Daily Archives: August 2, 2007

Weyerhaeuser Earnings On Deck (WY, IP)

Weyerhaeuser Co. (NYSE:WY) has been hit exceptionally hard in this last market slide.  The paper conglomerate reports earnings Friday, and First Call estimates are looking for $0.39 EPS and $4.24 Billion in revenues.  If this gives guidance, the estimates for next quarter are $0.59 EPS & $4.27 Billion revenues and the Fiscal December-2007 estimates are $1.85 EPS & $16.8 Billion revenues.

Weyehaeuser is a stock on the verge of being in trouble if you ask a technician.  Shares have done much worse than the broad market in this last slide.  The reason is fairly simple: as liquidity and credit crunches have cropped up, Weyerhaeuser is getting hit in the face, in the ribs, and then having its eyes poked.  The company has lots of borrowing, has been considering a full-blown reorganization, and is now ‘possibly’ considered out of reach from private equity firms that are willing to or even can go borrow the vast sums to buy up timberland.  The markets might not also be that excited about trying to absorb its units, and if you have been watching the financial sector of late you will wonder if its land and community development operations have a negative value or a positive value.

On average, analysts are looking for only an $85.00-ish price target.  It is also easy to find upgrades and downgrades to the point you don’t know which or even want to know which report to trust.  Options traders appear to be braced for a move of up to $2.00 in either direction, but this one is harder to read and recent market conditions dictate a broader range now.  For Weyerhaeuser shareholders’ sake, let’s hope this one isn’t a mirror image of the post-earnings trading doesn’t mirror the International Paper (NYSE:IP) earnings. 

There is a lot of company here, particularly with all the units and a $15.5 Billion market cap.  If the company cannot restructure into a REIT, cannot break itself up, cannot further unlock value, OR cannot get its earnings expectations up, then it is going to be a cold winter day in the forest…..even if it is August.  As a last ditch effort, Weyerhaeuser owns so much acreage in the U.S.that it could apply to become the 51st state or could become its ownCanadian Province.  Friday is much more than an important day forWeyerhaeuser.

Jon C. Ogg
August 2, 2007

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

Posted on: August 2, 2007 – 6:44 pm in Conglomerates, Earnings, , , , , ,

Cramer Sticking With DJIA Targets & The CME (CME, NYX)

On tonight’s Mad Money on CNBC, Jim Cramer talked up his DJIA target and DJIA components (there is another batch here as well) but he also said he’s backing the Chicago Mercantile Exchange (NYSE:CME).  He thinks this will benefit hugely from the increased volume and the increased volatility in futures.  This is one he thinks that can raise fees because they are so large in market share now that the CME/CBOT merger went through.  He even said this may be a secular growth story and even thinks the stock is cheap.  The company now has accelerating revenue growth for growth managers, and he thinks estimates could be too low.

Jon C. Ogg
August 2, 2007

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

Posted on: August 2, 2007 – 5:50 pm in Cramer, , , , ,

Earnings Preview: Brookfield Asset Management (BAM, BRK-A)

Friday morning will be the earnings report for Brookfield Asset Management (NYSE:BAM) (and TSX:BAM). The problem with this ‘earnings’ for U.S. investors is that the company is based in Canada and First Call only has a few analysts covering it.  It looks like consensus estimates are $0.26 on EPS, but again we are reluctant to lean too much on a formal estimate based on thin coverage here of a company that will report in Canada and in the U.S.

This one got quite a recent following after Jim Cramer labeled it as potentially the ‘next Berkshire Hathaway’ recently at the end of June.  Since then shares have slid with the weak markets.  Shares are actually now in the lower-half of the $27.08 to $43.82 trading range of the last 52-weeks.  Maybe Warren Buffett is jealous.

The company on July 31 already said it would spin-off 60% of its infrastructure unit called Brookfield Infrastructure Partners L.P. It will spin the stake off to holders of its Class A stock.  Brookfield will retain an approximate 40% equity interest in Brookfield Infrastructure and will manage its operations under a long-term management agreement.  Brookfield Infrastructure intends to seek a listing for its units on the New York Stock Exchange.

Brookfield will implement the spin-off by way of a special dividend currently estimated to be approximately US$1.00 per Brookfield Class A Share, or approximately $600 million in aggregate for 60% of the issued and outstanding interests in Brookfield Infrastructure.  Merrill Lynch & Co. and Citigroup are acting as financial advisors in connection with the spin-off.

According to the company: Brookfield Infrastructure will serve as the primary vehicle through which Brookfield will own and operate certain infrastructure assets on a global basis. Brookfield Infrastructure will focus on high quality, long-life assets that generate stable cash flows, require relatively minimal maintenance capital expenditures and, by virtue of barriers to entry and other characteristics, tend to appreciate in value over time. Its initial operations will consist of electricity transmission systems and timberlands, but Brookfield Infrastructure will seek acquisition opportunities in other sectors with similar attributes and where Brookfield’s operations oriented approach can be deployed to add value.

Jon C. Ogg
August 2, 2007

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

Posted on: August 2, 2007 – 5:21 pm in Buffett, Conglomerates, Cramer, Earnings, , , , , ,

Grand Theft Auto Delay Bad For Take-Two, Good For Other Game Publishers (TTWO, MSFT, ERTS, THQI, ATVI, GME)

Take-Two Interactive (NASDAQ:TWO) is showing how its woes are far from over.  The company is lowering guidance because it delayed the launch date for its upcoming blockbuster game Grand Theft Auto 4.  The company says additional development time is required to complete the title.  Hopefully, if Take-Two doesn’t want there name to be "took-none," they aren’t developing any more "Hot Coffee" scenes.  This GTA title is now being delayed to fircal 2008 instead of calender Q4 2007. 

Take-Two is also delaying its Manhunt 2 for PS2, PSP, and the Wii.   The losses now look large, quite large.  The company says it is in sound financial position, but they just now irritated shareholders and clients.  Investors who jumped in hoping that the new team was going to do a full takeover probably wish by now that they would have played a stock by the name of Forrest Gump’s fruit company.

There is always some good news, and this is the case for the rest of the sector.  Microsoft’s (NASDAQ:MSFT) Halo 3 is going to set records for game releases.  GTA was set to be another major blockbuster coming out right after Halo 3.  In short, Electronic Arts (NASDAQ:ERTS), THQ Interactive (NASDAQ:THQI), and Activsion (NASDAQ:ATVI) may have just gotten one monkey off their backs.   Activision (NASDAQ) just released earnings and is trading up about 1% on "Guitar Hero".   THQ Interactive (NASDAQ:THQI) traded higher today, but its shares are up another 1%; and Electronic Arts (NASDAQ:ERTS) is up almost 1% after a 7% rise today, despite its warning yesterday.   GameStop Corp. (NYSE:GME) isn’t faring as well since this takes out a key upcoming blockbuster title out of the Christmas season sales, with shares giving back gains today with a 3.6% drop in after-hours. 

We noted just yesterday how the sales out of the upcoming Halo 3 and GTA 4 would have acted as a suction against many of the outside game title sales for a period after those were released.  This delay of the GTA title just got rid of a monkey for the other game publishers. 

Take-Two shares are down almost $3.00 in after-hours trading down to $14.00. 

Jon C. Ogg
August 2, 2007

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

Posted on: August 2, 2007 – 4:51 pm in Earnings Warning, Video Games, , , , , , , , , , , , , ,

Did The Genpact IPO Price Too Low? (G, GE)

There is one thing companies coming public hate to see, and that is a discounted pricing to their indicated trading range from the original prospectus terms.  Genpact Ltd. (NYSE:G) did just that.  If you consider that the former General Electric (NYSE:GE) unit priced at $14.00 instead of the $16.00 to $18.00 range and then walked right up the trading staircase after opening from $14.00 (and a tad under) up to $15.00 and then $16.00 and then a close of $16.75, you’ll want to scratch your head.  Sure the market closed up again at the end of the day.  That is crucial and the IPO market has been weak.  But what is obvious is that underwriting departments are probably feeling a little spooked after recent debacles in IPO’s of hedge funds, private equity, and even online travel. 

This may actually help some of the IPO’s out there if this stability in the market and a solid IPO close can come.  There are some negatives out there as it was pointed out how GE represents almost 75% of Genpact’s business and with GE still owning more than a 20% stake.  Most of these ex-Conglomerate subsidiaries tend to do well in the markets, so barring the cautionary stance it seems hard betting against one of the spin-offs with "Gen…" in the name.

GE’s business contract runs to 2013 according to the prospectus.  Shares traded over 18 million shares today.

Jon C. Ogg
August 2, 2007

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

Posted on: August 2, 2007 – 4:17 pm in Conglomerates, IPOs, , , , ,

Openwave Posts Earnings & Names New CFO (OPWV)

Openwave Systems Inc. (NASDAQ:OPWV) has posted its quarterly earnings.  On a non-GAAP basis the company posted -$0.13 EPS and GAAP EPS was listed as -$1.11.  Revenues are listed as $68.1 million, but the revenue numbers from discontinued operations are $75.6 million on a post-MusicWave basis since that is for sale.  This will make comparisons harder to break-out considering that analysts are not following this one like a hawk as much anymore.  Estimates from First Call today were -$0.14 EPS & $71.21 million in revenues.

Unfortunately there is no guidance in the release, although they simultaneously made some other disclosures.  The company’s book-to-bill ratio of 1.0.  Its year-end was this quarter and it ended with almost $246.5 million in cash and equivalents, but its total current assets are now under its total stated liabilities.  The company has also named Jean-Yves Dexmier as CFO to replace Hal Covert, who is leaving for personal reasons.  Openwave also added former NorTel and Nokia executives to its product and sales ranks.  Lastly, Openwave annouhnced that SoftBank Telecom selected its Rich Mail solution for contract renewal in Japan.

Shares were up modestly after the report, but are now down a tad in after-hours.  We’ll have to wait for guidance before declaring this last quarter a real victory or real defeat for the company.

Here was the full preview for reference and for forward guidance and conjecture.

Jon C. Ogg
August 2, 2007

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

Posted on: August 2, 2007 – 3:45 pm in Earnings, Internet, Technology Companies, Telecom, WiMAX, Wireless, , ,

Openwave Systems Bracing For Earnings (OPWV)

Openwave Systems Inc. (NASDAQ:OPQV) is one of the companies reporting earnings after the close today, and this will be the year-end for 2007 as well.  Unfortunately the company has buried many shareholders more than once, and if it was France in the late 1700’s there would be a second or third shareholder revolt.  It leveraged and tried to force a buyout, and that failed to run the shares.  It also left the company alone, or at least "still’ and ‘for now.’  The company probably wasn’t run so poorly before the blow-up occurred, but as we’ve said many times this company is one of the myriad of service providers that found itself in a consolidating internet, cellular, and wireless communications providers world.  When there are much fewer and very big clients out there, it means companies will see "Good hits, and bad misses."  The bad misses hurt, a lot.

Estimates today are -$0.14 EPS & $71.21 million in revenues, and the next quarter estimates are -$0.06 EPS & $72.5 million in revenues.  It is unfortunately still expected to post a loss for fiscal-June 2008.  Shares are down basically 50% from the yearly highs, and barely above the lows from ist $5.07 to $10.58 trading range over the last year.  It is hard to find too many people who want to talk about the old $20+ highs from early 2006.

If you trust options in a sub-$10.00 stock it looks like options trades are not expecting more than a 4% or 5% move in either direction.  But that is hard to guage on a lower priced stock as each penny is substantial in real money terms.  The chart is unfortunately broken as the fundamentals have deteriorated and most of the analysts have outright abandoned teh stock.

A larger company could integrate this company for an instant-in with mobile phone and other wireless communications providers. It also has some substantial platforms and proprietary technology.  The flip side is that in the consolidated world of fewer providers is that it boils down to what someone would pay for it.  The current market cap is $440 million, and right now it’s just not known if the value is really that much higher or that much lower.

Jon C. Ogg
August 2, 2007

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

Posted on: August 2, 2007 – 12:35 pm in Earnings, Internet, Technology Companies, Telecom, WiMAX, Wireless, ,

Beazer Homes (BZH): Sick Of Being Bankrupt

Big hedge-fund Citadel says it upped its stake in home-builder Beazer (BZH) to 5.7%. Just in time.

Investors who go a piece of Beazer after it was pulverized on bankruptcy rumors could have picked up shares yesterday at $8.10. But, the bankruptcy only lasted a few minutes. Once Beazer shot down the talk, the shares moved back up and now trade at $12.90, up 12% on the day.

The Citadel news helped.

The whole incident has to make Wall St. wonder how a rumor like the Beazer one gets started, and why enough traders believe it to drive the stock from $13.40 to $8.10 in just a few minutes.

Seems like someone wanted the shares down, at least for a moment.

Douglas A. McIntyre

Posted on: August 2, 2007 – 12:18 pm in Uncategorized,

Charter (CHTR) Can’t Beat The Devil

Charter (CHTR) just kept going up and up. At one point in July it was up over 275% from where it had traded a year earlier.

The premise was simple. The company’s $19 billion in debt had been refinanced on more favorable terms. It was still too much, but with VoIP, broadband, and digital TV customers streaming through the door, cash flow could keep ahead of the debt load.

Revenue for the quarter grew a ho hum 8.5% to just under $1.5 billion. The company did add VoIP customers at a good clip. Telephone customers increased by approximately 127,700 in the second quarter of 2007, nearly double the 66,500 net additions in the year-ago quarter.

High speed internet customers grew at a rate slightly better than last year, but digital video customers increased by approximately 7,600, compared to 23,800 net additions in the year-ago quarter.

But the company did not make a lot of financial progress and its shareholders payed the price. operating income was $200 million compared to $146 million the year before, but interest expense was essentially flat at $471 million.

So, Charter lost money. Too much for Wall St.

The stock fell 5% to $3.37. And, it has dropped from $4.93 on July 19.

Douglas A. McIntyre

Posted on: August 2, 2007 – 12:05 pm in Uncategorized,

Pozen (POZN): Another Microcap Biotech Falls Apart

Pozen (POZN) got the bad news that the FDA has "delayed approval of an experimental two-in-one migraine drug from GlaxoSmithKline (GSK)", according to Reuters.  The drug, Trexima combines Glaxo’s popular migraine drug Imitrex with the older painkiller naproxen sodium.

Pozen’s shares dropped 45% to $9.55. Its market cap is now $285 million, but over the last year, it has been as high as $500 million.

It is a frightening valuation for a company that is virtually a one-trick pony. In the last reported quarter, Pozen has revenue of $7.7 million and an operating loss of $2.9 million.

Even with the drop, the stock still seems high.

Douglas A. McIntyre

Posted on: August 2, 2007 – 8:42 am in Uncategorized, ,

Accredited Home Lenders, Maybe Not So Accredited (LEND, AHM)

Accredited Home Lenders Holding Co. (NASDAQ:LEND) is in trouble this morning.  Shares were down 30% in pre-market activity after an SEC Filing from the company warned of solvency issues, although the trading has improved a bit since then.  The company even issued a ‘going concern’ note on itself.  Apparently the company is worried that after the debacle at American Home Mortgage (NYSE:AHM), creditors and lenders may place margin calls on it as values of the underlying mortgages come under more and more questions.  Unfortunately it can have these margin calls on a one-day notice.  This wouldn’t be the first margin call it ever received, but things have deteriorated further and finding firms that are willing to be white knights or that can come to aid is nearly impossible right now if you are a lender in the soup.

Lone Star Funds has a buyout offer for Accredited Home Lenders, but the obvious fear is that it will either back out entirely or that it will take the juice out of the buyout.  The company is also trying to renegotiate terms to avoid defaulting and avoid a liquidity crunch.  It is also now delinquent in SEC filings.  Accredited Home Lenders shares are down over 20% to just over $6.25.  Its 52-week trading range is $3.77 to $47.82.

How would you like to own that at $40+ and be wondering if the company can make it back up there?  You know that happened to some.  Ouch.

Jon C. Ogg
August 2, 2007

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

Posted on: August 2, 2007 – 8:40 am in Financial Stocks, SEC, Shareholder Issues, , , , ,

IPO PRICING: Genpact (G, GE)

Genpact Ltd. has priced its IPO under the ticker "G" on the New York Stock Exchange of 35.294 milllion shares at a price of $14.00 per share.  Unfortunately, the estimates pricing range was originally set at $16.00 to $18.00.  The joint book runners for the offering were Citigroup, Morgan Stanley, and J.P.Morgan.  Co-managers are listed as Merrill Lynch, Wachovia, Banc of America, Deutsche Bank, Credit Suisse, and UBS.

This is now a former General Electric (NYSE:GE) GE unit, and it is a Bermuda-based offshore provider of business process outsourcing to General Electric and to many large global companies.  GE sold a 60% stake of Genpact back in 2004 to private equity, but it still held a minority stake and is the company’s largest customer with a contract through 2013.  Half of the shares are being sold by the company for funding and half of the shares are being sold by holders.

Here is the company’s own basic description of itself, and it sounds more like an outsourcing and cost containment operation that operates within other companies (mostly within GE now).  We manage business processes for companies around the world. We combine our process expertise, information technology expertise and analytical capabilities, together with operational insight derived from our experience in diverse industries, to provide a wide range of services using our global delivery platform. Our goal is to help our clients improve the ways in which they do business by continuously improving their business processes, including through the application of Six Sigma and Lean principles and by leveraging technology. We strive to be a seamless extension of our clients’ operations.

Genpact has more than 26,000 employees and operates in 9 countries. Its 2006 revenues were $613 million, and its business outside of GE is currently listed as 25.8%; so GE is almost 75% of its business for now.  Immediately following this offering, 206,409,349 common shares and no preference shares will be issued and outstanding.  GE is selling 5.88+ milliojn shares in the IPO, and based on the prospectus it appears that GE will continue to own a 22.65% stake in the company after the IPO.

Jon C. Ogg
August 2, 2007

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

Posted on: August 2, 2007 – 8:04 am in Conglomerates, IPOs, , , , ,

Pre-Market Stock News (August 2, 2007)

(AIV) Apartment Investment & Management $0.88 EPS vs $0.80 est.
(AIZ) Assurant $1.36 EPS vs $1.26 est,
(ANSS) ANSYS $0.30 EPS vs $0.27 esy.
(ATK) Alliant Techsystems $1.50 EPS vs $1.35 est.
(CBB) Cincinnati Bell $0.08 EPS vs $0.08 est.
(CHINA) CDC Corp. sells its interactive agency operations to Aegis Group.
(CKP) Checkpoint Systems $0.36 EPS vs $0.27 est.
(DELL) Dell plans to acquire private ASAP Software for some $340 milllion; Dell trading up almost 1% pre-market.
(DIS) Disney trading down almost 1% after earnings yesterday.
(DJO) DJ Orthopedics $0.35 EPS vs $0.28 est.
(EK) Eastman Kodak indicated up 2% after posting a gain before charges.
(ERTS) Electronic Arts traded down 2% after missing estimates and giving soft guidance.
(GYI) Getty Images trading down 15% after missing earnings and guiding lower.
(HOT) Starwood Hotels $0.82 EPS vs $0.62 est.
(IBAS) iBasis $0.00 EPS vs $0.12 est.
(IP) International Paper $0.52 EPS vs $0.54 est.
(ISYS) Integral Systems awarded Air Force contract for $5.8 million.
(KB) KBR Inc. $0.30 EPS vs $0.28 est.
(LOCM) Local.com announced traffic is building at its UK site.
(NITE) Knight Trading names new CFO.
(NSR) Neustar $0.30 EPS vs $0.27 est.
(NUS) Nu Skin $0.24 EPS vs $0.23 est.
(NYX) NYSE $0.65 EPS vs $0.63 est.
(PDC) Pioneer Drilling $0.26 EPS vs $0.31 est; unsure if comparable.
(PPL) PPL $0.63 EPS vs $0.52 est.
(PTEN) Patterson-UTI $0.64 EPS vs $0.54 est.; announced $250 million share buyback.
(SBUX) Starbucks trading up almost 3% after meeting earnings and in-line guidance.
(TBL) Timberland $0.30 EPS vs $0.30 est.
(TK) Teekay Shipping $0.90 EPS vs $0.85 est.
(USPH) US Physical Therapy $0.20 EPS vs $0.20 est.
(VIA) Viacom $0.54 EPS vs $0.50 est.
(WCG) Wellcare $1.30 EPS vs $1.23 est.
(WPI) Watson Pharma $0.34 EPS vs $0.26 est.; named a CEO succession plan.

Posted on: August 2, 2007 – 7:24 am in Pre-Market Activity

Germany Saves A Bank, Would The US?

IKB, a specialist lender based in Düsseldorf, was bailed out by the German government. According to the Financial Times, Jochen Sanio, head of Germany’s financial regulator, is said to have warned of the worst banking crisis since 1931."

IKB had invested heavily in sub-prime investments.

Along with the German government, DeutscheBank (DB) and Commerzbank invested in the bail-out.

The arrangement raises the question of whether the US central bank would do the same thing? Clearly Bear Stearn (BSC) has problems in some of its hedge funds and most large banks and investment banks have loans out on billions of dollars in LBO and private equity deals. It is just a matter of time before one or more of these implodes.

And, that raises the question of whether the government here would step in if it saw a series of failures of US financial companies or it it would let the market sort out the quick from the dead.

That could be dangerous, but it is the American way.

Douglas A. McIntyre

Posted on: August 2, 2007 – 7:19 am in Uncategorized, ,

Pre-Market Analyst Calls (August 2, 2007)

AAPL started as Buy at B of A.
ALVR raised to Buy at First Albany.
BARE cut to Sector Perform at CIBC.
BRCM raised to Outperform at CIBC.
COCO raised to equal weight at Lehman, raised to Outperform at Piper Jaffray.
DB cut to Peer Perform at BEar Stearns.
DELL started as Buy at B of A.
DJ raised to Equal Weight at Lehman.
EDS cut to Hold at Jefferies.
ENDP cut to Neutral at UBS.
FCH raised to Outperform at Wachovia.
GMR raised to Outperform at Bear Stearns.
GYI cut to Sell at Deutsche Bank.
HPQ started as Buy at B of A.
IBM started as Neutral at B of A.
MI raised to Buy at Deutsche Bank.
MRVL cut to Sector Perform CIBC.
MVIS started as Buy at Merriman Curhan Ford.
OMX raised to Overweight at JPMorgan.
Q raised to Outperform at CIBC.
SUNW started as Buy at B of A.
SYMC raised to Outperform at Baird, raised to Outperform at FBR.
ZGEN raised to Buy at B of A.

Jon C. Ogg
August 2, 2007

Posted on: August 2, 2007 – 7:02 am in Analyst Calls, , , , , , , , , , , , , ,

Amgen (AMGN) And GSK (GSK): Is The Government Getting Tougher On Pharma?

The U.S. Centers for Medicare & Medicaid Services issued its final ruling governing use of a class of anemia drugs including Amgen’s (AMGN) Aranesp .The CMOS guided doctors to restrict the use of the drug which has been the subject of studies about its health risks. According to Reuters: "The ruling goes to the heart of the core franchise of the world’s biggest biotech company by sales."

Aranesp brought in over $4 billion in sales for Amgen last year, and safety concerns added to these new restrictions are almost certain to drive that number down. Amgen’s shares are off from a 52-week high of $77 to $52.

At almost the same time, the FDA has issued significant restrictions on the labeling of GlaxoSmithKline’s (GSK)  best-selling diabetes drug, Avandia. Bloomberg writes that “Glaxo will probably receive a black-box warning and the sales will probably not recover to the previous level,” according to Pascale Boyer Barres, an analyst at Bordie & Cie.

It may simply be a coincidence or it may be that US government drug oversight is tightening. Studies from doctors outside the government lead to questions about Avandia, and the FDA may feel that it does not want to be lead around by the nose by physicians who are not on its staff.

If the government is picking up its investigations into drug safety after embarrassment like Merck’s (MRK) Vioxx, big pharma can add that to its problems with generics. The difficulties are piling up.

Douglas A. McIntyre

Posted on: August 2, 2007 – 6:49 am in Uncategorized, , ,

Starbucks (SBUX) Lackluster Results

Starbucks (SBUX) turned in an OK performance and its stock moved only a little over 2% up in pre-market trading.

Revenue rose from $1.66 billion in the quarter a year ago to $2.01 billion, up. But, earnings rose only 10.6% to $243 million.

Sales at coffee shops open at least 13 months, a key retail measure known as same-store sales, rose 4 percent. The company opened 668 new stories during the period

The market was relieved, but it was not heartened.

At this point, the market will need to see more than a 4% gain in same-store sales to drive the shares much higher. Even with the small rally after the report, Starbucks shares are under $28 on a 52-week high/low of $40.01/$25.22. Those are hardly growth stock numbers.

But, for now, Starbucks is not a growth stock.

Douglas A. McIntyre

Posted on: August 2, 2007 – 6:24 am in Uncategorized,

Nokia (NOK): Winner And Still Champion

According to Bloomberg, Nokia’s (NOK) net income rose to 2.83 billion euros ($3.87 billion), or 72 cents share. The company moved market share toward 40 percent by introducing new devices as competitor Motorola (MOT) lost money. 

One analyst’s comments were particularly cruel: “Motorola’s capitulation in the second quarter has paved the way for Nokia to take full advantage of its strong low-end portfolio without facing major price pressure,” Helsinki-based Michael Schroeder, an analyst at Kaupthing Bank.

The average selling price of a Nokia phone stood 90 euros in the quarter, up from 89 euros in the previous quarter and down from 102 euros a year earlier.

The Finnish company shipped 101 million devices during the quarter, a 29 percent increase from a year earlier and an 11 percent gain sequentially.

Data source: Bloomberg

Douglas A. McIntyre

Posted on: August 2, 2007 – 6:09 am in Uncategorized, ,

Europe Markets 8/2/2007

Markets in Europe were higher at 6.50 AM New York time.

The FTSE rose .7% to 6,295. BP (BP) was down 1.4% to 565.5. BT (BT) was up 1.9% to 315.75. GSK (GSK) was up 1.4% to 1273.

The DAXX rose 1.1% to 7,553. Bayer (BAY) rose 2% to 52.66. DeutscheBank (DB) rose 2% to 100.76. Deutsche Telekom (DT) rose 1.9% to 12.76.

The CAC 40 rose .6% to 5,688. AXA (AXA) rose 1.8% to 28.64. France Telecom (FTE) rose 2.9% to 20.23.

Data from Reuters

Douglas A. McIntyre

Posted on: August 2, 2007 – 6:00 am in Uncategorized, , , , , , , ,

Sohu (SOHU), So Small

A look at Sohu’s (SOHU) earnings for the last quarter shows how small and vulnerable China’s internet properties are compared with global operations like Google (GOOG) and Yahoo! (YHOO). It also indicates how much they may be overvalued.

Sohu is really not growing very quickly and its revenue is tiny. Total revenues for the quarter ended June 30, 2007 was $39.0 million, compared to revenues of $33.1 million for first quarter ended March 31, 2007, and $34.1 million for second quarter ended June 30, 2006. Net income for second quarter of 2007 was $5.7 million or $0.15 per fully diluted share.

The company estimated that total revenues for third quarter 2007 to be between $45 million to $47 million.

Sohu has a market cap of $1.25 billion and its stock is up 65% over the last year, while Google’s is up 40%.

Sohu’s shareholders have a problem. China may be large, but use of web portals is not financially significant. None of the Chinese internet companies including search leader Baidu (BIDU) have revenue that even approaches a company like Yahoo!.

But, the disadvantage is great than that. While Google and Yahoo! can come into the Chinese market and compete for market share by investing large sums in local operations or forming partnerships with existing online companies in the country, the Chinese firms do not have the capital or the means to expand their revenue base into the US or Europe. Those markets are probably permanently closed to them while China may be permanently open to the large US online companies.

That makes big valuations of Chinese internet firms a bit riskier.

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

Posted on: August 2, 2007 – 5:33 am in Uncategorized, , , ,