Daily Archives: March 22, 2007

Does China YouTV Remind You of Anyone? (CYTV-OTC)

China YouTV Corp. (CYTV-OTC) is one stock that has been on a tear in recent days, yet no one really knows the company yet.  CYTV shares are up threefold in the last few days and sit around $2.60 today.  This is the first Chinese online video site listed in the US and this is the description: CnBoo.com is the online video site of HuaJu NetMedia, the Joint Venture partner of China YouTV. CnBoo.com was established in May, 2005 as one of the earliest video sharing sites in China.  The online chat rooms are calling this one "the next YouTube, and in China too…"

The web site is a video viewing site and social networking site that allows users to create their own profiles, post videos, and comment on each other’s posts. It offers short-form videos that are predominantly user-generated or, in many cases, professionally produced videos that have been user "edited." Everyone can watch videos on CnBoo.com. People can see first-hand accounts of current events, find videos about their hobbies and interests, and discover the quirky and unusual.  The company claims that CnBoo.com already has more than 1.2 million members and over 1 million pieces of original video shorts.  So far it is being billed as the YouTube of China, sorry Google.

There is one question here that really needs to be addressed though, outside of the traditional OTC stock spin: How does this get around the Chinese censorship laws there?  There has to be some issue here, even if the company claims it "monitors" the content per Chinese laws.  The company’s website is also very basic and doesn’t exactly ooze "mega-video" AND this company in the joint venture was (partly) funded In MARCH 2007 with 2 deposits of 1 million RMB (about $130,000.00 at the time under today’s echange rates).  Access the registration from March here, and you can probably assume that there will be some share sales if there haven’t been already.

Investors need to know that this one has stock promoters behind it because the emails have been sent around en-masse in a template that many other OTC stocks get put in.  But hey, I don’t want to sound only negative on this sort of investment tool because sometimes letting the actual fundamentals get in the way of a great story is more costly than can be imagined.  I am sure the fact that all the chat rooms are calling it "the next YouTube, and in China too" is going to keep the buzz going regardless of if this is a $2.80 stock, a $4.00 stock, or a $0.50 stock.  After you have been around for a while, these all fit a boilerplate dujour and it is hard not to at least raise an eyebrow or two.  But, once again, sometimes putting the fundamentals and financials in front of a big story makes a huge missed opportunity.  That will be for you to decide.

Cytv_chart 

Jon C. Ogg
March 22, 2007

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

Posted on: March 22, 2007 – 9:23 am in Internet, Micro Cap

Starbucks’ Credibility Problem

After a little up-tick yesterday when Starbucks (SBUX) said it would add 10,000 stores over the next four years, and double revenue in five, the stock is moving back down again. At $32, it is down 10% in the last 90 days.

The problems seems to be that very few investors think that the next year will be great for Starbucks, let alone the next five years. Of the 21 analysts who cover the stock, five have it as a hold, according to Thomson First Call. Morningstar’s "fair value" estimate for the stock is only $35, which is below where it traded in January.

Stabucks did increase it sales by 91% from 2003 to 2006, moving from $2.39 billion to $4.61 billion. But, now its aims to double off a much larger base.

Then, there is the problems of McDonald’s (MCD) which is clearly targeting Starbucks with a better morning menu, premium coffees and 24-hour stores. Even Dunkin Donuts offers up-scale coffee.

The next four years are four hard years, at least compared to the last four. Come to think of it, that comment is obvious.

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

Posted on: March 22, 2007 – 9:11 am in Food

With Chinese Stock Markets At All-Time High, Why Aren’t China Stocks On US Exchanges?

This is a mystery, so if you are looking for an answer, skip this section of the test and go to the next question. The Shanghai Composite hit an all-time record yesterday. It has come all the way back from the correction two weeks ago, plus some and stands at 3,071. A year ago, it was at 1,295.

So, what happened to all of the Chinese companies that trade on US exchanges?

Let’s take Baidu (BIDU), the big Chinese search engine. It trades at $101, well down from its 52-week high of $134. Sina (SINA)? At $33.94, below its 52-week high of $37.73. China Mobile (CHL). It’s at $46.28, off its 52-week high of $51.78.

China Life (LFC) is well below its 52-week high of $57.85 and currently trades at $43.06. China Petroleum & Chemical (SNP) has a 52-week high of $95.50. It now changes hands at $80.43.

Maybe the markets aren’t so efficient.

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

Posted on: March 22, 2007 – 8:55 am in International Markets

Ultrapetrol Files to Sell Shares

Ultrapetrol (ULTR) is looking to sell $201 million in a stock offering, although it has not set the terms nor the number of shares.  Lead underwriters are UBS Investment Bank and Bear Stearns; co-managers are: Jefferies, Raymond James, and DVB Capital Markets.  Ultrapetrol will use the proceeds from the offering for funding acquisitions, construction costs, shipyard expansion, and for general corporate purposes.

This is after the company posted its annual results: Full year 2006 revenues of $173.5 million were 38% higher than full year 2005 revenues; Full year 2006 EBITDA was $62.4 million, up 46% annually on adjusted basis; Fourth quarter 2006 EBITDA of $13.1 million, compared $3.0 million in Q4 2005.  Full year 2006 net income was $10.5 million, compared to $14.6 million in 2005. The 2005 results included the net gain of $13.1 million on the sale of the “Cape Pampas”. Diluted net income per share in 2006 was $0.58 compared to $0.94 in 2005. Ultrapetrol had a net loss of $2.8 million in the fourth quarter 2006, a significant improvement on the net loss of $7.8 million experienced in the equivalent period of 2005.

Here is the breakdown of its business, based in the Bahamas: River Business (502 barges)river barges and pushboats that transport dry bulk and liquid cargos in South America; Offshore Supply and transport for offshore exploration and production companies (4 ships, 4 more being built); Ocean Business owns and operates eight oceangoing vessels for liquids and dry bulk; Passenger Business fleet consists of two vessels with a total capacity of approximately 1,600 passengers primarily in the European cruise market.

Jon C. Ogg
March 22, 2007

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

Posted on: March 22, 2007 – 8:10 am in Uncategorized

Goldman Sachs Research Summary (MAR 22, 2007)

Biovail (BVF) downgraded from Buy to Neutral.
Raytheon (RTN) downgraded from Neutral to Sell.

Eaton (ETN) started as Buy.
Triad Hospitals (TRI) started as Neutral (coverage universe transfer after analyst been covering the sector for 11 years).

Earnings estimates INCREASED: IHS Inc. (IHS), Morgan Stanley (MS), Eli Lilly (LLY).

Earnings estimates DECREASED: General Motors (GM), Motorola (MOT), Radio One (ROIAK), Triad Hospitals (TRI).

Komag (KOMG) maintained Sell at Goldman on eroding margins.

Jon C. Ogg
March 22, 2007

Posted on: March 22, 2007 – 7:15 am in Analyst Calls

Pre-Market Stock News (MAR 22, 2007)

(ABAX) Abaxis announces CLIA waived status for two additional medical test panels.
(AMZN) Amazon.com’s partnership at Borders is being terminated.
(ARWR) Arrowhead Research subsidiary Unidym to merge with Carbon Nanotechnologies for $5.4 million worth of ARWR common stock.
(BGP) Borders Group sees losses because of charges on closing Walden Books locations; ends distribution pact with Amazon.com.
(BVX) Bovie Medical reports Q4 EPS of $0.02.
(CAG) ConAgra $0.38 EPS vs $0.35e.
(CBST) Cubist Pharma licenses rights for development and commercialization of Cubicin in Japan to Merck.
(CRXL) Crucell announces influenza alliance with ADImmune.
(EBS) Emergent Biosolutions announces the promotion of Daniel Kramer to President.
(FLE) Fleetwood is in a modular housing supply pact with the US Army.
(GIS) General Mills $0.73 EPS vs $0.70e.
(GLGC) Gene Logic names new CEO.
(IAO) IA Global board approved a 4 million share buyback.
(ICFI) ICF International awarded $22.1 million contract with the FAA.
(MOD) Modine Manufacturing sees Q4 EPS be at or below the break-even level.
(MNST) Monster Worldwide says online recruitment activity rises in top 28 US metro markets in February; not a surprise after you saw the newspaper numbers drop.
(MOT) Motorola lowered guidance; accelerated share buyback; made management changes (not Zander).
(NMX) NYMEX trading up 1% after 7 million shares priced at $136.50 for secondary.
(RTN) Raytheon raised dividend; stock lower on Goldman Sachs downgrade.
(SPPI) Spectrum Pharma study said that patients treated with Satraplatin demonstrated statistically significant improvement in pain response.
(TRIS) Tri-s Security subsidiary awarded $6.4 million contracts with FAA.
(TWTR) Tweeter will consolidate in restructuring pact; closing 49 stores and exit certain regions; will have 20% layoffs.
(USEY) US Energy Sys signs agreement with Illinois Commerce Commission enabling its reorganization to proceed with creditor support.
(VQ) Venoco signs agreements to acquire fields in Texas and California.
(WSM) William Sonoma boosts dividend and announced 5 million share buyback plan; $1.06 EPS vs $1.03e.
(ZOLL) ZOLL Medical receives marketing clearance for M Series with real CPR help technology.

Jon C. Ogg
March 22, 2007

Posted on: March 22, 2007 – 6:50 am in Pre-Market Activity

Earlybird Analyst Calls (MAR 22, 2007)

ALU cut to Neutral at Goldman Sachs.
APKT started as Hold at Stifel Nicolaus.
ARO cut to Neutral at B of A.
AZN cut to Underweight at JPMorgan.
BBBB cut to Buy at First Albany.
BBND started as Outperform at Morgan Keegan.
BFAM raised to Buy at B of A.
CHIP started as Buy at Merriman Curhan Ford.
CRNT started as Buy at Oppenheimer.
CSCO started as Hold at Stifel Nicolaus.
EDO raised to Neutral at SunTrust Robinson Humphrey.
EMC raised to Outperform at Morgan Keegan.
GILT started as Buy at Oppenheimer.
GSK cut to Underweight at JPMorgan.
IMCL raised to Outperform at FBR.
IRF cut to Equal Weight at Lehman.
JNPR started as Buy at Stifel Nicolaus.
KNXA raised to Buy at Jefferies.
LTM started as Outperform at CIBC.
MED started as Neutral at First Albany.
MOT cut to Sector Perform at RBC.
NCMI started as Neutral at B of A.
NVO raised to Overweight at JPMorgan.
NTRI started as Sector Perform at CIBC.
NTRI started as Buy at First Albany.
OMTR cut to Neutral at First Albany.
OSIP started as Outperform at Piper Jaffray.
PLCM started as Hold at Stifel Nicolaus.
RFMD cut to Sector Perform at CIBC.
SBNY raised to Outperform at FBR.
SNE started as Overweight at Prudential.
SRTI started as Buy at Merriman Curhan Ford.
TTO started as Outperform at Wachovia.
TTWO started as Neutral at Prudential.
WTW started as Sector Perform at CIBC.

Jon C. Ogg
March 22, 2007

Posted on: March 22, 2007 – 6:25 am in Analyst Calls

Europe Markets 3/22/2007 AXA, Siemens Up

Markets in Europe are sharply higher at 6.20 AM New York time.

The FTSE is up .7% to 6,300. Barclays is up 2.3% to 729. BP is up 1.2% to 522.5. BT is up .3% to 308.25. GSK is down .3% to 1409. Prudential is up .1% to 734. Reuters is up .9% to 452.25. Unilever is up .3% to 1493. Vodafone is up .8% to 144.2.

The DAXX is up 1.6% to 6,822. Bayer is up 1.4% to 45.42. Daimler is up 2.5% to 58.45. DeutscheBank is up 2.3% to 99.8 Deutsche Telekom is up .1% to 12.48. SAP is up .7% to 34.52. Siemens is up 2.9% to 81.89.

The CAC 40 is up 1.3% to 5,571. Alcatel-Lucent is down 1.1% to 8.7. AXA is up 3.5% to 31.68. France Telecom is up 1.1% to 19.94. ST Micro is up 1.1% to 14.4. Vivendi is up 1% to 29.93.

Data from Reuters

Douglas A. McInyre

Posted on: March 22, 2007 – 5:19 am in International Markets

Motorola’s Problems Take Stock Back Toward 2003

After a number of missteps, Motorola’s stock fell from $23 in 2001 to under $7 in 2003. The stock did not make it back to $23 until late 2005 and then peaked at just above $26 late last year.

With the announcement that its cell phone business is collapsing, the stock traded down to $17.83 after hours, below its 52-week low.

Motorola (MOT) is in a boom or bust business. It is the company’s turn in the dog house, and, short term, there is nothing, northing that the company can do. The same thing happened to Nokia (NOK) when it was caught flat-footed by the introduction of the Motorola RAZR. That product, so hot only recently, is now last year’s news, and more marketable products are coming from Nokia, and, perhaps, Apple (AAPL)

Credit Suisse is now estimating that Motorola’s global handset share will drop to under 18% and Nokia’s will rise 4 points to almost 39%.

Motorola can cut jobs and buy back stock, but its core problem is that it does not have the "must have" handset product the way it did two years ago. Developing a replacement could take a year, two years, or three. It may be a "PlayStation" scenario. The leading product in a market gets old, and competitors (Microsoft (MSFT) and Nintendo) come to market with more successful alternatives.

Wall St. can bet the farm. Motorola won’t be back soon.

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

Posted on: March 22, 2007 – 4:31 am in Wireless

Have NBC and News Corp Set Up A YouTube Competitor?

Several media outlets including the LA Times, are reporting that NBC (GE) and News Corp are setting up their own video distribution operation as a way to by-pass YouTube (GOOG). The new venture would collect content from major media companies and license it to large sites that may include Yahoo! (YHOO), AOL (TWX), MSN (MSFT), and MySpace.

The plan is cumbersome and complex making it unlikely to work. Sites like Yahoo! already have a large store of video content and a huge number of other channels, so making content from major media companies stand out will be very difficult. The same holds true for the other large web portals that the venture will target for distribution. Many of their other channel make large sums of money, so driving traffic to a section with video from TV networks is unlikely to be economic for them.

If the large media companies do not make peace with YouTube, they could spend millions of dollars and countless man hours trying to replace a model that already has tens of millions of users and hundreds of millions of videos viewed.

If you can’t beat ‘em, join ‘em.

Douglas A. McIntyre

Posted on: March 22, 2007 – 4:15 am in Media

Media Digest 3/22/2007 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, Starbucks (SBUX) is close to a settlement with the Ethiopian government over trademarking the country’s coffee beans.

Reuters writes that Hutchison Whampoa Ltd narrowed its loss on better results from its 3G cell phone operations.

Reuters writes that Yahoo! (YHOO) has hired a executive to help cut online ad fraud.

Reutes writes that Mazda has set a goal of raising its operating profit 27% by 2010.

Reuters writes that Wal-Mart (WMT)  has launched bonus and incentive plans for its employees.

The Wall Street Journal writes that Motorola (MOT) will post a first quarter loss and revised down its 2007 revenue targets.

The Wall Street Journal reports that Borders (BGP) will open its own e-commerce site and end an alliance with Amazon (AMZN). It will also close a number of stores.

The Wall Street Journal also reports that Paul McCartney will join Starbucks (SBUX) new record label.

The WSJ also writes that Fedex (FDX) results were hurt by a slowing economy.

The New York Times reports that earnings at Morgan Stanley (MS) rose sharply in the last quarter.

The NYT writest that, after a sell-off, Chinese stocks are back at an all-time high.

The FT writes that Japan’s trade surplus grew unexpectly in a hopeful sign for its corporate sector.

Barron’s writes that Apple’s (AAPL) new TV set-top will not do well according to industry expert Phil Swann.

Douglas A. McIntyre

Posted on: March 22, 2007 – 3:54 am in Press Digest

Asia Markets 3/22/2007 Hitachi, Cathay Pacific Up

Most markets in Asia were sharply higher.

The Nikkei rose 1.5% to 17,419. Bridgestone was up 1.5% to 2410. Canon was up 1.7% to 6540. Fuji Film was up .6% to 4830. Hitachi was up 3% to 878. Honda was up 1% to 4200. NEC was up 1.5% to 624. NTT was up .2% to 601000. Docomo was up .9% to 215000. Sharp was up 1.6% to 2290. Softbank was up 1.3% to 3120. Sony was up 1.5% to 3120. Toshiba was up 1.1% to 790. Toyota was up .8% to 7800. Yahoo Japan was up 1.6% to 41300.

The Hang Seng rose .6% to 19,829. Cathay Pacific was up 3.2% to 20.15. China Mobile was down 2.3% to 71.9. China Netcom was up 3% to 18.54. China Unicom was up 3.9% to 10.24. HSBC was up 1.4% to 136.1. PCCW was up 1.3% to 4.71.

The KOSPI was up .4% to  1,450.

The Straits Times was up 1.7% to 3,209.

The Shanghai Composite was up .5% to 3,071.

Data from Reuters.

Douglas A. McIntyre

Posted on: March 22, 2007 – 3:31 am in International Markets

S&P Closes Above 50-Day; Utilities, Telecom Make New Highs

From Ticker Sense

After today’s gains, the S&P 500 has moved back above its 50-day moving average.  Utilities and Telecom, unfazed by prior broad market declines, are back to 52-week highs.

Spx50day

Util321

Tels321

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

Posted on: March 22, 2007 – 3:18 am in Research

MOT: Motorola Confirms Our Thesis – No Bottom in Sight for Mobile

By William Trent, CFA of Stock Market Beat

We have been saying for quite some time that the mobile phone market had peaked for the current cycle, and have been bearish on several of the associated stocks. For example, we recently said:

With potential buyers scheming months in advance on how to get hold of an iPhone, it’s a safe bet they won’t be buying a BlackBerry (RIMM), Treo (PALM), Nokia (NOK), Motorola (MOT – Annual Report), or whatever. And yes, we know there will be some people who prefer the traditional models and continue to buy them. But many of them will also wait to check out the iPhone, just in case.

We have also been surprised by the upbeat nature of some of the mobile phone suppliers such as Texas Instruments (TXN – Annual Report), who we believe are cruisin for further bruisin.

This is something of a confirmation of what we saw in the employment report last week. Things are slowing down, despite the arguments that the housing malaise wouldn’t spread. As we noted earlier today we were surprised Texas Instruments was able to tighten their guidance rather than lower it outright. A new cel phone probably isn’t a necessity for most consumers, and is an easy way to avoid some spending. What will the market reaction be if they do miss?

And, regarding optimism from National Semiconductor (NSM), we said:

So he has been fairly consistent in his categorization, which moved over time from “current” to “behind us.” But we’re still afraid that “everyone he talks to” is probably a narrow group of industry optimists. We see inventory continuing to be a problem, particularly given the slowing consumer’s likely impact on the mobile telephone market.

Judging from the revision to Motorola’s earnings forecast, it certainly doesn’t look as though the correction is “behind us.” In fact, for suppliers it seems likely to continue well into the future, given Motorola would seem likely to cut its orders back to a level more appropriate to meet end demand. Let’s take a look at some of the highlights from Motorola’s announcement:

The first quarter revision was prompted by lower than anticipated sales and operating earnings at the company’s Mobile Devices business….

“Performance in our Mobile Devices business continues to be unacceptable, and we are committed to restoring its profitability,” said Edward J. Zander, Chairman and Chief Executive Officer of Motorola. “After a further review following the leadership change in our Mobile Devices business, we now recognize that returning the business to acceptable performance will take more time and greater effort.”

Restoring its profitability? Last year the RAZR was the hottest thing since sliced bread. It’s not like they have been in need of a major turnaround. They just made too damn many phones.

Motorola now expects sales for the first quarter of 2007 to be in the range of $9.2 to $9.3 billion. First quarter GAAP results are expected to be a loss in the range of $0.07 to $0.09 per share, including charges of approximately $0.09 from the items highlighted below.

So even without restructuring charges, the company only expects to break even. Analysts were expecting $0.17 on $10.5 billion. They are falling short by more than a billion dollars on the top line and $0.17 on the bottom line. This isn’t an earnings miss, it is an unmitigated disaster brought on in part by their failure to recognize the oversupply issue earlier. How do we know?

In emerging markets, particularly India, Africa and South Asia, competitors lowered prices at a faster rate than anticipated.

Prices fall “faster than anticipated” when supply exceeds demand. It’s Economics 101. It gets even better:

For the full year 2007, Motorola currently expects overall sales, profitability and operating cash flow to be substantially below prior guidance. The company expects to be profitable for the full year and also to generate positive operating cash flow. The company expects the Mobile Devices business to incur an operating loss in the first quarter, and to experience a gradual recovery in the second half and be profitable for the full year.

Analysts were expecting $1.05 in EPS. So Motorola’s guidance for all of 2007 is that $1.05 > Earnings > Zero. Boy, that’s helpful. But don’t worry. Motorola has a plan:

Motorola is committed to improving the financial performance of the Mobile Devices business by pursuing market segments and product tiers that demonstrate the best opportunity for high gross margins and meaningful profitability. In this regard, the company is focused on steps to reduce cost and improve consumer experiences, including:

  • Deploying open standards Linux/Java™ software across mid- and high-tier devices to enhance the experiences available on handsets
  • Accelerating a more cost-competitive silicon strategy
  • Shifting the marketing approach to include experience as well as design as a product value proposition
  • Introducing new feature-rich products that deliver compelling mobile experiences
  • Simplifying platform and product portfolio while transitioning out of legacy platforms
  • Improving product design processes to achieve competitive price points

Unfortunately, “stop making so damn many phones” does not appear to be part of the plan. Until Motorola and its competitors adopt that last, crucial step this won’t be the last acerbic article we write on the issue.

Disclosure: Author owns put options on Research in Motion (RIMM).

Disclosure: Author holds put options on Research in Motion (RIMM) at time of publication.

http://www.stockmarketbeat.com/

Posted on: March 22, 2007 – 3:17 am in Wireless

On Corus, Fremont, and the Impairment Charge

From Gannon On Ivesting

I haven’t written about the sub-prime lending story on this blog, because it didn’t involve the kinds of stocks I would normally write about. Despite the recent market tumult, very few financial services companies have seen their stock prices decline to levels where they would be worth writing about. However, there are a few exceptions. Last Thursday, one of these exceptions, Corus Bankshares (CORS), made an announcement that connected it to the wider sub-prime lending story.

Impairment Charge

Corus announced that it had determined the decline in the market value of its stake in Fremont General (FMT) constituted an "other than temporary" impairment (as defined by GAAP). As a result, Corus plans to record a charge in the first quarter of 2007.

At the time of the press release (March 15, 2007) Corus held 2.5 million shares of Fremont General purchased at an average cost of $12.73 a share. The most recent trade I saw on Fremont was at $8.81 a share. So, at present, Corus’ common stock position in Fremont would be $31.83 million at cost and only $22.03 million at market. If the quarter ended today, Corus would record a $9.8 million pre-tax charge. The impairment charge would increase to the extent that Fremont General’s share price falls between now and March 31st; conversely, the impairment charge would decrease to the extent that Fremont General’s share price rises between now and March 31st.

Adding to the Position

At year end 2006, Corus held only 1.6 million shares of Fremont General. The recent increase is explained in the March 15th press release:

"During 2007, and since the recent disclosures and decline in Fremont’s stock price, Corus has opportunistically purchased an additional 967,000 shares, bringing its total position to 2.5 million shares with an average cost basis of $12.73 a share."

Common Stock Portfolio

The 2.5 million shares of Fremont General are held at the holding company level. The holding company has a portfolio consisting entirely of the common stock of companies within the financial services industry.

To give you an idea of what the portfolio looks like, here is a summary of Corus’ common stock investments as of December 31st, 2006. Remember, this information is out of date – especially in regard to the Fremont General position:

Bank of America (BAC): 16.5%

Fremont General (FMT): 11.8%

JP Morgan (JPM): 11.1%

Wachovia (WB): 10.4%

Regions Financial (RF): 8.9%

Comerica (CMA): 7.1%

Citigroup (C): 5.8%

Merrill Lynch (MER): 5.7%

US Bancorp (USB): 4.5%

MAF Bancorp (MAFB): 4.2%

Morgan Stanley (MS): 3.1%

Compass Bancshares (CBSS): 3.0%

Associated Bancorp (ASBC): 1.9%

SunTrust Banks (STI): 1.8%

Bank of New York (BK): 1.8%

National City (NCC): 1.3%

Amcore Financial (AMFI): 1.0%

Both on December 31st, 2006 and March 15th, 2007 the holding company’s common stock portfolio had a total market value in excess of $200 million. Therefore, it is unlikely the Fremont stake accounts for much more than 15% of Corus’ common stock portfolio.

Future of the Fremont Position

In announcing the "other than temporary" impairment, Corus went out of its way to state it "has the intent and ability to retain its Fremont investment". This is a direct reference to one of the criteria for judging whether there has been an other than temporary impairment under GAAP.

Essentially, Corus is saying that its determination of an other than temporary impairment in its Fremont investment is the result of: "The financial condition and near term prospects of the issuer, including any specific events which may influence operations of the issuer or may impair the earnings potential of the investment" and/or "The discontinuance of a segment of the business that may affect the future earnings potential".

I’m going with "and" here, since Fremont announced it will exit its sub-prime lending operation as a result of the FDIC’s cease and desist order. This is a textbook case of "other than temporary" impairment. Regardless of what Corus intends to do with its Fremont stake, it is appropriate to record an impairment charge here.

As Corus notes in the press release, one odd consequence of taking such a charge is that the company’s earnings will certainly be reduced when the charge occurs (at the end of the first quarter of 2007); but, if Corus retains its investment in Fremont and the share price improves considerably, it is quite possible that any countervailing improvement will not be reflected in Corus’ earnings for a very long time.

Corus filed its 2006 annual report on February 27, 2007. You can read it here.

The company’s fiscal first quarter ends March 31st.

http://www.gannononinvesting.com/

Posted on: March 22, 2007 – 3:14 am in Research

AES: Restating Due To Remediation

From AAO Weblog

Monday, AES Corporation issued a non-reliance 8-K covering its financials for 2006 to date and the years ended 2005, 2004, and 2003.

The company is still investigating, but it will restate for a variety of reasons. From the 8-K:

“The errors identified by the Company relate primarily to the following categories, which may change before the accounting review is finalized:
· Accounting for derivatives
· Capitalization
· Certain errors, including depreciation adjustments in the Company’s subsidiaries, C.A. La Electricidad de Caracas and AES Eletropaulo
· Share-based compensation, including stock option and restricted stock unit awards
· Income tax expense

Note the near-obligatory mantra: “All errors that have been presently identified result in non-cash adjustments.” That doesn’t mean they won’t matter: it’ll be interesting to see how widely the revised earnings vary from the original. And it’s interesting to note that the errors were uncovered during the remediation of control weaknesses noted in the 2005 audit. The “Controls” part of last year’s filing listed an amazing number of flaws, and you can see how it took over a year to work them all out. The late filing for 2006 and revocation of the prior years’ financial are just more evidence that internal controls matter… to companies of all sizes.

Many of these errors were identified as a result of the Company’s continuing remediation of previously identified material weaknesses. Other errors were discovered during the Company’s quarterly and year end accounting reviews. All errors that have been presently identified result in non-cash adjustments.”

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

Posted on: March 22, 2007 – 3:10 am in Accounting

Wednesday’s Top Biotech & Medical Stocks

by H.S. Ayoub
BioHealth Investor.com

Biotechnology

OSIRIS THERAPEUTICS [OSIR] +12.53%
EMERGENT BIOSOLUTION [EBS] +9.25%
ZIOPHARM ONCOLOGY IN [ZIOP] +8.91%
NANOGEN INC [NGEN] +8.20%
NEURO-HITECH INC [NHPI.OB] +6.60%

Diagnostic Substances

ADVANCE MAGNETIC [AMAG] +6.49%
REMOTEMDX INC [RMDX.OB] +6.25%
AMER BIO MEDICA [ABMC] +5.45%
AVALON PHARMACEUTIC [AVRX] +4.89%
RG GLBL LIFESTYLS [RGBL.OB] +4.20%

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Posted on: March 22, 2007 – 3:07 am in Biotech

Chapman Demands Independent Audit of eSpeed (ESPD) – Cantor Fitzgerald Agreement

From 13DTracker

Large eSpeed, Inc. (Nasdaq: ESPD) holder, Chapman Capital LLC, demanded that the company’s Board of Directors retain an independent auditor, distinct from eSpeed/BGC Partners/Cantor Fitzgerald’s shared financial auditor Deloitte & Touche LLP, to review the Joint Services Agreement between eSpeed and Cantor Fitzgerald-related entities.

Chapman Capital said the goal of the audit would be to confirm or invalidate the related parties’ claims that the Joint Services Agreement were negotiated and have been executed in an arms-length fashion.
Commenting on a recent patent ruling, Robert L. Chapman, Jr., Managing Member of Chapman Capital, siad, "This ruling fortifies Chapman Capital’s apprehension that eSpeed itself may continue to incur significant licensing and other expenses, or may relinquish significant market data and other revenues, unnecessarily or improperly for the benefit of Cantor Fitzgerald."

Chapman Capital also reiterated its demand that the value of eSpeed’s Class A shares be maximized via conversion of all Class B common shares into Class A common stock, followed by the full scale auction of the Company.

http://13dtracker.blogspot.com/

Posted on: March 22, 2007 – 3:03 am in SEC

Chapman Capital Demands Embarcadero Technologies (EMBT) Director Haroian Resign

From 13D Tracker

Chapman Capital, a 9.3% holder of Embarcadero Technologies Inc. (Nasdaq: EMBT), demanded that Mr. Gary E Haroian immediately resign from the company’s board of directors.

Robert Chapman said, "Mr. Haroian has been compensated into the hundred of thousand of dollars while acting out the part of a ‘career director’ of the board of Embarcadero, Aspen Technology, Inc., Lightbridge, Inc., Network Engines, Inc., and Phase Forward, Inc. In order to reinstate any semblance of obeying his responsibility to the owners of these public companies, Mr. Haroian should resign from whichever boards necessary to allow for this adequate attention and focus on the remaining issuers."
Chapman Capital has recently demanded that the company’s Board of Directors maximize shareholder value via a change-of-control transaction. Chapman has determined to seek nominees to replace Class I directors Timothy C.K. Chou and Frank M. Polestra, and Class II directors Michael J. Roberts and Samuel T. Spadafora, should a sale of Embarcadero not be announced by March 30, 2007.
Posted on: March 22, 2007 – 3:00 am in SEC

Loeb’s Third Point LLC Raises Stake in PDL BioPharma (PDLI), Wants Four Board Seats, Retain Consulting Firm

From 13D Tracker

In an amended 13D filing on PDL BioPharma Inc. (Nasdaq: PDLI), Dan Loeb’s Third Point LLC disclosed an 8.8% stake (10.1 million shares) in the company. This is up from the 7.5% stake (8.6 million shares) in the original 13D filing.

Loeb also disclosed a new letter to the company’s CEO, requesting four candidates be added to the Company’s Board of Directors. Loeb also stated that he had been in discussions with a prominent consulting firm and that he would like the Board to retain that firm to review corporate and research and development spending. Loeb demanded, in the transmission, a definitive response from the CEO and the PDLI board, by the close of business on Thursday, March 22nd, as to whether they have agreed to add the four to the Board.

http://13dtracker.blogspot.com/

Posted on: March 22, 2007 – 2:58 am in SEC