Daily Archives: April 6, 2007

A Death Blow For Vonage?

Vonage was ordered to suspend signing up new customers. The VoIP company had lost a case in which Verizon (VZ) had accused it of violating certain patents. The next step was for Verizon to use the judgment to effectively push Vonage out of the business, and, perhaps, out of business altogether.

Vonage and other VoIP operators, especially the big cable companies like Comcast (CMCSA) has been taking landline customers from the traditional phone companies at an alarming rate.

And, now it’s payback time.

Douglas A. McIntyre

Posted on: April 6, 2007 – 10:33 am in Telecom

1st Qtr Volumes Bode Well for Exchange Stocks

This first quarter of 2007 has seen much higher levels of volatility than during the entire second half of last year.  And of course, with higher volatility usually comes higher volume, which is making for some record quarters at the public exchanges.  Here’s a quick recap of recent volume figures:

The Intercontinental Exchange (ICE), which is still integrating its NYBOT purchase from last year, saw average daily volumes for March up 23% at 4.4 million shares.  Average volumes at the company’s U.K. futures market rose over 76% YoY, driven largely by gains in oil futures trading. 

Meanwhile, average daily commissions in ICE’s OTC trading nearly doubled (up 98%) from March ’06.

The Chicago Boys also performed well last month – The Chicago Mercantile Exchange (CME) reported record average volumes of 7.7 million shares per day, up 45% YoY.  CME’s electronic Globex platform reported volume growth of 59% in March.

Meanwhile, over at the dually-targeted CBOT (Both CME and ICE are looking to acquire the exchange), March volumes came in at 4 million/day, up 30% from last year.  Gains here were largely driven by heavy increases in agricultural future like corn, where volume is up over 60% in the past year. 

Nymex (NMX) reported March volumes up 44% to 1.37 million per day, while total volumes for the 1st quarter were up 40% YoY.  Within the strong overall figure, however, we see evidence of the mass exodus in floor trading, as NYMEX floor volumes fell from 540k to 329k per day, while electronic volumes rose nearly 600% to 595k/day. 

Nymex also says that it will be adding crude oil options to its electronic platform starting on April 16; floor-traded options on crude prices will continue to trade at the exchange. 

The increasing volume story seems to be legitimate, and not just reserved to heightened uncertainty around the stock market.  Gains are being had across the board in commodities, oil futures, and OTC credit markets.  Derivatives are becoming democratized, being used by more and more investors in both “old-school” hedging models and as speculative investments.  We will keep you up to date as earnings announcements come together for the group, as 1st qtr releases should tell us a lot about the breadth of growth, M&A prospects, and the ongoing revenue implications of Reg NMS.

Ryan Barnes

April 6, 2007

Ryan Barnes can be reached at ryanbarnes@247wallst.com; he does not own securities in the companies he covers.

Posted on: April 6, 2007 – 10:10 am in Exchange News

US Earnings Calendar (APR 9-13, 2007)

MON APR 9
CardioDynamics -$0.04e; Cascade (CAE) $0.75, Lawson Software (LWSN) $0.03, Schnitzer Steel (SCHN) $0.62.

TUE APR 10
ALCOA (AA) $0.76, Electro Scientific (ESIO) $0.20.

WED APR 11
Apogee (APOG) $0.28, Bed Bath & Beyond (BBBY) $0.78, Genentech (DNA) $0.67, R-I-M (RIMM) $0.98, Ruby Tuesday (RI) $0.52, SAIC (SAI) $0.17.

THU APR 12
Cost Plus (CPWM), Krisy Kreme (KKD) $0.04, Lam Research (LRCX) $1.06, MGIC (MTG) $1.76, Pier 1 (PIR) -$0.30, Polaris (PII) $0.32, Rite Aid (RAD) $0.02.

FRI APR 13
General Electric (GE) $0.44, Infosys Tech (INFY) $0.40.

As a reminder, please understand that these dates and estimates may change ahead of the event.  They may have already changed.  These can change literally up to the day of the earnings.  We will not be posting changes to these even if they change.

Jon C. Ogg
April 6, 2007

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

Posted on: April 6, 2007 – 7:01 am in Earnings, ,

Forget Throwing The New York Times Board Out

Institutional Investor Services, an independent firm that helps large money managers decide how to vote in proxy matters, is recommending that shareholders withhold votes for board members of The New York Times Company (NYT). Morgan Stanley, a big NYT shareholder has been trying to convince that company that its poor performance in the newspaper industry requires a new approach that would probably mean a new board and new management.

The problem with Morgan’s plan is that the Times is controlled by the founding Sulzberger family which has set up two tiers of shares. The family’s trust controls most of the voting shares which allows it to appoint the majority of the board.

The idea behind family control is that it will protect the editorial independence of the company. It should also prevent a greedy shareholder from taking the company over and slashing the editorial budget, crippling the Times’ ability to be the premier newspaper product in the country.

Trying to dislodge the Sulzbergers is waste of time. The trust structure is not going to be dismantled. And the family has a most compelling argument. Investors who put their money into NYT stock knew about the voting control issue when they bought their stock. No one was suckered in.

It would be nice to think that the NYT could be taken over and broken into pieces that would fetch more than the company’s current market cap. But, there is no guarantee that the parts are worth more than the whole. Newspapers are not particularly attractive properties.

As for the management at NYT, they are in a race to improve revenue from their online properties like NYTimes.com while the sales of their newspaper subscriptions and advertising lineage fall.

Even if they lose the race, outside shareholders can stand and watch, or sell their stock.

The Sulzbergers don’t care.

Douglas A. McIntyre

Posted on: April 6, 2007 – 5:08 am in Media

A Microsoft Chess Move? Free Zunes To Fight The iPod

Apple (AAPL) has almost the entire portable music player market. Its iTunes and iPod platforms seem to have such a huge lead that gettng market share in the industry is nearly impossible.

Microsoft (MSFT) has launched a competing product, The Zune, but its sales have been modest, while Apple sold over 20 million iPods in the last reported quarter.

So, why not make the Zune free as long as users sign up for a music download subscription plan? As MarketWatch points out, cellular providers like Verizon (VZ) do it every day. Lose money on the device and make money on the service.

Microsoft will have to take a radical approach to the MP3 business. The Apple IPod was in the market for five years before the Zune came out, and it has a cult-like following all around the work.

But, free is free, even attached to a service plan. And, free often works. Finally, a company may have come up with a plan to chase Apple.

Douglas A. McIntyre

Posted on: April 6, 2007 – 4:51 am in Consumer Electronics

Chrysler: The Great Genius Of Kerkorian

The offer that billionaire Kirk Kerkorian has made to buy Chrysler from parent DaimlerChrysler (DCX) is nothing short of brilliant.

Kerkorian has in essence trumped three other offers from private equity firms and Canadian parts company Magna but offering to make the labor unions at Chrysler his partners.

While the $4.5 billion offer appears low by most estimates, it offers Daimler a way out by not selling the company to a group that would be at odds with unions over job cuts from the start. Half of Daimler’s board is made up of employee representatives. Union officials have voiced strong concerns that a private equity firm would simply break Chrysler into pieces and eliminate tens of thousands of jobs.

By contrast, Kerkorian will play spider to the UAW’s fly. He is offering unions a large part of the ownership in Chrysler in exchange for concessions on employment levels, pensions, and benefits.

What Kerkorian understands, and it putting on the table up-front, is that any owner will cut jobs at Chrysler. The UAW knows that as well.

But, Kerkorian is willing to offer something in exchange for the pain.

Douglas A. McIntyre

Posted on: April 6, 2007 – 4:30 am in Autos

Media Digest 4/6/2007 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters Kirk Kerkorian has offered $4.5 billion to buy Chrysler from parent DaimlerChrysler (DCX).

Reuters writes that the CEO of Ford (F) received $39 million in compensation for 2006.

Reuters reports that Nintendo has forecast that it will have a 62% improvement in profit for the year ending March 31.

Reuters also reports that the shares of Vonage (VG) fell another 7% as it face a possible injunction against using patented technology from Verizon (VZ).

The Wall Street Journal reports that private equity firms are looking at store chain Kroger (KR) as a candidate for being bought out.

The New York Times reports that a system built by Ebay (EBAY) for brokering TV ads has not worked. Clients said that "it went to far in removing humans from the ad sales process."

The NYT reports that the Institutional Shareholder Services has recommended that shareholder withhold votes for the board of The New York Times (NYT) because of poor performance and the company’s two tiered ownerhsip structure.

The FT writes that KKR has walked away from making a bid for food chain Sainsbury.

Barron’s writes that several online advertising broker stocks could be takeover targets. These inclue 24/7 Real Media (TFSM) and aQuative ((AQNT).

Douglas A. McIntyre

Posted on: April 6, 2007 – 4:17 am in Press Digest

Asia Markets 4/6/2007

Stocks: (CAJ)(FUJ)(NIPNY)(NTT)(DCM)(HIT)(HMC)(SNE)(TM)

Most markets in Asia were closed but the Nikkei was off slightly.

Read More »

Posted on: April 6, 2007 – 4:01 am in Uncategorized