Daily Archives: July 11, 2007

Motorola (MOT) Bleeds To Death

It was worse for Motorola (MOT) in Q2 than even most pessimists believed.

The company sold only about 35 million handsets, down from 45 million in Q1 and almost 52 million in the quarter a year ago.

Motorola said sales in the quarter ended June 30 will be between $8.6 billion and $8.7 billion, compared with its previous forecast that sales would be about $9.4 billion. The company no longer expects that handset division to be profitable for the year.

Hard to see how it could be worse.

Douglas A. McIntyre

Posted on: July 11, 2007 – 4:52 pm in Uncategorized

An OK Quarter At Genentech (DNA)

Genentech’s (DNA) for Q2 hit $3 billion, up from $2.2 billion in the same quarter last year. Operating income hit $1.1 billion up from $.75 billion last year.

Big winners in the company’s drug portfolio were Avastin with sales up 33% to $564 million in US product sales and Lucentis, introduced recently with sales of $209 million.

Sales of the company’s No.1 product, Rituxan, were up 11% to $562.

The shares traded flat after hours.

Douglas A. McIntyre

Read More »

Posted on: July 11, 2007 – 3:15 pm in Uncategorized,

Nintendo Shows Why It’s Ahead

Nintendo today announced a game controller that is operated the user’s feet. Called the "Nintendo Balance Board", the new product allows gamers to manipulate the action on their screens while moving around and on and off the device like skate boarders.

The new controller will also be launched with a new game called Wii Fit. Players will get points in the game for difficult moves jumping on and off the board.

The new development shows why Nintendo’s Wii is outselling Sony (SNE) PS3 and Microsoft (MSFT) Xbox 360. Even with price cuts these game consoles are too "old style" for anyone other than hard core players.

If the Wii continues with innovations like this, it is very likely to continue to draw those with more casual interest in video games, and strenthen its lead over rivals.

Douglas A. McIntyre

Posted on: July 11, 2007 – 2:19 pm in Uncategorized, , , , , ,

Is Motorola’s (CEO) Leaving?

Motorola’s (MOT) shares are up as much as 3% on rumors that Ed Zander, its CEO, is leaving. Carl Icahn and other activists have tried to push Zander out and he has replaced key managers under him.

Motorola has gone from being the darling of the handset business when its RAZR phones were selling over 50 million units a quarter and its global share was over 20% to its current position of pushing to sell 40 million units per quarter.

Lehman Bros has just raised its forecast for handset sales this year to 1.118 billion units and says that Motorola rival Nokia (NOK) should get the lion’s share of the increase. RBC Capital recently cut its forecast for Motorola handset sales for the quarter to 40 million phones from its previous figure of 46 million.

The quarter is over now. Motorola’s board knows how the company did. If it only sold 40 million units, Zander is probably gone.

Douglas A. McIntyre

Posted on: July 11, 2007 – 1:53 pm in Uncategorized, ,

Yahoo!: Back To $22?

Bloomberg has written an analysis of Yahoo!’s (YHOO) business prospects that is grim. The news agency makes the argument that, after losing the search business to Google (GOOG), its is losing the display ad market to social networks.

Bloomberg reports that social networking advertising will double in 2007 to $900 million, and will reach $2.5 billion by 2011. Overall display advertising will grow about 13%. “Every ad dollar MySpace and Facebook take is a dollar that in the past would have gone to Yahoo," an analyst at the Munder Fund told Bloomberg.

The Bloomberg case is almost certainly right, for now at least. Yahoo!’s shares trade at 5.5x sales. Google’s go at 14.1x.

And, that means that Yang and Decker have not time. If they cannot conclude a major purchase of a property like Facebook or forge a strategic alliance with AOL, Microsoft (MSFT), or News Corp (NWS), the company will fall further and further behind its rivals.

Most of this has been clear in the market since Terry Semel left as CEO, but the share that social networking sites are taking is display make the company’s problems more difficult by the quarter.

If management’s instinct is to solve Yahoo!’s problems by running the company better instead of through a major transaction it would not be surprising to see its shares below the $23 where they traded last October.

Douglas A. McIntyre

Posted on: July 11, 2007 – 1:44 pm in Uncategorized, , , , ,

Nokia (NOK) And Skype’s Cellular Threat

Just as there is talk of the FCC opening up spectrum for companies to set up independent voice and data networks, Nokia (NOK) has announced that its adding Ebay’s (EBAY) Skype VoIP service to some of its handsets.

The two pieces of news show that the revenue of US cellular giants Verizon (VZ), AT&T (T) and Sprint (S) could be under siege within a year or two.

The FCC auction may allow companies like Google (GOOG) to buy portions of the wireless spectrum and offer services independent from current cell companies. It could also set-up a system where, with minor modification, an Apple (AAPL) iPhone could run on a network other than AT&T’s. Perhaps the biggest threat to the large telcos is an open system where consumers could download software and multimedia without having to get electronic "permission" from their carriers. This would make it easier for Google to get its search and location software onto phones.

Nokia is the world’s largest handset company with about 35% of the global market. If it become aggressive in adding VoIP to its phones they can be used for free internet calls in wireless hot spots. This would allow consumers to by-pass the toll that current cell providers charge per minute of calling time.

Not a good day for the phone company.

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

Posted on: July 11, 2007 – 10:17 am in Uncategorized, , , , , ,

Sohu (SOHO): Video Sharing Spans The Globe

Reuters reports that Sohu.com (SOHU), the large Chinese news and information site, plans to add video-sharing as a key feature for users. The company’s CEO was quoted as saying: "The overall strategy of Sohu is to be not only a news portal but also a big community — like MySpace,"

Sohu, which plans to upgrade its blogging service to include video-sharing, had around 400,000 active online users.

The user base is tiny compared with YouTube, so it is somewhat difficult to imagine that the Chinese initiative will help it much. Even though US search engine and portal users attract huge users to their sites, most of the video sharing and viewing is done elsewhere, especially at YouTube.

Douglas A. McIntyre

Posted on: July 11, 2007 – 9:59 am in Uncategorized,

Pamplona Bulls Crush Compuware (CPWR)

Compuware (CPWR) has bad news for investors and its share price was run-over as a result.

The company’s shares dropped 20% to $9.75.

TheStreet.com writes: "Compuware said it expects first-quarter revenue of approximately $278 million, 8% short of analysts’ expectations for $303 million. It now expects break-even earnings per share. Analysts had been expecting EPS of 10 cents a share, according to Thomson Financial."

The company also said it plans to cut $90 to $100 million in annual costs.

The odd part of the announcement is that the company would seem to be in a good business delivering software that manage businesses to manage their IT enterprises systems. Compuware claims that 90 or the Fortune 100.

What does that say about corporate IT spending?

Douglas A. McIntyre

Posted on: July 11, 2007 – 8:55 am in Uncategorized,

Thor’s Hammer Falls On Vital Images (VTAL)

Vital Images (VTAL) which provides enterprise advanced visualization and analysis solutions, today announced preliminary second quarter 2007 revenue of approximately $15.1 million to $15.4 million, versus $16.9 million reported in the second quarter of 2006. The second quarter 2007 net loss per share is expected to range from $0.02 to $0.05, compared to net income per diluted share of $0.09 recorded in the second quarter of 2006.

The company also killed its guidance for the year. It revised its forward-looking revenue guidance for the full year ending December 31, 2007, and currently is expecting revenue of approximately $75 million to $80 million, compared with revenue of $70.5 million in 2006. The company’s prior revenue guidance was $90 million to $95 million.

The stock took Thor’s Hammer on its share price and is down 26% to a new 52-week low of just above $19.

Douglas A. McIntyre

Posted on: July 11, 2007 – 8:44 am in Uncategorized,

Google (GOOG): Predicting The Next Decade

When Wall St. researchers make 10-year predictions, it is worth wondering if they have anything better to do with their time. Perhaps they could focus on the next quarter.

Cowen & Co. has decided that Google (GOOG) will end up with a 90% of search market within the next decade. Over Microsoft’s (MSFT) and Yahoo!’s (YHOO) dead bodies.

According to Briefing.com, Google’s large advantages will be an R&D budget that is likely to remain  higher than its competitors and a "sustainable advantage in providing more relevant results". The fact that Google can deliver faster results is also viewed as critical.

But, looking out a decade is like wishing on a star. It does not take into account that, at some point, Microsoft will be forced to throw the kind of effort again search and its MSN portal that it is throwing behind Xbox. The world’s largest software company must wound Google to keep it from easily coming after it in the desktop applications business.

It is also very possible that Yahoo! will end up in the hands of a company that is much larger than it is and has more substantial resources to put into R&D whether it affects EPS or not. While that company might be Microsoft, it could also be a large media company which already has a huge stake in the internet like News Corp.

Cowen’s projection reads well, but it is a work of fiction.

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

Posted on: July 11, 2007 – 8:13 am in Uncategorized, , ,

Goldman Sachs Targets Select IT Names (DRIV, MVSN, BOBJ, COGN, INFA)

Goldman Sachs has initiated several IT names this morning.  While most of the names are neutral rated, these are the stocks it views favorably in each group with values as the current issue.

BUSINESS INTELLIGENCE: Cognos (COGN) started as Neutral, $1.70 2007 EPS target. Informatica (INFA) started as Neutral, $0.52 2007 EPS target. Business Objects (BOBJ) coverage transfer, also started as Neutral. Goldman Sachs also notes that it would look for a pullback in the names for a more attractive entry point.

DIGITAL RIGHTS: Macrovision (MVSN) started as Neutral and $32 target, $0.76 2007 EPS target.

MIGRATION SOFTWARE: Digital River (DRIV) started as Buy, $1.59 2007 EPS target; issues $54 target; attractive valuation atfer recent pullback.

Jon C. Ogg
July 11, 2007

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

Posted on: July 11, 2007 – 7:58 am in Analyst Calls, , , , ,

Dendreon’s New Hurdle: The SEC (DNDN)

It appears that Dendreon (NASDAQ:DNDN) may be an SEC target now, or at least it is going to get the pleasure of dealing with the SEC for a while.  The New York regional office of the Securities and Exchange Commission has sent a letter as an informal inquiry to Dendreon management.  The letter asks for information related to Dendreon’s clinical trials for Provenge, its biologics license application for Provenge filed with the FDA, the FDA’s review of Provenge, and related correspondence from January 1, 2007 through the present.

The SEC’s letter notes that the request should not be construed as any indication by the SEC or its staff that a violation of the federal securities laws has occurred nor should it be considered a reflection upon any person, entity or security,according to the filing.  Dendreon also said that it intends to cooperate fully with the SEC. The letter was received on July 9 and was dated July 3, 2007.

Unfortunately, shares are trading down almost 6% in pre-market activity and appear to have given back all of the late-day mystery gains from yesterday.  With an SEC inquiry, the company may have a bit of a harder time securing a development partner if it decides to pursue that path after rumors have persisted for weeks.

Jon C. Ogg
July 11, 2007

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

Posted on: July 11, 2007 – 7:28 am in Biotech,

Pre-Market Stock News (July 11, 2007)

(AIR) AAR Corp. received $31 million order for specialized shelters.
(ASYS) Amtech Systems received another $4.4 million in new solar orders.
(BCGI) Boston Communications being acquired for $3.60 by Megasoft.
(CHAP) Chaparral Steel being acquired by Gerdau Ameristeel for $86.00 per share in cash.
(CRDN) Ceradyne is paying $27.5 million for a raw materials supplier.
(DEIX) Directed Electronics lowered revenue guidance based on lower priced SIRIUS receivers being sold.
(DMGI) Digital Music Group is acquiring Orchard Enterprises.
(DNDN) Dendreon gets SEC inquiry regarding Provenge trial data.
(EMKR) Encore -$0.18 EPS vs -$0.15 est.
(GERN) Geron initiated Telomerase cancer vaccine trial.
(INFY) Infosys traded down 1.5% after posting 34% gain on EPS but tepid guidance partially on FOREX risks.
(LGF) Lionsgate made a strategic investment in Break.com, an online video entertainment site for young men.
(LIZ) Liz Claiborne unveils long-term plan and will review its 16 brands for opportunities.
(MSFT) Microsoft said it will not follow Sony on price cuts for its gaming system.
(VMSI) Ventana Medical says its Board of Directors has unanimously rejected Roche’s unsolicited $75.00 tender offer as inadequate.

Jon C. Ogg
July 11, 2007

Posted on: July 11, 2007 – 7:04 am in Pre-Market Activity

Pre-Market Analyst Calls (July 11, 2007)

ABT started as Outperform at Wachovia.
ACL started as Outperform at Wachovia.
AGN started as Outperform at Wachovia.
ATVI cut to Neutral at JPMorgan.
BAS cut to Sector Perform at RBC.
BJS cut to Sector Perform at RBC.
BOL started as Mkt Perform at Wachovia.
BSX started as Mkt Perform at Wachovia.
CME cut to Hold at Deutsche Bank.
COO started as Mkt Perform at Wachovia.
CPB raised to Overweight at JPMorgan.
EFX raised to Outperform at JMP Securities.
ESS raised to Overweight at Lehman.
EW started as Outperform at Wachovia.
EYE started as Mkt Perform at Wachovia.
FRX raised to Buy at UBS.
GW cut to Sector Perform at RBC.
HAL cut to Sector Perform at RBC.
JAZZ started as Overweight at Lehman.
JAZZ started as Neutral at Credit Suisse.
JNJ started as Mkt Perform at Wachovia.
KEGS cut to Sector Perform at RBC.
MDT started as Outperform at Wachovia.
NBR cut to Sector Perform at RBC.
NYX raised to Overweight at Lehman.
PTEN cut to Sector Perform at RBC.
QLGC started as Neutral at UBS.
RKT raised to Buy at Deutsche Bank.
RMIX started as Hold at KeyBanc/McDonald.
STJ started as Mkt Perform at Wachovia.
STRA raised to Hold at Citigroup.
USG started as Sell at B of A.
VTAL cut to Hold at Jefferies.
YUM raised to Buy at UBS.

Jon C. Ogg
July 11, 2007

Posted on: July 11, 2007 – 6:44 am in Analyst Calls

Would Daimler (DCX) Take Chrysler Back? Yes.

The last month has not been a good one for shareholders of DaimlerChrysler (DCX). Its shares are up 5% compared to a little under 10% for Ford (F) and 20% for GM (GM). Wall St. would think that, without the money losing Chrysler, investors would warm to the stock. But, the shares are off again this morning.

But, as interest rates rise, raising the money may becoming more and more difficult for Cerberus, the hedge fund that is taking an 80% interest in Chrysler. Due to conditions not to its liking Cerberus has already walked away from a deal to buy a controlling interest in car parts company Delphi.

There is a possibility that Daimler could end up having to hang on the Chrysler. And, that may not be such a bad thing.

With Chrysler would come the Cerberus play-book. Eliminate a lot of middle management jobs. Let the Chinese build the company’s smallest cars. Beg the UAW for the kinds of concession that GM an Ford will probably get.

JP Morgan upgraded Ford and GM yesterday, primarily because it believes that the UAW will give back a lot of pension and health benefits in the fall negotiations. The theory behind the upgrade should apply to Chrysler as well.

That makes the US car unit a bit more attractive than it was six months ago.

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

Posted on: July 11, 2007 – 6:31 am in Uncategorized, , ,

Microsoft (MSFT): Xbox Price Cut?

Bloomberg is reporting that Microsoft (MSFT) may make a huge cut in the price of the Xbox. The company "needs to lower Xbox’s $299 to $479 price to increase sales and lure customers who aren’t interested in traditional combat and racing video games, said Shane Kim, vice president of Microsoft Game Studios."

The cut would put the price of the Xbox at about what the Nintendo Wii goes for, and the Xbox arguably has many more features.

The price cut could also offset any concerns about Xbox hardware problems. Microsoft has recently taken a $1 billion hit to extend warranties due to faulty machines.

But, the world’s largest software company loses money on the Xbox. Bloomberg writes that "in fiscal 2006, the games unit lost $1.26 billion on sales of $4.26 billion."

That may put the burden of making money onto Xbox Live, the companies internet-based multi-game playing function. The income from this product could run $500 million a year.

A price cut may get Microsoft market share, but it could drive the gaming division deeper into the red, at least for now.

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

Posted on: July 11, 2007 – 5:58 am in Uncategorized, ,

Private Equity Moves To Metals

Usually private equity firms need to do tremendous amounts of work to identify targets. But, in the metals business, the industry may be doing it for them. The M&A dance now includes, at least, Rio Tinto (RTP), BHP Billiton (BHP), Alcoa (AA), and Alcan (AL). The latter two have market caps under $40 million, clearly in the range of what large private equity firms can afford.

Reuters recently reviewed an Ernst & Young study which say that "Mining companies’ balance sheets, flush with cash thanks to soaring prices for industrial metals, fit well with the low cashflow-to-debt ratio favored by private equity, which tends to rely on high leverage."

So, it would appear that in that Alcoa could face bidders from private equity as it tries to take over Alcan, and BHP Billiton may face the same interests in its potential bid for Alcoa.

Perhaps if a large private equity firm buys one of the miners it can pay another some money for all of its excellent research on the industry.

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

Posted on: July 11, 2007 – 5:33 am in Uncategorized, , , ,

Infosys (INFY): Good Earnings, Bad Guidance

Infosys (INFY), the India tech outsourcing company, posted an earnings increase of 31%. The strength of the rupee against the dollar will hurt earnings in upcoming quarters, so the company moved its guidance down.

Douglas A. McIntyre

Posted on: July 11, 2007 – 5:15 am in Uncategorized

Europe Markets 7/11/2007

Markets in Europe were falling at 6.10 AM New York time.

The FTSE was off .3% to 6,612. BP (BP) was down .7% to 607.5. Unilever (UL) was up 3.3% to 1701.

The DAXX was down 1.1% to 7,874. DaimlerChrysler (DCX) was down 1.9% to 67.14. DeutscheBank (DB) was down 1.5% to 104.59. Siemens (SI) was down 1.5% to 106.83.

The CAC 40 was off .6% to 5,986. Alcatel-Lucent (ALU) was down 1.5% to 10.18. Vinci was up 3.1% to 56.13.

Data from Reuters.

Douglas A. McIntyre

Posted on: July 11, 2007 – 5:10 am in Uncategorized, , , , , , ,

Microsoft (MSFT): The Xbox Ain’t Dead Yet

"The rumors of my death have been greatly exaggerated"–Mark Twain

The recent warranty problems with the Microsoft (MSFT) cost the big software company over $1 billion. They had people calling for spinning off the game platform business and debating whether it would ever make money.

But, not so fast. Microsoft says that a number of game releases coming in the next few months will drive up the users of its Xbox Live platform from seven million to ten million.

Unlike the Sony (SNE) PS3 and Nintendo Wii, Xbox Live allows gamer to connect with one another across the internet. And, Microsoft charges for the service with the prices being relatively high for levels of service like Xbox Gold running $60. And that is on top of the hardware and games.With 10 million subscribers, the pot of recurring revenue could hit $500 million a year.

In a conversation with the FT, the head of the Xbox operation said: "the online element of Halo 3, Microsoft’s biggest franchise, would add members when it was published in September and exclusive online content for the Grand Theft Auto 4 game would give a further boost when it is introduced next spring."

Live internet gaming is a big advantage. And, Microsoft’s rivals don’t have it now.

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

Posted on: July 11, 2007 – 4:54 am in Uncategorized, ,