Daily Archives: October 5, 2007

Movie Gallery (MOVI) Goes Chapter 11

According to The Wall Street Journal, Movie Gallery (MOVI), the video rental chain, will go Chapter 11.

The company’s shares fell as low as $.20 after hours. They had closed at $.45, down from a 52-week high of $5.29.

The newspaper writes "Under the pre-negotiated plan, Movie Gallery would convert its bonds to stock, and a portion of its second-lien debt also will be converted to stock. The company had $1.2 billion in debt as of July, including $322 million in bonds, $175 million in second-lien debt, and $600 million in first-lien debt."

Posted on: October 5, 2007 – 6:01 pm in Law,

Whole Foods (WFMI): CEO Given Clean Bill Of Health By Board

Whole Foods Market (WFMI) announced that the special committee of the Board of Directors of Whole Foods Market, Inc., assisted by its independent counsel, has completed its investigation into online financial message board postings related to Whole Foods Market and Wild Oats Market. The Board has reaffirmed its support of John Mackey, Chairman and CEO of Whole Foods Market, and the Whole Foods Market leadership team and has turned over its findings to the SEC. WFMI and the Board intend to cooperate fully with the SEC in completing its related inquiry.

The announcement was made after the market close, but WFMI shares were up 4.2% today to $53.20

Posted on: October 5, 2007 – 5:53 pm in Retail,

Sony (SNE) Cuts PS3 Price In Europe

Sony (SNE) has cut the price of its Playstation 3 in Europe, the Middle East and Africa. It is also releasing a 40-gigabytes console version, which is aimed at the inexpensive Nintendo Wii. The current PS3 is a 60-gigabyte version.

Most analysts expect the price of the PS3 to be cut in the US as well. Slow sales may force Sony to make the product more attractive as the holiday season approaches.

Douglas A. McIntyre

Posted on: October 5, 2007 – 5:01 pm in Consumer Electronics,

The 52-Week Low Club: Tellabs (TLAB) And More

Tellabs (TLAB) Q3 earnings warning. Drops to $8.95 from 52-week high of $13.67.

Quepasa (QPSA) CEO gets new comp package? Drops to $2.75.

Nutrition 21 (NXXI) Still moving down after announcement of poor quarter. Falls to $.78 from 52-week high of $2.63.

TranSwitch (TXCC) Dropping after weak guidance earlier in the week. Dow to $.98 from 52-week high of $2.07.

Douglas A. McIntyre

Posted on: October 5, 2007 – 4:54 pm in HI/LOW, , , ,

This Week on Stockhouse October 1 to 5

This week we proudly launched the new Stockhouse beta (http://beta.stockhouse.com/). We’re very proud of the new site with its new rating and ranking tools, improvements for networking and expanded charting capabilities, among other elements. We want everyone to take some time to look around, play with the new features, and give us suggestions or questions using our feedback form (http://beta.stockhouse.com/tools/?page=%2Ffeedback%2Easp).

Publisher and Executive Editor Darin Diehl announced the launch in his regular Publisher’s Notebook (http://beta.stockhouse.com/Community-News/2007/October/2/Publisher-s-Notebook–The-New-Stockhouse-is-Here! ) column, and highlighted the importance of our user community, and mentioned the site’s clean look and improved navigation.

The news flow from the community continued to address a wide range of important issues.

In a continuing series about how statistics can be used to manipulate a message to the public markets, littleguy123 wrote about the consumer confidence number (http://beta.stockhouse.com/Community-News/2007/October/1/Stockhouse-Community-News–U-S–economic-statistic ).

While Sigurd profiled a silver company (http://beta.stockhouse.com/Community-News/2007/October/1/Capstone-offers-healthy-silver-exposure ) he says carries some risk, and plenty of upside.

Many investors looking to cash in on the booming China economy have put funds into Chinese markets, but Gabrielgray warned his fellow users to move cautiously (http://beta.stockhouse.com/Community-News/2007/October/3/Risk-vs–reward-in-China).

While interest in zinc (http://beta.stockhouse.com/Community-News/2007/October/4/World-class-mining-company-in-the-making ) has dulled compared to the precious metals, David Zurbuchen and Ming Guo wrote that one company with a promising property in the Sierra Mojada mining district is worth a second look.

What does a high Canadian dollar mean for investors in Canada? Stacey Laliberte suggested that U.S. stocks are looking cheap (http://beta.stockhouse.com/Community-News/2007/October/4/Canadian-dollar-parties-like-it-s-1976 ) by comparison.

And from our regular columnists…

Danny Deadlock also looked at silver this week, profiling a company with a large land position (http://beta.stockhouse.com/Columnists/2007/October/1/Microcap-Monday–Silver-Stock-Shines-Brightly ) in Durango State, Mexico.

The credit crisis is driving consumer price inflation, and will be the main driver of higher gold prices (http://beta.stockhouse.com/Columnists/2007/October/1/Using-commodity-prices-as-an-inflation-calculator ), wrote Greg Silberman.

Greg McCoach agreed, saying all signs signal that gold is a buy (http://beta.stockhouse.com/Columnists/2007/October/2/All-Signs-Point-to-BUY-GOLD ).

Steven Saville concurred, although he focussed on the commitment of trade (http://beta.stockhouse.com/Columnists/2007/October/3/Gold-risks–the-COT-and-the-dollar ) dollars in gold to show that short-term declines would not be unexpected.

Sticking with gold and silver, Institutional Research Partners interviewed CEO Richard Hamelin of a gold and silver exploration company (http://beta.stockhouse.com/Columnists/2007/October/2/Microcap-Spotlight–Production-will-make-UC-Resour ) with properties in Mexico and Canada.

Using a deflated energy play, Don Rodgers cautioned readers against guessing they know where market sentiment (http://beta.stockhouse.com/Columnists/2007/October/2/Trading-Discipline–Market-sentiment-versus-market ) will go.

Septos Capital Management’s Jay Matulich said that the markets are in for a rocky ride (http://beta.stockhouse.com/Columnists/2007/October/3/Cash-is-king! ), and pointed out that he thinks cash is king at the moment.

In the latest salvo in a series trumpeting warnings about a coming fiscal crisis, the Casey Files warned investors against thinking like the Wall Street crowd (http://beta.stockhouse.com/Columnists/2007/October/5/Crisis–What-crisis- ).

Wouldn’t it be nice if you didn’t have to take off your shoes every time you took the kids to Disneyland or flew to your best client’s office for meetings? Totally Technology writers Leon Hamerling and J. Paul found an Israeli company with Homeland Security connections and a technology that could eliminate at least one headache of air travel (http://beta.stockhouse.com/Columnists/2007/October/5/IDO-Security ).

If you read last week’s report on why to write your will, you’ll want to read about how to set up trusts (http://beta.stockhouse.com/Columnists/2007/October/5/The-advantages-of-trusts) in this week’s Financially Fit.

Posted on: October 5, 2007 – 4:44 pm in Uncategorized

Google (GOOG) Had 40% Of US Online Ad Market In First Half

According to TechCruch, Google (GOOG) had a 40% share of the US online ad market in the first half of 2007.

The IAB puts internet ad revenue in the first half at just below $10 billion.

Douglas A. McIntyre

Posted on: October 5, 2007 – 12:39 pm in Internet,

Xinhua Finance Media Sees The China Boost (XFML)

Chinese stocks this week have gone bonkers, in most cases to the point that goes beyond sensible.  When stocks rise exponentially and with a major wave you always have to back over the reasoning with a fine tooth comb.

We just saw Xinhua Finance Media Limited (NASDAQ:XFML) make a mystery run of 6% before giving back some gains, and no doubt it was the China Syndrome helped it.  This company is one we’ve covered on and off and it is up roughly 80% from its post-IPO lows.  The stock was punished severely shortly after coming public due to lurking issues that weren’t properly disclosed ahead of the IPO.  It’s too bad that this turned into a busted IPO so fast, because the company may have alienated many investors who would have otherwise been quite interested.

Xinhua actually has a lot going for it.  It brought in more outside independence after Yucaipa bought shares from selling shareholders into a lock-up expiration.  It has actually been able to stage a defense after much negative outside media coverage (imagine news agencies bashing each other).  The company has been making deals and now is much more than just a "Chinese Finance Media Company."  It has too many distribution partners and now research to mention in a quick article.

Read More »

Posted on: October 5, 2007 – 12:01 pm in China, Media, ,

Microsoft’s Gift: A Bungie Spin-Off (MSFT, ERTS, TTWO, ATVI, THQI)

Microsoft (NASDAQ:MSFT) is giving investors and the public a gift today.  The company has announced that Bungie Studios, the creators of Halo 3 and the Halo franchise, is going on the path to becoming an independent company.  It isn’t clear if this will ultimately be an IPO or a spin-off, but this will be a huge event.

Last night came the announcement that the company already saw Halo 3 generate $300 million in revenues in just the first week alone, although we noted that this will quite easily and quite rapidly reach $500 million.  It is when, not if.  We have noted how investors were looking at this, and now there is going to be a new way to look at it.  We have joked before about the XBOX franchise being spun-off to existing holders, but this will do for now.

Microsoft will retain an equity interest in Bungie, at the same time continuing its long-standing publishing agreement between Microsoft Game Studios and Bungie for the Microsoft-owned "Halo" intellectual property, as well as other future properties developed by Bungie.  Bungie Studios will remain in its current location in Kirkland, Wash.

We have already stated how the next generation games of Halo are already under conceptual development despite this being the "end the fight" version of the game. All you have to do is follow the money, it ALWAYS works.

Interestingly enough, Electronic Arts (NASDAQ:ERTS), THQ Inc. (NASDAQ:THQI),  Activision (NASDAQ:ATVI), and even Take-Two Interactive (NASDAQ:TTWO) are all trading higher.  This will end up becoming quite a unique situation for our readers of the SPECIAL SITUATION INVESTING NEWSLETTER as more data becomes available, and we eagerly look forward to providing special coverage of this special situation.

Jon C. Ogg
October 5, 2007

Jon Ogg produces the Special Situation Investing Newsletter and he does not own securities in the companies he covers.

Posted on: October 5, 2007 – 10:58 am in IPOs, Video Games, , , , , , , , ,

NYSE Month End Short For September Month’s End

Below are the major changes in short interest in NYSE listed companies comparing the figures on September 28 with those on September 14.

Largest Short Positions

Company                                             Short Interest

Ford (F)                                               177.6 million

Qwest (Q)                                              84.3 milion

AMD (AMD)                                           76.4 million

Countrywide (CFC)                                 76.1 million

GE (GE)                                                65.9 million   

Time Warner (TWX)                                64.9 million

Best Buy (BBY)                                     62.3 million

Tenet Health                                          57.4 million

GM (GM)                                               56.5 million

Home Depot (HD)                                   55.6 million

Micron (MU)                                           54.3 million

EMC (EMC)                                           52.8 million

Sprint (S)                                               51.7 million

Altria (MO)                                             51.2 million

Largest Increases In Short Position

Company                                               Increase

Excelon                                                 Up 12.5 million

Circuit City (CC)                                     Up 11.6 million

Solectron                                               Up 10.9 million

GE                                                        Up 6.1 million

EMC                                                      Up 5.6 million

AT&T (T)                                                Up 5.4 million

Spint                                                     Up 3.9 million

Largest Decreases In Short Interest

Company                                               Decrease

Ford                                                       Down 13.6 million

National Semi                                         Down 12.1 million

Home Depot                                           Down 8.2 million

AMD                                                      Down 8.1 million

JP Morgan (JPM)                                    Down 5.2 million

Morgan Stanley (MS)                               Down 4.8 million

Data from NYSE and WSJ       

Douglas A. McIntyre

Posted on: October 5, 2007 – 10:17 am in Short Interest, , , , , , , , , , , , , , , , ,

International Bond ETF Launch (BWX)

The American Stock Exchange has launched trading in the SPDR Lehman International Treasury Bond ETF (AMEX:BWX) by State Street Global Advisors, the investment management arm of State Street Corporation (NYSE:STT).

BWX seeks to replicate as closely as possible the price and yield performance of its benchmark index, the Lehman Brothers Global Treasury Ex-U.S. Capped Index. The Index tracks fixed-rate local currency sovereign debt of investment-grade countries outside the U.S.

As of August 31, 2007, there were 674 issues from 18 countries denominated in 11 currencies included in the Index. The Fund will normally invest at least 80% of its total assets in fixed-income securities that comprise its benchmark Index.

Jon C. Ogg
October 4, 2007

Posted on: October 5, 2007 – 9:15 am in ETF, ,

IPO Pricing: China Digital TV Double Premium (STV)

China Digital TV Holding Co. Ltd. (NYSE:STV) has a premium IPO pricing, after already having raised its price range for a 12 million ADR offering.  The revised higher range was $13.00 to $15.00, and $16.00 per share is the pricing.  Morgan Stanley and Credit Suisse acted as the joint book-runners, and co-managers are Piper Jaffray, Needham, and CIBC World Markets.

China Digital TV provides conditional access systems to the digital television market in China.  The company has installed its systems at 130 digital television networks throughout China.  If you have seen the Chinese stocks this week, you’ll know why the deal price got boosted.  There was strong demand for this IPO ahead of this week, but the parabolic moves on even the smallest headlines or hints may have helped put an even higher premium into the opening price today.

As this is an NYSE offering, shares should start trading shortly after the open today.

Jon C. Ogg
October 4, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the SPECIAL SITUATION INVESTING NEWSLETTER and he does not own securities in the companies he covers.      

Posted on: October 5, 2007 – 7:51 am in ADR, China, IPOs, , ,

Secure Computing Defections Raise Eyebrows (SCUR)

Secure Computing Corp. (NASDAQ:SCUR) has ‘reaffirmed its guidance’ after yesterday’s close.  The press release notes that it expects to meet or slightly exceed its billings, non-GAAP revenue and non-GAAP earnings-per-share guidance ranges, which were provided on July 26th for the third calendar quarter.  But it is the "Other Corporate Matters" that looks suspicious:

The company announced that Vincent M. Schiavo, senior vice president of worldwide sales, and Dr. Paul Judge, chief technology officer, have tendered their resignations from the Company effective in the first half of October 2007. Both Mr. Schiavo and Dr. Judge advised the Company that they were resigning for personal reasons.

John McNulty, chairman and chief executive officer: "On behalf of Secure Computing, I would like to thank Vince and Paul for the hard work and contributions that they made to the company.  We wish them all the best in their future endeavors."  It would be interesting to see what he really thinks about the head of worldwide sales and chief technology officer bailing at the same time after new products and initiative have been launched.

If you have followed this company, you will know that company reaffirmed guidance in mid-September as well.  But it simultaneously announced that one of its directors was resigning his position, also due to personal reasons.  The company did recently name Daniel Ryan, a former Oracle and Stellent executive, as chief operating officer at the end of August and said he’d be responsible for Worldwide Sales, Marketing, and Product Development. 

We received a statement from the company in an inquiry, "Both Vince and Paul have moved on for personal reasons, and we thank them for their many contributions.  With two sizable acquisitions over the past two years the company has undergone tremendous change, and has largely reinvented itself.   Their assistance in the integration of technology, products and people has helped us to achieve a market-leading position, with strong momentum and a rich portfolio of products entering into Q4 and beyond."

I was also told that these were not firings and that it was the "personal reasons" issue.  I have not found anyone on record willing to state that Daniel Ryan, the new COO, is driving on the other side of the road.  This would make one raise some questions.  The company can reaffirm guidance all it wants.  But this is the sort of issue that makes a skeptic look for fire around the smoke. 

Jon C. Ogg
October 4, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the SPECIAL SITUATION INVESTING NEWSLETTER and he does not own securities in the companies he covers.      

Posted on: October 5, 2007 – 7:29 am in Management Change, ,

Cablevision (CVC): Big Shareholder May Block Buy-Out

Uber fund manager Mario Gabelli owns a big piece of Cablevision (CVC) which is being taken private by the founding Dolan family. The problem is that Gabelli thinks the $36.26 price being proposed is $15 too low.

"Part of us says take the money and run because of what the world’s going through with regard to the [lending-market] crisis," Gabelli told The New Post. "But it could be worth $65 to $70 a share in five years."

Cablevision is incorporated in Delaware, and under that state’s law, Gabelli could ask a court to place a value on the shares.

Another buy-out deal that could fall apart.

Douglas A. McIntyre

Posted on: October 5, 2007 – 7:16 am in Cable Companies,

Pre-Market Analyst Calls (October 5, 2007)

ALXN started as Buy at B of A.
BE raised to Hold at Jefferies.
BOBJ cut to Neutral at Credit Suisse.
BRKR raised to Outperform at Bear Stearns.
CLWR cut to Peer Perform at Bear Stearns.
CNQR started as Buy at Jefferies.
COLT cut to Neutral at Credit Suisse.
EMC started as Neutral at Credit Suisse.
ERTS cut to Peer Perform at Bear Stearns.
EW raised to Outperform at Piper Jaffray.
FRH started as Overweight at Lehman.
HTX raised to Outperform at Bear Stearns.
JNS raised to Neutral at UBS.
JBHT raised to Neutral at B of A.
KSWS started as Sell at B of A.
MNST cut to Mkt Perform at Wachovia.
MT cut to Neutral at B of A.
PDLI started as Outperform at Credit Suisse.
PLL raised to Overweight at Lehman.
TROW cut to Neutral at UBS.
VSEA raised to Outperform at Credit Suisse.
WAG cut to Sell at B of A.
WERN raised to Neutral at B of A.

Jon C. Ogg
October 5, 2007

Posted on: October 5, 2007 – 7:03 am in Analyst Calls

Details Of Yahoo! (YHOO) Break-Up From Bernstein Research

24/7 Wall St. has obtained a copy of the Bernstein Research report on the break-up of Yahoo!.

The first model done by Bernstein assume that the company is broken into three parts.

The first piece is Display Advertising. Using comparable figures for valuations of companies including DoubleClick, the value of this unit is put at $25.5 billion.

The next piece is the Search Unit. Looking at the values of Google (GOOG) and Ask.com, the research firm values this piece at $15.6 billion.

The last piece is Subscriptions. To get a value for this Bernstein used Match.com and RealNetworks (RNWK) and came up with a value of $1.3 billion.

The values of Yahoo! Japan and China e-commerce company Alibaba was added to cash and net operating losses, bringing the total break-up value of Yahoo! to $54.3 billion, or $38.65 a share.

Bernstein offered a second analysis based on Yahoo! outsourcing its search business to Google. If this was done, search revenue would rise 28% in 2008, and total revenue by 16% over current projections. Yahoo! could cut 25% of its head count dropping operating expenses by 17%. The combined benefit of these actions would improve operating income by 205% over current Wall St. estimates.

Maybe Yahoo! could contract out management of the company to Bernstein.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: October 5, 2007 – 6:44 am in Internet, , ,

Bernstein Calls For Yahoo! (YHOO) Break-Up

Sanford C. Bernstein & Co. analysts want Yahoo! (YHOO) management to break-up the company, and believe that such a move would create a $39 price for shareholders. The stock now trades just above $27.

According to Bloomberg, Bernstein added that "selling Yahoo! to a buyer that will cut jobs and revamp the advertising and search businesses may lift company shares to $45."

Of course, Yahoo! could cut those jobs itself.

Douglas A. McIntyre

Posted on: October 5, 2007 – 6:15 am in Analyst Calls,

Big Sallie Mae (SLM) Shareholders Willing To Fight For Buy-Out

When JC Flowers waked away from its $60 bid for Sallie Mae (SLM) and then returned with a lower bid, Wall St. questioned whether the company’s board had any recourse. Take the lesser deal or take nothing at all.

Well. SLM’s three largest institutional shareholders have come out and said that they back the company on its position that the $60 bid in binding. That means that deep pocket funds may be willing to take Flowers to court.

According to The New York Post, "at least three big shareholders, including the company’s largest holder on record, have indicated that they stand behind SLM in its effort to block Flowers from cutting the takeover price they agreed to in April." One of the three, Capital Guardian Trust Company, is a large and powerful player in the fund business. Another QVT ventures has written "We believe that the J.C. Flowers-led consortium’s attempt to renegotiate the acquisition of Sallie Mae represents a situation in which the buyer is extraordinarily poorly placed to demand a reduction in the purchase price."

Flowers is probably in real trouble now. SLM and the three funds could certainly mount a spirited series of lawsuits against the private equity fund and cost it a great deal in legal fees. It would also do real damage to Flowers’ reputation as a firm that can be counted on to do what it says it will.

Looking back, Flowers management may well see that it has made a big mistake.

Douglas A. McIntyre

Read More »

Posted on: October 5, 2007 – 5:55 am in Mergers and Buy Outs,

Europe Markets 10/5/2007

Markets in Europe were mixed at 6.20 AM New York time.

The FTSE rose .3% to 6,566. BP (BP) was up 1.8% to 572.5. Nothern Rock was down 3.6% to 155.9.

The DAXX was up .2% to 7,960. Commerzbank was down 1.1% to 29.7. Deutsche Boerse was up 3.1% to 103.6.

The CAC 40 was flat at 5,805. Alcatel-Lucent (ALU) fell 2.8% to 7.01. Renault was up 1.8% to 111.02.

Data from Reuters

Douglas A. McIntyre

Posted on: October 5, 2007 – 5:25 am in International Markets, ,

ABN Amro (ABN): The Last Big Bank Deal

It appears that the group lead by Royal Bank of Scotland has won the right to buy bank ABN Amro (ABN) for $101 billion. RBS and buy-out partners Fortis and Banco Santander will break ABN into pieces. Each of the three buyers will take the part that is most valuable to its current businesses, and all will be right with the world.

The deal is huge, but because there were, in essence, three buyers, the prey could be digested. As one banker told The Wall Street Journal "Size on its own is no longer a safety net for financial institutions."

The banking world has changed since ABN Amro went into play. Bank balance sheet have become mine fields primarily due to leveraged buy-out loans and pools of mortgages. Although many of these problems are being written off in third quarter earnings. much of this debt cannot be marked to market, because there is no liquid market at this time. Determining the value of many bank balance sheets has become an exercise in modeling and theory.

Until the current set of credit problems are washed out of the banking system, and that could take two or three years, due diligence on financial company balance sheets will become extremely difficult.

And, that may put a halt to banks buying other banks for quite some time.

Of course, there is always KKR.

Douglas A. McIntyre

Posted on: October 5, 2007 – 4:55 am in Banking,

Pfizer (PFE) Finally Gets The Message

For Pfizer, it has been a long and painful fall. In early 2004, its shares were just below $39. It was the age of Big Pharma. Most of the big drugs had not gone "off patent" and so there was very little competition for the blockbuster money makers.

Now, Pfizer’s shares are unlikely to trade above $28. Over the last five years, the S&P is up about 80% and Pfizer is down almost 20%.

Pfizer found its brain yesterday. It had not been far away, perhaps no further off that a closet in its NYC headquarters.

According to The Wall Street Journal "Pfizer’s labs struggled to find enough new drugs to offset the anticipated loss of sales when $13-billion-a-year cholesterol drug Lipitor faces generic competition, which could come as soon as 2010." So, its has hired a big time biotech executive to be head of a new Pfizer biotechnology center. He will work on advances including medicines made by splicing genetic material into live cells.

The stock market has been telling Pfizer that biotech has been the place to do much of its research work. The company trades at 3.6 times sales. Genentech (DNA), the leader in bio-based medicine trades at 7.5x. Its shares are up 400% over the last five years.

It will be several years before it is absolutely clear whether Pfizer’s move into the more advanced part of pharma R&D will work. But, at least it has given itself a chance.

Douglas A. McIntyre

Posted on: October 5, 2007 – 4:39 am in Pharmaceuticals, ,