Daily Archives: July 13, 2007

Blackstone Goes On The Defensive (BX)

Blackstone Group (NYSE:BX) has gone on the defensive after the close today with a press release refuting the front page article in The New York Times.  Blackstone said the article is filled with inaccuracies, myths, and misrepresentations that give a false impression of Blackstone’s tax situation and that of its partners.

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Posted on: July 13, 2007 – 5:48 pm in Private Equity,

Cramer’s Earnings Winner Predictions (July 13, 2007)

Stock Tickers: KO, INTC, UTX, FCX, HON, JCI, CAT, SLB, MER, C, JPM, WFC, BAC

On tonight’s MAD MONEY on CNBC, Jim Cramer wanted to talk about all the earnings coming out next week that will benefit from the strong foreign currencies. Cramer said he thinks Coca-Cola (NYSE:KO) is going to beat earnings based on the weak dollar.  He also thinks that Intel (NASDAQ:INTC) can go to $27.00 on earnings. 

Three more Cramer likes headed into earnings are United Technology (NYSE:UTX), Freeport McMoRan (NYSE:FCX), and Honeywell Int’l (NYSE:HON).  Johnson Controls (NYSE:JCI) could rally $10.00 off the $122.00 base. Caterpillar (NYSE:CAT) is one he thinks is that if you bet against you do it at your own risk because it’s headed up.  Schlumberger (NYSE:SLB) is a $90.00 stock poised to go to $120.00 and he doesn’t even care about the quarter because they are in such a strong spot. 

Cramer also thinks that any bank or brokerage stock will buyback stock and/or raise dividends to try to signal that nothing is wrong in the companies: Merrill Lynch (NYSE:MER), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), J.P.Morgan (NYSE:JPM), Bank of America (NYSE:BAC).

We’ll see.  It will be nice to see how these react after earnings if they go up after each report.  based on the recent miracle that the few stocks that manage to report or warn about bad earnings either still rally or barely trade off has to be somewhat comforting for investors.

Jon C. Ogg
July 13, 2007

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

Posted on: July 13, 2007 – 5:21 pm in Cramer, , , , , , , , , , , , ,

Top Earnings Next Week Part 2 (July 19-20, 2007)

THURSDAY
Advanced Micro Devices (NYSDAQ:AMD)
Ameritrade (NASDAQ:AMTD)
Bank of America (NYSE:BAC)
Bank of New York (NYSE:BK)
Cemex (NYSE:CX/ADR)
Continental Airlines (NYSE:CAL)
Cypress Semi (NYSE:CY)
Dow Jones (NYSE:DJ)
Fifth Third Bancorp (NASDAQ:FITB)
First Data (NYSE:FDC)
Gilead Sciences (NASDAQ:GILD)
Google (NASDAQ:GOOG)
Harley-Davidson (NYSE:HOG)
Honeywelll (NYSE:HON)
Illinois Tool Works (NYSE:ITW)
International Game Technology (NYSE:IGT)
Microsoft (NASDAQ:MSFT)
Motorola Inc. (NYSE:MOT)
NASDAQ Stock market (NASDAQ:NDAQ)
OptionsXpress (NASDAQ:OXPS)
PMC-Sierra (NASDAQ:PMCS)
Roche
Safeway (NYSE:SWY)
SanDisk (NASDAQ:SNDK)
SAP AG (NYSE:SAP)
Scholastic (NASDAQ:SCHL)
Seagate Tech (NYSE:STX)
SunPower Corp. (NASDAQ:SPWR)
SunTrust (NYSE:STI)
Telefonos De Mexico (NYSE:TMX)
Union Pacific (NYSE:UNP)
UnitedHealth Group (NYSE:UNH)
Wyeth (NYSE:WYE)
Xilinx, Inc. (NASDAQ:XLNX)

FRIDAY
Boston Scientific (NYSE:BSX)
Caterpillar (NYSE:CAT)
Citigroup (NYSE:C)
Ericsson (NASDAQ:ERIC)
Schlumberger (NYSE:SLB)
Wachovia Corp (NYSE:WB)

Jon C. Ogg
July 13, 2007

PLEASE NOTE: THSE DATES MAY CHANGE WITHOUT NOTICE OR MAY HAVE ALREADY CHANGED

Posted on: July 13, 2007 – 5:05 pm in Calendar, , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Top Earnings Next Week Part 1 (July 16-18, 2007)

MONDAY
Mattel (NYSE:MAT)
Novellus (NASDAQ:NVLS)
Philips Electronics (NYSE:PHG/ADR)
W.W. Grainger (NYSE:GWW)

TUESDAY
Johnson & Johnson (NYSE:JNJ)
Intel Corporation (NASDAQ: INTC)
Merrill Lynch (NYSE:MER)
Novartis (NYSE:NVS/ADR)
Pharmaceutical Product Development (NASDAQ:PPDI)
SLM Corp. (NYSE:SLR)
State Street (NYSE:STT)
Coca Cola (NYSE:KO)
Wells fargo (NYSE:WFC)
Yahoo! (NASDAQ:YHOO)

WEDNESDAY
Abbott Labs (NYSE:ABT)
Altria (NYSE:MO)
Alliance Data (NYSE:ADS)
Blackrock (NYSE:BLK)
Cintas (NASDAQ:CTAS)
CIT Group (NYSE:CIT)
Citrix (NASDAQ:CTXS)
eBay (NASDAQ:EBAY)
J.P.Morgan (NYSE:JPM)
Juniper Networks (NASDAQ:JNPR)
Labor Ready (NYSE:LRW)
Noble Corp. (NYSE:NE)
Northern Trust (NYSE:NTRS)
Pfizer (NYSE:PFE)
SEASPAN (NYSE:SSW)
Southwest Airlines (NYSE:LUV)
St. Jude Medical (NYSE:STJ)
Teradyne (NYSE:TER)
United Tech (NYSE:UTX)
Washington Mutual (NYSE:WM)

Jon C. Ogg
July 13, 2007

PLEASE NOTE:  ALL DATES SUBJECT TO CHANGE OR MAY HAVE ALREADY CHANGED

Posted on: July 13, 2007 – 4:58 pm in Calendar, , , , , , , , , , , , , , , , , ,

52-Week Lows (July 13, 2007) (ACA, AVAV, IDIX, KERX, NKTR, REDE, STAA, TRMP, UBET, WON)

Stock Tickers: ACA, AVAV, IDIX, KERX, NKTR, REDE, STAA, TRMP, UBET, WON

The DJIA & S&P 500 Index may have put in new highs today, but as you know there are always a dingy group of little piggies putting in new 52-week lows.  Some companies are poorly run, and some are just victim of circumstance.  Maybe they can just all blame Friday the 13th.  Not all of these are definitely CLOSING on 52-week lows but some deserved the honorable mention.  Here are today’s little piggies:

(ACA) ACA CAPITAL HOLDINGS… Giving it up again, down 50% from Highs.  ACA provides financial guaranty insurance products to participants in the global credit derivative, structured finance capital, and municipal finance capital markets.  You think subprime or CDO blow-ups snuck into their pocketbook?

(AVAV) AEROVIRONMENT INC… Shares traded down another 2.4% and traded down into the ‘teens’ for the first time since its IPO in January.  No one realized that its flying re-con plane was needed to find stock buyers rather than enemy soldiers over the horizon.

(IDIX) IDENIX PHARMACEUTICALS… Whoops, FDA halts Hep-C trials. Ouch!

(KERX)    KERYX BIOPHARMA… no real news, just days and days of weakness.

(NKTR) NEKTAR THERAPEUTICS… no real news, just days of weakness.

(REDE) RED ENVELOPE… no real news, although for an ‘online of high-end gifts’ it is pretty shocking that I have yet to meet anyone who has bought from them online.

(STAA) STAAR SURGICAL… very thin volume, no news; not being run by stars?

(TRMP) TRUMP ENTERTAINMENT… The truth is that this DIDN’T CLOSE on a low, but it hit a new since coming public after the recapitalization in 2005 and deserves to be noted.  Hopefully The Donald won’t sue us for saying something negative like he has been known to do, but this stock has been a stinker.

(UBET) YOUBET.COM… You can bet it is hard to find bulls or bears in this name.

(WON) WESTWOOD ONE INC… This was down close to 15% at one point but managed to come all the way back on 4-times average volume to a 10-year ("TEN") after traders bought it back up after Citigroup downgraded it.

Jon C. Ogg
July 13, 2007

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

Posted on: July 13, 2007 – 3:03 pm in HI/LOW, , , , , , , , , ,

Cramer Talks Homebuilders (BRK/A, HOV, PHM, USG, GE, GRP)

On today’s STOP TRADING segment on CNBC, Jim Cramer addressed the homebuilders all being up based on the rumors that Warren Buffett’s Berkshire Hathaway (NYSE:BRK/A).  Cramer said it would more likely be Pulte Homes (NYSE;PHM) because Hovnanian (NYSE:HOV) is more regional and he can go in bigger with Pulte.  This shows that it is too hard to short in this market.  Cramer said Buffett has always liked this group.Cramer also noted USG (NYSE:USG today).  If this all sounds familiar there is a reason. 

Cramer also noted that Grant Prideco (NYSE:GRP) is the one to step up to after the General Electric (NYSE:GE) hint that it might begin building rigs in its earnings conference call.  Grant Prideco shares traded up more than 1% on this Cramer endorsement.

Jon C. Ogg
July 13, 2007

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

Posted on: July 13, 2007 – 1:52 pm in Buffett, Cramer, Housing, , , , , ,

Can General Electric Hold 5+ Year Highs? (GE)

General Electric (NYSE:GE) shares are trading higher today after Wall Street greeted its earnings decently, but very much greeted the increased share buyback plans to a $14 Billion total plan.  Shares are about 1% off of the intraday highs of $40.17 and are just a hair under the previous $39.77 yearly high from last month.  Wall Street is also content with an exit from the sub-prime slime.

With more than two-hours left in the day shares are already more than 50% above average daily trading, and the market cap is back over $400 Billion.  Options traders are still not really betting for a rapid break-out above $40.00 before next Friday’s options expiration.  We have a lot of earnings next week and the market still acts like it wants to go higher, so stay tuned. 

Today may finally put to rest those old concerns and desires to break-up the giant conglomerate, pardon the redundency.

If you press me to it, I would also venture a guess that with Energizer Holdings (NYSE:ENR) still managing to trade higher after a ‘conglomerization goal’ acquisition of Playtex (NYSE:PYX) is an endorsement that Main Street doesn’t feel the conglomerate model is a dead one.  The trend back into mega-caps is also in its favor.

UBS this week maintained a $45.00 target, and we’d expect mostly positive analyst calls on Monday based on the response we have seen so far today.

Jon C. Ogg
July 13, 2007

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

Posted on: July 13, 2007 – 1:12 pm in Conglomerates, Earnings, HI/LOW, , ,

If Buffett Really IS Buying More Housing Stocks, What About USG Corp. (BRK/A, USG, HOV, XHB)?

There have been market rumors today that Warren Buffett’s Berkshire Hathaway could be buying a stake in Hovnanian Enterprises Inc. (NYSE:HOV).  The truth is that anything is possible, particularly since Buffett likes businesses that you never have to sell.  It isn’t even worth trying to debate the truth or fiction of this because you can see it in the stock with Hovnanian (NYSE:HOV) up 9% as short sellers don’t want to be caught in this market and don’t want to be caught on the wrong side of a Buffett bet.  Hovnanian has much exposure to the volatile California and sensitive Florida markets, and this makes the thought of this questionable.  Once again though, why bother questioning it as the sector is up on the hopes and on short covering.

This has homebuilders higher, and even has the SPDR Homebuilders ETF (AMEX:XHB) up 2.5% at $30.80.  based on an initial look at the chart on the "XHB" as a group, this doesn’t really change anything.  But a chart won’t be able to fight a buyout or stake taken by Buffett.  that sector is in the tubes and the only good news in the group is that "less bad news than before" will come at some point.  It always does.

Buffett’s Berkshire Hathaway (NYSE:BRK.A) already has many housing related plays as wholly owned: Benjamin Moore & Co., Clayton Homes, Johns Manville, Jordan’s Furniture, Nebraska Furniture Mart, RC Willey Home Furnishings, Shaw Industries, Star Furniture, Acme Brick Company, and more.  So anything is possible in the sector.  But what has to be asked is "WHAT ABOUT USG CORP (NYSE:USG)?"  USG is trading under that $50.00 threshold and supplies sheetrock and related products to many of the homebuilders.  It is a long-standing "Buffett rumor target" since he owns such a big stake and would be quite easy for Berkshire Hathaway to integrate.

Jon C. Ogg
July 13, 2007

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

Posted on: July 13, 2007 – 12:44 pm in Buffett, Housing, Mergers and Buy Outs, Rumors, , , ,

Amazon’s (AMZN) New 52-Week High

Amazon (AMZN) hit a new high today at $75.20, putting it up over 110% for the last year.

Wall St. must think earnings are going to be amazing.

Amazon’s second quarter was mixed last year. Revenue rose 22% to $2.139 billion. But, operating income got hurt, dropping from $104 million in the same quarter the year before to $47 million.

The guilty parties in the drop in operating income were fulfillment costs (shipping) and technology costs. Fulfillment rose 20% and technology expense was up 58%.

What would impress Wall St. For starters, a 30% plus increase like Amazon had in the first quarter. That would mean close to $3 billion. If the company topped Q1’s $3.015 figure, it would be even better.

On the operating income side, Amazon would have to make a huge step forward to satisfy whatever critics are left. In Q1, operating income was $145 million. That number is going to have to be closer to $160 plus if Wall St. is to believe that margins are getting better fast.

With its valuation so high now, it is almost impossible to say what numbers would be satisfying. But, if it is not a fairly big up-tick from Q1 performance, it won’t be pretty.

Douglas A. McIntyre

Posted on: July 13, 2007 – 10:01 am in Uncategorized

IPO Filing: Abraxas Energy Partners, L.P. (ABP)

Abraxas Energy Partners, L.P. has announced that it has filed a registration statement with the SEC for an initial public offering of its common units.  A.G. Edwards & Sons, Inc. will act as book-running manager and representative of the underwriters.  It has a proposed max offering of $55.66 million for 2 million common units and will pay out a $1.50 per year dividend (paid quarterly divided by 4).

Abraxas Energy was formed in May 2007 by Abraxas Petroleum Corporation (AMEX:ABP) to exploit, develop, produce and acquire oil and gas properties. Our assets are located in South and West Texas.  Abraxas Petroleum is a thin volume oil & gas producer that operates in South and West Texas and in central Wyoming.  This is the parent of the spin-co and its market cap is only $193 million.  This is an interesting situation as it is very thinly covered, but keep in mind that this is a speculative play of what is already a speculative energy stock that has traded all over the place and used to be over $10.00 before 2000.

At December 31, 2006, its properties had estimated net proved reserves of 65.4 Bcfe, of which 91% were gas, with a standardized measure of $116.3 million. Net proved reserves as of December 31, 2006 were 58% proved developed and 42% proved undeveloped. At March 31, 2007, it owned an average working interest of 81% in 104 producing wells that produced 6.7 Bcfe during 2006 and 1.5 Bcfe during the three months ended March 31, 2007.  Primary producing properties are located in mature fields that exhibit relatively long-lived production, with a reserve to production index of 10.8 years based on pro forma reserves as of December 31, 2006 and pro forma annualized production for the three months ended March 31, 2007. Abraxas Petroleum operates over 90% of properties. We currently have over 80 identified drilling locations, of which 20 were classified as proved undeveloped as of December 31, 2006.

Jon C. Ogg
July 13, 2007

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

Posted on: July 13, 2007 – 9:05 am in IPOs, Oil & Gas,

T. Boone Pickens: $80 Oil Before He’s 80

Oil and energy trading magnate T. Boone Pickens was on CNBC earlier this morning with the prediction that we will now see $80.00 per barrel oil before he turns 80 years old.  That is only next May, or just over 10 months from now.  He noted with demand where it is and with capacity maxxed out that if you are speculating in oil prices there is just no way you can be short oil, even though it could go back under $70.00.  Pickens also hinted that Saudi and OPEC are trying to find the right equilibrium on oil prices as high but not too high.

Oil is trading at $72.91 (+$0.41) in early trading this morning, and it appears that part of the boost in oil prices may be on his comments.  We also had the International Energy Agency report saying global energy consumption would increase next year, and seperately there were gas line attacks by rebels in Mexico that have impeded supplies this week.

Jon C. Ogg
July 13, 2007

Posted on: July 13, 2007 – 8:02 am in Oil & Gas

Biotech Implosion: Idenix Pharmaceuticals (IDIX)

Idenix Pharma (NASDAQ:IDIX) this morning announced that its Valopicitabine development program was placed on clinical hold in the United States after discussions with the FDA.  Unfortunately this was the company’s hoped-for hepatitis C treatment.

Jean- Pierre Sommadossi, Ph.D., chairman & CEO of Idenix: "We are disappointed with the FDA’s perspective on the program and are working with Novartis to evaluate our options for valopicitabine.  We remain committed to building a leading antiviral franchise and will continue to focus on ensuring a successful launch of Tyzeka®/Sebivo® and on advancing our pipeline. We have a novel non-nucleoside reverse transcriptase inhibitor being evaluated in phase I clinical testing for the treatment of HIV. Additionally, we have a comprehensive HCV discovery effort, which includes a second-generation nucleoside polymerase inhibitor that is being evaluated in IND-enabling preclinical testing and novel HCV non-nucleoside polymerase inhibitor and HCV protease inhibitor programs."

The company claims approximately $160 million of cash on hand at June 30 and said it will be reviewing expenses and will review investing in programs it thinks can maximize shareholder value.  As of March 31 it carried $82.646 million in total liabilities, so don’t look at that cash level as "net cash after liabilities."

Shares are down 17% to $4.78 pre-market, down 17% or so from the $5.59 52-week low and down well over 50% from the $11.21 52-week highs.  Its market cap before this drop was $325 million.

Jon C. Ogg
July 13, 2007

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

Posted on: July 13, 2007 – 7:38 am in Uncategorized,

Pre-Market Stock News (July 13, 2007)

(AA) Alcoa may now be in play according to research notes since it withdrew Alcan bid.
(APA) Apache may go to $100.00 and then trade up to $120.00 according to Cramer.
(BHI) Baker Hughes put Q2 2007 EPS at $1.07 to $1.09, down from $1.17 last quarter due to deterioration of activity and profitability in Canada.
(CHINA) CDC Corp intends to offer up to $200 million of CDC Games in an IPO.
(DYAX) Dyax priced a 10.5M share stock offering atr $3.67 per share.
(EVST) Everlast BOD was sent a letter by Aquamarine Capital Management urging it to maximize shareholder value.
(GE) General Electric $0.52 EPS vs $0.52e; revenues ahead of estimates and increased shares under buyback; selling sub-prime unit.
(GWR) Genessee & Wyoming said rail carloads fell 7% to 67,165 carloads.
(IDIX) Idenix Pharma says Valopicitabine development program placed on clinical hold in the United States.
(PYX) Playtex Products being acquired by Energizer Holdings.
(XING) Qiao Xing will file annual report on July 16.

Jon C. Ogg
July 13, 2007

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

Posted on: July 13, 2007 – 7:22 am in Pre-Market Activity, , , , , , , , , , , ,

CDC Corp. Online Gaming Unit IPO Spin-Off (CHINA)

CDC Corp. (NASDAQ:CHINA) plans to file an SEC registration for an IPO of up to US$200 million aggregate principal amount of Class A Common Shares of CDC Games Corporation, its business unit engaged in online games in China.  This will allow CDC Games to differentiate its gaming line from CDC Corporation and provide a more targeted investment vehicle for investors seeking to invest only in the online games portion of CDC Corporation’s diverse businesses.  The offering is expected to occur in Q4 2007.  CDC Corporation currently anticipates that, in addition to CDC Games offering newly issued Class A Common Shares, CDC Corporation will also be a selling shareholder in the offering.

CDC Corp. itself has a market cap of $1.11 Billion before the reaction to the filing.  We will follow up with more detailed financial data with percentages of the companies and with financial breakdowns of each unit.

Jon C. Ogg
July 13, 2007

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

Posted on: July 13, 2007 – 6:55 am in ADR, IPOs, Internet, Video Games,

Pre-Market Analyst Calls (July 13, 2007)

AOB started as Outperform at CIBC.
AUY started asOutperform at Credit Suisse.
BGFV cut to Sector Perform at CIBC.
BJ raised to Equal Weight at Lehman.
BLK started as Outperform at Wachovia.
CCL raised to Overweight at JPMorgan.
CHE cut to Hold at Deutsche Bank.
CIT cut to Sector PErform at CIBC.
CREE started as Hold at Deutsche Bank.
DWA started as Buy at Stifel Nicolaus.
EMC cut to Mkt Perform at Morgan Keegan.
FRO cut to Reduce at UBS.
HAL raised to Outperform at Credit Suisse.
HDB started as Buy at Jefferies.
IBN started as Buy at Jefferies.
NATI raised to Overweight at Thomas Weisel.
NDN raised to Buy at Deutsche Bank.
PPDI cut to Hold at Jefferies.
RCL raised to Overweight at JPMorgan.
RNOW started as Hold at Cantor Fitzgerald.
RSH cut to Sell at B of A.
SEB raised to Buy at Jefferies.
SWK started as Neutral at B of A.
SWY raised to Equal Weight at Lehman.
VRSN raised to Buy at Jefferies.
VSCN cut to Mkt Perform at FBR.
WON cut to Sell at Citigroup.
ZBRA raised to Overweight at Thomas Weisel.

Jon C. Ogg
July 13, 2007

Posted on: July 13, 2007 – 6:43 am in Analyst Calls, , , , , , , , , , , , , , , , , , , , , , , ,

A Sane World: Shanghai Up Only As Much As Dow Jones Industrials

With all of the concern about how fast the market is moving up in Shanghai, there may be some comfort in the fact that, over the last three months, the Shanghai Composite is only up about as much as the Dow Jones Industrials.

The Dow is up a little more than 10% over that period, and the Shanghai Composite a bit more than 11%.

At least the financial world is sane again

Douglas A. McIntyre

Posted on: July 13, 2007 – 6:43 am in Uncategorized

Europe Markets 7/13/2007

Markets in Europe were modestly higher at 7.30 AM New York time.

The FTSE rose .3% to 6,718. Prudential (PUK) was up 1.9% to 732. Vodafone (VOD) was up .8% to 163.8.

The DAXX rose .7% to 8,109. DeutscheBank (DB) was up 1.7% to 107.68. SAP (SAP) rose 1.7% to 38.09.

The CAC 40 was up .4% to 6,128. AXA (AXA) was up 1.7% to 32.6. Vinci was down 1% to 57.12.

Data from Reuters

Douglas A. McIntyre

Posted on: July 13, 2007 – 6:38 am in Uncategorized, , , , ,

GE’s (GE) Mixed Bag Of Earnings

GE (GE) reported that revenue rose 12% in the last quarter to $42.3 billion. Operating income was up 11% to $6.5 billion. Impressive number off such a large base.

But, being a conglomerate is still no fun. Revenue in the company’s infrastructure businesses was up 23% to $13.9 billion. Segment profit in that area also rose 23% to $2.6 billion.

But GE’s medical operations had a 1% drop in revenue to $4.1 billion and segment profit there dropped 8% to $721 billion.

Revenue also fell in the quarter for GE’s NBC Universal and industrial units. Segment profits at the two units were flat.

GE also said that it will buyback more shares and get out of the sub-prime lending business.

The company’s biggest problem remains that it has two units that are now ongoing drags on results.

Douglas A. McIntyre

Posted on: July 13, 2007 – 6:01 am in Uncategorized

Nintendo: The Deviant’s Advantage

A fellow named Watts Wacker wrote a book a few years ago called "The Deviant’s Advantage: How Fringe Ideas Create Mass Markets". Used copies of the book are available on Amazon for as little as one cent, plus shipping and handling.

Wacker may not have been thinking of Nintendo when he wrote the book, but he should have been. The game company has just announced that it has begun making money on its hardware sales.

In most industries, that would not seem to be much of an announcement. Sell things at a loss and make it up on volume. But, in the video game business, companies often use their game consoles as a loss leader and make money on the software they sell. Some industry analysts think that Sony could be losing as much as $200 on each PS3. The division of Microsoft that sells its Xbox lost money last year.

The head of Nintendo has now set his sites on selling as many Wii game consoles as Sony sold PS2s. That is around 120 million units. The Wii is often sold out now, so Nintendo’s first challenge is to get production up.

But, when Wall St. looks at Nintendo what its should see is a company that turned the video game business on its head. Instead of marketing feature-rich, next-generation technology products like the Xbox 360 and PS3, it put out a game platform that almost anyone can use. It moved the video game business away from the 19-year-old who plays for 10 hours a day and has developed skills to do open heart surgery through a PC.

Nintedo was up against long odds. The heavy duty machine has been the foundation of the industry for at least the last five year. Now, Sony (SNE) and Microsoft (MSFT) are playing catch up.

And, grandma is in the living room  playing Super Mario Brothers on her Wii.

Douglas A. McIntyre

Posted on: July 13, 2007 – 5:34 am in Uncategorized, ,

Will Wal-Mart (WMT) Kill Best Buy (BBY)?

Sometimes the media will take a little bit of news and carry it too far. CNN Money recently speculated that because Wal-Mart had good sales in consumer electronics during the four weeks ending July 7 that Best Buy (BBY) and Circuit City (CC) better watch out.

It does appear that Wal-Mart did well in the TV and PC segment and that it sold more than its fair share of Dell (DELL) computers. Looking at the results, CNN Money put it this way: Given its reputation as a "category killer," could Wal-Mart’s ambition of becoming a major player in consumer electronics become the kiss of death for industry leaders Best Buy and Circuit City?

Most Wal-Mart buyers are not affluent. It is one of the reasons that its "non-bank banks" which offer services to people who do not have their own checking or savings do so well. It is the reason that the retailer sells inexpensive clothing. A walk through a Wal-Mart would tell most observers that the chain is not likely to be a big outlet for iPhones and 100-inch plasma TVs.

Best Buy has nothing to fear.

Douglas A. McIntyre

Posted on: July 13, 2007 – 5:18 am in Uncategorized, , ,