Daily Archives: February 17, 2007

Will Yahoo! Compete With Community News Site Digg!

Yahoo! (YHOO) may not be buying large internet properties, but it could be creating its own competitors to them. TechCrunch says that Yahoo!’s new Suggestion Board section where users can comment on Yahoo! features is not a competitor to huge community news site Digg.com. But, it could be a prototype, and, if it draws traffic, Yahoo! may decide that the opportunity to enter the market is too good to pass up.

Digg is ranked as the 74th largest website in the world according to Alexa.com. Web measurement service Quantcast puts Digg’s unique monthly audience at 4.6 million. And, most of the audience is young.

One of the financial advantages for Digg is that it is community created. A large web portal could drive traffic to a site like this but would not have to pay for content. While Digg is not as large as YouTube (GOOG) or MySpace (NWS), the cost of acquiring these companies was high. Yahoo! might be able to roll its own.

A drawback to the possibility of Yahoo! entering the community news site business is the relatively poor reception that AOL’s Netscape (TWX) received when it was converted from a web portal to a community news site.

But, that, by itself, does not mean that Yahoo! would fail in entering the same market.

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

Posted on: February 17, 2007 – 9:55 am in Internet

Comment From The Stock Masters.

Stock Tips I love it, Forbes puts out just a strange concept article of showing some at home pictures of "Top Armchair Gurus" with their 2007 stock picks and Allen Hill picked Microvision (MVIS). Check out the picture of Robert Candelaria Cory Hart - Sunglasses at Night Videowearing the stylish sunglasses on his head (thinks he wears them at night?) or Gary Tucker in what looks to be his high school prom photo. You may recall we just did an article on MVIS and we speculated that once they find a buyer for their PicoP technology it is game on and off to the races. Not to mention the potential market overseas for PicoP and all of its splendor. BusinessWeekOnline just put out a story and Peter Conley, managing director at MDB Capital Group said Microvision’s "mini projectors have created tremendous buzz… The market for the laser-based displays in micro form is huge, as the cell-phone market is still basically untapped." Joel Achramowicz, an analyst at MDB Capital, rates the stock a buy and expects Microvision to partner with a handset maker by summer. He sees the stock, now trading at $3.16, doubling in a year. Today shares are trading up 6%, don’t get me wrong Masters, this is still a risky play, so use that gambling money.

Stock Tips We know you’ve heard enough about Google (GOOG) but as Noteable Calls points out today Citigroup reiterated their Buy rating and $600 price target on GOOG for seven good reasons. We’ve provided this link before but the more we all use Google it’s hard not to think that Robert Cringely could be correct about Google’s eye on world domination. Most of us keep waiting for Google’s shares to split, but everyone including GOOG says that’s not in the cards. Want to buy 100 shares? Well that just comes to $46,900 at today’s price. No problem, let me just get out my debit card, or do you take checks?

http://www.thestockmasters.com/

Posted on: February 17, 2007 – 9:33 am in Research

H.B. Fuller: An Early Look At SAB 108

From AAO Weblog

As blogged previously, the SEC’s SAB 108 is two, two, two materiality tests in one. It requires firms to assess materiality of known but uncorrected errors on both a rollover basis and an iron curtain basis. (See linked post for discussion.) Applied correctly, it assures that known errors are isolated and removed from the balance sheet.

So, a new hobby might be developing here at the AAO Weblog: looking for interesting results from the application of SAB 108. It’s bound to be some blog fodder over the next month or so as these items emerge in newly-filed 10-Ks.

One that caught my eye yesterday: H.B. Fuller’s discussion in its 10-K. The net adjustment, a credit to retained earnings, was small – only $351,000 – but there were a few moving parts:

* Investment-in-Affiliate Adjustment: The company had recorded $309,000 more expense than necessary when recording a subsidiary’s earnings in a prior year, incorrectly reflected as an other long-term liability.


* Deferred Revenue on Shipments with Freight Claim Exposure: Fuller had recognized $585,000 of revenue on some pre-2004 shipments early, because they retained the risk of loss due to freight claim exposure.


* Consistent Application of Accounting for Sales Allowances: Fuller had unrecorded reserves for sales allowances; putting them on the balance sheet required a net adjustment of $454,000.

* Tax Accounting Adjustments: The company had overstated income taxes payable by $1,081,000.

As we go through the discovery of what firms had previously chosen to ignore, it’ll be interesting to see where errors occurred most often. Early bets (kind of like the sun coming up in the East): revenue issues and tax issues. Every company has both, there are plenty of moving parts to both, and especially in the case of taxes, a high concentration of technical issues. The opportunities to screw up are almost unlimited. It’ll also be interesting to see what firms considered “immaterial” in the past.

http://www.accountingobserver.com/blog/

Posted on: February 17, 2007 – 9:31 am in Accounting

Friday’s Top Biotech and Medical Stocks

From BioHealth Investor

Biotechnology

INSMED INC [INSM] +16.83%
ONYX PHARM INC [ONXX] +12.35%
ACORDA THERAPEUTICS [ACOR] +8.54%
ORTHOLOGIC CP [OLGC] +8.50%
LEV PHARMACEUTICALS [LEVP.OB] +7.36%

Diagnostic Substances

NYMOX PHARM CORP [NYMX] +9.41%
REMOTEMDX INC [RMDX.OB] +8.47%
COLEY PHARMACEUTICAL [COLY] +6.59%
IMMUNOMEDICS INC [IMMU] +4.70%
AVALON PHARMACEUTIC [AVRX] +4.13%

Drug Delivery

SYMBOLLON PHARM CL A [SYMBA.OB] +13.86%
DELCATH SYSTEMS INC [DCTH] +5.04%
QUIGLEY CORP THE [QGLY] +4.85%
PENWEST PHARM CO [PPCO] +4.04%
ALKERMES INC [ALKS] +3.22%

Drug Manufacturers

SINOVAC BIOTECH LTD [SVA] +14.39%
INTERPHARM HLDGS INC [IPA] +12.21%
NEXMED INC [NEXM] +7.09%
INSPIRE PHARMACEUT [ISPH] +6.24%
EXEGENICS INC [EXEG.OB] +5.75%

Medical Appliances & Equipment

RESTORE MEDICAL INC [REST] +5.90%
AMER MED SYS HLDG [AMMD] +4.42%
SIGNALIFE INC [SGN] +3.72%
CYNOSURE, INC. [CYNO] +3.43%
THERMAGE, INC. [THRM] +2.84%

Medical Instruments & Supplies

MILESTONE SCIENTIFIC [MLSS.OB] +19.12%
ENCISION INC [ECI] +14.85%
MICROMED CARDIOVASCU [MMCV.OB] +12.73%
CRYOCOR, INC. [CRYO] +9.26%
RETRACTABLE TECH INC [RVP] +6.00%

Medical Laboratories & Research

GENOMIC HEALTH, INC. [GHDX] +4.26% $0
BIO-IMAGING TECH [BITI] +2.38% $33.5 M
BIO-REFERENCE LAB [BRLI] +0.91% $178.1 M
ARRAY BIOPHARMA IN [ARRY] +0.55% $237.9 M
MEDASORB TECHNOLOGS [MSBT.OB] +0.50%

http://www.biohealthinvestor.com/

Posted on: February 17, 2007 – 9:29 am in Biotech

With GM In The Game, What Is Chrysler Worth? $6 Billion To $7 Billion (Revised)

Word is travelling around Wall St. that GM might be a buyer for Chrysler. Automotive News reports that talks are active and the new company could command almost 40% of the US car market, not to mention the huge saving of consolidating work forces, plants, and parts sourcing.

Based on DaimlerChrysler’s recently released earnings for 2006, the Chrysler Group had revenue of $61 billion and a loss of $1.44 billion.

It is impossible to value Chrysler without determining what would happen to the company’s assets. Which would go with the new company and which would stay with Daimler? More important, what would become of the obligations? The pension. The health care benefits. These are all the expenses that the market thinks would hamper the company going forward just as they have GM (GM) and Ford (F).

But, what if the new entity were set up so that its US balance sheet and legal obligations mirrored those of GM and Ford? In other words, Chrysler would keep the burdens of operating in the US just as it would have it Daimler had never bought the company at all.

Conveniently, both GM and Ford trade at 10% of their trailing twelve month sales. That gives GM a market cap of $21 billion and Ford a market cap of $26 billion.

On that basis, Chrysler would be worth a little over $6 billion. The company was valued at $37 billion when Daimler picked it up in 1998. That means that the company is worth 16% of what the German company paid. That may not be far off.

Ford shares traded for over $37 in 1998. The 200 day moving average on Ford’s share price is about $7.62. So, the share are worth about 20% of what they were in 1998. On that basis, Chrysler would be worth just under $7.5 billion.

A point in favor of the DCX shareholders who want Chrysler dumped. Daimler’s market cap is .36x its total revenue. If Chrysler is worth .1x, DCX shares should rise nicely without the American unit.

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

Posted on: February 17, 2007 – 7:49 am in Autos

Are Sirius Common Shares Worthless? (Revised 2)

Further speculation about a merger between XM and SIrius pushed the shares of XMSR much higher this week. But, how much of a combined company could SIRI shareholders get?

Sirius (SIRI) has about $352 million in cash and $1.1 billion in debt. Over the first nine months of 2006, the company had an operating loss of $831 million on revenue of $448 million.

The company has said it will be cash-flow breakeven for Q4 06, but holiday season sales drive much of that, and the company could easily be using cash again in 2007. And, as Morningstar points out: "Warrant grants to strategic partners, content providers, and Sirius’ convertible debt have created substantially more potential dilution for shareholders". In other words, shares outstanding could rise sharply.

According to the company 10-Q, the Sirius net flow cash from operating activities actually increased in the first three quarters of 2006 to $859 million up from $552 million in 2005. And, much of the company’s debt is due in 2008 and 2009. The company’s cash interest payments in 2007 are almost $66 million. fixed content and programming costs are over $120 million and marketing programs $52 million.

And, Sirius has some further risks. One is that the music companies will ask for higher royalties as the Sirius subscriber base increases. Another is that its satellites have experienced circuit failures. Another is that the cost to acquire a gross subscriber has fluctuated over the last several quarters. In the latest period, the number was $114. In the June quarter, the number was $131. In March, the number was $113.

Gross subscriber additions dropped each quarter from December 05 to September 06. The numbers: 12/05 at 1,267,000, 3/06 at 961,000, 6/06 at 830,000, and 9/06 at 732,000.

The net of all this is that Sirius could run through its remaining cash sometime this year. A refinancing of the company could drive up debt and/or significantly dilute shareholders again.

Since 2000, the price of Sirius shares has dropped from $69 to the current $3.70. And, with high debt and a large cash burn, the race to $0 is on.

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

Posted on: February 17, 2007 – 7:43 am in Satellite

It’s Not Too Late For Motorola To Buy Nortel (Revised)

Carl Icahn is upset that Motorola (MOT) is sitting on over $11 billion in cash and getting a 3% yield on it. He wants that dough to be given back to shareholders.

At the same time, the head of Nortel (NT), a former Motorola exec, is telling anyone who will listen that the big network company is turned around. According to the company its accounting issues are behind it, the employee cuts are done, and SEC investigations are a thing of the past.

Nortel’s fourth quarter revenue will be up 9% to $3.26 billion.

Nortel is also investing in WiMax, a technology that Intel (INTC) and Motorola have already embraced.

According to MarketWatch, Nortel CEO Zafirovski reiterated his belief that NT is now stable enough to contemplate a strategic acquisition that would strengthen its core businesses. But, maybe it will be the company that is acquired.

Motorola’s infrastructure business and Nortel are in very similar parts of the telecom supply sector. And, while a turnaround may be well along at Nortel, its stock has been flat for the last year.

Based on Nortel’s general and administrative costs, Motorola could probably take $100 million out of a combined company.

Motorola’s may have to rely on its telecom equipment business more for earnings in the future. It handset sales are faltering and the head of the units has left for Dell (DELL)

Nortel’s market cap is $13 billion. Perhaps Motorola could put all its cash to good use.

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

Posted on: February 17, 2007 – 7:38 am in Telecom

Viacom Makes The Case That IFILM Is Its YouTube (Revised)

Management at Viacom (VIA) property IFILM is making the case that they may not need YouTube. IFILM already has video-sharing features, video blogs, films, video ads, and TV. The video site has about 13 million unique visitors a month, according to the company. The combination of Viacom’s sites ranked No. 12 in the US with 37.3 million unique users in January, according to Comscore. This puts it well ahead of several other media conglomerate including Disney (DIS) with 25 million unique visitors, CBS (CBS) with 22.6 million and NBC Universal with 15 million.

Granted, YouTube has about 80 million unique visitors per month, and Metacafe has about 35 million, but the major content holders have troubles with these sites due to their lack of screening for premium content. In essence, the large content holders believe that the Google’s (GOOG) YouTube audience was built on the back of their property.

There has been a great deal of speculation that Fox (NWS), Viacom (VIA) and NBC (GE) might set up their own competitor to YouTube. What is not so obvious is that they may already have the platform, and base audience, for this in IFILM. If so, getting a joint venture off the ground to give YouTube a run for its money may not be as difficult as it first seemed.

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

Posted on: February 17, 2007 – 7:34 am in Media

The Ford Recover Falters: Have Ford Common Shareholders Been Wiped Out? (Revised)

CNN Money reports the Ford is missing almost all of its short-term targets for sales, market share and cost cuts as 2007 move along. An employee survey shows that only 47% of the companines have confidence in the company long-term plan.

Anthony Currie of web financial commentary site BreakingViews has done an analysis that say Ford’s common shares may be worth nothing. Taken into account are the unfunded pension liabilities, health care costs, debt, cash, and burn rate.

Not to be outdone, Merrill Lynch downgraded Ford’s (F) shares to "sell". According to MarketWatch, the reasoning from the brokerage was: "We believe that the market is pricing in a significant recovery in earnings by 2009/2010, and is not pricing in the risk of the at least three years it will take for results to recover, that is if they do."

Ford is certainly worse off than GM (GM). Its share of the US market is dropping to a level that could approach 14% this year. It operations in markets like China as not as robust as other large car companies. And, it started its significant restructuring several months after GM did.

It shows in Wall St.’s opinions. At the same time Merrill knocked down Ford, it upgraded GM (GM) from "sell" to "buy". This despite the fact that GM’s stock is up more than 60% over the last year while the Dow is up about 15% and Ford has only risen about 5%. And now GM is looking at buying Chrysler which would get its share of the US market back to about 37%, well over double Ford’s.

Ford took on $23 billion in additional debt recently. That may allow the company to survive, but it does drop the value of the common shares, at least in theory.

It will require a strong, strong turn up in Ford’s fortunes to get its stock to hold above $8 for any extended period of time.

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

Posted on: February 17, 2007 – 7:27 am in Autos

WiMax War Of The Worlds (Revised)

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. The price of his stock after its IPO rests entirely on WiMax being an commercial success.

And now, Sprint will have to put up or shut up, and soon. But, that 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 17, 2007 – 7:21 am in Wireless

AT&T And Qualcomm: The Glass Is Half Empty (At Least) (Revision)

AT&T (T) announced that it will adopt the Qualcomm (QCOM) MediaFlow system for delivery of wireless video to its customers. Verizon Wireless (VZ)(VOD) has already signed up for the system. According to The Wall Street Journal, all of this is almost more than the competing technology from Nokia (NOK) can bear.

Qualcomm’s stock went exactly nowhere on the news. For the week QCOM was up less than 10% at $42.61 on Wall St upgrades. The stock’s 52-week high is over $53.

So, what gives? Perhaps the cognoscenti on Wall St. believe that the proliferation of MediaFlo will help Qualcom but the jury is still out on whether consumers want to watch TV on cell phones. Way out. Parks Associates predicts that mobile TV use in the US will have only a 7% penetration by 2010. Strategy Analystics has an equally dismal prediction for Europe.

There are a multitude of problems facing mobile TV. One is clearly screen size. The other is dropped signals. It is one thing to call your office after a connection drops. It is another to have missed the best part of "Survivor".

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

Posted on: February 17, 2007 – 7:17 am in Wireless