Daily Archives: May 9, 2007

Starbucks Can Fix Itself Before Growth Plans; It Needs To As Well

Back on Monday, we ran some basic observations on Starbucks (SBUX-NASDAQ) based on its aggressive growth plans and based on our own muti-state and multi-site reviews.  The long and short of it is that there are obvious changes and improvements this operator needs to make before it embarks on a massive expansion.  Fix yourself, Then Grow! 

After looking back through the list of store reviews and the earnings review, there are even more suggestions that 24/7 Wall St. can offer the company.  Here is a brief summary of the basic impvements you can make on the surface:

Merchandise: Fix the placement of your add-on merchandise.  We know you can’t keep it all at the door where your customers will steal it but make it so that the merchandise is within reach on your way to the register.  95% of it is impulse buying, so if you make me walk over for it and then rewait in line to buy it I will tell my impulse to go to hell.

Newspapers: The New York Times (or local papers) would sell much better if you have it close to the cash register.  Newspaper companies need all the help they can get and you are not making that an easy purchase for something that needs to be easy.

Wi-Fi: Go fire T-Mobile and go for a free wi-fi immediately.  Many of your competitors offer this and I am positive you are leaving lots of "customer hours inside the store" on the table.  This may be sending your customers to your competitors.   Your T-Mobile paid wireless initiative is costing you money.  If patrons sit and work on their laptops the chance that they buy a sandwich, scone, or even another cup of coffee goes up astronomically.  This is 2007, not 1999, and that wireless issue is a bad one.

Emplyee Time: Any time a manager sees an employee standing around or yawning, that is an opportunity to send them to clean up the store or to make sure the bathroom is nice.  No one likes doing that stuff, but that has to be done.  You can’t be expected to have a shine on your floors and can’t be expected to have no trash around anywhere, but you have a lot of room to improve the cleanliness.

What was the point?:  Also, avoid cute long slogan writing on your coffee cups, and sure as hell stay away from religious writings on your corporate products.  You will offend people either way you do that one so just avoid it.

You have many things going well for you.  Your coffee is great or you never would have gotten here.  By and large you have hipper or just as hip as other upscale coffee chain stores. You have other non-coffee and non-food merchandise buyers already spending cash with you.  The public thinks you take better care of your employees than other low-wage food and beverage stops.

We are giving this to you because we actually believe that many investors still follow the Peter Lynch method of investing in what they use and know.   A consultant would give you this for quite a hefty fee and they’d have more scientific data down to 1% differentials and scorings with many more points, but this would be a great start.  You will be a better chain store for it and you’ll be better able to manage your store growth prospects in the coming years.

Jon C. Ogg
May 9, 2007

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

Posted on: May 9, 2007 – 7:02 pm in Food, Product Review,

Cramer’s Middle East Infrastructure Picks

On tonight’s MAD MONEY on CNBC, Jim Cramer came out not just on a ROW strategy for "rest of the world," but said it’s a BRIC+ME: Brazil, Russia, India, China PLUS the Middle East.  His picks here Caterpilar (CAT-NYSE) and Cummins (CMI-NYSE) for global capital spending plays. His other two picks from the area are hot as well as McDermott International (MDR-NYSE) and Foster Wheeler (FWLT-NASDAQ) that are both up big after his recommendations.  As expected, Cramer stuck with Fosted Wheeler and even said it could fetch $100.00.  Chicago Bridge & Iron is a beneficiary of the weak dollar and it wins many international infrastructure pacts in the Middle East.

Jon C. Ogg
May 9, 2007

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

Posted on: May 9, 2007 – 6:37 pm in Cramer, , , ,

With Mathstar (MATH) at $1.45 a share, it may be safe to play

Mathstar Inc. (MATH) hit yet another 52-week low today and is currently trading around $1.45 a share. Now that their company stock has fallen 66% in the last 6 months it got me thinking: "Mathstar, huh, why not?"

I’ll be honest, I haven’t been nice to company when I wrote: Can MathStar Inc. sell their FPOA technology or will they disappear? But there hasn’t been a real motive to write wonderful things about this company or what the stock could possibly do in the near future. Mathstar just reported Q1 07 on May 1st, revenues were $92,000, compared with $7,000 in the fourth quarter of 2006 and $8,000 reported in the same period last year. Net loss per share was $0.26 in the first quarter of 2007, compared with $0.28 per share in the fourth quarter of 2006 and $0.28 in the first quarter 2006. They spent more money on research and development with expenses increasing to $299,000 or 11% to $3.1 million, up from the $2.8 million reported in the same quarter a year ago. Not what I was hoping for nor what Wall Street wanted to hear. So with administrative expenses increasing $260,000 or 12% to $2.5 million, compared with $2.2 million in the same period a year ago, where do we go from here?

Well that would be a new 52-week low studio audience. To recap on what Mathstar does:
They have been developing an advanced type of programmable microchip for years, and has only just begun to sell its newest product to customers with the hopes of taking it mainstream. They are banking everything on a magical Field Programmable Object Array™ (FPOA) chips that operate at speeds up to 1 GHz and can be programmed to "serve a number of useful functions". They have shelled millions into developing these bad boys and are hoping their FPOA products can compete and win the Field Programmable Gate Array (FPGA) industry. They claim that FPOA’s are very different from the FPGA’s already widely available on the electronics market. MathStar says its chips have much higher data processing capability needed for data-heavy applications such as medical imaging and radar processing, at a lower price than other high-capacity programmable chips now on the market.

They spend a ton of money and who know’s if the FPOA chips will be a big seller. Doug Pihl, Mathstar’s president and CEO had this to say last week:
"We shipped our first production FPOA’s in the first quarter. MathStar’s 1 GHz part is up to four times faster than any other programmable logic device on the market today, clearly making it the performance leader. We are encouraged by the strong interest from customers, particularly in the professional video market, for our FPOA products. MathStar recently announced an agreement with Arrow Electronics, one of the world’s largest electronics distributors, as our global supply chain partner. This partnership gives us a fully deployed global sales channel to support our customers from the design and prototyping stage to production, in the Americas, Europe and Asia Pacific."

So, the CEO is hopeful (but that’s his job) and with the stock trading so low and where it should be, this becomes an attractive speculative play. Mathstar gets next to zero coverage on Wall Street, but if they start selling their FPOA technology, that could start to change.

Frank Lara Jr.

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

Posted on: May 9, 2007 – 6:34 pm in Uncategorized

RIMM To Take Out Wireless Carriers

For those of you sick of paying $70, $80, $90 or more a month for wireless service, just get a Blackberry.  It was announced yesterday that Blackberry smart phones will be able to utilize the Skype service for a $30 annual fee. Users will receive unlimited calling to computers using Skype or any landline or mobile phone.  This means that Blackberry users will save hundreds, maybe over a thousand dollars a year on wireless service.
With Apples (AAPL) iPhone offering just around the corner, RIMM has beat them to the punch allowing its users to virtually eliminate their cell phone bills.  With this savings, it is only a matter of time before users begin to purchase the top line Blackberry’s, justifying this purchase with the anticipated savings off their wireless bills. This bodes very well for shares of RIMM. 
Blackberry Smart Phone  users need simply go to http://www.shapeservices.com/ and download the software.  Then, go to your current wireless carrier and sign up for the least expensive calling plan (to avoid early term charges) and begin saving. In the future, Shape Services anticipates releasing versions for Window’s Smart Phones and Palm OS.   
Todd Sullivan
Posted on: May 9, 2007 – 6:31 pm in Uncategorized

Whole Foods: Complicated Earnings Report Doesn’t Help Slowing Growth

Whole Foods Market, Inc. (WFMI-NASDAQ) is trading lower by more than 4% in after-hours trading down to $43.83.  This earnings release is one of the more complicated earnings releases that this company has made and I have been reviewing this one for at least 9 years.  The 52-week lows on this one are $42.13, and those lows are actually the lows for more than 2-years. 

Based on the earnings release and lack of any set and formal guidance, we’ll hold off until the conference call clears this issue up.  Longer term, the Company’s goal is to reach $12 billion in sales in fiscal year 2010.  It is also working with the FTC to close its proposed Wild oats merger.

Competition: What is genuinely happening here is fairly easy to see and fairly easy to break-down as to why the stock is remaining weak.  The company’s competitive advantage to traditional grocery stores is shrinking.  Kroger (KR-NYSE) has made many many inroads into organic and higher-end groceries, and most Whole Foods stores are now to the point that a larger portion of the items are conventionally grown rather than being "organic only."  That isn’t a bad thing because it has widened out the customer base.  If you go compare the 2-year chart sine Whole Foods peaked, you will easily see this even if you avoid both stores.   Even Wal-Mart (WMT-NYSE) has made some entrance into organic food sales, although it is hard to imagine people trading in Whole Foods for Wal-Mart.  That’s even more true if you count that Wal-Mart cheated on some organic markings (said they were errors).  Other grocery stores are on the same bandwagon, so the company is under fire.

Multiples: The earnings multiple of Whole Foods is coming down, and that needs to compress some more.  The honest truth is that Whole Foods should ALWAYS command a higher earnings multiple to basic grovery store chains.  It has higher-end customers, it has premium stores, and it has premium products.  But the degree to which people are willing to pay a higher multiple is still coming in.  This may be one of the last quarters that the company trades with a P/E ratio north of 30, yet Kroger (KR) and Safeway (SWY-NYSE) trade with P/E ratios under 20.  Where the discrepancy comes down to is the part hard to figure out.  If grocers are going to maintain 18-ish multiples, then maybe Whole Foods can command a 25% or 30% premium on that multiple.  But more than a 60% multiple premium today is probably not as realistic for a company that is maturing.

I think Whole Foods is still by far the best shopping experience for food out there compared to any pure-play grocery store.  That’s why the company will demand a premium multiple.  But the multiple premium is still compressing abd looks like it needs to compress further.

Jon C. Ogg
May 9, 2007

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

Posted on: May 9, 2007 – 3:44 pm in Earnings, Food, , , , ,

Cramer Said Cisco Systems Was Not Bad

On today’s STOP TRADING segment on CNBC, Jim Cramer said he’s toying with a Fed that gave you nothing.  He doesn’t know whether to sell in May or Hang Himself.  He said that he was wrong about the May rate cut even though the retail numbers tomorrow will be weak.  Cramer is refuting that the Cisco (CSCO) conference call was bad.  He said Chambers was not being negative and the negativity on the street today is just wrong.  If things were so bad then companies would be acting differently and he still thinks the 14,500 DJIA target by year-end is doable.

Jon C. Ogg
May 9, 2007

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

Posted on: May 9, 2007 – 2:00 pm in Cramer,

Whole Foods (WFMI) may prove today it isn’t just for hippies (WFMI)

Whole Foods Market, Inc. (WFMI) reports Q2 earnings today after the market close.  They have not provided any guidance for the quarter and   Thomson Financial is expecting earnings of 36 cents per share on revenue of $1.49   billion. Back in February Whole Foods announced it would buy its smaller rival Wild Oats Markets Inc. for$565 million, or $18.50 in cash per share. So after the market close,it’s game on.

       

Many of us lump Whole Foods Market, Inc. (WFMI)into that category of PCC, Co-Ops, Natural Foods stores and that imageof hippies flowing the aisles shopping with smiles and hemp re-usablegrocery bags. That’s how the company started, a bunch of dreamers inthe 70’s who wanted to sell fresh and natural foods to other hippies sothey all could just keep Rockin’ in the Free World. They wanted to makeshopping for groceries a positive experience that was meaningful andhappy, a place where you could go and wear your tie-dye and not besnubbed. They created a paradise for vegans and in the process ofcreating good vibes, the made some heavy money, man… and dude, havethey ever made money.
            Whole Foods - Because Hippies need groceries too.
CEO John Mackey has created an empire at what started out being a Co-Ophas grown into a major corporation bringing in $5.6Bin revenue last year with $203M in net income. Those of you that haveshopped at a Whole Foods know that it’s not just your neighborhoodhippy hot spot, it’s a state of the art grocery experience every timeyou walk in one of their stores. They truly are the world’s leadingnatural and organic foods supermarket, they’ve even gone so far asaddressing the "Humane Treatment of Live Lobsters". Back in 2005 Mackey said:
"Weare viewing the lobster as a live creature rather than a commodity thatdeserves no concern. Just because we sell lobsters and have customerswho will buy them is not a compelling argument to maintain status quo." I didn’t think you could hug a tree harder but that’s pretty much standard for Whole Foods, Mackey eMuppets - The Rainbow Connectionarlierthis year said: "eating animals causes pain and suffering to theanimals", I guess he doesn’t eat too many chicken McNuggets does he?Just for fun, click around on their website,after about 3 minutes you feel like John Denver is about to come out ofyour screen with the muppets and start singing the "RainbowConnection". This is no slam on Whole Foods, I guess I didn’t have asmuch compasion for my McRib sandwich and how they got it to have those artificial rib like grooves in it – damn those were tasty.

       

Evenif you are a McRib guy like me or a vegan like Mackey, Whole Foods haseverything you ever wanted in a grocery store plus more. So aftertoday’s call, we will find out if investing in Whole Foods is a goodidea for the average carnivore or leaf eater. Over the past year sharesof Whole Foods have dropped 35%.They pay out a 18 Cent dividend every quarter but can they prove toWall Street they are worthy of a higher share price today? This wouldbe perfect timing for WFMI to turn things around, maybe if they startselling the McRib they could bring in added revenue?

       

Tellyou what, if the call goes bad today, I’ll personally put in a call CEOJohn Mackey and let him know about my "McRib Revenue" idea. I’m surehe’ll be all over it.

       

          Frank Lara Jr.       

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

Posted on: May 9, 2007 – 1:40 pm in Earnings, Food, ,

Top 10 Mid-Day Movers (MAY 9, 2007)

Stock Tickers: CSCO, DNDN, CMGI, IBM, ISIS, RTP, FWLT, MVSN, TXN, ERTS

So far this is turning out to be an interesting day, despite what looks to be very mixed and dull markets ahead of a Fed meeting announcement.  Did you notice how this is the "least covered" Federal Reserve meeting by the media today in several years?

There are quite a few active stocks despite the market and despite the Fed.  This is not the actual top-10 most actives or the top-10 most changed, but these are the ones we wanted to focus on:

Dendreon (DNDN) shares murdered by 60% to $7.10-ish after the FDA sends back an "approvable letter" with a request for more information on Provenge for the treatment of late-stage prostate cancer.

Cisco Systems (CSCO) is now down over 6% at $26.55 mid-day and we’ve already seen 90 million shares change hands.  Their numbers were fine even if Wall Street wanted more, but the mere hint of discussing North American businesses looking at a slower cap-ex environment will do that.

CMGI (CMGI) is up more than 2% at $2.44, and getting closer to its recent highs.

IBM (IBM) is hardly active considering the "Goldman Sachs upgrade to a Buy."  Shares are up 0.7% on 4.3 million shares at $104.00, and while that is actually a new recent high it’s probably one of the upgrades that went out yesterday.

Isis Pharmaceuticals (ISIS) is up almost 4% after Bristol-Myers Squibb signed a cardiovascular pact with the company.

Foster Wheeler (FWLT) is up more than 17% on what was nothing short of a spectacular earnings blowout.  Expect Cramer to be out touting this one today or tonight.

Macrovision (MVSN) shares are up 16% to $27.85 after beating earnings and raising guidance.

Electronic Arts (ERTS) shares are down on the following quarter guidance, even though the 2008 guidance is solid.  It has to be hard to trust even them when they have to compete in calendar Q4 against the upcoming Halo 3 and the Grand Theft Auto releases.  Shares are down 4% at $50.70.

Texas Instruments (TXN) shares are trading up 4% at $36.60 on analyst meeting commentary.

Rio Tinto (RTP) shares are trading up 12% at $297.50 on persistent merger mania driving rumors and reports that BHP Billiton is interested.  This is even with Rio Tinto saying they are unaware of such interest.

Jon C. Ogg
May 9, 2007

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

Posted on: May 9, 2007 – 11:31 am in Most Actives, , , , , , , , , ,

Cramer Hints at Scam in Qualcomm, But Not By the Company (QCOM)

Cramer has a fairly long video discussing "scams on Wall Street" on TheStreet.com video section.  Most of the video is just old reviews but toward the end if you pay attention, Cramer notes a potential scam in one of the most loved and more active stocks: Qualcomm (QCOM).

Cramer said a sort of scam that goes on in modern days is something that borderlines collusion among mutual funds to keep certain stocks higher. He said that it is sometimes so orderly that you would think the mutual funds are all in the same room buying stock.  He thinks this is going on right now in Qualcomm (QCOM) and he is cautious against it.  Keep in mind that Cramer is NOT saying that Qualcomm is doing anything that is a scam, he’s saying the fund buyers are propping shares up.  Cramer said he feels that is going on in QCOM, although he stressed that he has no concrete evidence on this.

I thought I was being gutsy by merely putting Paul Jacobs on a "probation watch" back in December about the stock being an underpereformer, but calling a scam even anywhere around this stock is going to generate hate mail for Cramer.  I was not calling Paul Jacobs out on anything other than the fact that QCOM holders have high demands and the shoes he had to fill were more than full of expectations. I received some hate email for even a mere mention of that.  Jacobs (the younger) is not on any active watch list of mine as a CEO that needs to go and he’s actually been working well with what he has.  I am just glad I didn’t have to fill Irwin Jacobs’ shoes because he was such a strong CEO on Wall Street that pulling an encore to him has to be 6-times the challenge of just running the company.

Cramer will almost certainly be getting more vicious emails today for mentioning the words "Qualcomm" and "scam" in the same discussion.

Jon C. Ogg
May 9, 2007

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

Posted on: May 9, 2007 – 11:06 am in Cramer, Telecom, Wireless,

3Com Marches On

Yesterday, 3Com (COMS-NASDAQ) rallied close to 10% after Citadel (huge Chicago hedge fund) disclosed that it was holding an 8.4% stake AND a letter to the company requesting a meeting with the management team and board of directors to discuss the 3Com strategy.  Shares are up close to 2% more today to $4.67.  This stake has also re-added fuel back into the "buyout" fire in the name.

This is Ken Griffin’s fund if you are not familiar with Citadel, and he can swing a rather large axe if he wants to.  Griffin and Citadel couldn’t help but note that the stock had slid almost 20% since 3Com’s purchase of the other 49% stake in the H3C-venture from Huawei Technologies.  The letter expresses support for management after speaking with CEO Edgar Masri, although Citadel believes it can drive shareholder value.  We noted that 3Com was in a position that it might not be able to fix itself on its own in the fairly recent past.  The good news is that Griffin can probably make a MUCH better effort to help fix the company.  He almost definitely wouldn’t hurt.

Since Griffin is a billionaire and since he cannot be faulted on most of his investment strategies, we aren’t going to pick any part of this apart.  He’s a stud of an investor as far as Wall Street is concerned.  The only suggestion would be to force Banhamou out once and for all out of the board room or at least replace him as Chairman of the Board.  That will eliminate one of the last legacy issues and will allow for what is a truly clean slate.

Jon C. Ogg
May 9, 2007

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

Posted on: May 9, 2007 – 9:21 am in Mergers and Buy Outs, Technology Companies,

What Are Dendreon Options Saying Now?

Dendreon (DNDN-NASDAQ) has already been noted as a bust this morning by us and by everyone else.  Even the Sub-Saharan Africa nations have noticed it, and this 10-point drop in the stock may force many shareholders to move there.  This is what can happen when betting around the FDA and pending FDA decisions.

The open interest is so large between the May put and call options that we could easily see 100 million shares trade hands today.  The $17.50 straddle for a volatility trade would have cost you $12.90 for both sides, meaning the stock would theoretically need to drop to under $5.00 or rise to over $30.00 for that trade to have been in the money.

Out of the active contracts, there were more than 500,000 various contracts of open interest in the PUT options and more than 550,000 in the various CALL option contracts.  Most of these may offset each other for the options market makers, but this could make for close to a 100 million share day in this stock.  The short interest alone was more than 33 million shares last month.

In less than 30 minutes of post-open trading (including pre-market) this stock has already traded more than 30 million shares.

Jon C. Ogg
May 9, 2007

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

Posted on: May 9, 2007 – 8:55 am in Biotech,

Financial Blog News Around The Web (MAY 9, 2007)

Stock Tickers: AAPL, TXN, GE, GOOG, DELL, CSCO, BRCM

TechCrunch noting some interesting changes in Web search possibilities in a Google (GOOG) search-dominated world..

Is eBay (EBAY) going to buy StumbleUpon as previously reported?

Is open source software getting too much like proprietary software?

Dell’s (DELL) cost cutting answer: ship more than 1 server in a box……

Someone else agrees that Cisco (CSCO) can be bought on buybacks.

At 8.5-times cash value, can you really call Broadcom (BRCM) a "value stock"?

General Electric (GE) may be able to fend off attempts to break itself up to please some holders.

Order pushouts happening at Texas Instruments (TXN).

Not exactly breaking news, but a good read on how Apple (AAPL) has doubled Mac’s market share in the last 8 months.

-The 24/7 Wall St. Editorial Staff

Posted on: May 9, 2007 – 8:21 am in Blogs, , , , , , ,

Coming to Rackable Systems’ Defense (RACK)

Rackable Systems (RACK-NASDAQ) is a stock that probably doesn’t need reminding about a weak stock, and calling it weak may be far too kind. 

Just yesterday the company settled some patent litigation with Super Micro Computer.  This morning the shares are trading higher after First Albany came out on valuations and raised the shares all the way up to a Buy rating from an Underperform rating.  This upgrade looks like it is the only active buy rating from brokerage firms that follow the stock.  It also appears that First Albany was not in the underwriting group back in 2005.

This former hi-flyer flameout has fallen over 80% from over $50.00 in the last 18 months to as low as $11.25 recently after a steady series of warnings.  Shares traded up 2.5% yesterday and are trading up more than 3% at $12.45 pre-market. 

Jon C. Ogg
May 9, 2007

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

Posted on: May 9, 2007 – 7:46 am in Uncategorized,

Will Berkshire Hathaway Lower Its Buyout Standards?

Berkshire Hathaway (BRK/A) may be setting its sights lower as far as the size of a merger it would pursue.  Reuters has reported that Warren Buffett gave an interview to a Swiss newspaper called Finanz and Wirtschaft saying the company was primarily interested in large takeovers.  Buffett said they would happily buy things in the $5 billion to $20 billion range, although potential targets are rare.  Buffett did note that they were confident they would be able to conclude several larger transactions soon in the interview.

We just ran several buyout targets that we widened out to fit the bill for a "whale" of an acquisition on Monday.

If Buffett looks at smaller companies then he will have a lot more to choose from.  It is somewhat surprising that Buffett has not looked at the retail and commercial banking sector since there are so many with healthy balance sheets and surpressed prices due to a temporarily inverted yield curve.  He has also failed on his promise to go big into power generation operations, and there are perhaps 5 or 6 names he could easily approach in that sector.

The truth is that if Buffett stoops down into the $5 billion to $20 billion range then there will be many opportunities for him.  Perhaps the largest reason for looking at larger deals is that he is probably concerned that he will be one-upped in a higher bid for any deal he considers in that $5 billion to $20 billion range.

Regardless of his comments, he needs to remove T-Bills as his single largest public investment at the current time.  Being too picky and just sitting on the sidelines for too long can come across as indecisive, even if you have made yourself into one of the world’s richest men. 

Jon C. Ogg
May 9, 2007

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

Posted on: May 9, 2007 – 7:22 am in Conglomerates, Mergers and Buy Outs, , , , , , , , , , , , , , , ,

Pre-Market Stock News (May 9, 2007)

(ARRO) Arrow International formed a special committee to evaluate strategic alternatives.
(ASN) Archstone $0.50 EPS vs $0.51e.
(AT) Alltel is being considered by private equity as a takeover target.
(AZPN) Aspen Tech $0.17 EPS vs $0.15e.
(CCRT) ComuCredit fell 8% after earnings; guided $4.00 EPS for 2007.
(CEGE) Cell Genesys trading down 1% on Dendreon sympathy; noted positive leukemia studies today.
(CRFT) CRaftmade announced a review of strategic alternatives.
(CSCO) Cisco trading down 5.5% after beating estimates and guiding to in-line with estimates.
(DCO) Ducommun announced the award of a $9.9 million contract for tail rotor blades for Apache helicopters.
(DIS) Walt Disney traded down 2% after earnings.
(DNDN) Dendreon trading down 60% on FDA request for more data on Provenge “approvable letter.”
(EFD) eFunds is reviewing strategic alternatives.
(ENMD) Entremed -$0.09 EPS vs -$0.12e.
(ERTS) Electronic Arts fell 3% on guiding lower for the quarter but up for the year.
(FACE) Physicians Formula fell almost 10% on earnings warning after beating EPS expectations.
(FWLT) Foster Wheeler $1.60 EPS vs $0.75e; unsure if comparable.
(GE) GE being noted as a break-up pressure target according to WSJ.
(HGSI) Human Genome Sciences -$0.38 EPS vs -$0.42e.
(HSP) Hospira $0.59 EPS vs $0.53e.
(ISIS) Isis Pharma in cardiovascular disease pact with Bristol-Myers.
(LMIA) LMI Aerospace fell 9% after earnings.
(MGAM) Multimedia Games $0.00 EPS vs -$0.05e.
(MPEL) Melco PBL Entertainment is confirming a May 12 opening date of its casino in Macau.
(NCI) Navigant started a modified Dutch Auction tender of 10.5M shares for $19.50 to $22.50 per share.
(NICE) Nice Systems $0.31 EPS vs $0.30e.
(PAL) North American Palladium noted as a stealth nickel trade by Cramer on Mad Money.
(PBH) Prestige Brands $0.17 EPS vs $0.19e.
(PCLN) Priceline.com fell 2% after posting losses on charges.
(PZZA) Papa Johns traded up 2% after earnings as guidance was ahead for the year.
(RTP) Rio Tinto trading up on overseas news reports that BHP Billiton may be interested in bidding for the company.
(THS) Treehouse Foods $0.24 EPS vs $0.31e; unsure if comparable.
(TM’) Toyota traded down 0.5% after earnings.
(TOL) Toll Brothers lowered guidance given in February.
(TRK) Speedway Motorsports $0.72 EPS vs $0.72e.
(ULBI) Ultralife Batteries wins $6.9M military order.
(WOOF) VCA Antech is paying $152.9M to acquire Healthy Pet Corp.
(WW) Watson Wyatt $0.76 EPS vs $0.64e but guidance looked light.

Jon C. Ogg
May 9, 2007

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

Posted on: May 9, 2007 – 7:01 am in Pre-Market Activity

Earlybird Analyst Calls (MAY 9, 2007)

AU             cut to Neutral at Prudential.
AUO         cut to Equal Weight at Lehman.
BFPH       started as Buy at Oppenheimer.
BRKS       cut to Peer Perform at Bear Stearns.
CCRT      cut to Underperform at Wachovia.
CS            raised to Buy at Merrill Lynch.
CZN          cut to Neutral at Credit Suisse.
DSX          started as Overweight at JPMorgan.
EGLE       cut to Mkt Perform at Wachovia.
EXP          started as Underweight at JPMorgan.
FLIR         cut to Neutral at JPMorgan.
FSR         started as Mkt Perform at Wachovia; started as Equal Weight at Lehman.
HPQ         target raised to $53 from $50 at Goldman Sachs (yesterday).
IBM           raised to Buy at Goldman Sachs.
ISTA         raised to Hold at Jefferies.
LIOX         raised to Buy at Jefferies.
LUM         cut to Neutral at JPMorgan.
MVL          cut to Neutral at JPMorgan.
MVSN       raised to Buy at Jefferies.
NRMX      cut to Sector Perform at CIBC.
NSR         cut to Hold at Jefferies.
NHY         cut to Neutral at UBS.
PFS          cut to Mkt Perform at FBR.
SPP          cut to Neutral at Credit Suisse.
THC          cut to Underperform at Jefferies.
TWTC       raised to Outperform at Bear Stearns.

Jon C. Ogg
May 9, 2007

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

Posted on: May 9, 2007 – 6:19 am in Analyst Calls

Is Gateway Even Relevant?

Gateway Inc. (GTW-NYSE) is just missing the entire point of being an operating company.  The company posted another loss last night with a net loss of $8.6 million, or -$0.02 EPS on revenues of $1.021 Billion.  First quarter operating income equaled a loss of $6.7 million.  What were Wall Street estimates?  It doesn’t matter.  About the only good news is that the loss is narrower than the same quarter last year, but its PC unit sales were also down 9% year over year to 1,251,300.

Gross margin was also lower at 4.9% down from 7.3% year over year.  If you must know the estimates, it looks like First Call had targets of $0.01 EPS on revenues of $983.6 million. 

This company has been bolstered in the past by takeover speculation, but cautious investors should probably focus on figuring out why someone would come to bail the PC maker out.  The company’s market cap is only $769 million, but there are so many buried shareholders that they would probably demand a far higher price if a buyer really emerged.  The relevance of this company is still a pressing issue, and that looks more and more the case each quarter.

Investors are probably thinking that Gateway has changed its name to "Get-away"

Jon C. Ogg
May 9, 2007

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

Posted on: May 9, 2007 – 6:00 am in Earnings, PC Companies,

Dendreon Nailed by FDA with a “Request for More Information” and “Approvable Letter”

Dendreon Corporation (DNDN-NASDAQ) was hammered this morning.  It received a Complete Response Letter from the FDA that is the equivalent of an "approvable letter" with a request for additional clinical data for Provenge in the fight as a last line of defense in prostate cancer.

The FDA has requested additional clinical data in support of the efficacy claim contained in the BLA. The Company is seeking a clarification from the FDA as to the nature of the data that is being requested. The FDA has also requested additional information with respect to the chemistry, manufacturing and controls (CMC) section of the BLA, which the Company believes it can supply to the FDA in a timely manner.

Initial trading is showing indications down around $12.00 in pre-market activity, but we still have more than 3 hours until the official stock market open.  That number may be higher or lower by the open.  Just last night the "at the money" straddle as a pure volatility play (May $17.50 Put & Call)  would have cost $12.90 for a May 17 expiration, and that is for what was a $17.74 stock.

Mitchell H. Gold, M.D., president and chief executive officer of Dendreon: "Given our strong belief in the survival benefit and safety profile of PROVENGE, coupled with the positive outcome of the Advisory Committee meeting, we are disappointed that this decision will cause a delay in the availability of PROVENGE for patients who suffer from advanced prostate cancer.  We are committed to working closely with the FDA to resolve these questions in a timely and efficient manner to bring PROVENGE to patients with advanced prostate cancer who currently have few appealing treatment options."

This news is too fresh to have that many analyst calls out there, but it is safe toasume there will be many analyst calls.  You can probably expect some additional fallout in many of the speculative biotech names as well.  Just on May 2, A.G.Edwards started this with a Hold rating, noting that investors would do better by staying away from the situation.

Jon C. Ogg
May 9, 2007

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

Posted on: May 9, 2007 – 5:36 am in Uncategorized,

A General Electric Break-Up STILL a Bad Idea (GE)

The Wall Street Journal is reporting that there is still some shareholder pressure to break-up General Electric (GE-NYSE).  This is partly modeled on the ongoing Tyco (TYC-NYSE) break-up, but the idea is stupid and throws caution into the wind.

A couple weeks ago I was on CNBC noting that this was a bad idea.  That is still the case and a break-up of the conglomerate would be putting roughly 40 to 50 years of work to the wind merely for short-term gains.  The stock is up roughly 6% in the last year, but shares are up more than 50% since early 2003 when the economy started making its recovery.  You can go back and argue that share are flat since Immelt took the helm, but he took over the week before September 11, 2001 and right when the economy went into nosedive mode.  The following 18 months are not at all his fault.

Jet engines are a huge business right now, but it wasn’t that long ago that the jet maker was laying off thousands.  GE’s alternative energy and energy complex operations might not be able to be as robust as a standalone entity, particularly as many emerging market government are late or delinquent in payments.

Trust me on this.  This strategy is actually good if we are in a permanent bull market and if the investment community only wants to invest in growth companies.  But if investors want diversification and safety, this is a horrible idea.  The company is already making attempts to divest operations like plastics, and there are still plenty of acquisitions it can make.  There are some strategies that could unlock values with the issuance of a media tracking stock or the same in other areas, but a wholesale break-up is just not prudent.

Bull markets do always come to an end.  Great economies always fade eventually.  And there are some environments where safety is more important than a break-up to focus on growth segments.  Pressuring Jeff Immelt, who we noted as one of Americas most entrenched corporate leaders (and rightfully so), is not the right idea.

Jon C. Ogg
May 9, 2007

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

Posted on: May 9, 2007 – 5:22 am in Conglomerates, ,

Overseas Market News (MAY 9, 2007)

                                VALUE        CHANGE    % CHANGE
NIKKEI                    17,748.12    91.28            0.52%
Shanghai Comp    4,013.08    63.07             1.60%
Hang Seng             20,844.78    138.43         0.67%
FTSE 100                6,569.50    19.10             0.29%
DAX 30                    7,466.40    24.20              0.33%
CAC 40                    6,043.77    9.52                0.16%

Toyota Motors (TM) posted a 2 Trillion Yen profit in Japan; sees slower growth ahead; stock indicated down 0.55%.

Japan Airlines posted a loss for its fiscal 2006.

Softbank (9984.JP) posted 2006 revenues of 2 Trillion Yen.

Rio Tinto (RTP) trading higher on London speculation that BHP Billiton (BHP) may bid on the company.  Keep in mind this could have antitrust issues on a global basis.

BNP Paribas posted a 25% EPS gaiun in Europe.

Easyjet trading lower despite narrower losses in London.

Alltel (AT) is generating bid interest from several groups according to WSJ. Rumors have been out there on this name already.

China Mobile (CHL) looking for acquisitions in Asia according to WSJ.

General Electric (GE) is being urged to split up the company by shareholders according to WSJ.  This is a short term-bull market play and a bad idea long-term.

Outback Steakhouse (OSI) shareholder vote delayed on merger because of a lack of shareholder vote.  They didn’t offer enough premium is why.

Thomason (TOC) and Reuters (RTRSY) talks now looking like a $17.5 Billion deal according to New York Times.

Jon C. Ogg
May 9, 2007

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

Posted on: May 9, 2007 – 4:57 am in International Markets, , , , , , , , ,