Daily Archives: May 16, 2007

Toyota Brings the Caskets to the Big Three (TM, GM, F, DCX)

Toyota’s (TM-NYSE) strength in US market share is probably only getting bigger and bigger from here on out.  They aren’t perfect and they will probably have some stumbles along the way, but they are scaring the you know what out of the Big Three.

On tonight’s MAD MONEY on CNBC, Jim Cramer said he’s tired of the Big Three.  There is a beneficiary of the DaimlerChrysler (DCX-NYSE) and it is not GM (GM-NYSE) or Ford (F-NYSE) since they are only trying to shrink to profits: it is Toyota Motors (TM-NYSE).  That is going to make Toyota the last growth engine. If you will remember this stock was Cramer’s #1 Foreign Stock For 2007 according to Cramer. 

I sometimes argue with Cramer and sometimes back him.  The truth is that Toyota is the true winner.  It has fallen $16.00 in three months and about the only thing scary about Toyota’s stock right now is that the chart looks like it is going to trade like a drunkard until a new trend is more clear. 

Today I heard a local radio commercial from a GM dealership mention accusations naming Toyota as not really being the better auto maker because of the last recall I thought that this was a sheer sign that Toyota hasn’t just been eating its lunch.  GM dealers must be worried this will only get worse and that they have to do whatever they can to scare car buyers away from Toyota.  Toyota is scaring the hell out out of GM, that’s obvious. 

You won’t like what is going to be said if you work for or are related to a UAW member, but this is solely from the investment and economic outlook on what is obvious.  If things continue the way they have been going and if they go the way it looks, then the "Big 3 Monthly Auto Numbers" will soon be reported differently.  The risk is that the new monthly auto numbers will probably be reported at "The Big Red One and The Three Little Pigs."

Jon C. Ogg
May 16, 2007

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

Posted on: May 16, 2007 – 5:42 pm in Uncategorized, , , ,

H-P Keeps Firing On All Cylinders

Hewlett-Packard (HPQ-NYSE) posted $0.70 EPS versus $0.68 EPS estimates and posted Revenues of $25.5 billion.  Since the company had already raised guidance, alll that matters here is the forward guidance and the details in the numbers.  Next quarter’s guidance is for EPS in the $0.63 to $0.65 range versus $0.64 estimates.  It also forecast fiscal 2007 revenues of $100.5 to $100.9 billion versus street estimates of $100.65 Billion and forecast EPS at $2.75 to $2.77 compared to estimates of $2.73. 

Looking beyond printing and imaging, the numbers are all showing growth: Enterp[rise Storage & Servers up 8%, HP Services up 7%, Software grew 58% (because of Mercury Interactive acquisition), Financial Services grew 6%.  If you include personal systems and imaging these grew also: personal systems grew 24% and unit shipments grew 30%, and imaging and printing grew 6%.

During the quarter, on a year-over-year basis, revenue in the Americas grew 11% to $10.7 billion, revenue in Europe, the Middle East and Africa grew 14% to $10.3 billion, and revenue in Asia Pacific grew 16% to $4.5 billion. When adjusted for the effects of currency, revenue in the Americas grew 11%, revenue in Europe, the Middle East and Africa grew 7%, and revenue in Asia Pacific grew 13%.

Shares are being rewarded in after-hours because of a belief that CEO Mark Hurd is conservative in earnings guidance.  Shares are currently up 0.5% to $45.40, and the old 52-week high before today was $45.35.

Its forward P/E ratio is now 16.5 and its forward revenue multiple is 1.2.  Investors can always question their ability to ramp and grow like they managed in the last two years when its stock doubled, but calling this an expensive stock now based upon its multiples is just hard to say.

Jon C. Ogg
May 16, 2007

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

Posted on: May 16, 2007 – 3:26 pm in Earnings, PC Companies, Software, Technology Companies, , , ,

The Value of Psoriasis Treatments (CGPI)

This morning there was a micro-cap biotech that focuses primarily on dermatological issues, made what could be an interesting acquisition for the treatment of Psoriasis.  CollaGenex Pharmaceuticals, Inc. (CGPI-NASDAQ) and QuatRx Pharmaceuticals Company today announced a licensing agreement under which CollaGenex will develop and commercialize becocalcidiol.

This is a patented Vitamin D analogue developed by QuatRx that is currently in Phase II clinical trials for the topical treatment of mild to moderate psoriasis.  So it is not without risks because this is merely in Phase II studies.  The company claims that unlike all other Vitamin D-based treatments for psoriasis, becocalcidiol does not appear to induce hypercalcemia, a ’significant dose-limiting toxicity.’

It also states that according to the National Institutes of Health, approximately 7.5 million Americans have psoriasis, a non-contagious, chronic skin disease characterized by itching and red, scaly patches of skin.  Here is the real issue though that was not brought out in this press release: Psoriasis is still a largely untreated skin disease that appears in numerous stages and numerous degrees of severity.  It isn’t just that, though.  Psoriasis isn’t just largely untreated, it is one of the most obvious blockbuster opportunities for drug and ointment companies to go after right now.  There is no cure and no one that has claimed to be close to a cure, so if you win patient customers now you will have the ones that get positive results for years and years.

Olin Stewart, president/CEO of CollaGenex: "We have been in discussions with QuatRx for a number of months and have been very impressed with the quality of their research and development efforts. This license is another important step in executing our strategy to become a leader in therapeutic dermatology by developing a broad portfolio of innovative, proprietary products. The market for non-biological treatments of psoriasis is currently $600 million. This compound has great potential as a unique treatment for psoriasis and is an excellent fit for CollaGenex."

Dr. Klaus Theobald, Chief Medical Officer of CollaGenex: "Becocalcidiol has shown efficacy in the clinic and appears to be a non-irritating formulation for the treatment of psoriasis. It is unique among available Vitamin D analogues because it does not seem to promote hypercalcemia. If successfully developed, this product could provide significant advances in the topical treatment of psoriasis."

CollaGenex will pay an upfront licensing fee of $1.5 million to QuatRx and will be responsible for all further development costs. Additional fees are payable upon the achievement of various development and sales milestones. The agreement also provides for royalty payments linked to future product sales.

My own personal opinion is that this "$600 million" figure is grossly understated potentially by several times over.  That is because most people either live without knowing they have mild cases or choose to not treat it and because most of the treatments on the market are not targeted and do not work that well.  CGPI has a $215 million market cap, has close to $60 million cash on hand, and is producing light revenues.  It was a bit surprising to see this only up less than 1% in mid-day trading; shares are up 0.7% at $10.12 and the 52-week trading range is $7.66 to $15.75.  This looks like they just bought what could be one hell of a call option on a big treatment for mild to moderate cases of a widespread issue.

Jon C. Ogg
May 16, 2007

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

Posted on: May 16, 2007 – 1:40 pm in Biotech, Drug companies,

Trump may be rich but it’s not from his stock (TRMP)

Trump Entertainment Resorts Inc. (TRMP) hit a new 52-week low today and is now trading around $13.20 a share. Over the past three months Trump Entertainment shares have dropped 30% and show no sign of getting back up to its 52-week high of $23.80.

On May 3rd, TRMP reported a Q1 07 loss on decreased promotional costs and efforts to streamline operations. Trump Entertainment operates three casinos in Atlantic City, NewJersey and posted a net loss of $8.1 million, or 26 cents per share, compared with $9.7 million, or 32 cents per share, in the same period a year ago. Wall Street was anticipating the company to lose 24 cents per share. Net revenue fell to $7.42 billion from $7.96 billion and TRMP saw a $3.8 million decline in gaming revenue.

The same day earnings were reported Prudential Financial reiterated their "neutral weight" rating on Trump Entertainment and reduced their target price from $20 to $19. Trump VodkaIt appears that if the Donald’s name is on it, the company stock hasn’t been doing so hot lately (much like his hairdo). Take Drinks Americas Holdings, Ltd. (OTC:DKAM) that puts out Trump Premium Vodka, their shares have dropped 57% in the past three months and still remains an Over-the-Counter stock.

Trump IceMaybe it’s time for Trump to take his own advice from his TV show The Apprentice and say "you’re fired" to the man in the mirror? But wait, you can still buy Trump Ice, his special bottled water that was completely masterminded on the "hit TV show the Apprentice" (now in its 6th and worst season ever). What’s the tag line for his water you say? Well, it’s…
The Difference is Clear.
I bet my nephew’s 3rd grade class could come up with a better slogan than that, come on.

What I want to know is when is the Instant Trump Hairdo product coming out? Bald Americans would go crazy for that!

Trump is an easy target, but it’s because he has been so successful, his story is the American dream. So we poke fun at him, but he’s a good sport so I know he can take it.

But perhaps there is hope on the horizon, on Monday (5/14) Nollenberger Capital Partners upgraded Trump Entertainment Resorts Inc. (TRMP) from "sell" to "neutral" with the fair value set to $14 a share. The upgrade is based on valuation, following the recent decline in the company’s share price. A partial smoking ban has recently been implemented at Atlantic City casinos, which is unfavorable for the market, and Nollenberger Capital believes that Trump Entertainment Resorts would not be able to meet its goal of achieving property-level EBITDA margins in-line with the Atlantic City averages in 2H07.

So if I had to bet on Trump Entertainment Resorts Inc. (TRMP) versus Drinks Americas Holdings, Ltd. (OTC:DKAM), I’d pick Trump Entertainment Resorts. Real estate is the Donald’s bread and butter, it’s how he’s managed to become one of the wealthiest men in the United States. Trump can handle his properties, so he’ll make a comeback with his Casino’s, that’s something I would be willing to make a bet on. Trump is the Chairman of the Board at TRMP and not just a name on a product (Trump Vodka), which is the case over at Drinks Americas. The Donald is not one to let failure or a setback stand in his way, so don’t expect Trump Entertainment to die a slow death. Trump once said: "Anyone who thinks my story is anywhere near over is sadly mistaken." With that in mind, don’t underestimate Trump Entertainment.

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 16, 2007 – 1:11 pm in Uncategorized

Sirius (SIRI): Another 52-Week Low

Sirius Satellite Radio (SIRI) hit another 52-week low today at $2.66, down from its 52-week high of $4.84.

There could be several reasons, but the most likely is popular radio team Opie and Anthony were suspended from XM (XMSR) for 30 days. Lewd remarks and all.

The incident raises two thorny issues. The satellite radio companies managements are holding their breaths while the FCC and Congress look at the deal. Morals issues are bound to play a part in how the merger is viewed. Even Howard Stern could run into issues at Sirius if the company thinks he is hurting the chances of the deal.

But, customers go to satellite radio for programming that is not allowed on over-the-air radio. Stern is the prime example. It Stern and his bawdy friends are pushed off the satellite waves, subscriber growth could plateau or even fall.

Douglas A. McIntyre

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Posted on: May 16, 2007 – 12:25 pm in HI/LOW

Is This 1985 All Over? Cramer Thinks So

Cramer (TheStreet.com video link) thinks that this year is looking like stocks and the cycle are going to be a 1985 re-run.  The stocks started running and the companies became huge.  The share buybacks and private equity are creating a similar environment.  Right now the blip up in interest rates is just a blip.  You need to look at your stocks that are lower and you want to look back at your valuations and entry levels and decide what you want to buy.  There will be mild 3% to 5% pullbacks here, but you probably won’t get the panic selling large drops you would hope for.

This may be true, and it might not.  I have my own opinion on this even if Cramer is right that it feels this way.  But Joe Q. Public is being left in the dust and current shareholders on the newer multi-billion dollar buyouts are not being rewarded to the same tune they were just a few months ago.  If you look at what private equity is buying and what prices they are paying you would really think that most companies are now willing to accept a small buyout premium to avoid being a public company.  Just keep in mind that portfolio managers do have to show "realized returns" at some point down the road, even if they are private equity or pension managers.  The cash flow may justify prices paid but a large portion of the gone-private crowd will actually have to come back onto the public market either via an IPO or by a resale to a large niche play or conglomerate.

If this is really going to be 1985 all over again, how many people will start jumping back to the argument "Don’t forget October 1987!"?

Jon C. Ogg
May 16, 2007

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

Posted on: May 16, 2007 – 11:46 am in Cramer, Economy, Mergers and Buy Outs, Private Equity, Shareholder Issues

Apple Rumor Delays, Likely False Rumors

Yesterday I was asked a strange question, "Have you heard anything about the iPhone being delayed?"  As of then I had not.  But today there is a story on Engadget that shows a mixed piece.  You can interpret this as "false information" or you can call it "more Apple rumoring."

Engadget is saying they "have it on authority" that the iPhone launch and Leopard are being delayed.  You have to read it at their site because if this is not true we don’t want to be part of the rumor mongering.  To be fair they do have an "Update" that says Apple’s PR department are still on track from the last updates by the company.  More likely than not you will hear something out of Apple today because the company cannot afford the confusion in the 8th or 9th inning of the waiting game.

Keep your eyes open for a press release or PR comment from Apple, or at least that would make sense.  Shares of Apple traded lower by more than 1% on the posting of the first data and have recovered with the "update comment."  Literally as I was getting ready to post this CNBC reported that Apple said its iPhone on track and these reports are erroneous and rumors only.

Stay tuned for a formal release from the company.

Jon C. Ogg
May 16, 2007

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

Posted on: May 16, 2007 – 11:23 am in Consumer Electronics, Rumors, Telecom,

Amazon.com DRM-Free Service Won’t Kill Apple (AMZN, AAPL)

What happens when an online retailer like Amazon.com (AMZN-NASDAQ) gets to compete against Steve Jobs and Apple (AAPL-NASDAQ) at the race to DRM-free music downloads?  The most likely truth may be not that much.

Amazon.com has announced a DRM-Free MP3 download store that will be exclusively in the MP3 format.  EMI will be licensing their 12,000+ record label catalog to Amazon in the deal.  So they are going for a platform neutral music service that will allow songs to be burned onto CDs for personal use.  It should be known that at least a version of this agreement from Amazon.com has been anticipated after EMI signaled it was planning to do DRM-free music.

The real truth to this is that Amazon.com is basically getting to join the club since Jobs was the first or at least the most vocal for this move.  Amazon.com shares are up 0.5% at $60.88.  If this was going to be a true iTunes killer, then AAPL shares would not likely be up the same 0.4% this morning.  There are probably too many iTunes and iPod loyalists out there for this to be a true Apple-killer of a deal.

Jon C. Ogg
May 16, 2007

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

Posted on: May 16, 2007 – 9:27 am in Consumer Electronics, Entertainment, Internet, Media, Technology Companies, ,

Hewlett-Packard Earnings Preview (Q2 2007)

Hewlett-Packard (HPQ-NYSE) reports earnings after the close today.  Forget about today’s earnings because they already fessed up that they sent out an email noting that they would beat expectations.  This quarter report is going to be all about guidance and ancillary operations outside of just PC’s, laptops, and printers.

For formalities, today’s estimates are $0.69 EPS and $25.4 Billion.  More importantly, we have to look ahead: next quarter estimates are $0.64 and $24 Billion, Fiscal Oct-2007 is $2.73 and $100.65 Billion.  They may only give some rough percentages for Fiscal Oct-2008, but if they do give guidance that far out then the street is at roughly $3.05 EPS and $105.2 Billion revenues.  In percentage terms that represents roughly 11-12% EPS growth and almost 5% revenue growth.  These forward numbers are ex-acquisitions and ex-restructurings.

The company might not be able to take away as much market share from Dell as it did in the last two quarters, but it still could see some gains and its #1 PC-seller rank is not really at risk right now.  It makes more on servers now as well as more on the people side of the business with software and consulting. 

Shares of Hewlett-Packard are only up about 3% since its mid-February report, but shares are up 14% from the lows since that time.  With the gains seen today, shares of Dell (DELL) are up about 4% over the last 3 months, and Dell is up about 13% from its lows during the same period.  Jim Cramer just last night named CEO Mark Hurd as one of the top five transformational CEO’s out there.

Jon C. Ogg
May 16, 2007

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

Posted on: May 16, 2007 – 9:04 am in Earnings, PC Companies, Technology Companies, ,

Why Oracle Wants Agile Software (ORCL, AGIL)

Larry Ellison Inc., I mean Oracle Corp. (ORCL-NASDAQ), is paying $495 million to acquire a small niche software player Agile Software (AGIL-NASDAQ).  The buyout price is $8.10 per share and that will make most holders that purchased the shares over the last 2 years whole. 

Ellison isn’t buying the company at any great valuation or any big discount (even though not a huge price premium either) because the company is only forecast to make $0.08 EPS on revenues of $145 million in fiscal April-2008.  Agile brings some pre-packaged tier-1 clients and tier-2, but it has maintenance renewal contracts and lets Oracle more easily compete that much more with SAP, Microsoft (MSFT-NASDAQ), and IBM (IBM-NYSE) on the product lifecycle management software.

When you back out all the liabilities, there is still a net tangible value in the vicinity of $165 million, so net net this is arguably only a $330 million purchase price.  This also swings Oracle more into many tier-1 customers: Saturn (auto). Heinz, Dell, Playtex, Hitachi, Qualcomm, Lucent, Siemens, Tyco, and more.

Jon C. Ogg
May 16, 2007

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

Posted on: May 16, 2007 – 8:39 am in Mergers and Buy Outs, Software, , , , ,

Bausch & Lomb Selling Itself Away Too Cheap

Bausch & Lomb (BOL-NYSE) announced today that it has entered into a definitive merger agreement with affiliates of Warburg Pincus, the global private equity firm.  The transaction is valued at approximately $4.5 billion, including approximately $830 million of debt.  Bausch & Lomb common stock will be acquired for $65.00 per share in cash.

While this is a tiny premium to today’s price the companies are claiming this is a 26% premium over the volume weighted average price of Bausch & Lomb’s shares for 30 days prior to press reports of rumors regarding a potential acquisition.

Bausch & Lomb’s Board of Directors, following the recommendation of a Special Committee composed entirely of independent directors, has unanimously approved the agreement and recommends that Bausch & Lomb shareholders approve the merger.

The transaction is subject to certain closing conditions: the approval of Bausch & Lomb’s shareholders, regulatory approvals, and the satisfaction of other customary closing conditions. There is no financing condition to consummate the transaction.  Bausch & Lomb does have a go-shop alternative where it may solicit superior proposals from third parties during the next 50 calendar days and Bausch & Lomb would only be obligated to pay a $40 million break-up fee to affiliates of Warburg Pincus.

Shares of Bausch & Lomb closed at $61.50 yesterday and its 52-week high was $62.26.  Shares are trading north of the buyout price because there are obvious hopes that this would represent a sheer giveaway and hopes of a higher bid.  For some reference, this stock traded in the $70’s in the late 1990’s and had been over $80.00 in recent years.  This may be far from over.

Jon C. Ogg
May 16, 2007

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

Posted on: May 16, 2007 – 7:34 am in Consumer Goods, Drug companies, Mergers and Buy Outs, Private Equity,

Microsoft Sets Halo 3 Release Date (MSFT, TTWO, GME)

Microsoft (MSFT-NASDAQ) has announced that September 25, 2007 will be the release date for its long-awaited video game blockbuster ‘Halo 3.’  Normally a video game release date would be just another day, but the Halo franchise has been such a large seller that it has even been a disruption mechanism to the gaming industry. 

The European release will be September 26.  Starting today, Microsoft Game Studios will kick off the "Halo 3" multiplayer beta, which provides audiences worldwide with an exclusive, early look at some of the multiplayer elements of "Halo 3" on Xbox LIVE®.  Just to show you how large this franchise is, here is the Halo 2 data that will knock your socks off (stat from teh company): In November 2004 the release of "Halo 2" generated a record-setting $125 million in sales within the first 24 hours.  That equates to roughly 2 million units.

Starting May 16, the specially marked copies of "Crackdown" will act as a key for gamers to participate in the "Halo 3" multiplayer beta. In addition to giving gamers their first opportunity to get their hands on the new levels, weapons, vehicles and game types, the multiplayer beta will also provide valuable data that Bungie will use in continued development. 

What is more interesting is that this actually looks a bit earlier than originally thought.  Combine this with an upcoming release around the same of Take-Two Interactive’s (TTWO-NASDAQ) new Grand Theft Auto and you have what may be a 2-game dominated video game sector at the end of calender Q3 and much of Q4.   GameStop (GME-NYSE) has been taking pre-orders for some time, but there are conflicting reports on how many units have really been ordered (some are as high as 4 million pre-orders).

The last thing to note is that the Halo 3 profits are supposed to be the tipping edge that actually makes the entire Xbox franchise a net profit to Microsoft after 7 years.  If that is the case, then stock traders really needs to change the abbreviated nickname of Microsoft from "Mister Softie" of "Soft" to "Master Chief."

Jon C. Ogg
May 16, 2007

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

Posted on: May 16, 2007 – 7:00 am in Video Games, , ,

Pre-Market Stock News (May 16, 2007)

(AGIL) Agile Software being acquired by Oracle for $495 million.
(AMAT) Applied Materials trading down 5% after offering guidance, although it beat earnings and was initially trading up 2% after earnings.
(ASYS) Amtech Systems announced a new $1.9 million solar order.
(C) Citigroup trading up $1.00 now that Eddie Lampert disclosed a larger than 15 million share stake.
(CGPI) CollaGenex announced development for commercialization of Becocalcidol for the treatment of psoriasis.
(DE) Deere $2.72 EPS vs $2.41 estimate.
(JBX) Jack in the Box $0.80 EPS vs $0.70e.
(HEES) H&E Equipment Services acquired private J.W.Buress for $108 million.
(HLF) Herbalife now positively noted by Cramer on Mad Money after he said he was wrong on the stock.
(INO) Inovio Biomedical will raise about $16M through an equity sale.
(INTL) Inter-Tel received a $26.50 offer from Vector Capital, subject to due diligence and financing conditions.
(MT) Arcelor Mittal $1.62 EPS vs $1.56e; offers mixed guidance by division for Q2.
(RNWK) RealNetworks announced EU music service pact with Vodafone.
(SNE) Sony reported a loss but expects a boost in sales for 2007.

Jon C. Ogg
May 16, 2007

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

Posted on: May 16, 2007 – 6:35 am in Pre-Market Activity

Earlybird Analyst Calls (May 16, 2007)

BID cut to Outperform at JMP Securities.
BRCD raised to Overweight at JPMorgan.
BPO raised to Buy at Stifel Nicolaus.
CCIX started as Outperform at FBR.
CMO started as Strong Buy at JMP Securities.
CNQ cut to Equal Weight at Lehman.
CROX started as Overweight at JPMorgan.
GPIC cut to Neutral at First Albany.
HLIT raised to Mkt Perform at FBR.
LRCX cut to Neutral at Merriman Curhan Ford.
LTD downgraded at B of A, Citigroup, and Wachovia.
MSCC started as Buy at Stifel Nicolaus.
NUVO raised to Neutral at B of A.
OMX raised to Peer Perform at Bear Stearns.
PAYX raised to Outperform at Bear Stearns.
PLT started as Mkt Perform at JMP Securities.
SBSA raised to Overweight at JPMorgan.
TIVO raised to Outperform at Bear Stearns.
TXN cut to Sector Perform at CIBC.
UTHR started as Outperform at CIBC.
WL started as Buy at SunTrust Robinson Humphrey.
WTFC started as Buy at SunTrust Robinson Humphrey.

Jon C. Ogg
May 16, 2007

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

Posted on: May 16, 2007 – 6:19 am in Analyst Calls

New Study Show Cable Customer Satisfaction Low: Opening For Phone Companies?

The new American Customer Satisfaction Index has been released, and one of the takeaways from the survey of 80,000 consumers is that they think service from the cable companies is really poor.

According to MarketWatch, one director of the poll said: To some extent, companies in those industries "can afford to have low satisfaction and still do well. Comcast is a good example: Low and declining satisfaction and pretty good financials because the buyer has limited power to punish the service provider."

Charter Communications (CHTR) had a score of only 55 out of 100 for customer satisfaction. Comcast (CMCSA) was at 56 (a sever percent decline from the prior year) and Time Warner Cable (TWC) had a score of 58. Satellite TV provider Echostar (DISH) did much better at 67.

The phone companies are not known for their service, but their wireless operations got good scores in the survey. Verizon Wireless scored a 71. If they can bring this level of customer relations to their fiber TV, broadband and voice services, they may be able to break cable’s hold on bundled services. With cable using VoIP to steal their customers, they could use the leverage.

Phone customer services operations involve tens of thousands of people, making a change in quality control difficult. But, it may be the key to marketing fiber services to consumers over the next few years.

Douglas A. McIntyre

Posted on: May 16, 2007 – 6:08 am in Uncategorized

Europe Markets 5/16/2007

Markets in Europe were off slightly at 6.40 AM New York time.

The FTSE was down .1% to 6,562. BT (BT) was down .5% to 317.75. Reuters (RTRSY) was down .3% to 624. Vodafone (VOD) was down .6% to 143.

The DAXX was off .3% to 7,485. DaimlerChrysler (DCX) was up .4% to 63.8. DeutscheBank (DB) was down 1% to 115.35. Deutsche Telekom (DT) was .8% to 12.55. VW was up 1.7% to 108.32.

The CAC 40 was down .3% to 6,033. Accor was down 4.5% to 68.13. ST Micro (STM) was down 1.2% to 14.41.

Data from Reuters.

Douglas A. McIntyre

Posted on: May 16, 2007 – 5:52 am in International Markets

Motorola (MOT): Good Products, Wrong Market

Motorola (MOT) has introduced a slug of high-end phones that range from a thinner version of the RAZR to a new multimedia handheld device to compete with Blackberry. The phones look good. No denying that . But, they have an interesting target. “These phones are aimed at classy users we haven’t been addressing,” said Motorola’s chief executive, Edward J. Zander.

The high end of the market may have a good yield-per-unit, but it is the slowest growing part of the market, and one of the most competitive. It is where Sony Ericsson has made most of its money. It is where the iPhone is aimed. And, Nokia has a number of models for the more affluent users.

The market growth for handsets is in countries like India and China. The US and Europe are nearly saturated. The top three cell service providers in the US have about 175 million customers. That does not leave much room for new bodies.

It is not bad that Motorola has put together a line of high end handsets, but until it is matched with cheap phones with reasonable margins aimed at the growing end of the market, Motorola can never move toward a complete recovery. With Nokia’s (NOK) market share at 36% and Motorola’s at 17%, attacking only one part of the market won’t work.

Douglas A. McIntyre

Posted on: May 16, 2007 – 4:28 am in Uncategorized

NY State Kicks Dell (DELL) While It’s Down

The New York State Attorney General is after Dell (DELL) for deceiving consumers when it sold and financed Dell computers for the citizens of the fair state.

It appears that New York thinks that Dell was running a classic bait and switch. Bring in buyers with a promise of low financing rates and leave them with the kind of high interest rates that they pay on their Visa cards. According to The Wall Street Journal, the other portion of the complaint involves: "Dell denies promised rebates, and fails to honor warranties and service contracts by misleading customers and making it difficult to get technical support "

The first portion of the accusation seems a bit thin. Unless Dell lied in the section on interest rates that it offers consumers, buyers probably did not bother to read the fine print. It is a pretty standard problem when customers don’t read the terms and conditions. They may be onerous, but the customer did agree with them.

The second problems seems to be the much larger one. Not honoring service contracts and warranties has the scent of more attorneys general from other states getting involved. It also has that "class action" suit aroma.

Dell has clearly had problems with service. About a year ago, it brought in a customer service czar to try to repair the support services at the company. Hard to say whether that worked.

But, a big slug of legal action over warranties and written service agreements could pull Dell’s recover effort further off the track.

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

Posted on: May 16, 2007 – 3:58 am in Law

Sirius: Will Programming Train Wreck Hurt Merger?

XM Satellite Radio (XMSR) favorites Opie and Anthony made some sexual remarks about Queen Elizabeth and Condoleezza Rice. The show hosts made an obligatory apology and XM said it was embarrassed and ashamed. The duo went be back on the air as scheduled, but yesterday the hosts were suspended for 30 days Sirius (SIRI) has its own version of shock radio in Howard Stern.

All of this may be a problem as the two satellite radio operators try to merge. Congress and the FCC are looking hard at the deal. Their biggest problem so far is that they think the combination could form a monopoly. Not good for the consumers and all. The fact that the two companies are close to financial failure doesn’t seem to matter.

But, the Don Imus incident has raised the profile of racist and sexist remarks to a new level. Imus was booted from CBS and MSNBC. Of course, the FCC regulates over-the-air radio program content. Its does not have the same power over satellite radio.

But, the FCC may want a bit at the apple. Pushing for less raunchy content could be part of that. And, what congressman wants to say he approved of a merger that involves a company which has show hosts making sexual comments about the Queen of England.

Opie and Anthony did not do their employers any favors. But, without over-the-top content, satellite radio would probably see a drop in subscriptions.

Classic lose lose.

Douglas A. McIntyre

Posted on: May 16, 2007 – 3:43 am in Satellite

Media Digest 5/16/2007 Reuters, WSJ, NYTimes, FT, Barron’s

Reuters writes that shares of  Starbucks (SBUX) hit an 18-month low on concerns about growth.

Reuters reports that the State of New York sued Dell (DELL). Reuters writes that "the suit alleges that Dell and its financial services unit engaged in deceptive practices to sell computers".

Reuters writes that Sony (SNE) suffers a 68% drop in profits for its 06/07 fiscal year caused primarily by loses at its game unit. It projected that profits would be $3.7 billion in the current year.

Reuters writes that the UAW is near a deal with parts supplier Delphi. A new contract could help bring the company out of Chapter 11.

The Wall Street Journal reports that News Corp (NWS) MySpace will expand its video offerings with content from The New York Times and National Geographic.

The Wall Street Journal writes that Oracle (ORCL) agreed to buy Agile Software (AGIL) at a 14% premium.

The Wall Street Journal reports that XM (XMSR) suspended two of its most popular hosts due to unsavory comments.

The Wall Street Journal writes that Japanese car markers are trying  to catch the early sales leaders in China which include GM (GM) and Volkswagen.

The New York Times writes that Motorola (MOT) has released a line of new phones aimed at the high end of the market.

FT reports that a fund controlled by Ed Lampert, the head of Sears, has taken an $800 million stake in Citigroup (C).

Barron’s reports that Wyeth (WYE) is still a big pharma value play.

Douglas A. McIntyre

Posted on: May 16, 2007 – 3:39 am in Press Digest