Daily Archives: August 13, 2007

VMware IPO Price: Almost At 24/7 Wall St. Pricing Projection (EMC, VMW)

EMC Corp. (NYSE:EMC) has finally done it.  The VMware (NYSE:VMW) partial spin-off and initial public offering has priced.  On Monday morning we gave a projected pricing of $30.00+.  We were close, but it priced at $29.00 per share.  The original $23.00 to $25.00 got bumped to $27.00 to $29.00 for the same 33 million shares.  Go ahead and just include that 4.95 million share overallotment being exercised, because this IPO is highly likely to open at a premium to a large premium.

Here is the critical issue: The company could have literally sold as many shares as it wanted.  In fact, I’d bet all the tea in China, all the corn in Iowa, all the cactus in Mexico, and all the desert sand in Africa that EMC could have sold off the entire VMware company IF IT WANTED TO.  It doesn’t want to, and it will be a while before the company starts to unload some of its holdings.  EMC doesn’t want to do that, and they have been quite consistent and adamant about holding 87% of the company post-IPO.  Because of a class B stock, they have almost the whole vote.  They didn’t want to sell more shares because EMC believes there is more juice to this IPO.

So we did not quite get our $30.00 price or higher, even if this priced at the top of the already raised range.  But what you can bet on, barring a monster crash in the stock market, is that this will have a premium opening.  Maybe a very large premium.  This pricing was a bit surprising, but the company still owns so much unregistered locked-up stock that it actually makes a lot of sense for EMC not to take all the juice out of the VMware share performance on the first day.  Back in June, we predicted a ’second week in August’ for starters on this pricing.

What will the premium be?  Well, TheStreet.com used a $60.00 possible figure.  Here is what Jim Cramer said on CNBC’s MAD MONEY on Monday regarding his opinion on EMC:  "People thought I was an idiot. But you know what? Stocks don’t always tell the truth in their direction. I think it goes to $23. It’s not too late to pull the trigger."  If this opens at $60.00, well all bets are off. In fact, we noted that at $60.00 or anywhere close right now, that this would mean the wheels have been ripped off the looney wagon. EMC closed up 7.5% at $19.05 on double normal volume, and it looks like it proceeded to trade up another 1.4% to $19.32 in after-hours trading.

We are sending out the EMC-VMware playbook for the special situation investing newsletter subscribers in the morning, mostly on how it pertains to EMC stock and how to value it.  Congratulations EMC and VMware.  Now the rationale will be back in the stock here after tonight and tomorrow.  Stay tuned.

If you don’t know much about virtualization, you better read up on it.  It’s going to be THE next big thing for 2008 and beyond.  Those cheap dual core and quad core processors and cheaper and cheaper DRAM modules are finally turning theory into mainstream.

Jon C. Ogg
August 13, 2007

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

Unfortunately, because of the volume of emails on EMC & VMware we won’t be responding to individual emails on the IPO for a few days.

Posted on: August 13, 2007 – 10:39 pm in IPOs, Software, , , ,

The 52-Week Low Club

Thornburg Mortgage Asset (TMA) Mortgage company and real estate investment trust gets downgraded by S&P. Falls to $13.81 from 52-week high of $28.40.

Pope & Talbot (POP) Forest products company has big Q2 loss and freezes hiring. Down to $.45 from 52-week high of $8.44.

Tribune Company (TRB) Tough time to do a newspaper LBO. Share price shows it. Down ot $25.57 from 52-week high of $33.99.

SCO Group (SCOX) Lost copyright battle over key Unix operating system to Novell (NOVL). Drops to $.35 from 52-week high of $3.11.

Movie Gallery (MOVI) No. 2 movie rental chain has too much debt. May not make it. Shares off to $.26 from 52-week high of $5.29.

Beacon Roofing Supply  (BECN) Company hurt by residential building. Down to $11.98 from 52-week high of $23.58.

Douglas A. McIntyre

Posted on: August 13, 2007 – 3:21 pm in Uncategorized, , , , , , ,

Financial Website Rankings For July: WSJ Digital, No Murdoch Goldmine

It appears that the speculation about Rupert Murdoch’s News Corp (NWS)  making the WSJ online edition free to expand its audience may not make sense. Based on measurements from Net Ratings, Wall Street Journal Digital has almost 8.2 million unique visitors a month, and the average visitor spent just under 20 minutes on the sites last month.

While the Dow Jones (DJ) sites have only about half the unique visitors that Yahoo! Finance (YHOO) has at 16.8 million, a great deal of the WSJ and Barron’s online content is only available to paid subscribers. It would not be hard to imagine the number of visitors going up by 5x to 10x if all of that content became free. And, the Net Ratings numbers only include US visitors.

But, as Silicon Alley Investor points out, even a large web audience might bring in enough money to offset closing or cutting back circulation of the print paper.

This year, The Street.com will bring in about $20 million in advertising revenue. It had 3.1 million unique visitors last month.

Even if Wall Street Journal Digital could get its audience up to 66 million uniques, an ambitious eight-fold increase, annual advertising revenue would only be about $450 million, based on extrapolating from TSCM numbers. That isn’t enough to offset Dow Jones huge editorial and sales costs.

Brand or Channel Unique Audience (000) Time Per Person (hh:mm:ss)
Yahoo! Finance                        16,851 0:22:52
MSN Money                        11,672 0:17:47
AOL Money & Finance                        10,530 0:15:16
Wall Street Journal Digital                         8,160 0:19:25
CNNMoney                         8,113 0:14:21
Forbes.com                         7,775 0:05:03
Reuters                         6,994 0:05:32
Bankrate.com                         3,481 0:06:14
Motley Fool                         3,310 0:17:24
TheStreet.com                         3,104 0:08:08
FreeCreditReport.com                         3,029 0:07:25
BusinessWeek Online                         2,912 0:03:59
American City Business Journals Network                         2,759 0:04:40
Bloomberg.com                         2,250 0:05:41
About.com Business & Finance                         2,164 0:02:20
Smartmoney                         2,068 0:10:01
USATODAY.com Money                         1,608 0:03:49
FT.com                         1,517 0:02:47
Hoover’s Online                         1,397 0:02:43
Morningstar                         1,291 0:09:39

Douglas A. McIntyre

Posted on: August 13, 2007 – 1:05 pm in Media, , ,

Will Nintendo Go After The Apple (AAPL) iPhone?

TechCrunch is reporting that Nintendo has filed a patent for a handheld device with a sensor control. That would mirror a key function of Apple’s (AAPL) iPhone. And, Apple is already working on adding gaming to its handset Some of the games for the Nintendo DS handheld sell more than 10 million units a year.

While it may not be much of a hurdle for Apple to move the iPhone to some level of video game functionality, it would be more difficult for the DS to move into the talking handset world. The chipsets are very different, and the Japanese company would need an alliance with a major carrier like Verizion Wireless.

That is, of coure, unless a Nintendo DS game device used WiFi and VoIP for its phone function. That could make its call feature free. And, with the Sprint (S) and Clearwire (CLWR) nationwide WiMax networks going online, Nintendo might find some very willing partners if it wants to use the new wireless standard.

Douglas A. McIntyre

Posted on: August 13, 2007 – 12:30 pm in Uncategorized, , ,

Top 25 Financial Websites For July, Big Increase At TheStreet.com

Notable changes this month start with the large drop in the MSN Money, down 22% to

10.3 million unique visitors. The Street.com (TSCM) had an unusually large increase of 51%

BusinessWeek, SmartMoney, and Nasdaq had sharp drops compared with last year.

Douglas A. McIntyre

Unique Visitors (000)
Jul-06 Jul-07 % Change
Total Internet : Total Audience 173,191 180,078 4
Finance – News/Research 50,297 49,302 -2
Yahoo! Finance 11,394 12,396 9
AOL Money & Finance 12,008 11,704 -3
MSN Money 13,199 10,271 -22
CNN Money 6,421 5,642 -12
Dow Jones & Company 5,972 5,438 -9
Forbes Property 5,644 5,414 -4
MANTA.COM 1,597 3,628 127
Reuters Group 3,647 3,449 -5
Bankrate.com Sites 3,529 3,003 -15
Reed Business Information 1,788 2,227 25
TheStreet.com Sites 1,337 2,023 51
BIZJOURNALS.COM 1,604 1,873 17
Business Week Online 2,589 1,839 -29
Hoovers Sites 2,178 1,791 -18
Motley Fool 1,506 1,615 7
BBB.ORG 1,339 1,221 -9
BLOOMBERG.COM* 966 1,195 24
PRINCIPAL.COM 798 706 -12
Google Finance N/A 689 N/A
ML.COM 732 625 -15
FASTCOMPANY.COM 456 592 30
SmartMoney.com Property 995 585 -41
Nasdaq Property 726 548 -24
CNBC.COM N/A 509 N/A
Financial Times Group 340 475 40

Source: ComScore Media Metrix

Posted on: August 13, 2007 – 10:47 am in Research,

VMware IPO Pricing Projection: $30.00+ (EMC, VMW)

EMC’s (NYSE:EMC)partial spin-off of VMware (NYSE:VMW) in the long-awaited IPO should price later today for a Tuesday pricing, although some reports had indicated a Monday trade over the weekend.  As of 9:10 AM EST, the properfilings were not in for a trade today and even though that can change Tuesday should be the day.  EMC shares are up 4% in early trading.

Based on the brokerage community commentary and based on the  flurry ofinquiries and activity from readers here and at other onlineinformation services, this should get a premium pricing.  We had beenwondering why EMC itself in employee exchange offers had not ratchetedthe price range up a few weeks ago.  The demand is here from retail andfrom institutions and this "virtualization" trend is something you aregoing to hear a lot more about. 

By all the looks of it, VMware couldprice well north of $30.00 per share. A $30.00 per share pricing wouldgive this roughly a $10 Billion market cap, but keep in mind that sofar only 33 million shares have been committed and EMC is going to hold 87% of the stock even after the IPO.  It is probably a safebet to assume the 4.95 million share overallotment will be exercised.  Jim Cramer on TheStreet.com has predicted as high as $60.00 per share on VMware,giving it a market cap in the vicinity of $20 Billion all said anddone.  If this prices up that high it would be more than shocking andwe’d think the wheels of financial rationality had come off the crazymarket bandwagon.  But nonetheless, this could well price north of the$27.00 to $29.00 higher revised range.  We don’t yet have any ratios, but theshares have been inquired about to death and this was unofficiallyoversubscribed before the roadshow even kicked off last month.  This could easilyprice north of $30.00 and it would be a surprise if it didn’t.  A major market tank can trim some demand, buteveryone wants in this IPO so don’t be shocked if it indicates higherand higher.

We’ll be sending out a more detailed pricing and playbook for this tonight for our special situation investing newsletter, but we want to warn that if it prices intraday then it will create some exacerbated reactions potentially both ways.

We expect at least one or two more "virtualization" companies willfile to come public in the next few weeks to months based on thestrength here.  Look at the backers of one competitor.  Here were the employee conversions from last week and it almost seemed as though some of the employees were holding out.  The last amended prospectuslisted Citigroup, JPMorgan, Lehman Brothers, Credit Suisse, MerrillLynch, and Deutsche Bank in the syndicate cover; although there weremore co-managers previously listed in this and that may just be anabbreviated group.

Jon C. Ogg
August 13, 2007

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

Posted on: August 13, 2007 – 9:46 am in IPOs, , , , ,

Qualcomm (QCOM) Lieutenant Walks The Plank

Qualcomm’s (QCOM) legal strategy for defending its intellectual property has been a mess recently. It lost a key ruling with the ITC. The agency said that because the company infringed on certain Broadcom (BRCM) patents that handsets with QCOM technology in them would be banned from import.

Qualcomm also lost a key patent case to Broadcom, and last week the judge in the case doubled the award.

Now, Qualcomm’s general counsel is on his way. The CEO, Paul Jacobs, son of the company’s founder, gets to stay. But, at least the move is a start.

Qualcomm needs to quickly make peace offerings to Broadcom and Nokia (NOK). QCOM is in a licensing battle with the big handset company which is its largest customer.

With a new person running the legal department, the company has a chance to take a fresh approach to litigating every problem. But, the window is probably not open for long.

Douglas A. McIntyre

Posted on: August 13, 2007 – 8:48 am in Uncategorized, , ,

Intel (INTC) Puts Another Nail In AMD’s (AMD) Coffin

AMD (AMD) hope to this day that its new Barcelona quad-core chip will get it back in the game of taking server chip market share from Intel (INTC). The four cores allow the chip to process substantially more information that single or dual-core chips.

But, the first version of Barcelona, out next month, will be less powerful than analysts had hoped.

To make matters worse, Intel has made it to market with its own quad-cores, and today said it would put out a cheap, low-powered version of the architecture and one that very speedy and more expensive.

The Intel chips will carry low price points, which will help further squeeze AMD’s already shrinking margins.

Perhaps AMD should simply give its chips away. It can’t lose much more money than it already does.

Douglas A. McIntyre

Posted on: August 13, 2007 – 8:19 am in Technology Companies, ,

Sears (SHLD) Shows What A Poor Retailer It Is

The head of Sears (SHLD), Ed Lampert, may be a good hedge fund manager, but he is an awful retailer. (He has appointed another poor soul, Aylwin Lewis to be CEO and market whipping boy).

Sears announed today that its sames store sales had dropped 4.3% over the last quarter and it K-Mart division was down 3.8%. The company also reduced its profit projection for the quarter from a range of $170 million and $185 million to $160 million to $200 million.

The whole Sears/K-Mart thing looked so promising at one point.

Rumors that Lampert was both a hedge fund and retail genius took Sears shares from $118 in early 2006 to $195 last April. But, as retail results started to weaken, the idea that Sear Holdings would be the next Berkshire Hathaway started to fade.

The shares now hit $135 on a good day, and the notion that the two old retail chains can be turned around is a thing of the past.

Douglas A. McIntyre

Posted on: August 13, 2007 – 7:59 am in Uncategorized,

Pre-Market Stock News (August 13, 2007)

(BEAS) BEA Systems trading up 6% pre-market on 3 upgrades: Raised to Buy at B of A; raised to Buy at UBS; raised to Outperform at Bear Stearns.
(BX) Blackstone earned posted revenues $975M vs $1.06 Billion.
(C) Citigroup disclosed $500+ million in credit losses, yet stock indicated higher.
(EMC) EMC trading up 2% ahead of VMware IPO pricing (as of now VMware IPO should price today and trade Tuesday).
(GS) Goldman Sachs is adding $3 Billion in additional capital into one of its ‘undervalued’ hedge funds.
(HOV) Hovnanian said quarterly net contracts are down 24% and forecast higher cancellations.
(IDEV)  Indevus Pharm announced receipt of a $49.9 Million milestone payment from Esprit Pharmaceuticals.
(LCRY) LeCroy $0.12 EPS vs. $0.06 est.
(MOT) Motorola signed contracts with China Mobile for nearly $400 million.
(NITE) Knight Trading said that Goldman Sachs invested for a minority interest in its Direct Edge ECN.
(PHTN) Photon Dynamics raised mid-point of range.
(Q) Qwest Communications names Edward A. Mueller Chairman and Chief Executive Officer
(SHLD) Sears is lowering KMart and Sears sales.
(SYY) Sysco Foods $0.49 EPS vs $0.46 est.
(USBE) US Bioenergy $0.15 EPS vs $0.12 est.

Jon C. Ogg
August 13, 2007

Posted on: August 13, 2007 – 7:32 am in Pre-Market Activity, , , , , , , , , , , ,

Blackstone (BX) Earnings: A Walk-Off Home Run

Blackstone’s (BX) earnings tripled and the stock is up almost 10% in the pre-market. Net income hit $774 million up from $224 million a year ago.

The earnings were more than a normal quarterly report. The figures are a vindication for the firm that went public earlier this year and watched its shares drop from $38 to $22.76, humiliating CEO Steve Schwartzman  and his staff.

The crisis in LBO and private equity debt has taken its toll on the ability of firms like Blackstone to syndicate the huge pools of debt that they take on with deals.

In the light of the summer’s financial markets problems, the real numbers to watch will be BX Q3.

Douglas A. McIntyre

Posted on: August 13, 2007 – 7:23 am in Uncategorized,

Pre-Market Analyst Calls (August 13, 2007)

AMB cut to Sell at Citigroup.
ARW raised to Buy at Citigroup.
ARUN started as Neutral at JPMorgan.
AVT raised to Buy at Citigroup.
BEAS raised to Buy at B of A.
BMC raised to Buy at B of A.
CIT raised to Outperform at CIBC.
CRYP raised to sector perform at CIBC.
DHI cut to Neutral at JPMorgan.
EGLE raised to B uy at UBS.
ELNK raised to sector perform at CIBC.
FE raised to Buy at Deutsche Bank.
GSF raised to Buy at Jefferies.
JPM raised to Buy at Deutsche Bank.
JWN raised to Outperform at Piper Jaffray.
LMT raised to Buy at B of A.
MNST raised to Outperform at Wachovia.
NCMI raised to Buy at Deutsche Bank.
OSG raised to Outperform at Credit Suisse.
PPO started as Mkt Perform at William Blair.
PTV raised to Buy at B of A.
PLD cut to Sell at Citigroup.
RIG raised to Buy at Jefferies.
SEE raised to Buy at B of A.
SGP raised to B uy at UBS.
SRE raised to Buy at Deutsche Bank.
TEO raised to Buy at Deutsche Bank.
USB raised to Hold at Deutsche Bank.
VCLK raised to Overweight at JPMorgan.
WBSN raised to Buy at Deutsche Bank.

Jon C. Ogg
August 13, 2007

Posted on: August 13, 2007 – 7:01 am in Analyst Calls

Europe Markets 8/13/2007

Markets in Europe were up at 6.30 AM

The FTSE rose 1.8% to 6,147. GSK (GSK) was down 1% to 1263. Vodafone was up 3.1% to 156.3.2%

The DAXX rose rose .8% to 7,402. Daimler (DCX) was up 2.7% to 61.69.

The CAC 40 rose 1% to 5,505.

Douglas A. McIntyre

Posted on: August 13, 2007 – 5:30 am in Uncategorized

Microsoft (MSFT) Hopes New Game Can Salvage Xbox

One very popular video game is only available on the Microsoft (MSFT) Xbox. Halo, a violent space game, has sold 15 million units of its first two versions, according to The New York Times.

Halo 3 comes out next month. And, it cannot hit too soon. For the year ending June 30, Microsoft’s 10-K shows that its entertainment and device division, which is primarily Xbox sales, had revenue of $6.1 billion, but a loss of $2.1 billion.

The Nintendo Wii has been outselling Xbox and Sony (SNE) PS3, and with Take-Two’s (TTWO) big "Grand Theft Auto" game delayed, the video gamin introductions that might help holiday sales are not looking very healthy.

But, it would be fair for Wall St. to ask just how much halo effect Halo 3 will give Xbox. Core gamers who love the game may replace older Xbox units with the new Xbox 360 and Halo 3 sales may bring in new revenue. But, these are not the kind of "conquest sales" that Microsoft needs to take business away from Sony and Nintendo. That means the holidays could be rough for Redmond’s game unit.

Douglas A. McIntyre

Posted on: August 13, 2007 – 4:20 am in Uncategorized, , ,

Media Digest 8/13/2007 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, Asian central banks put $5.1 billion into the credit markets on Monday to calm fears.

Reuters writes that Motorola (MOT) won $394 million worth of contracts to supply telecom gear to China Mobile (CHL).

The Wall Street Journal writes that Qwest (Q) named former Ameritech CEO Edward Mueller as its new head.

The Wall Street Journal reports that AMD (AMD) and Intel (INTC) are intensifying their race to make more powerful multi-core chips.

The New York Times writes that Halo 3, a new video game, could drive Microsoft (MSFT) Xbox sales coming into the holidays.

FT writes that GM (GM) may allow customers to rent batteries for its new Chevy Volt car.

Barron’s writes that demand for fiber optics could drive up profits at Corning (GLW).

Douglas A. McIntyre

Posted on: August 13, 2007 – 4:04 am in Uncategorized

Asia Markets 8/13/2007

Markets in Asia were modestly higher.

The Nikkei rose .2% to 16,800. NEC (NIPNY) was down 1.4% to 550. NTT (NTT) was up 1.4% to 503000.

The Hang Seng was up .3% to 21,867. China Mobile (CHL) was up 1% to 85.5. China Netcom (CN) was down 1.2% to 18.86.

The Shanghai Composite rose 1.5% to 4,820.

Data from Reuters

Douglas A. McIntyre

Posted on: August 13, 2007 – 2:53 am in International Markets, , , ,