Daily Archives: May 2, 2007

Cramer Defends Level 3 Communications (LVLT)

Tonight on CNBC’s "Mad Money," Jim Cramer also came out in defense of Level 3 Communications (LVLT-NASDAQ) since this stock has been shelled in recent days.  In just the last 5 trading days, LVLT had been down more than 10% before recovering some today.  It was during a call-in from a guest caller where Cramer defended the stock (rather than one of his features) but he noted that this is what can happen in the highly speculative stocks and they are volatile.  He thinks that today was probably the trajectory reversal and noted that this one could chug up to $7.00.  From a $5.42 close and considering that this one has only been as high as $6.80 over the last year (and $7.00 would be a 5-year high), this would be a feat.  It would also be almost a 30% gainer from here.  As a reminder this was Jim Cramer’s #1 Speculative Pick for 2007 back in January, so something would need to go drastically wrong for him to reverse his stance on the stock.  That’s my opinion on his stance on Level 3 anyway.

Jon C. Ogg
May 2, 2007

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

Posted on: May 2, 2007 – 6:07 pm in Cramer,

Cramer’s Picks From France

Cramer on tonight’s MAD MONEY said the best market in the world right now is France because of Sarkozy who is expected to win thge election there.  Cramer has 2 picks:

1) CGG Veritas (CGV-NYSE/ADR); 2) Veolia Environment SA (VE-NYSE/ADR)

CGG Veritas is into geophysical services for mapping the ocean and land is its winning hand for oil and gas drillers and surveyors.  They are the #3 map maker and #2 in offshore behind Schlumberger.  It has a dupoly in input/output and the Atlantic being opened up in the US may offer a huge opportunity if and when it gets opened up for drilling.

Veolia Environment is a water play and waste management that transports water and converts waste water.  With Sarkozy, he wants to privatize agencies because companies can do a better job than the socialist managers.  They are the #2 waste management company on earth.  This one even does recycling and waste to energy conversion, plus energy management services.  It has 30 Billion Euro’s worth of carbon credits on its books.

After Cramer was finished with these, Cramer said that Sarkozy has said he would like to buy a taser for every police officer in France and that could be a huge win for Taser International (TASR-NASDAQ).  TASR just jumped 6% on this in after-hours trading.

I would normally say that these two picks based solely on the electionin France is bunk, but the recent elections that are coming up inFrance have Nicolas Sarkozy favored to win and he’s a true capitalistwith capitalist reforms coming.  My other reason for agreeing with himis that the head of the European Central Bank is Jean-Claude Trichet.BUT…. Regardless of if the country is really going to be the best,you still have to believe in the companies and sectors that these arein.  Otherwise you are might as well just look at the iShares MSCIFrance (EWQ-AMEX) and ask your broker if you can hedge the currencyposition since the US Dollar has lost so much ground against the Euro.

Jon C. Ogg
May 2, 2007

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

Posted on: May 2, 2007 – 5:26 pm in ADR, After-Hours Activity, Cramer, Defense, Oil & Gas, Water

Carl Icahn loses more money thanks to Blockbuster (BBI)

Tough day for Blockbuster Inc. (BBI) with shares falling 13% and continuing to drop after hours. BBI reported Q1 today and their loss widened because of "a soft market for movie rentals and heavy spending on its online rental program". Looks like Netflix (NFLX) wins this round.

Consider Icahn Management holds 9,187,280 shares of BBI when earlier this morning that was worth $54,021,206.40. Just a few hours later you’ve got $49,611,312.00 in your pocket putting your one day loss at $4,409,894.40.

But Carl Icahn picked up 18,882,411 shares back on Jan 3rd, 2007, now it gets fun:
Carl's BBI LOSS
Better luck tomorrow Carl, $13.4 million is just pocket change, but still, you think you lost on BBI today, someone did even worse.

Feel better yet?

There was some good news on the call today:
Revenue was up 5% to $1.47 billion. That beat the Street forecast of $1.37 billion and last year’s first quarter, which had sales of $1.4 billion.

Blockbuster said Total Access, its online service, grew to 2.8 million paying subscribers, up 800,000 during the quarter.

Blockbuster plans to replace about 200 stores this year with smaller versions, which will save them money.

As for Carl, I’m sure he’ll be just fine.

Frank Lara Jr.

Frank Lara Jr. can be reached at feedback@247wallst.com; he does not own securities in the companies he covers. 

Posted on: May 2, 2007 – 5:17 pm in Earnings

NutriSystem heads back to where it should be

NutriSystem (NTRI) shares went up 3.8% today to close at $62.12. After hours shares dropped less than 1% but for NutriSystem investors this finally comes with a sigh of relief.

Just last week they beat Q1 estimates with a 70% rise in profits. Revenues increased 62% to $238 million in when compared to Q1 06 revenue of $146 million. The delayed reaction to finally moving the share price could be that NTRI shares have already gone up %16 in the last month. Last Friday Avondale Partners raised their price target from $80 to $88 and they are maintaining their "market outperform" rating on NutriSystem Inc. On the same day Colin Sebastian of Lazard Capital reiterated his "buy" rating on NTRI and raised his target price from $75 to $80. So with shares trading in the low $60’s and the powers-that-be saying it will get to at least $80 a share, there appears to be money to be made.

The future also looks good for NutriSystem, they expect Q2 earnings of 82 cents to 86 cents a share and revenue of $190 million to $200 million. They are also looking to add at least 210,000 new Direct channel customers in the second quarter. Wall Street was projecting Q2 to be earnings of 70 cents a share on revenue of $171.7 million.

76 lbs = $20So America, if Shelley can lose 76 lbs. with NutriSystem, you can certainly gain $20 a share before the end of 2007. No matter what happens this year with the stock market, people are still going to flock to NutriSystem because they want to look and feel good. Even if NTRI’s business slows down, the stock is trading at such a good premium right now that it makes me want to celebrate by eating a dozen doughnuts.

Frank Lara Jr.

Frank Lara Jr. can be reached at feedback@247wallst.com; he does not own securities in the companies he covers.

Posted on: May 2, 2007 – 5:14 pm in Research

The 52-Week Low Club

As the market moves higher almost everyday, the membership in the Club becomes more exclusive.

NeuroChem (NMRX) Negative news about phase 3 clinical trial data for its Alzheimer’s drug candidate, Alzhemed, followed by an $80 million in convertible notes. Brutal day for the shareholder. Down 22% to $9.06, and moving further off the 52-week high of $26.91.

Harris Stratex Networks (HSTX) Wireless transmissions systems supplier is another 20% decliner today on poor earnings outlook. Falls to $14.85 down from 52-week high of $21.25.

AudioCodecs (AUDC) Joins the club again. Downgrade from Piper Jaffray after Q1 loss. Drops to $5.86 from 52-week high of $14.00.

Power-One (PWER) Wall Street Journal said management sold shares before bad news. Big loss from operations in last quarter from designer and manufacturer of power conversion products. Drops to $4.02 from 52-week high of $8.15.

Douglas A. McIntyre

Posted on: May 2, 2007 – 5:11 pm in HI/LOW

Dendreon’s New ‘Hold’ Rating at A.G.Edwards

A.G.Edwards has initiated the recently volatile and controversial Dendreon (DNDN-NASDAQ) with a Hold/Speculative rating.  The summary points are that it is starting the biotech as a Hold rated stock for Speculative investors. 

It sees significant risks surrounding the May 15th PDUFA action date for Provenge for prostate cancer.  This notes that Provenge was the subject of a recent panel meeting where committee members voted unanimously on the Safety and 13-4 on the Efficacy of Provenge. 

A.G.Edwards notes that beyond a positive panel vote, there may be political forces within the Center for Biologics Evaluation and Research that increases the odds of Provenge being approved.  It notes that, however, given that Provenge failed to achieve primary or secondary endpoints in either Phase II trial and that the primary statistical analysis for comparing overall survival was not pre-specified.  A.G.Edwards believes that additional confirmatory data may be required by the agency.  After surveying 16 oncologists and 14 urologists, the brokerage firm found that oncologists were mixed 50%/50% on whether Provenge should be approved and that urologists favored approval 71.4% to 28.6%.

The A.G.Edwards’ summary ends with "Nevertheless we recommend that investors stay on the sidelines."

Furthermore it notes that Dendreon is not profitable and is not expected to be profitable until 2011.  A.G.Edwards notes that an "Approvable Letter" and request for more data could be an outcome of the PDUFA, but also notes the flipside that the agency would be viewed as not looking out for the interest of patients’ best interest if they hold this up.  That’s a coin toss there.

It is worth noting that Needham reiterated their Buy rating with a $22.00 target, and that was what energized the shares today.  Shares of Dendreon (DNDN-NASDAQ) closed up 6.3% at $17.20 in regular trading.  Remember that two analysts can look at the exact same data and take away opposite opinions, and that appears no different here.

As far as looking at options for any direction, a MAY08 $17.50 Straddle (own Put and Call) to play volatility would cost you $10.30 based upon last look at the end of the day.   Here is what we noted just last week on this one, and it has links to several prior issues as well.

Jon C. Ogg
May 2, 2007

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

Posted on: May 2, 2007 – 4:44 pm in Analyst Calls, Biotech, FDA, Options,

RealNetworks Beats Earnings, Thanks to Microsoft (RNWK, MSFT)

RealNetworks Inc. (RNWK-NASDAQ) posted a 60% rise in earnings with $0.22 EPS on revenues of $129.5 million, but analysts were only expecting $0.17 & $125.3 million.

Real expects next quarter revenue in the range of $130 million to $134 million, GAAPnet income per diluted share of $(0.01) to $0.01 and adjusted netincome per diluted share of $0.04 to $0.06. This guidance assumes aneffective tax rate of approximately 37%.  FIRST CALL estimates are$0.00 & $133.6M.  For the full year 2007, Real expects revenue inthe range of $547 million to $563 million. Real expects 2007 GAAP netincome per diluted share of $0.24 to $0.27 and adjusted net income perdiluted share of $0.23 to $0.25.  FIRST CALL estimates are $0.22 &$550.45M.

The board also approved another $100 million for buybacks after it completed a previous $100 million stock repurchase program in the first quarter of 2007, repurchasing approximately 9.8 million shares for $78.5 million.  It has also integrated WiderThan for games innovation and it posted gross margin of 65% (down from 69% year-over-year).

If you look at the EPS for this quarter and the others, just about the entire year EPS is stacked up into this quarter.  That is because results include payments related to Real’s antitrust settlement and commercial agreements with Microsoft (MSFT-NASDAQ).  Shares closed up almost 1% at $7.59 and shares are up by 6% at $8.05 in atfer-hours trading.  The 52-week trading range is $7.42 to $12.08.

As you can tell, this looks like it was the last quarter that the company will be scoring any major settlement payments that drop down straight to make a significant contribution to the bottom line.

Jon C. Ogg
May 2, 2007

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

Posted on: May 2, 2007 – 3:33 pm in Earnings, Internet

JDS Uniphase: Fiber Not Lit Up Enough

JDS Uniphase (JDSU-NASDAQ) just reported earnings: non-GAAP EPS was $0.06 (but was -$0.07 on GAAP) on revenues of $361.7 million; versus estimates of $0.10 and $346.5 million.  The company’s guidance for revenues to come in between $325 to $345 million compared to First Call estimates of $354.5M.  The company did at least generate positive cash flow.

Americas’ customers represented 54% of net revenue. European and Asia- Pacific customers represented 27% and 19% of net revenue.  Here is the unit break-down:  Communications Test and Measurement non-GAAP net revenue of $162.9 million was down 3% from last quarter, and up 28% from the same quarter a year ago. This segment represented 45% of total revenue.  Optical Communications non-GAAP net revenue of $128.7 million was down 3% from last quarter, and up 1% from the same quarter a year ago, representing 36% of total net revenue.  Advanced Optical Technologies non-GAAP net revenue of $45.6 million was up 13% from last quarter, and up 12% from the same quarter a year ago. This segment represented 12% of total net revenue.

The problem with playing JDS Uniphase ahead of earnings is that it has a scattered history, and if you have been trading long enough you will know that comment is the understatement of the year.  Options traders were only prepared for this stock to move $0.55 to $0.70 in either direction.

Shares closed up 2.5% at $16.64 in regular trading and the 52-week trading range adjusted for its reverse split is $13.93 to $29.28.  If all the numbers are accurate, it looks like JDSU is still having a hard time with street expectations.  Shares are down over 4% to under $16.00 in after-hours trading.

Jon C. Ogg
May 2, 2007

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

Posted on: May 2, 2007 – 3:17 pm in Earnings, Earnings Warning, Telecom,

Interactive Brokers IPO Looks Hyperactive

Interactive Brokers, under the propsed ticker "IBKR," has essentially doubled what the company will raise and what it will ultimately be worth.  The IPO was deemed a hot issue, but it has gotten hotter.  This may even reach close to $1 Billion in funds raised.

Originally it had filed to sell 20 million shares at $23.00 to $27.00, but the strong demand from the public has jacked up the offering 34.5 million shares with a new higher range of $27.00 to $31.00.  This one will price Thursday evening for a Friday trade.

One note to mind here is that this one is coming out via the W.R.Hambrecht OpenIPO(R) system.  HSBC is acting as a joint book-runner, and co-managers are listed as Fox-Pitt Kelton, Sandler O’Neill, and E*Trade.   This OpenIPO has been shunned by some on Wall Street at the bulge bracket firms, but the other side of the story is that the market buyers determine the actual market pricing rather than bulge bracket firms setting an arbitrary value.

Because of the online broker’s footprint, this is a winner as it trades stock, options, futures and currencies on more than 60 global markets.  That gives it the advantage hands down to other name online trading firms available to Joe Q. Public.

Jon C. Ogg
May 2, 2007

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

Posted on: May 2, 2007 – 2:25 pm in Brokerage Firms, Financial Stocks, IPOs, Internet

GRMN: Garmin Moves on Small Surprise

By William Trent, CFA of Stock Market Beat

Read More »

Posted on: May 2, 2007 – 1:58 pm in Earnings

Cramer Eats Wings & Beans

On today’s Stop Trading on CNBC, Jim Cramer came out discussing Buffalo Wild Wings (BWLD-NASDAQ) after the stock rose more than 14% to a new 52-week and all-time high after the company beat earnings estimates.  The company makes one-third of its money from beer and buffalo sauce, and he can’t imagine why 1/3 of the float was short.  But Chipotle (CMG) is the one he said is the stock of the day, and may be a multi-year grower.

He also said the market is remarkable and we all came in too bearish at the start of the year.  Cramer still thinks the market is decelerating inside the US and the rest of the world is rising while we are not. 

Cramer called Liz Claiborne (LIZ) as the worst retail conference call of the quarter, same as I noted yesterday.

Jon C. Ogg
May 2, 2007

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

Posted on: May 2, 2007 – 1:57 pm in Cramer, , ,

CTSH: Cognizant Growth Slowing A Bit More Than Expected

By William Trent, CFA of Stock Market Beat

Read More »

Posted on: May 2, 2007 – 1:55 pm in Earnings

StreetInsider.com Unusual 11 Mid-Day Movers 05/02/2007

Voxware, Inc. (Nasdaq: VOXW) 217% HIGHER; Scott Yetter, President of Voxware, said, “…In our most recent quarter, total revenues were up 79%, with a 172% increase in software license revenue when compared to the same quarter of 2006.”

Sonic Foundry (Nasdaq: SOFO) 26% LOWER; Revenues for the second quarter of fiscal 2007 were $3.82 million, an increase of 29 percent from the $2.95 million reported for the second quarter of fiscal 2006. The company reported a GAAP net loss of $1.91 million or 5 cents per share for the second quarter of fiscal 2007 compared to $947,000 or 3 cents per share in Q2-2006.

TTM Technologies, Inc. (Nasdaq: TTMI) 24% HIGHER; Reports Q1 EPS of $0.20, 5 cents better than estimates. Revenues were $176.9 million vs. $169.36 million consensus.

Harris Stratex Networks, Inc. (Nasdaq: HSTX) 20.8% LOWER; Reports Q3 non-GAAP EPS of $0.06, 15 cents worse than estimates. Revenues were $146.8 million compared with $137.6 million in the same period of the prior year. Revised non-GAAP guidance for the second half of fiscal year 2007 (ending June 29, 2007) is a range of $0.19 to $0.24 per diluted share. Second half revenue is expected in a range between $300 million to $310 million. Non-GAAP earnings guidance for fiscal year 2008 is a range of $1.05 to $1.22 per diluted share. Our planned cost reduction actions are expected to be completed by mid fiscal year 2008 and should result in savings of $35 million.

Chipotle Mexican Grill (NYSE: CMG) 16.5% HIGHER; Reports Q1 EPS of $0.38, 6 cents better than estimates. Revenues came in at $236.1 million versus the consensus of $228 million.

Pain Therapeutics (Nasdaq: PTIE) 15.7% HIGHER; Reports Q1 EPS of $0.28, 30 cents better than the consensus of a $0.02 loss. Revenues came in at $22 million versus the consensus of $12.95 million.

Molina Healthcare (NYSE: MOH) 14.3% HIGHER; Reports Q1 EPS of $0.34, 3 cents better than estimates. Revenues were $562.9 million vs. $540.6 million consensus. The Company confirms the guidance it had issued on January 18, 2007, for earnings per diluted share for fiscal year 2007 in the range of $1.75 to $1.90. (Consensus is $1.63)

Jones Lang LaSalle (NYSE: JLL) 14% HIGHER; Reports Q1 EPS of $0.81 vs. consensus of $0.07. Revenues were $490 million vs. $385.4 million consensus.

Blockbuster (NYSE: BBI) 13% LOWER; Reports Q1 loss of $0.26 per share, below the consensus of a $0.13 loss. Revenues came in at $1.47 billion versus the consensus of $1.37 billion.

Cooper Tire (NYSE: CTB) 10.5% HIGHER; Reports Q1 EPS of $0.33 vs. consensus of $0.17. Revenues were $689 million vs. $672.09 million consensus.

MasterCard Inc (NYSE: MA) 10.4% HIGHER; Reports Q1 EPS of $1.57 vs. consensus of $1.15. Revenues were $915 million vs. $840.32 million consensus.

Read More »

Posted on: May 2, 2007 – 1:53 pm in Research

ValueClick in FTC Regulatory Crosshairs?

From Internet Outsider

Read More »

Posted on: May 2, 2007 – 1:51 pm in Internet

PAR Capital Sells 6.75M Shares of US Airways Group (LCC), Cutting Stake to 0.29%

From 13D Tracker

Read More »

Posted on: May 2, 2007 – 1:49 pm in SEC

Shamrock Activist Value Raises Its Stake in TNS (TNS) to 8.77%

From 13D Tracker

Read More »

Posted on: May 2, 2007 – 1:48 pm in SEC

Is BEA Systems Any Closer To An Offer? (BEAS)

BEA Systems (BEAS-NASDAQ) is a name that just came back under fire yesterday after lowering its quarterly revenue projections.  The drop in the stock was not massive as estimates were $348+ million and the company guided to $342 to $347 million.  Shares closed down only 3% or more, but they had traded down over 10% early yesterday.  The licensing revenues are a disappointment: the guidance was as low as $111 million versus prior forecasts of $132 million. 

It is blaming the reorganization and saleforce realignment, but the likely issue is that Oracle (ORCL-NASDAQ) is taking more of the middleware market share away or that other competitors are winning.  The company also competes against H-P (HPQ) via H-P’s Mercury Interactive, SAP’s (SAP) NetWeaver, Tibco Software (TIBX), and IBM (IBM). You can now interpret that Salesforce.com (CRM) is more into the space than in prior years. BEA Systems has been a "rumored and speculated" takeover name literally back into the 1990’s and valuations were always in the way.  The balance sheet and income statements are both somewhat guesswork because BEA has been delinquent in filings over stock options and much of the current numbers are best ‘guestimates.’  If the balance sheet is still close to $900 million in tangible book value, we can at least take a stab at "valuations."

This has been a BAIT SHOP member in the past (of takover candidates) at much lower prices and before the options backdating was an issue, and has been removed because of valuations getting higher than a perceived buyer would have paid.  If the company is feeling more competitive pressures then it could finally decide to be more open to a deal.  That is most likely not yet the case.  The problem would boil down to the price: it would probably take close to $14.00 in today’s money as is for an "entry-level" bid that would keep the board from laughing a buyer out of the room.  This is one we have noted as needing to go lower and "staying lower" because of sales or industry pressure before management would be considered very vulnerable to a predator or before they would capitualte. 

Let’s take the warning a bit further to determine more conservative base-line forward valuations.  If we were going to price in competitive pressures and a slower environment and trim off 10% of earnings and revenues, then here is what the company would lool like in valuation (these numbers reflect a 10% discounting to forward street estimates): $0.55 EPS for JAN-08 fiscal year on revenues of $1.39 Billion; so forward multiples would come in at 20.5 times forward discounted EPS, 3.2-times forward revenues, and 17-times discounted cash flow from operations.  These levels aren’t exactly overvalued for a software company, but they aren’t good enough alone for a larger competitor to get a free assassination of a competitor.  They also might not be good enough without knowing what the real charges will end up being because of stock options, and it requires trusting the past financial data without current numbers being precise.

With a $4.45 Billion market cap today it is within the constraints of a doable deal.  The ‘unknowns’ probably still negate the "acquirable size."  Another problem is that the company has maintained that it wants to remain independent and a buyer might not be interested if the company begins implementing measures that could make the company less attractive.  As far as we are concerned, BEA Systems’ stock still needs to get current with the SEC and the stock needs to settle in at lower levels before we’d start looking at it as any serious takeover candidate with an actionable and hedged call. 

Jon C. Ogg
May 2, 2007

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

Posted on: May 2, 2007 – 12:20 pm in Bait Shop, Mergers and Buy Outs, Software, , , , , , ,

24/7 Wall St. Starbucks Store Evaluation Tour Back In NY

Peter Lynch, who had one of the great investment track records while at Fidelity once made this point:  "An amateur investor can pick tomorrow’s big winners by paying attention to new developments at the workplace, the mall, the auto showrooms, the restaurants, or anywhere a promising new enterprise makes its debut."

And  Howard Schultz, the founder of Starbucks (SBUX), recently wrote to his management: "Over the past ten years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand." 

24/7 Wall St. is setting out to test the Lynch investment approach, and to find out if Mr. Schultz does have a problem Our writers will visit at least one Starbucks a day at 7.30 AM to 8.30 AM local time. We will look at stores in over a dozen cities. Each outlet will be graded on the time it takes from getting in line until the order is delivered, cleanliness of the store, cleanliness of the bathroom, whether the store has adequate seating, the friendliness and professionalism of personnel, whether their is adequate inventory, and overall ambiance. Each of these will be grade 1 though 3, with 3 being the best score.

Locations: New York City, corner of 92nd Street and Third Avenue. 8.20 AM. Wait time: 2 minutes, 55 seconds with three people in line. Cleanliness-1, Bathroom–1. Seating–2, Staff-2, Inventory–3, Ambiance–2.

Store is located in one of Manhattan’s busy up-scale neighborhoods. Store was just shy of filthy. Store is small, but has adequate seating. Staff was efficient, but not friendly.

Douglas A. McIntyre

Posted on: May 2, 2007 – 11:51 am in Retail

Apple’s iPhone: Good For AT&T

Apple (AAPL) begins selling its revolutionary iPhone this summer and it will mark the end of the string of hits for the company.  Billed as "your life in your pocket", it will sell for $599 with a one year or $499 with a two agreement through AT&T (T) Wireless.  The company has had a string of hits since it introduced the iPod and its shareholders have benefited sending shares from $7 in 2003 to the $100 they sit at today.  The introduction of the iPhone will be the first miscue for the company and send it’s shares, priced for perfection tumbling. "Why"? You ask. 

More Isn’t Always Better:
The beauty of the iPod was and is its simplicity and singular purpose.  It enabled even the most tech phobic of us the ability to operate and enjoy it.  Because of this sales have been phenomenal.  There are several versions of mp3 player phones out there and none of them are big sellers.  The reason? The market does not want them together.  I do not want to have to turn of my music to get a phone call.  If I am driving my family in my car and we are listening to the iPod, having to turn off the music to answer my phone becomes a major hassle.  The same holds true for any event that I use the ipod to play music at.  Having both in one creates problems, it does not solve them. Why would I pay $600 for this, or, buy an iPod in addition to this in order to avoid the hassle?

One Carrier:
All of have cell phone agreements and have a cancellation fee.  This varies from $100 to $150 dollars. This price needs to be added to the costs of the iPhone for those who want it right away or will cause a lag in initial sales.  This lag will allow cell competitors to create their own, cheaper versions to compete, hurting future sales.

Touch Screen
Being able to make a call simply by pointing a finger at a number is a feature touted for the phone.  How is this any different or accurate than scrolling on my blackberry?  This feature will lead to frustration as users who do not point exactly at the number they want will keep initializing errant calls.   

"All in One" Historical Issues:
How many people have had TV/VCR or DVD combos?  Now, how many regret that decision?  When you have an all in one you then become a slave to that device.  If either breaks, the both units must be replaced.  If a newer, better version or either comes out, you cannot purchase it because it then entails buying both again at considerable cost.  Now, when you consider the unimpressive reliability history of the iPod and the cost to attempt to repair them (usually it is cheaper to just buy a new one),  it is not an unrealistic stretch to consider that you may be purchasing one of these every 2 or 3 years. An expensive proposition.

What Should Apple Do?
This is the easiest part. There is no reason to have an 8GB iPod on the phone.  Give us a 2GB capacity so we can put our favorite stuff on it and listen when we want and cut the price to $299 and you may have something.  A $599 phone will not gain mass acceptance no matter what it does, especially when people can still get tits functionality from their existing devices.  Also, the exclusive deal with AT&T WIreless was not a very bright idea.  Until it is expanded to all carriers, you will have nothing more than a little niche product. 

The real winner in all this? AT&T (T) Wireless, not Apple or its shareholders.

Todd Sullivan
5/2/2007

Posted on: May 2, 2007 – 11:32 am in Telecom

Cramer’s Obesity Stock Plays

Jim Cramer has a video on TheStreet.com this morning discussing obesity stock plays.  With 7 million Americans more than 100 pounds overweight and $33 Billion is spent on healthcare per year on obesity alone.  This is a great trend for investors as far as Cramer notes:  As the market comes down, that is your opportunity.

NutriSystem (NTRI) is one that was a great pick in the $40’s and has a great momentum that you want to be in.  On Herbalife (HLF) is that "Breakout Stocks" is calling for a gain; Cramer doesn’t like it because of the multi-level marketing, but it is cheap and may have some value.  Life Time Fitness (LTM) is a great one with the nicest facilities and they are shrewd operators and well run; Lifetime is the best for Cramer because of great gross margins and lower cost per customer; here is what he has said before on it.

Jon C. Ogg
May 2, 2007

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

Posted on: May 2, 2007 – 10:48 am in Cramer, Medical