Daily Archives: February 19, 2007

S&P 500 “Top 25″ and “Bottom 25″ Lists

From Ticker Sense

Over the next couple of days, we will be highlighting the best and worst of the S&P 500 based on numerous categories.  For our first installment, we take a look at share price performance (not total return) of current S&P 500 members.

The first two tables list the best and worst performing current S&P 500 stocks since the bear market began on March 24, 2000 (it ended on October 9, 2002).  XTO Energy leads the top 25 list with a whopping return of over 2,188%, while JDSU has fallen over 98%.  The list of winners is led by health care names while the list of losers is pretty much all tech and telecom.

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The next two tables highlight the price performance of current S&P 500 stocks since the bull market began on October 9, 2002.  The thing that stands out the most from these lists is that only 18 of the 500 stocks in the index at the moment have seen their share prices decline during this 4 year+ bull market.

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Looking at the top and bottom 25 over the last year, we see much more muted gains, as only one stock (ATI) is up over 100%.  Technology stocks again lead the list of losers.

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And finally, we see that RSH and YHOO are off to a good start for 2007, while AMD continues to struggle.  Only one stock made the top 25 list for each of the time periods we analyzed: Cognizant Technology (CTSH).  Unfortunately for Micron Technology (MU), it is the only company that made all four bottom 25 lists.

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Ytddown

http://tickersense.typepad.com/

Posted on: February 19, 2007 – 8:42 pm in Research

JetBlue Airlines (JBLU)

From The Stock Masters

Stock Tips JetBlue Airlines (JBLU) has been all over the news lately. Today marked day six of a continuing scheduling nightmare at Kennedy Airport that began after a Valentine’s day storm that left many travelers stuck on JetBlue planes for up to 12 hours. The good thing is there were no Snakes on the Snakes on a PlanePlane, and they weren’t showing that movie, which despite all the hype, just looks awful and unbearable to watch. But back to JBLU, today they said they were canceling almost a quarter of their flights but hoped to be back to full operations tomorrow. Last week a major snowstorm stranded planes on runways for hours and started a string of cancellations that led to JetBlue’s travel festivus. So the Masters are thinking, what will be the impact to JBLU shares? The past 6 months, JetBlue has enjoyed a nice little 31% increase in share price and shares are trading around $13.50. Don’t expect shares to stay at that level with all the negative press. These past few days of massive cancellations and loyal JetBlue customers vowing to never fly with them again is going to push this stock down. JetBlue has built a loyal following with quirky flight attendants, leather seats, 36-channel personal television monitors, and its CEO making weekly trips. Just wait fellow Masters, the downgrades will begin later this week. JBLU has posted net losses for the last two years, though it did recover somewhat late last year, earning $17M for the final quarter. However with all this recent bad news, it’s probably best to avoid the stock and Snakes on Plane, watch Airplane! (1980) it’s the best airplane movie ever made.

http://www.thestockmasters.com/index.asp

Posted on: February 19, 2007 – 8:40 pm in Airlines

Short week so what to expect?

From The Stock Masters

Good article on TheStreet.com highlighting what to expect during this short 4 day week. The consumer-level inflation report comes out and reporting earnings this week includes: Abercrombie & Fitch (ANF), TJX, Zale (ZLC), J.C. Penney (JCP) and Whole Foods (WFMI). Don’t forget WFMI has had a tough few months, if they have any good news, it could finally move the stock. WFMI has been trading $4 away from its 52-week low and more than $30 from its high. They have missed expectations twice in the past four quarters, most recently by a penny per share. Article at TheStreet.com…

http://www.thestockmasters.com/index.asp

Posted on: February 19, 2007 – 8:37 pm in Research

FCC Could Block Sirius Merger With XM

Sirius (SIRI) and XM (XMSR) today announced that the companies would merge in a combination that would give each company’s shareholders 50% of the new firm.

The merger has one huge hurdle, the FCC. And, the agency may have good reason to block the deal.

Competition between the two companies has almost certainly kept the monthly rate to subscribers at around $12. The mergered company would almost certainly raise rates to increase revenue and try to pay down the huge debt of the companies. It is one of the reasons that the federal goverment resisted newspaper mergers for so long.

The two companies would have to make a case that they would not survive without the merger.

Douglas A. McIntyre

Posted on: February 19, 2007 – 3:17 pm in Mergers and Buy Outs

XM And Sirius Mark Final Merger Announcement

XM (XMSR) and Sirius (SIRI) announced today that they will merge. Mel Karmazin will be CEO of the combined company

The agreement calls for shareholders of the company to each own 50% of the new entity.

Douglas A. McIntyre

Posted on: February 19, 2007 – 3:08 pm in Mergers and Buy Outs

Is A Successful Future For AT&T A Lost Cause?

Given its size and huge customer base, AT&T’s (T) future as a successful public company faces challenges that the firm may not be able to  overcome. It has three businesses. One, its land line operations, will almost certainly continue to shrink over the next decade as consumers and businesses move from tradition phone service to VoIP and cell service.

The company’s huge Cingular cell phone service, which is being re-branded AT&T Wireless, operates in a US market where the growth of subscribers is slowing, especially in contrast to the rapid expansion of markets like China and India. It is almost certain the cell phone penetration will reach a saturation point in America fairly soon and that most sales will have to come at the expense of entrenched competitors like Verizon (VZ) and Sprint (S). Or, these competitors will take share from AT&T.

AT&T last business is it broadband operations, which, until recently have been entirely DSL based. But, DSL connections are slower than those provided by cable rivals like Comcast (CMCSA), Cablevision (CVC) and Time Warner Cable (TWX).

As MarketWatch points out, AT&T is faced with two relatively unattractive options to compete with cable. One is to cement relationships with satellite TV providers, perhaps by buying one. Even if the companies were available, they are expensive. Echostar (DISH) has a market cap of almost $19 billion.

The other route AT&T could go is to aggressively put down fiber to build a high-speed broadband network the way Verizon (VZ) has. Verizon has said it will invest $18 billion in the initiative, but it only signed up about 100,000 subscribers. AT&T plans to spend about $5 billion on fiber, but that may well be too little, too late.

Some investors view the Verizon gamble on fiber as too risky, but, it may be the only chance that it has to beat back cable competition. If so, AT&T is over a year behind.

Teaming with a satellite company is probably a poor solution. Because the signal are one-way, this does not help with providing broadband the home, and cable companies have plenty of tools to compete with satellite TV.

Fiber may well be AT&T’s last, best hope. If so, time’s a wasting.

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

Posted on: February 19, 2007 – 11:19 am in Telecom

How Sirius & XM Would Look As a Merged Company (Revision)

The New York Post today wrote that a Sirius (SIRI) merger with XM (XMSR) could be announced as early as today.

While many are guessing or speculating on a merger between XM Satellite (XMSR) and Sirius (Satellite Radio (SIRI), very few have shown what a combined company would look like and what issues would need to be overcome.  No one can say the deal is a shoe in, but it is more than worth investigating what a combined operation would look like.

The Department of Justice might block a deal FCC may not allow a merger of the two satellite radio companies, but, if one gets into significant financial difficulty, that might change.  If they are both running very well and they are still going to grow, then they have to put on a salesman hat to win approval, but if both companies have growth issues and a potential survival issue and then all of a sudden neither can run profitably then they would have a better case of pressing the DOJ & FCC to approve a merger.  There would be some conditions, but if the FCC had to see a near monopoly or had to see yet another failure of a space venture they just might be inclined to go along without blocking the deal from the start.

There are some regulatory issues that would be there as noted, and at least Mel Karmazin has already addressed that as a real issue.  He of course also has expressed interest in acquiring XM.  If this were to happen soon before a new administration that may or may not be more hawkish on blocking mergers, the issues could potentially be worked out.  After all, there are others that have at least some capabilities of offering a competing service in the US and Canada.  Satellite radio is also not going to be deemed as important as terrestrial radio to an FCC or to a DOJ.

XMSR has a $3.75 Billion market cap and SIRI has a $5.2 Billion market cap.

Would both networks be maintained along all of the programming on every channel, or would the strongest programs be migrated to the most robust platform? Most likely a long-haul migration to the strongest and most stable platform would result with other satellites either set up for sale or geared toward other uses and product offerings not currently in development.  Sprint already has ties to Sirius, and Cingular already has ties to XM.  We already know that the music industry is looking at trying to force both companies to pay more in royalties as well.  Sirius has the Stiletto and XM has the XM Xpress or XM2go versions, and both are working on video capabilities. We also have what GM has said will be 1.8 million cars with XM factory installed over the course of 2007 and Honda with what will be some 650,000 XM installed cars yesterday.  Now that we are past the holiday season should get solid and goal-oriented 2007 projected subscriber add-ons from each company, but that is a guess on the timing based on the companies and based on industry forecasting.

Based on SEC filings, company documents, and Wall St. analysis, this is what the two companies would look like as one entity at the end of 2006:

The subscriber base of the two companies together would be roughly 7.8 million from XM. and 6.9 million from Sirius. There is probably almost no overlap between the customer bases, so the new company would probably start with about 14.5 million subscribers.  If you look later in the article you probably won’t get any solid “guestimates” out of the subscriber bases for the end of 2007 until after the end of the holidays.

Based on Q3 numbers and Wall St. projections, Sirius should have about $200 million in revenue in Q4 (Q3 was $167 million) to add to XM’s $290 million (Q3 was $240 million). So, the revenue base going into 2007 would be about $500 million.

Sirius has $323 million in costs in Q3 and XM had $301 million. However, some of those costs could be consolidated from the potential total of $625 million. Customer billing at Sirius runs about $15 million a quarter. At XM, the number is $27 million. The combined companies can probably take out $10 million a quarter. Sales, marketing, and customer acquisition at Sirius is almost $130 million. At XM, the number is about $90 million. Total costs for marketing and acquisition could probably be cut $75 million.

Sirius has general and administrative plus engineering costs of $56 million a quarter. XM has $30 million in costs on these items. The total number based on lay-offs and consolidation could probably be dripped to $65 million, a savings of about $30 million.

Before programming costs, overall expense could probably be driven down by $115 million, which would leave the combined entity with a nominal loss. But, programming costs are the largest expense at both companies. Sirius spent $80 million in the last quarter and XM spent almost $40 million. Sirius has 133 channels. XM has 170. Many of he programming contracts are long-term and extend out several years. Because of overlaps on current station deals, a combined company could drive down programming costs even after the added programming expenses in 2007.  Any savings in this area in the combined company would make the entity profitable or at least close to profitable on a GAAP basis. It should be noted that depreciation and amortization at Sirius is about $28 million. At XM it is running about $43 million a quarter.

The balance sheets represent a huge problem. Sirius has almost $1.1 billion in long-term debt. At XM that number is over $1.3 billion. Sirius has cash and securities of $350 million. XM has $285 million. So, combined debt would be $2.4 billion against about $600 million in cash. Payables and accrued expenses of the combined company would be over $500 million. To have a significant value to shareholders, the combined business would have to pay down at least $200 million in debt per year. None of the debt is due until 2009, but the majority is due by 2013. The combined company would be able to partially use cash on hand and could go to the capital markets with a new debt issue with the sole purpose of refinancing that amount due in 2009 (and with convertible debt if they were smart and/or able).

If revenue growth can continue at 10% quarter over previous quarter and expense growth can be held to 5%.

Once again, this is more of a viewpoint of what a combined company would resemble rather than a forecast of a Sirius-XM tie-up.

-Douglas A. McIntyre & Jon C. Ogg

Posted on: February 19, 2007 – 10:14 am in Satellite

XM And Sirius To Announce Merger, NY Post

According to the NY Post, XMSR and Sirius will announce a merger as early as today. Both Sirius and XM trade near multi-year lows as their subscriber growth decelerates and they face competition from new consumer electronics devices like the Apple (AAPL) iPod.

The companies each has over $1 billion in debt.

A consolidation is seen as way to save hundreds of million of dollars in redundant costs, but the FCC may resist a merger which would eliminate competition in the satellite radio market.

Douglas A. McIntyre

Posted on: February 19, 2007 – 6:58 am in Mergers and Buy Outs

Media Digest 2/19/2006 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, DaimlerChrysler (DCX) shares hit a five year high on a possible sale of its Chrysler unit.

The Wall Street Journal writes that Citigroup (C) is considering listing on the Tokyo Stock Exchange. The move may make it easier to acquire Japanese companies.

The Wall Street Journal writes that JetBlue (JBLU) continued to cancel flights on Monday.

The New York Times writes that Viacom’s (VIA) MTV, one of media’s premier brands in under seige from a number of new competitors.

FT writes that oil may become much more difficult to find in in 15 years and tapping new resources will be more damaging to the environment.

Barron’s writes that the video revolution is finally making it to internet TV a trend that should help companies like Cisco (CSCO)

Douglas A. McIntyre

Posted on: February 19, 2007 – 6:40 am in Press Digest

Osiris: Promising Stem Cell Research, Questionable Management

by H.S. Ayoub
BioHealth Investor.com

While investors must research the history of any company’s management and executives, it is even more imperative in the biotech industry.

Cutting edge medical research is both risky and expensive, so it is imperative that investors seek those tiny biotechs that are managed by individuals with positive historical backgrounds.

Osiris Therapeutics (OSIR) could not have been involved in a riskier and more highly debatable field than stem cell research. But the company focuses on adult stem cells, not embryonic or fetal stem cells, which tend to be more contraversial.

The company is also different than the rest of the publically traded stem cell companies in that it is conducting multiple late stage clinical trials. Most of the others have yet to initiate any human trials, let alone late stage studies. StemCells Inc (STEM) has just initiated early phase human trials with its stem cells just last year.

Osiris stock has also been on a tear since debuting on the Nasdaq last year. At its all time high in January it was up almost three fold!

Back on October 24 however, Herb Greenberg of MarketWatch.com, completely downplayed the company’s potential. In his article he exposes the financialy trumultous history of the company’s co-founder, the swiss capitalist Peter Friedli, and suggests that the company’s research might have been over hyped.

Alas, Mr. Greenberg was right, as Osiris released disappointing phase I/II results of Chondrogen, a stem cell derived therapy for ligament regenerative therapy. While the study was aimed at proving the safety of Chondrogen, data was also collected to see whether there was any volume increase in the miniscus of the knees of patients. There was no significant difference in the volume of the miniscus between patients taking Chondrogen and those on placebos after six months.

Investors were obviously disappointed as the stock lost more than 10% on the day, and currently stands at just above $17. The stock reached its all time high of almost $30 just a few weeks ago in January!

One miss does not kill a company, especially since Osiris is still conducting other late stage trials using stem cells. But the background history of its co-founder, and the disappointing results of the Chondrogen trial makes Osiris stock seem a little too risky at the moment.

It would be wise to be patientand wait for more study results to be released, especially those from late stage trials.

It would also be interesting to see how management acts in tough times. Keep an eye out for insider trades in the next few months. Any insider selling and Osiris stock could prove Mr. Greenberg was right once again.

http://www.biohealthinvestor.com/

Posted on: February 19, 2007 – 6:24 am in Biotech

Asia Markets 2/19/2007

The Nikkei was up and a number of other markets were closed for holidays.

The Nikkei rose .4% to 17,940. Bridgestone was down 1.9% to 2580. Canon was up 1.2% to 6630. Hitachi was up 1.9% to 849. Honda was up 1.3% to 4720. NTT was flat at 643. Softbank was up 1.7% to 2930. Sony was up .2% to 6270. Toyota was down .5% to 8150. Yahoo Japan was up .4% to 45,250.

Data from Reuters

Douglas A. Mcintyre

Posted on: February 19, 2007 – 6:23 am in International Markets