Daily Archives: October 4, 2007

Forget $300 Million Already…Halo 3 Will See $500 Million Very Soon (MSFT, GME, ERTS, TTWO)

Microsoft (NASDAQ:MSFT) has generated over $300 million in sales from Halo 3 titles in the first week alone, with $59.95 of that being from me.  There were more than 1.7 million copies pre-ordered, which broke its own record-breaking release of Halo 2 sales and beat the record sales set for Spider-Man 3 and of Harry Potter movies.  Video games surpassed movies in annual sales in recent years.  If you’ve ever played ANY of the Halo games you’ll know why. 

It seems that there are somewhere in the vicinity of 12 million or more Xbox 360 units on the marketplace.  When you include the Xbox 360 console sales for the upcoming holiday season and say that all titles will be the cheap $59.95 version you can see where this can quite easily generate $500 million in sales with less than 10 million copies sold.  There are always lagging sales and these Halo 3 sales will continue.  We haven’t even gotten the release for Halo 3 on PC yet, although several game store managers are not even sure if it will come for PC’s.  We think it will by late 2008, but that’s speculation.  The question isn’t IF Halo 3 hits $500 million.  It’s just how quick it happens that is a question.

If you would like to read the full official story from Microsoft you can see it on the site here.
24/7 Wall St.’s Views on Halo 3:

Jon C. Ogg
October 4, 2007

Posted on: October 4, 2007 – 6:34 pm in Video Games, , , , , , , ,

Has Alcatel-Lucent (ALU) Lost More Business?

The FT is reporting that Alcatel-Lucent (ALU) may have lost a big piece of the AT&T (T) wireless business. According to the paper "Ericsson is capitalising on Alcatel-Lucent’s severe difficulties to strengthen its leading position in mobile phone infrastructure deals based on WCDMA technology."

Siemens (SI) also apparently picked up business that might have gone to ALU.

The merger of Alcatel and Lucent has been a series of disasters. Although the board of the firm has expressed support for CEO Pat Russo, it is hard to imagine that it will continue. Shares in the company are down from $15.43 earlier this year to just above $10.

A mess.

Douglas A. McIntyre

Posted on: October 4, 2007 – 6:12 pm in Telecom, , ,

Will Level 3 (LVLT) Drive Down Akamai (AKAM) Margins

Alley Insider is reporting that as Level 3 (LVLT) moves into the content delivery network business dominated by Akamai (AKAM) that it will undercut what the industry charges most clients by a significant amount. The site reports that "Level 3 plans to sell CDN services at the same rates it sells plain-vanilla Internet bandwidth."

Akamai’s shares are already under tremendous pressue from lower pricing offered by several private companies and by recent IPO Limelight Networks (LLNW).

Akamai traded for almost $60 last February. It now changes hands at $30. Limelight traded above $24 after its IPO and now sits just above $9.

Because Level 3 has such a large network and bandwidth of its own, it may be able to offer content delivery at a large discount. It is hard to imagine that it can make much money by pursuing the tactic.

It could be that, as prices drop for customers, all three companies lose.

Douglas A. McIntrye

Posted on: October 4, 2007 – 5:47 pm in Internet, , ,

Cramer’s Grocery Pick (KR, WFMI, SVU)

On tonight’s MAD MONEY on CNBC, Jim Cramer said he still thinks the supermarket stocks are cheap but some deserve to be cheap.  His pick in the sector is Kroger (NYSE:KR).  He liks the outperformance and that they beat earnings and raised guidance with a 5+% same store sales number.

This has been our pick as well, and we even went as far as saying that this was actually becoming an alternative to Whole Foods (NASDAQ:WFMI) if you go there (24/7’s View on Whole Foods vs. Kroger).

Cramer thinks that this is going head to head with SuperValu (NYSE:SVU) although it is cheaper and SVI is just a value trap.

Jon C. Ogg
October 4, 2007

Posted on: October 4, 2007 – 5:14 pm in Cramer, Food, , , , ,

ETF Winners & Losers (October 4, 2007)

Today was a very mixed bag with the ETF’s that track various sectors and markets.  We saw commodity and foreign market ETF’s leading the pack.  As always, we have removed the obvious leveraged ETF’s from the mix and we also removed the "inverse index" ETF’s so traders can see the true groups that were winners and losers.  If one sector is dominating the winners or losers, we also try to remove the less performing duplicates to show how more sectors performed.

Here are today’s winners and losers in ETF’s (with % change):

WINNERS
First Trust Indust/Producer Dur AlphaDEX (FXR)       +3.23%
PowerShares DB Oil (DBO)                                            +2.75%
PowerShares DB Energy (DBE)                                     +2.53%
iShares MSCI Belgium Index (EWK)                              +2.48%
HealthShares Euro Medical Prod & Devices (HHT)    +2.31%
Market Vectors Gold Miners ETF (GDX)                         +1.81%
iShares MSCI Austria Index (EWO)                                 +1.78%
iShares MSCI Singapore Index (EWS)                           +1.74%
iShares MSCI South Africa Index    (EZA)                       +1.73%

LOSERS
SPDR S&P Homebuilders (XHB)                                    (2.89%)
iShares DJ US Home Construction    (ITB)                   (2.31%)
Claymore Global Balanced Inc  (CBD)                          (1.75%)
SPDR DJ Wilshire Small Cap Growth  (DSG)              (1.61%)
PowerShares Global Clean Energy     (PBD)               (1.41%)
SPDR S&P Retail     (XRT)                                                (1.24%)
Internet Infrastructure HOLDRs     (IIH)                          (1.15%)

Jon C. Ogg
October 4, 2007

Posted on: October 4, 2007 – 3:59 pm in ETF

Sprint (S) To Get New CEO

The pressure of poor performance and a falling share price finally got to Sprint’s (S) board of directors. CEO Gary Forsee is being forced out, and the company will begin looking for a replacement.

The Wall Street Journal writes that many of Sprint’s problems come from relying on customers with poor credit. The company has had trouble finding new subscribers while AT&T (T) and Verizon Wireless add to their totals each quarter.

The largest single question facing the company is whether it will move forward with it plan to build a $5 billion national WiMax network to offer next-generation wireless broadband.

Douglas A. McIntyre

Posted on: October 4, 2007 – 3:57 pm in Management Change, ,

The 52-Week Low Club

King Pharmaceuticals (KG) Still falling after selling off assets. Down to $10.96 from 52-week high of $22.25.

NutriSystem (NTRI) Bad earnings. Falls to $30.60 from 52-week high of $76.20.

Isilon Systems (ISLN) Weak forecast. Down to $5.26 from 52-week high of $28.50.

Coldwater Creek (CWTR) CEO stepping down. Drops to $10.47 from 52-week high of $31.25.

Douglas A. McIntyre

Posted on: October 4, 2007 – 3:49 pm in HI/LOW, , , ,

Reviewing Battered IPO’s: Superior Offshore (DEEP)

There is one fairly new small cap oil and energy company that keeps coming up in discussions over and over locally in Houston: Superior Offshore International Inc. (NASDAQ:DEEP).  The company is a fairly recent IPO and has never recovered the bulk of its post-IPO losses.  Merrill Lynch and J.P. Morgan brought this offshore deepwater services operator public at $15 in the middle of the $14 to $16 range, but the company was able to boost the offering by 1.5 million shares to 10.1+ million shares because of high demand. 

Superior offers subsea construction and commercial diving services to the offshore oil and gas industry, serving operators in the outer continental shelf and deep waters of the U.S. Gulf of Mexico was well as offshore Mexico, Latin America, Africa and the Middle East.  The company operates a fleet of 10 or 11 service vessels and provides remotely operated vehicles and saturation diving systems for deep water and harsh environment operations.  As of the last available figure, it employs 665 offshore personnel in North America, Africa, South Africa and the Middle East. 

If you have been watching oil lately with oil prices back over $80.00 per barrel, you would wonder what is going on.  This stock is in the right sector and there is a chance that it has been oversold and overlooked.  Of course, there is also the chance that there are problems in the business model change.  Because this is in the red hot energy services sector and has been kept down this long we have had it on a watch list.  It does not meet the criteria to become a formal pick for our Special Situation Investing Newsletter for a myriad of reasons, but it is one of the companies in the sector we have on a small cap watch list.

Read More »

Posted on: October 4, 2007 – 2:58 pm in IPOs, Oil & Gas, , ,

More Lead Paint Recalls of Public Company Products (DIS, ENR)

The U.S. Consumer Product Safety Commission (CPSC) has announced more toy recalls today for lead paint violations.  There is a full list of product recalls here, but interestingly enough this may actually have an impact on more of the companies than just the ones noted herein.

Because these recalls announced today are "Winnie the Pooh" and "Pirates of the Caribbean" it could technically have an impact on Disney’s physical toy and physical merchandise.  It doesn’t mention the company and Disney has many outside arrangements, but guess who has the trademarks. 

We will be the first ones to point out the actual numbers of product recalls are small in the grand scheme of things, but there are many parents and consumer activists (as well as free trade activists/foes) that are watching this like a hawk.  There are also no known incidents of note.  We only included the ‘lead paint recall items’ in this. 

Public companies: Energizer (NYSE:ENR) and Walt Disney Co. (NYSE:DIS).  Below is a brief summary of the product recalls announced today:

Read More »

Posted on: October 4, 2007 – 1:16 pm in China, Entertainment, Law, Product Review, Regulation, , , , , , , ,

Simon Says, “More Credit” (SPG)

Simon Property Group (NYSE:SPG) announced it successfully increased its revolving credit facility from $3.0 Billion to a higher $3.5 Billion, which includes an $875 million multi-currency tranche.  The company said the extra $500 million had high interest with commitments from 26 institutions aggregating more than $1.1 Billion.  Simon’s revolving credit facility now includes 48 institutions.

What is interesting here is why the company needs a hike to its facility.  This doesn’t mean that it will actually borrow more, but this would give it more dry powder to make renovations or acquisitions.  It is already a huge retail shopping mall and center REIT that operates in the U.S. and Puerto Rico, and it has interests in Canada, the EU, Mexico, Japan and elsewhere.  IF it is going to acquire more properties, it would seem that the focus may be in international markets.

With a $23+ Billion market cap, it is the largest of the pure plays in shopping REITs.  The yield of roughly 3.20% seems low compared to other REITs but is basically in-line with the shopping sector.  Shares pulled back from over $105.00 to $104.00 on the news, but they have recovered slightly.  The 52-week trading range is $82.60 to $123.96.

Jon C. Ogg
October 4, 2007

Posted on: October 4, 2007 – 12:00 pm in REIT, ,

Can Research in Motion Earnings Match Stock Gains? (RIMM)

Research-in-Motion (NASDAQ:RIMM) is set to report earnings today after the stock market closes, and First Call estimates are $0.50 EPS and $1.36 Billion in revenues.  Keep in mind that the consensus estimate moved up from $0.49 over the last week and from $0.48 over the last month or two.  Estimates of new subscribers are somewhere in the 1.35 to 1.45 million range (forecast was 1.32-1.37M) and shipments of more than 3 million units.

We just noted this one as one of the huge Window Dressing Stocks that was a large beneficiary of fund buying.  Based upon a $98.00 mid-morning price, since the June 29 date shares are up 47%; but if you go merely one day before the end of the last calendar quarter shares are up a monster 77%.

It is never easy standing against the crowd and it is never easy saying hi-flyers have run too much.  It is possible to stand against the crowd, but stocks have shown time after time how sometimes they will keep rising despite performance and despite valuations.  But it is hard to imagine that there isn’t going to be some profit taking.  RBC Capital Markets just downgraded this Monday saying R-I-M was hard to see higher prices for the time being.  The average target is roughly $100 now, although there are higher targets.   Jim Cramer said recently that he expects some profit taking in these names that are up big, mostly from his "New Four Horsemen of Tech" stocks.

The BlackBerry is still more business-focused, but what we are rally trying to look at is how large the global total is that the company can take.  It has leaped over the Palm Treo from Palm Inc. (NASDAQ:PALM) and the iPhone, for now at least, has been less of a business focus and is still in the the very early stages of its 20 million unit target where R-I-M is trying to counter the advance.

We would expect some profit taking as the obvious move, but we aren’t going to try stand in front of a freight train.  This one has just had way too many gap-ups on earnings before.   With new versions of its PDA smartphones having hit the market, we aren’t going to try to outguess the guestimates for shipments and subscribers.  We are still trying to factor in a longer-term estimate of the total global market opportunity for R-I-M and we aren’t alone. 

The $55 Billion market cap sounds giant, but it depends upon how you view its global opportunity in the years ahead.  Another wild card today will be the impact that the weak US Dollar had.  Research in Motion is based in Canada, derives much of its sales in the U.S., and now has global sales with most major global wireless carriers.

Jon C. Ogg
October 4, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers. 

Posted on: October 4, 2007 – 10:21 am in Consumer Electronics, Earnings, Wireless, , , , , , , , , ,

Microsoft (MSFT) Moves Into Healthcare With HealthVault

Microsoft (MSFT) has just made its first big move into healthcare with a new product called HealthVault.

Individual patients can upload all of their key medical records to a secure online storage area. This data can then be shared with doctors and other healthcare providers.

Redmond has already signed some big names to use the service on the healthcare provider side: American Hearth Association, the American Lung Association and New York Presbyterian Hospital.

New versions of PC applications may allow for data like blood pressure reading to be uploaded directly to the new system.

Will doctors use the new products? Probably not. Patient information is often not entirely electronic. Much of it is still kept on paper. And, doctors don’t like sensitive medical data leaving their offices.

But, it was a good idea anyway.

Douglas A. McIntyre

Posted on: October 4, 2007 – 10:21 am in Software,

China Stocks Wild Again Today (RCH)(KUN)(CHNR)

There is no gravity in the Chinese stock market.

Shares in several companies traded in the US but based in China are making big runs again today.

China Architectural (RCH) Amex traded shares up 36% to 52-week high of $27.10 against low of $4.80.

China Shenghuo Pharma (KUN) Amex traded company up 25% to $15.14. The 52-week low is $3.10.

New Oriental Energy & Chemical Corp (NOEC) Nice 16% run today to 52-week high of $9.60. Low for the period is $2.93.

China Natural Resources (CHNR) Up 18% to $48.40. Near 52-week high on low of $6.50.

The average return from the 52-week low on these is about five times.

Not bad

Douglas A. McIntyre

Posted on: October 4, 2007 – 10:02 am in China, , , ,

Penwest Pharmaceuticals (PPCO) Set For Huge Fall

According to The Associated Press Endo Pharmaceuticals (ENDP). and Penwest Pharmaceuticals (PPCO). said Wednesday the patent on their pain drug Opana ER is being challenged by Impax Laboratories Inc.

Endo and Penwest are currently reviewing the details of this notice from IMPAX. Endo and Penwest note that they intend to pursue all available legal and regulatory avenues in defense of OPANA® ER, including enforcement of their intellectual property rights and approved labeling.

PPCO is off 31% in the pre-market at a 52-week low of $7.85.

Douglas A. McIntyre

Posted on: October 4, 2007 – 7:33 am in Biotech, ,

Goldman Sachs Pairs Trade: Long Maxim, Sell Intersil (MXIM, ISIL)

Maxim Integrated Products (MXIM) has found itself in a strange predicament over its listing status, but Goldman Sachs doesn’t seem to care.  Maxim (MXIM) is being added to Goldman Sachs’ Conviction Buy List, although it says there is no change to above-consensus estimates or to the 14% projected upside at a $33 price target.  Goldman is adding Intersil (ISIL) to its Conviction Sell List, although it already has a sell rating on the shares.  Goldman is not changing its $29 target with 13% downside.

Interestingly enough, the basis for this call appears to be a pairs trade (arbitrage on price moves) with a LONG MXIM and SHORT ISIL thesis.  It is based upon valuation gaps of nearly 30% on 2008 P/E ratio estimates and a 50% gap on EBITDA projections, despite estimates of 11-13% earnings growth for both.  The 20% underperformance of MXIM along with the delisting are looked at for a reversion.  Solid trends are also noted at both companies, although Goldman Sachs noted that this looks priced in at ISIL based upon positive pre-announced earnings (Goldman believes this is not priced in on MXIM).  There is even a note that a possible market inefficiency exists due to Thomson using GAAP EPS for MXIM and non-GAAP EPS for ISIL.

Jon C. Ogg
October 4, 2007

Posted on: October 4, 2007 – 7:30 am in Analyst Calls, Semiconductor, , , ,

Hollis-Eden Pharmaceuticals (HEPH) Up 40%

Hollis-Eden (HEPH) and company in the development of a new class of small molecule compounds based on endogenous steroid hormones, today announced new preclinical data with its drug candidate HE3235 for the treatment of cancer.

Data reported this week in an oral presentation demonstrated that HE3235 significantly inhibited tumor growth in a preclinical model of hormone-independent prostate cancer utilizing human tumor cells. Hormone independent tumors are associated with late-stage prostate cancer, a condition for which there currently is no effective treatment.

Shares are moving up over 40% before hte open.

Douglas A. McIntyre

Posted on: October 4, 2007 – 7:27 am in Biotech,

Pre-Market Stock News (October 4, 2007)

(ABX) Barrick Gold noted positively by Cramer as his new gold stock.
(ANGO) AngioDynamics granted patent entitles “Endovascular Treatment Device Having a Fiber Tip Spacer” in U.S.
(ARM) Arvin Motor lowered guidance; stock down 5%.
(ATHN) athenahealth noted positively by Cramer in recent IPO’s; stock up 6%.
(BCSI) Blue Coat trades ex-split to reflect its 2-1 stock split.
(BEAS) BEA Systems stake of Icahn now at over 13%; shares up 1%.
(BIDU) Baidu.com shares indicated down about 1% on a Reuters report that Google is taking more Chinese search market share from its Sina.com (SINA) partnership.
(BSC) Bear Stearns holds semi-annual half-day investor meeting.
(C) Citigroup in talks with KKR about purchasing some of its leveraged loan portfolio off its books.
(CMP) Compass Minerals’ unit Great Salt Lakes Minerals is raising potash prices immediately.
(CWTR) Coldwater Creek CEO retiring.
(DIS) Disney opening an 800 room hotel and resort facility on western side of oahu in Hawaii.
(EBAY) eBay bought Afterbuy.de in German.
(FCN) FTI Consulting priced 4.2 million shares at $50.00.
(FDO) Family Dollar $0.26 EPS vs $0.25 est.
(HMY) Harmony Gold has recued roughly half of its 3000+ trapped miners in an African mine.
(ISCA) International Speedway missed earnings and guided lower; shares indicated down 2%.
(JCI) Johnson Controls trades ex-split to reflect a 3-1 split.
(MAR) Marriott $0.31 EPS vs $0.32 est.
(NTRI) NutriSystem lowered guidance; stock fell to new 52-week lows after hours.
(QCOM) Qualcomm tried to explain to a court why it did not turn over 300,000 pages of documents that had been requested, according to WSJ.
(S) Sprint Nextel has an activist Ralph Whitworth threatening proxy fight for a board seat.
(SIRI) Sirius said the Justice Department is asking for more information on the XM-Sirius merger.
(TRMS) Trimeris halted its supplemental application on its Biojector product.
(WTSLA) Wet Seal stock down 14% on guidance.

Jon C. Ogg
October 4, 2007

Posted on: October 4, 2007 – 7:06 am in Pre-Market Activity

Pre-Market Analyst Calls (October 4, 2007)

AAPL started as Buy at BMO Capital.
AVR cut to Neutral at JPMorgan.
BIOF cut to Neutral at JPMorgan.
CHIC cut to Neutral at JPMorgan.
CIEN raised to Neutral at UBS.
COO cut to Underperform at Bear Stearns.
ENDP cut to Hold at Jefferies.
ESL cut to Neutral at JPMorgan.
FCL started as Outperform at FBR.
FISV raised to Overweight at JPMorgan.
HANS cut to Neutral at Goldman Sachs (see full note).
LIFC raised to Outperform at Piper Jaffray.
MOT target raised to $22 at Lehman.
MPWR raised to Buy at Goldman Sachs.
MXIM raised to Buy at Goldman Sachs.
MYL raised to Overweight at JPMorgan.
NGLS removed from Goldman Sachs conviction buy list.
NHY raised to Overweight at JPMorgan.
NTRI cut to Hold at Lazard.
PNRA raised to Overweight at JPMorgan.
RAD raised to Neutral at HSBC.
SAP raised to Buy at Sun Trust; downgraded at Bernstein.
SHW raised to Buy at UBS.
SLAB cut to Hold at Citigroup.
SPF raised to Neutral at UBS.
WFT cut to Neutral at B of A.
WTSLA cut to Neutral at JPMorgan.
X started as Underweight at JPMorgan.

Wachovia initiated major technology companies today, but it appears that this was part of the A.G.Edwards transitioning this week (AMD, INTC, TXN, DELL, IBM, HPQ, NOK, QCOM, BRCM, MOT, JAVA).  Here is a full list.

Jon C. Ogg
October 4, 2007

Posted on: October 4, 2007 – 7:00 am in Analyst Calls, , , , , , , , , , , , , ,

Hansen Natural Hit Hard By Goldman Sachs (HANS)

Hansen Natural Corp. (NASDAQ:HANS) was downgraded by Goldman Sachs this morning basedupon recent gains in the stock reflecting valuations.  Goldman Sachs believes this reflects the potential that it sees for new product growth and geographic and channel growth.  At the $59 close yesterday the stock was apparently up over 47% since it had been added to Goldman’s BUY LIST on June 14, 2007, compared to a mere 1.1% gain in the S&P 500 index.  It also noted the sever outperformance over the last year with Hansen up over 89% versus an S&P gain of 15.4%.

If pre-market trading is accurate it appears that HANS shares are down 5% around $56.00 in very early indications.  Its 52-week trading range is $24.75 to $61.65, and its market cap was almost $5.4 Billion as of yesterday’s close.

Jon C. Ogg
October 4, 2007

Posted on: October 4, 2007 – 6:52 am in Analyst Calls, Food, ,

Wachovia: Tech Analyst Coverage After A.G.Edwards Merger (AMD, INTC, TXN, DELL, IBM, HPQ, NOK, QCOM, BRCM, MOT, JAVA)

Yesterday was a bad day for chip stocks based upon Morgan Stanley’s key downgrades in the semiconductor sector.  But today is a different day as many major technology companies have been initiated with new coverage at Wachovia.  Keep in mind that Wachovia just completed its acquisition of A.G.Edwards and has been making its official coverage and department head transitions this week.  This appears to be a part of that transition.

Wachovia’s OUTPERFORM RATINGS: Analog Devices (ADI), Broadcom (BRCM), California Micro (CAMD), Dell (DELL), Hewlett Packard (HPQ), Intel (INTC), Micron (MU), Microsemi (MSCC), Nokia (NOK), Xilinx (XLNX).

Wachovia’s MARKET PERFORM RATINGS: Altera (ALTR), Advanced Microdevices (AMD), IBM (IBM), Motorola (MOT), Qualcomm (QCOM), Sun Microsystems (SUNW), Texas Instruments (TXN).

Jon C. Ogg
October 4, 2007

Posted on: October 4, 2007 – 6:43 am in Analyst Calls, Technology Companies, , , , , , , , , , , ,