Daily Archives: September 10, 2007

Apple iPhone Knock-Offs Become Big Business

The Chinese seems to be quite good at copying Western products, and, as it turns out, the Apple (AAPL) iPhone is no exception.

Bloomberg found that some of the counterfeit handsets had been made in Taiwan using pictures of the iPhone that AAPL had posted online. The news service also found "the knockoff phones are produced in batches of 1,000 at a factory in Shenzhen, China."

The fake iPhone are apparently not very hard to build and priced well below the real thing. `The longer Apple delays, the more the pirates can rip the company off,” says Chialin Lu, an analyst at Yuanta Core Pacific Securities Co. in Taipei.

Bloomberg also notes that the fakes have an advantage: "While the knockoffs resemble iPhones, they don’t use Apple software. Ben says his phones have the advantage of working on any network, while iPhones connect only to AT&T Inc.’s system."

Apple may well find out that Asia, especially China, has a way of sucking huge profits out of many products sold globally. Microsoft (MSFT) estimates than more that 85% of the Window OS copies sold in China are counterfeit. Jobs & Co. will end up leaving a lot of money on the table there, but there is almost nothing that they can do.

Douglas A. McIntyre

Posted on: September 10, 2007 – 7:28 pm in Consumer Electronics, ,

Cramer’s Recession Draft Picks 2 (XOM, SLB, HPQ, DE, UTX, FWLT)

On tonight’s MAD MONEY, Jim Cramer went over Defensive Stocks that will be immune to FED rate cut dependence.  Cramer already gave his fantasy football draft list for the defensive linemen, but here are his draft picks for Quarterback as the first to rally off the bottom:

  • Exxon Mobil (NYSE:XOM),
  • Schlumberger (NYSE:SLB),
  • Hewlett-Packard (NYSE:HPQ),
  • Deere (NYSE:DE),
  • United Technologies (NYSE:UTX),
  • Foster Wheeler (NASDAQ:FWLT).

I gave a huge list of 17 defensive stocks on Friday that we edited from prior defensive stock lists, so that is why some of these names will sound familiar.

Jon C. Ogg
September 10, 2007

Posted on: September 10, 2007 – 5:48 pm in Cramer, Defensive Stocks, , , , , ,

Cramer’s Recession Draft Picks (PEP, MHS, MO, NOC, MCD, PG)

On tonight’s MAD MONEY, Jim Cramer said he was equating a stock picking portfolio like a fantasy football draft.  He has been discussing rising unemployment, houses being lost, and a recession coming for months.  As far as the FED cutting rates, he thinks the FED will only cut rates by 0.25% this month instead of the 0.50% rate cut that is needed.  The Fed governor speeches today noted that the ‘weak jobs numbers’ are a trend rather than a one-instance. Cramer said that he is creating a draft list of stock picks like a fantasy football team that he thinks can make money regardless of the Fed being late on policy.  On Friday, I gave a huge list of 17 defensive stocks that we edited from prior defensive stock lists.  Here are some of Cramer’s picks:

A defensive lineman draft is Pepsico (NYSE:PEP), and another is Medco Health (NYSE:MHS) for cost controls in medical and drugs.  Altria (NYSE:MO) is also on there with a 4.4% yield. Northrup Grumman (NYSE:NOC) is also on his list and the business has no dependence on the Fed.  McDonald’s (NYSE:MCD) is on his list, and Proctor & Gamble (NYSE:PG) made his list tonight.  Four of Cramer’s Six Picks were on my list from Friday morning.

Jon C. Ogg
September 10, 2007

Posted on: September 10, 2007 – 5:28 pm in Defensive Stocks, , , , , ,

Bayer’s Death Drug

Add to the list of reasons not to have open heart surgery the potential use of Bayer’s (BAY) Trasylol to control bleeding. According to The Wall Street Journal  "two studies published in 2006 suggested the drug doubled the risk of kidney failure/" The FDA is reviewing the drug due to the kidney issue and because" two additional studies have suggested the drug also could increase the risk of death."

The FDA has a "black box" warning on the Trasylol label. but the studies do raise that question of why the drug is on the market at all.

Maybe someone should look into this.

Douglas A. McIntyre

Posted on: September 10, 2007 – 4:24 pm in Pharmaceuticals,

Google: YouTube is Now 35% of Users–Watch Those Profit Margins (and Stock?) Decline

From Silicon Alley Insider

According to JMP Securities analyst William Morrison’s analysis of Comscore data, Google continues to gobble up global market share at a fantastic rate.  From July06 to July 07:

  • worldwide users +20%
  • US users +18% (now 22% of 552 million global total)
  • time spent on sites +113%
  • page views +56%
  • Google Maps: blows past Yahoo to 682 million pageviews/mo +98% (vs. Yahoo’s 397 million, +32%)

Even more startling: YouTube now accounts for 28% of total minutes spent on Google worldwide and an astounding 35% of global users…continued here

Posted on: September 10, 2007 – 4:03 pm in Media

Yahoo (YHOO) Traffic Grinds to Halt: Fat Lady Singing?

From Silicon Alley Insider

JMP Securities analyst William Morrison takes a detailed look at Comscore’s global traffic trends for the year through July.  He writes an excellent macro piece, with several important findings.  We’ll highlight a few this afternoon, starting with the latest horrendous news at Yahoo.

The only trend that train-wreck Yahoo had going for it–global user growth–is no longer going for it.  If the company can’t reverse this trend in short order, its only hope will be to sell itself …continued here

Posted on: September 10, 2007 – 3:57 pm in Internet

The 52-Week Low Club

Krispy Kreme (KKD) Downgrades, bad numbers. You name it. Drops to $3.24 from 52-week high of $13.94.

BearingPoint (BE) Consulting firm releases numbers late, and they are bad. Drops to $4.80 from 52-week high of $9.

Office Depot (ODP) Still spinning down from bad results. Down to $17.79 from 52-week high of $44.69.

Hovnanian Enterprises (HOV) Another home builder makes another 52-week low at $9.93 down from $38.66.

Legg Mason (LM) Mutual fund company continues its fall. Moves down to $76.80 from $110.17.

DUSA Pharmaceuticals (DUSA) Quaterly results failed to impress. Off to $1.63 from 52-week high of $5.89.

Cognizant Technology (CTSH) No news. Just a bad day. Drops to $67.60 from 52-week high of $95.55.

Douglas A. McIntyre

Posted on: September 10, 2007 – 3:44 pm in HI/LOW, , , , , , ,

lululemon Results Strong, But Looks Like Traders Wanted More (LULU)

Diluted earnings per share were $0.07 on net income of $5.1 million (compared to $0.03 on net income of $1.9 million in Q2 2006). Net revenue increased 80% to $58.7 million (from $32.5 million in 2006 Q2).

Income from operations increased 202% to $9.8 million, or 17% of revenues (compared to $3.2 million, or 10% of revenues, in Q2 2006).  Net revenue from corporate-owned stores also increased 98% to $53.1 million compared to $26.8 million for the second quarter of fiscal 2006, with comparable store sales growth of 30%.  Gross profit as a percentage of revenue rose 430 basis points to approximately 53% of net revenue from 49% in Q2 2006.

Unfortunately, these estimates are hard to compare.  The coverage universe from the underwriters just opened up last week, as you saw in our analyst initiations of LULU.  Shares closed up 2.1% at $36.66 in normal trading, about 6% off of its post-IPO highs.  But in after-hours activity, shares are trading down over 7% to under $34.00 in the initial reaction.  These fresh companies are often hard to cover with estimates and using real targets right out of the chute. 

Apparently these are not being deemed as enough above what the street wanted, but the real indications will come from the trading levels in pre-market trading tomorrow.  It makes you wonder if Cramer will still think of this as "The Next Under Armour" that he discussed last month.

Jon C. Ogg
September 10, 2007

Jon Ogg produces the 24/7 Wall St. SPECIAL SITUATION INVESTING NEWSLETTER; he does not own securities in the companies he covers.

Posted on: September 10, 2007 – 3:36 pm in Apparel, Earnings, ,

Take-Two Makes It Number

Take-Two (TTWO) hit the numbers that it had given earlier, and the shares staged a relief rally.

Net revenue for the third quarter was $206.4 million, compared to $241.2 million for the same period of fiscal 2006. Net loss for the third quarter was $58.5 million or $0.81 per share, compared to a net loss of $91.4 million or $1.29 per share in the third quarter of fiscal 2006. As compared with the year-ago period, the 2007 third quarter results reflected a decrease in product costs, software development costs, royalties and operating expenses.

The company provided strong guidance for the year ending October 31, 2007. Revenue should be in the range of $1.1 to $1.4 billion with EPS of $.80 to $1.00.

Shares moved up 4.7% to $16.49 after hours.

Douglas A. McIntyre

Posted on: September 10, 2007 – 3:31 pm in Earnings,

More Exchange Mergers Coming? (NMX)

NYMEX Holdings, Inc. (NYSE:NMX) has been making another one of its mystery rallies today, as shares traded up to over $129.00 before today’s close.  This one has been thought of in the past as being a buyout candidate, and the prevailing thought is that they "could be" back in play.  The stock volume was actually light until the end of the day, but the stock options trading took a while to catch up in the trading interest today. 

The option premium was not indicative of a super-premium expected, if it was even coming at all.  Recent June highs were in the $140.00+ range, and shares traded as high as $150.01 after opening at $120.00 back on the November 17, 2006 IPO date.  The market cap of NYMEX is almost $11.9 Billion, so not just anyone could be able to acquire this exchange.  Any deal would have to be a friendly merger as well.  There is a conundrum because even if we are skeptical, this one of the potential exchanges that could participate in the global exchange consolidation.  The question is what price an acquirer would pay.  Based on today’s options trading and prices, that premium does not look as though it is expected to be huge. 

This is a very abbreviated version of what we sent to free email subscribers during trading hours today.  We are currently reviewing several key corporate developments for subscribers of our Special Situation Investing Newsletter.  Trials are available and can be signed up for. We are currently reviewing some financial picks, we have a security play that has a transport angle under review, and we even have under a company in the death and elderly care under review.  Lastly, the NCR tax free spin-off of Teradata is also being reviewed for the paid newsletter.  Which of these will be the next newsletter? We’ll know any day now.

If you want to see samples of our work that we have now made available for public view, here are some resent examples of our subscriber-based Special Situation Investing Newsletter.  We called for a pullback in EMC shares right at the VMware IPO and compared it to other key spin-offs in recent history.   We also outlined for paid subscribers what was an industry sea change that was a essentially nothing short of a reverse merger in the stock photo industry that was creating a black hole scenario for Getty Images (GYI).  We gave the scenario where we called for Getty to fall from around $50.00 to under $40.00, and this panned out much faster than we initially would have expected.  The stock trade would have netted out a greater than 30% return on the recommendation, and the options trade alone would have been well over a 100% profit for readers that followed this advice.

Jon C. Ogg
September 10, 2007

Jon Ogg produces the 24/7 Wall St. SPECIAL SITUATION INVESTING NEWSLETTER; he does not own securities in the companies he covers.

Posted on: September 10, 2007 – 3:12 pm in Exchange News, Mergers and Buy Outs, Rumors,

Business And Financial Website Numbers

Nielsen/NetRatings has released its numbers for the major US financial websites.

Yahoo! (YHOO) Finance remains in first place with over 16.8 million unique visitors in August. Time per person spent on the site is over 23 minutes, also the highest among the top 20 financial destination. In time spent, Wall Street Digital is second at over 22 minutes.

Among online business magazine properties, Forbes remained in first place with over 9.1 million unique visitors. Fortune is combined into CNN Money. BusinessWeek.com falls well behind at just under 2.8 million unique visitors.

Douglas A. McIntyre

Online versions of magazines and news service websites tend to lag other financial properties in terms of minutes spent per month. Forbes, Bloomberg, BusinessWeek, and Reuters all come in under six minutes.

Top Online Financial News and Information Destinations for August 2007
Brand or Channel Unique Audience (000) Time Per Person (hh:mm:ss)
Yahoo! Finance                        16,844 0:23:35
MSN Money                        12,297 0:19:13
AOL Money & Finance                        10,077 0:16:58
Forbes.com                         9,136 0:05:18
Wall Street Journal Digital                         8,445 0:22:39
CNNMoney                         8,105 0:14:00
Reuters                         6,355 0:05:25
Bankrate.com                         3,977 0:07:20
Bloomberg.com                         3,502 0:05:26
TheStreet.com                         3,491 0:07:50
Motley Fool                         3,369 0:16:32
American City Business Journals Network                         2,821 0:03:22
BusinessWeek Online                         2,796 0:04:15
FreeCreditReport.com                         2,637 0:09:49
About.com Business & Finance                         2,557 0:01:57
Smartmoney                         1,880 0:11:32
USATODAY.com Money                         1,875 0:05:09
FT.com                         1,765 0:03:04
Google Finance 1520 0:16:08
Morningstar 1466 0:19:24
Posted on: September 10, 2007 – 12:57 pm in Media,

National Municipal Bond ETF Launch (MUB)

Today marks the launch of iShares S&P National Municipal Bond Fund (Amex: MUB) by Barclays Global Investors.  MUB aims to track the municipal bond sector of the United States as defined by the S&P National Municipal Bond Index.

The Index includes municipal bonds from issuers that are primarily state or local governments or agencies, Puerto Rico, the U.S. Virgin Islands, and Guam.  The interest on each underlying bond is exempt from U.S. federal income taxes and the federal alternative minimum tax as determined by the Index Provider in accordance with its methodology. 

Susquehanna will act as the specialist for this ETF on the American Stock Exchange.

Jon C. Ogg
September 10, 2007

Posted on: September 10, 2007 – 12:53 pm in ETF, ,

Apple’s (AAPL) iPhone: 1 Million Is Below Plan

From Silicon Alley Insider

…Jobs has announced plans to sell 10 million iPhones by the end of 2008 — a year and a half after launch. But a million iPhones in 74 days works out to a little less than 5 million iPhones per year — if you’re selling them at a consistent rate…continued here…

Posted on: September 10, 2007 – 12:45 pm in Wireless

VMware Rides Its Own Waves (VMW, EMC, MSFT)

Shares of VMware (NYSE:VMW) are up over 3% today above the $72.00 mark. Today marks the intro for the widely anticipated VMWORLD 2007 CONFERENCE. 

The company issued four press releases this morning alone and we’d expect others to be making partnership and general press releases around this conference.  The main expo will run from tomorrow through Thursday, so press releases around the terms "VMWORLD" and "Virtualization" should be many. Many of its competitors and partners have released data ahead of this conference as well, with many stories coming out last week.  Microsoft (NASDAQ:MSFT) made its noise in the virtualization game last week, although it received very little coverage on a relative basis.

We noted Friday how the Goldman Sachs note on EMC (NYSE:EMC) had punished shares of both companies, and it had little chance of seeing any great reception as the market was so negative Friday after the jobs numbers.

As a reminder, VMware’s stock post-IPO high is $73.95.We have noted this ongoing VMware conundrum that exists around the VMware-EMC ties, although that may take a backseat position with this conference being this week.

Jon C. Ogg
September 10, 2007

Jon Ogg produces the 24/7 Wall St. subscriber-based SPECIAL SITUATION INVESTING NEWSLETTER; he does not own securities in the companies he covers.

Posted on: September 10, 2007 – 12:27 pm in Software, , , , ,

A True Believer Walks Out On Cardica

Medical device market Cardica (CRDC) hit a all-time high last Wednesday as a group of surgeons "successfully used its automated system during coronary artery bypass operations." It was not hundreds of surgeons in various locations. It was just two teams. One in Nashville and one in Richmond.

But, the shares jumped to $12.04, almost 3x their 52-week low. The company’s market cap got to almost $200 million. CRDC lost $12.1 million last year on $2 million in revenue.

This morning, A.G. Edwards & Sons Inc. downgraded the shares from "buy" to "sell" "saying the company’s positive update last week was overblown on Wall Street," according to The Associated Press.

The analyst, probably with good reason, thinks that doctors will want to see more than a couple of operations. The stock is down 13% today to $8.60.

Douglas A. McIntyre

Posted on: September 10, 2007 – 11:49 am in Medical,

BearingPoint (BE): Consultant Heal Thyself

Management and technology consulting for big companies has always seemed like a sweet deal. A consulting firm hires a lot of people with high IQs, usually from Harvard Business School, and then sends them to companies where management is not smart enough to solve their own problems.

BearingPoint (BE) is in this business. As they say "BearingPoint Gets Things Done. Differently" That is an understatement. It has treated its shareholders differently. That is for certain. The stock is down from $9 last September to well under $5. Let’s hope the company treats its customers better.

BearingPoint "said it could not file its results on time due to a significant delay in completing its financial statements for the year ended Dec. 31, 2006," according to Reuters.  The is probably not a good sign for a consulting company full of very smart people. It did file results for its March 31 quarter last week. The Associated Press reports The company recorded a net loss of $61.7 million, or 29 cents per share for the quarter, compared with a loss of $72.7 million, or 34 cents per share, in the same period a year earlier. Revenue grew 4 percent to $866.3 million from $833.7 million.

As it turns out, that was below Wall St.’s expectations.

The company may want to move some of its egg heads to the accounting department.

Douglas A. McIntyre

Posted on: September 10, 2007 – 10:43 am in Earnings,

Level 3 Won’t Stop Falling

Shares in Level 3 (LVLT) won’t stop falling. The stock is down almost 25% in the last six moths with most of that slide coming since early July.

LVLT seems to be in a great business. It provide a huge highway for the delivery of internet data, video, and voice. In the last reported quarter, LVLT revenue moved from $819 million to $1.035 billion. The company’s net loss was flat at just over $200 million. Acquisitions played a part in the revenue improvement.

What Level 3 has that Wall St. does not like is boat loads of high yield debt, over $.6.8 billion. And, the company is not exactly throwing off a lot of cash.

High yield debt was in favor until a couple of months ago, but that has changed considerably. Even relatively attractive private equity deals are having immense problems getting funded. That makes the market cast a jaundiced eye toward a company like Level 3.

If earnings and cash flow are not good in the current quarter, LVLT could end up with very few supporters.

Douglas A. McIntyre

Posted on: September 10, 2007 – 10:15 am in Telecom,

To Overshadow AMD Chip Launch, Intel Raises Q3 Revenue Forecast

It was to be AMD’s (AMD) day in the sun. The company is launching it savior, the Barcelona quad-core chip, designed to take back business from Intel in the high-end server market.

But, Intel does not want the light to shine on AMD. This morning it announced that it was raising Q3 guidance from a range of $9 billion to $9.6 billion to a new range of $9.4 billion to $9.8 billion. Some of that probably came out of AMD’s hide.

INTC gross margin percentage for the third quarter is expected to be in the upper half of the previous range of 52 percent plus or minus a couple of points.

Intel’s shares moved up almost 2% on the news. On its big day, AMD is up almost 3%.

Douglas A. McIntyre

Posted on: September 10, 2007 – 8:22 am in Earnings, ,

Apple Sells One Million iPhones

Apple (AAPL) announced this AM that it has sold one million iPhones in the first 74 days since the product hit the market. The company says it will sell 10 million by the end of 2008.

The news is actually mixed. although AAPL shares are up about 4%. Hitting one million should serve to remind the market that cutting the price on the iPhone may have been unnecessary.

Apple will now have to sell 1,666,657 iPhones to bring in the same revenue that it did on the first million. There is something about that math that is troubling.

Douglas A. McIntyre

Posted on: September 10, 2007 – 8:08 am in Consumer Electronics,

3G For Apple iPhone

The Inquirer calls Apple’s (AAPL) iPhone the "Jesus" phone. According to the website, AAPL has signed a deal with 3G hardware provider Interdigital to provide the big consumer electronics company the pieces necessary for a second coming of the device.

Several AT&T stores have told 24/7 Wall St. that they expect the 3G iPhone "soon". This could cause a rush of sales in the period before Christmas since a number of customers are waiting until the handset is available to run on AT&T’s fastest wireless network.

And, if the new version does not sell well, Jobs & Co. can always offer a $200 rebate.

Douglas A. McIntyre

Posted on: September 10, 2007 – 7:48 am in Wireless, ,