Daily Archives: March 2, 2007

CMGI Didn’t Get The Down Market Memo

CMGI Inc. (CMGI-NASDAQ) is one issue that is actually just amazing.  You would have never known that this stock reported bad news of the loss of its Hewlett Packard (HPQ) business along with its earnings.  The company reported another positive earnings quarter but it warned that it was losing $100 million in annual business since they were notified that HP was insourcing.  CMGI closed at $1.55 on Monday ahead of earnings, it gapped up a tad after the positive earnings, and then went lower on the news of the loss of the H-P business.

This one hit as low as $1.38 the day after the earnings with a tanking DJIA & NASDAQ.  In after-hours on Monday I noted that it wouldn’t be surprising if the shares gave back more of their recent gains.  But instead of going down and staying down, the first day we had a rally it screamed up.  Its old counterpart, Internet Capital Group (ICGE-NASDAQ), did not fare the same and closed down much lower this week.  So what gives?

The bulls are winning here.  CMGI trades usually about 5.9 million shares, but here is the volume for this week: 9.7 million shares ahead of earnings, 15.2 million shares after the earnings, then 22.98 million shares, then 31.6 million shares, and finally 16.4 million shares.  Its February short interest was 17.3 million shares in February, up from 15.1 million shares.  That isn’t ridiculously high in short selling of a cult stock. 

I received an email asking me if I thought this could be a takeover target and I responded with as close to what would be an "absolutely not" as you could get without putting in some caveats.  I also re-read over and over everything I could about the wording of the contract loss and the forward projections.

This is all about a) what was said at the Baird conference this week (like many cared with the market tank), and b) the cult stock status.  The comments at the conference were for up to $1.10 billion in 2007 revenue and even full year gross margin improvement. CMGI is targeting 12% to 14% gross margin, 7% SG&A, and 5-7% operating margin.  CMGI was also optimistic in its ModusLink supply chain operations business. 

Even in a market like this, the bulls can find issues to get behind.  When even the "front-line defensive stocks" get punished with the market, it sure makes you wonder when you see performance like this.  I had hardly noticed this one because of the major market issues, but it really looks like congratulations are in order to the company and its current believers.  Shares closed the week out at $1.66 and traded as high as $1.71 (a recent high). 

If you have any thoughts or comments feel free to send them in.  We are always looking for fresh views and thoughts.  We’ll assume that if you are positive on the name that you are long the stock and if you are negative that you are either short or have been burned in the past by this cult stock.  I have written in the recent past about how the company has been trying to transform itself.  We’ll see what next week brings.

Jon C. Ogg
March 2, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: March 2, 2007 – 7:33 pm in After-Hours Activity, Alternative Energy, Earnings, Internet, Software, Technology Companies

Cramer’s MAD MONEY Recap (MAR 2, 2007)

Tonights MAD MONEY with Jim Cramer on CNBC was more of a strategy session for a down market, and much less full of his normal buy-list stocks. 

Cramer said the close is not as important as what the intraday lows are.  On Tuesday we hit 12,086, but the lows are not clear because of the NYSE shenanigans.  On Thursday we got to 12,059 and today we closed at 12,109… Cramer says the silver lining in today’s close is that we never really took out the lows set in earlier in the week.  Despite this, you need a plan because we are likely not done going down.  He wants you to rank your stocks by what you like, what you would like if it was at lower prices, by what you will sell if it runs up, and then by what is one you want to sell.

Cramer tonight said he thinks you can own garbage collection stocks because they are partially recession proof and they would even do well in a Democratic led 2008 and beyond.  He discussed Stericycle (SRCL) and American Ecology (ECOL) are one sthat will hold up and have held up in bad markets.  Clean Harbors (CLHB) and Allied Waste (AW) will both hold up in bad markets as well.

Sinners win over Saints.  Cramer thinks that vices are better for investing than the socially conscious stocks.  He thinks oil and tobacco companies will make better money than the socially conscious. Vices are MO, DEO, BAT, RAI, LVS, MGM, WYNN, IGT, STZ.

Jon C. Ogg
March 2, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: March 2, 2007 – 6:50 pm in Cramer

Even Defensive Stocks Closed Crummy

DJIA               12,114.10; Down 120.24 (0.98%)
NASDAQ          2,368.00; Down 36.21 (1.51%)
S&P500           1,387.17; Down 16.00 (1.14%)
10YR-Bond       4.5150%; Down 0.0410
NYSE Volume    3,313,037,000
NASD Volume    2,444,310,000
CBOE VIX         18.61 (huge difference from just over 10 last Friday)

Wow, this is a bit of a surprise.  After seeing Doug’s 52-week low club and seeing the names on that are on there and then after looking at the "20 Defensive Stocks for a Crummy Market" this does not feel over yet.  I was on CNBC last night and when they asked me what I wanted to see before feeling like a bottom had been reached I responded that I wanted to see the list of 20 Defensive Stocks that we published reach a bottom.  There was not time to Name them but I noted that they are the ones that make things you eat, drink, and smoke.  That of course is only part, because there are some utilities, some drug names, and some consumer products.  On Tuesday we hit 12,086 intraday or so and the lows are not clear because of the NYSE shenanigans.  On Thursday we got to 12,059 and today we closed at 12,114.

Here is the full list of first line defensive stocks, and if only ONE OF TWENTY CLOSED UP then it just isn’t very comforting to tip toe in yet unless these gap down.  Be sure to read into the logic behind these because these will fall in a steadily falling market, but they usually don’t fall as bad as the overall market.  The good news is that they aren’t falling as bad as the overall market, but they are not signalling any levels of comefort yet.  Anyway, here’s the list:

Ticker  Close       Change
KO      $45.89      $(0.63)
PEP     $62.93      $(0.50)
JNJ     $61.95      $(0.50)
MRK     $44.19      $0.20
PFE      $24.79      $(0.25)
PG       $63.16      $(0.52)
CAG     $24.41      $(0.73)
BUD     $48.14      $(0.88)
HRL     $36.43      $(0.38)
CPB     $39.82      $(0.63)
K        $49.24      $(0.45)
GIS      $55.50      $(0.62)
DUK     $19.49      $(0.32)
CL       $66.65      $(0.28)
MO      $83.48      $(0.86)
RAI      $59.66      $(0.73)
MCD     $43.67      $(0.43)
CLX     $62.90      $(0.61)
KFT     $31.85      $(0.52)
TAP     $82.83      $(1.10)

Jon C. Ogg
March 2, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: March 2, 2007 – 6:31 pm in HI/LOW

The 52-Week Low Club

How the mighty have fallen. AMD (AMD) hit a low of $14.18. Its 12-month high was $42.70. Troubles at Dell (DELL) and strength in the business at rival Intel (INTC) continue to push the shares down.

Georgia Gulf (GGC) Shares in the chemical company dropped to $18.01. The 52-week was $32.88. Its debt and the housing market have kept pressure on the shares.

Circuit City Stores (CC) The retailer sells a lot of PCs and the market for these has been weak. Piper Jaffray recently cut its rating. Stock trades at $17.74, down from a 52-week high of $31.54.

Anadarko Petroleum (APC) The US Department of The Interior says that Anadarko owes it royalties. The matter is headed to court. According to Reuters, "If Anadarko prevails, the government could lose up to $60 billion in royalties industrywide, according to the U.S. Government Accountability Office." Of course, they may not prevail. Currently at $39.42 off a 52-week high of $56.98.

Hoffmann Offshore (HOFF) The company joins the club again. Low guidance and a poor Q4 continue to drive down the shares. New low–$12.93. A 52-week high of $24.00.

Transmeta (TMTA) On the list again, now down to $.62. Big loss in the fourth quarter and a cut of about 40% of its work force recently. Company can’t find any believers. The 52-week high: $2.37.

Coldwater Creek (CWTR) Shares dropped to $17.62. The 52-week high was $31.26. The specialty retailers sales have lagged.

Acacia Technologies (CBMX) The company acquires and licenses patents. Revenue down in Q4 from the same period a year before. Stock at $.63 against a 52-week high of $2.90.

Douglas A. McIntyre

Posted on: March 2, 2007 – 4:30 pm in HI/LOW

Clearwire Set For IPO Next Week (CLRW)

Craig McCaw’s Clearwire (CLWR-NASDAQ) is set to bring its WiMAX (wireless broadband) out in what will be a hot IPO.  Any trader knows that if the market continues as a crummy market thatIPO’s are generally about as fun to trade as fun is to insuranceseminars.  So if we keep sliding or if things get really bad then youcan probably expect a delay or at least a softer pricing than we wouldhave otherwise expected.  If it isn’t hot, it’s the market at fault rather than the fault of McCaw or Clearwire.  The range is set at $23 to $25 for 20 million shares plus the 3 million in the overallotment.  In a static and market-neutral environment you could just plan for this to be above the higher end of the range and maybe even more shares, and this is the one garnering the most attention for most IPO’s on the horizon.  Keep in mind that they have already forecast the need to borrow more funds and that they will need to sell stock in the future, but that should be know now.  Here is the backgrounder for the deal, and here is the more in depth filing from January 30.

Posted on: March 2, 2007 – 2:58 pm in IPOs, Technology Companies, Telecom, Wireless

Xinhua Finance Media IPO Next Week

Any trader knows that if the market continues as a crummy market that IPO’s are generally about as fun to trade as fun is to insurance seminars.  So if we keep sliding or if things get really bad then you can probably expect a delay or at least a weaker pricing than we would have expected two weeks ago.

Xinhua Finance Media (XFML-NASDAQ) is set for its awaited true IPO next week.  Some are mistakenly referring to Xinhua as the CNBC of China, but they aren’t off by too wide of a margin.  This Chinese business media operator is run by Fredy Bush and it is now very well entrenched.  This story isn’t a trade, it has the shot of being a major keeper.  Stock market trends come and go, and if this negative trend hurts the pricing of this one then you can count it a blessing.  Here are our notes from the last available data.  We are trying to get an interview with the company but they probably don’t want to say much until they come out.

Jon C. Ogg
March 2, 2007

Posted on: March 2, 2007 – 2:35 pm in Financial Stocks, IPOs, Media, Old Media

Cramer Wants You To Do Weekend Homework

On today’s Wall Street Confidential video on TheStreet.com Cramer said we should probably not be keying off of Europe.  He thinks the US keying off of Europe is an opportunity for you to circle around and decide which names to buy.  There are opportunities on same of the names that have fallen too much.  Cramer thinks the stock specific pieces of news merit work this weekend and pour over the good conference calls that were missed because of the market turmoil.  He did note many positives but noted how it is difficult for them to be noticed when everyone is focused on their own trading screens.  Some of the tickers he noted are: DF, VZ, GSF, DISH, DTV, VIA.

Jon C. Ogg
March 2, 2007

Posted on: March 2, 2007 – 1:52 pm in Cramer

Consumer Sentiment Dips, But Trend Line Remains Positive YoY

The Reuters/UM’s composite Index of Consumer Sentiment came in at a finalized 91.3 for February, down from a 96.9 reading in January that was essentially a spike from solid stock market gains in the 4th quarter of 2006.  Feb’s reading on a year-over-year basis was up from 86.7.

The current conditions index fell to 106.7 from 111.3 in January, while the more important expectations series fell to 81.5 from 87.6 last month.   

The thing to remember about subjective studies like this simple – one month a trend does not make.  Most economists will wait for 4-5 months of similar results before attributing any long-term economic shift based on it, and we are still averaging well above the levels seen across 2006.  This week’s market activity will not be reflected in the results due to survey timing, but you can be sure there will be some headwinds to get past on next month’s report, as stock prices tend to get reflected here.  March of 2006 came in at 88.9, and we could slide in below that next month unless the indexes go on a tear for the next couple of weeks. 

In reading the remarks from the survey’s director, it appears that the divide between the rich and the poor is widening (as if we needed more evidence):

“The economic experiences of upper and lower income households have diverged to a considerable degree, with income gains reported by twice as many upper income households, and with stressed family budgets being reported twice as frequently among lower income households”…

Also highlighted in the remarks were concerns over sub-prime mortgages and weak conditions in the U.S. Midwest due to manufacturing losses. 

All in all, although the report came in slightly below expectations, this wildly volatile indicator wasn’t far enough off to negatively impact the markets too terribly much.  The Conference Board’s Consumer Confidence, released earlier in the week, came in at the highest levels since August of 2001.  Results are mixed, and we’ll need to see a few more months of coincident results from the two surveys before predicting any long-term changes in outlook or consumer spending. 

Ryan Barnes

Posted on: March 2, 2007 – 1:06 pm in Economy

IPO Filing: Sirtris, A Diabetes Biotech

There has been another diabetes treatment-seeker that has filed to come public.  Sirtris Pharmaceuticals has filed for an IPO and it has enlisted JPMorgan, CIBC, Piper Jaffray, JMP Securities, and Rodman & Renshaw as the underwriters.  Its proposed ticker on NASDAQ is "SIRT."

The biopharmaceutical company is focused on discovering and developing oral small molecule drugs to treat diseases associated with aging, including metabolic diseases such as Type 2 Diabetes.  Its drug candidates are designed to mimic certain beneficial health effects of calorie restriction, without requiring a change in eating habits.

Here is how the company describes the progress of its studies straight out of the prospectus: In two Phase 1a human clinical studies, SRT501 was found to be safe and well tolerated. In these studies, SRT501 was administered orally, once daily, to 85 healthy male volunteers for seven days, in order to evaluate safety, dose, tolerability and pharmacokinetics. The trial demonstrated dose proportional drug levels in the blood. All of the reported adverse events were reversible and none were serious. Based on these results and preclinical data, we initiated a Phase 1b study in October 2006 in patients with Type 2 Diabetes who were not on medication for their disease. The Phase 1b trial is designed to evaluate the safety and pharmacokinetics of SRT501 in 90 patients with Type 2 Diabetes using oral administration of SRT501 for 28 days. We have also initiated a similar Phase 1b study with twice daily dosing. We expect data from these studies in the second half of 2007.

Obviously this one has all the proper "buzz category" as it is well known that the effects of diabetes (plus related effects) are the largest medical expense arena in the US.  This will be one to watch for sure, but keep in mind that it is still in its earliest stages and it is highly focused in one specific target.

Jon C. Ogg
March 2, 2007

Posted on: March 2, 2007 – 11:55 am in Biotech, IPOs

Can Palm Buyout Rumors Be True?

The Friday rumor mill is at it again.  In fact this is a "re-rumor" because the company has been rumored, or rumoured from the British Inquirer, to be an acquisition candidate on what may be more than a dozen occasions.  Palm (PALM-NASDAQ) is enjoying a nice gain of 7% at $17.65 on rumors that Nokia (NOK-NYSE/ADR) may be interested in the company.

Nokia has been "rumored" before as an acquirer, but there is a huge list of past acquirers the rumor mill has thrown out there.  Apple, Cisco, Research-in-Motion, Microsoft, Motorola, Samsung, and many more have all at some point been thrown into the acquirer role by the rumor mill.  So if this sounds skeptical, you would be interpreting it correctly.  Can a deal happen here? Sure it could.  Is there value to it?  Sure there is.  Is anyone really going to do it?  Maybe, but they haven’t yet.  Is the company vulnerable?  Yes.

So let’s consider what a buyer would really be buying, because there is actually a plus side and there is actually some value.  First they would be buying a competitor to Research in Motion and one that already has they Microsoft business platforms signed.  They would be buying a global IP network cloud that is already in place with its partners.  The balance sheet is fine with accounts payable hardly above receivables and inventory and no real long-term debt.  It has more than $500 million in cash and equivalents and roughly $200 million more in assets I would count (my estimate is lower than the balance sheet claims).  Even if the company continues to falter it trades at a massive discount to RIMM on forward revenues and RIMM is just about the only company you can directly compare this to.  So if you strip everything out that I am counting as net tangible value, a buyer would be paying $1.1 Billion plus whatever deal premium they would have to pay.  Motorola put a dent in them with the Treo-copycat, but that seems to have abated and now the real competition is back to RIMM.

A bidder could come in and start an offer at $20.00 and that would make most of the holders whole that bought in the last two years.  There would likely be some substantial overlaps in providers and distribution channels that could be consolidated down in costs, assuming it is Nokia or someone similar.  This does not fit the bill of a private equity target, but who knows for sure in the current wacky world of private equity.  Before you go run out and buy this one thinking it will be acquired, you better keep in mind that any rumors on PALM have so far ended up being the boulevard of broken dreams and you better keep in mind that this one has a very checkered earnings and guidance history. 

I personally love the Palm phone products and many love the handhelds and have been very curious as to why someone hasn’t gobbled this company up during its weak-cycle.  Most of the commentary here points to the value and a partial checklist of what a buyer would be getting, but it is VERY difficult to get excited on an issue that has been rumored as many times as this one has with no fruition.

Jon C. Ogg
March 2, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: March 2, 2007 – 11:41 am in Consumer Electronics, Media, Mergers and Buy Outs, Rumors, Wireless

GooTube Signs More Deals; Viacom NBC Get Lonelier

From Internet Outsider

PleaseThe BBC, the NBA, the Sundance Channel, the "hundreds" of small media partners who sign up every quarter… GooTube is quietly partnering with almost all of the old media world that hasn’t been scarfed up by Viacom or NBC.  According to the New York Times, moreover, when 100,000 Viacom videos were stripped off YouTube a few weeks ago, and some commentators suggested that the loss of these massively trafficked clips would force the arrogant little arriviste to beg and plead, YouTube traffic increased 14% in two weeks.

The bottom line: YouTube does not need Viacom or NBC.  For the moment, Viacom and NBC can tell themselves that they do not need YouTube.  In another year or two, however, when every other content producer on the planet has set up a dedicated "channel" on YouTube, it will be the stubborn old media conglomerates’ turn to say "please."

http://www.internetoutsider.com/

Posted on: March 2, 2007 – 10:50 am in Media

Sector 50-Day Spread Charts

From Ticker Sense

Below we highlight 50-day moving average spread charts for the ten major US sectors.  The blue line represents the historical daily percent difference between the current price of the sector and its 50-day moving average.  The green and red lines represent extreme points over the time period shown (11/05-present).  As shown, financials and consumer staples are very close to their low points over the past year and a half, while the utilities sector is close to its high point.  ETFs tracking financials are IVF and VFH.  ETFs tracking consumer staples are IYK and XLP.  ETFs tracking utilities are UTH and IDU.

50day1

50d2

50d3

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

Posted on: March 2, 2007 – 10:44 am in Research

Can Video Game Tunes Help Save Warner Music?

There was piece of news that came out on Wednesday, but covering it then would have been about as valuable as gold to a dead man.  In the midst of a correction (or meltdown or whatever you call the selloff) no one cares about a music company that has been caught between a rock and a hard place.  But now that the dust has somewhat settled, there is something that could generate a boost for Warner Music (WMG-NYSE).  There is no doubt that CD sales have been eroding and no doubt that music publishers have been fighting to keep control over their content. 

This week Warner Music signed a pact with Microsoft (MSFT-NASDAQ) where the company will administer and license music compositions owned by Microsoft.  You have to consider that this includes the music from games such as the Halo franchise, Fable, Age of Empires, and many more.  In truth, one game maker will not make a dent even if it is Microsoft and Master Chief.  But if you take this one step further you could end up with an entirely new revenue stream for Warner if they go out and lock up the other game publishers with the same agreement.  Video game tunes and music compositions are currently very difficult to purchase and this could bridge that divide.

Warner currently on its site lists music by Movie/Stage/TV, Songwriter, publisher, lyrics, artist and Label.  This will add several thousand music compositions for an entirely new music category in their offerings.  If Warner Music can go out and seize a dozen other gaming contracts, this could be an incremental new revenue stream that comes with minimal partnership and download costs.  It could be an enormously profitable business segment that contributes right to the bottom line.  They can advertise on all the major gaming sites for probably $1 million per year and would be able to generate many profits.

The trick is that they have to do it.  We are after all talking about Warner Music, and they are not exactly known currently for doing everything right.  The company is in a real catch-22 right now and it will take time and much effort just to maintain its current position. 

If you don’t think video game music can be a huge add-on, think again.  Video game sales have caught up to movie sales.  This is a huge industry.  Last summer the Houston Symphony featured an event that was probably the ONLY way they could have brought in floods of kids and young adults: It featured the MUSIC OF VIDEO GAMES.  This was a huge hit.  Many of the compositions are actually great classical music that can even cross over to non-gamers.  If you haven’t heard the music intro for the Halo2 video game just know that you are missing a phenomenal symphonic score.  So, this isn’t a guarantee for the company but it’s definitely a potential start.

Jon C. Ogg
March 2, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: March 2, 2007 – 10:21 am in Uncategorized

Goldman Sachs Notes (March 2, 2007)

Earnings Estimate Increased on DELL, BVN, SHLD, VIA, THE, AER, GGL, TFX.

Earnings Estimate Decreased on CDL, GPS, SWN, PRAI, OCR, CMOS, XTXI, XTEX.

Goldman Sachs has noted on BJ’s Wholesale Club (BJ) that a recent private equity purchase of a competitor called Smart & Final could yield $45.00 as a buyout price if the multiples were the same.  While they are saying they have a $34 to $35 private equity takeout value, this number is one that is hard to use since the other deal was not really comparable.

Ciena (CIEN) maintained Buy/Attractive despite some problem last quarter; still sees upside to Goldman estimates.

Dell (DELL) was maintained as Neutral but Goldman notes that its margin has has actually held up and the new structure expenses may already be taking some effect.

Goldman Sachs also lists the tower, outdoor and Internet groups leading the CME SECTOR: its best buy list ideas in the sector are IT, GOOG, LEAP, LYV; other focus names include CMCSA, DIS, EBAY, GHS, MHP, NWS, RHD.

American International (AIG) reiterated Buy/Attractive on buybacks, guidance, and dividend hike.

Jon C. Ogg
March 2, 2007

Posted on: March 2, 2007 – 9:14 am in Analyst Calls

YouTube Gets More Content No One Wants To Watch

After announcing that it had signed hundreds of deals with small video content providers, YouTube from Google (GOOG) made a joint statement with the BBC that content from the British news organization would be available on several YouTube "channels". The material will be advertising supported.

The venture will allow consumers to watch BBC News and shows that are hardly hits like "Doctor Who". It is just the kind of hip content that the relatively young YouTube audience is looking for.

Or, maybe not.

Douglas A. McIntyre

Posted on: March 2, 2007 – 8:37 am in Media

EADS: Airbus Says If It Ain’t Broke Don’t Make It

By William Trent, CFA of Stock Market Beat

We’ll save our usual “why big jets are unnecessary” comments for those who want to click through to read them. Germany Puts Freight A380 on Ice: Financial News – Yahoo! Finance:

Financially troubled European airplane manufacturer Airbus has stopped work on the freight version of its new A380 superjumbo so it can focus more on the troubled passenger version of the aircraft, a spokesman for its parent company said Thursday.

If that doesn’t say it all, we don’t know what does. The model that doesn’t have significant problems also doesn’t have any customers. Meanwhile, the longer the delays for the passenger version the more likely the plane never gets off the ground.

http://www.stockmarketbeat.com/

Posted on: March 2, 2007 – 8:31 am in Transports

Starbucks Cuts “Dividend”

By William Trent, CFA of Stock Market Beat

According to the Seattle Times (via AZ Central):

Every year around this time, Starbucks sends its shareholders a little gift along with its annual report and proxy. The past five years, Starbucks sent a gift card for $3.50, enough money to buy a latte. Previously, it was a coupon for a free drink of their choice.This year, shareholders are opening the envelope to find a coupon good for two coffee-drip drinks. Starbucks says it wants people to bring a friend or family member along and then write about their experience at www.mystarbucksstory.com.

The new coupon also happens to cost less. Last year, Starbucks spent roughly $1.4 million for gift cards to about 400,000 shareholders. By giving away cheaper drip coffees, the company will save hundreds of thousands of dollars.

With the stock down significantly of late, this is likely to prove annoying. If Howard Schultz is serious about wanting Starbucks to regain its community feel he will consider the fact that many shareholders collect the gift cards, getting use from them beyond the $3.50 initial take.

Further, what’s the idea of bringing a friend? Do they think anyone who really enjoys Starbucks knows someone who is a virgin to the concept?
As Starbucks shareholders, we considered the gift card to be our dividend. And we are annoyed both at the fact that the initial value is lower and that we will lose the residual “collectible” value.

We expect better next year, Howard.

http://www.stockmarketbeat.com/

Posted on: March 2, 2007 – 8:29 am in Food

Pre-Market Stock News (MAR 2, 2007)

(AIG) AIG rose 2% after meeting expectations, boosting dividends, and announcing a $8 Billion stock buyback plan ($5B this year on accelerated basis).
(ATPG) ATP Oil & Gas said annual production increased 155% and a reserves replacement ratio of 315%.
(BRW) Bristol West is being acquired by Farmers Group for $22.50.
(CFC) Countrywide is noting a rise in delinquent payments in its annual report.
(DELL) Dell $0.26 EPS vs $0.29e; R$14.4B vs $14.9B(e); stock down 3%.
(DF) Dean Foods announced a special $15 dividend.
(DRTE) Dendrite being acquired by $16.00 per share by CEGEDIM.
(F) Ford announces it will sell Automobile Protection Corp to Trident.
(GOOG) Google down 0.5% on more YouTube news concerns; may be dispute with SEC over tax recognitions.
(GPS) Gap trading flat even after guiding down after earnings.
(IDIX) Idenix Pharma says Sebivo approved in China as new treatment option for patients with chronic Hepatitis B.
(MYL) Mylan Labs priced almost $1Billion in convertible notes.
(SIRI/XMSR) Sirius/XM announced customer initiatives as first concessions to getting the merger approved.
(TRB) Tribune may now get a bid from Sam Zell according to Crain’s.
(UNH) United Health said it will be current in SEC filings by March 15.
(VVUS) Vivus -$0.02 EPS vs -$0.09e.
(YHOO) Yahoo! trading down 0.4% despite UBS report that Microsoft should consider buying Yahoo!.

Jon C. Ogg
March 2, 2007

Posted on: March 2, 2007 – 8:20 am in Pre-Market Activity

Pre-Market Analyst Calls (MAR 2, 2007)

BRLC started as Buy at Cantor Fitzgerald.
CCL raised to Positive at Susquehanna.
CIEN raised to Hold at Jefferies.
CRZO started as Buy at Jefferies.
DTE raised to Buy at KeyBanc.
EXLS started as Outperform at Credit Suisse.
FCX raised to Buy at Deutsche Bank.
FNXMF started as Overweight at Prudential.
HAWK started as Buy at Jefferies.
HTZ raised to Overweight at JPMorgan.
HYSL cut to Hold at Soleil; cut to Neutral at First Albany.
INTU raised to Outperform at CIBC.
LUV raised to Overweight at Prudential.
MCO raised to Outperform at Bear Stearns.
NDAQ cut to Neutral at JPMorgan.
NOVN cut to Hold at Deutsche Bank.
ROP raised to Outperform at FBR.
RCL raised to positive at Susquehanna.
SPRT started as Buy at Cantor Fitzgerald.
T raised to Hold at Stifel Nicolaus.
TWC started as Peer Perform at Bear Stearns.
TXI cut to Hold at BB&T.
UPL started as Buy at Jefferies.
UTHR started as Overweight at Lehman.
VQ started as Buy at AGEdwards.
WNS started as Outperform at Credit Suisse.
WTS raised to Outperform at FBR.
XRM cut to Underperform at Baird.

Jon C. Ogg
March 2, 2007

Posted on: March 2, 2007 – 7:57 am in Analyst Calls

15 Companies That Management Can’t Fix: Dell

There are certain companies that probably cannot be turned around no matter who runs them. They tend to be in industries where macro-economic trends are against them, like the buggy whip business 150 years ago.

Investors are not likely to get much out of these firms, unless and until the trend that is hurting them is reversed

Dell (DELL) reported earnings yesterday. At least partial figures, with earnings and revenue falling. Issues with the company’s revenue recognition will probably prevent it from giving a complete picture of its finances for some time.

Dell faces several operational issues which it may not be able to address. One is a flattening in growth in PC sales, especially in the US. Another is a loss of market share. Yet another is the resurgence of rival Hewlett-Packard (HPQ). Dell’s model of selling directly to customers may be a handicap as other PC companies sell through retail chains. And, it has already taken so much cost out of the company by working down component prices from suppliers that there is not much left in that area to cut costs.

American Technology Research recently made the case that Dell’s business model is almost completely broken.  Quoted in Barron’s the firm said: "In our view, DELL needs to fundamentally change the way it does business where its direct model is at a structural disadvantage in addressing consumer and international markets."

Whether Dell changes its sales model or not, PC shipment growth is slow. In 2007 iSuppli estimates that global growth will only be about 10%. With drops in Dell’s market share, a rapidly growing market would certainly help revenue, but that does not seem to be on the horizon. And Gartner Group is forecasting that even the slow growth will come with a cost as PC prices drop and the revenue from sales actually contracts.

There is the temptation to look at the success at Hewlett-Packard and ask whether Dell can replicate it. But, HP is not doing as well as it might appear at first glance. The company’s guidance disappointed Wall St.  In its most recent quarterly report, notebook revenue rose almost 20% quarter over previous quarter, but desktop sales were little more than flat. And, HP has its huge printer business to help buttress its overall hardware sales. Dell’s server sales revenue for 2006 was flat, so the company probably cannot look to that business as a driver for growth.

Dell will certainly be around for a long time. But, the macros of the PC business and the level of competition from HP and manufacturers in the Far East will make it hard for the company to grow. Dell is probably going from a company that was growing 15% to 20% two years ago to one where 5% to 10% growth is the norm.

And, that is not going to get the markets excited.

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

Posted on: March 2, 2007 – 7:11 am in PC Companies