Daily Archives: February 11, 2007

Could Charles Prince Leave As Citi CEO This Week?

Word from TheStreet.com is that the largest shareholder of Citigroup, Prince Alwaleed bin Talal, and perhaps some Citi board members are trying to get former B of A CFO Al de Molina to take the helm in place of the beleaguered Charles Prince.

The question is why would anyone want Prince to leave now? Over the last year, Citi’s stock trailed Bank of America’s (BAC), but that has changed recently. Because of recent gains, Citi’s stock is up about 17% and BAC’s has added 21% over 12 months. If Prince announces some significant cost savings initiatives, it would not be surprising to see Citi’s shares move up handily.

Has Prince done a good job? Probably not. But, if there is any time that he is likely to get the message and do something to boost the shares it is now.

Give the guy another 60 days.

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

Posted on: February 11, 2007 – 6:17 pm in Banking

Will Oil Rise As Iran Issues Grow?

Iran has spent the last day or so saying that its nuclear program is no threat to Israel and facing accusations from the US that it is supplying parts for roadside bombs.

Oil prices traded just below $60 on Friday due to cold weather and OPEC supply cuts. But, bad things come in threes, or so they say, and the news of tensions with Iran are unlikely to be good for the price of crude as it opens the week.

It may be that low fuel prices are due for an extended holiday.

Anyone fro $70 a barrel oil?

Douglas A. McIntyre

Posted on: February 11, 2007 – 4:36 pm in Oil & Gas

Daimler Shareholder Still Wants Rid Of Chrysler (DCX)

One of DaimlerChrysler’s large shareholders is still lobbying for a spin-off of Chrysler. The investment firm, DWS, wants the disposal of the American unit to be considered along side current plans to cut 10,000 workers and use more Mercedes product development and parts sourcing to save money.

Any outside shareholder concerned about Daimler’s overall plans has not looked at a chart of the stock price. DCX shares are at $64. They have not been near that level in the last five years.

Why shareholders think Chrysler is worth more as a separate company is something of a puzzle. DCX shares trade at over .3x revenue. GM’s (GM) trade at below .1x. A standalone Chrysler would probably have a valuation multiple well below Daimler’s and its is unclear that the parent’s shares would rise considerably if Chrysler was gone.

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

Posted on: February 11, 2007 – 4:22 pm in Autos

Barron’s Digest February 12, 2007 Issue

Barron’s says that smart moves by CIT (CIT) management are positioning the company for more stock price gains.

Vonage (VG) cannot offer the "triple play" of voice, TV, and broadband, which will make it hard for the VoIP stock to recover from its sharp sell-off,

As adjustable rate mortgages reset up, companies like New Century Financial (NEW) are likely to be further punished.

Costco Wholesale (COST) is the new big retailer to beat. The company has superior management and great opportunities for growth. The shares are pricier on a forward P/E basis that Wal-Mart (WMT), Home Deport (HD), and Target (TGT). But, the company’s financials may be misunderstood because of its conservative treatment of depreciation.

UnitedHealth Group (UNH) is coming out of its options scandal with good prospects and a lot of cash. At $51, the stock has a forward P/E of 15. That could take the stock into the $70s over the next 12 to 24 months.

Novo Nordisk (NVO) is likely to benefit from its insulin related products as the number of diabetics grows worldwide. Its product line is more complete and convenient than those of competitors Eli Lilly (LLY) and Sanofi-Aventis (SNY).

Some investors are unhappy that the management and board of Tut Systems (TUTS) did not get more of a premium when the company was sold to Motorola (MOT).

A hedge fund is trying to get the board of Ceridian (CEN) forced out and have the company spin-off its fast-growing Comdata operation.

Companies that use spit tests for drug testing are doing poorly. Better bets are urine test companies OraSure Tech (OSUR) and Medtoc Scientific (MTOX).

John S. Herhold, the energy research firm,  likes Anadarko (APC), Chesapeake Energy (CHK), Apache (APA), EnCana (ECA), Canadia Natural (CNQ), Linn Energy (LINE), And EV Energy Partners (EVEP)

As Teva Pharmaceuticals (TEVA) recovers from a rough numbers in 2006, it appears that earnings and cash flow will drive the big generic drug firm’s results higher in the next year.

Hitachi (HIT) will spin-off its fiberop modules business this week. The new company will be called Opnext (OPXT). A similar company Optium (OPTM) went private four months ago.

The success of Blackstone’s buyout of Equity Office Products (EOP) depends on rising rents and real-estate prices

Douglas A. McIntyre

Posted on: February 11, 2007 – 11:33 am in Press Digest

Multiple Break-Up Values From This Week (2)

Stock Tickers: CAH, DUK, FDX, BUD, AA, HAL

This week 24/7 Wall St. featured many names that fall within the realmof larger private equity screens as far as potential break-up stocks.That does not mean that they WILL be broken apart or that the companiesare certain candidates, but this is one of many screens that firmsrun.  As with ANY 'value' or 'screen' there is a matter of opinion andnot everyone will share the same opinion.  This is the second half of the list, with the first half posted yesterday.  The methodology is at the end of the article.  Here is the list:

24/7 Wall St. break-up value for Cardinal Health (CAH): $73.50; stock price was $71.28 at the time.

24/7 Wall St. break-up value for Duke Energy (DUK): $29.00; stock price was $20.16 at the time.

24/7 Wall St. break-up value for FedEx (FDX): $130.00; stock price was $114.20 at the time.

24/7 Wall St. break-up value for Anheuser-Busch (BUD): $56.00; stock price was $50.25 at the time.

24/7 Wall St. break-up value for Alcoa (AA): $46.00; stock price was $32.15 at the time.

24/7 Wall St. break-up value for Halliburton (HAL): $59.00; stock price was $29.64 at the time.

METHODOLOGY

Posted on: February 11, 2007 – 10:30 am in Mergers and Buy Outs

Sirius Without Stern

A great deal has been made of the $500 million deal that Sirius Satellite Radio (SIRI) gave Howard Stern. Since it is a five year deal, it is safe to assume that it has added at least $100 million in costs to Sirius’s P&L eaach year (with bonuses, perhaps more).

But, what if Sirius had grown only as fast as XM from the time the Stern rumors began and the deal was announced in the fall of 2004. The official deal was made public on October 6, 2004.

At the end of the second quarter 2004, Sirius had 480,000 subscribers. XM (XMSR) had 2.1 million.At the end of 2006, Sirius had 6.024 million subscribers and XM had 7.625 million.

If XM’s growth rate is applied to Sirius, the No.2 satellite radio company might not even be in business. From Q2 04 to the end of 2006, XM’s subscriber base increased 3.6x. Sirius’s figure was 12.5x. Take XM’s growth rate against the Sirius base at the end of Q2 04, and Sirius would have 1.73 million subscribers. It would probably not be a viable operation at all.

Has Stern added 4 million subscribers to the Sirius base? Maybe not. But, the lion’s share of the difference in the growth of the two companies has to be attributed to him.

If so, he may be the only reason Sirius is in business.

Priceless..

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

Posted on: February 11, 2007 – 9:33 am in Consumer Electronics