Daily Archives: May 18, 2007

The 52-Week Low Club (May 18, 2007)

Despite day after day of the "New DJIA High" headlines some companies keep going the opposite direction and put in new 52-week lows.  This little piggy went to market…..

Atherogenics (AGIX)…. Keeps drifting lower. $140 million implied cash on the books, but negative liquidity with the debt.  Maybe it’s easier to be in the parachute business.

CalAmp (CAMP).. Customer issues hurting earnings results, and shareholders.

Gaming Partners (GPIC)… Not all casino suppliers are doing well, even if the company customers are.

Healthcare Realty (HR)… This is and was surprising.  Now you have to wonder if that 8% divdend is going to be real.

JDS Uniphase (JDSU)… Dark fiber, is it 2000 all over again?

JAPAN SMALLER CAP FUND (JOF)… this was surprising, even though we usually leave funds off the list.

Shoe Pavilion (SHOE)… must have Digger selling the shoes or it must be smelly feet.

Sonic Solutions (SNIC).. lower revenues, a Roth downgrade, and breaking the sound barrier the way the test pilots did before Chuck Yeager made it.

Jon C. Ogg
May 18, 2007

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

Posted on: May 18, 2007 – 3:34 pm in HI/LOW, , , , , , , ,

Einstein Bros. Back From the Pink Sheets (NWRG, BAGL, PNRA, SBUX)

Is it an IPO, a Recapitalization, a Secondary, or a PIPE? Truthfully, it is all of them and none of them.  It’s a Re-PO.

Maybe the restaurant chain didn’t die, but the stock might as well have until now.  New World Restaurant Group, Inc. (NWRG-PINKSHEET) is back to the old Einstein Noah Restaurant Group, Inc. name and will trade under the ticker "BAGL" on NASDAQ after this upcoming securities sale.  This has been in the works for some time via SEC filings (April 10 original filing date), but today the company set some terms for an offering.  Einstein is selling 5 million shares at an estimated $19.00 to $21.00 range in what should amount a roughly $100 million stock offering.  This will get it back into NASDAQ compliance and off the deathly Pink Sheets where most investors fear to tread.

This is not a simple deal, so be sure to read what we are noting on this and be sure to read through the prospectus link on your own if you are interested in this offering.  Anyone with an “investor’s memory” may recall that the company never went under as far as an operation, but it was definitely an investor flame-out the first time around. We look for special situation investments such as back-door plays into IPO’s or recapitalizations, and this is truly a unique offering in that this one is a bit of both. 

We will be posting more on this offering on Monday, so stay tuned.  This entire full note with more detail and analysis went out to our free email subscriber list.  If you wish to sign up for that list you can do so on the website yourself or you can send an email to jonogg@247wallst.com with your name and email and label it "Subscribe" in the title.

Further on in this we have identified the financials, the brokers who will cover it, the risks, the outlook, the financials, the growth plans, the ownership, control stakes, the debt and financial covenants, and more.  We will also be conducting some spot location reviews similar to what we did on Stabucks (SBUX-NASDAQ) in different geographic locations and noted a brief similarity to Panera Bread (PNRA-NASDAQ).  NWRG/BAGL is a far different entity than the others and will definitely not be the sort of stock for every single investor out there.

Have a great weekend.

Jon C. Ogg
May 18, 2007

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

Posted on: May 18, 2007 – 3:06 pm in Cult Stock, Food, IPOs, Secondary Offering, Shareholder Issues, , , ,

Cramer Says the Internet Mergers Are Game-Changers

Cramer on today’s STOP TRADING said the Microsoft (MSFT-NASDAQ) deal for aQuantive (AQNT-NASDAQ) is a game changer.  If they willpay $6 Billion to buy AQNT, then what is coming in the land grab against Google.  Yahoo! (YHOO-NASDAQ) is one that could merge with Microsoft to put Google on the effensive.  He even thinks Yahoo! could do something with eBay (EBAY-NASDAQ).  Cramer says it isn’t doing well on its numbers but it has too much traffic to ignore and called it a buy here.

Cramer also decided to slam the Verizon (VZ-NYSE) upgrade that was so obviously late to the party.

Under Armour (UA-NYSE) reports next week, Cramer thinks it has gotten too cheap and he thinks it is done going down.

Posted on: May 18, 2007 – 1:51 pm in Cramer, , , , , ,

Odyssey Marine Exploration: Treasure Hunting Rags to Riches (OMR)

Stock Tickers: OMR, CLCT, PRXI, HIST

If you haven’t heard of Odyssey Marine Exploration Inc. (OMR-AMEX), you either haven’t watch treasure ship shows on television or haven’t seen some wild occasional stock moves.  Today shares of Odyssey Marine Exploration are up a whopping 60% to a multi-year high of $7.38 and this is not because of a takeover.

The company has completed a pre-disturbance archaelogical survey and preliminary excavation of a Colonial-period shipwreck in an "undiclosed location in the Atlantic Ocean."  The artifacts include more than 500,000 silver coins that are said to weigh more than 17 tons.  There are also gold coins and other precious artifacts.  These are said to be legally imported into the United States and are undergoing documentation and conservation.

This is the same outfit that uncovered the gold coins from the SS Republic, an 1865 Civil War era shipwreck that yielded over 50,000 coins with a retail value said to be over $75 million.  If you have ever been channel surfing on television late at night you have probably seen those coins. 

The company has a market cap of some $347 million after today’s massive run.  The question now is "what is the value of the other potential ships in the area?".  There is also the ongoing turf wars that exist in every offshore treasure hunt because every nation around wants their cut, and depending on how old the shipwrecks are, there may actually stilll be some ’salvage and ownership claims’ from either government or individuals or insurance companies that paid loss claims once upon a time.  This one is now an even more active speculator’s stock if you ever saw one.

There are some other stocks that get tied in to this sort of stock whenever there is news.  Gallery of History (HIST-NASDAQ) is a micro-cap that has some overlaps.  Collector’s Universe (CLCT-NASDAQ) is a coin grading and certification service, although they are probably more known for their PSA sportscard and memorabilia grading and authentication services.  There is lastly the company Premier Exhibitions Inc. (PRXI-NASDAQ), which owns of all things the RMS Titanic Inc. (yes, the famed shipwreck) salvage and artifact company. 

Jon C. Ogg
May 18, 2007

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

Posted on: May 18, 2007 – 10:21 am in Cult Stock, , , ,

DaimlerChrysler (DCX): What If The Deal Comes Undone?

Cerberus, the suitor that appears to have wrapped up the purchase of Chrysler from DaimlerChrysler (DCX) does not exactly have a perfect record of closing deals. The fund walked away from its arrangement to buy bankrupt car parts company Delphi. The rumor at the time was that trouble with the UAW caused Cerberus to get cold feet.

Some members of the UAW believe that the union was not aggressive enough in getting guarantees about jobs and benefits before the Chrysler deal was inked. And, eventually, that could open the door to trouble with the buy-out of the big US car company. A spokesperson for the Chrysler Employee Buyout Committee, a group of UAW workers told The Detroit Free Press: "Chrysler’s management and union employees have been betrayed by the UAW and denied the right to bid fairly for Chrysler by DaimlerChrysler." The group was considering having the union play a part in taking the company private.

As MarketWatch points out the fragmented opinion within the union "comes at a vulnerable time for Gettelfinger’s (UAW president) management team, which is preparing to negotiate new labor contracts with Detroit’s Big Three auto makers this summer." In other words, the head of the UAW may not end up with member support.

The Chrysler deal may look done, but that is on the surface. If Chrysler’s hourly workers want to preserve their stake in the game, they could making closing the transaction very difficult.

Douglas A. McIntyre, a former resident of Pontiac, Michigan, can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: May 18, 2007 – 9:39 am in Uncategorized

After aQuantive, 24/7 Real Media Deserves a Much Higher Price

The 24/7 Real Media (TFSM-NASDAQ) buyout price now looks silly after this premium that Microsoft (MSFT-NASDAQ) is paying to acQuire aQuantive (AQNT-NASDAQ).  Lets forget about the percentage premiums and just look at the multiples.  At a $6 Billion payout based on forward revenues and earnings, there is a huge discrepancy between TFSM/AQNT. 

Depending on what service you use for forward estimates you come up with roughly 77-times forward non-GAAP earnings and about 9-times forward revenues.  These numbers would not have been this high if the bidding for aQuantive wasn’t so high, but Microsoft’s price is the rule-setter.

If you apply the same numbers to TFSM it is pretty sick.  On the forward earnings estimate basis for TFSM you can derive in the vicinity of a theoretical $37.50 price.  On a forward revenue basis you could derive something nuts like a $45.80 price.  The truth is that there is debt and intangibles and all sorts of ‘exceptions’ that would skew these numbers and you would have to be a mad man to believe that TFSM would really sell for a premium like that.  But in a bidding war environment where Google paid up for DoubleClick and where Microsoft goes out this far and this high to buy Aquantive means that management agreeing to a $11.75 buyout price is nearly cowardice.

The basic multiple comparisons are just not as fair because the only two companies that were identical in the models were TFSM and DoubleClick, so trying to use an exact comparison would be flawed.  On May 10, we noted that the starting valuations could put TFSM at a $11.81 starting price and a value that at certain extremes could fetch $19.75.  We noted that somewhere in the middle at say $15.00 or higher could be feasible.  So why is TFSM selling so cheaply?

This leaves ValueClick (VCLK) as the last ‘independent’ man standing, and that is up 11% today.

Jon C. Ogg
May 18, 2007

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

Posted on: May 18, 2007 – 8:59 am in Bait Shop, Internet, Media, Mergers and Buy Outs, Technology Companies, , , , , ,

Tata Motors: A Longer-Term Threat to US Autos?

What would happen if the US auto industry had to compete against India in its neverending turf war? The long and hard truth is that for now the US market is probably safe as far as competition from India, but Tata Motors is growing in India and throughout Asia and ultimately could make more of a dent in world auto sales.  It also sells in Australia, Europe, and the Middle East.

Tata Motors Ltd. (TTM-NYSE/ADR) reported earnings in India.  Its profit was roughly $140 million after $2 Billion in revenues on a conversion basis from Rupees to dollars after the company sold north of 172,000 units.  The part of the business that is even more impressive is the buses and trucks unit that grew more than 20%, compared to 14% growth in passenger cars and jeeps.  Their units were also broken down as 87,467 commercial units and 70,248 passenger vehicles.

The good news is that US auto makers don’t have to compete with the company locally here in the US, although they do overseas.  Tata sells cars, trucks and buses in India, Asia, Australia, the Middle East and some in Europe.  Many of the cars and vehicles just don’t look like they would sell in the US, but some would.  You can see how the autos just look and feel different at the company product offerings on their web site.

The $2 Billion equivalent in sales is small in comparison to an average $50 Billion in quarterly sales out of General Motors (GM-NYSE), $40 Billion out of Ford (F-NYSE), or even $20+ Billion out of Honda (HMC-NYSE).  This isn’t exactly a threat to the US auto industry, not yet anyway.  But look out a decade when the rest of the emerging markets are growing and the US auto industry is potentially still facing many of the same issues as today.  The fact that Tata Motors is part of the larger group of companies, the Tata Group, makes this even more probable since the rest of the group is in steel, chemicals, IT, hotels, and financial services.

Jon C. Ogg
May 18, 2007

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

Posted on: May 18, 2007 – 8:14 am in Autos, , , ,

Pre-Market Stock News (May 18, 2007)

(ADSK) Autodesk trading down 0.7% after trading higher initially on earnings yesterday.
(AQNT) aQuantive gets a $66.50 buyout price from Microsoft, nearly a 90% premium.
(APD) Air Products is in CEO succession, current CEO will retire on October 1.
(ARWR) Arrowhead Research announced a $16.5 million institutional investment.
(AZN) AstraZeneca gets FDA approval on its once-daily Seroquel tablets for the schizophrenia. 
(BWLD) Buffalo Wild Wings announced it is buying its Las Vegas Franchise restaurants and announced a 2 for 1 stock split.
(CHUX) O’Charley’s announced a $50M share buyback plan.
(CY) Cypress Semi noted as a good value by Cramer.
(GE) GE is in final stages of selling its plastics unit.
(INTU) Intuit trading up 11% after beating earnings.
(IOX) IOMED to be acquired by ReAble for $2.75 per share.
(MRVL) Marvell Tech trading up 0.7% after missing revenue projections.
(SNY) Sonfi-Aventis said the FDA is approving Lovenox for most severe heart attacks.
(TONE) Tier One being acquired by CapitalSource

Jon C. Ogg
May 18, 2007

Posted on: May 18, 2007 – 7:33 am in Pre-Market Activity

aQuantive Massive Buyout Premium (AQNT, MSFT)

Stock Tickers: AQNT, MSFT, GOOG, TFSM, YHOO, VCLK

aQuantive Inc. (AQNT-NASDAQ) just recived a huge premium buyout by Microsoft (MSFT-NASDAQ).  This is one that was a 50/50 chance of happening via deductive reasoning after the Google (GOOG-NASDAQ) and after the WPP Group buyout of 24/7 Real Media (TFSM-NASDAQ) and after the Yahoo! (YHOO-NASDAQ) acquisition of a private Right Media.  So this only leaves ValueClick (VCLK-NASDAQ).

What is surprising is the premium: aQuantive is being acquired for roughly $6 Billion, or $66.50 per share.  This stock has never seen a price like that except back at the recombination price at the start of 2001.  Now if you have been a holder of AQNT you are guaranteed a huge profit. 

In all honesty this deal is not a surprise at all, but the price is very surprising since it is nearly a 90% premium.  Microsoft would have been able to have owned this one cheaper if they would have acted sooner.  Shares of ValueClick (VCLK) are trading up 17% pre-market at just under $33.00 as they are the last man standing independently, and that is above the $31.34 year-high.

Jon C. Ogg
May 18, 2007

Posted on: May 18, 2007 – 7:10 am in Bait Shop, Internet, Mergers and Buy Outs, Software, , , , , ,

Pre-Market Research Summary (May 18, 2007)

ADS downgraded at Baird, Bear Stearns, Piper Jaffray.
APKT raised to Buy at Canto Fitzgerald.
BARE started as Outperform at Wachovia.
BNI started as Outperform at Morgan Keegan.
CAI raised to Buy at UBS.
CAMP cut to Neutral at Oppenheimer.
CRZ cut to Sector Perform at RBC.
CSX started as Mkt Perform at Morgan Keegan.
DCP started as Hold at Stifel Nicolaus.
FACE started as Outperform at Wachovia.
FLOW started as Outperform at Cathay.
FBN cut to Sell at Stifel Nicolaus.
GET started as Buy at Citigroup.
HWAY started as Buy at B of A.
INTC raised to Buy at Merrill Lynch.
JNPR cut to Hold at Citigroup.
KSU started as Outperform at Morgan Keegan.
MATR started as Neutral at B of A.
NCX cut to Neutral at UBS.
NSC started as Outperform at Morgan Keegan.
NYX raised to Neutral at JPMorgan.
PCLN raised to Buy at Citigroup.
PSTA started as Buy at Merriman Curhan Ford.
REP raised to Hold at Citigroup.
RVBD raised to Buy at Citigroup.
SKT raised to Buy at B of A.
SNIC cut to Hold at Roth.
SONO cut to Neutral at Oppenheimer.
THC cut to Underperform at Bear Stearns.
TOPT raised to Hold at Cantor Fitzgerald.
UNP started as Outperform at Morgan Keegan.
VZ raised to Buy at Citigroup.

Jon C. Ogg
May 18, 2007

Posted on: May 18, 2007 – 6:54 am in Analyst Calls

Verizon (VZ) Gets An Upgrade

The folks over at Citigroup love Verizon (VZ). They upgraded it all the way from "sell" to "buy" and moved their price target from $33 to $48. Since the stock trades at $42, that seems like a bizarre move, but why  keep looking stupid for another day.

The reason for the upgrade is that the bank thinks the drop in Verizon’s landline business may come to an end soon and that margins at its wireless business should get better.

The premise of the upgrade is probably wrong. There seems to be little reason to believe that cable companies will not continue to take wireline business with their VoIP products. Comcast (CMCSA) added over 500,000 of these customers last quarter. Then there is the issue of Verizon’s fiber-to-the-home product. It will have to do extremely well to offset that company’s $23 billion investment. And, it is still not clear why consumers would switch from bundled cable services with broadband, TV, and voice to a similar product from the telephone companies.

Citi probably knows all that, but what can investors expect from analysis that had a price target at $33 when the stock was trading at $42. A little slow off the mark.

Douglas A. McIntyre

Posted on: May 18, 2007 – 6:23 am in Uncategorized

Sony: Still Trouble Ahead

Sir Howard Stinger has done it. Sony’s (SNE) stock has not been this high in almost five years. But, that means that the stock is simply back to where it was five years ago, and is flat, while the S&P is up about 30%.

Stinger improved the yield from the company’s electronics division, which sell products like TVs, and he jacked up the results from the company’s studio. Perhaps most important, he sharply cut losses at Sony’s game unit. But, that part of the company is still forecast to lose another $454 million in the current fiscal year. That is based on selling 11 million PS3 units. And, that may not happen.

US April sales of PS3 were really awful. NPD, a research firm that tracks these kinds of things, says that PS3 sales for the month hit only 82,000 units. Sales of the Nintendo Wii were 360,000. Sales of the Xbox 360 console were 174,000. Industry experts think it will take a sharp price cut to make PS3 sales rise.

There is nothing wrong with Sony’s projection for game console sales over the next year, except for the fact that they are only a projection. And, early polling would indicate that they could be wrong.

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

Posted on: May 18, 2007 – 4:56 am in Consumer Electronics

IBM: The Tragedy Of the 21st Century Company

IBM (IBM) has announced its plans to double earnings per share by 2010. Part of it is business as usual for a big US company. It hopes to double revenue in emerging markets to $9 billion.That would be about 10% of current annual revenue. It will also improve its mix of software versus hardware, which it has been doing for many years.

But, the real road to better EPS for IBM is the CFO route. And, that is too bad, because it means that the company does not think much of its current businesses. No, the key to the improvement will be cost cuts, share buy-backs,chopping retirement benefits, and making acquisitions.

Perhaps IBM should not be judged too harshly. It has underperfomed the markets for the last five years. It needs to come up with something to make Wall St. happy. But, it has no plans for an HP-stype resurrection. It wants to go the financial engineering route.

Given what IBM stood for over many decades, this is really too bad. IBM was at the heart of US technology innovation. It filed for more patents than Thomas Edison did, year in and year out.

But, IBM’s plans reveal a sort of self-loathing. The things the company cannot do with better products and services, it will do by pushing out people, cutting their benefits, and buying in shares. It is the poor man’s way to build an attractive investment.

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

Posted on: May 18, 2007 – 4:37 am in Uncategorized

GE: No Make-Up Needed

General Electric (GE) is finally getting rid of the plastics division that has dogged its earnings for several quarters. It appears that Saudi Basic Industries will pay $11 billion, which The Wall Street Journal says is more than was expected  What the company’s board is not doing is remaking the company.

GE has clearly decided to keep its conglomerate status with divisions in the entertainment, infrastructure, industrial, healthcare, and consumer and commercial marketing businesses.

GE is making a bet that could well pay off. In a bull market, its stock has done poorly. But, as the S&P has flattened over the last six months, GE’s shares are up 8%. Granted, part of that is due to break up rumors.

GE has become a stock which does OK when the markets are good, but more than OK when markets are poor. From 2000 to 2002, when the Nasdaq bubble collapsed and the markets went through 9/11, GE outperformed the broad market by a wide margin. Until the last six months, it performance from 2002 on was nothing special.

And, perhaps this is the wisdom of the GE management and board. Build a company that will always do well, and, at times, especially bad times, may do better. For long-term investors, that is not so bad.

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

Posted on: May 18, 2007 – 4:17 am in Conglomerates

Media Digest 5/18/2007 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, profits at British Airways (BAB) dropped 18%.

Reuters writes that DaimlerChrysler (DCX) will sharply reduce its debt after the sale of Chrysler.

Reuters also reports that JC Penny (JCP) profirts rose sharply taking the company’s shares higher.

Reurters also writes that Marvell (MRVL) reported revenue below Wall St. estimates.

The Wall Street Journal reports that GE (GE) is close to selling its plastics unit to Saudi Basic Industries for $11 billion. The price is more than expected.

The Wall Street Journal also reports that Alliant Techsystems won a government contract to develop precision-guided artillery shells

The WSJ also reports that profits at Intuit (INTU) rose 23% due to sales during tax season.

The WSJ also writes that IBM (IBM) "expects to find enough cost cuts, acquisitions and stock-buyback opportunities that annual earnings per share could nearly double by 2010."

According to The New York Times, the Nintendo Wii sold 460,000 units in the US during April, Microsoft (MSFT) Xbox 360 sold 174,000 units and Sony (SNE) PS3 sold 82,000.

FT says IBM claims it will "derive half of its profits from software and double its revenues in emerging markets to $9bn by the end of the decade"

Barron’s writes that Autodesk’s (ADSK) forecasts for the next quarter topped Wall St. estimates.

Douglas A. McIntyre

Posted on: May 18, 2007 – 3:49 am in Uncategorized

Asia Markets 5/18/2007

Markets in Asia were down.

The Nikkei was off .6% to 17,399. Hitachi (HIT) was down 2.2% to 845. NTT Docomo (DCM) was down 1.4% to 209000. Toyota (TM) was up .3% to 7340

The Hang Seng was down .8% to 20,820. China Petroleum  (SMP) was down 1.7% to 8.04. PCCW (PCW) was off .8% to 4.06.

The Shanghai Composite was off .5% to 4,030.

Data from Reuters

Douglas A. McIntyre

Posted on: May 18, 2007 – 3:21 am in Uncategorized

AMAT: Still No Bottom for Applied Materials

By William Trent, CFA of Stock Market Beat

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Posted on: May 18, 2007 – 3:05 am in Uncategorized

BEAS: BEA Leaves Investors Hungry For More

By William Trent, CFA of Stock Market Beat

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Posted on: May 18, 2007 – 3:03 am in Uncategorized

Microsoft (MSFT): Three Views On Vista

By William Trent, CFA of Stock Market Beat

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Posted on: May 18, 2007 – 3:02 am in Uncategorized

MU: Micron Can’t Take a Hint

By William Trent, CFA of Stock Market Beat

When a mature business can’t generate enough cash to fund its operations, it usually takes the hint and
Micron Announces Proposed $1.1 Billion Offering of Convertible Senior Notes:

Read More »

Posted on: May 18, 2007 – 2:59 am in Uncategorized