". The share price does not reflect all of the improvements in operations. One investor sees the stock moving up 30% over the next 18 months to $65.

Hansen Natural (HANS), the No.2 energy drink maker is a potential takeover target. Anhueser-Busch (BUD), which has tried to launch similar products on its own, may be a buyer.

Barron’s writes that last week’s tech earnings downgrades may have been an overreaction. Cisco (CSCO) was downgraded by several firms, but the company seems upbeat.

Douglas A. McIntyre

Posted on: January 21, 2007 – 12:11 pm in Press Digest

7 Highly Entrenched CEO’s (Part 1)

Stock Tickers: DELL, CSCO, IACI, FO, VIA, CBS, CMCSA, CMCSK, NWS

This story is re-run from yesterday morning for those who missed it on RSS or already deleted.

This week I composed a list of highly entrenched corporate leaders,and it is the first of a multi-part series.  Because of by-laws orbecause of multiple voting classes or just because certain CEO’s arethat valuable, there are certain corporate insiders entrenched insidecompanies for literally as long as they want to be. Some don’t evenhave a majority of the shares, but they are the face of a company andthe company might look entirely different without them. 

When investors make decisions they are usually betting on a stronghorse, but there are many companies where an investment is much more onthe jockey than it is on the horse. This is no call for an ouster byany means, and most of these companies could suffer serious setbacks ifthe leader left the company. There is no higher or lower ranking by theorder here at all, and the full articles can be accessed by clicking onthe names.

Norman Wesley, Chairman & CEO of Fortune Brands (FO)
Fortune Brands has seen a range-bound stock over the last year, but their corporate figurehead is a huge plus for the company.

Michael Dell, Chairman of Dell Inc. (DELL)
No shareholder would want to see him leave. Period.

John Chambers, Chairman & CEO of Cisco Systems (CSCO)
Sowhat if he says "caysh-flow," he has proved critics wrong. Even afterthe tech bubble burst in 2000 the stock drop was never blamed on him.He has orchestrated more future technology acquisitions than "secretgovernment agencies." He’s there as long as he wants to be.

Barry Diller, Chairman & CEO of IAC/Interactive (IACI)
Manycomplained about the massive pay package last year, but investors havedone well and he acts 20 years younger than his age when it comes toenergy in being a dealmaker.

Rupert Murdoch, Chairman & CEO of News Corp. (NWS)
Could someone imagine what News Corp. would look like if Murdoch announced it was time to open up the company?

Brian Roberts, Chairman & CEO of Comcast (CMCSA)
Asit has been one of the best performing media stocks out there in 2006,it would be hard to imagine who would even challenge him.

Sumner Redstone, Chairman of Viacom (VIA) and CBS Corp. (CBS)
Hehas been pulling out the chainsaw over key employees not doing deals,even though the resources may not be available. Some have said he ishard to work for, but trying to get an immediate replacement and tryingto absorb all the shares he owns in trust would probably just let theother media companies swarm in as vultures.

There is also a brief background post ahead of this as well, because the articles would be too long to include a pre-set guideline on each one.

Jon C. Ogg
January 20, 2007

Posted on: January 21, 2007 – 9:00 am in Business Services, Economy, Internet, Management Change, Media, PC Companies, Shareholder Issues, Technology Companies

Steve Jobs Is Replaced By Accountants

Apple (AAPL) has apparently pointed a finger at inside attorneys as the fellows who did most of the options backdating work that is now under investigation. But, the company may have run out of lawyers to blame, so it has turned to the accountants.

Apple has been informing customers who download a piece of its software that supports faster wireless technology that they need to pay $1.99. Why? Because their accountants have told them the company has to charge to get favorable financial treatment for Apple’s revenue. The accounting profession’s response is that Apple’s position is BS: Quoted in the WSJ: "Accounting doesn’t require any charge for anything," says Edward Trott, a member of the Financial Accounting Standards Board,

Apple is clearly a company with tremendous creativity. The iPod will be remembered as one of the great consumer electronics products of the last several decades. But, the company has a habit of coming up with odd excuses for its behavior and making it appear that its powerful CEO is never involved in decisions that might have negative consequences.

The company’s has said that Jobs did nothing wrong with back-dating options. The Apple attorneys and CFO appear to be in line to take blame for that. Some poor CPA in the bowels of Apple’s accounting department appears to be responsible for the $1.99 download program. It is as if no one else was consulted and the decision was made in a vacuum. Once the program started to be criticized, he was probably turned over to local law enforcement for prosecution.

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

Posted on: January 21, 2007 – 8:12 am in Accounting