Daily Archives: June 12, 2007

Cramer’s Picks & Pans in Pharmaceuticals

Stock Tickers: MRK, PFE, JNJ, GSK, SGP, LLY, WYE, NVS, NVO

On tonight’s MAD MONEY on CNBC, Jim Cramer said he keeps getting asked about Big Pharma drug stocks.  He’d rather focus on farms, but Cramer said he doesn’t like Big Pharma.  He’s reviewing names he wants to sell, keep, or buy.

Drug companies have lost their growth and haven’t produced any blockbusters.  Most big drug companies face an earnings gap down the road that will have earnings pressure from patent expiration.  The biotech companies are the only ones making new big drugs.  He also hates that the Democrats have Big Pharma under attack because of prices.

Here are his two avoid stocks in drugs: Pfizer (PFE) and J&J (JNJ).  Pfizer (PFE) is one you should avoid because they have many patent expirations coming up. Lipitor and NORVASC are already under generic pressure.  The one worse than Pfizer is Johnson & Johnson (JNJ).  They have patent expirations on major drugs and thinks Warren Buffett was wrong investing in it. He expects J&J to lose money for holders.  He didn’t give these as his two ‘avoid stocks’ but Cramer was cautious on Merck (MRK) and GlaxoSmithkline (GSK).  Merck’s GARDISIL is good, but not good enough to make him like the stock.  GlaxoSmithkline (GSK) showed how at-risk it was after AVANDIA crushed the stock because of heart attack side effects.

Cramer did say that if you must own a big drug company, he does have a couple less bad ones.  Two names he doesn’t mind are Eli Lilly (LLY) and Schering-Plough (SGP).  Eli Lilly (LLY) is one that has setbacks on patent expirations and negative developments, but it has a blockbuster in its pipeline and he can live with you owning this one.  One that he thinks you can buy is Schering-Plough (SGP) despite its patents expiring and somewhat limited pipeline.

While he is still negative on the whole sector, he has a couple of picks that he says are actual buys that he blesses: his second favorite is Wyeth (WYE) because it is mostly immune from generics right now even though it has some problems.  Novartis (NVS) is his favorite pick with little exposure to generics in the near future.  He would push Roche (RHBBY) except it is only a pink shot.

If you care for any personal favorites outside of what Jimbo thinks, my own personal favorite drug pick as a "defensive stock" that you can almost always own is Novo Nordisk (NVO).  Novo Nordisk the ultimate diabetes play, and should do well as long as America stays fat and as long as the rest of the world keeps adding pounds.  It is thinly traded here in the US because it is really based in Denmark, so because of the currency floating you need to look at the ticker "NVO" on the Copenhagen Stock Exchange to get the true chart read. 

Jon C. Ogg
June 12, 2007

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

Posted on: June 12, 2007 – 5:53 pm in Cramer, Drug companies, Pharmaceuticals, , , , , , , , ,

Stock Winners On a Losing Day (June 12, 2007)

The market rises and falls, goes flat, sells off, recovers……. But no matter what there are some days where you have some winners and losers.  Here are some stocks that rose today in a crummy market.

Generex Biotech (GNBT) +42.8% at $1.80….diabetes hopes drive traders, for 2013….

Horizon Offshore (HOFF) +10% at $18.64….a cash buyout doesn’t care about a down market.

Magellan Health Services (MGLN) +9.2% at $47.08….won Medicaid contract in Arizona

Pier One Inc. (PIR) +8.8% at $8.50…thanks to a Goldman upgrade to CONVICTION BUY LIST

Robbins & Myers Inc. (RBN) +8.8% at $46.72….KeyBanc upgrades

Repligen (RGEN) +8.55 at $3.85…court ruling that ImClone obstructed the company

Digital Recorders (TBUS) +7.9% at $2.44….’considering’ shareholder value initiatives.

Jon C. Ogg
June 12, 2007

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

Posted on: June 12, 2007 – 3:54 pm in HI/LOW, , , , , , ,

ETF Winners & Losers (June 12, 2007)

DJIA                        13,295.01; -129.95 (0.97%)
S&P500                  1,493.00; -16.12 (1.07%)
NASDAQ                 2,549.77; -22.38 (0.87%)
10YR-Bond             5.248%; +0.111%
NYSE Volume          2,964,548,000
NASDAQ Volume    2,046,866,000

Obviously we have the "inverse index and UltraShort ETF’s" leading the day because of the more than 125 point drop in the DJIA today.  Regardless, there are some winners outside of the inverse funds.   And there is a whole slew of ETF losers.

WINNERS:
The top 22 ETF performers are short or ultra-short ETF’s, but here are the few and far between sectors that won on their own…..but most aren’t even real stock sectors….

United States Natural Gas                             (UNG) +1.05%
PowerShares DB G10 Currency Harvest     (DBV) +0.42%
PowerShares DB Agriculture                         (DBA) +0.41%
CurrencyShares British Pound Sterling Tr  (FXB) +0.29%
PowerShares DB US Dollar Index Bullish  (UUP) +0.20%

LOSERS:
SPDR S&P China                                             (GXC) (-2.17%)
Market Vectors Steel                                         (SLX) (-2.11%)
Market Vectors Gold Miners                             (GDX) (-2.09%)
Claymore/Zacks Yield Hog                              (CVY) (-2.08%)
WisdomTree International Financial             (DRF) (-2.05%)
iShares Dow Jones US Real Estate              (IYR)  (-2.03%)
iShares S&P Latin America 40 Index             (ILF) (-2.01%)
SPDR S&P Emerging Markets                        (GMM) (-1.97%)
WisdomTree Pacific ex-Japan Hi-Yld Eq       (DNH) (-1.94%)

Jon C. Ogg
June 12, 2007

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

Posted on: June 12, 2007 – 3:22 pm in ETF, HI/LOW, , , , , , , , , , , , , ,

Hovnanian (HOV), Pulte (PHM) Join The 52-Week Low Club

Hovnanian (HOV) Home builder sector gets worse by the day. Down to $20.37 from 52-week high of $38.66.

Pulte Homes (PHM) Same disease, different patient. Drops to $24.50 from 52-week high of $35.56.

Dean Foods (DF) Milk processor cuts Q2 estimates and drops to $30.50 from 52-week high of $50.50.

Netbank (NTBK) Stuggle to survive continues. Drops to $.18 from 52-week high of $6.90.

Limelight Networks (LLNW) Very recent IPO falls again to $18.85 from $24.33.

Melco PBL (MPEL) Macau casino developer suffering from chances that there may be visa restrictions. Drops to $12.20 from high of $23.55.

UTStarcom (UTSI) Telecom equipment company tried to sell itself but got no premium bidders. Down to $5.83 from 52-week high of $10.92.

Douglas A. McIntyre

Posted on: June 12, 2007 – 3:03 pm in Uncategorized

Motorola (MOT): No Joy In Mudville

The crowd at CIBC World Markets believes that Samsung could pass Motorola (MOT) as the world’s second largest handset manufacturer behind Nokia (NOK). The bank thinks MOT’s market share could drop to just above 15% in the second quarter. It hit 22% at its peak last year.

Motorola’s new RAZR2 phone may be hurt by the ITC’s important ban on certainly Qualcomm (QCOM) chips.

It would not be surprising at the point for Motorola to revise its Q2 forecasts down as the quarter moves toward an end. There is enough bad news regarding the company’s business that it is barely staying above its 52-week low of $17.32.

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

Posted on: June 12, 2007 – 2:27 pm in Uncategorized

Generex Biotechnology (GNBT): Nice Wild Speculation

Generex Biotechnology (GNBT) describes itself as "the leader in drug delivery for metabolic diseases through the inner lining of the mouth". Not a leader, the leader. Today, a small investment bank outfit called Rodman and Renshaw opened coverage on the company with a "market outperform" rating.

The investment house said: "Our analysis indicates that Generex’s oral insulin, Oral-lyn, could be a significant player in the non-injectable insulin market. We believe that Oral-lyn’s product profile, combined with strong clinical data and expected rapid growth in the global diabetic population, could result in > $600 MM in revenues by 2013."

That’s right,"could result" in 2013. The stock moved up 42% to $1.79.

For the present, the company had $45,000 in revenue in the last reported quarter. The company’s operating loss for that period was $5.5 million.

Talk about a risky investment.

Douglas A. McIntyre

Posted on: June 12, 2007 – 2:04 pm in Uncategorized

Blackstone Closes $8 Billion ‘Extended Stay’ Sale Ahead of IPO

Blackstone has completed its sale announced two months ago of Extended Stay America for some $8 Billion to The Lightstone Group.  Considering that Blackstone paid $2 Billion in equity and assumed another $1 Billion debt, this sounds like a decent profit even after Blackstone added more than 50% more property units to the company.

With the recent pay packages having been announced and being looked at by many with ’shock and awe,’ it’s a good thing blackstone closed this sale ahead of the IPO next week.  It throws a potnetial wrench in evaluating the overall porfolios and cash balances, but the truth is that much of this already feels a bit like guestimates than exact math after you parcel through the prospectus.  The company has close to $80 Billion under management and it now seems as though it is involved in more business sectors than it isn’t.

Blackstone is set to come public via an IPO of its Limited Partnership units.  Here were the actual terms set for last week. 

Jon C. Ogg
June 12, 2007

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

Posted on: June 12, 2007 – 12:41 pm in IPOs, Private Equity

Dow Jones (DJ): Stock Downgraded

Goldman Sachs downgraded Dow Jones (DJ) on potential weakness in its Wall Street Journal and local media properties. The bank cut its earnings forecasts for the quarter and the year.

The perception that earnings at Dow Jones may be getting worse almost certainly rules out a bid at the $60 level from someone other than Rupert Murdoch. One of the beefs about DJ management is that they have not been able to create large, profitable businesses outside the Dow Jones news and Wall Street Journal franchises.

Douglas A. McIntyre

Posted on: June 12, 2007 – 11:07 am in Uncategorized

GE (GE) Watch: Good Press And Break-Up Rumors Don’t Help

Between the good press GE (GE) received in Barron’s recently and a little run due to break-up talk, Wall St. would think the conglomerate’s stock might hold its ground. But, it hasn’t worked out that way, Even with Barron’s saying the stock could move to $50 and the sale of its performance challenged plastics unit, GE is flat. For the year-to-date, the stock is up about 1%. The closest comparable to GE, Siemens (SI) is up 33% this year. And, Siemens has replaced its top management in the midst of a scandal.

At least a million explanations for why GE’s stock is flat have been floated. But, one recent incident may be telling. GE had a look at buying Dow Jones (DJ). The financial information company would have been put into NBC and could have bolstered the units CNBC operation. Dow Jones would at that point have branding in print, online and on TV.

GE backed off. It even asked Microsoft (MSFT) into the deal to share the risk. As Paul LaMonica pointed out at CNNMoney, GE does not needs Microsoft’s cash to close a deal for Dow Jones. It was simply not willing to take the whole chance.

And, perhaps that is what the market sees when it looks at GE. No risk. No reward.

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

Posted on: June 12, 2007 – 8:59 am in Uncategorized

Starbucks Partially Ditched for McDonalds by Goldman Sachs (SBUX, MCD)

This morning Goldman Sachs has made several changes to its Americas Conviction Buy List, but the most interesting change was the dropping of Starbucks (SBUX).   Goldman Sachs said it was adding McDonald’s (MCD) as the replacement for Starbucks on the Conviction Buy List because Starbucks reached an imposed stop-loss limit. It was put on the list back in March and the shares had fallen 9.9% compared to gain in the S&P 500 of 8.8%.  Goldman also noted that the shares of Starbucks were down 23.3% over the last year, while the S&P is up more than 20%.

What is odd is that Goldman Sachs is actually maintaining an official "BUY RATING" on Starbucks as it believes it still has the most compelling risk/reward out of the coverage universe for the next 12-months.  Based on its discounted cash flow model, Goldman still has a $43 price target based on 36X CY2008.  What is interesting is the forward multiple, because it is quite obvious that there is a contraction occuring in in the multiple that people are willing to pay.  The risk/reward isn’t so much of an issue because new investors are buying shares at almost a 40% discount from the 52-week highs, it’s just that forward multiple and price target that seem a bit too aggressive based on the current environment.

Starbucks still has some lofty growth models ahead and it has a long way to go before it can adequately handle the new store volumes.  We gave an in-depth series of reviews at many of the stores ahead of its last earnings with some solutions for the company.  After a couple recent Strabucks visits it looks like some effort is being made, but it doesn’t seem right that Goldman Sachs is still using that forward multiple.

We recently noted some lessons that Starbucks could learn from McDonald’s.  Goldman Sachs has a $57 target on McDonald’s, representing 11% upside to yesterday’s close.

Jon C. Ogg
June 12, 2007

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

Posted on: June 12, 2007 – 8:55 am in Analyst Calls, Food, Product Review, Research, Retail, ,

Yahoo! 2007 Shareholder Meeting: Can Semel Survive? (YHOO, GOOG, MSFT, AQNT)

Today is the highly-awaited Yahoo! (YHOO-NASDAQ) shareholder meeting, and the media focus isn’t on Google (GOOG-NASDAQ) and Microsoft (MSFT-NASDAQ) and the bulk of the online advertising deals that have been made.  The media focus is on Terry Semel being given a one-way ticket for a vacation at the Resort de Guillotine.  We have noted since December that Terry Semel was no longer the right man for the job.  We noted that its Chief Technology Officer leaving was the wrong executive leaving.

Let’s de-personalize this for a moment and reflect on why some CEO’s are great at some times and atrocious at others.  Let’s even forget about stock bonus awards that were already made.  Semel came along in a time of need, back when the company needed a real world CEO that actually sold and packaged things when merely having search and ads wasn’t a solid enough business model.  That was true at the time and they did get a CEO that gave them stability when they needed it.  The problem is that most people are not able to recognize whne their best performance and effort has been maximized, and that’s the case here and now with Yahoo!.

Semel may be a great guy, but his usefulness has come and gone.  So much is riding on Panama at Yahoo!, and frankly the reviews and reception from Wall Street are mixed.  Many are even questioning how much of a real threat it is to Google’s search, particularly since Google acquired DoubleClick and even since Microsoft acquired aQuantive (AQNT-NASDAQ).

Since December when we went out with a "Semel needs to leave" and our 10 CEO’s that could use at least some change, there has been a steady push from other media and even shareholder groups calling for the same end.  It isn’t that Semel is incompetent or that Semel is a bad guy.  He was the stabilizer in a time of instability, but now Yahoo! needs a homerun hitter.  The song ‘Panama’ was probably the last big hit that anyone can recall for David Lee Roth, and now it seems like a reference for nothing good ahead.  If Semel doesn’t want his own Panama apex and long decline, perhaps he should capitulate and take the obvious hints.  There are plenty of new large movie studios and his career will be far from over if he doesn’t ride this into the ground.

The last rally before the most recent sell-off was based on hopes that a buyout could be in the works, but a digital company with a $36 Billion market cap that has limited growth and has been under attack from a more nimble Google might not be the best buyout target.  There are many other avenues the company can go on, and it’s too bad that the driver of the cab won’t admit he’s lost.

Shares of Yahoo! are trading down more than 0.5% pre-market, although the volume is too light for a real read.  If you wish to listen to the webcast today, it starts at 1:00 PM EST and can be accessed here.

Jon C. Ogg
June 12, 2007

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

Posted on: June 12, 2007 – 8:31 am in Corporate Governance, Internet, Management Change, , , ,

Lehman Sails Past Estimates (June 12, 2007) (LEH)

Lehman Brothers (LEH-NYSE) has reported Q2 2007 earnings.  The company posted $2.21 EPS and Revenues $5.51 Billion versus street estimates of $1.88 EPS and $4.97 Billion.  The results saw a 55% jump in investment banking, non-US revenues were 48% of total revenues, and it is expanding energy and commodities platform.  Capital Markets reported record net revenues of $3.6 billion in the second quarter, an increase of 17% from the second quarter of fiscal 2006, driven by a record performance in Equities Capital Markets; Fixed income revenues were $1.9 Billion, down 14% from Q2 2006.  Pre-tax margin grew 0.1% from Q2 2006 to 34.1%.

Chairman and CEO Richard S. Fuld, Jr.:"Our record results for the second quarter and the first half reflect our ongoing commitment to achieving diversified growth. With non-U.S. net revenues representing nearly half of our total net revenues for the quarter, our global platform is stronger and more balanced than ever. To build on this momentum, we remain focused on leveraging our resources and capabilities to maximize value for our clients and shareholders."

Book value was listed at the end of the quarter as $37.15, compared to a $75.68 close; shares are trading above $77.00 in pre-market trading.  Goldman Sachs (GS) and Bear Stearns (BSC) are set to report on Thursday morning, and shares of both are indicated higher in initial trades.

Jon C. Ogg
June 12, 2007

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

Posted on: June 12, 2007 – 7:22 am in Brokerage Firms, Earnings, , ,

Pre-Market Analyst Calls (June 12, 2007)

BRY raised to Buy at Goldman Sachs.
CBH cut to Neutral at Oppenheimer.
CENX cut estimates at Goldman Sachs.
CPNO started as Buy at UBS.
DJ lowered estimates at Goldman Sachs.
ECL raised to Outperform at Credit Suisse.
FMS started as Outperform at Wachovia.
FST raised to Conviction Buy List at Goldman Sachs.
GNBT started as Outperform at Rodman & Renshaw.
GLUU started as Buy at Kaufman.
JDSU raised to Outperform at Bernstein.
JOSB raised to Neutral at First Albany.
KV/A raised to Overweight at JPMorgan.
NUE cut estimates at Goldman Sachs.
OC started as Mkt Perform at Morgan Keegan.
PIR raised to Buy at Goldman Sachs, narrows loss forecast.
QXM started as Outperform at CIBC; started as Outperform at Cowen & Co..
SBUX removed from Goldman Sachs Conviction Buy List.
TTWO raised to Overweight at JPMorgan.
TV cut to Neutral at Credit Suisse.
X cut to Peer Perform at Bear Stearns.

Posted on: June 12, 2007 – 7:11 am in Analyst Calls

Deutsche Telekom (DT) Likes Its US Cell Operation

Deutsche Telekom (DT) sees no reason for dumping its US operation, T-Mobile. After a push by investors in Vodafone (VOD) to sell its piece of Verizon Wireless, they may want to look again.

DT believes that cellular operation, which has 26 million subscribers and revenue of $4.7 billion in the last quarter can continue to grow rapidly. According to The Associated Press: "T-Mobile USA aims to add another 5 million subscribers by the start of 2008". SInce the US market is not growing at that rate of nearly 20%, T-Mobile must believe that it can take market share from Sprint (S), Verizon Wireless, or AT&T (T). Since T-Mobile is running a distant fourth to the others, that would be a neat trick.

For the Big Three, it could also be an unpleasant surprise.

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

Posted on: June 12, 2007 – 7:06 am in Uncategorized

Oil Pushes The Elevator Up Button

Oil demand is going up. But supply is probably not  So says the International Energy Agency. Demand is expected to rise by 2% in 2007.

According to Marketwatch: The IEA said "hopes for moderation in crude prices in the short term lie both with OPEC and the U.S. gasoline market."  But, that may be cold comfort. Gasoline demand here is likely to rise through the summer and OPEC has indicated it has no intentions of raising output, especially if the US and other countries continue to invest in biofuels to replace the dwindling oil supply.

If signs point anywhere, it is to $70 plus oil. That could be the last straw for an already tiring US economy.

Douglas A McIntyre

Posted on: June 12, 2007 – 6:56 am in Uncategorized

Pre-Market Stock News (June 12, 2007)

(ACAS) American Capital announced a 17 million stock offering, 12 million of which are from the company and 5 million are from shareholders.
(ACLI) American Commercial Lines lowered guidance; announced a $200M share buyback plan.
(ASPM) Aspect Medical announced repurchase and alliance conclusion for brain monitoring products with Boston Scientific; ASPM will buy 2 million shares from BSX at $15.91/share; BSX relieved of all obligations in alliance.
(ASYS) Amtech Systems reaches $16.5 Million in solar orders.
(BOT) CBOT buyout by CME received DOJ clearance.
(CRGN) Curagen announced positive data on for Belinostat in potential lymphoma treatment.
(DF) Dean Foods lowered its 2007 guidance to $1.52-1.58 EPS, down from $1.69.
(FNM) Fannie Mae noted as Cramer’s top pick right now for the changing political environment and ahead of getting its filings in order.
(FVRL) Favrille acquired Anti-CD20 monoclonal antibodies from Diversa.
(GERN) Geron released positive data on its telomerase inhibitor cancer drug in Phase I/II trial.
(HOFF) Horizon Offshore confirms it will be acquired by Cal-Dive for $19.25 per share.
(IDIX) Idenix Pharma announced 72% response rate for Hepatitis C treatment.
(INAP) Internap reaffirmed 2007 guidance after expanding collocation facilities.
(LEH) Lehman set to report earnings today, estimate is $1.88 EPS.
(STR) Questar trades ex-split to reflect a 2-1 stock split.
(TBUS) Digital Recorders said it is considering shareholder value enhancements.
(TLVT) Televent awarded contract worth close to $40 million.
(TTWO) Take-Two traded up 2% after earnings, no volume seen yet today.
(TXN) Texas Instruments lowered guidance at mid-quarter update.
(VICL) Vical received $6 Million grant from NIH to advance RapidResponse DNA vaccine platform
(VSEC) VSE Corp. trades ex-split to reflect a 2-1 stock split.
(YHOO) Yahoo! has its annual shareholder meeting today.

Posted on: June 12, 2007 – 6:54 am in Pre-Market Activity

Earlybird Analyst Calls (June 12, 2007)

CPNO started as Buy at UBS.
ECL raised to Outperform at Credit Suisse.
FMS started as Outperform at Wachovia.
GNBT started as Outperform at Rodman & Renshaw.
GLUU started as Buy at Kaufman.
JDSU raised to Outperform at Bernstein.
JOSB raised to Neutralat First Albany.
KV/A raised to Overweight at JPMorgan.
OC started as Mkt Perform at Morgan Keegan.
QXM started as Outperform at CIBC.
TTWO raised to Overweight at JPMorgan.
X cut to Peer Perform at Bear Stearns.

Posted on: June 12, 2007 – 6:36 am in Analyst Calls

Europe Markets 6/12/2007

Markets in Europe were down slightly at 6.20 AM New York time.

The FTSE fell .1% to 6,563. BP (BP) was up 1.1% to 575. GSK (GSK) was down .6% to 1312.

The DAXX was off .3% to 7,685. Deutsche Bank (DB) was off 1% to 107.79. Siemens (SI) was up 1.5% to 97.85.

The CAC 40 was down .3% to 5,925. Alcatel-Lucent (ALU) was off 1.4% to 9.95. ST Micro was down 1.2% to 14.06.

Data from Reuters

Douglas A. McIntyre

Posted on: June 12, 2007 – 5:28 am in Uncategorized

Texas Instruments (TXN): Better Than Forecast

Wall St. was disappointed by the Texas Instruments (TXN) mid-quarter forecast and cut the stock down after hours. The company said sales for the Q would be in the range of $3.36 billion to $3.51 billion. It had previously said the range would be $3.32 billion to $3.6 billion.

But inside the numbers, TI is doing quite well in its most critical business, chips for cell handsets. The slight trouble in the company’s forecasts were due to slow sales in the calculator market. But, calculators are not the company’s future. TI’s largest customer, Nokia (NOK) last month said "inventory conditions are improving:,according to MarketWatch. And TI management put a point on that: "Growth has resumed as expected following the inventory correction of the past few quarters," said TI Vice President Ron Slaymaker.

TI’s shares are trading near a five-year high at $35.79. They should be. With a recovery in sales to Nokia, the company is likely due for some stronger quarters. Sales of back-to-school calculators are not going to ruin that.

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

Posted on: June 12, 2007 – 5:18 am in Uncategorized

Cable VOD: More Ugliness For Blockbuster (BBI) and NetFlix (NFLX)

Warner Brothers will begin national simultaneous release of its films on DVD and VOD. If the trial works, many of its films could show up on home televisions the same day they are available from NetFlix (NFLX) and Blockbuster (BBI). VOD revenue shares bring studios over 60% of the retail price. DVD’s yield closer to 15%. Hard to say which is better.

Of course, if these trials work as well as Warner believes they will, the other major studios are likely to join in. The economics are too good to resist.

NetFlix is quickly becoming last year’s movie delivery business model. And, Blockbuster’s model has not worked well since almost a decade ago. Perhaps that is why Netflix shares are down 20% over the last year and Blockbusters are off 50% over the last 24 months.

Douglas A. McIntyre

Posted on: June 12, 2007 – 5:03 am in Uncategorized