Daily Archives: May 15, 2007

Home Depot (HD): Stop Expanding Retail Operations

The Home Depot (HD) net income dropped in the first quarter, as it endured a weakened spring selling season and continued to weather the soft housing market. In the first quarter, Home Depot had net income of $1 billion on $21.6 billion in sales, compared with net income of $1.5 billion on $21.5 billion in sales in the first quarter of 2006. Earnings were 53 cents a share, compared with earnings of 70 cents a share in the first quarter of 2006. Sales in the retail segment dropped 4.3 percent to $18.5 billion, and comparable store sales fell 7.6 percent. Sales in the HD Supply segment grew by 46 percent to $3.1 billion, reflecting sales from acquired businesses. 

As I have said before, HD without the Supply unit is worth far less than it is now.  There is growth there. Yes, that growth is acquired growth but there is no “acquired” growth to be had in the retail division.  The argument could actually be made that the retail division, when you consider Lowe’s is actually over built and a little contraction would do all players a little good.  What Home Depot needs to do is stop the expansion of its retail operations

There seems to be a trend recently in former high flyers like Wal-Mart, Starbucks and now Home Depot to not fully recognize that they cannot continue to just grow and grow to get results. There comes a point in time where you begin to just cannibalize your own customers.  Rather than focusing on their current locations and improving them and their customers experience in them, they still have an almost myopic focus on more locations.  All three are experiencing discontent among many of their core customers as they have felt “neglected” or taken for granted and are leaving for competitors like Target, Dunkin’ Donuts, McDonald’s and Lowes that they feel more appreciated by and have grown smarter and retained what made them popular. As a result, all three are experiencing difficulty and an onslaught of negative sentiment 

If anything, Eddie Lampert at Sears Holdings and Julian Day at RadioShack have proven that shareholders can be richly rewarded without throwing up locations everywhere and focusing energy and investment on getting the most out of what is already there and improving their shoppers experience.  Growth for growth sake is not necessary for shareholders and the company to prosper.

Todd Sullivan

5/15/2007

Posted on: May 15, 2007 – 7:25 pm in Retail

Cramer Backs Mark Hurd at Hewlett-Packard

Cramer’s second CEO in his "Transformational CEO’s" list is Mark Hurd of Hewlett-Packard (NYSE:HPQ).He said you can slap a buy on him because he took over H-P in March of2005 after Carly Fiorina was leading the company.  H-P shares havedoubled and he took it out of disarray.  It was even behind Dell(NASDAQ:DELL)in market share.  The payrolls were bloated and the server business wasa joke.  Hurd went back to focus on engineering and the company even delivered on Cramer’s prediction of an earnings upside surprise.  Hurd even took NCR (NYSE:NCR) up some 300% before joining H-P.

Last night, Cramer noted Schering-Plough’s Fred Hassan as one of his top 5 transformational CEO’s.

The call on H-P and Mark Hurd is hard to argue with.  Dell still mayhave more of a leveraged upside if the company can swing it around andlive up to the expectations, but so far it is hard to argue with thiscall.

Jon C. Ogg
May 15, 2007

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

Posted on: May 15, 2007 – 5:58 pm in Cramer, , ,

Cramer’s Next Infrastructure Stock (ACM, FWLT)

The next big infrastructure play according to Cramer on Mad Money is AECOM Technology (ACM-NYSE).  He called it the next Foster Wheeler (FWLT-NASDAQ).  This just came public Friday and it should have had a better IPO than it had.  It is almost back to where it started at the IPO, but he thinks they should be higher.  Its operations are on all continents and it’s involved in many aspects of engineering and infrastructure company.  It used to be part of Ashland Oil and has been its own operation since 1980, but it is mostly a non-energy play.  The backlog is up 63% and was at $3.1 Billion.

Jon C. Ogg
May 15, 2007

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

Posted on: May 15, 2007 – 5:23 pm in Uncategorized, ,

Cramer Eats Crow Over Herbalife (HLF)

Tonight on CNBC’s Mad Money, Jim Cramer said he was ready to eat crow over Herbalife (HLF-NYSE) because it is a supplement company that he got wrong.  It sells via Multi-level marketing and that uses 3rd party manufacturers.  He thought it was bad, but now he says that this one deserves to trade higher rather than lower.  The earnings were better and guidance in-line, plus they just got approval to market in 2 Chinese provinces.  It has high margins and strong cash flow.  They rejected a $38.00 bid from J.H.Whitney, so this should have a fairly clear floor.  It also has a large buyback and a decent dividend.  A new CEO cut down some of the distributors down.

This one traded up 2.4% to $40.34 in after-hours, after closing up 0.4% at $39.39 today.  The 52-week trading range is $27.73 to $42.54.

Jon C. Ogg
May 15, 2007

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

Posted on: May 15, 2007 – 5:09 pm in Cramer,

Bill Gates & Cascade Holdings

These are the holdings of Cascade Investment Management, L.L.C. as of March 31, 2007.  For those that do not recognize the name "Cascade," that is Bill Gates own private investment vehicle he uses for outside unrelated and passive investments for his own money that is not tied to Microsoft operations.  Here are the holdings as of March 31 per the SEC FILING:

Stock                                                                                $$Value            Shares
BERKSHIRE HATHAWAY (BRK-A)        $441,410       4,050                
CANADIAN NAT. Rail (CNI-NYSE)        $1,387,530      31,434,745            
FISHER COMMUN. (FSCI-NASDAQ)    $22,147         455,700   
FOUR SEASONS HOTEL (FS-NYSE)   $57,483         715,850   
GRUPO TELEVISA SA (TV-NYSE)         $579,288      19,439,200 
OTTER TAIL CORP (OTTR-NASDAQ)   $87,535       2,556,499   
PNM RES INC  (PNM-NYSE)                   $210,581       6,519,550
REPUBLIC SVCS INC (RSG-NYSE)     $756,494      27,192,451 
SIX FLAGS INC  (PKS-NYSE)                  $61,366      10,210,600
WESTERN ASSET
CLAYMORE US TR                                    $26,425       2,270,200   
WESTERN ASSET/CLYMRE
US TR INF (WIA-NYSE)                             $48,872       4,113,800 

Jon C. Ogg
May 15, 2007

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

Posted on: May 15, 2007 – 4:42 pm in Uncategorized, , , , , , , , , ,

The 52-Week Low Club

Airline day. Delta (DAL) down to $18.15. Fuel costs rising. Only public recently. High $21.95.

US Air (LCC) Down to $32.25 from $63.27. Good that Delta has not been public for a year. It could be down 50%.

Liz Claiborne (LIZ) Huge EPS drop in Q1. Retail is a brutal place to be. Period. Down to $33.24 from $46.84 as 52-week high.

Atherogenics (AGIX) Pharma company. Little revenue, big loses. Down to $2.47 from 52-week high of $20.03. Someone has to be bleeding.

Spatialight (HDTV) Refuses to get off the list. Quarterly results, bad financing and delisting notice all weigh. Down to $.14. Less than the cost of a breath mint. From 52-week high of $3.33.

Neurochem (NRMX) Little revenue, big loses. CIBC concerned that most recent trials of Alzheimer’s disease treatment did not go well. Bank downgrades the stock. Down to $6.01 from 52-week high of $26.51.

Douglas A. McIntyre

Posted on: May 15, 2007 – 4:32 pm in Uncategorized

Warren Buffett Rides More Railroads (BNI, NSC, UNP), Plus Other Holdings

This is an edited version of the first story to run an expanded list. 

Last month we all found out that Warren Buffett’s Berkshire Hathaway decided to take a ride on the Reading by investing in Burlington Northern (BNI-NYSE).  He also said that he had invested in two others, and now we know the holdings out of today’s larger filing.  Here are the positions noted in the filing.

Here is a full list out of the SEC FILING:

Here are the rail positions: Burlington Northern (BNI), Norfolk Southern (NSC), Union Pacific (UNP).

American Express (AXP), American Standard (ASD), Ameriprise, Anheuser Busch (BUD), H&R Block (HRB),  Coca Cola (KO), Comdisco, ConocoPhillips (COP), Costco (COST), First Data (FDC), Gannett (GCI), General Electric (GE), Home Depot (HD), Ingersoll Rand (IR), Iron Mountain (IRM), J&J (JNJ), Lowe’s (LOW), M&T Bank (MTB), Moody’s (MCO), Nike (NKE),  PetroChina (PTR), Pier 1 Imports (PIR), P&G (PG),  Sanofi Aventis (SNY), Servicemaster (SVM), Sun Trust Banks (STI), Torchmark, Tyco International (TYC), US Bancorp (USB), USG Corp (USG), United Parcel Service (UPS), United Health group (UNH), Wal-Mart (WMT), Washington Post (WPO), Wells Fargo (WFC), Wellpoint (WLP), Wesco, Western Union (WU)

Jon C. Ogg
May 15, 2007

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

Posted on: May 15, 2007 – 3:49 pm in Conglomerates, SEC, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Applied Materials, Chip Cap-Ex Not Dead

Applied Materials Inc. (AMAT-NASDAQ) posted $0.29 EPS on sales of $2.53 Billion versus First Call estimates are $0.28 EPS and $2.35 billion in revenues.  On a non-GAAP EPS basis Applied posted an even more impressive $0.36 EPS.  As far as what to expect for Q3 we didn’t get guidance, but the current estimates are $0.30 EPS and $2.43 Billion in revenues.

It said New Orders were $2.65 Billion; and Backlog at the end of the second quarter of fiscal 2007 was $3.67 billion, compared to $3.55 billion at the end of the first quarter of fiscal 2007.

Mike Splinter, president and CEO: "Applied Materials delivered higher than expected revenue and earnings this quarter.  We demonstrated our ability to execute across our business lines, deliver enhanced operational performance and open new opportunities for growth, announcing our first contracts for solar cell production lines. While the market for Display remained soft, Silicon and Fab Solutions exceeded expectations fueled by continued high levels of memory investment and momentum from market share gains."

Unfortunately there was not any formal guidance so this one is still ‘unresolved business.’  Shares of Applied Materials ar up about 1.4% at $20.13, but that is after a 3.1% drop back to under $20.00 today.

Jon C. Ogg
May 15, 2007

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

Posted on: May 15, 2007 – 3:12 pm in Earnings, Semiconductor,

Cramer Spoke Too Soon on Limited

On today’s STOP TRADING on CNBC, Jim Cramer said that Limited (LTD-NYSE) will go up.  The CEO doesn’t rest on his laurels and that could be a $30.00 play.  He thinks there is value to unlock.  He spoke before he got to really look at the news.  Shares are down 5% at $26.00 on the day.  The company is unlocking shareholder value, but it also issued a warning.

Limited has re-opened after announcing its news: The company is selling 67% of the ownership in its Express brand for some $548 million, with total after tax cash proceeds coming in at $425 million.  It is exploring strategic alternatives for its Limited Stores business.  These bits of news would have been welcomed on their own, but the company warned on earnings as well: The Company stated that it now expects 2007 first quarter earnings to be $0.12 to $0.14, versus its initial guidance of $0.25 to $0.28, and $0.25 last year and therefore estimates 2007 second quarter earnings per share to be $0.20 to $0.24 compared to $0.28 per share last year.  For the full year 2007, the Company now expects earnings per share of $1.55 to $1.65, versus its initial guidance of $1.75 to $1.90.  Most of this is being blamed on weakness at Victoria’s Secret.

Cramer might be right longer-term, but he didn’t anticipate that earnings warning.  Making a call before you know what the news is just proved yet again to be a dangerous game.  The good news is that shares were halted so there was no way those comments could have impacted traders.  This is part of the problem in believing that all "unlocking value" is without risks.

Jon C. Ogg
May 15, 2007

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

Posted on: May 15, 2007 – 2:43 pm in Apparel, Cramer,

Crocs Inc. is trading over $70 a share, is it too much?

Crocs, Inc.  (NASDAQ:CROX) has had an amazing run over the last year, since last May the stock has risen 160%. Last week (5/7) Wedbush Morgan upgraded Crocs from "buy" to "strong buy" and set a 12-month target price at $95. Wall Street loves Crocs, they can’t get enough of them, and with the stamp of approval of almost $100 a share, how could it get any better?! On Tuesday they signed a licensing agreement to create new lines of the company’s plastic slip-on shoes and accessories featuring comic book characters Croc's Sandalpublished by Marvel Entertainment Inc. (MVL). They’ve made a fortune from their sandals and there appears to be no end in sight, these magical sandals have made this stock a ‘must have’ for investor’s portfolios. So why even question they can do no wrong? It’s hard not to when they have build the company around one product, a sandal. I know they are branching out, they are international, they are this, they are that, but how long can the good times last?

They Cayman slip-on sandal is the life blood of this company, it retails for $29.99 on their website. It’s an amazing shoe, I’ve tried it out and they boast the following about it:
• orthotic foot bed
• advanced toe-box ventilation system
• slip-resistant and non-marking soles
• anti-microbial and odor resistant; ergonomic italian styling
• wide, roomy foot bed made with croslite PCCR material; buoyant
• weighs only ounces

Richard L. Sharp, director of Crocs Inc., sold 100,000 shares of common stock, according to a filing with the SEC last Thursday for $70.25 to $71.13 a piece. Good for him, the guy deserves it, look how much money he’s made for his shareholders in the last year. He’s not the only one cashing in on success, just take a look at the insider transactions in the past 6 months:
Yahoo Crox
Quite a few sales going on wouldn’t you say?

I realize I’m not going to be a popular guy by writing this article, I’ll get emails saying "well, they’re an IPO, this is typical activity", "Why would you talk negatively about a stock everyone loves and is making investors money?"

I’m just trying to get you to think about a few things, such as:

1. Ever consider Crocs sandals could be a fad, in 2009 do you think they will outsell the Rubik’s Cube?

2. Can you convince your loved ones that this stock will continue to grow provided it’s product stream? Would your recommend your parents put part of their retirement savings in Crocs’ company stock?

3. They primarly make their money from sandals, what happens when everyone who wants a pair, buys one — then what? Sure there will be return customers and referrals, but is everyone in America going to wear these things?

I’m not against this stock, I’m not buying puts, and I don’t have a short position. Crocs tells you all about why you "gotta have ‘em", I’m just talking about the reasons why you may not "gotta have" the stock.

Crocs Website

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 15, 2007 – 2:03 pm in Uncategorized

A Ten Step Program For Wal-Mart

If you have read us before, you may have read something about Wal-Mart Stores Inc. (WMT-NYSE).  There is probably an 80% chance that it was critical of the company but not for the entirely the same reasons as many Wal-Mart critic sites.  We do not subscribe to the evil corporate beast mantra as some, but sometimes it is obvious as a sore thumb that a company’s image is carrying right over into its shareholder pocketbooks.

I was just on CNBC (watch video here) discussing Wal-Mart along with many analysts and portfolio managers today discussing what is wrong with Wal-Mart.  There is no reason to keep going on and about your earnings and you guidance, because frankly it was just "less bad" than it could have been.

That is the case here.  Calling for Lee Scott to step down or for the Walton’s and the board to force him down is beginning t sound like a broken record.  But for starters he needs to.  You that time that two public speakers convey a message and one doesn’t carry an audience and one shines?  Lee Scott is falling short on all fronts.

So what are solutions?  There are about 10 things on the surface.   There are many more, but here’s a start:

Read More »

Posted on: May 15, 2007 – 1:44 pm in Retail, , , ,

Starbucks (SBUX) At A 52-Week Low

Starbucks (SBUX) hit a 52-week low today, trading at $28.37. It was November of 2005 the last time is traded below that level.

For those keeping score, boring old McDonald’s (MCD), which now pushes premium coffee along with happy meals is up about 45% over the last year. Starbucks is down over 20%.

What happened to the excitement about eventually having 40,000 stores, and the 20% per year growth rate. Those things should at least keep the stock flat.

The company’s last quarter was solid. Nothing was out of place. The last analyst meeting was a good show.

But, Starbucks is beginning to suffer from the Wal-Mart (WMT) syndrome. Wall St. is worried that too many stores hurts same store growth. Walking around the financial district a few blocks from Wall St., and it is not hard to see why the concern might have some validity.

The stock goes lower if same-stores sales don’t go higher.

Douglas A. McIntyre

Posted on: May 15, 2007 – 12:44 pm in Uncategorized

Wal-Mart (WMT): Inactivity Is The Reason Scott Has To Go

World’s biggest retailer Wal-Mart (WMT) said Tuesday quarterly profits rose 8% to $2.83 billion ($0.68/share) and revenue rose 8.5% to $86.41 billion — hitting analyst estimates exactly. Wal-Mart said Sam’s Club and international operations were its strongest areas, while food and generic drug sales were large growth sections. It expects domestic comparable-store sales to rise 1-2% in the coming quarter after a 0.6% first-quarter rise. It forecasts Q2 earnings from continuing operations of $0.75-0.95; analysts had been calling for $0.79.  In the company’s earnings press release, CEO Lee Scott shrewdly observed: "While these are record sales and earnings, we feel there was an opportunity to have done better,"
Thanks for the heads up Lee.  Kind of like General Custard saying "we should have brought more guys"
It is time for Lee to go. It is not for the standard reason people give, the stagnant share price.  Let’s be honest here. If you were dumb enough at the turn of the century to pay 60 times earnings for a massive retailer growing at less than 1/2 that, you deserve the predicament you are now in. Given Wal-Mart’s scale, it would have been impossible for ANY CEO to get performance out of the company to justify that high of a PE ratio and avoid the eventual share decline. The price of the stock had to fall. 
Why should Scott go? I have been in 4 Wal-Mart the past 2 weeks and one thing sticks out. They have not changed at all the past 7 years. Everything feels the same, the look , the merchandise, the people, everything.  The worst part is, there seems to be no plans to change anything.  If you are struggling with earnings and growth because you have become stale, do something different. You just can’t sit there, no matter who you are. How about this?  Let’s update the clothing.  We have heard for years that Target has had great success with low cost brand name designer clothing.  Wal-Mart’s is just low cost and in an increasingly brand conscious world, it just is not cutting it.  Let spruce it up a bit.  Maybe we could take some of the $7 plus billion you are sitting on and buyback a meaningful amount of shares? Wal-Mart is increasing cash at an over a billion dollar a year pace and last year spent just over that on share buybacks.  Let’s take $3 billion and make a dent in the shares outstanding ( 1.5%) and give more back to shareholders if we are not going to put it work anywhere else.
Wal-Mart’s image has taken a hit. When people want something "cheap" they think Wal-Mart, when the want a value, they think "Target". Because Scott seems to have no desire to change that, it is time to go….
I hold no position in any company listed above.
Todd Sullivan
5/15/2007
Posted on: May 15, 2007 – 12:24 pm in Earnings Warning

Are AMD shareholders 20% better off? no

Shares in Advanced Micro Devices (NYSE:AMD) are up 20% in five days. That means its market cap is up about $1.5 billion.

ThinkEquity did raise the shares to a "buy" because the research firm believes that orders from Dell (NASD:DELL) are strong. But, Dell is not doing all that well itself. American Technology Research also raised its rating on the theory that AMD will sell some of its operations and pay down part of its very large debt load. But, that is speculation.

AMD also came out with two "Intel (NASD:INTC) killer" chips earlier this week. One is a high end graphics chip for PC gamers. The other is a quad-core chip that delivers more computing and eats less energy.

All of the news is thrilling. But none of its means a thing.

AMD is still being thrashed by Intel. It appears that the larger chip company now has 80% of the x86 market for PCs and servers. This would mean that it took back all of the gains that AMD made in 2006, plus some.

GAAP gross margins at AMD were 28% in Q1. The same quarter a year before, they were 58%.

There is more evidence that things are getting worse at AMD than there is that they are getting better.

Douglas A. McIntyre

Posted on: May 15, 2007 – 11:11 am in Uncategorized

GE: Keeping NBC and No Interest in Dow Jones

General Electric’s (NYSE:GE) Jeff Immelt just made the inference during a CNBC interview that GE will not be showing any interest in Dow Jones (NYSE:DJ) and implied that they are not going to jettison its NBC media unit.   This is actually good news if you prefer the safety of a conglomerate in a slower economy.  If you prefer only smaller growth stocks then you have many other choices.   We noted that the break-up would be a bad idea in the recent past and stand by that.

He said the equivalent of "we have no interest at all in acquiring DowJones."  He noted the newspaper business and respect for Rupert Murdochand News Corp (NYSE:NWS), but any speculation left at all that Immelt or GE was interested in Dow Jones probably just got shot out the window.

Also he noted that they want to keep NBC and are happy with it.  Henoted that they would sell a business if someone else can run it betterand be monetized, but he noted that he expects to see double-digitgrowth at the end of the year in the unit.  He also noted the upcomingOlympic coverage.  In short, he is not going to unload NBC.  Immelt has been noted very positively as a corporate leader by us, and we even had him on our "entrenched corporate leader" list because of his leadership.

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

Posted on: May 15, 2007 – 9:31 am in Conglomerates, Media,

SunTrust’s “Value Initiative” Falls Short

Usually when companies issue favorable "shareholder value initiatives" you tend to see value created in the shares almost instantly.  That isn’t the case for SunTrust Banks (STI-NYSE) today. 

The company says it will focus on efficiency and productivity, the sale of its Coca-Cola (KO-NYSE) common stock holdings, and work on its capital optimization and balance sheet management.  Just last week, we noted in our free email newsletter (sign-up on homepage) that call options trading activity was signaling something brewing and there was talk going around again that the company may be up for grabs.  Rumors in the past had noted SunTrust as a likely acquirer, so who knows.

It aims to save some $530 million in fiscal 2009, up from original saqvings targets of $325 million.  It has also boosted savings plans in 2007 and 2008.  It sold 4.5 million Coke-KO shares, about 9% of its holdings.

Unfortunately none of the "value initiatives" noted today hint at anything toward a sale.  When the new initiatives don’t look like a buyout and that is what the street was hoping for, you can see the reaction in the stock speaks for itself.  SunTrust shares are actually down about 0.5% and have been down as much as 1% in early trading. 

Jon C. Ogg
May 15, 2007

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

Posted on: May 15, 2007 – 9:15 am in Banking, ,

Applied Materials Earnings Preview (May 15, 2007)

Applied Materials Inc. (AMAT-NASDAQ) reports its Q2 earnings after today’s close and First Call estimates are $0.28 EPS and $2.35 billion in revenues.  As far as what to expect for Q3, the current estimates are $0.30 EPS and $2.43 Billion in revenues.

What is most interesting is that AMAT shares have actually climbed up to over $20.00 again for the first time since early 2006.  The highs on various rallies in late 2003 and early 2004 were just north of $25, then $24, and then $23; so from current levels the stock looks like it could have a 10% upside from here before it starts meeting some stronger resistance level if it gets over that $21.00 hurdle.

Based on very early options trading, it appears that options traders are braced for a move of $0.40 to $0.50 in either direction.  This may be a tad off since shares have been coming in after the open.

Applied Materials has a new area that it can shift its focus to other than Cap-Ex spending out of chip-makers.  It has been growing its solar operations now that it acquired the Applied Films and this is still being under-covered by the media and by those that follow the stock.  It is very likely that this has at least helped the push that helped drive the stock from around $15.00 last summer up to a $17.00 to $19.00 range and then back over $20.00.  As this area grows and becomes more main stream, Applied Materials has the opportunity to capitalize.

The company probably should focus more on solar, but its new 45 nanometer transistor testing that was announced this morning will probably rule the conference call.  Other stocks to watch based on AMAT: KLAC, NVLS, TER, KLIC, LRCX.

Jon C. Ogg
May 15, 2007

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

Posted on: May 15, 2007 – 8:52 am in Alternative Energy, Earnings, Semiconductor, Technology Companies,

Dendreon, the Day That Could Have Been and What to Expect Now

At about 5:20 this morning after rolling the calendar a day over to see the notes, something stood out like a sore thumb: DENDREON DO OR DIE DATE!  The truth is that the May 15 date was on the "by May 15" date, and we all know that last week’s bomb from the FDA came out resulting in what will be very long delays for the company before we know if the FDA will approve Provenge for late-stage prostate cancer victims. 

So, What do Dendreon shareholders have to look forward to and what should they expect from here?  The "approvable letter" is a far batter response than a non-approvable letter" that is the true kiss of death, but the delays come at a time where the company is going to have to go into cash survival mode. 

There is an active shelf registration that on the last conference call the company was very vague about when it would raise cash via security sales.  If you can use the term "body language" on an audio call, then the body language sure sounded like the company would raise cash either late this year or in 2008.  It signaled that it has enough cash and resources to get through the 2008 mid-point dates of the study.  We’ll see if that is the case or not.  The company still has "other alternatives" if it decides to partner with a larger drug company, a move which it has resisted.

The company briefly enjoyed a "media openness" in the few weeks in between the FDA panel backing date and the delay from the FDA "approvable letter."  Based on last week’s conference call you won’t hear much until the American Society of Clinical Oncology presentations where ‘new data’ is supposed to be presented, whatever the new data is.  There is one more conference where data will be show, but after those two events it is likely that you will hear nothing much from teh company until its next earnings report in August.

The FDA has to be cautious, but it also has to be humanitarian as well.  That is a difficult balance to maintain and there are an equal number of arguments on both sides that could go on endlessly.  There are a couple more potential news weeks coming up for the stock, but after that this story may go quiet for a while.  Last week shares reached lows of $4.95, but shares recovered back up to $6.18 yesterday and shares are indicated slightly higher this morning.

Jon C. Ogg
May 15, 2007

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

Posted on: May 15, 2007 – 8:04 am in Biotech,

Myriad’s Alarming Alzheimer’s Forecasts

Myriad Genetics, Inc. (MYGN-NASDAQ) has issued a press release discussing a new study showing that the potential savings to the US healthcare system alone could be $4.0 Trillion from 2010 to 2050.  It estimates that in 2030 the rate from today’s 5.1 million Americans with Alzheimer’s will grow to 7.7 million and then to 16 million by 2050.

What Myriad is doing is essentially promoting its Flurizan (currently in Phase II’s) and it is trying to speed things up by noting that the delay of even a year could have tremendous expense ramifications.  We noted many of the other company names working in the sector after Barron’s ran a cover story on this epidemic that Barron’s left off.

These current numbers and projections are seeming to get worse and worse each year

Jon C. Ogg
May 15, 2007

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

Posted on: May 15, 2007 – 7:13 am in Biotech,

DaimlerChrysler’s Fair Quarter

For the first quarter of the year, EBIT at DaimlerChrysler (DCX) rose to $2.7 billion from $1.5 billion a year ago. Unit sales worldwide dropped by 5% to 1.1 million. First quarter revenue fell 6% to $47.3 billion.

The Mercedes Group had first quarter EBIT of $1.1 billion. Chrysler posted a negative $2 billion in EBIT. No wonder DCX was so anxious to be rid of it.

EBIT at the Truck Group was $706 million. Financial services EBIT was $560 million. Other segment posted first quarter EBIT of $2.5 billion. The earnings improvement was primarily due to gains realized in connection with the Group’s equity interest in EADS; the execution of a derivatives transaction in connection with the transfer of a 7.5% equity interest in EADS led to a gain of $1,019 million

While it is nice for Daimler to have all of these earnings contributions from outside its core business, it mean that, even without Chrysler, its car and truck businesses are not so hot.

Douglas A. McIntyre

Posted on: May 15, 2007 – 6:48 am in Uncategorized