Daily Archives: February 13, 2007

Warner Music Finally Does Something Right

Warner Music (WMG) which has been thrashed for poor earnings, announced that it would team up with Egypt mobile provider Orascom to provide music and ringtones to 60 million cell customers in markets including Algeria, Pakistan, Bangladesh and Italy, according to the FT. The deal is seen as a way to get money from markets that are rife with content piracy.

Warner’s poor earnings troubled everyone on Wall St. including Jim Cramer who took a swipe at the company on CNBC. 

Warner has also been in a fire fight with Apple (AAPL) CEO Steve Jobs over whether music downloads should be protected by digital rights management.

WMG stock is down from a 52-week high of $31 to its current price of $19.39, close to its low.

Maybe a deal in the desert will help.

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

Posted on: February 13, 2007 – 9:36 pm in Media

Is Yahoo! Music Management Departure A Sign Of Focus?

The two executive who lead Yahoo! Music have left the building. For good. According to ValleyWag.

Wall St. has been concerned for some time that Yahoo! is in too many businesses. The music download portion of the internet is populated by firms from Apple (AAPL) iTunes to RealNetworks (RNWK).

The departures may be random, or they could be a sign that Yahoo! will focus on its larger and more promising initiatives like search, YahooFinance, HotJobs, and Personals.

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

Posted on: February 13, 2007 – 7:39 pm in Internet

Cramer’s Private Equity Trifecta Strategy

Cramer said that private equity has a ton of money tied up, with Goldman Sachs alone raising $19 Billion.  Cramer said they can borrow up to 10-times and they are willing to pay big premiums.  He thinks Lamson & Sessions (LMS-NYSE) is the one they should pay $35 to $40 to acquire it.  His private equity master plan works, but he says he still only wants to look at companies if they make sense.  If it was valued like PW Eagle that just got a bid it would be valued at $35 to $38 today.  He said it didn’t even move when LMS hired a banker.  LMS only has a $445 million market cap and Cramer thinks this should be rolled with American Standard (ASD-NYSE) now that they are selling the plumbing business; and then he’d buy the Home Depot building and supply business.  Cramer thinks this would be a big powerhouse company that would be a vertical integrated company that could easily be public again in 3-years.

Jon C. Ogg
February 13, 2007

Posted on: February 13, 2007 – 6:23 pm in Bait Shop, Cramer, Mergers and Buy Outs

Cramer Says Viacom Has Fixed Its Stock

Cramer first came onto CNBC’s MAD MONEY show discussing howto tell when a broken stock is on the mend: you need to something big. Viacom (VIA) is showing this by its 250 jobcuts yesterday. So Cramer is changing tobeing a Bull on Viacom. He said he wasthis way at $17 on Time Warner (TWX). VIAnow needs to focus on growing profits rather than revenues. Sumner Redstone is back according toCramer; and Cramer thinks that the will do another big buyback or that a private equity firm could swoop in and buy it. VIA 52-week range is $32.42 to$43.87, and it closed at $39.98; so at $40.55 after-hours this one has alreadyseen some of the worst behind it. VIA isstill under where it was when it split from CBS.

Jon C. Ogg
February 13, 2007

Posted on: February 13, 2007 – 6:07 pm in Cramer, Media, Old Media

Nice To Be Wanted: The Global Climate Blacklist (XOM)(WFS)(COP)…and more

Ceres, a group of state pension funds, has announced its climate blacklist.

On the list are Wells Fargo (WFS), Exxon (XOM), Conoco (COP), TXU (TXU), Dominion Resources (DOM), Massey Energy (MEE), Consol Energy (CNX), ACE (ACE), Allegheny Energy (AYE), and Bed, Bath & Beyond (BBBY).

The energy companies are fairly easy to understand, but the insurance company, bank and home goods store are a puzzle.

According to Ceres this was the problem with BBBY:  "Bed Bath & Beyond has been unresponsive to shareholder requests that it disclose its strategies and performance on energy efficiency and other climate related issues."

And ACE: "The insurer ACE Limited has refused various investor requests to disclose its strategies, policies and potential exposure from climate change."

So if you don’t play ball, you make the list no matter what you are doing to the environment.

And the bank: "Unlike Bank of America and JP Morgan Chase, which have set specific goals to reduce GHG emissions from their lending activities, Wells Fargo has been unresponsive to shareholder requests for comprehensive emission reduction goals relating to its business."

That makes the entire endeavor a joke.

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

Posted on: February 13, 2007 – 5:23 pm in Corporate Governance

Cramer Pick GSI Commerce Ticks Up on Earnings

GSI Commerce (GSIC-NASDAQ) posted $0.50 EPS and revenues at $257.2 million, versus $0.43 and $243M estimates.  The stock is up 2% after the report, and traders should remember that Jim Cramer touted this one as his stealth ecommerce play for Christmas back in December.  The stock had popped to $18.80 in after-hours trading at the time, and shares closed up 1.95% on the day at $17.74.  Since Cramer’s tout it has been in a $16.00 to $19.00 range.

Jon C. Ogg
February 13, 2007

Posted on: February 13, 2007 – 4:17 pm in After-Hours Activity, Cramer, Earnings, Internet

Applied Materials’ Mixed Numbers

Applied Materials (AMAT-NASDAQ): EPS was $0.29 and Revenues were $2.28 Billion; expectations were $0.27 & $2.35B.  They posted new orders of $2.54 Billion, up 24% year over year but down 6% sequentially.  Gross margin for the first quarter of fiscal 2007 was 46.7 percent, up from 45.1 percent for the first quarter of fiscal 2006, and down from 47.1 percent for the fourth quarter of fiscal 2006.

The is not any formal guidance until the conference call, but CEO Mike Splinter said: "We executed effectively and met our operational objectives for the quarter.  Rapid customer acceptance of our new leading-edge platforms for chemical vapor deposition and metal etch, as well as strong demand for Applied’s service products, set the stage for future growth."  This doesn’t mean they ARE growing per se and you can’t read too much into the comments either way.  There was no guidance, but Next quarter expectations from the street are also $0.27 & $2.35 Billion.

The stock has been dead money for the better part of 4-months so if anyone was demanding blow-out numbers to stay in the name then they are reading different tea leaves than we are.  It is still closer to the $20.90 year-high but its low is $14.3 and it closed the day at $18.18.  Shares are down less than 0.5% for the initial reaction to the mixed earnings.

Jon C. Ogg
February 13, 2007

Posted on: February 13, 2007 – 4:09 pm in Earnings, Semiconductor, Technology Companies

Cramer Thinks KB Home Could Be Bought

On today’s STOP TRADING segment on CNBC, Cramer discussed why the market is good today.  He doesn’t care about executive pay nor about sub-prime.  KB Home (KBH) in one Cramer likes that can go higher; he noted revenues were up and home sale prices were up; even noted that it could be bought since it has no CEO; he thought that KBH should be acquired if it drops.

On Alcoa (AA) Cramer thinks that Rio Tinto could buy it and they are undermanaged. He said that earlier too.  on 3M (MMM) Cramer once again questioned the buyback since he hasn’t fixed 3M.

Jon C. Ogg
February 13, 2007

Posted on: February 13, 2007 – 2:46 pm in Cramer

WiMax War Of The Worlds

The CEO over at Vodafone (VOD) the massive wireless operator that just bought into India’s Essar, is saying that WiMax doesn’t really work. MarketWatch quotes him as saying: "To get all puffy and excited about it today is too much, too soon."  Puffy is an odd way to look at it, but fine.

The folks at Intel (INTC), Motorola (MOT), Sprint (S), Samsung, and IPO candidate Clearwire (CLWR) can’t afford to agree with Vodafone. They are rolling out a nationwide WiMax deployment for Sprint to the tune of at least $3 billion invested. It is supposed to reach 100 million potential customers in the US. Motorola and Intel have put $900 million into Clearwire, and the underwriters taking it public might be a little worried that a player of Vodafone’s stature is bad mouthing their stuff. Trash talking, really.

The guy who runs Clearwire, Craig McCaw, is in many ways the father of the cell phone industry in the US. Here, at least, he probably has more credibility than the Vodafone CEO.

Sprint will have to put up or shut up, and soon. But, it won’t take long.

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

Posted on: February 13, 2007 – 1:56 pm in Wireless

Illumina’s Double Play (Revise)

Shares in Illumina (ILMN), a company that makes chips and tools for testing genetic variations, are up 5% to $36.70 on 14 million shares.

The company made two announcements. One is that it will sell $350 million in convertible notes and buyback $202 million in stock. The shares convert at an above market price.

Illumina also said findings in Type 2 diabetes research were were conducted using the company’s HumanHap300 and Human-1 BeadChips.. According to the company: "These results were published in the journal, Nature, and are believed to explain up to 70 percent of the genetic background of type-2 diabetes".

Illumina has been in a war with larger genetic tools company Affymetrix (AFFX). And, the smaller company has been handily besting its larger rival. Over the last year, Illumina’s stock is up over 60% while Affymetrix is down about 20%. Revenue and profit have been falling at AFFX, and, despite a recent brokerage upgrade by Caris, no one seems to want to go near the stock.

It would appear that Illumina has trumped the competition again.

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

Posted on: February 13, 2007 – 1:17 pm in Biotech

Cramer Talks Alcoa (AA)

On today’s Wall Street Confidential video on TheStreet.com Jim Cramer noted Alcoa (AA).  Cramer said this was an undermanaged company and this might not be able to be resisted; it’s a country club that needs to change.  Cramer thinks Rio Tinto (RTP) is the more likely buyer.  On 3M (MMM) Cramer doesn’t like the buyback; the quarter was really bad and they are selling the good properties to maintain its bad ones.  The buyback isn’t a good one because the business isnt well run; he’d take the profit on the pop.   On General Motors (GM) Cramer said it has decided to be a small company and GM might want to consider Chrysler if DaimlerChrysler (DCX) spins it out because it could be am interesting buy for GM.  GM can make more money as a smaller auto maker than as the largest, so that contradicts the ’smaller company’ depending on how you take it.

Posted on: February 13, 2007 – 12:55 pm in Bait Shop, Cramer, Mergers and Buy Outs, Metals

Zecco Slaps Wells Fargo

In a strongly worded press release, free trading company Zecco went after the new Well Fargo 100 free trade program.

Zecco Disputes Wells Fargo’s Claim to be Best Commission-Free Online Trading

Wells Fargo Restricts to a Few What Zecco Provides to All

Burlingame, California

Zecco.com, the industry’s first zero commission online trading site, points out that Wells Fargo’s new offer requires a high balance and gives investors too few free trades.

“We are pleased to welcome another legacy bank with a half hearted offer to the free trade community, but its too little, too late,” says Jeroen Veth, CEO of Zecco, which offers up to 480 stock trades per year with a minimum balance of as little as $0.  “The old-school banks are trying to get into the free trading game, but all of them have a huge catch and none of them deliver value to investors like Zecco.” 

Wells Fargo requires $25,000 in combined balances and gives customers only 100 trades per year.  Bank of America requires $25,000 in uninvested cash, which can generate up to $1,000 per year of profit for them or more.  And, both of them charge an additional account fee:  $100 per year for Bank of America and $60 per year for Wells Fargo.

At Zecco, there are no catches.  You can open a regular brokerage account and get up to 40 free trades per month with a minimum balance of $2500 in assets (and that’s NOT $2500 in cash). What’s more, you can open an IRA with $0 minimum balance and get up to 40 free trades per month.

Comparison of Free Trading Brokerage Accounts

Zecco

Wells Fargo

Bank of America

Stock Commissions

$0

(up to 480 per year)

$0

(up to 100 per year)

$0

(up to 360 per year)

Minimum to qualify

$2,500 assets in a brokerage account

($0 assets in an IRA)

$25,000 assets in combined accounts

$25,000 in UNINVESTED cash in combined accounts

Penny Stocks

$0

Greater of $24.95 or 2.5% of principal

$0

Options Commissions

$3.50 plus $0.60 per contract

$9.95 + $1.00 per contract

$19.95 + $1.50 per contract

Annual Fee

$0 in regular brokerage accounts

$60 per year (with certain exemptions)

$100 per year (with certain exemptions)

Note: Zecco offers up to 10 free trades per day, 40 free trades per month.

www.zecco.com

Posted on: February 13, 2007 – 11:54 am in Brokerage Firms

Don’t Expect Express Scripts to Bow Out of Caremark Bidding

By Chad Brand of Peridot Capitalist

Pharmacy chain CVS (CVS) has increased its bid for Caremark (CMX) by $4 per share in an attempt to secure the pharmacy benefits manager. Rather than simply raise the per-share amount of its merger offer, CVS has chosen the unconventional route of sweetening its offer by promising a special dividend to Caremark holders should the deal go through. With CVS increasing the proposed special dividend to $6 from $2, their offer is now fairly comparable to the opposing cash and stock offer from rival Express Scripts (ESRX).

You may recall I already weighed in on this rare type of deal sweetener in January. I still believe offering a one-time special dividend to CMX holders is more like changing the deal terms from all-stock to cash and stock, since CMX shares will go down after a one-time large dividend is paid.

With the bids more similar now, I would expect Express Scripts to raise its offer shortly, perhaps as early as after the close today. They will not go the special dividend route. They want Caremark badly and realize that in order to convince Caremark holders to merge with a main competitor, and not a retail pharmacy, they will have to pay handsomely.

With consultants having already recommended investors reject the prior CVS offer, Express Scripts may very well land support for an increased bid, as they know that CVS is being very conservative with their special dividend strategy. All in all, I think Caremark prefers to do a horizontal merger with CVS, rather than a vertical integration with Express Scripts, but the offers must be at least comparable for such a move to survive a shareholder vote.

Full Disclosure: No positions in the companies mentioned

http://www.peridotcapitalist.com/

Posted on: February 13, 2007 – 10:42 am in Drug companies

SNE: Sony Wakes Up, Smells What’s Brewing for Semiconductors

By William Trent, CFA of Stock Market Beat

Speaking of semiconductor overcapacity, it seems at least one major consumer electronics firm is starting to get the picture. Sony to Reduce Semiconductor Investments: Financial News – Yahoo! Finance

Sony Corp. (SNE) plans to cut capital expenditures at its semiconductor operations by a “large amount,” a company executive said Tuesday, weeks after the electronics giant reported a drop in profits for the latest quarter.The Tokyo-based company’s capital expenditures in its semiconductor business will be much less than the 460 billion yen (US$3.79 billion; euro2.93 billion) it spent over the last three fiscal years, said Executive Deputy President Yutaka Nakagawa, who heads the company’s semiconductor and component device business.

Sony also indicated that their next generation chips (when production shifts to 45 nanometer geometries) may be produced at foundries rather than company-owned fabs. Given that the foundries have space to fill, doing so would make tons of sense.

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; 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: Starbucks (SBUX) call options; Landstar (LSTR) put options; Plantronics (PLT) put options

http://stockmarketbeat.com/blog1/

Posted on: February 13, 2007 – 10:40 am in Semiconductor

EXPD: Expeditors at Odds With Economic Data

By William Trent, CFA of Stock Market Beat

Stock Market Beat Large Cap Watch List member Expeditors International (EXPD) reported earnings this morning, and the results would have looked really good had the market not expected better. Sales of $1.24 billion were below the $1.28 billion consensus figure, and earnings per share were $0.28 instead of the expected $0.31. As a result, the shares are down nearly 12%.
Expeditors Announces 23% Increase in 2006 Annual Earnings: Financial News – Yahoo! Finance

“We’ll take these fourth quarter results, particularly given the rather stiff comparisons we were up against,” said Peter J. Rose, Chairman and Chief Executive Officer. “Growth in airfreight was good, particularly viewed in context of the blowout 4th quarter of 2005. Ocean freight volumes were very strong throughout the entire quarter and our brokerage product just continues to reliably roll along, taking market share as it goes. Our ability to provide alternatives in both the air and ocean transportation markets, with consistent global service, quality and visibility standards coupled with a seamless brokerage product is providing some definite advantages,” Rose remarked.

These comments are somewhat puzzling given that Expeditors is in the business of… well… expediting global shipping. And that business appears to be booming, given today’s trade data. According to the Reuters report:

The monthly trade gap totaled $61.2 billion, up 5.3 percent from November as oil prices rebounded and Americans imported record amounts of consumer goods and autos and auto parts.

The December shortfall exceeded the median forecast of $59.5 billion made by Wall Street analysts surveyed before the report. It also marked the tenth time in 2006 that the monthly deficit exceeded $60 billion.

U.S. exports of goods and services, which have benefited recently from stronger foreign economic growth and a decline in the value of the dollar, totaled a record $125.5 billion in December.

If Americans are both importing and exporting record amounts of goods (and more than observers were expecting) how can Expeditors be taking share when they report less than observers were expecting? Without the answer to that puzzle, it is no mystery why Expeditors shares are falling today.

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; 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: Starbucks (SBUX) call options; Landstar (LSTR) put options; Plantronics (PLT) put options

http://stockmarketbeat.com/blog1/

Posted on: February 13, 2007 – 10:38 am in Research

Two Noteworthy Analyst Actions — HANS and NEW

From Ticker Sense

After a torturous couple of days, there is finally some good news for NEW.  This morning, Stifel Nicolaus, the top rated analyst covering the stock, upgraded NEW from a Sell to a Hold.

HANS is another stock receiving some action on the analyst front this morning.  Goldman Sachs downgraded the stock from a Buy to a Hold.

Please see the charts below for the historical calls on NEW and HANS by the above mentioned anaylysts.

Newupgrade

Hansgs

http://www.tickersense.typepad.com/

Posted on: February 13, 2007 – 10:36 am in Research

MSFT Down 8 Days in a Row

From Ticker Sense

As we noted in our previous post, MSFT has been down 8 days in a row.  We looked back throughout the company’s entire public history to see how many times this has occurred and found that it has only happened on 2 other occasions.  On October 10, 1988, the stock was down 8 days in a row and went up 2.48% on the ninth day.  Over the following week, the stock gained 3.96%.  On September 22, 2005, the stock experienced the same 8-day losing streak but went down 28 bps on the ninth day, was flat on the tenth day, and was up 2.37% over the next week.  Please see the table below for details.

Msft8

http://www.tickersense.typepad.com/

Posted on: February 13, 2007 – 10:33 am in Research

Consecutive Up and Down Days

From Ticker Sense

Below is our list of the S&P 500 stocks currently experiencing the longest winning and losing streaks.  Public Service Enterprise Group (PEG) leads the list of consecutive up days with 8, and Microsoft (MSFT) leads the down list with 8 straight losing days.  In the past 3 years, this has happened to MSFT one other time, and it went down again on the ninth day (9/23/05) for a loss of 28 bps.

Updown213

http://www.tickersense.typepad.com/

Posted on: February 13, 2007 – 10:31 am in Research

New Bond ETFs

From Ticker Sense

This weekend’s Financial Times ran an article highlighting a new line of ETFs recently introduced by Barclays.  The eight new ETFs offer investors an easy way to gain exposure to different areas of the fixed income markets, although we would warn that liquidity in most of these issues is lacking.  In the table below, we have highlighted the new and existing fixed income ETFs along with their average daily volume.

Bond_etfs

http://www.tickersense.typepad.com/

Posted on: February 13, 2007 – 10:29 am in ETF

Qualcomm’s PR Machine

To hear Qualcomm (QCOM), it welcomes the upcoming ITC hearings on patent problems between it and Broadcom (BRCM). Broadcom is asking that certain QCOM chips be banned from the US. The ITC has already said that Qualcomm infringes on a Broadcom patent.

Qualcomm’s stock did not get any lift from the news. It is trading at about $35.60 at 10.20 AM New York time, flat with yesterday. Last May, the stock was close to $53.

The initial reaction over at Broadcom was negative. The stock dropped from $34.50 to $32.19. But, that was probably an overreaction. The stock is back up slightly today.

Over the last three months, both stock are up about 5%. But, after the ITC hearings that could change. With a "win" on the patent issue, Broadcom would already seem to be in a good position to argue its point. Long term, that is not good for Qualcomm.

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

Posted on: February 13, 2007 – 10:28 am in Wireless