Monthly Archives: November 2007

Cramer Calls For Paul Saleh To Quit Sprint (S)

Jim Cramer came out tonight on CNBC’s MAD MONEY to replace Ed Zander on his WALL OF SHAME with his 6 CEO’s that are in the Rogue’s Gallery.  As you know by now, Ed Zander is out at Motorola (NYSE:MOT).  His replacement to the WALL OF SHAME is interim-CEO Paul Saleh of Sprint Nextel (NYSE:S).  Cramer said he’s not doing anything better than when Forsee was still in charge, and he even didn’t even meet with the former Nextel CEO and the South Koreans after they offered to invest $5 Billion in the company.

We did our own list last December of TEN CEO’s THAT NEED TO LEAVE CORPORATE AMERICA, and six of the eight we said had to leave are gone, our "probation" CEO Paul Jacobs is still managing to hang on, and our "fixer recommendation to Jeff Bezos" actually came true this year although the company never made any announcements there.

We’ll be previewing some similar CEO’s momentarily to our open email distribution list. Stay tuned.

Jon C. Ogg
November 30, 2007

Posted on: November 30, 2007 – 6:14 pm in Cramer, Management Change, ,

ETF’s Gone Wild: A Wal-Mart ETF.. Really (WSI, WMT)

There is a ton of value that ETF’s bring to the table.  They trade like stocks, they have lower fees, they are usually more transparent, and more when you compare these to traditional mutual funds.  But sometimes ETF’s go to far and become too specific.  Enter today’s new ETF launch: FocusShares ISE-REVERE Wal-Mart Supplier Index Fund (NYSE Arca: WSI).

This ETF is meant to track the performance of the ISE-Revere Wal-Mart Supplier Index which is made up of stocks of companies that derive a substantial portion of revenue from Wal-Mart Stores, Inc. (NYSE:WMT).  On this premiere trading day, we saw a whopping 2,000 shares trade.

If they are going to create ETF’s that are this focused, 24/7 Wall St. would like to suggest to Revere and FocusShares some new ETF ideas:

  • A porn ETF, after all it’s one of the biggest online segments out there;
  • An Apple-supplier ETF, after all its suppliers do actually move on new inclusions or exclusions;
  • An "SEC Stock Options Investigation" ETF for all the companies that will benefit after they get the SEC out of their offices;
  • A prison-related ETF that tracks prison REITs, security systems, and law enforcement stocks;
  • An illegal alien ETF that tracks the largest "hiring alien" companies, the companies that win off border patrol and "the fence" and we could even include the restaurants, clothing and retail chains most frequented by illegal aliens.

You get the idea.  We love most ETF’s.  Just not the notion of this one.

Jon C. Ogg
November 30, 2007

Posted on: November 30, 2007 – 5:35 pm in ETF, ,

SPAC IPO Filing: CAPITAL TEN ACQUISITION CORP.

CAPITAL TEN ACQUISITION CORP., a special purpose acquisition company, or a SPAC or Blank Check company, has filed to come public via an IPO.  This is a small deal with 7.5 million units being filed to come public at $8.00, although this is 8.625 million after the overallotment option.  Each unit consists of one share of common stock and one warrant.  Ladenburg Thalmann & Co. Inc. is being tapped as the underwriter here.

  • Here are excerpts from the self description: "We are a blank check company…. with the purpose of effecting a merger…. We intend to focus our efforts on the global information technology industry, which includes software, technical services, business process outsourcing and mobile computing, both within the United States and internationally… Although we intend to focus on identifying acquisition candidates in the IT industry and will not initially actively seek to identify acquisition candidates in other industries, in the event that an opportunity is presented to us in another industry, we may consider pursuing that opportunity if we conclude that it represents an attractive opportunity for us…."

Management isn’t green.  Edward Boykin is its Chairman of the Board since our inception. Prior to his retirement in June 2003, Mr. Boykin was president and chief operating officer of Computer Sciences Corporation (NYSE: CSC) with responsibility for CSC’s line organizations in Europe, Asia, Australia and the Americas.

If you wish to join our open email distribution list, we cover and preview many SPAC’s, IPO’s, buyouts, mergers, merger arbitrage, reorganizations, back door plays into IPO’s, and other IPO’s.

Jon C. Ogg
November 30, 2007

Posted on: November 30, 2007 – 5:16 pm in IPOs

52-Week Low Club II (IUSA, JSDA, KNOT, TRK, WAG, ZLC)

Below is our last list of featured 52-week lows today:

  • InfoUSA (NASDAQ:IUSA)… here’s what happens when your paid model gets Google-ized by free everything. $8.63 close versus $8.79 prior yearly low.
  • Jones Soda (NASDAQ:JSDA)… indigestion took this down 3.3% to $6.60, although it managed in the last hour to get back above the prior $6.51 52-week close.  With a $32.60 high, this will still make most investors burp. We aren’t rushing out to include this in our "10 Stocks Under $10 Newsletter" just because it’s under $10.00 again, mainly on its triple-digit P/E ratio despite a severe sell-off.  Jim Cramer has been out of this name as a backer for quite some time, but he are some old comments from Cramer.
  • The Knot (NASDAQ:KNOT) lower by 3.7% to $13.20, just under the $13.24 prior 52-week lows as American anti-family values are taking hold.  Maybe they could hedge the business with divorce.com.  All joking aside, keep your eyes on this one.  We had this as a possible buyout candidate from our "Small Cap Internet Watch List" but we noted that things had to get worse and stay worse before management would have to capitulate and agree to a buyout.
  • Speedway Motor Sports (NYSE:TRK).. maybe NASCAR and stock car racing isn’t immune from a slower consumer, even if there was a big promotion in NYC this week. Closed $33.75, prior 52-week range was $33.80 to $41.68.  Maybe the U.S. needs more NASCAR moms and more soccer dads.  Paying $1 million to go on a car may be dwindling too, but who knows.
  • Walgreen Co. (NYSE:WAG).. this was surprising with another 1.9% drop to $36.59, under the last year range of $37.06 to $49.10.  Apparently dropping those CVS plans over price might not be the right ticket.  At 18-times earnings we aren’t licking our chops yet.
  • Zale Corp. (NYSE:ZLC)…. jewelry is tough in a slower economy, and you can’t sell your garage to buy that diamond tennis bracelet.  This was down in sympathy with Tiffany.  Zale closed down 2.7% to $17.89, under the 52-week range of $18.18 to $31.57.

Jon C. Ogg
November 30, 2007

Posted on: November 30, 2007 – 4:45 pm in HI/LOW, , , , , ,

52-Week Low Club I (AMD, BIG, DRIV, FRPT, HOTT, SOLD)

Below is the first batch of 52-week lows today:

  • Advanced Micro Devices (NYSE:AMD) hits the 52-week lows.  I guess Dell being weak and them losing their position there isn’t pleasing anyone.  Maybe they get another stake taken from the Middle East.  Maybe not.  This one is now eligible for coverage in our "10 Stocks Under $10" Newsletter, although unless the company has a split personality it’s hard to be positive here. $9.72 close…under the $9.80 new low.
  • Big Lots (NYSE:BIG)…down 8% to $18.67, under the $19.17 prior 52-week low.  It beat earnings but a lowered guidance makes this the story of "The Good, The Bad, & The Fugly"… remember our own "Big Lots Stock Uglier Than Its Stores" call? We took some heat for being insulting, but it wasn’t as insulting as the stores themselves.  They don’t sell iPods, but i-Nots are over the place.
  • Digital River (NASDAQ:DRIV) fell 3.3% to $38.67, under the $39.01 lows and down from $60.99 highs. A BenQ contract win didn’t help. 
  • Force Protection (NASDAQ:FRPT) down big today by 27% to 410.81. Apparently the Marines are slowing spending on mine-resistant trucks, and that kills this stock.
  • Hot Topic (NASDAQ:HOTT) down 3% to $6.31 versus $6.37 prior 52-week lows.  Nothing hot here.
  • Housevalues (NASDAQ:SOLD)…. apparently the housing woes aren’t ending there, even if housing and lending is seeing severe short covering.

Jon C. Ogg
November 30, 2007

Posted on: November 30, 2007 – 4:32 pm in HI/LOW, , , , , ,

Unique Value Manager’s Take On EMC…Sans-VMware (EMC, VMW)

The 3rd annual VALUE INVESTING CONGRESS took place in New York City this week, and 24/7 Wall St. attended and covered this great value investor event.  Fund managers, investment managers, and hedge fund managers gave numerous presentations on Wednesday and Thursday of this week and many VALUE STOCKS were covered from different angles and views.

Whitney Tilson and Glenn Tongue are the managing partners at T2 Partners, LLC, a prominent value investing management fund and are one of the key forces behind the VALUE INVESTING CONGRESS.  Mr. Tilson gave his presentation on Thursday, and one of his key value stocks was EMC Corp. (NYSE:EMC).  But what is interesting is that Tilson (and partner Glenn Tongue) were not just giving the traditional "Buy EMC because they own 87% of VMware (NYSE:VMW)" that we have heard over and over from other pundits.  Tilson discussed what he was referring to "The EMC Stub" where investors could derive a raw purchase price of around $4.22 for EMC shares.

Read More »

Posted on: November 30, 2007 – 1:21 pm in Research, Software, Technology Companies, Value Investing, , , , , ,

The Dell (DELL) Turnaround Died With Its Boots On

Dell’s (DELL) slightly frightening forecast about more restructuring, acquisitions, and component costs probably hurt the company to the extent of a 14% price drop today. But, the shares are still at $24.24 against a 52-week low of $21.61. And, the stock is heading back to the lower number.

It is only now dawning on the market that Dell may be a company that cannot be repaired. The direct-to-customer model on which the firm was built has too little share of the global market. Now that HP (HPQ) has taken the high ground, Dell probably cannot get it back. It has the additional problem of Apple (AAPL) and Lenovo being in stronger positions.

It may take Dell a year or longer to get a worldwide retail network that looks like the one HPQ has. In the meantime, it is likely that the larger company will continue to grow faster, at least in the PC business. The server segment is also more competitive. IBM and HP have big pieces of that action, and Sun (JAVA) will do almost anything to show more than single digit growth. It may even give servers away just like it does its software.

Global PC growth is running up a little better than 10% a year. Dell is probably lagging that by some, but even if it can get back to the industry growth rate it is not a compelling stock to own.

It would be nice to think that Dell had some alternatives, but it doesn’t. It is not in a broader array of businesses the way that HP is. It is bound by the competitive market forces in PCs and servers. It has no advantages in material costs. When the "direct" model was in vogue, it may have had some cost advantages, but those do not exist now.

Michael Dell may be the smartest man in the world. Or, maybe second to Jack Welch. And, even Jack could not fix this one.

Douglas A. McIntyre

Posted on: November 30, 2007 – 12:52 pm in PC Companies, , , , ,

Is Overstock.com A Hidden Value Stock? One Fund Manager Thinks So (OSTK, NILE, AMZN)

There was an interesting event this week in New York City that was attended and covered by 24/7 Wall St., and that was the 3rd annual VALUE INVESTING CONGRESS.  Fund managers, investment advisors, and hedge fund managers gave numerous presentations on Wednesday and Thursday of this week.  Many VALUE STOCKS were covered.

Lisa Rapuano, portfolio manager and founder of Lane Five Capital Management, discussed several key value stocks and gave the notion that one of the best screens in finding value stocks is by searching the list of "new lows" (similar to our own "52 Week Low Club" we issue daily), and then looking for the companies that can avoid "going to zero."  When she presented Overstock.com (NASDAQ:OSTK), there were many expressions of surprise from the large audience at the Value Investing Congress.

What was interesting was that she also noted how she was an Amazon.com (NASDAQ:AMZN) loyalist that buys many items from the online e-tail and retail giant.  She noted how Overstock.com was a stock that back when her firm started screening it was hitting new daily lows and had all the recipes in place to go to zero.  But then she noted how controversial CEO Patrick Byrne was now being kept at bay by the fairly new President & COO Jason Lindsey being thought of as "adult supervision."  She also noted how the company blew out its old stale inventory without concern of the immediate charges so that it could focus on longer-term turnaround plans, noted how the company was able to raise cash via a financing (which surprised her), how the company trashed the old crummy ad campaign, and how it has been able to focus on a more attractive inventory mix and product offering that could fill a niche that Amazon.com wasn’t in.

In the presentation, she also described a site visit to Overstock.com’s facilities, noted insider ownership and a high a short interest, and had many tongue-in-cheek comments for believers and skeptics alike.  She also noted how difficult it was to make that decision and to evaluate the stock because its financial losses at the time were such that it wouldn’t fit into most VALUE INVESTING screens.  This is also not a brand new investment or a breaking call as Lane Five has been in the position, but this was a considerable surprise to the audience (and to yours truly).

One of the similar stocks that Rapuano rode up was Blue Nile Inc. (NASDAQ:NILE) as a pick from the prior year, and it sounded like Lane Five has lightened up considerably in that position.  But she did note that before the recent sell-off there that the company’s internal performance was at the higher-end of her best case scenario from the start, and she noted that Blue Nile’s stock could actually reach the vicinty of $150 per share if the company can fully execute on its plan.  So Lisa Rapuano isn’t treading into an entirely new space, and I sure didn’t get any impression that she was making any hasty decisions.

As reminder, opinions are opinions.  Sometimes they work quite well and sometimes they don’t.  I didn’t hear any exact price targets or time frame given, although Lisa Rapuano takes a long-term view and doesn’t panic out of her funds positions when the underlying thesis remains intact.  With such a huge short interest of more than 5 million shares on last look, it is always interesting to see various points of view.  They say "beauty is in the eye of the beholder," and it has been shown through time that financial metrics are as well. 

As 24/7 Wall St. enjoys screening value stocks for our Special Situation Investing Newsletter, this certainly gave us a different way of looking at some stock screens in a different light compared to traditional value screens. 

The next VALUE INVESTING CONGRESS takes place in May 6 & 7, 2008 in Pasadena, California, and 24/7 Wall St. would recommend that any value investing strategists and managers consider attending.  Sometimes a simple idea or new way of thinking about a situation can be worth millions, and there was far more than one simple idea and more than one way of thinking differently about a situation.

Jon C. Ogg
November 30, 2007

Posted on: November 30, 2007 – 12:13 pm in Internet, Value Investing, , , , , ,

CEOs Who Need To Return To Business School

Looking around the wreckage of some of the big cap companies it is not hard to find a few CEOs who probably need to go back to business school. Wall St. would like to see them at Harvard so they would get the best education possible, but the school in Cambridge might not let them in.

First on the list is Hector Ruiz of AMD (AMD). He already has a PhD, but it may be the money order kind that you can get through the mail. Ruiz has effectively taken AMD from a high-margin chip company which had the technology to compete with larger rival Intel (INTC) to a sad shadow with big debt and small margins. He engineered the buy-out of graphics chip company ATI, which has been a disaster of their first order. Less than two years ago AMD traded at above $42. It now sits at under $10.

James Tobin, the CEO of Boston Scientific (BSX), should get a return ticket. The company has a solid medical device operation. Then Tobin decided to get into a bidding war for Guidant and ended up with a balance sheet with almost $9 billion in debt. When the company’s core cardiac stent business started to crater due concerns about safety, the firm had no cash for dry powder. His handsome job has taken the shares from $27 two years ago to just above $12. Now, he is selling off he company in piece to raise dough.

The list would not be complete without Gary Pruitt of newspaper company McClatchy (MNI). He can’t be blamed for the problems in the industry, but he is responsible for doubling down his bet that newspapers would do well by buying Knight-Ridder. His company now sits on over $3 billion in long-term debt. MNI shares are down close to 70% this year compared to peer Gannett (GCI), which is off about 40%.

Jerry Yang of Yahoo! (YHOO) has not been in his job for long, but the portal’s stock is down 20% over the last five weeks while Google is up about 5%. Yang has failed to do the one thing he could do quickly, which is cut costs. The company’s ad revenue is growing more slowly than the industry as a whole and that is not likely to change. Yahoo! has too high a cost base given its future prospects. P&L 101.

James Crowe, the head of Level 3 (LVLT) sits on a promising company. LVLT has about 50,000 miles of IP-network. In a period when data, voice, and video are running wild on the internet, the firm should be doing well. But, Crowe likes to make an acquisition a month. No one can tell whether the company is coming or going. It is constantly in the midst of trying to integrate this or that new business. Operating profits are weak for a company with so much debt. The shares were at $6.80 earlier this year. Now, on a good day they may break $3.50.

It is almost too easy to put Angelo Mozilo of Countrywide Financial (CFC) onto the list. But, he sold so much stock before his company’s shares collapsed that he can afford it. CFC stock has been as high as $45 over the last year, but now trades at under $11. Mozilo made one of the great bone-headed errors that B-School professors say to guard against–never assume that your business will go up forever and guard against the day your industry dynamics move against you.

John Mack is Mr. Wall St. He has run almost every investment bank in the US and Europe. When Morgan Stanley (MS) kicked out Phil Purcell, Mack was brought in to fix the place. Since he walked back in the door almost three years ago, MS shares are off 5% while the S&P is up 25%. Shares in Goldman Sachs (GS) are up 120% over that period and Lehman (LEH) is up 40%. Mack decided taking on more risk was a sure fire way to improve earnings. It worked for about two years. He decided to knock-off president Zoe Cruz, but that will only take the spotlight off of him for a few days.

The list could be longer, but admissions for the Spring term are light. Even these people may have trouble getting in.

Douglas A. McIntyre

Posted on: November 30, 2007 – 12:09 pm in Management Change, , , , , , , , , , ,

Lazard Defends Itron (ITRI)

Itron Inc. (NASDAQ:ITRI) is being defended by Lazard Capital Markets after the stock’s recent weakness.  Analyst Sanjay Shrestha at Lazard is reiterating/maintaining his BUY Rating on Itron with a $115 price target.

Shrestha notes, "We believe the current levels represent a very attractive risk/reward. The shares have pulled back meaningfully after 3Q07 results. We continue to believe that Itron is well positioned to deliver stable growth from its core AMR and meter business with potential for meaningful upside from the rollout of AMI projects…. Our recent checks suggest that several large-scale AMI projects are still on track to move forward over the next several months with potential for some projects to be announced before year end."

Srestha notes that there are risks such as lumpy sales and meaningful revenues might not be seen until late in 2008 with meaningful contributions not seen until 2009 and beyond.

"Our $115 price target reflects a 25x multiple on our 2009E EPS of $4.60. This multiple is essentially in line with ITRI’s peer group. We believe that, if anything, ITRI should trade at a premium to its peers given its leadership position and increasing visibility on movement of several large-scale AMI projects…. At current levels, we see limited downside risk given that the shares are trading at about 15x FCF/share of about $5.00 in 2009E."

If you are interested specifically in power and alternative energy news, you can set your RSS feeds to the following URL:
http://www.247wallst.com/alternative_energy/index.html

As Itron is one of the solid-state and automated meter reading plays, we regularly watch this one as a beneficiary of clean energy and dirty energy alike.  It is also one of the ongoing plays for the upgrades needed for the entire US power grid(s) upgrade cycle over the coming decade. Itron shares are up 0.9% on thin volume at $78.59, and the 52-week trading range is $47.23 to $112.92.

Jon C. Ogg
November 30, 2007

Posted on: November 30, 2007 – 10:50 am in Alternative Energy, , ,

SPAC IPO FILING: GHL Acquisition & Greenhill Back Door Play (GHL, GHQ)

GHL Acquisition Corp., a ’special purpose acquisition company’ or "SPAC" (or blank check company) has filed to come public.  This SPAC is actually a larger filing than many, with the initial amount indicated as up to $460 million if you include the overallotment option ($400 million otherwise).  The 40 million units are going to be at the nominal $10.00 per unit, with each unit holding one share of common stock and one warrant with a $7.50 strike price.

Banc of America is the listed underwriter.  A company called Greenhill & Co. (NYSE:GHL) is the founding shareholder and it has purchased 8 million warrants at $1.00 per warrant.  GHL has the proposed AMEX stock ticker of "GHQ" and ultimately its warrants will trade separately.

It is a truly open-ended blank check company, but there is a back-door play here:  Our efforts in identifying a prospective target business will not be limited to a particular industry. Instead, we will focus on industries and target businesses in the United States and Europe that may provide significant opportunity for growth. We do not currently have any specific initial business combination under consideration….. We will seek to capitalize on the significant investing experience and contacts of our Chairman and Chief Executive Officer, Scott L. Bok, our Senior Vice President, Robert H. Niehaus, and our Chief Financial Officer, John D. Liu.  Mr. Bok has over 20 years of experience advising on mergers, acquisitions and restructurings and investing in private equity.  Mr. Niehaus has over 20 years of experience investing in private equity and sourcing, evaluating, structuring and negotiating control or significant minority investments in businesses.  Mr. Liu has 14 years of experience advising on mergers, acquisitions and restructurings.  Each of our executive officers has significant networks of contacts throughout the investment community and with a variety of sources of potential targets, including Greenhill’s managing directors and senior advisors.

So, Greenhill & Co. (NYSE:GHL) is the back door play here into the IPO.  Its shares are up about 3% to $74.56 today, and the 52-week trading range is $47.14 to $77.00.  Greenhill & Co.’s market cap is $1.99 Billion.  We will be reviewing this for our Special Situation Investing Newsletter, where we cover back door plays into IPO’s, spin-offs, break-ups, buyout candidates, reorganizations, and more.

We also preview certain data on these to our own open email distribution list.

Jon C. Ogg
November 30, 2007

Posted on: November 30, 2007 – 10:32 am in IPOs, ,

Bear Stearns Chimes In On XM & Sirius Merger (XMSR, SIRI)

Bear Stearns has a research note out calling for an imminent decision on the regulatory approval decision regarding the merger between Sirius Satellite Radio (NASDAQ:SIRI) and XM Satellite Radio (NASDAQ:XMSR).  This does not say that the merger is a done deal, but it gives some upside targets if this merger gets approved.

Bear Stearns believes the following targets can be hit if the merger is approved:

  • $20.00 on XM Satellite; compared to $13.74 close yesterday.
  • $4.50 on Sirius Satellite; compared to $3.52 close yesterday.

Just last week, 24/7 Wall St. covered the possibilities of this coming more true.  The Sirius & XM merger has been under review for our own Special Situation Investing Newsletter where we cover mergers, break-ups, spin-offs, divestitures, back door plays into IPO’s and reorganizations that create hidden value opportunities for shareholders.

Jon C. Ogg
November 30, 2007

Posted on: November 30, 2007 – 9:18 am in Mergers and Buy Outs, Satellite, ,

Zander Leaving Motorola (MOT) A Bad Sign For Earnings

Never throw out a CEO when he is in the middle of a solid turnaround. Motorola’s (MOT) CEO, Ed Zander is out. The new CEO, Greg Brown, was COO, and there is not reason to believe that he will be better than his predecessor. He clearly did not step up when the company needed him.

But, the really bad news is that Zander is out. Everyone from Carl Icahn to the King of Siam tried to rid the company of him, but he stuck like old gum on a shoe. The departure, though, is a sign that the quarter must be going very poorly. A loyal board would not have sacked him otherwise. Motorola has gone from having 22% of the global handset market early last year to about 15% today. Rival Nokia (NOK) has driven its share up to almost 40%. Samsung and Sony-Ericsson have also gained ground

It is hard to say much for Zander. In the words of Walter Kerr "He had delusions of adequacy."

Douglas A. McIntyre

Posted on: November 30, 2007 – 9:08 am in Uncategorized, ,

Top 10 Pre-Market Analyst Calls (CS, DB, UBS, ASML, IFX, PHG, ETFC, FCEL, MHK, PLUG, TMX, VLO, WNR)

These are not teh only impact analyst calls today impacting stocks, but these are the key calls that 24/7 Wall St. is focusing on.  This isn’t exactly 10 if you look at the bullet points, but that is because some of the research calls are multi-stock calls:

  • BEAR STEARNS Downgrades key European investment banking names: Credit Suisse (CS) and Deutsche Bank (DB) both downgraded to Underperform from Peer Perform ratings; UBS AG downgraded from Outperform to Peer Perform rating.
  • EU CHIP & TECH: ASML Holdings (ASML), Infineon (IFX), and Royal Philips Electronics (PHG) all started as Buy at UBS.
  • E*Trade (ETFC) downgraded to Market Perform from Outperform at BMO Capital Markets; Credit Suisse cut its price target to $4.00; Goldman Sachs cautions that a takeover is unlikely near-term..
  • Fuel Cell (FCEL) started as Overweight at JPMorgan.
  • Plug Power (PLUG) started as Underweight at JPMorgan.
  • Telmex (TMX) raised to Neutral at JPMorgan.
  • Valero (VLO) & Western Refining (WNR) were both raised to Buy at Banc of America.  Mohawk (MHK) downgraded to Sell from Neutral at Banc of America.

Jon C. Ogg
November 30, 2007

Posted on: November 30, 2007 – 9:06 am in Analyst Calls, , , , , , , , , , , , ,

Zander Out At Motorola (MOT)

Shares of Motorola Inc. (NYSE:MOT) are surging pre-market after CNBC’s David Faber broke some news that is just trickling out across the web.  Embattled and disliked CEO Ed Zander is out effective January 1, 2008.  COO Greg Brown is replacing him, although Zander will apparently remain as Chairman until the annual meeting in May 2008.

Carl Icahn still holds a stake. Zander initially won out over that activist fight, but it looks like in the end that the inevitable has come to pass.

Zander was one of the CEO’s on 24/7 Wall St. internal list of anti-shareholder or poor CEO’s being reviewed for our 10 CEO’s THAT NEED TO LEAVE for 2008.  Six of eight of our list we compiled in December 2006 were pushed out or left for 2007.

Motorola shares are trading up almost 5% at $16.40 pre-market, and the 52-week trading range is $14.87 to $22.55.  This makes us wonder if the company is going to have yet another wave of earnings disappointments or technology issues coming down the pipe.

We’ll be previewing some of these to our open email distribution list in the coming days.

Jon C. Ogg
November 30, 2007

Posted on: November 30, 2007 – 8:49 am in Management Change, ,

Wall St.’s Message To Dell (DELL): Stop Restructuring

Dell’s (DELL) earnings seemed OK. Revenue was up 9% to $15.6 billion. EPS rose 26% to $0.34. With a restructuring charge backed out, that was what Wall St. expected.

US sales were weak, but any analyst reading Gartner already knew that. The rest of the world looked pretty good. In Asia revenue in the quarter grew by 18 percent on a 20 percent increase in units. Revenue increased 14 percent and shipments were up 13 percent in Europe, Middle East and Africa. Dell’s notebook business exploded upward by 22%.

But, there were a few little sentences at the end of the earnings release that sent the stock down 8% after hours. "As the company executes against these priorities it will continue to incur costs as it restructures to improve productivity and execution, reduce headcount where appropriate, and invest in infrastructure and acquisitions…this may adversely impact the company’s performance."

Investors sent Dell a critical message yesterday night, and that will probably continue in the trading days between now and the next earnings announcement, at least. End the restructuring and stop buying new businesses. The company recently closed a deal to buy ASAP Software for $430 million. Dell also bought IP storage company EqualLogic. And, Michael Dell has said the company is not done.

Dell has as much as admitted that cutting headcount could hurt performance, at least short term. It is also saying that buying new companies can hurt the P&L and take up management time. Wall St. hopes that those effects are temporary.

But, the real message the market has for Dell is "enough already." Please, run your PC business. Try to improve sales in the US. Get more retail partners around the world. Be like HP (HPQ).

Do one thing well, and not several things badly.

Douglas A. McIntyre

Posted on: November 30, 2007 – 6:42 am in PC Companies, ,

Europe Markets 11/30/2007

Markets in Europe are modestly higher at 6.20 AM New York time.

The FTSE is up .7% to 6,391. Barclays (BCS) is up 2.6% to 554. Man Group is up 4.4% to 564.5. Northern Rock is down 9.2% to 106.

The DAXX is rising. 1.1% to 7,851. Commerzbank is up 2.2% to 26.53. Siemens (SI) is up 1.4% to 103.41.

The CAC 40 is up .8% to 5,641. Alcatel-Lucent (ALU) is up 3% to 5.47. Societe Generale is up 2% to 104.79.

Data from Reuters

Douglas A. McIntyre

Posted on: November 30, 2007 – 6:26 am in International Markets, , ,

As Google (GOOG) Bids For Wireless Spectrum, Will Used Car Business Be Next Target?

The Wall Street Journal is reporting what everyone already assumed. Google (GOOG) will announce that it will bid for wireless spectrum in the upcoming FCC auction in January. The financial paper writes that Google "has said it wants to make mobile networks more open, so that consumers can use any Internet service and application and move their handsets between carriers without onerous restrictions."

Wall St. assumes that Google will make some money off leasing spectrum but most of it return will come on using its vaunted ad delivery system to send marketing messages to wireless devices. The model is unproven. Google has already launched a program to put its software on to handsets and allow outside developers to do the same.

But, to be in the wireless business, the search company is going to have to build or less an infrastructure. Word is that buying spectrum could cost over $4 billion. Creating a system of cell towers across the country may not cost much less.

Google does have to get in some business aside from PC-based search. No matter how good it is, it can’t grow forever.

But, in the last month, Google has said it will spend hundreds of millions of dollars creating "green" alternative energy sources, offer new handset software, and, probably, bid for wireless spectrum. Core and strategic expansion? Maybe not.

The used car business will be next.

Douglas A. McIntyre

Posted on: November 30, 2007 – 6:17 am in Wireless,

Goldman’s (GS) China Partner Starts Some Competition

Ah, China. A place where your best friend can compete with you on a day’s notice. Especially if you are not a card carrying member of the communist party.

Goldman Sachs (GS) is about to find out the hard way just how the game is played.

According to The Wall Street Journal, Goldman’s "China partner, Fang Fenglei, is moving forward with plans to set up a private-equity fund that could complicate his relationship with Goldman as both hunt for investments in China." Fang is chairman of investment banking joint venture, Goldman Sachs Gao Hua Securities. He will probably keep the title.

Fang has an important advantage. One of his new partners is a state-backed investment firm.

When the time comes for a private equity or investment banking deal to get done, who will have a finger on the scales? A big US bank based in New York City? Or, a firm which has a partnership with the Chinese government?

Douglas A. McIntyre

Posted on: November 30, 2007 – 6:06 am in China,

Freeze Mortgage Rates For Millionaires

The federal government and several large mortgage lenders have a plan to freeze loan rates for certain subprime borrowers. The Wall Street Journal writes that ‘The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled subprime home loans."

Among the financial institution who will be on board are Citigroup (C), Countrywide (CFC), Washington Mutual (WM), and Wells Fargo (WFC). The government and these banks are worried that, as subprime adjustable-rate mortgages reset, interest rates on them could move from 7% to as high as 11.5%. That could certainly accelerate the rate of foreclosures.

The plan is fraught with problems. Which subprime borrowers will qualify? Will hundreds of thousands of homes have to be re-appraised? If so, who will cover those costs? Will there be a household income component to deciding who gets the special deals?

The other major trouble with the whole scheme is that it leaves out higher income homeowners who took out loans in good faith but will also see them reset in the next two years. These borrowers could argue that they were pulled in by super-low rates that will move up. The plan does not address what happens if this group cannot afford to stay in their homes.

There may be people classified as millionaires, simple working folk who have done well enough to own a 20 foot fishing boat and a four bedroom house in a nice suburb, who won’t be able to make their payments if they go from $3,000 a month to $6,000. That may seem odd, but the extra $3,000 is probably well above that on an after-tax basis. An additional $40,000 a year can be a lot of cake, even for the upper middle class.

If the government and lenders are going to be big-hearted with the subprime crowd, the ought to look a little higher in the income chain.

Douglas A. McIntyre

Posted on: November 30, 2007 – 5:59 am in Housing, , , ,