Daily Archives: July 20, 2007

Cramer’s European Picks (TOT, SI, ABB, PHG, BF)

On tonight’s MAD MONEY on CNBC, Jim Cramer made his final "Investing In Europe" series pick.  He went to France and named Total (NYSE:TOT) as the oil pick as his final pick for the European buy list.  He likes their global footprint and they are looking at more developing country energy plays, but they are going where many American companies cannot get as much done.  He also likes how well they operate even in Russia and Africa.  Their refineries are also being upgraded to process the more sour crude that needs more refining, and this one is cheap compared to some of its US counterparts and is even trading more off its highs.

This series that Cramer did was all full of the big cap stocks in Europe.  What this will prove in the end if these all go up is not so much that these were just incredible stock picks.  It will prove we are in a major bull market and the market is willing to buy big cap stocks again.  You could go make the exact same strategy picks out of Asia and probably come back with the same sort of results.  Interestingly enough, in Cramer’s game plan for next week he ran more of a cautious note and suggested taking at least some profits.  So it doesn’t seem he’s just going to chase winners endlessly.  Cramer made other stock picks from Europe all week in his series, and here they are:

Thursday, he picked BASF (NYSE:BF) out of Germany as a chemical predator.

Wednesday, Cramer picked Siemens (NYSE:SI) as the major conglomerate for Europe that is similar to GE.

Tuesday, Cramer went to Switzerland’s infrastructure pick for the world as ABB Ltd. (NYSE:ABB).

Cramer’s first pick this week was Philips Electronics (NYSE:PHG) out of The Netherlands (NYSE:PHG).

Jon C. Ogg
July 20, 2007

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

Posted on: July 20, 2007 – 5:23 pm in ADR, Cramer, , , , ,

New 52-Week Lows (July 20, 2007)

STOCK TICKERS: ABK, ACA, BZH, LEN, DHI, RYL, CC, BX, FIG, FINL, HGSI, HSY, HW, JNY, NLS, REDE, TRMP, UBET, TZOO, WB

The DJIA may have hit 14,000 earlier.  A pullback here, some bad news there, and all of a sudden there are still many little piggies being sold off.  Here are some of the main stocks hitting 52-weeks lows today, and it is even an edited-down list:

AMBAC (ABK) $80.05
Whoops, insuring and guaranteeing debt.

ACA Capital (ACA) $6.40
Yep, still no word out of the company yet.  Trading and guaranteeing CDO’s and derivates isn’t what it was cracked up to be, and we still don’t know their real situation.

Beazer Homes (BZH), Lennar (LEN) DR Horton (DHI), Ryland (RYL)
One of its comps calling for crummy to 2009…ouch.

Circuit City (CC) $13.63
You knew this one wasn’t bottomed out yet.

Blackstone (BX) $25.95
Schwarzman isn’t responsible for this added drop, but he’ll do for the blame.

Fortress Inv. Group (FIG) $22.28
This hedge fund, boy…are they in private equity and CDO’s?  Not an intraday low, but its lowest close.

Finish Line (FINL) $7.88
Glad I removed it from the BAIT SHOP of buyout candidates when I did, this one must have 10 piggies in each of their shoes.

Human Genome Sciences (HGSI) $8.61
Maybe genomics is such a 1990’s term.

Hershey (HSY) $47.84
This one was very overvalued for something you eat, so it squirts.

Headwaters (HW) $16.43

Jones Appareal (JNY) $26.62
Weren’t these guys supposed to sell out?

Nautilus (NLS) $9.14
When will a growth exercise and fitness company that warned be touted as a value stock?

Redenvelope (REDE) $5.05
Still don’t know anyone who has used this online e-tailer.

Trump Entertainment (TRMP) $9.50
The Donald’s casino operator can’t find a bottom without reaching under his back.

YouBet.com (UBET) $2.04
Bet this one isn’t done?

Travelzoo (TZOO) $23.00, prior intraday low was $23.16; high was $40.00+.
Online travel carnage continues….maybe France, Hong Kong, and Japan aren’t worth it.

Wachovia (WB) $49.98 close..prior 52-week low was $50.32.
Banks, they need someone to "Watch-ova-ya"

Jon C. Ogg
July 20, 2007

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

Posted on: July 20, 2007 – 3:38 pm in HI/LOW, , , , , , , , , , , , , , , , , , , ,

Hoku Scientific Earnings: Not Really About Earnings (HOKU)

Hoku Scientific, Inc. (NASDAQ:HOKU) has been a stellar company since its stock has tripled over the last 75 days or so.  The company is set to report earnings next Tuesday, July 24, 2007, but investors will want to look past the earnings as far as "EPS and Revenues" are concerned.  No one expects a profit and the revenues expected are just a  tad over $1 million.  The truth going one step further is that the actual numbers shouldn’t matter compared to the "long term plan and progress expected" in 2009 and beyond.  This one has been public for just under two-years, and this latest run took it briefly back to its all time highs.

Investors and traders will want to monitor the company’s long-term outlook for its Idaho facory, potential financings, cash requirements, AND the ‘total market opportunity’ it thinks it can capture for its photovoltaic modules from 2009 and beyond.  In other words, this is not a present earnings story and it isn’t even really a forward 2008 story.  This is a story of what the company can do in 2010 and beyond, since the factory being constructed is not scheduled to be completed until 2009 and is set to produce roughly 3,000 metric tons of polysilicon for use in solar panels.

We recently ran a "Both Sides of the Coin" piece on Hoku, and everything is still somewhat the same.  You can parcel through that to give a better historical background, but the overall timing, financing, and trends for their facility completion and the subsequent ability to deliver on later contracts will be the important part to focus on.  This company is still more of a long-term implied call option on solar power and alternative energy rather than an operating company at this point.  With the recent run and the flurry of trading volume, this will definitely be one to watch.

Jon C. Ogg
July 20, 2007

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

Posted on: July 20, 2007 – 1:45 pm in Alternative Energy, Calendar, Earnings,

ETF Launch: Bear Stearns ETF Based on MLP’s (BSR, BSC)

Bear Stearns (NYSE: BSC) issued their first Exchange Traded Note (ETN) that allows investors to buy a diversified group of MLP’s (Master Limited Partnerships): the BearLinx Alerian MLP Select Index ETN on the NYSE, under the ticker symbol BSR.  The BearLinx Alerian MLP Select Index ETN (NYSE:BSR) is based on the Alerian MLP Select Index whose components are publicly listed energy MLPs engaging in the exploration, marketing, mining, processing, production, storage or transportation of any mineral or natural resource.

With 25 of the 37 components in the Alerian MLP Select Index listed on the NYSE, the BearLinx Alerian MLP Select Index ETN’s top five companies by weight include, Enterprise Product Partners (NYSE:EPD), Kinder Morgan Energy Partners (NYSE:KMP), Plains All American Pipeline Partners (NYSE:PAA), Energy Transfer Partners (NYSE:ETP) and TEPPCO (NYSE:TPP ).  Some other sizable MLP’s are Enbridge (NYSE:EEQ), Kinder Morgan Management (NYSE:KMR), Magellan Midstream (NYSE:MMP), Oneok Partners (NYSE:OKS), and more.

Alerian claims that since 1990, the market-cap weighted index of MLP’s has generated compounded annual returns over 17% with consistent annual distribution growth of 8% to 9%.  Alerian said the MLP’s have grown from $10 Billion in 1999 to $25 Billion in 2001, is nearly triple that now, and will reach $125 Billion by the end of 2008.

Jon C. Ogg
July 20, 2007

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

Posted on: July 20, 2007 – 1:16 pm in ETF, ,

Top 10 Earnings Next Monday & Tuesday (July 23 & 24, 2007)

Stock Tickers: AXP, AMZN, BIIB, BNI, CME, DD, HAL, LMT, MRK, PEP, T

These may not be the ONLY important earnings, but we wanted to hit most of the major earnings.  It is hard to break-out this few when there are more than 160 S&P 500 Index companies reporting quarterly results next week alone.  Keep in mind that these estimates could have changed (an may change still) and the dates could move on any of these.  We have broken these out with the earnings per share estimate and then the revenue estimate for each of these top stocks.  So it’s a TOP 11 rather than a TOP 10

MONDAY JULY 23
American Express (AXP)                     $0.86/$7.5B
Highest credit quality out of all non-bank assets in the country.  If credit dwindles here you could see even more credit quality concerns on Wall Street.

Halliburton (HAL)                                 $0.56/$3.5B
King Hal, one of Cramer’s TOP 9 FOR 2007.

Merck (MRK)                                         $0.72/$5.77B
Does this run the market anymore? NO.  But at a $107 Billion market cap and 60,000 workers it gets perpetual attention.

TUESDAY JULY 24

Amazon.Com (AMZN)                             $0.15/$2.81B
Major retailer now, bigger than top book (B&N) and electronics (Best Buy) brick and mortar operators combined with a $29 Billion market cap:

AT&T (T)                                                     $0.67/$29.6B
iPhone…telecom is back, who said the Bells couldn’t be reunited…and who said the old telecom utility is dead after re-mergers galore?

Biogen-Idec (BIIB)                                     $0.63/$759.75M
Check on status of buyback; may yet again boil down to its own Tysabri; could effect Elan and Genentech depending on each drug commentary.  Fifth largest biotech in U.S.

Burlington Northern Santa Fe (BNI)         $1.22/$3.85B
Another look into strength of rail and other shipping in U.S.

Chicago Mercantile (CME)                         $3.67/$331.75M
How will this look ahead now that the CBOT is finally united with its step-brother?  Keep in mind these earnings and revenues may be very different now and ahead since the unification.

DuPont (DD)                                                  $1.06/$7.85B
Another good measure of the U.S. economy….hopefully.

Lockheed Martin (LMT)                                 $1.53/$10.25B
Major defense contractor close to highs.

Pepsico (PEP)                                                 $0.89/$9.35B
Coke already reported, but let’s see if Pepsi can claim the investor taste test.

Jon C. Ogg
July 20, 2007

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

Posted on: July 20, 2007 – 11:16 am in Calendar, , , , , , , , , , ,

Williams Cos., Insists On Shareholder Rewards (WMB, WPZ, DVN, BSC)

The bus is filling up with energy industry passengers wanting to create a master limited partnership (MLP) from their midstream assets. Earlier this week Devon (NYSE:DVN) got on-board and today, Williams Companies, Inc. (NYSE:WMB) announced that it is placing its natural gas pipelines into a new MLP. WMB said that proceeds from the IPO will be used to fund growth projects and for "general corporate purposes." In August 2005, WMB completed an IPO for another MLP, Willliams Partners L.P. (NYSE:WPZ), and WMB noted in this announcement that WPZ unitholders have realized a return of 137% since that IPO.

WMB also announced a $1B stock buyback, which brings its total buybacks to just over $10B from a board-authorized total of $20B. WMB also announced an agreement with Bear Stearns (NYSE:BSC) in May to sell essentially all of its electric power generation assets to BSC for about $512MM.

The primary asset in the new MLP will be WMB’s Northwest pipeline, a 3,900-mile bi-directional system that supplies the Pacific Northwest with natural gas from the San Juan Basin, Canada, and the northern Rockies. WMB is not including its Transco system, which hauls gas from the Gulf Coast to the U.S. northeast, nor is the Gulfstream pipeline, from Mississippi to central Florida. WMB’s Transco pipeline is the jewel in its midstream assets. It serves a huge market along the Atlantic seaboard and is close enough to the coast that if LNG terminals are ever built, Transco is a natural connection point to move that gas to northeast markets.

In the past 5 years, WMB stock has risen from a low of $1.40 in October 2002, to yesterday’s close at $34.39. Today’s news bumped the share price by $1.56 almost instantly, and that is good news for WMB shareholders. But the company’s P/E ratio for the trailing twelve months is 66.36. That would be dot.com territory for a company with a mean target price of $35.90. The saving grace: a $21 Billion market cap and a 2007-forward P/E of 26 if it hits targets.

Paul Ausick
July 20, 2007

Posted on: July 20, 2007 – 9:51 am in IPOs, Oil & Gas, Shareholder Issues, Stock Buybacks, , , ,

MF Global (MF): The Hurt That Keeps On Giving

The markets hated MF Global (MF) before it went public, And Wall St. hates it more now.

Putting a derivatives broker IPO into a market that is running from derivatives won’t get the company or the underwriters the annual Albert Einstein Genius Award.

So, the shares were to go out at $36. That was cut to $30. And, today the stock trades at $26.20.

The FT gives a good reason for why the pricing was flawed from the start. "At the upper end, $39, the implied 2007 price/earnings multiple of 30 times put MF’s rating closer to that of futures exchanges. MF faces a more competitive environment than the latter." A rational market took that down, and an irrational market is taking it down further.

Perhaps the most important point about the IPO is that Man Group, the hedge fund based in the UK, that was spinning off part of its ownership in MF could have waited. It did not need the money for operating expenses.

Instead, a group of investors lost some real cash.

Douglas A. McIntyre

Posted on: July 20, 2007 – 9:40 am in Uncategorized,

Orbitz, A Busted IPO Out Of The Chute? (OWW, BX, TZOO)

Orbitz Worldwide Inc. (NYSE:OWW) came public as planned, but so far that is the only good news.  This was an anticipated IPO as the company used to be public, but most shareholders knew that the IPO commitment money was just going to Blackstone Group (NYSE:BX) to let Schwarzman do more things to garner negative press.

Shares opened under the $15.00 pricing and have traded as low as $14.25 so far in early trading on more than 4 million shares.  That makes this a busted IPO by definition right out of the chute.  What is even more disappointing is that Orbitz priced under the initial $16.00 to $18.00 range.  That doesn’t mean the IPO will stay a busted deal as it is impossible to know if this closes up or down on the day. 

The weakness in Travelzoo (NASDAQ:TZOO) and the new 52-week lows there probably isn’t helping either.  Orbitz priced under the $16.00 to $18.00 range at $15.00, and based on the initial reaction after the open it would appear that the IPO subscribers wished this one priced even lower.  These private equity firms may need to start letting at least a portion of IPO proceeds go to the underlying companies rather than going to pay back debt and pay a one-time looting dividend all to themselves.

Jon C. Ogg
July 20, 2007

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

Posted on: July 20, 2007 – 8:55 am in IPOs, Internet, , ,

Could Journal Register (JRC) Miss Its Debt Service?

Journal Register (JRC) announced its Q2 earnings today. They were ugly and Wall St. punished the company by pushing it to a 52-week low of $3.68. The company missed consensus earnings estimates by three pennies.

JRC had revenue of $120.7 million. Net income was $5.5 million and interest payments on the company’s $646 million debt were $10 million.

JRC now has a market cap of $140 million, well under the value of its debt and only 25% of its revenue run rate. Gannett (GCI) has a market cap to revenue multiple of 1.5x. Clearly its does not have JRC’s debt problem.

Journal Register also announced that June advertising revenue dropped almost11%. Total revenue for the month fell to $36.6 million. That would be a quarterly run rate of about $111 million.

Last year in the third quarter JRC had revenue of $132 million. The company’s current quarterly operating expenses are about $100 million.

Could JRC’s revenue be as low at $110 million in Q3 07. If revenue loss accelerates at all, it could.

At $110 million, all of JRC’s operating income goes to interest expense. Any slip from there put the company in a world of hurt.

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

Posted on: July 20, 2007 – 8:53 am in Uncategorized, ,

Nucryst Pharmaceuticals (NCST) Rallies Like A House On Fire

Nucryst Pharmaceuticals (NCST) is up over 100% to $4.40 on news that the FDZ cleared its antimicrobial cream containing the compound NPI 32101  Of course, there was no revenue forecast attached to the news.

Nucryst investors have had a frightening ride over the last year. Shares were at $16 a year ago. They were below $2 in early July.

The stock is another example of the craziness attached to micro-cap pharma stocks. In the last quarter, the company lost almost $2 million on just over $5 million in revenue. Today it has an $80 million market cap.

Douglas A. McIntyre

Posted on: July 20, 2007 – 8:38 am in Uncategorized,

Short Sellers Hit EMC Ahead of VMWare’s IPO

If there is such a strong interest in the VMWare IPO, it is amazing how short sellers have been increasing their bets against EMC Corp. (NYSE:EMC).  In July, short sellers increased their bets to 40.918 million shares in the short interest.  In June, the short interest reading was 36.374 million shares.  The overall short interest also rose at the NYSE: Based on information received from members and member organizations,short interest increased to 12,950,726,148 from 12,467,283,409 as ofJune 15, 2007.

The reading from May to June was actually a decline in the short interest, as the May reading only showed 38.93 million shares.  In May to June, there was a lack of data that had been coming out of the company and some of that uncertainty may have led to short sellers being confused.  Shares were also rising.  The short interest increase this month is likely earlybird arbitrage players trying to make early bets.  It could just be traders betting that after a huge run that the best had been seen in EMC and that profit taking could come into play after earnings next week.  Who knows for sure, but this will be one to watch.

Here is the entire history linkage we have made after EMC’s filing indicated at the pricing and the terms for what appears to be early August.

As a reminder, EMC holders will not actually receive shares in the VMWare IPO.  This is more representative of the old’tracking stock’ model seen in the 1990’s, even if it is expected to be a hot IPO.  EMC shares closed yesterday less than 1% under the intraday highs over the last 52-weeks, and that is actually the multi-year highs.  Shares are up almost 30% in the last 90 days.  The company reports earnings on Tuesday, July 24, 2007.

Jon C. Ogg
July 20, 2007

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

Posted on: July 20, 2007 – 8:11 am in Short Interest, ,

Stent Blockage Kills Boston Scientific (BSX)

A large drop in the sale of drug coated stents knocked Boston Scientific’s (BSX) quarter way down. The company’s second-quarter profit, excluding charges, was $271 million, or 18 cents per share, compared with $412 million, or 31 cents per share, a year ago. Quarterly sales fell slightly to $2.1 billion.

Boston Scientific probably cannot solve the issue with its stent product. The medical community believes that the products can cause clotting and heart problems. That is unlikely to go away. Sales of its drug-eluting heart stents were $437 million in the quarter from $647 million last year.

That could get worse, and so could the stock price.

Douglas A. McIntyre

Posted on: July 20, 2007 – 7:41 am in Uncategorized,

Short Selling the Bankers (July 2007) (BAC, WB, WM, CFC, JPM, USB, WFC, NCC, STI, C, STT)

Short selling in banks is always an interesting area to watch, particularly in the midst of a credit lending debacle that has led to a lower credit ranking and higher loan loss reserves in most financials.  It appears short sellers are expecting credit issues to remain a headwind, at least that is how the short interest trends are acting.  Here is the JULY, JUNE, and Change to shares in the short interest:

BANK (TICKER)                                    JUNE    JULY    CHANGE
Bank of America (BAC)            48.7M      35.2M      +38%                  
Wachovia (WB)                          39.98M   31,88M    +25%
Washington Mutual (WM)        47.99M    39.98M    +20%
Countrywide (CFC)                    51.4M      45.7M     +12%
JPMorgan Chase (JPM)           33.64M    31.63M    +6%.
US Bancorp (USB)                    36.62M    35.42M    +3%
Wells Fargo (WFC)                     53.7M     51.8M      +3%            
National City (NCC)                   34.04M    3.72M      +1%         
SunTrust Banks (STI)                 7.04M     7.42M       -5%
Citigroup (C)                               27.17M    31.26M    -11%
State Street (STT)                        6.43M      13.8M     -53% 

Short selling increased overall on the NYSE as seen on the NYSE notice, but this went above and beyond.  Here was a sector breakdown for the May to June period for 2007 if you want to compare.  Interestingly enough, short sellers are lightening up on Citigroup and Sun Trust saw another drop.

Jon C. Ogg
July 20, 2007

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

Posted on: July 20, 2007 – 7:22 am in Short Interest, , , , , , , , , , ,

Pre-Market Stock News (July 20, 2007)

(ACOR) Acorda COO resigned to pursue other interests.
(AMD) Advanced Micro Devices traded up 4% after revenues were ahead of plan on processor sales.
(AUY) Yamana Gold makes business combination offer for Meridian Gold.
(BVF) Biovail received a non-approval letter from the U.S. FDA for its NDA for BVF-033.
(C) Citigroup $1.24 EPS vs $1.13 estimate, Revenues $25.6 Billion vs. $24.88B est.
(CAT) Caterpillar $1.24 EPS vs $1.49 estimate.
(ERIC) Ericsson ADR’s trading down over 4% after earnings rose 12% overseas.
(MSFT) Microsoft traded down almost 1% after meeting expectations.
(OWW) Orbitz IPO priced 34 million shares at $15.00.
(GOOG) Google traded down 7% after missing EPS on higher expenses.
(PRSP) Prosperity Bancshares $0.52 EPS vs $0.52 estimate.
(RHHBY) Roche profit rose 24% overseas; named new chief for diagnostics unit.
(SLB) Schlumberger $1.02 EPS vs $0.95 estimate.
(SNDK) SanDisk trading up over 4% after beating earnings.
(SNTS) Santarus announces achievement of $5 million milestone payment under license agreement wit Schering-Plough.
(SON) Sonoco $0.56 EPS vs $0.59 estimate.
(WB) Wachovia $1.23 EPS vs $1.22 estimate.
(WHR) Whirlpool $2.00 EPS vs $1.83 estimate.

Jon C. Ogg
July 20, 2007

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

Posted on: July 20, 2007 – 7:21 am in Pre-Market Activity, , , , , , , , , , , , , , , , , , ,

Pre-Market Analyst Calls (July 20, 2007)

ADSK cut to Hold at Citigroup.
ALEX cut to Mkt Perform at Wachovia.
ALVR cut to Sector Perform at CIBC.
BMI cut to Neutral at Baird.
CLWR cut to Hold at Jefferies.
CYBS cut to Mkt Perform at JMP Securities.
FFCH raised to Neutral at Sun Trust Robinson Humphrey.
KR cut to Hold at BB&T.
HSY cut to Peer Perform at Bear Stearns.
ITT cut to Neutral at JPMorgan.
MAN raised to Buy at B of A.
NUE raised to Outperform at Credit Suisse.
PFGC cut to Hold at BB&T.
RTSX started as Buy at Deutsche Bank.
SLG raised to Outperform at Wachovia.
STX raised to Outperform at Bear Stearns.
SWY cut to Hold at BB&T.
SYY cut to Hold at BB&T.
TRN started as Overweight at JPMorgan.
WLSC cut to Equal Weight at Lehman.
X cut to Neutral at Credit Suisse.

Jon C. Ogg
July 20, 2007

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

Posted on: July 20, 2007 – 6:28 am in Analyst Calls, , , , , , , , , , , ,

Orbitz Prices IPO (OWW, BX, TZOO)

Online travel hub operator Orbitz did price its IPO of 34 million shares at a price of $15.00 per share.  Orbitz will trade under the "OWW" ticker on NYSE.  Unfortunately the original range was indicated as $16.00 to $18.00, so this is going to be deemed as a poor IPO pricing.

Morgan Stanley & Co. Incorporated, GoldmanSachs & Co., Lehman Brothers Inc. and J.P. Morgan Securities Inc.are the global coordinators with Credit Suisse and UBS Investment Bankacting as joint lead managers. Thomas Weisel Partners LLC, PacificCrest Securities, Piper Jaffray, and Stifel Nicolaus are co-managers ofthe offering.

Blackstone (NYSE:BX) is receiving basically all of the IPO proceeds as they are regurgitating the company in a re-IPO.  Here is the backgrounder on the company explaining the history since this was public before, then was acquired by the old Cendant, and then became part of a larger sale to Blackstone just last year.  The weakness in Travelzoo (NASDAQ:TZOO) is also partially to blame for a weak IPO here in the same space, as well as the relation to Blackstone and Wall Street’s poor reception of the private equity beast.

Jon C. Ogg
July 20, 2007

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

Posted on: July 20, 2007 – 6:12 am in IPOs, Internet, , ,

An European Union Funded Competitor For Google (GOOG)

According to TechCrunch, the EU has decided to fund a new search engine business called Theseus. The German government is putting up an extraordinary $165 million.

The Associate Press writes that Theseus is "aiming to develop the world’s most advanced multimedia search engine for the next-generation Internet." German heavyweights including Siemens (SI) and SAP (SAP) will help with research work.

France is considering kicking in another $112 million.

The EU is concerned about having fallen so far behind the US is information technology and internet innovation.

While the project may never challenge Google (GOOG), it could be troublesome for Microsoft (MSFT) and Yahoo! (YHOO) who are fighting to protect their share of the search business. If Theseus got even a small portion of global search activity it would have a profound impact on the long-term recovery efforts at Yahoo!.

But, it may be that the Europeans are only dreaming. They are late to the game.

Douglas A. McIntyre

Posted on: July 20, 2007 – 6:03 am in Uncategorized, , , , ,

Microsoft’s (MSFT) Online Business Begins To Cook

One of the pieces of information buried in Microsoft’s (MSFT) earnings report was the improvement in the company’s online businesses, primarily made up of MSN and Live Search.

Revenue in that part of the company’s operations rose from $580 million last year to $688 million in the current quarter, up 19%. The unit still lost $239 million.

MSFT online still has a ways to go. Yahoo! (YHOO) bought in $1.7 billion in the last quarter, $1.2 billion if traffic acquisition costs are taken out.

In some ways the Yahoo! figures are good news for Microsoft. They are an indication that, based on the audience of  Microsoft sites and its improving share of search, the online unit’s revenue has a chance to double.

Douglas A. McIntyre

Posted on: July 20, 2007 – 5:50 am in Uncategorized, ,

Why Qualcomm’s (QCOM) CEO Needs To Leave

The head of Qualcomm (QCOM), Paul Jacobs, has worn out his welcome. His father founded the company, so it may be hard to get him out. But, the board has to consider the record. Jacobs has always said that he should be judged by results.

Shares in the company have gone from $53 in May of last year to $43 today. Most of the fall is based on poor decisions by management.

Qualcomm has decided that its IP portfolio is so strong and its position as a provider of circuits and software for handsets so dominant that it can force is licensing terms onto the industry.

But, recently, that method of running the company has been a failure.

Qualcomm has been in a series of disputes with its largest customer, Nokia (NOK) for some time. Nokia thinks Qualcomm’s licensing fees are too high and that the US company violates some of its intellectual property. It is hard to believe that Qualcomm’s CEO has decided to move the fight into the public forum, but he has. If Nokia prevails in some of its antitrust and IP violation claims, Qualcomm could be badly damaged.

Qualcomm has also made a point of going to court as often as its can with rival Broadcom (BRCM). The two chip companies have been fighting over IP rights and recently the ITC decided that Qualcomm did violate some of Broadcom’s patents. The body said that handset companies could no longer import certain new models with Qualcomm chips. The news almost certainly alienated manufacturers like Motorola (MOT) and carriers like AT&T (T) Wireless. They need the new handsets to keep sales moving.

Qualcomm was dealt an extraordinary blow yesterday. The company had assumed that it could get Bush to overturn the ITC ruling with lobbying help from handset and cellular companies. Verizon Wireless broke ranks and will license the Broadcom IP directly which undermines Qualcomm’s leverage to get the decision overturned. Verizon will pay $6 per phone.

It is also an acknowledgment that the industry is beginning to accept the fact that Qualcomm’s IP infringes on Broadcom’s.

Jacobs has decided that litigation trumps negotiation. He has been unusually consistent in that. Now he has made enemies of his customers and the cellular service companies. And, he has lost most of his legal battles.

The company needs someone new to mend fences.

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

Posted on: July 20, 2007 – 5:32 am in Uncategorized, , , ,

Short Sellers Taking Heat in Semiconductor Stocks July 2007

Stock Tickers: AMD, SMH, TXN, TER, ADI, LSI, MU, CY, NSM, TSM, STM, IFX

Tech stocks kept rising from June to July, yet the short sellers were beligerent.  They must have loads of money, because on individual short selling in stocks they lost more and more money if this trend remained static as it looks.  Short selling increased overall on the NYSE as seen on the NYSE notice, but this went above and beyond.  Here was a sector breakdown for the May to June period for 2007 if you want to compare. Here are the chip stock results for the major chip names listed on NYSE:

Advanced Micro (AMD) grew from 73.78M in June to 81.25M in July; Texas Instruments (TXN) grew from 30.6M in June to 33.3M in July; LSI Logic (LSI) grew from 43.77M in June to 49.75M in July; Micron (MU) grew from 50.37M in June to 59.99M in July, National Semi (NSM) went from high to higher after growing from 52.93M in June to 59.3M in July; Cypress Semi (CY) saw its 15.49M in June grow to 17.52M in July, Analog Devices (ADI) saw its 7.77M in June grow to 9.05M in July; Taiwan Semi (TSM) saw its 13.73M in June grow to 14.05M in July.

There were a few standouts as far as the actual drop in the short interest.  The most interesting drop out there came in the Semiconductor HOLDRs (SMH) as the short interest fell from 35.2M in June down to 25.6M in July, so go figure.  Teradyne (TER) fell from 14.2M in June to 13.05M in July; STMicro (STM) saw its short interest drop from 3.7M in June down to 2.89M in July;

Jon C. Ogg
July 20, 2007

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

Posted on: July 20, 2007 – 5:31 am in Semiconductor, Short Interest, , , , , , , , , , , ,