Daily Archives: September 10, 2007

Vodafone Give Apple The Bird

Vodafone (VOD) has decided that it wants nothing to do with Apple’s (AAPL) iTunes or the iPhone and is also giving the cold shoulder to Nokia’s new music download service. The largest cellular carrier in Europe will go it alone.

Vodafone will use its own MusicStation store, which can download an album to a phone in minutes, according to The Inquirer.

If Vodafone has any success, it may encourage other large cell carrier systems like Verizon Wireless and China Mobile (CHL) to test the economics of their own music download systems. If they work, it cuts of a piece of the field for both Apple and Nokia.

Douglas A. McIntyre

Posted on: September 10, 2007 – 7:40 am in Uncategorized, , ,

Pre-Market Analyst Calls (September 10, 2007)

AGP raised to Outperform at Credit Suisse.
BHI started as Buy at UBS.
CVG raised to Buy at UBS.
ESV cut to Hold at Jefferies.
HAL started as Buy at UBS.
HAS raised to Neutral at JPMorgan.
LFG raised to Outperform at KBW.
MYL raised to Buy at UBS.
MT cut to Hold at Citigroup.
NE cut to Hold at Jefferies.
PALM cut to Underweight at Lehman.
PRE started as Buy at UBS.
RDC cut to Hold at Jefferies.
RDWR raised to Outperform at RBC.
SLB started as Buy at UBS.
TMA raised to Hold at Jefferies.
VNDA started as Buy at B of A.
WFT started as Neutral at UBS.
WBS raised to Pewer Perform at Bear Stearns.
ZION cut to Mkt Perform at FBR.

Jon C. Ogg
September 10, 2007

Posted on: September 10, 2007 – 7:13 am in Analyst Calls

AMD’s New Chip Can’t Save it

AMD (AMD) launches it new Barcelona quad-core chip today. With four processors in one, it offers server and PC manufacturers a new level of computing power at a relatively low price. The problem is that Intel (INTC) has already launched a similar product of its own.

Intel has been so successful at taking back market share from AMD over the last 18 months that shares in the smaller company have fallen from $42 in January 2006 to $13. When AMD bought graphics chip company ATI, it took on boat loads of debt, leading to concerns that it cannot meet its obligations on the interest. AMD’s two most senior sales executives recently left the company and CEO Hector Ruiz appears to have no idea how to get the company out of its predicament

According to the company’s 10-Q, it lost $600 million last quarter on revenue of $1.378 billion. Pricing pressures have caused its gross margins to collapse. The balance sheet shows long-term debt of over $5.3 billion.

If Intel had not launched a competing product, Barcelona might have a chance to pick up market share from its larger competitor.

But, if wishes were horses, all the beggars would ride.

Douglas A. McIntyre

Posted on: September 10, 2007 – 5:16 am in Semiconductor, ,

Google Gets A New Fan

Capgemini, the largest IT consultant in Europe, will begin to market Google (GOOG) Apps. The software combines the search company’s e-mail, spreadsheet, document, and presentation functions. Unlike Microsoft (MSFT) Windows, it runs by connecting the user’s PC to Google’s servers instead of taking up memory and processing on the computer itself.

The announcement is a blow to Microsoft, even if it is no more than a nice public relations move. Capgemini holds the level of respect in Europe that EDS and Accenture have in the US. Google appears to have created Apps for smaller businesses, so the fact that a consulting firm that has large customers would market the software is a big "win."

Google’s software still has the disadvantage that it only provides a small number of the functions that Windows does. It may take years for Google to build these features into Apps, if it decides to do it at all. But Apps is cheap, priced at $50 per user per year. So in enterprise environments where only a limited number of functions are needs on a large number of PCs, it may just fit the bill.

Not a good for MSFT.

Douglas A. McIntyre

Posted on: September 10, 2007 – 5:05 am in Software, ,

KKR Knuckles Under

After weeks of sabre rattling about how its would hold banks to their lending commitments on money to finance its takeover of First Data (FDC), KKR "appears willing to agree to a covenant that places a performance criteria on First Data’s debt," according to The Wall Street Journal. The paper says that banks may still lose as much as $1.3 billion on the debt.

But, large banks and investment houses have make billion of dollars in fees providing financing for similar deals, and, in a bad environment, it may be time for them to part with some or all of their gains as they stick to contracts that promise that they will provide debt for individual private equity financing.

The larger question is whether KKR has done itself and its competitors any favor by giving in even a little. It could certainly make the argument that banks have gotten rich off it deal that the private equity firm has brought them. As the Journal writes: "It is to everyone’s benefit for the syndication process to move smoothly," says one person who worked on the deal. "And it benefits both KKR and the banks for the debt to trade well."

That may not be true. KKR makes it money from buying companies and collecting fees, in part, on how well those companies do in the future. Anything that begins to tie its hands in the operations or financial activities at the companies adds to the firm’s risk.

Giving the banks even a little is a slippery slope.

Douglas A. McIntyre

Posted on: September 10, 2007 – 4:52 am in Financial Stocks,

Disney Humiliates Mattel

Disney (DIS) will begin to inspect toys based on characters that it licenses to large companies like Mattel (MAT). Disney does not make the toys. It does not sell them. But, to protect its brand, it does not want other manufacturers to sell unsafe products that carry its name via licensing deals.

“It sends the message that we are looking over their shoulders,” said Andy Mooney, the chairman of Disney’s consumer products division writes The New York Times.

Given the large numbers of factories that make these toys and the tens of thousands of outlets that carry the products, the Disney move may simply be symbolic and a good PR ploy. But, it send a message to toy companies, especially Mattel, that it no longer trusts them and that they present a danger to Disney’s image.

It adds to the humiliation of Mattel which has clearly done a very poor job of policing its consumers. The company has also been accused of reporting safety products to the federal government. Mattel’s CEO is being hauled before Congress and will likely be pilloried by representatives who will see the hearings as a stage to demonstrate how concerned they are about child safety.

Mattel’s shares are now at $21, down from $29 earlier this year. Watch them fall farther as its critics pile on. The company’s holiday sales will be a train wreck.

Douglas A. McIntyre

Posted on: September 10, 2007 – 4:38 am in Retail, ,

If Yahoo! Outsources Search, Microsoft Must Pay Up

According to The Wall Street Journal, Yahoo! (YHOO) has recently considered outsourcing search to either Microsoft (MSFT) or Google (GOOG). Although it recently launched its own new search function, Panama, it does not seem to be doing terribly well. The paper writes: "Such a move would likely give Yahoo an immediate revenue bump representing hundreds of millions of dollars annually, because Google, for one, generates about 40% more revenue for each consumer search than Yahoo!"

Yahoo! may have shelved that idea for now because it does not want to give up such a strategic part of its business to an outside competitor, but the fact of the matter is that it has about 25% of the US search market to Google’s 50%. Microsoft’s share is about 12%.

If Yahoo! has another poor quarter, it may turn to Google because it needs the extra revenue to get its stock back on track. The company’s stock was at nearly $44 in early 2006 and now trades around $24.

Microsoft cannot afford to let the Yahoo! business go to Google, no matter what the cost. If Google effectively powered 75% of the search queries in the US, Microsoft’s attempt to move up the hierarchy of the business would be dashed. It would  have no chance of recovering.

Google’s search system is almost certainly more efficient for delivering results and related ad revenue, so Microsoft might have to guarantee Yahoo! certain revenue floors. It would be worth it to keep from being shut out of such an important market.

Douglas A. McIntyre

Posted on: September 10, 2007 – 4:26 am in Internet, , ,

Asia Markets 9/10/2007

Markets in Asia were mixed.

The Nikkei fell 2.2% to 15,765. Toyota (TM) was down 2.4% to 6440. Sony (SNE) was down 6% to 4300.

The Hang Seng rose rose .5% to 23,101. China Mobile (CHL) was up 1.2% to 102.2. China Petroleum (SNP) was down 1.7% to 8.41.

The Shanhai Composite rose 1.4% to 5,342.

Data from Reuters

Douglas A. McIntyre

Posted on: September 10, 2007 – 3:10 am in International Markets, , , ,

New Digest 9/10/2007 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, Citigroup (C) will list its shares on the Japanese stock market as early as November.

Reuters writes that Capgemini, Europe’s largest computer consultancy, will start to incorporate Google (GOOG) Apps into its offerings for clients.

Reuters reports that most OPEC ministers support holding oil prices at current levels.

Reuters reports that AMD (AMD) has launched its Barcelona chip in an effort to improve its competitive position against Intel (INTC).

Reuters writes that Australian authorities are looking into Google’s bid for Doubleclick due to concerns about antitrust.

The Wall Street Journal writs that KKR is willing to make concessions to its banks on its purchase of First Data (FDC) agreeing to performance criteria on First Data’s debt.

The Wall Street Journal writes that Yahoo! (YHOO) has considered outsourcing its search functions to Google (GOOG).

The Wall Street Journal writes that PC maker Lenovo will introduce laptop and desktop computers for its new consumer segment.

The New York Times writes that Disney (DIS) will test toys based on its characters to make certain that they are safe.

The FT writes that hedge funds are concerned about large redemptions in September due to poor August performance.

The FT reports that credit agencies could face lawsuits over their ratings of sub-prime debt.

Barron’s writes that Berkshre Hathaway (BRK.A) was the most admired company in recent poll of professional investors.

Douglas A. McInyre

Posted on: September 10, 2007 – 3:08 am in Press Digest, , , , , , , ,