Daily Archives: August 21, 2007

Google: YouTube Goes For The Cash

Google (GOOG) has finally announced how it will make money on YouTube. According to The Wall Street Journal, the site will begin to run video commercials 15 seconds into the site’s content. The user can close the ad. The paper writes that "YouTube plans to sell these ads only on videos from its content partners, whose original videos include a variety of genres and include professionally produced clips and user-generated content."

The problem with the program is that so much of the content at YouTube is created by nutty users. And, a look at the most popular videos at the webste indicates that these dominate traffic. These include laughing babies, UFO videos, and a rant from Jim Cramer.

GOOG should not count the money yet.

Douglas A. McIntyre

Posted on: August 21, 2007 – 7:17 pm in Internet,

The 52-Week Low Club

UST Inc (UST) Philip Morris USA is testing rival product. Shares drop to $47.73 from 52-week high of $61.17.

Saks (SKS) Market miffed about Q2 loss. Drops to $16.55 from high of $23.25.

Williams-Sonoma (WSM) Citi initiates retailer as "sell". Falls to $29.51 from 52-week high of $36.95.

Oplink Communications (OPLK) Fiber optics company gives weak outlook. Fall sto $13 from 52-week high of $22.38.

Adams Respiratory (ARXT) Posts loss and see generic competition. Falls to $34.50 from 52-week high of $46.67.

Douglas A. McIntyre

Posted on: August 21, 2007 – 3:50 pm in Uncategorized, , , , ,

Wal-Mart’s DRM-free MP3 Music Not Likely To Hurt Apple or Amazon.com (WMT, AAPL, AMZN, RNWK)

Earlier this morning, Wal-Mart (NYSE:WMT) announced the launch of its own "DRM-free" MP3 music downloads.  Those wanting the service can download from Walmart.com at $0.94/song and $9.22/album.  The new MP3 digital format allows the ability for customers to play music on nearly any device, including iPod®, iPhone® and Zune(TM).

Wal-Mart is one of the first major retailers to offer MP3 digital tracks with music content from major record labels such as Universal and EMI Music, and the launch is aimed to get into the space of Apple (NASDAQ:AAPL) and Amazon.com (NASSDAQ:AMZN).  Wal-Mart’s new MP3 music catalog includes hundreds of thousands of songs and albums, and will be continually expanded with additional mainstream and independent music content. Also, Wal-Mart is currently offering special MP3 album pricing on hundreds of album classics.

It used to be that once Wal-Mart went after your space that things became instantly worse for you and your other competitors.  But after the Wal-Mart woes of late, they just don’t seem able to wrangle away customers at the same rate.  In fact, many may now chuckle at new initiatives because its online presence is still too small to be a major factor.

Steve Jobs and Jeff Bezos probably didn’t call each other up in a panic this morning, and probably won’t be tomorrow either.  These stocks are even higher on the heels of RealNetworks (NASDAQ:RNWK) launch of a new digital music company with MTV.  We addressed this earlier today.  If these were as threatening as they sound then Amazon.com (AMZN) shares might not be up 3.8% and Apple (AAPL) shares might not be up 4% today.  Getting the huge established tech predators unseated from a dinner table at their favorite restaurants usually takes more than getting a two-top table in the corner.

Jon C. Ogg
August 21, 2007

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

Posted on: August 21, 2007 – 2:31 pm in Consumer Electronics, Entertainment, Internet, , , , , , , , , ,

Limelight Networks: How Many Class Action Suits Can It Get? (LLNW, GS, MS)

One thing has held true since the bubble burst and long before then: When shares of a company get hit hard, attorneys file class action lawsuits against a company for misleading shareholders and causing losses.  There was a suit filed against Limelight Networks, Inc. (NASDAQ:LLNW) today, but after looking on the surface there have been a slew of suits.  It looks like seven suits have been filed so far:

August 21: Lerach Coughlin Stoia Geller Rudman & Robbins LLP
August 20: Klafter & Olsen LLP
August 20: Wolf Haldenstein Adler Freeman & Herz LLP
August 17: Roy Jacobs & Associates
August 15: Federman & Sherwood    
August 15: Law Offices of Brian M. Felgoise, P.C.
August 13: Paskowitz & Associates

Interestingly enough, it seems that law firms never go after the underwriters.  That isn’t the always the case and a huge master settlement has been paid by top firms, but these law firms tend to file against the company itself.  When you see a stock price at $15.00 in June, gap over $20.00 on the IPO, come off and then go higher, just to fall off a cliff.  Shares are currently under $8.00 and the trading range since its IPO is $7.96 to $24.33.

Needless to say, the firms filing suits now may need to look elsewhere.  Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) were the lead underwriters in this last offering.

Jon C. Ogg
August 21, 2007

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

Posted on: August 21, 2007 – 1:43 pm in IPOs, Law,

Shareholders Approved The Deal, But What Will Tribune Really Fetch? (TRB, GCI, NYT)

Shares of Tribune Corp. (NYSE:TRB) are trading up higher by about 3% today after shareholders approved the transaction with Same Zell.  That was not really a question.  If you were in a troubled industry that is going to face a steady secular onslaught ahead and may not be able to keep your stock above $30.00, of course the $34.00 transaction would be approved.  Sam Zell first gave the formal terms on April 2, 2007 at the height of the private equity boom.

Here is the first problem: Zell was getting the most influential voice in the company with what was going to be $315 million investment.  Tribune’s total equity deal would value the stock at nearly $4 Billion.  He got the company to approve the Employee Stock Option Plan to hold the outstanding stock and Zell holding a subordinated note and a warrant giving him the right to buy 40% of the stock.  He also gets the chairman seat.  Employees will finance a huge portion, but they all have to know who they will ultimately be answering to.

The real problem is that a cash tender for 126 million shares at $34.00 per share was to be funded with incremental borrowings and a $250 million investment from Sam Zell.  In a credit-tight environment it is hard to imagine that there would not be financing concerns. It will be able to sell off assets to pay down the debt, and it seems no one believes that Zell won’t try to renegotiate terms.  Wouldn’t you? 

Our prediction: A new offer would seem to still be fair around $31.00 on the low-end and the need to pay above $32.50 just doesn’t seem merited if the credit markets are going to actually make you prove you have real worth.  We noted some risks to the merger last week and before.

Incidentally, Options out to January 2008 seem to give an indicated price range of $31.50 to $32.40.  That is a highly subjective number, but that’s what the tea leaves are signaling today after the 3% gain in the stock.  The future of newspapers and broadcast stations still has a value, but it is a decreasing value and far lower than just a few years ago.

Gannett (NYSE:GCI) shares are down over 15% since early April.  New York Times (NYSE:NYT) shares are off less than 10% from early April,  but those shares are down more than 15% since the June highs.  Neither is a fair comparison since they don’t have as broad of assets, but a company reliant upon newspaper sales is going to be compared to other newspaper companies.

Jon C. Ogg
August 21, 2007

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

Posted on: August 21, 2007 – 12:25 pm in Media, Mergers and Buy Outs, , , , ,

Google Takes Another Checkered Flag

Google (GOOG) walked off with another win in the July Hitwise search engine sweepstakes with 64.35% of the US market, up from up from 60.23% the same month last year.

Yahoo! (YHOO) was fairly flat moving from 22.54% to 22.13%.

Microsoft’s (MSFT) portal fell from 8.79% down from 11.77% in July of last year. Ask.com fell from 3.29% to 3.21%. So much for their new ad campaign.

Douglas A. McIntyre

Posted on: August 21, 2007 – 12:02 pm in Uncategorized, , ,

Apple: The Market Reacts To New Competition

It must be humiliating for MTV and RealNetworks (RNWK) to say they will compete with Apple (AAPL) iTunes and watch the AAPL shares spike up almost 6% to $129. RNWK were up only slightly more, and they should be the big beneficiaries of the news.

What the market’s reaction says is simple. Even with Viacom (VIA), Verizon Wireless, a joint venture between Verizon (VZ) and Vodagone (VOD) , behind  a deal to sell and distribute music over one of the largest cellphone networks in the world, AAPL can’t be touched. MTV is a global brand. It doesn’t matter. RealNetworks has outstanding technology.

The new music store initiative is being viewed as a loser before it is even launched. And, that is probably right. It is hard to see what someone with an iPod (almost everyone), using iTunes, would switch to the new platform. Using cellphones to play music may become a big business, but it is not today.

In addition, that market does not like four-way deals among big companies. Each one has a different goal, and no one runs the thing. The promise and the problems end up in a committee.

Douglas A. McIntyre

Posted on: August 21, 2007 – 11:09 am in Consumer Electronics, , , , ,

SWMX: How Not To Be Transparent and Fair

From Silicon Alley Insider

New York-based SoftWave Media Exchange (SWMX), a competitor to Google’s radio ad placement business, announced its Q2 results last week.  The results were weak–revenue declined year over year.  The press release didn’t draw any attention to this fact, however: Instead…continued

Posted on: August 21, 2007 – 9:39 am in Uncategorized

IPO FILING: BioForm Medical (BFRM)

A company named BioForm Medical has filed to come public vian an initial public offering.  For registration purposes, it has a proposed sale of up to $115 million in common stock under the proposed "BFRM" ticker on NASDAQ.  The lead underwriters are listed as JPMorgan and Piper Jaffray, and co-managers are listed as CIBC and Jefferies.

BioForm is a medical aesthetics company focused on products that are used by physicians to enhance a patient’s appearance. Its core product is Radiesse, an injectable dermal filler designed to provide long-lasting, cost-effective and safe aesthetic improvement for patients. The clinical studies in various stages have demonstrated that Radiesse provides meaningful initial aesthetic correction and approximately 12 months’ duration of aesthetic improvement in many patients. It also said that physicians have used Radiesse for more than five years and it has shipped over 500,000 syringes worldwide. BioForm has also obtained licenses to two products: Aethoxysklerol, a drug product which is currently in a Phase III trial for the treatment of spider and reticular veins; and BioGlue, a surgical adhesive in clinical testing for tissue fixation in browplasty, or forehead lift.

For the fiscal year ended June 30, 2007 revenues were $47.4 million representing a 109% increase over the prior fiscal year. BioForm currently markets products through a direct sales force of over 100 sales representatives in the United States and Europe and a network of third party distributors in more than 30 countries.  Primary customers are dermatologists, plastic surgeons and facial plastic surgeons.  This are high-end as their aesthetics products are not reimbursed by insurers and are paid for entirely and directly by patients.

Jon C. Ogg
August 21, 2007

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

Posted on: August 21, 2007 – 8:33 am in IPOs, , ,

Target Not Sharing Wal-Mart’s Woes (TGT, WMT)

Target Corp. (NYSE:TGT) reported in-line earnings and gave guidance that was basically in-line with prior targets.  The retail giant posted $0.80 EPS against $0.80 estimates, and revenues were $14.62 Billion versus $14.67 Billion estimates.  Target said it expects earnings of $3.60 per share remains within the range of likely outcomes for its fiscal earnings target. That’s in line with the company’s prior guidance and slightly below analysts’ average estimate of $3.63, but it in no way is full of the caution that Wal-Mart (NYSE:WMT) recently gave with its guidance.

To top it off, Bob Ulrich said in the press release that he believes Target will deliver strong sales and profit performance in 2007 AND generate another year of profitable market share growth.  Profitable market share growth is key for the retailer, as that is likely coming right out out of Lee Scott’s efforts.  Wal-Mart seems to have an excuse for every aspect of the business, and Target is apparently able to keep a higher income customer base in comparison.  If you have stepped into the stores for a comparison lately, you will see that Target wants to go for quality and experience and Wal-Mart is stuck on lowest priced items.  That might not hold true on 100% of the items, but the stores are night and day for a shopping experience.

Target is still using the 4% to 6% growth for same store sales, yet Wal-Mart is using the 1% to 2% bogeys.  Maybe that will change in time, but that "profitable market share growth" seems to be key.  Target shares are  trading up 1.5% at $60.00 in pre-market trading, and Wal-Mart shares are simultaneously indicated down less than $0.10 at $43.51. 

Jon C. Ogg
August 21, 2007

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

Posted on: August 21, 2007 – 8:20 am in Uncategorized, ,

Pre-Market Stock News (August 21, 2007)

(ADLS) Advanced Life Sciences in collaboration with U.S. Government to study cethromycin as treatment for anthrax and other high-priority biodefense agents.
(AEO) American Eagle Outfitters $0.37 EPS vs $0.36 est.
(BJ) BJ’s Wholesale $0.46 EPS vs $0.41 est.
(COF) Capital One closes GreenPoint Mortgage unit and will lay off 1,900 workers.
(DKS) Dicks Sporting $0.83 EPS vs $0.76 est.
(FO) Fortune Brands CEO Norm Wesley is retiring on January 1, but will remain Chairman.
(LEND) Accredited Home Lenders up 2% after trading $1 Billion of loans with right to pruchase.
(LOCM) Local.com private placement holder registered 3.393+ millin shares from private placement just 3 weeks ago.
(MYGN) Myriad Genetics -$0.18 EPS vs -$0.18 est.
(PRLS) Peerless Systems extends pact with Adobe Systems to June 30, 2008.
(RIMM) Research in Motion trades ex-split to reflect its 3 for 1 stock split today.
(RTLX) Retalix $0.03 EPS vs $0.14 est.; names new COO.
(SPLS) Staples $0.25 EPS vs $0.25 est.
(TGT) Target $0.80 EPS vs. $0.80 est.
(TRB) Tribune shareholders vote on the merger today, although concerns are prevalent that the deal may not close under the $34 terms or in any set time since Zell had so much leverage.

Jon C. Ogg
August 21, 2007

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

Posted on: August 21, 2007 – 7:32 am in Pre-Market Activity

Accredited Home Lenders Sends Loans To Vulture Investors (LEND)

Accredited Home Lenders Holding Co. (NASDAQ:LEND) has issued a press release saying that it has entered into an agreement to trade approximately $1 billion of loans under a 90-day purchase agreement with an investor at an advance rate comparable to the advance rates the company is currently receiving from warehouse lenders.  Shares were initially up only 2% pre-market, but now shares are up closer to 8% around $7.00 on rising volume.

The initial settlement of a pool consisting of approximately $500 million closed on Friday, August 17, 2007, with the remaining loans trading every other week as borrowers make their first payments due under the loan. The final sale of the loans is expected to occur by October 2007.  Accredited has the ability but not the obligation, in its sole discretion, to repurchase all of the loans traded through mid-November 2007 at a premium to the advance rate. If the loans are not repurchased by the Company by mid-November, the Company’s call right to repurchase the loans expires and the investor will keep the loans with limited recourse to the Company.

James A. Konrath, chairman & CEO, stated "If the market improves to a rational level, our intention is to repurchase these quality loans by mid-November and sell or securitize them."

It is anticipated that the transaction will neither produce nor use any significant liquidity at time of funding, but this will reduce AHL’s exposure to margin calls on these loans since the agreement does not permit the investor to decrease the advance rate during the 90-day repurchase period. 

Here is how the company says it will look after the transaction: Accredited has approximately $600 million of loans not covered by this agreement funded by warehouse credit facilities and Company cash.  Terms of the transaction include a small holdback reserve to allow thepurchaser to reject loans that do not meet certain criteria.

For those of you who are not familiar with these "other investors" out there, it sure sounds like there is starting to be some vulture investing out there where investors are gobbling up mortgage loans on the cheap.  We noted some vulture activity starting to be seen just yesterday.  Prices are all over the place depending upon the collateral and the structure of each loan pool traunch.  The good news is that this looks like it will get the bulk of the loans off the books.

Jon C. Ogg
August 21, 2007

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

Posted on: August 21, 2007 – 7:22 am in Financial Stocks, Housing, ,

Pre-Market Analyst Calls (August 21, 2007)

ACAD started as Buy at Deutsche Bank.
AHS started as Neutral at B of A.
ASML raised to Outperform at FBR.
AW started as Neutral at B of A.
BBBY started as Hold at Citigroup.
CCRN started as Neutral at B of A.
DRI raised to Buy atGoldman Sachs.
EDU started as Hold at Jefferies.
FL started as Neutral at Goldman Sachs, estimates decreased.
HOV cut to Neutral at B of A.
LSI dropped from coverage at Goldman Sachs (because acting as advisor).
LSTR started as Mkt Perform at Wachovia.
NSM raised to Overweight at Lehman.
PDLI raised to BUy at First Albany.
RSG started as Buy at B of A.
SPF cut to Neutral at B of A.
THI cut to Neutral at Goldman Sachs.
TOL cut to Neutral at B of A.
VMW started as Neutral at Baird.
VPRT raised to Outperform at Bear Stearns.
WCN started as Neutral at B of A.
WMI started as Buy at B of A.
WSM started as Sell at Citigroup.
WWY raised to Peer Perform at Bear Stearns.

Jon C. Ogg
August 21, 2007

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

Posted on: August 21, 2007 – 7:01 am in Analyst Calls

Research-in-Motion On An Ex-Split Basis (RIMM)

Research-in-Motion (NASDAQ:RIMM) is going to trade ex-split today to reflect the previously announced 3-for-1 stock split.  The $235.99 close of yesterday would now have an adjusted price of $78.663.  Yesterday’s $236.66 high was actually the 52-week high and that would now be adjusted to a year high of what seems or feels like ‘only’ $78.88 because it has carried such a larger price tag for so long.   

Yesterday’s price gain to a close of $235.99 was up more than $15.00 pre-split and up more than $5.00 post split.  The stock’s intraday high yesterday was also followed by its highest closing price that was barely above the old high closing price of $234.35 (or $78.116 adjusted for the split) and one penny above the intraday highs from the same date of July 19.

When you see performance like this it is hard to argue witrh it being one of the new "Four Horsemen of Tech" that Cramer recently named.

Jon C. Ogg
August 21, 2007

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

Posted on: August 21, 2007 – 6:55 am in Stock Splits,

Wal-Mart And The China Dog Food Wars

Wat-Mart (WMT) is the latest US firm to get embroiled in the quality problems with Chinese products. According to The Associated Press, the sweethearts at WMT have yanked Chicken Jerky Strips from Import-Pingyang Pet Product Co. and Chicken Jerky from Shanghai Bestro Trading. Their brand names almost make them sound good enough for human consumption.

Philadelphia television station WPVI reported last week that a woman claimed her 2-year-old Chihuahua died after eating Bestro Chicken Jerky Strips. But, there is no indication that the two products that WMT has taken from stores are dangerous.

Just a little precaution so that no one accuses the world’s largest retailer of selling junk.

Douglas A. McIntyre

Posted on: August 21, 2007 – 6:55 am in Retail,

Tough Days For Verizon And Comcast: Broadband Growth Slows

Verizon (VZ) and Comcast (CMCSA) along with all of their other telecom and cable friends have been hoping that the broadband growth party would never end. VZ has put $23 billion into its FiOS fiber-to-the-home project, and CMCSA is counting on rising digital cable and VoIP demand to keeps its revenue moving up.

CIBC says that sharp increase in broadband households that has shown up in quarterly earnings for the past several years is about to end. According to Briefing.com, US broadband growth will slow in 2008 and get worse in the years after that. The reasons the firm gives are that about 30% of households do not use the Internet, migration of value oriented dial-up subscribers is set to get more difficult, and incremental infrastructure upgrades have stalled around 85% coverage.

This means that VZ, CMCSA, AT&T (T), Time Warner Cable (TWC) and their smaller rivals will be faced with taking business from one another instead of from a growing base. If the broadband market is like all others, slowing growth means more price competition and lower margins.

The broadband business may be about to get worse.

Douglas A. McIntyre

Posted on: August 21, 2007 – 6:32 am in Cable Companies, , , ,

Local.Com Private Placement Holders Register Shares After 3 Weeks (LOCM)

Local.com (NASDAQ:LOCM) last night had an SEC Filing that was registering 3.393 million shares for sale, although many of these aren’t going to be hitting the market based on conversion prices.  These are not new shares from the company per se because these are all from selling stockholders who received shares in a very recent private placement.  Here is the breakdown:

2,356,900 shares of common stock sold in a private placement transaction on July 31, 2007; and 1,037,036 shares of common stock which are issuable upon the exercise of warrants which were issued on August 1, 2007 in a private placement transaction.

These shares are from that $13 Million private placement completed only about 3 weeks ago, with the 2.3569 million shares being sold to two institutions at $5.50 per share and the rest being in warrants connected to those shares.  These warrants have higher strike prices, but this being 3 weeks into that private placement period is generally speaking far shorter than most registrations of unregistered securities from a private placement.

Shares closed at $5.09 yesterday and indications have not really been seen yet for trading today.

Jon C. Ogg
August 21, 2007

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

Posted on: August 21, 2007 – 6:22 am in Secondary Offering, ,

Europe Markets 8/21/2007

Markets in Europe were slightly down at 6.40 AM New York time.

The FTSE fell .3% to 6,058. Barclays (BCS) fell 1.6% to 624.5. Vodafone (VOD) rose .4% to 155.9.

The DAXX dropped .4% to 7,379. Bayer (BAY) rose 4.6% to 57.17. DeutscheBank (DB) fell 1.6% to 91.98.

The CAC 40 was down .3% to 5,386. BNP Paribas was off 1.7% to 76.95.

Data from Reuters

Douglas A. McIntyre

Posted on: August 21, 2007 – 5:42 am in Uncategorized, , , ,

Adobe Flash Goes HD Web Video

Adobe (ADBE) will launch a version of its video software which will allow high def streaming over the internet. It will use the H.264 MPEG standard. The ADBE Flash player, into which the new feature will be incorporated, is downloaded onto about 700 million PCs worldwide.

According to News.com, ADBE decided "to support the standard now because it is being adopted more by content producers and media distributors like cable companies."

The move give sites like YouTube the chance to use HD content and studios and other premier content providers will soon be able to stream the better looking video to PCs around the world. For operations like Blockbuster (BBI) and NetFlix (NFLX), the new tech could open up an unanticipated line of business.

Douglas A. McIntyre

Posted on: August 21, 2007 – 5:23 am in Software,

Microsoft And Cisco: Friends Forever

Microsoft (MSFT) and Cisco (CSCO) want to make it clear that, although they compete, they are friends. According to Reuters, even though the two companies both make "unified communications" systems that tie together e-mail, phones and other tools over Internet networks, the systems from the two companies will inter-operate. Customers should not worry that incompatible features will ruin their IT efforts.

MSFT has had these press conferences before. There was one with AAPL a number of years ago when Redmond put money into the Mac company and said it would build Windows versions for the AAPL machine. The has been one with Sun Microsystems (SUNW) to bury an old hatchet between the two firms. And, one with Novell (NOVL) to announced a venture that would market Linux and Windows together as products that can both be used together efficiently on PCs and servers.

The MSFT press conferences usually do not amount to much. Reuters writes that "CSCO CEO John Chambers said he and MSFT CEO Steve Ballmer would visit customers together late yesterday, and that the they would try to clarify how the two companies compete and work together at the same time."

The word "try" is important in that report. "Try" is all either company will get. They are mortal enemies competing for billions of dollars being spent by the same customers. All they want to do is cut each other’s throats.

Douglas A. McIntyre

Posted on: August 21, 2007 – 4:55 am in Software, , , , ,