Fox Business News just launched this Monday and many are referring to it as Rupert Murdoch’s answer to both CNBC and to Bloomberg TV. This just got sent to us and appears to be coverage from yesterday. Trader Eric Bolling covered 24/7 Wall St. this morning with anchor Alexis Glick. YOu can watch this on YouTube at the link provided here.
Douglas A. McIntyre
If you can’t beat them, copy them. Sprint (S) will begin to offer a touch-screen phone that looks great deal like the Apple (AAPL) iPhone. It should be available for the holiday sales season.
According to Reuters "like iPhone, HTC’s Touch — set to go on sale on November 4 — lets users surf the Web or navigate their photo albums by moving their fingers across a touch-sensitive screen. But at $249.99, Touch has a lower price tag than iPhone’s $399." (Taiwan’s High Tech Computer Corp makes the handset.)
The new product has one modest advantage over the iPhone. It runs on Sprint’s high-speed 3G network while the Apple product uses the AT&T (T) 2.5G network. The Touch also runs Microsoft (MSFT) mobile software and supports corporate e-mail, but it is hard to tell whether those features will draw customers.
The new handset does have two big drawbacks. First, it is not made by Apple, and, therefore, lacks cool branding and curb appeal. The other is that it is being offered by Sprint, which has the rare distinction of being hated by most of its wireless customers.
Game. Set, Match.
Douglas A. McIntyre
Recently, the signs on the road have looked bad for Toyota (TM). The last Consumer Reports survey of vehicle reliability dropped the biggest Japanese car company to third place after it had the front seat for years. And, the company’s shares are trading near a 52-week low, perhaps because UAW contracts promise to make GM (GM) and Ford (F) more financially competitive.
Now, Toyota has recalled 470,000 vehicles in its home market of Japan. According to the FT, it is the company’s fifth recall this year. The latest recall is for various models, including the Crown luxury sedan, made in Japan between September 1999 and October 2004, and the specific problems include fuel pumps, fuel control and steering, according to Reuters.
It may be that Toyota has grown so fast that it no longer has a good handle on its well-known quality control systems. As the company expands into new plants to cover new markets, the number of managers with the background to move Toyota’s systems into new locations has to be stretched.
And, it is paying the price.
Douglas A. McIntyre
Did he or didn’t he? That is the question being asked about Countrywide (CFC) CEO Angelo Mozilo and his 10b5-1 stock sales plan. Normally these programs are set up to cover regular stock sales over a number of months or years.
If the plan is entered into on a date when the executive has no knowledge of material company events, the individual can sell a set number of shares on a set timetable. The plans are rarely altered until the selling is completed. The programs allow shares to be sold during black-out periods and when executives do have material information because the sales dates and number of shares sold were set in advance.
But, Mozilo appears to have changed his plan to accelerate his sales. According to The Wall Street Journal, he "sold at least $130.6 million in company stock in the first half of the year."
If Mozilo did make a change and increase the pace of his sales or knew something about the upcoming mortgage market meltdown when he initially filed for the selling, things may get mighty hot for him.
Douglas A. McIntyre
Washington Mutual Inc. (NYSE:WM) posted earnings after today’s close, and as you’d expect there was a severe drop compared to 2006. The lender posted earnings per share of $0.23, down from a whopping $0.77 EPS in the third quarter of 2006 and under the $0.27 EPS estimate.
The ‘red side of the books’ continues to weaken. One key metric to review is non-performing assets, which again rose to 1.65%. The non-performing assets were 1.29% in Q2 2007 and were 0.69% in Q3 2006. The company also increased the provision for loan losses for credit cards to $323 million from $229 million in the second quarter reflecting a higher level of delinquencies and a lower level of anticipated recoveries. The quarter’s provision increased to $967 million from $372 million in the prior quarter in response to higher delinquencies and impacts from recent house price trends; the increase in the non-card portion of the provision to $644 million from $143 million in the second quarter.
You know it isn’t going to be a good day there when the comments start out like this: "We’re disappointed with our third quarter results but they reflect the increasingly difficult market conditions that are challenging the banking industry," said WaMu Chairman and Chief Executive Officer Kerry Killinger. "Despite these challenges, our Retail Banking, Card Services and Commercial businesses delivered good operating performance during the quarter, and we continued to adapt our Home Loans business to meet market conditions."
The company also announced its Board of Directors declared a quarterly cash dividend on the company’s common stock of $0.56 per share. Yet income is $0.23 EPS and internals are still weaking. When companies pay out a higher dividend than income, investors have to wonder when a dividend cut may be forced upon the company. Maybe the company is throwing out all the bad news it can, but there is just very little to get excited about here.
Shares closed down 0.4% at $33.07 today, and shares are down about 1% at $32.75 in after-hours trading. Its 52-week trading range is $31.27 to $46.38.
Jon C. Ogg
October 17, 2007
We have partnered with Water.ca in Canada for a weekly Internet radio discussion about Water as an investing strategy for U.S. and Canadian investors. The focus here is a discussion about the overall investing climate around water as a stock sector rather than a mechanism for giving many individual stock recommendations. Jon Ogg of 24/7 Wall St. is interviewed in this Internet radio feature here at Water.ca.
The stocks and tickers discussed today were as follows:
If you are an investor that wants to invest in water or interested in learning about water investing you’ll want to listen to the report that lasts only about 9 minutes or so. This is not covering only the bullish side and not meant as a tout for any single water stocks.
Citrix Systems Inc. (NASDAQ:CTXS) posted earnings of $0.41 non-GAAP EPS on revenues $350 million. First Call had estimates at $0.38 EPS and revenues at $339.7 million. GUIDANCE: next quarter guidance is $0.42 to $0.43 non-GAAP EPS on $374 to $382 million revenues; estimates are $0.45 EPS and $373 million; but there are charges even in these non-GAAP numbers.
In prior periods this might not have garnered enough enthusiasm for its own preview, but after it announced XenSource for $500 million it became a more focused interest as a virtualization stock. It should be noted that the company notes many charges fvor its XenSource and Ardence acquisitions and those revenues won’t start until Q1 2008. If VMware (NYSE:VMW) investors were hoping for any additional robust virtualization comments, they are going to have to wait for the conference call questions and answers.
Citrix shares closed at $32.27 the day the XenSource deal was announced. Shares closed today down 0.3% at $41.77 and its recent yearly high is $42.75. Shares are down a little over 2% in immediate after-hours trading, probably as a result of no major driving comments above and beyond the huge recent gains.
Unfortunately, the complexities around virtualization mean that the report given here (including the guidance) might not be all that complete for the long-term expectations out of the company.
Jon C. Ogg
October 17, 2007
The market was wildly optimistic about Ebay’s (EBAY) earnings, trading the stock up a much as 5% today. It was a good play. Third quarter results took the stock up another 7% after hours to $43.67
Revenue was expected to come in at $1.83 billion for the third quarter, with earnings per share of 33 cents, according to Thomson’s consensus estimates
eBay reported record consolidated Q3-07 net revenues of $1.89 billion, representing a year-over-year growth rate of 30%. Non-GAAP operating income was $593 million, representing a year-over-year increase of 28% and 31% of net revenues. Non-GAAP net income was $564 million, or $0.41 earnings per diluted share, representing a year-over-year increase of 53%.
GAAP numbers included a write-down of Skype
PayPal net revenues totaled a record $470 million in Q3-07, representing a year-over-year growth rate of 35%.
Guidance was also strong.
Fourth Quarter 2007 — eBay expects consolidated net revenues for Q4-07 to be in the range of $2.100 billion to $2.150 billion. Non-GAAP earnings per diluted share for Q4-07 are expected to be in the range of $0.39 to $0.41. These amounts assume a US dollar to Euro exchange rate of $1.38.
Full Year 2007 — eBay now expects consolidated net revenues for 2007 to be in the range of $7.600 billion to $7.650 billion. Non-GAAP operating margin for 2007 is expected to be approximately 33%. Non-GAAP earnings per diluted share for 2007 are now expected to be in the range of $1.47 to $1.49. These amounts assume a Q4-07 US dollar to Euro exchange rate of $1.35, and actual rates through the first three quarters of 2007.
Douglas A. McIntyre
Wal-Mart (NYSE:WMT) has been upgraded by Goldman Sachs in a late afternoon research call today. The bulge bracket firm raised Wal-Mart’s rating from a Neutral to Buy. Barron’s also ran an article mid-day with a note citing "Wal-Mart Will Rise Again." Interestingly enough, the company issued a release noting that the head of Wal-Mart’s outreach to environmental groups was leaving the company.
Shares ticked up on this news late in the day. Shares had been down around $45.75 and then popped up to $46.35 before settling into the $46.00 area right at 4:00 PM EST for an unofficial close. Wal-Mart’s 200-day simple moving average of $46.73 looks to be adding some resistance.
Jon C. Ogg
October 17, 2007
Forum Oilfield Technologies, Inc. has registered to sell up to $345 Million in common stock via an initial public offering. So far in the filing it only lists Credit Suisse and JPMorgan as the underwriters. Forum has been given the proposed ticker of "FOT" on the New York Stock Exchange.
By the companies name, you can guess they aren’t an internet play, nor are they a medical tech company. The company designs, manufactures and supplies drilling and flow control products for oil and natural gas drilling and production applications worldwide. Some of the products include mud pump refurbishment, centrifugal pumps, iron roughnecks, manual tools, elevators, offshore deepwater 1000 ton elevators, drive refurbishments, monitor systems, guages and instruments, bearings, fluid end pump parts, powered mouseholes, choke & kill manifolds, hydraulic catwalks, back savers and much more. Forum sells to onshore and offshore drilling related companies and in the six-months ended June 30 it generated about 30% of its sales outside of North America.
The company makes parts and does refurbishments, but it is not a direct builder of drilling rigs. It has more than 500 customers, but there is something investors in this will want to know form the company:
Access Oil Tools, Inc., our predecessor for financial reporting purposes, began as a manufacturer of manual tubular handling equipment in 1985. In early 2005, management of Access Oil Tools and SCF Partners, a private equity firm that focuses on investments in the oilfield services segment of the energy industry, formulated a strategy to take advantage of the growing market opportunity to supply expendable products to the drilling industry and capital products for the growing drilling rig refurbishment and upgrade market. Following an investment from SCF Partners in May 2005, Forum was established from Access Oil Tools to execute this strategy. Since SCF’s investment in Access Oil Tools, we have grown our business both organically and through strategic acquisitions.
It generated $300.734 million in pro forma 2006 revenues and net income on a pro forma basis was $34.74 million.
Jon C. Ogg
October 17, 2007
Shares in Cablevision (CVC) and The New York Times (NYT) are both off about 3% today. Cablevision’s shares are down because its large shareholders don’t want the company sold. The Times is down because its large shareholders do want a sale.
Mario Gabelli and other large stockholders in Cablevision are in the process of scuttling a deal by the founding Dolan family to take the company private. Gabelli argues that the company is worth $50 a share. The stock trades at under $33 today.
So, is Cablevision worth a 50% premium over its current price? Not if you ask the public holders of Comcast (CMCSA) and Time Warner Cable (TWC). Over the last three months, shares in those companies are down about 15%. The market is concerned that fiber-to-the-home products from Verizon (VZ) could start to take away cable TV and broadband customers.
Over at The New York Times, large institutional investors are begging for a sale. Hassan Elmasry, the portfolio manager with Morgan Stanley Investments, who owned about 10 million shares, dumped most of those today. He got sick of waiting for management at the big newspaper company to do something to get the share price up.
The Dolans have billions of dollars lined up to buy Cablevision, but it looks like they won’t need the money. Unless, of course, they can convince the Sulzbergers to sell them The New York Times.
Douglas A. McIntyre
Citrix Systems Inc. (NASDAQ:CTXS) is set to report earnings after the close today. Because of past options reviews and its old listing issues this may only be a partial or preliminary report that only shows revenues. First Call has estimates at $0.38 EPS and revenues at $339.7 million. Next quarter estimates are $0.45 EPS and $373 million; and Fiscal-2008 estimates (very wide range) appear to be $1.75 EPS and $1.57 Billion revenues.
In prior periods this might not have garnered enough enthusiasm for its own preview, but after it announced XenSource for $500 million it became a more focused interest as a virtualization stock. That deal is expected to close this quarter. As per its comments: This acquisition moves Citrix into adjacent server and desktop virtualization markets, expected by Citrix to grow to nearly $5 billion over the next four years. None of the results from XenSource will be included in Q3 earnings, but it’s a safe bet that the focus from Wall Street will be covering the virtualization push.
Citrix shares closed at $32.27 the day the XenSource deal was announced. Shares now sit up above $41.00 and over the last few days this was on new year highs at $42.75. Analysts have an average price target around $43.00.
Citrix also extended its virtualization alliance with Microsoft (NASDAQ:MSFT) in September by standardizing on the Microsoft® Virtual Hard Disk (VHD) format as a common runtime environment for both virtualized operating systems and applications.
We won’t start drawing the EMC (NYSE:EMC) comparisons for the value that VMware has added in relation to XenSource. The companies are very different and the company can’t (or at least shouldn’t) make too many robust comments on a pending or developing issue. But despite the major size differences between these companies, it is quite likely that VMware traders and investors will be looking to see how much focus Citrix gives to virtualization.
Jon C. Ogg
October 17, 2007
Jon Ogg is the publisher of the 24/7 Wall St. Special Situation Investing Newsletter and he does not own securities in the companies he covers.
In a radical change of heart, Apple (AAPL) is opening up the software of its iPhone so that third-party developers can make applications for the handset using a software development kit supplied by Apple.
Steve Jobs said at the Appel website: "We want native third party applications on the iPhone, and we plan to have an SDK in developers’ hands in February. We are excited about creating a vibrant third party developer community around the iPhone and enabling hundreds of new applications for our users."
Will it help keep people from doing outside hacks to the phone? Probably, at least ones that do not conform to the basic operating system that runs the phone.
Apple’s shares were fairly flat on the news.
Douglas A. McIntyre
eBay Inc. (NASDAQ:EBAY) is on deck for earnings today. First Call has estimates pegged at $0.33 EPS and revenues at $1.83 Billion; next quarter estimates are $0.38 EPS and $2.06 Billion revenues; its Fiscal-2008 targets have a much wider range but that estimate looks like $1.61 EPS on $8.82 Billion.
Analysts have an average price target of $40 to $41, so if the news is good there will likely either be "valuation" comments or raised targets. Shares are up over 20% from the recent lows, and have been stuck in a $38 to $40 range for most of the last five weeks. If you use this months options that expire Friday, it appears that options traders are braced for a move of up to 3.5% to 4% in either direction.
This is only one of several recent calls, but Cantor Fitzgerald just maintained its SELL rating with a $30 target yesterday. A counter-call to that was American Technology Research, which reiterated a Buy rating and raised the target from $43 to $45 in its note.
eBay’s SKYPE signed an internet voice pact with MySpace just yesterday, and this has also contributed to some optimism. Skype needs all the hype it can get because the founders already hinted that they thought eBay overpaid when it acquired Skype.
One of the big underlying things to watch here is the fear of mergers. Many have feared that eBay will again make more mergers. We’ll be watching this one closely along with its other metrics.
Jon C. Ogg
October 17, 2007
Citigroup (NYSE:C) shares have spent most of the day in the tank after three straight down-days in the stock. In fact, todays intraday lows were actually 52-week lows.
Conversely, JPMorgan Chase (NYSE:JPM) is seeing its shares trading up over 3%. 24/7 Wall St. has the take that the earnings were so-so, but based upon what we felt was Wall Street expecting bad numbers this is a net win compared to other banks. The higher credit standards of Chase must be at least giving some insulation against the other half of the economy that isn’t doing as well.
But back to Citigroup…. There were rumors that Chairman & CEO Chuck Prince was finally about to step down. The company told CNBC’s Charlie Gasparino that this rumor is baseless and that Mr. Prince has the full confidence of Bob Rubin and the Board of Directors. If this could be compared to a baseball analogy then you’d determine that Chuck Prince is just about to go. In baseball a losing manager gets a formal vote of confidence from the team owners and general manager. And he’s then fired within two to four weeks.
Will he or won’t he? That is the million dollar question. Actually it’s a BILLION dollar question. Citigroup has more than a $220 Billion market cap, and we have seen estimates that a Chuck Price resignation or firing could be worth an INSTANT 4% or 5% to shares. That may be too much for one single person, but that is what some believe.
Chuck Prince was a great fit at a critical time when the financial giant was having severe regulatory issues. But that time has come and gone. Citi no longer needs a regulatory fixer. It needs a growth manager. We have called for him to leave since late in 2006 and the stock is now worse than dead money. If Mr. Prince really wants to make a lot of money on top of his options and pay, he should leverage his assets and buy all the stock he can and then "resign due to outside pressure." He’d have a great payday on that.
Jon C. Ogg
October 17, 2007
Gannett (GCI) announced Q3 results today along with details on revenue for September. Total operating revenues for the company were $1.81 billion in the third quarter compared to $1.88 billion in the third quarter of 2006. For the 2007 third quarter earnings per diluted share from continuing operations were $1.01 compared with $1.08 per share in the third quarter of 2006.
The stock reacted well, moving up 2.3% to $44.54, still near its 52-week low.
Buried in the announcements were the results for USA Today. At the big national newspaper, advertising revenues decreased 6.6 percent compared with the third quarter of 2006. Paid advertising pages totaled 803 compared with 929 in the same period a year ago. And, at USA TODAY, advertising revenues for September were down 7.0 percent on paid ad pages of 292 versus 358 last year.
The New York Times (NYT) is off 2.3% today and hit a 52-week low of $18.30.
A drop in ad revenue at a large national paper is not good news for the Times.
Douglas A. McIntyre
China TechFaith Wireless (CNTF) is trading up 32% to $8.64 on news that the company announced that China’s Ministry of Public Security Information Center has awarded TechFaith a contract to custom develop a pocket PC phone for the police forces in two provinces in China.
Of course, no revenue was attached to the deal. It may be used by three cops in total.
It is TechFaith’s first contract from a customer that is not in the telecommunication sector. CNTF expects to benefit from strong demand in the broader, non-telecommunication market going forward as its custom developed phones are adopted to meet needs ranging from security and surveillance, to data management, GPS/location based tracking and other various data and communications needs.
Nice PR. Meaningless.
Douglas A. McIntyre
Baidu (BIDU), which operates the most popular search engine in China, has traded as high as 70x revenue. The stock was beateen down last week, but it appears that the little drop is about to end.
Baidu shares are up over 4% on news that it will enter the Chinese consumer e-commerce market.
The company said it has a strategic plan to enter the Chinese e-commerce market. Baidu will leverage its high user traffic and large online communities to build a consumer-to-consumer service,
Search engines already play a critical role in the Chinese e-commerce market. According to iResearch, 49% of China’s current consumer-to-consumer users conducted searches before visiting e-commerce sites
Douglas A. McIntyre
If you’ve ever heard shoes referred to "wheels" in slang that isn’t really slang for Heelys Inc. (NASDAQ:HLYS), which makes the wheeled shoes for kids. This was a fairly hot IPO for a brief period and there was some cool product buzz. Unfortunately it was a flameout and the stock imploded after coming public. Inventories had been up and previous guidance wasn’t exactly what investors in hot post-IPO’s look for.
Today, the company has launched its ‘non-wheeled’ line of shoes. So these are just regular shoes. Heelys is already in apparel, bags and accessories, so this is not exactly the first ‘first’ for the company. This launch is called the Gamer by Heelys. The new Heelys Gamer shoe embraces a favorite American pastime by featuring a simulated game controller on the outsole of the shoe. This was demonstrated in July at the World Series of Video Games. This will hit stores in November for pre-holiday sales. If you want to see the demo you can see the design at http://www.heelysgamer.com.
Shares are up 8% pre-market at $10.60. The trading range since the IPO has been $7.65 to $40.09. As of the end of September, Heelys had over 2.3 million shares listed in its short interest (about 10 days to cover).
Barron’s also pointed to risks in this early on.
Jon C. Ogg
October 17, 2007
Medarex (NASDAQ:MEDX) is seeing shares being hit by a research note where Banc of America initiated coverage with a "SELL" rating. This is a fairly thin volume stock in pre-market trading, but shares are down about 1% pre-market. If you will recall this is one of the Dendreon-esque biotech situations as far as stock options trading with a huge open interest and huge premiums for farther out options. The reason is because of the Bristol-Myers Squibb (NYSE:BMY) pending trial data for its melanoma partnership, and the open interest in Bristol-Myers stock options in JAN-08 is higher than any single other options contract out there.
If there has been some negative news out regarding the trials, it is an interpretation because the benchmark for the results is said to be quite low compared to other cancer and melanoma treatment candidates. The reason for pondering this is from negative research calls on the stock of late:
Jon C. Ogg
October 17, 2007
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