Markets in Asia were up shareply.
The Nikkei rose 2.7% to 16,569. Honda (HMC) rose 4.4% to 3820. NEC (NIPNY) rose 3.8% to 547. NTT (NTT) rose 2.9% to 538000. Sony (SNE) rose 5.5% to 5580. Toyota (TM) rose 3.7% to 6760.
The Hang Seng rose 1.7% to 23,885. China Mobile (CHL) roe 3.1% to 113.7. China Netcom (CN) fell 1.8% to 18.66.
The Shanghai Composite rose 1% to 5,219.
Data from Reuters
Douglas A. McIntyre
Coldwater Creek (CWTR) Week numbers for women’s apparel company. Down to $12.85 from 52-week high of $31.25.
Chico’s FAS (CHS) Apparel retailer reports poor earnings. Down to $15.35 from 52-week high of $27.94.
Energy Conversion Devices (ENER) Solar cell maker show poor numbers and profits may be delayed until 2009. Drop to $25.05 from 52-week high of $41.07.
Sirf Technology (SIRF) Company makes chips for use in GPS devices. Received poor brokerage rating last week. Share won’t recover. Falls to $16.20 from 52-week high of $34.15.
Douglas A. McIntyre
Dell (DELL) closed up today. Its shares were up over 2% to $28.36. The company then reported preliminary results for its second quarter of fiscal year 2008, with revenue of $14.8 billion, operating income of $896 million and earnings per share of $0.32.
Several factors effected operating expenses in the quarter, including $102 million, or $0.03 per share, in incremental compensation expense related to payments for expired in-the-money stock options; $59 million, or $0.02 per share, in costs associated with the Audit Committee’s investigation into certain accounting and financial reporting matters; and higher headcount and associated costs related to investments in sales and customer support.
The company highlighted areas outside PCs. Server revenue in the second quarter was $1.6 billion. For Q2, Dell was again No. 1 in the United States in server units shipped with 32.7 percent share. But, this is still a small part of the overall product and service revenue mix.
Percentage of Total Net Revenue:
————————————————-
Desktop PCs 34%
Mobility 26%
Servers and Networking 11%
Storage 4%
Enhanced Services 9%
Software and Peripherals 16%
And its forecast was vague but carried a warning. "Near-term results could be adversely impacted by a slower decline in component costs in the second half of the year."
Dell’s stock was fairly flat after hours.
Douglas A. McIntyre
Merrill Lynch downgraded Wal-Mart to a "sell" this morning, more humiliation for a management that has already proven that "if it can go wrong, it will go wrong". In the Merrill research note, quoted by MarketWatch, the analyst said: "Following years of weak comps, declining new door productivity and aggressive expense management, margin erosion in the core U.S. division looks set to continue, and may, in fact, accelerate in the years ahead."
That does not leave much wiggle room for the company. Recent reports show that its sales in Mexico and the US Southeast are being hurt by higher Hispanic unemployment brought on by things like the slow housing market.
Wal-Mart probably cannot cut costs much more. With comparable store sales running up 1% to 2%, the company could begin to close some US stores. Right now, the company competes with itself. It has over 1,000 discount stores and 2,300 supercenters in its home market.
And, that is just too many when sales are so slow.
Douglas A. McIntyre
The new Sony (SNE) Walkman will not be a home run. Apple’s (AAPL) iPod has taken care of that. But, Sony management believes that the new version of its very old product will lift its market share in multimedia players from single digits to 10%. The upgraded version no longer uses a proprietary audio format. It runs MP3 just like everything else.
The little machine also plays video.
How Sony was trumped in the audio player market will be a matter for debate in the decades to come. It is now going down the same path in the video game platform business.
It has to be something beyond bad luck
Douglas A. McIntyre
Coldwater Creek (CWTR) does not sell the most expensive women’s clothes, but it does market to the 35+ age group and to spas. So, not cheap stuff.
But, the company reported crummy earnings anyway. Maybe the older and more affluent are feeling pinched.
CWTR earnings fell down 27.6% from $12 million and it said the next quarter was going to be tough.
Wall St. did not like the news. CWTR is off over 20% to $13.65, a new 52-week low.
Douglas A. McIntyre
Lightreading is reporting that telecom equipment company Nortel (NT) may be close to buying Tellabs (TLAB). NT may have already made an offer of $14 to $15. According to Lightreading, "Tellabs is seen as a solid technical fit for Nortel, according to sources close to both companies,"
While it may appear like a good fit, the price would be too hight. TLAB has a market cap of $4.5 billion. The price NT would pay probably moves that up to $6 billion. And, that is to buy a company which did $534 million last quarter with an operating profit of $28 million. So, the price would be almost three times annual revenue.
Nortel trades at about 70% of its annual revenue base of $11.5 billion.
Tellabs would get almost 45% of the company for bringing in 20% of the revenue.
Douglas A. McIntyre
Sears (SHLD) reported a poor quarter this AM.
The company reported net income of $176 million, or $1.17 per diluted share, for the second quarter ended August 4, 2007, compared with net income of $294 million, or $1.88 per diluted share, for the second quarter ended July 29, 2006.
For the quarter, our operating income decreased $178 million to $339 million in fiscal 2007, as compared to $517 million in the second quarter of fiscal 2006. The decline in operating income was mainly attributable to lower gross margin dollars generated at both Kmart and Sears
SHLD repurchased 9.6 million of our common shares at a total cost of $1.5 billion under our share repurchase program during the second quarter of fiscal 2007.
So much for Eddie Lambert’s Big Idea.
Douglas A. McIntyre
Ciena (CIEN) network specialist, announced results for its fiscal third quarter ended July 31, 2007. Revenue for the third quarter totaled $205.0 million, an increase of 34.4% over the same period a year ago when the firm reported sales of $152.5 million.
Ciena’s net income for the fiscal third quarter 2007 was $28.3 million, or $0.29 per diluted share. compared with a reported GAAP net loss of $4.3 million, or a loss of $0.05 per share, for the same period a year ago.
"Consistent execution of our network specialist strategy has enabled Ciena to benefit from two significant industry trends: the demand for increasing network capacity and the transition to Ethernet/IP-based network infrastructures," said Gary Smith, Ciena president and CEO
Shares are up almost 7% in the pre-market to $40.82, which means the company could open at a 52-week high.
Douglas A. McIntyre
Merriman upgrades Taser (TASR) from neutral to buy.
Lehman (LEH) upgrades Motorola (MOT) from equal weight to overweight.
Sun Trust starts Penn Virginia with a buy and $54 price target.
Cowen upgrades Lab Corp (LH) from neutral to outperform.
RBC starts VMWare (VMW) at sector perform.
Douglas A. McIntyre
Intel (INTC) says that its growth in Asia will be robust for the balance of the year, a sign that PC sales in the region are strengthening. IDC expects a 14% increase in PC sales in Asia to a total of 28.3 million PCs.
Reuters writes that "Intel’s share of market for processors that power most personal computers was 85.3 percent in the second quarter in the region." That figure was up a bit from the same quarter last year.
Which means that AMD is losing ground is the world’s fastest growing chip market.
Douglas A. McIntyre
Ford (F) management won’t say this, but it is in no rush to sell Jaguar or Range Rover until next year. Mahindra & Marhindra, the Indian car conglomerate,TPG Capital, Cerberus Capital Management, Ripplewood Holdings and One Equity Partners. Tata Motors of India are all kicking the tires.
Mahindra builds SUVs, so Rover would be a good match.
But, for now, Ford is probably just going through the motions. The value of the two car units is pegged at $3 billion to $6 billion, with most estimates at the low end. Ford does not want that money in its bank account while it is pleading poverty to the UAW in current contract negotiations.
But, if the UAW allows Ford and GM (GM) to put their pension and healthcare liabilities into a fund run by the union, watch how fast Ford unloads the units to put up its stake.
Douglas A. McIntyre
Markets in Europe were up modestly at 6.15 AM New York time.
The FTSE rose .6% to 6,167. BHP Billiton (BHP) rose 1.4% to 1409. BP (BP) rose 1.2% to 549.
The DAXX was up a fraction to 7,441. Duetsche Bank (DB) was down 1.2% to 89. Siemens (SI) was up 1.1% to 89.1.
The CAC 40 rose .7% to 5,557. Credit Agricole rose 2% to 27.42. ST Micro (STM) rose 1.7% to 12.46.
Data from Reuters
Douglas A. McIntrye
Novell (NOVL) reported next to no reveue growth in its last quarter. The number was $243 million, up less than 3% from a year ago. According to TheStreet.com, cash flow dropped from $36 million to $26 million. That is about what Microsoft (MSFT) spends to operate its corporate jet each month.
The other "big" company in the open-source enterprise Linux software business is Redhat (RHT). In the last reported quarter, revenue there was $119 million.
A recent study from Gartner actually shows Microsoft (MSFT) taking back market share in the server OS business. That means that one of the largest markets for Linux may not be a growth busienss any more.
Novell and Redhat live in the shadow of the ogre in Redmond. Microsoft recently said that Linux violates a number of its patents.Could be.
But, Linux is not big, and it is not growing much as an alternative for enterprise application software.
Linux has become the next Netscape.
Douglas A. McIntyre
According to Bloomberg, when investment bankers look into their Christmas stockings, all they will see is coal. The news service owned by New York’s mayor writes "Standard & Poor’s said business conditions for securities firms are worse than in the second half of 1998 and revenue from investment banking and trading could fall 47 percent in the final six months of this year."
S&P looked at the largest banks and investment backs in drawing its conclusions. The second part of their analysis was obvious. Bonuses will be cut to keep these firms profitable. That may mean a recession in New York City and falling real estate prices. But, the bankers will be back in a year or two and all will be right again.
Douglas A. McIntyre
Tivo (TIVO) was, at one point, the next big thing. Recording and time shifting TV programs. Watch them when you want to. Not VCR required.
In the last quarter, TIVO has revenue of only $62.7 million. The DVR business has destroyed the TIVO growth opportunity and now the company is close to irrelevant.
TIVO added 136,000 new subscribers in the quarter. DirecTV (DTV) is not selling TIVO to its customers any more. Comcast (CMCSA) will start marketing a TIVO product later in the year.
According to USA Today: "TiVo’s failure to anticipate how quickly consumers and retailers would fall in love with HDTV products added static to a fuzzy financial picture." A very good point from MacPaper.
With its stock down from almost $13 in March 2004 to just above $6 now, TIVO is now roadkill on the high tech super highway.
Douglas A. McIntyre
Yahoo! (YHOO) has announced that its head of sales is out. That part of the company will be combined with a business development unit and run by a new chief. It does mean that YHOO has lost its two most visible sales executives, the ones with the greatest ties to Madison Avenue, wherever that may be. Having this kind of turmoil among the people who bring in the money doesn’t sound wise.
But, no matter. Yahoo! has already lost the war for getting rapid growth from its current businesses. Display ad growth is slowing across the industry and Yahoo!’s improvement there is almost at a standstill. The company’s new Panama project, which was build to take market share from Google’s text ad business, has not show that it can push back the tide of a stagnant topline.
Yahoo! does have e-commerce and licensing businesses, but it is not in a lead position in any of these. Its jobs site is fairly large. The company has modest shopping and travel businesses, but they are not at a scale where they can pull the company out of the mud.
All of this means that, withing reason, it does not matter who runs the revenue operations at YHOO. The company does not have the tools it needs to restart growth.
M&A is almost certainly Yahoo!’s only way out. It is risky. With its stock so low, the portal company will have to give up a large part of its equity to get anything good. It will probably have to gamble that the social network business can eventually bring in a lot of revenue. Facebook is now the No.17 site in the US in terms of traffic. Yahoo! could makes some buys in vertical markets, perhaps pick up Monster (MNST) or CNET (CNET).
But, this is all old news. Yahoo!’s future strategy is endlessly debated.
In the meantime, the company is not doing anything.
Douglas A. McIntyre
There is no rule about kicking companies when they are down, and Motorola (MOT) is figuring that out.
Recently Samsung caught MOT in global market share, at about 15%. Nokia (NOK) is the leader with over 36%. In fourth place sits Sony-Ericsson.
Sony-Ericsson has always been a large niche player with 9% of the market. It is highly profitable becuase it concentrates on upper end phones with multimedia capacity and cameras. It has never been a threat in huge markets like India and China because its handsets cost too much.
That is changing. According to The Wall Street Journal, Sony-Ericsson is releasing a number of low end products aimed at emerging markets.
The first two things that this says are that the No.4 handset company is willing to give up operating margins to expand revenue. The cheap phones just don’t pay-off as well at the bottom line. The second aspect of Sony-Ericsson’s decision is that it needs to take share from Nokia in the emerging markets world. In some of these countries Nokia has over half the market.
But, Nokai will do just fine. Its stock is at a six year high and its has just launched a music service and handsets to go after the Apple (AAPL) iPod and iPhone.
The company that cannot take having another handset operation with a broad range of products is Motorola (MOT). The Sony-Ericsson move means that the US company now has new competition at both ends of the market, which will makes its turnaround much more difficult.
Who said life was fair.
Douglas A. McIntyre
According to Reuters, Yahoo! (YHOO) has pushed out its top sales executive and combined its sales and e-commerce units.
Reuters writes that Microsoft (MSFT) has purchased a corporate group chat provider.
Reuters writes that Apple (AAPL) is about to introduce a new series of iPods.
The Wall Street Journal writes that a battle between banks and KKR is heating up over the purchase of First Data (FDC).
The Wall Street Journal said that Altria (MO) was working on spinning off its international operations.
The Wall Street Journal says that Sony Ericsson is starting to build phones for the low end of the market.
The New York Times reports that the CFO of Gap (GPS) left to go to Visa.
The FT reports that the Pritzgers will sell a $1 billion stake in Hyatt Global.
Barron’s writes that Tivo (TIVO) issued weak Q4 guidance.
Douglas A McIntyre
Markets in Asia rose
The Nikkei was up .9% to 16,152. Hitache (HIT) fell 1.5% to 724. Sony (SNE) rose 1.1% to 5290.
The Hang Seng rose 1.8% to 23,413. China Mobile (CHL) rose 2.6% to 101.8. HSBC (HBC) rose .4% to 138.8.
The Shanghai Composite rose 1.1% to 5,168.
Data from Reuters
Douglas A. McIntyre
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