Daily Archives: October 9, 2007

Silicon Alley Insider Begins To Join The World Of PaidContent.org And GigaOm

There are a very few websites that technology and media executives turn to for information. They are probably the same ones that Web 2.0 institutional investors and the M&A types track. Ditto all the big-time geeks and gear heads like Sun’s CEO Jonathan Schwartz and Fake Steve Jobs. Add the VC firms to that list.

The king of these sites is TechCrunch. It has an astonishing amount of content, most of which it gets before any of its competition. It is the only tech and internet news site or blog in the top 1,000 websites on the Alexa list. For the last week, it ranked 751.

The list also includes sites that are fairly hard news operations like WebProNews (Alexa: 9,555) and ZDNet (Alexa: 1,608), part of CNET. Some of the properties lean more in the direction of gossip. These would include Gawker (Alexa: 5,796), which is followed heavily buy old and new media types, and ValleyWag (Alexa:5,638).

Other highly regarded blogs in the industry are GigaOM (Alexa: 8,859), VentureBeat (Alexa:17,521), and PaidContent.org (Alexa:15,433).

It’s a tough racket. Most of these websites are chasing the same news, speculation, and gossip. Die-hards following the industry may check most of these sites several times a day. Standing out is not easy.These sites often link to each other to get broader coverage.

Most of the properties are over a year old, and some have been around two or three years. They have been joined recently by a new site which has only been in business about three months–Silicon Alley Insider (Alexa:11,896). The site has made a big audience move very quickly, as the Alexa one-week average traffic figure shows.

Each of these sites has a unique perspective. At Alley Insider, it is probably the focus on East Coast tech, media, and venture activity. And, of greater appeal, the site comes at its coverage the way that Wall St. would. Not surprising, since the writers are a former securities analyst and journalists from Forbes. The site rips apart companies based on valuation. Very few other places cover the industry that way.

Alley Insider has made a very big move in 90 days. It has already passed industry standards like Paid Content and VentureBeat. And, it looks like its audience is likely to keep moving up.

Douglas A. McIntyre

24/7 Wall St. runs stories from Alley Insider from time to time.

Posted on: October 9, 2007 – 7:02 pm in Media

Life Gets Harder At Newspaper Companies (JRC)(MNI)

Sisyphus kept moving that rock up the hill and it kept coming back at him. Newspaper executives must feel that way. John Morton, a long-time analyst of the industry made the point in the American Journalism Review that "through the first half of 2007, using results of publicly reporting newspaper companies as a proxy for the industry, total revenue was down nearly 5 percent and operating profit was off more than 14 percent."

Morton adds that "bad as 2007 has been, the publicly reporting companies still produced an average operating-profit margin of nearly 16 percent in the first half of the year–a level many businesses can never hope to achieve. Still, the average profit margin has been in steady decline since 2002, when it was 22.3 percent."

A sixteen percent margin is very good, unless, like Journal Register (JRC) and McClatchy (MNI), a newspaper company has a high debt load and a modestly poor debt rating. Each point of margin that comes off makes the notes harder to pay.

Morton has one final bit of wisdom that will come to late for most firms in the industry. "Most newspaper companies concentrated on shoring up the profitability of their traditional newsprint-oriented business, chiefly through laying off employees, downsizing their newspapers and cutting back on circulation in distant areas of little interest to advertisers in their core markets. It was a classic defensive strategy that undermined the very things–standing, reputation, influence–that are crucial to success on the Internet."

No one seems to have listened.

Douglas A. McIntyre

Posted on: October 9, 2007 – 6:03 pm in Media, ,

Do Chrysler Lay-Offs Spread To Ford (F)

Newly private Chrysler believes that talks with the UAW may note yield enough savings to get the car company back on the right financial footing. So, the company is looking hard at lay-offs among non-union employees and temporary workers.

Bloomberg writes that Chrysler may cut 1,500 salaried and contract jobs because of falling U.S. auto sales.

If anything, Ford (F) is in a position which is worse than Chrysler’s. Its sales have been falling fast, off over 20% last month. And, there is no reason to believe that, between its aged model line and a faltering economy, that the country’s second largest car maker does not need to make significant cuts.

It is a question of when and not if.

Douglas A. McIntyre

Posted on: October 9, 2007 – 5:51 pm in Uncategorized,

Starbucks (SBUX) China Toy Cup Recall

As if a falling share price and shrinking same store sales growth were not enough, Starbucks (SBUX) is recalling 250,000 children’s cups.

The coffee retailer said if a cup is dropped, the colorful face on the cup can break off and leave small parts or sharp exposed edges that can pose a choking or laceration hazard to young children.

Starbucks has received seven reports of the cups breaking, including two reports in which a child began to choke on a broken piece. The company is offering a complimentary beverage as an incentive to return the recalled cups. Nice touch.

And, of course, the cups were made in China. Maybe the coffee is, too.

Douglas A. McIntyre

Posted on: October 9, 2007 – 5:06 pm in China,

Google (GOOG) Takes On MySpace

Recent research picked up by TechCrunch shows that Google (GOOG) social network Orkut now has about 25% of the audience of News Corp’s (NWS) MySpace. In the fast-growing Asia region, the sites are neck-and-neck.

TechCrunch adds "Business Week also confirms our estimated November 5 launch date for a new set of APIs which let developers build applications that span a number of Google services."

Douglas A. McIntyre

Posted on: October 9, 2007 – 4:50 pm in Internet, ,

Altria: The Hidden SABMiller & Molson Coors Winner (MO, TAP, BUD)

If you follow beverage stocks or follow alcohol and beer stocks very much, you certainly saw the huge gains today seen in Canadian ADR’s of Molson Coors (NYSE:TAP).  Shares rose some 10% on four-times normal volume after the announcement that SABMiller plc and Molson Coors will combine U.S. brewing operations into a joint venture called MillerCoors.  The joint venture will be 58% owned by SABMiller and 42% owned by Molson Coors with each having an equal voting interest in an all out effort to cut costs to better compete against the dominance of Anheuser-Busch (NYSE:BUD) and the solid Budweiser brands.

This joint venture will result in a combined savings of $500 million annually which will be from reduced shipping distances, economies of scale, production and capacity utilization, and operational and advertising overlaps. The companies are projecting $6.6 Billion in combined U.S. sales.  Anheuser-Busch shares are down 1% on the day as its total sales in 2006 for domestic and international (plus equity partner sales) were $15.717 Billion in net sales.

Interestingly enough, Altria Group, Inc. (NYSE:MO) may be the hidden winner in this venture because it owns approximately 28.6% of SABMiller plc.  Altria is also the one that will hold the SABMiller interest after the previously announced pending spin-off of Philip Morris International occurs in 2008 (assuming it does).

Read More »

Posted on: October 9, 2007 – 4:15 pm in Tobacco, , , , , , , , , ,

The 52-Week Low Club

TOUSA (TOA) Home builder hire Lazard to review capital structure. Down to $1.32 from 52-weej high of $11.37.

Edge Petroleum (EPEX) Updates guidance. Off to $8.93 from 52-week high of $20.26.

Childrens Place Retail (PLCE) Down to $20.56 from 52-week high of $71.81.

TranSwitch Corporation (TXCC) Down to $.96 from 52-week high of $2.07.

Douglas A. McInyre

Posted on: October 9, 2007 – 3:02 pm in HI/LOW, , , ,

Sept. 18 FOMC Minutes… Showing More Fed Easing Bias?

Minutes of the Federal Open Market Committee from the September 18, 2007 meeting that were released October 9, 2007…. We glanced over the notes and here are some quick standout comments:

  • Unanimous on decision to cut rates;
  • Skeptical about payrolls numbers, but they were unanimous in decision to cut and trimmed economic outlook for rest of 2007 and 2008 with firming growth likely in 2009;
  • Financial markets still fragile and concerns over weakening consumer spending;
  • Grew more confident that inflationary pressures and concerns would come down.

This may at least give the FED RATE HOPEFULS with a slightly better argument that the FED is willing to further cut rates in light of recent economic numbers.  That may or may not be the case and with a possible dollar crisis the FOMC has some careful decisions to make on rate cuts or keeping rates where they are.  Traditionally there are no "one and done" moves, but we have a mostly new FOMC than under Greenspan so we aren’t endorsing a definite policy either way as of yet.

As a reminder, many of these initial market reactions change after more time has been given to absorb all of the data and the turns.  Here are the full FOMC MINUTES.

Jon C. Ogg
October 9, 2007

Posted on: October 9, 2007 – 1:13 pm in Economy, ,

ALCOA Leading Off Earnings Season (AA)

It is hard to get too excited about metals and aluminum companies when technology and IT stocks are putting in new high after new high.  Regardless, ALCOA (NYSE:AA) is set to lead off the earnings season today as it is the first DJIA component to show its formal Q3 2007 earnings after today’s close with a conference call to follow at 5:00 PM EST.

First Call has estimates at $0.65 EPS and $7.4 Billion in revenues.  Based upon the stock in the middle of the 52-week range of $26.39 to $48.77 and based upon the upside earnings surprises having dwindled, it is hard to make any bold predictions today.  Options traders appear to be braced for an actual stock move of up to about $19.80 to $1.95 in either direction.  Analysts are still positive on the company with an average target north of $45.00. 

As far as the chart looks somewhat neutral.  There is some near-term upside resistance in this $38.50 to $39.50 range; but on a longer-term basis this has traded sideways outside of any long-term uptrend since late summer and is not indicative of any major new trend forming in either direction.

The company is already engaged in and has tried to be engaged in buyouts and divestitures of its own, but there have been more twists along the way than a pretzel.  Jim Cramer has gone on record saying this would not be entirely its own entity a year from now.  We aren’t going to cover the tie-ups because of the complexity and because of the recent changes to the capital market’s willingness to finance deals.  We will only evaluate this one on a standalone basis in the current environment.

Jon C. Ogg
October 9, 2007

Posted on: October 9, 2007 – 10:51 am in Earnings, Metals, , , ,

China Stocks Lead The Market Higher, Again (LDK)(STV)(RCH)(YTEC)

Why should today be different from any other. Stocks of companies based in China dominate the list of price gainers.

China Digital TV (STV) Up 30% to $55.31, a 52-week high. NYSE listed.

China Architectural (RCH) Up 20% to over $17. AMEX listed.

Yucheng Technologies (YTEC) Just public. Up 11% to $14. Nasdaq Listed.

China Shenghuo Pharmaceutical (KUN) Up 13% to almost $13. AMEX traded.

QIAO Xing Mobile (QXM) Up 12% to almost $12. NYSE listed.

LDK Solar (LDK) Up 9% to $41. NYSE listed.

China Finance Online (JRJC) Up 8% to about $38. Nasdaq listed.

Douglas A. McIntyre

Posted on: October 9, 2007 – 9:32 am in China, , , , , , ,

Thomson-Reuters: $500 Million Savings = 3000 Fired

From Silicon Alley Insider

The EU wants to take a closer look at the Thomson-Reuters (RTRSY) merger (surprise, surprise).  The commission now expects to deliver its ruling on Feb 25th.  The companies, of course, will cooperate. NYT/Bloomberg

Meanwhile, the companies have said they expect the merger to save $500 million annually.  continued…

Posted on: October 9, 2007 – 8:29 am in Mergers and Buy Outs

Qwest Kicks Up the Bandwidth (Q)

Qwest Communications International Inc. (NYSE: Q) has announced it will offer wholesale customers Dedicated Internet Access over Ethernet with speeds from 2 Gigabits per second (Gbps) up to 10 Gbps within key U.S. metropolitan markets.  Bandwidth intensive wholesale customers (major international carriers, content providers, cable companies, resellers and wireless carriers) can now order Qwest DIA over Ethernet in 1 Gbps increments to consolidate Internet traffic and realize significant cost advantages.

With all the online videos, interactive advertising from portals, and file sharing (like it really stopped), it seems that bandwidth needs are growing as fast or faster than the offerings can keep up with.  Most of that old dark fiber has been bought up, and if you use the Internet actively throughout the day you’ll probably agree that there might not be enough bandwidth out there.  Maybe Qwest can help the Internet recipe cook book from Emeril and say "Let’s kick it up a notch."

Jon Ogg
October 9, 2007

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

Posted on: October 9, 2007 – 8:20 am in Uncategorized, ,

LDK Solar (LDK) Says Everything Is Fine

After being beaten half to death by a piece in Barron’s and watching it stock move down by over 25% yesterday, LDK Solar (LDK) says that no one should worry. It’s OK.  According to Reuters "a former executive said the solar wafer maker had problems with its silicon inventories."

Today, LDK offered a rebuttal. And, the company sharply increased its estimate for earnings. Based on preliminary management reports, LDK exceeded its original plan and shipped approximately 75 MW of wafers in the third fiscal quarter ended September 30, 2007. As a result, LDK hereby updates its Q307 revenue guidance from $115 to $125 million to $140 to $150 million.

"As we previously indicated, we believe that there is no merit in the allegations made about our inventory accounting practices, our business operations are normal and we continue making shipments to fulfill our customers’ orders," stated Xiaofeng Peng, Chairman and CEO.

After falling from a 52-week high of $76.75. all of the bad news had sent LDK down to $37.50.

The shares are up 15% on the "positive" news.

Douglas A. McIntyre

Posted on: October 9, 2007 – 8:08 am in Earnings,

Children’s Place Must Be Spanking The Kids (PLCE)

The Children’s Place Retail Stores, Inc. (NASDAQ:PLCE) just can’t seem to get it right.  The company posted a 4% September sales gain to $217.8 million, but its same store sales came in at -3% (compared to a 16% gain last year).  To top it off, it now anticipates that earnings per share for the third quarter will come in at least 60% below the low end of its previous guidance of $0.94 to $1.02 given on August 23, 2007. Included in this new outlook is an estimated charge of approximately $0.07 per share related to severance payments to be made to the former chief executive officer pursuant to the terms of his employment agreement.  This will drag down its annual guidance significantly as well, and it does not plan to offer further guidance for Q4 or the fiscal year.  Of course the ‘unseasonally warm temperatures’ was also thrown out there as part of the excuse as well.

Children’s Place had to take significant inventory markdowns and expects these trends to continue for the remainder of the year.  Chuck Crovitz, the interim CEO, is actively engaged with other members of management in overseeing the updating and completion of the Company’s delinquent SEC filings.  The Board of Directors has established a Search Committee to find a permanent CEO. Despite noting that it is reviewing inventory strategy, it will likely take several quarters to make adjustments to the extent they are necessary.

After the prior reduction and disclosure of being out of compliance with its Disney deal, it’s hard to want to endorse this regardless of a low trailing P/E.  Shares are hitting another 52-week low at $20.56 pre-market, and the 52-week trading range is $23.86 to $71.81.  It sure sounds like this company better find a permanent CEO rather fast.

Jon Ogg
October 9, 2007

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

Posted on: October 9, 2007 – 7:56 am in Earnings Warning, Retail, ,

Wal-Mart (WMT) To Sell Broadband Service

Wal-Mart (WMT) is teaming up with Hughes Communications (HUGH) to sell satellite-based broadband, according to a report in BusinessWeek. While DSL and cable have much larger customer bases, the entry of Wal-Mart into the market could force price cuts at the incumbents, if they want to keep share.

Coupled with WiMax deployments from firms like Clearwire (CLWR) and Sprint (S), the number of companies marketing big pipes to the home is increasing fairly fast. Good for customers. Bad for the companies.

Douglas A. McIntyre

Posted on: October 9, 2007 – 7:43 am in Retail, , , ,

Pre-Market Stock News (October 9, 2007)

(BRLC) Syntax-Brillian approved a 120-day action plan by the co’s new management team and Board of Directors.
(CLMS) Calamos Asset Management reported assets under management grew to $46.7 BIL as of Sept 30, compared with $43.9 BIL in AUGUST and $44.8 BIL in SEPT 06.
(CSC) Computer Sciences announced another $1.1 Billion in federal contracts.
(HOKU) HOKU Scientific announces a TCS Engineering contract win for Hoku Materials polysilicon plant.
(ISIS) ISIS Pharma received a $1.25 million milestone payment from ICO for initiation of Phase 1 study of iCo-007.
(PLCE) Childrens Place lowered guidance to well under the low-end of estimates.
(QLTI) QLT acquired an ocular drug delivery system from ForSight Labs.
(S) Sprint’s Chairman/CEO Forsee was forced out.
(SAI) SAIC reaffirmed FY2008 guidance.
(SCOR) comScore guidance was actually above consensus levels.
(SLM) Sallie Mae filed a lawsuit over the merger termination.
(SOLF) Solarfun Power appointed a new CFO.
(T) AT&T acquired Wireless Spectrum from Aloha Partners for $2.5 Billion.
(TAP) Molson Coors and SABMiller confirm that they have signed a letter of intent to combine the U.S. and Puerto Rico operations Miller and Coors in a joint venture called MillerCoors; will have annual combined beer sales of approximately $6.6 BIL.
(TASR) Taser had another product liability suit dismissed.
(TLB) Talbots retained a consulting firm to support its development of a strategic plan.
(VICL) Vical announced positive study data on animal studies of pandemic flu and measels vaccines.
(VOLC) Volcano will sell 6 million shares under its existing shelf registration; sees revenues at $31.5 million versus $29+ million estimates.
(YUM) Yum! Brands traded up 4% after beating earnings and raising guidance.

Posted on: October 9, 2007 – 7:24 am in Pre-Market Activity

Hoku Production Award (HOKU, SGR)

Hoku Scientific, Inc. (NASDAQ:HOKU) has announced that its Hoku Materials subsidiary entered into an Engineering Services & Technology Transfer Agreement for Dynamic Engineering to provide design and engineering services, and a technology license, for Hoku Materials to build a trichlorosilane production and purification unit at its planned polysilicon production plant in Pocatello, Idaho.

The agreement announced today provides for Dynamic to provide the basic engineering package and related services for the TCS production component of Hoku’s planned polysilicon plant, which will be integrated by Stone & Webster Inc., a subsidiary of The Shaw Group Inc. (NYSE:SGR), and Hoku’s engineering, procurement and construction management firm, into the overall polysilicon production facility, and will be constructed by JH Kelly, Hoku’s general construction contractor.

Shares are up over 15% in early pre-market trading at $10.60 on the headlines despite no terms being disclosed. The 52-week trading range is $2.52 to $14.55. Other items of interest in HOKU:

Jon Ogg
October 9, 2007

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

Posted on: October 9, 2007 – 7:22 am in Alternative Energy, Cult Stock, ,

Amazon (AMZN): Today’s “Thanks For Nothing” Analyst Call

Bank of America was good enough to raise its price target on Amazon (AMZN) from $90 to $105. The shares trade at $95.85.

Better late than never?

Douglas A. McIntyre

Posted on: October 9, 2007 – 7:21 am in Analyst Calls,

AT&T (T) Buy Aloha, Ups Wireless Video Capacity

AT&T (T) is paying $2.5 billion to buy wireless spectrum from Aloha Partners. According to The Wall Street Journal, Aloha’s footprint covers 196 million people. The spectrum blankets 72 of the nation’s top 100 markets.

The new spectrum will probably be used for 3G applications, including over-the-air video

Douglas A. McIntyre

Posted on: October 9, 2007 – 7:14 am in Wireless,

Pre-Market Analyst Calls (October 9, 2007)

ADVS started as Hold at Deutsche Bank.
ARRY started as Overweight at Lehman.
ATVI started as Buy at Citigroup.
BOBJ cut to neutral at UBS, cut to Hold at Jefferies.
COGN cut to Hold at Jefferies.
COO cut to Underweight at JPMorgan.
CYBS raised to Outperform at JMP Securities.
DROOY cut to Underweight at HSBC.
DRS started as Buy at UBS.
ERTS started as Buy at Citigroup.
FFIV cut to Sector Perform at RBC.
FISV started as Buy at Deutsche Bank.
GG cut to Underweight at HSBC.
GOLD cut to Neutral at HSBC.
HCN cut to Neutral at UBS.
HMY cut to Neutral at HSBC.
HNSN started as Buy at Merriman Curhan Ford.
JKHY started as Buy at Deutsche Bank.
KO cut to Hold at Deutsche Bank.
KGC cut to Neutral at HSBC.
MDG cut to Neutral at HSBC.
MF started as Buy at B of A.
NHP cut to Neutral at UBS.
NTLS cut to Neutral at UBS.
OHI cut to Sell at UBS.
PEP cut to Hold at Deutsche Bank.
PNM cut to Hold at Jefferies.
RDEN Cut to Neutral at Sun Trust Robinson Humphrey.
RGLD cut to Neutral at HSBC.
RNWK starte das Neutral at JPMorgan.
SNH cut to Neutral at UBS.
SPPI raised to Buy at Brean Murray.
THQI started as HOLD at Citigroup.
TTWO started as HOLD at Citigroup.
VTR cut to Neutral at UBS.
WBD cut to Hold at Citigroup.
WGO raised to Outperform at RBC.
WM estimates cut at Goldman Sachs.

Jon Ogg
October 9, 2007

Posted on: October 9, 2007 – 6:54 am in Analyst Calls