Daily Archives: July 5, 2007

Shanghai’s Big Fall

Overnight, the Shanghai Composite dropped over 5%, but that is not the real story.

Since June 19, when the index hit an intra-day high of 4,280, it had dropped to 3,616. That is a fall of over 15%.

Reuters presents the problem as one of too many Chinese IPOs coming to market and soaking up liquidity, but the greater force may be the realization that many Chinese products are dangerous and defective. Western countries, especially the US, could be restrictions on a number of Chinese imports.

Vegas odds are that Shanghai goes lower.

Douglas A. McIntyre

Posted on: July 5, 2007 – 5:06 am in Uncategorized

AT&T’s (T) Next Edge

GigaOm is suggesting that AT&T (T) offer free WiFi access at 10,000 locations all of its home 3 megabit DSL customers. The technology news site suggests that, to get an edge of cable broadband subscribers, the WiFi offer be extended to all AT&T DSL subscribers as a way to retain and build its home broadband service business.

GigaOm goes further to suggest that Apple (AAPL) iPhone customers also get the free WiFi access since the handset now only works on AT&T substandard 2.5 G network.

The problem with the suggestion is that it is expensive. It may cost the company very little to give the WiFi product to DSL customers, but iPhone subscribers might use the product to set up free voice over IP calls.

But, AT&T may not have a choice. T-Mobile has just launched free WiFi calling for its customers along with standard cell service. If its works the balance of the cellular service providers may have to follow.

Douglas A. McIntyre

Posted on: July 5, 2007 – 4:59 am in Uncategorized, , , , ,

Did The Apple (AAPL) iPhone Sell Too Many Or Not Enough

Most media and analysts said that Apple (AAPL) sold over 500,000 iPhones and that the figure showed high than expected demand. TheStreet.com writes that Apple’s own goal was one million units and that the product launch was a bust.

Due to the "poor" launch, stocks in company’s like Sprint (S) rose late last week.

But, the theories about what early sales of the iPhone mean are wrong, and it will be several quarters until the effect of the handset is really known.

Sprint, for example, has problems of its own, well beyond the iPhone. It could loss a million customers to the iPhone this year, but if its could improve its integration with NexTel and upgrade customer service, it might not matter. If the company’s planned roll-out of a national WiMax network is an early success, the iPhone will hardly be an issue.

The early sales of the iPhone will also be limited because it does not work on AT&T’s (T) 3G network. Early adopters, a phrase coined by out-of-work marketing executives, may buy the new handset with the substandard network, But, most smart mainstream customers will wait. And, that will allow companies like Nokia (NOK) and Sony Ericsson to get new products to market to compete with the Apple product.

Come back at the end of Q1 2008, and maybe the market will have some useful data.

Douglas A. McIntyre

Posted on: July 5, 2007 – 4:49 am in Uncategorized, , , , , , ,

T-Mobile Tries To Flank Apple’s (AAPL) iPhone

The New York Times writes that T-Mobile, a unit of Deutsch Telekom (DT) which ranks fourth in subscriber in the US cell market, is launching a line of phones that work on its cell system and with WiFi. Calls from WiFi hotspots work on voice over IP and are free.

The moves seems a bit desperate, but like many actions of this sort, it can do real damage to both the company taking the action and its competitors. Fourth place is an ugly place to be when the first two places belong to Verizon Wireless and AT&T (T) with its new Apple (AAPL) iPhone.

But, free is free, and that is hard to bet. T-Mobile has to gamble that it can pick up enough subscribers to help offset the time that new customers spend taking over WiFi. The phones will almost certainly be used on the regular cell network some of the time, so perhaps those net incremental minutes for which T-Mobile gets paid have a high margin. They run on a network that has already been built.

By coming to market with a product that could save cellular consumers a very large amount of money, it breaks the customer base down the middle. On the one side are people who want the most cost efficient service and on the other are people who want the most beautiful phone.

Beauty only lasts so long.

Douglas A. McIntyre

Posted on: July 5, 2007 – 4:36 am in Uncategorized, , , , , ,

Boston Scientific (BSX) Wants To Come Back

The Wall Street Journal writes that Moody’s may soon downgrade Boston Scientific’s (BSX) bonds to junk status. As the Journal points out, the company said that its cash flow after the merger with Guidant would hit $2.5 billion a year. It is running less than half of that.

Boston Scientific’s hope that its bonds can hold their current rating falls under the "if wishes were horses, all the beggars would ride" category. The stent business that is critical to the company’s growth is simply falling apart too quickly. Doctors have become concerned about the product liability of stents that may cause clots. The MD’s aren’t coming back.

There are also problems with Guidant cardiac products that could force an expensive legal settlement.

Boston Scientific is really only left with two options. It can raise money or cut costs to the bone. Most shareholders would probably hope for the latter.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com

Posted on: July 5, 2007 – 4:27 am in Uncategorized

Media Digest 7/5/2007 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, Australia Australian fund manager Caledonia said it would vote against Chicago Merch’s (CME) proposal to buy CBOT (CBOT) The fund own over 6% off the exchange.

Reuters writes that GE (GE) see its growth in stable emerging markets growing faster than the GDP in those countries.

The Wall Street Journal reports that Blackstone’s (BX) purchase of Hilton (HLT) raises the question of whether Marriott (MAR) and Starwood (HOT) are also takeover candidates.

The Wall Street Jounal reports that the Justice Department has started a probe of the SAP (SAP) theft of certain Oracle (ORCL) documents.

The Wall Street Journal also reports that Boston Scientifc (BSX) is trying to make a comeback ahead of a portential downgrade of its bonds, but bears says that problems with its stent and other businesses have cut cashflow well below projections.

The Wall Street Journal also writes that exchanges between Alcoa (AA) and Alcan (AL) signal pressure on the US company to buy its Canadian rival.

The Wall Street Journal also reports tha Conoco Phillips (COP) expects a strong second quarter.

The New York Times reports that album sales continue to drop as digital music sales rise sharply.

The NYT writes that Naver.com is the leading search engine in Korea. Taking advantage of cultural differences, it outperfoms Google (GOOG) by a wide margin.

The FT reports that IPO offerings from Chinese companies may outpace those from any other country in the world.

FT reports that China Unicom (CHU) and China Mobile (CHL) are using free beer to help sign up subscribers.

FT reports that Telefónica’s O2 mobile phone business is set to become the Apple (AAPL) iPhone provider for the UK.

Barron’s reports that new management at Liz Claiborne may help reverse the fall of its shares.

Douglas A. McIntyre

Posted on: July 5, 2007 – 3:12 am in Uncategorized, , , , , , , , , , , , , , ,

Asia Markets 7/5/2007 Sanghai Dow Again

Markets in Asia were mixed.

The Nikkei rose .3% to 18,221, NTT (NTT) rose 1.2% to 551000. Sony (SNE) rose 2.4% to 6450.

The Hang Seng fell .2% to 22,182. China Petroleum (SNP) fell 1.4% to 8.97. China Unicom (CHU) fell 2.8% to 13.32.

The Shanghai Composite fell 5.3% to 3,616.

Data from Reuters

Douglas A. McIntyre

Posted on: July 5, 2007 – 2:42 am in Uncategorized, , ,