Daily Archives: October 12, 2007

The Week In Review (BEAS, ORCL, MCD, C, GE, MSFT, BIDU, VMW, ERTS, TSCM, VM, WMT, COST, BA, VLO, EBAY)

This was a long and crazy week for stock traders, but the Bond weasels got Monday off and only had a four-day work week.  Thursday was the mystery tank day when the beleaguered tech stocks dove, only to recover Friday.  PPI came in on a nominal basis at +1.1% instead of the +0.4% estimate, but when you look at core PPI without food and energy you only had a +0.1% read in September.

Here were the top stories of the week, sorry if itn’t kept to only 10.

Baidu.com (NASDAQ:BIDU)…… Traded north of $350.00 after a move that just wouldn’t quit, only to tank Thursday down to $300-ish and see a Friday recovery after Jim Cramer gave a $500.00 figure for conjecture. Here we posted some lessons from the dot.com bubble days.  Chinese stock craziness didn’t end.

BEA Systems (NASDAQ:BEAS) got a $17.00 buyout offer from Larry Ellison & Co. or Orcale for some $17.00 per share in cash and then rejected it as undervalued.

McDonald’s (NYSE:MCD) raised guidance again.  What a story.

Citigroup’s (NYSE:C) Chuck Prince fired management, but he didn’t fire himself ahead of Monday’s earnings.
http://www.247wallst.com/2007/10/why-citi-c-cant.html
Deutsche Bank cut Citi to a SELL rating.

24/7 Wall St. took the heads and the tails sides of the General Electric (NYSE:GE) earnings report, and McIntyre’s "tails" appears to have won the better call.  GE may also unload NBC Universal, but not until after the 2008 Olympics.

Electronic Arts (NASDAQ:ERTS) is having some serious Halo-envy as it made an $800 million acquisition.

No wonder Jim Cramer was happy all week, besides getting one day off for the CNBC Republican Presidential Debate….. His TheStreet.com (NASDAQ:TSCM) rose to seven-year highs.

Virgin Mobile (NYSE:VM) of billionaire Richard Branson made its IPO debut.

Wal-Mart (NYSE:WMT) sales were not good, but it cut costs amply and raised EPS targets.  Now that the market has stopped treating this as a grwoth stock, the earnings story is the focus.  Costco (NASDAQ:COST) posted better than expected sales.

Microsft (NASDAQ:MSFT) wants to go after VMware’s (NYSE:VMW) dominance in virtualization, but it wont be ready until later in 2008.  The big deal in VMware breaking $100 we gave some projected valuations even if you put the upside surprise on top of the expected growth rates.

Boeing (NYSE:BA) delayed the launch of the Dreamliner by another 6 months, and its suppliers got hit harder than the aerospace, defense, and jet maker itself.

Valero (NYSE:VLO) warned that feedstocks were killing margins and it gave an earnings warning, butthe stock rallied.

eBay (NASDAQ:EBAY) launched its own social networking site, and the reviews are not that encouraging with a "doomed to fail" consensus from our circles.

Jon C. Ogg
October 12, 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: October 12, 2007 – 3:28 pm in The Week, , , , , , , , , , , , , , , ,

Cramer Gives A Monster Price to Baidu.com (BIDU, GOOG)

Jim Cramer just said noted on CNBC’s STOP TRADING segment that Baidu.com (NASDAQ:BIDU) is growing at 80% and the downgrades or cautionary comments aren’t warranted.  He even went as far to say "Baidu could go to $500.00," although that sounded more like conjecture than a formal target.  Shares were up over 2% but now shares are suddenly up over 4% on stronger volume to a $322.00 level.  When this was falling apart yesterday we noted the old bubble lessons learned from the dot.com days.

His Google (NASDAQ:GOOG) went from $600.00 to $700.00, then $701.00 last week to a new higher target of $750.00 recently.  Once again, this Baidu.com $500.00 didn’t sound like a formal target but it’s definitely a number that will grab some attention.

Baidu.com is not one of Cramer’s "new four horsemen of tech" but this was one of his key feature stocks that he felt was better than other Chinese stocks.

Jon C. Ogg
October 12, 2007

Posted on: October 12, 2007 – 1:57 pm in Cramer, Internet, , ,

Evaluating Medarex & Bristol-Myers Huge Options Open Interest (MEDX, BMY, DNDN)

We were screening options activity today and something came up that where bets had significantly grown from our prior coverage.  Earlier this year we covered some strange biotech options activity after noting a "Dendreon-esque" amount of longer-term options trading in Medarex (NASDAQ:MEDX) with a huge open interest that has now gotten even larger.  The company has a partnership in melanoma treatment development with Bristol-Myers Squibb (NYSE:BMY).

In 2005 Bristol-Myers Squibb paid Medarex roughly $50 million in cash and it can receive various milestone payments of nearly $500 million more dependent upon the success of tests and on the ultimate success of Medarex’s antibody.  Last June Bristol-Myers and Medarex reported to oncology experts that the drug shrank tumors in 13% of 356 melanoma patients. 

Bristol-Myers and Medarex are expected to finish key trials this fall, although a formal date has been elusive and we are leery of solid dates in this field.  These response rates for overall melanoma seem quite low compared to other benchmarks or endpoints, but from all the poking around that has been done the verdict from the investment community seems to be that the results don’t have to be anywhere close to a majority.  Minimal improvement may ultimately yield approval.  Analysts are mixed with price targets and opinions all over the place and the most recent research reports have been somewhat cautious on the company.

What is interesting is that Medarex may have a lot of potential upside that riding on this, but it will not fail at all as a company on this event alone if this trial fails to tickle investors.  As of its last report the company had over $400 million in cash and short-term investments plus another $312.9 million in long-term investments.  Its market cap is roughly $1.8 Billion.  The company has a huge pipeline with many other partners which you can see on its site.  This is an old figure but the short interest as of September was listed as more than 34 million shares.

But the open interest in the options trading is massive.  Back in APRIL we noted the huge open interest in its options for the JAN-2008 contracts:
JAN $12.50   CALL 60,061 contracts    JAN $7.50 PUTS   19,683 contracts
JAN $15.00   CALL 39,065 contracts    JAN $10.00 PUTS   14.869 contracts
JAN $17.50   CALL 84,943 contracts    JAN $12.50 PUTS   42,187 contracts
JAN $20.00   CALL 9,376 contracts    JAN $15.00 PUTS   19,122 contracts
But now look at the open interest in the same Medarex options contracts for JAN-2008 TODAY:
JAN $12.50   CALL 109,379 contracts    JAN $7.50 PUTS    28,015 contracts
JAN $15.00   CALL 118,995 contracts    JAN $10.00 PUTS   40,392 contracts
JAN $17.50   CALL 251,272 contracts    JAN $12.50 PUTS   114,109 contracts
JAN $20.00   CALL 43,056 contracts      JAN $15.00 PUTS   174,056 contracts
Bristol-Myers Squibb (BMY) has THE LARGEST single open interest for a single contract of all other stock option contracts on the exchange:
JAN08 $32.50 CALLS 223,666 contracts in the open interest.
JAN08 $32.50 CALLS 526,003 contracts in the open interest (Largest)

There wasn’t any major spike in stock trading from it presenting at the Natixis Bleichroeder’s Hidden Gems Conference this last Monday.  In early November it will be at the JPMorgan Ninth SMid Cap Conference.  It looks like there is more bias to the call options, but after the FDA actions of late we won’t really speculate on what the chances of success are.  We noted some Bristol-Myers speculation some time back about takeover speculation, and that may have contributed to the high open interest.

Jon C. Ogg
October 12, 2007

Jon Ogg produces the 24/7 Wall St. Special Situation Investing Newsletter; he does not own securities in the companies he covers.

If you feel you have anything to contribute feel free to send an email in with relevant data or opinions. All comments are welcome, even the bad ones.

Posted on: October 12, 2007 – 1:05 pm in Biotech, Drug companies, Options, , , , , , ,

Samsung Cell Sales, Good Or Bad For Motorola (MOT)?

Samsung sold almost 43 million handsets in the last quarter. During the first three quarters of the year, that number was 115 million, more than the company sold for the entire 2006 calendar year.

Sony Ericsson announced yesterday that it sold 26 million units during the quarter, up 31% from the same period last year.

These numbers would suggest that global handset sales are growing at about 25% That is unlikely. Most industry estimates are for about 12% year-over-year growth. "Informa estimates that global handset sales, which had risen by an average of 20 percent each year in 2005 and 2006, will slow to an average 5.6 percent annual growth from 2007 through 2012," according to The New York Times.

All of that would tend to spell trouble for Motorola (MOT). Its market share has been steadily dropping for a year. Only so many companies can increase sales by almost a third when the entire industry is not growing as quickly.

Douglas A. McIntyre

Posted on: October 12, 2007 – 11:51 am in Wireless,

Citigroup’s Last Downgrade Before Earnings (C)

Citigroup (NYSE:C) is feeling the wrath of yet another SELL rating, this time the downgrade came from Deutsche Bank.  Interestingly enough, the note directly challenges management saying changes are needed in the chairman position and dissatisfaction with management.  The shakeup putting Vikram Pandit over trading, investment banking and alternative investments may appear to be desperation or a last ditch effort.

Shares are down 1.5% at $47.58, at the lower-end of the $44.66 to $57.00 range over the last 52-weeks.  But there is another thought to consider.  This is the last business day ahead of earnings.  Citigroup ramped up its earnings date.  You could argue that this will allow it to be the first of the big banks to report so that the bank has no comparables at all from peers.  Citigroup already threw out all but the kitchen sink with its previously lowered guidance of a 60% profit plunge.  It’s already going to be ugly, but now the question is for how much longer. 

Last week it was cut to Sell at Punk Ziegel, and Lehman maintained an overweight rating but cut its target to $59 from $60 at the time.   UBS earlier this week maintained its own Neutral rating on the banking giant.  24/7 Wall St. has been quite vocal about Chuck Prince needing to go, and he made the hall of shame last year when we discussed Chuck Prince needing to be fired then.  There is even a CNBC interview I gave with more gruesome commentary on this topic.  But today we’ve also got Chuck Prince’s defense as to why the board can’t turn on him too much.  No one else has done much better lately. 

Citigroup shares have been dead money since 2000.  Dear Chuck Prince, "It’s time to go.  You served your purpose in cleaning up operations.  But now a racehorse is needed.  And why on earth are you paying Bob Rubin so much?"

Jon C. Ogg
October 12, 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: October 12, 2007 – 11:25 am in Analyst Calls, Banking, ,

BankUnited Still Feeling Florida Woes (BKUNA)

BankUnited Financial Corporation (NASDAQ:BKUNA) has been hitting the 52-week low club at a rate that feels almost daily.  At $13.02 it is a dime under the prior 52-week low (of this week too) and down over 50% from the $28.79 52-week high and its market cap is now $460 million.

BankUnited already lowered guidance earlier this month.  Unfortunately it is the ties to the Florida consumer and Florida real estate market that are an issue.  Its lending activities comprise one-to-four-family residential mortgage loans, consumer loans, commercial real estate and multi-family loans, real estate construction loans, land loans, commercial loans, mortgage loans, and mortgage-backed securities.  Earlier this year the lender said a Wall Street Journal article left the impression that it was involved in sub-prime mortgage lending, which it denied.  It seems the damage may have been done and that Florida had more speculation and inflated values.

As of its latest stat sheet it listed 75 branches in 11 counties in Florida.  These 52-week lows are actually 5-year lows.  At its earnings warning the company gave guidance of $0.41 to $0.46, and that compares to $0.63 last year.  Non-performing assets were listed as $210 million, or about 1.4% of assets, and the loan loss provision was put at $8 to $10 million for the quarter.

BankUnited repurchased approximately 315,000 shares of common stock during the quarter, less than originally anticipated, and noted that it would repurchase shares under its current authorization as appropriate.  Each new day at 5-year lows might mark "an appropriate" time.

Jon C. Ogg
October 12, 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: October 12, 2007 – 10:11 am in Banking,

BEA Already At Premium To Offer (BEAS, ORCL)

BEA Systems Inc. (NASDAQ:BEAS) is already trading north of the $17.00 cash buyout offer from Oracle (NASDAQ:ORCL).  Almost 30 million shares have already traded hands, and there is more than 30 minutes to the market open.  Oracle proposed to acquire BEA Systems for $17.00 per share in cash.   

Carl Icahn just got vindicated for his persistence.  The $17.00 pershare offer is a 25% premium over yesterday’s closing price.  But whatis interesting is that a "letter being sent" is no assurance that adeal will be approved by management at BEA Systems.  The 52-week high is $16.77.  Management can hold out here if they want, but at some point they’ll have to roll over if the deal gets too sweet. Pre-Market trading had shares up over the $16.00  level right after the offer was announced.  Shares are now trading right at $18.00, $1.00 above the buyout price.  Wall Street is thinking the offer will get bumped up, or maybe even that another suitor would step in.

Jon C. Ogg
October 12, 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: October 12, 2007 – 7:58 am in Mergers and Buy Outs, Software, ,

Baidu (BIDU) Fights To Hold $300 Level

The $300 level for Baidu’s (BIDU) may not mean much. But, it is a symbol of how far the shares have come in a short time. They closed above $300 for the first time on September 24 on their way to over $359.

Now, after yesterday’s sell off, Wall St. is dumping on the Chinese search engine. This morning Credit Suisse called the shares "underperform" and expressed concern about Q4 guidance. Baidu is barely holding $300 before the open.

Baidu started the year at $130. In may seem inconceivable that the shares could return there. But, trading at close to 70x revenue, it could happen more easily than many investors think.

Douglas A. McIntyre

Posted on: October 12, 2007 – 7:33 am in China,

McDonalds Continues Its Gains (MCD)

McDonald’s (NYSE:MCD) is on a mission.  The company has just raised guidance yet again with projections of $0.83 EPS versus $0.77 estimates. 

This does not include gains from the sale of Boston market but it does include currency gains that added $0.03 to operations and growth in other operating income added $0.02.  Its US same-store-sales were up 3.5% in September, Europe up 5.7%, and Asia/Pacific/MiddleEast/Africa up 12%.  Its system-wide sales in Spetember were up 11.5%, but noted as 7.2% in constant currency.

McDonald’s shares were originally up about 1.5% pre-market, but shares are up right at 1% now at $56.85 in pre-market activity.

Jon C. Ogg
October 12, 2007

Posted on: October 12, 2007 – 7:11 am in Food, ,

Qualcomm’s (QCOM) Future Starts To Dim

“Qualcomm will not be able to take its royalty model further, that’s absolutely clear,” said Dresdner Bank AG analyst Per Lindberg in London, who rates the shares “sell” and expects them to fall as much as 40 percent to $25. From Bloomberg, no less.

As Qualcomm begins its fight with Nokia (NOK) over license fees. there not many people on Wall St. who think it will work out well for the US company. Nokia is asking the ITC to look at how much Qualcomm IP is actually in next-generation cellphones. If it is not as big a chunk as it was a couple of years ago the authorities are likely to insist that the QCOM piece of the pie go down.

U.S. International Trade Commission Judge Paul Luckern will decide Nov. 13 whether three Qualcomm patents are valid and apply to Nokia’s phones. Broadcom (BRCM) has already taken QCOM in front of the ITC with substantial success.

Qualcomm’s next visit to the judge is not likely to go well, either.

Douglas A. McIntyre

Posted on: October 12, 2007 – 6:56 am in Wireless, , ,

Pre-Market Analyst Calls (October 12, 2007)

ANR cut to Mkt Perform at FBR.
BWA cut to Underperform at RWBaird.
C cut to Sell at Deutsche Bank.
CHS cut to Underweight at Thomas Weisel.
CNC raised to Overweight at Lehman.
COST cut to Neutral at UBS.
CSCO started as Outperform at Wachovia.
CWTR cut to Mkt Perform at Wachovia.
ELX started as Outperform at Wachovia.
EMC started as Outperform at Wachovia.
FCN started as outperform at RWBaird.
IAG raised to Sector Perform at CIBC.
LNCR cut to Hold at Citigroup.
MEE cut to Underperform at FBR.
MLNM raised to Outperform at RWBaird.
MNTA cut to Underperform at Bear Stearns.
NILE cut to Hold at Citigroup.
NLY raised to Outperform at RBC.
NTAP started as Outperform at Wachovia.
PBG cut to Neutral at B of A.
PDGI raised to Buy at Jefferies.
QLGC started as market perform at Wachovia.
QXM cut to Sector PErform at CIBC.
RATE cut to Outperform at RBC.
S raised to Outperform at Wachovia.
SGR cut to Hold at Citigroup.
STX started as Outperform at Wachovia.
SWY raised to Outperform at CIBC.
TEF raised to Buy at Citigroup.
UMC cut to Neutral at UBS.
VCLK cut to Hold at Jefferies.
WDC started as market perform at Wachovia.
XRTX started as market perform at Wachovia.

Jon C. Ogg
October 12, 2007

Posted on: October 12, 2007 – 6:46 am in Analyst Calls

Dendreon Has $130 Million More At Its Disposal, If It Wants (DNDN)

Dendreon Corporation (NASDAQ:DNDN) has secured a committed equity financing facility under which it may sell up to $130 million of its registered common stock to Azimuth Opportunity, Ltd. over an 18-month period.

Dendreon is not obligated to utilize any of the $130 million facility and remains free to enter into and consummate other equity and debt financing transactions.  Dendreon will determine, at its sole discretion, the timing, dollar amount and floor price per share of each draw under this facility, subject to certain conditions. The number and price of shares sold in each draw are determined by a contractual formula, whereby Dendreon will issue shares to Azimuth when and if Dendreon elects to use the facility at a small discount to the volume weighted average price of Dendreon’s common stock over a preceding period of trading days.

This is a good news situation for the company, IF it determines it wants to bolster its cash. Sure, it’s dilutive.  But with PROVENGE on hold and the FDA being more unpredictable than a two-card draw game, they bought themselves much more cash if they want.  Some may try to say that they see the company showing a position of need, but this also gives the company even more long term cash to keep up its fight.  Dendreon’s options haven’t shown any major indications of late, although the bias has still leaned to call option buying and higher open interest compared to put options.

Jon C. Ogg
October 12, 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 12, 2007 – 6:17 am in Biotech, ,

Another Take on GE (GE)

General Electric (NYSE:GE) reported earnings and guidance, all of which looked in-line with expectations.  The conglomerate posted $0.50 EPS & $42.5 Billion in revenues, versus $0.50 & $42.42 Billion estimates. It also sees an EPS range next quarter of $0.67 to $0.69 versus $0.68 estimates and sees fiscal 2007 EPS in a range of $2.19 to $2.22 versus a $2.21 estimate.  It previously offered $2.18 to $2.23 for Fiscal 2007 before it’s "pretty good economy" presentation.

My partner broke out the numbers and saw that operating income lagged revenues growth.  He isn’t all that impressed.  Personally, GE’s earnings are almost always a mixed bag.  There are so many items in each quarter and always some moving parts that are viewed individually as good or bad.  This just depends if you see it half full or half empty.  My take is that with everything in-line and the reaction almost always being muted, this quarter was fine.  The company repurchased $6.3 Billion in stock for the quarter and will repurchase $5.7 Billion of stock in the fourth quarter.  Ths one boils down to interpretation and final opinions.  To me this looks fine, but there probably aren’t going to be any vigilant analyst calls either way.  This has so many moving parts that it just boils down to opinion.

Other issues ahead of earnings:

Jon C. Ogg
October 12, 2007

Posted on: October 12, 2007 – 6:07 am in Conglomerates, Earnings, ,

Oracle Wants to Acquire BEA Systems (ORCL, BEAS)

Oracle Corporation (NASDAQ:ORCL) has delivered a letter to the Board of Directors of BEA Systems, Inc. (NASDAQ:BEAS) on October 9 whereby Oracle proposed to acquire BEA for $17.00 per share in cash.  Oracle is prepared to proceed immediately to a process that leads to a definitive agreement.

Carl Icahn just got vindicated for his persistence.  The $17.00 pershare offer is a 25% premium over yesterday’s closing price.  But whatis interesting is that a "letter being sent" is no assurance that adeal will be approved by management at BEA Systems.  The 52-week high is $16.77.  If managementwants to hold out, they’ll probably be able to.  Shares are indicatednorth of $16.00 in very early indications.

Oracle President Charles Phillips: "We have made a serious proposal including a substantial premium for BEA. We believe our all cash offer provides the best value for BEA’s shareholders and the best home for BEA’s employees and customers. This proposal is the culmination of repeated conversations with BEA’s management over the last several years. We look forward to completing a friendly transaction as soon as possible.  We intend to protect the investment customers have made in BEA’s products by supporting those customers and products for years to come.  Our continuing support commitment has been amply demonstrated with all of our previous acquisitions, including PeopleSoft and Siebel. BEA will be no different. The acquisition of BEA by Oracle will enable an increase in engineering resources that will in-turn accelerate the development of our world-class suite of middleware. Both Oracle and BEA customers will benefit from this increase in engineering investment as they migrate to modern SOA technologies."

Jon C. Ogg
October 12, 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: October 12, 2007 – 5:48 am in Mergers and Buy Outs, Software, ,

GE’s (GE) Bad Quarter

GE (GE) announced modest revenue growth, but its operating income lagged significantly

GE announced Q3.revenues from continuing operations were $42.5 billion, up 12%, increasing 8% organically. Earnings from continuing operations were up 7% to $5.1 billion.

Infrastucture reveue was up 19% to $14.5 billion. But segment profit rose only 12% to $2.6 billion. Commercial finance reveue was up 17% to $7 billion. But segment profit there rose only 12% to less than $1.5 billion. Industrial income was flat at $6.2 billion. Segment income rose 6%.

Reveue at NBC Univeral was up 3% to $3.8 billion. Segment profit moved up 9% to almost $600 million.

A weak quarter, all things considered.

Douglas A. McIntyre

Posted on: October 12, 2007 – 5:42 am in Earnings,

China Market Bubble Gets Much Worse

The markets in China have gotten so out of hand that companies doing IPOs are upset it they do not get a 100% return on the first day out. The Shanghai Composite is up 120% this year, but the single day return hopes are a little out of hand.

Or are they. The average first-day return for Chinese IPOs in 2007 is 192%, according to data from Thomson Financial, according to The Wall Street Journal. Even China shares traded on US exchanges have gotten overpriced. Some small-caps traded on the AMEX and Nasdaq are up 300%. More well-known companies like Baidu (BIDU) and China Petroluem (SNP) has also logged tremendous gains. Over the last year, China Pet is up 120% to Exxon’s (XOM) 38%.

The big rise in Chinese IPOs signals two things. The first is that the market in China is overheated, perhaps to the point where a correction of 30% or more could occur at any time. The other is that investment banks taking Chinese companies public are doing their clients a disservice. If a stock doubles in the first day, a lot of money that might have been raised is left on the table.

The biggest problem with Chinese IPOs may not be how much they rise. It may be how much inefficient their investment bankers are in capitalizing on the demand.

Douglas A. McIntyre

Posted on: October 12, 2007 – 5:22 am in China, , ,

Why Citi (C) Can’t Fire Chuck Prince

Citigroup CEO-for-life Chuck Prince engineered another major reorganization of his senior management group. This time the reason was all of the mortgage and fixed income losses the bank had. The ones that hurt Q3 numbers.

According to The Wall Street Journal, Citi "will merge its investment-banking operations and its alternative-investments businesses." The big banks head of trading and one of its fixed income bosses are out. Vikram Pandit, a former Morgan Stanley (MS) big is in.

The financial paper goes on to point out that "word of the poor Q3 results prompted a fresh round of calls for Mr. Prince’s departure from some investors and analysts, who say that the behemoth bank should be performing better."

Well, that is fine until investors look at the Citi stock performance. Down about 3% over the last year, it matches the stock losses of Bank of America (BAC) and JP Morgan (JPM) almost exactly.

Prince has a simple argument for his board. He is a victim of his times. He has done no better or worse than he peers.

Mediocrity wins once again.

Douglas A. McIntyre

Posted on: October 12, 2007 – 4:51 am in Banking, , , ,

Wal-Mart (WMT) Loves Chinese Imports

Wal-Mart (WMT) CEO Lee Scott had a special message for his investors and customers. Chinese stuff may break or be dangerous. But, it is cheap.

"Right now, the way it works, our model is `We sell for less.’ If we put products out there and we have to sell them for more because our competitors are sourcing more efficiently and more effectively for the same quality of product, our model doesn’t work. We cannot be at a price disadvantage," Scott said to the AP.

Wal-Mart may want to "buy American", but it can’t afford to. Scott was quick to point out that he could also buy from countries like Vietnam and Cambodia. But, the work forces and factory infrastructures are relatively small there, and Scott knows that.

The wonderful thing is that the Chinese know the dilemma that Scott and his US retailing competitors have. They need China to stay competitive in a US market were the poor and middle class have no interest in paying more for goods and services.

China has US retailers by the short hairs. And that means incentives to improve quality are small.

Douglas A. McIntyre

Posted on: October 12, 2007 – 4:41 am in China,

Amgen: 24/7 & Business Week Compare & Contrast (AMGN, BIIB)

It seems that the thoughts of 24/7 Wall St. aren’t alone in the opinion of Amgen’s (NASDAQ:AMGN) future.  In this morning’s issue of Business Week’s "Inside Wall Street" segment, George Putnam of "The Turnaround Letter" gave an endorsement to Amgen….. "This is a great opportunity to buy into one of the premier names in a key industry."  His target is $64.00 over the next 12-months.

If you are an avid reader of 24/7 and this sounds familiar there is a reason.  Last month we wrote an "IF….THEN" scenario that was starting to shape up.  We even compared it to the past issues of Biogen-Idec (NASDAQ:BIIB).  Even though the circumstances were different, the pattern and theoretical recovery and reasoning behind each actually seem quite similar.  Hence the commentary: But based on how Biogen acted, Amgen could its shares rise between now and the end of March 2008 to as high as an estimated range of $61.50 to $65.00 if the trajectory and momentum heads back in it in the same manner.   Shortly thereafter the "IF…..THEN" started to come to fruition.  Shares traded over $55.00 on that bit.  Amgen shares closed at $57.83 today. 

This $64.00 price target of Business Week and our own $61.50 to $65.00 targeted range may only be one or two solid headlines away.

Jon C. Ogg
October 12, 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 12, 2007 – 4:01 am in Biotech, , , , ,

Media Digest 10/12,2007 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, a sharp fall in shares of China internet company Baidu (BIDU) raised fear that the tech market has topped.

Reuters (RTRSY) reports the Citigroup (C) has gone through another management shake-up.

Reuters writes that JC Penney recalled toys because of high lead content.

The Wall Street Journal reports that the wealthiest 1% of Americans earned over 21% of all national income in 2005.

Electronic Arts (ERTS) will buy a videogame developer for $860 million from private-equity firm Elevation Partners

The Wall Street Journal writes that doube-digit gains in Chinese IPO are now routine.

The Wall Street Journal writes that the major business magazines are being hurt badly by financial websites.

The New York Times writes that the sale of Jaquar is dragging.

The New York Times writes that Tata Motors will introduce a $2,500 car in India.

The New York Times writes that ABC is producing a 15 minute version of its evening new for the internet.

The FT writes that the head of Toyota’s (TM) Lexus operation is moving to Ford (F)

Barron’s writes that Limelight (LLNW) said it Q3 numbers would beat expectations.

CNN Money writes that oil prices jumped and a near a record.

Douglas A. McIntyre

Posted on: October 12, 2007 – 3:11 am in Press Digest, , , , , ,