Daily Archives: July 16, 2007

Google’s (GOOG) Mobile Search Magic

Google (GOOG) is launching a new service that will help mobile handset users search ringtones, games, and other content that consumer can buy from content providers.

Google will make money by allowing companies to buy sponsored links on the service. As The Wall Street Journal points out, the new technology could allow customers to by-pass their service providers like AT&T (T) to buy content directly from owners. AT&T and its peers charge fees as a commission for content that they sell.

If the service catches on, it represents another area where Google has moved at least one step ahead of Microsoft (MSFT) and Yahoo! (YHOO) in the race to move services from the desktop to the handset.

In this case the race does seem to go to the swiftest.

Douglas A. McIntyre

Posted on: July 16, 2007 – 7:56 pm in Uncategorized, , , ,

Schwab Unveils New Bond Trading Fee Structure (SCHW, MER, AMTD)

Online brokerage giant, Charles Schwab Corp. (NASDAQ:SCHW) has unveiled some new pricing plans for its bond trading to entice more online brokerage account defections away from competitors.  It has unveiled new $1.00 per $1,000 face value.  The company has a $10.00 minimum commission/fee on this, and a maximum of $250.00.  If your browser or mobile device does not support graphical images, you can link the new pricing here.  If the comparison prices from other online brokerages are accurate, this looks like a significant discount to other online brokerage firms (see below):

Schwab_bond_pricing_2

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Posted on: July 16, 2007 – 5:55 pm in Brokerage Firms, , ,

Cramer’s EU Picks: Philips Electronics (PHG, TSM)

On tonight’s MAD MONEY on CNBC, Jim Cramer said his new weekly feature will be to add Eurpoean stock picks into his portfolio.  The markets in Europe are hot despite higher taxes and rising interest rates.  Cramer said the easy play is the European ETF’s, but then he took his stance that ETF’s are just another product scam to him.  He’d rather focus on best of breed names.

The Netherlands has Philips Electronics (NYSE:PHG), and that is one of Cramer’s top picks for the series.  The company was a dead money stock a few years ago without much going on, but now they have pared back operating picks.  He thinks the company is worth 20% more than it is listed as right now.  It has four segments and the non-core operations and investments/stakes that could be worth yet another $10.00.  One such holding is Taiwan Semi (NYSE-TSM). 

This call is hard to argue against, even if you took the ‘anti-Cramer stance’ no matter what.  As a value stock, you could even make the argument that this one could have been in one of his Top Value Picks for 2007 (even though it wasn’t). The company still has Billion’s it owns in stakes of public companies.  It has been able to keep winning medical equipment business and its green business initiatives have been getting good press.  It also has been trying to focus on more and more core-operations so it can more easily derive value.  It has even been able to hedge its currency risk with business in the US and the weak US Dollar.  Lastly, this large cap is fairly liquid and somewhat widely held for an ADR.  Shares did trade down almost 2% today after earnings were released, so barring any major downgrades tomorrow the specific event risk has largely been taken out of the stock.

Jon C. Ogg
July 16, 2007

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

Posted on: July 16, 2007 – 5:25 pm in Conglomerates, Cramer, ,

ACA Capital: Deep Value Stock OR Serious Viability Risk (ACA, BSC)

ACA Capital Holdings, Inc. (NYSE:ACA) is a company in trouble.  A stock screen yields the results that the company trades significantly under book value, but your name would have to be Dr. Pangloss to believe that this was anywhere close to the real balance sheet as of today.  As of March 31, 2007, the company’s net tangible book value was listed as $424.6 million.  Today’s market cap was listed as $240.9 million.  Shares closed down another 22% today at a new post-IPO low of $6.59 on more than 3.1 million shares.

Since the company listed nothing worth noting as goodwill on its balance sheet, you’d realize that there is ‘ill-will’ on the books.  This company has been public only since the end of 2006 and the last month for shareholders could only be described as fugly.

When you run stock screens, it is always interesting when a company stock shows up as 0.6-times stated book value.  But if the market is trading at all-time highs, you have to know better and you have to know that something may be wrong.  Because of the business segment this is in (financial guaranty insurance in credit derivatives, ouch), it is almost certainly safe to assume that the old book value is nowhere close to the situation today.  On June 29, the company withdrew its registration statement over a proposed 3.9+ million share offering from selling stockholders.

ACA Capital is a holding company that provides asset management services and credit protection products to participants in the global credit derivatives markets, structured finance capital markets and municipal finance capital markets.  If that isn’t the crummiest sector to be in right now, tell these guys to ask Bear Stearns (NYSE:BSC).  Bear Stearns is also a significant shareholder in the company.

The NYSE has a note that the company does not comment on unusual activity and my telephone call to Hyde Park Financial Communications was responded to with the answer that as of now that is all that will be coming out of the company.

With the obvious implosions in the CDO markets and in other credit derivatives, it is hard to know  what the real situation is.  There is either a significant risk to the company’s viability, or at some point there is significant value.  But if the company is keeping the media room dark then any investment into this is no different than flying blind.  This will have to be left to the speculators because from the eyes of a value-oriented focus this one is impossible to evaluate with data that is more than 90-days old.

Jon C. Ogg
July 16, 2007

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

Posted on: July 16, 2007 – 4:16 pm in Financial Stocks, ,

GE’s $40+ Close: First Time Since March 2002

General Electric (NYSE:GE) managed to close over $40.00 today, a closing price it has not seen since March 2002.  Technicians would view this as a mixed day.  While shares did close up 1.4% at $40.07 at 4:00 PM (unofficial closing price), shares also closed under the intraday highs from Friday of $40.17.  This is still going to be viewed as a win.

Just Friday we were wondering if the megacap’s shares could hold their 5-year highs and that $400+ Billion market cap.  Shares fell off of highs Friday and didn’t hold that $39.77 close from June.  But today’s trading action showed that there is a renewed belief in the stock.  This should put those calls to break-up the conglomerate to bed.

On a split adjusted basis, GE shares ended 2006 at $36.66, so shares are up 9.2% for the year based on that unofficial closing price.

Jon C. Ogg
July 16, 2007

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

Posted on: July 16, 2007 – 3:11 pm in Conglomerates, HI/LOW,

Microsoft Regaining Market Share in Search (MSFT, YHOO, GOOG, TWX, IACI)

If someone told you that good old Microsoft (NASDAQ:MSFT) was actually regaining its market share in search, would you believe them?  If you did believe it, you’d at least want proof.  This actually happened, at least according to comScore.  You can see the full table in the press release.  The JUNE 2006 market share for online search saw a drop in market share for Google (NASDAQ:GOOG) and for Yahoo! (NASDAQ:YHOO).  IAC Interactive’s (NASDAQ:IACI) Ask Network held its share at 5% and Time Warner’s (NYSE:TWX) saw a slight drop. 

Before you throw the towel in or make any longer-term projections you need to consider a couple things.  First is that all of these search and other online measurements are wildly different from source to source.  That doesn’t mean the results are inaccurate, but the data is based on samplings and calculations that are different from source to source.  The second item to note is that there is always some drift on a month to month comparison.  But Microsoft has to be happy to see its market share of search from 10.3% in MAY to 13.2% in JUNE.

comScore does note that the significant increase at Microsoft (2.9 points and 36% in volume) is in part due to Live Search Club, a program launched by Microsoft in late May to engage and reward users of Live Search. 

Once again, this data varies wildly on a month to month comparison, as well as from source to source.

Jon C. Ogg
July 16, 2007

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

Posted on: July 16, 2007 – 2:44 pm in Internet, Research, , , , ,

Cramer’s Trade Off Verizon: Sprint (S)

On today’s STOP TRADING segment on CNBC, Jim Cramer has a pretty tall call: he thinks instead of hoping for a Verizon (NYSE:VZ) buyout that was reported/misreported this morning, you should be buying Sprint Nextel (NYSE:S) as the more likely play to be bought by private equity or by an overseas operator wanting into the U.S.  Sprint Nextel (NYSE:S) already has a market cap of $64+ Billion before his call.  He thinks that many companies could make this acquisition.

Cramer also said he thinks that Coca-Cola (NYSE:KO) could trade up to $55.00 by week-end after earnings because all the brokers will reiterate their buy ratings after the company beats earnings and raises guidance because of the weak dollar.

Jon C. Ogg
July 16, 2007

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

Posted on: July 16, 2007 – 1:48 pm in Cramer, , ,

Stumbling Block For Detroit: Highways In India (GM)(F)

The domestic auto industry’s promised land seems to be China and India. Neither country has a huge, mature manufacturing industry of its own. There are hundreds of millions of people, and very few have cars.

GM (GM) and VW along with joint venture partners are the largest car companies in China, and Ford (F) often talks about how fast it is growing in the world’s most populated country.

Naturally, the attention turns to India as well. In a country with 1.1 billion people. there are only 2.8 million car owners.

The New York Times says that the Transportation Research Institute is about to release a study showing a number of hurdles that the Indian car industry must face before it can begin to see the kind of growth that should be expected in a developing country.

The No.1 problem is “The infrastructure needs to be improved more than you might think", according to one researcher involved in the survey. In other words, the roads are no good.

That may be bad news for India car makers but it is at least as bad for Detroit. GM and Ford do have the capacity to build cars that can be sold in India, at least if their experience in China is any indication.

But, you can’t buy what you can’t drive.

Maybe GM can go into the road building business.

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

Posted on: July 16, 2007 – 1:22 pm in Uncategorized, ,

Short Bet Against Cameco (CCJ) And Uranium

According to Bloomberg, the short interest in uranium company Cameco (CCJ) has gone to 6.2% of shares outstanding. A few months ago, 24/7 pointed out that valuations of uranium companie were getting too high. At the turn of the year, Merrill Lynch offered a very upbeat note on the industry and this help raise prices in the sector.

Now sentiment is moving the other way, and fast enough to crush a large number of investors. After being up almost 40% from the first of the year, Cameco shares have fallen 7% in two days with the path down getting sharper.

Bloomberg quotes one brokerage firm as saying that the correction still has a way to go: "Uranium may slide about 30 percent to $95, the long-term price, from the record of $138 a pound in the last week of May, according to Raymond James Financial Inc. in Dusseldorf." 

Posted on: July 16, 2007 – 12:38 pm in Uncategorized,

Is Lawsuit Against Facebook Keeping Buyer Away?

TechCrunch has a story about a three-year old lawsuit against Facebook. It may be what is keeping Google (GOOG), Microsoft (MSFT), or Yahoo! from making the big offer the press keeps talking about.

Three people who worked with Facebook founder Mark Zuckerberg have accused him of stealing the source code from another project to start the company.

If the suit has potential validity, it would certainly make the large web portals think twice before making an offer.

Douglas A. McIntyre

Posted on: July 16, 2007 – 12:26 pm in Uncategorized, , ,

comScore Traffic For June (TWX)(GOOG)(MSFT)(YHOO)

comScore data for June showed Yahoo! (YHOO) leading all properties in the US with 133 million unique visitors. Google (GOOG) and Time Warner (TWX) sites were virtually tied at just over 123 million. Microsoft (MSFT) sites were next at 115 million followed by Fox (primarily MySpace) at 84 million.

Rounding out the top ten were eBay (EABY), Amazon (AMZN), Ask (IACI), Wikipedia, and Apple (AAPL).

Douglas A McIntyre

Posted on: July 16, 2007 – 11:40 am in Uncategorized, , , , , ,

Dendreon: A New Form of Shareholder Activism (DNDN)

There was a bit of an unusual message this morning, and that was an advertisement about Dendreon’s (NASDAQ:DNDN) Provenge in the Sunday edition of The Washington Post.  Yet it apparently isn’t from the company itself.  Usually activist shareholders target an actual company for change to ehnace share prices, but a group of shareholders, patients, advocates, and activists have a made an unusual move.  In Sunday’s Washington Post, this group took out an advertisement calling for citizens to contact their Congressional representatives to urge the FDA to reverse their delay of Provenge.

After looking around for more data to see who this group is, I ran across CNBC’s Mike Huckman blog post on this subject.  This even shows a scan of the advertisement that was in the paper.  His post is definitely worth the read.

So far, Wall Street isn’t giving too much credit and hope for the ad, because shares of Dendreon are down roughly 0.25% at $7.77 on under 2 million shares just before noon.  Huckman also noted in his post that the company was unaware of the group.

This is not the first move for a group of shareholders to back or attack in a newspaper advertisement, but this is a highly unusual appeal and a rare use of advertising.  This is a battleground stock, and the stakes are quite large for the prostate cancer patients.  If this happened once, it is probably a safe bet that this won’t be the only call to arms.  Provengenow.org is a site that has taken similar steps, although it has not taken out advertisements such as this.

Jon C. Ogg
July 16, 2007

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

Posted on: July 16, 2007 – 11:13 am in Biotech,

Is Samsung After AMD (AMD)?

The Inquirer has heard that Samsung may be eying AMD (AMD). As the second largest manufacturer of semiconductors in the world picking up the No.2 x86 company might make sense.

Samsung has a larger footprint than AMD. It provides solutions that run in mobile devices, PCs, consumer electronics, and industrial applications. But, Samsung does not provide core chips for PCs and servers as AMD does, so there might be very little overlap in product.

Samsung’s semiconductor business is currently about 25% of it overall operations. It is likely that it could take a large amount of the marketing, SG&A, and R&D costs out of AMD. And, AMD could use a savior.

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

Posted on: July 16, 2007 – 9:24 am in Uncategorized,

Earnings Preview: Novellus Systems (NVLS) (July 16, 2007)

Novellus Systems Inc. (NASDAQ:NVLS) reports earnings after today’s close.  First Call estimates were $0.44 EPS and $413.3 million revenues on last look.

On a static snapshot of this morning’s options prices, it looks like options traders are not looking for more than a 2% price change in either direction.  While chip stocks have been busy putting in recent highs, Novellus hasn’t really participated in the share gains.  Unfortunately, this stock has seen its fair share of downgrades this year and the average price target from analysts is under $30.00 as the analysts prefer other chip equipment plays out there.  If the company makes the $1.64 EPS estimate for 2007, it trades at 17.7 times 2007 earnings.

At the end of June, Novellus said results would come in at the lower-end of the guidance ranges previously offered.  The company also announced it would cut executive pay and see some temporary shutdowns in the third and fourth quarters to cut down on operating expenses.  Even with the recent interest in chip stocks, it feels like the Bulls’ only hope for today is news that could be deemed "less-bad" than just a couple weeks ago. 

Novellus’ market cap is under $4 Billion at current prices and the stock is no longer viewed as a sector-leader.  Its 52-week trading range is $22.55 to $35.00 and shares are down more than 10% in the last 90-days.

Jon C. Ogg
July 16, 2007

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

Posted on: July 16, 2007 – 9:23 am in Earnings, Semiconductor,

Can You Trust Syntax-Brillian’s Higher Guidance? (BRLC)

Syntax-Brillian Corp. (NASDAQ:BRLC) is seeing its shares going bonkers this morning.  After the open shares are up close to 20% at $6.65 and it has already traded close to a full day’s trading volume.  The company increased its revenue guidance to a new range of $1.1 billion to $1.3 billion from its prior forecast of $950 million to $1.1 billion.  It maintained revenue guidance of $190 million to $210 million for the June-end quarter, and gross margins will be within or above the top half of the range of 15% to 17% that it had previously forecasted.

Syntax-Brillian expects to report its financial results for the quarter and fiscal year ended June 30, 2007 no later than the second week of September.  That is a pretty long ways out for a quarterly report.  As a reminder this stock has a HUGE short interest with more than 17 million shares listed in the June short interest, which was listed as more than half of the float at the time.  Also, this company has made TWO secondary offerings in a manner where you have some trust issues with management. 

If you read through this release, part of the increase is due to an accounts receivable issue from South China House of Technology.  You’ll have to read through the press release wording, because the way this is written the verbage could be considered ‘up for interpretation.’

Jon C. Ogg
July 16, 2007

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

Posted on: July 16, 2007 – 8:51 am in Earnings,

Vodafone (VOD) Won’t Buy Verizon

The FT said that Vodafone (VOD) the huge cellular company, was looking at buying Verizon (VZ) for a premium of about 25% or $160 billion. Vodafone issued a denial.

Whatever the merits of the press story, Vodafone would not want Verizon at its current valuation. The company has bet too much on its fiber-to-the-home initiative and it may take years to see whether that $23 billion investment will pay off

Verizon also has a large fixed-line business that is being eaten alive by VoIP.

The normal investment banker’s pitch here would be to pay the $160 billion and keep the 65% of Verizon Wireless that Vodafone does not already own. But, cellular subscriber growth in the US is beginning to slow as consumer penetration rates begin to move toward saturation.

So, the argument would go, sell off the land line and fiber business to help pay for the $160 billion transaction. Unfortunately, there is little evidence that these businesses would fetch much. Qwest (Q), which is primarily a landline company, has underperformed both Verizon and AT&T (T) in the market over the last year.

Verizon simply isn’t worth $160 billion. It may not be worth what the shares trade for today.

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

Posted on: July 16, 2007 – 8:19 am in Uncategorized, , ,

IPO Filing: Renewable Energy Group (RWE)

In an SEC Filing on Friday evening, a company called Renewable Energy Group, Inc. has decided to come public via an IPO.  The stock will have the proposed ticker of "RWE" on NYSE.  Credit Suisse and Goldman Sachs are listed as lead underwriters, with Bank of America and Thomas Weisel listed as co-managers.  It has filed to sell up to $150 million in securities. 

Renewable Energy is what it believes to be the largest operator, marketer and distributor of biodiesel in the U.S. under the SoyPOWER® brand.  During 2006, it marketed approximately 78 million gallons of biodiesel, representing what it shows to be approximately 27% of U.S. biodiesel sales.  It operates a 132 million gallon network of biodiesel production facilities, currently consisting of one facility owned by the company and four facilities owned by third parties. In addition to the 5 plants in operation, it has 4 more under construction.

Jon C. Ogg
July 16, 2007

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

Posted on: July 16, 2007 – 8:09 am in Alternative Energy, IPOs,

Target (TGT) Becomes Target

Pershing Square Capital now owns 9.6% of the shares of retailer Target (TGT). There had been news that the fund was holding about 5%.

Speculation is that Pershing would like to see Target sell its credit card operations, which have $6.5 billion in receivables, according to The Wall Street Journal.

Outside investors usually try to go after poorly run companies in the hope that they can get the firms to mend bad habits. But, Target falls into the category of public corporations that are considered well-run.

Over the last year, Target’s shares are up almost 50%. Rival Wal-Mart’s stock is up only about 15%.

Pershing calls Target "undervalued". Target says that its credit card business is essential to its relationship with customers.

On a stock price increase of 50%, a lot of shareholders are going to want to stick with management’s program.

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

Posted on: July 16, 2007 – 8:03 am in Uncategorized, ,

Nokia’s (NOK) Big Gamble Pays Off

Nokia (NOK) was having trouble launching hot phones three years ago, Motorola’s (MOT) RAZR would the phone-of-the-year in 2005 and held that title for about 18-months.

But, now Motorola looks like a turtle rolled onto its back. If it wants to find a model for its turnaround, it needs to look no further than its larger rival.

In China, 42% of handset sales go to Nokia. In India, the number is over 60%.

The shareholder’s lament at Nokia is that it had to produce cheap, low margin phones to get into these developing market. But, it appears that the company had a method to its madness. According to Bloomberg:: "Nokia lowered its prices last year in emerging markets to keep Motorola’s share from rising."

Now the company is marketing more expensive phones into these regions as customers replace less expensive models. Because of its huge market share owners of its handsets are more likely to step up to product from the same company.

Nokia took a huge risk. And, it paid off.

Douglas A. McIntyre

Posted on: July 16, 2007 – 7:52 am in Uncategorized, ,

Applebee’s Buyout: Virtually a ‘Take-Under’ (APPB, IHP)

Back in February we noted that there wasn’t exactly a whole lot of value to Applebee’s (NASDAQ:APPB) at the $27.25 level when it decided to explore strategic alternatives.  Someone did find value, but at a lower price.  IHOP Corp. (NYSE:IHP) has decided to acquire Applebee’s for $25.50 per share in an all cash transaction.  Interestingly enough, IHOP has a mere $980 million market cap and this acquisition is valued at roughly $2.1 Billion.

IHOP will finance part of the deal on its own by franchising out 500 of the company-owned stores.  Including current frnachises, Applebee’s currently has 1,943 locations.

If you bought into this back in February after the ’strategic alternatives’ announcements, congratluations on the take-under.  The sad part is that this is actually a decent offer for the restaurant chain.  The company had peaked out geographically and if it was not able to become part of another chain it was probably going to have to branch out into a different brand via an acquisition of its own to spur growth.

Jon C. Ogg
July 16, 2007

Posted on: July 16, 2007 – 7:51 am in Food, Mergers and Buy Outs, ,