Daily Archives: November 4, 2007

Citigroup (C): The Journeyman Leaves The Stage

One thing must be said for Chuck Prince, who left Citigroup (C) today
after four years. He could take a beating. From the moment the CEO’s
chair was vacated by the ample frame of Sandy Weill, Prince
was criticized for his leadership. In the first few months he led the
bank, shares kept up with those of Bank of America (BAC) and JP Morgan (JPM). That
began to change in late 2004 and by the beginning of 2006, Citi’s performance
was a far cry from its rivals.

Investors began to call for Prince’s head early and often. With each new
quarter, it became apparent that the company had no real plan to keep a lid
on costs or spin-out underperforming units.

When all was said and done, Prince was forced out because of his lack of
imagination much more than the recent losses that the bank suffered last
quarter due to its exposure to financial instruments tied to the debt market.
Weill did not always do a good job running the bank. Citi had a particularly
bad patch from 1997 to 2002. But, Weill’s constant M&A activity made that
company as exciting as a high wire act. There was a new story every quarter,
a entrance into a business like retail brokerage or the exiting of a business
like insurance. Citi was viewed well because of Weill’s ability to dazzle
investors with the possibility that the company could win big in almost
any financial future. The next pot of gold was a quarter away.

Prince may have been a good attorney, but as the leader of a company with
scores of divisions, he could never get the mix right. If investment banking
did well during a quarter, consumer banking did poorly. Some piston was
always missing. Wall St. did not believe that Prince had a grand plan for
the bank because he was never able to articulate one.

Believing that large banks and investment houses can do well for long periods
requires a sophistry based on the idea that financial success will never be
undermined by the progress of risk. Taking chances always catches up. But, the
devil is in guessing the timing.

It is hard to blame Prince for being willing to countenance a full steam rush
into mortgage based financial products or into LBO debt. His dreams were no
different from those of any other Wall St. chief. The money seemed to be coming
easy and missing out would be a sin. It may be that Goldman Sachs (GC) and
one or two other firms were able to largely keep out of harm’s way, but most
of the industry has been taken down by wanting nothing more than as much as it
could get of a good thing.

Prince was whipped and he always came back knowing that there would be more.
He is fortunate to be leaving. History will not be kind to him, but he did
not need to be reminded of that every day.

Douglas A. McIntyre

Posted on: November 4, 2007 – 5:47 pm in Management Change, , , ,

A Little Trouble For Bristol-Myers (BMY) Plavix

Plavix from Bristol-Myers (BMY) is the medical drug-thinner of choice. According to CNN Money, sales of the drug "totaled $3.4 billion in sales during the first nine months" 

Now Eli Lilly (LLY) has a horse in the race. The Associated Press reports that "a new blood thinner proved better than Plavix, one of the world’s top-selling drugs, at preventing heart problems after procedures to open clogged arteries." The news services added people given the experimental drug, prasugrel, were nearly 20 percent less likely to suffer one of the problems in a combined measure — heart attack, stroke or heart-related death — than those given Plavix, a drug that millions of Americans take to prevent blood clots that cause these events.

Lilly could use a little help. Its shares are flat this year, while Bristol-Myers is up over 10%.

The problems with these new drugs and treatments is always the same. They solve one problem, but cause another. Patients taking prasugrel are more likely to die from bleeding.

Oh, well.

Douglas A. McIntyre

Posted on: November 4, 2007 – 5:28 pm in Drug companies, ,

Apple (AAPL) Re-Locks iPhone

According to a blog at Fortune.com, Apple (AAPL) has re-locked the software for the iPhone, at least in the UK.  The latest version of the phone comes pre-installed with a software update — 1.1.2 — that disables third-party applications "comes pre-installed with a software update — 1.1.2 — that disables third-party applications."

The story ads "the update is also likely to disable — and perhaps re-brick — iPhones unlocked to work with cellular providers other than Apple’s official carriers (AT&T in the U.S., O2 in the U.K., T-Mobile in Germany and Orange in France)."

Douglas A. McIntyre

Posted on: November 4, 2007 – 1:12 pm in Consumer Electronics, ,

Pfizer (PFE): Viagra Can Make Men Hard Of Hearing

Pfizer (PFE) has a new ad campaign for its erectile dysfunction drug Viagra. The marketing message is all over TV and in little video clips online. Reuters.com appears to have one of the ads on every page. It is an nauseating vignette of several men, about 50 years old, singing the praises of the ED-drug while playing a guitar, piano, and bass. "Viva Viagra" indeed.

Now word comes that Viagra and other ED drugs can make some men hard of hearing. That may be a blessing when one of the "Viva Viagra" ads comes onto a TV or PC screen.

In an alert from FDA Medwatch, the agency wrote that it had informed healthcare professionals of reports of sudden decreases or loss of hearing following the use of PDE5 inhibitors Viagra, Levitra, and Cialis for the treatment of erectile dysfunction. In some cases, the sudden hearing loss was accompanied by tinnitus and dizziness.

Perhaps Pfizer’s investors will be listening for news of the next Viagra side-effect.

Douglas A. McIntyre

Posted on: November 4, 2007 – 12:44 pm in Medical,

Barron’s Poll Has Apple (AAPL) And Google (GOOG) As Buys And Sells

In Barron’s semi-annual Big Money Poll, institutional investors are asked about their two favorite stocks and also which shares are most overvalued. For the latest poll, 112 money managers responded.

On the buy list were such household names as Cisco (CSCO), Microsoft (MSFT), Intel (INTC), and GE (GE). The stocks these investors wanted out of included Starbucks (SBUX),  RIM (RIMM), Amazon (AMZN), Baidu (BIDU), and Sears (SHLD).

But, Apple (AAPL) and Google (GOOG) were on both lists. The schizophrenia surrounding the stocks has to impress even the most long-time trader.

Apple’s future no longer relies on the iPod. The iPhone could eventually sell 30 million or 40 million units a year. The entire global market for handsets is over one billion per annum. But, competition could beat the device back into the stone age. The Mac is hot now, but HP (HPQ) and Dell (DELL) may have something to say about that.

Google (GOOG) may have over 50% of the global search market, but that may have peaked. The company must now look to its online application products and the new Google phone for growth. There is no way to handicap those products.

Both the "buy" and "sell" crowds may be right on the two companies depending on the time-line Wall St. wants to put on the eventual prospects of the firms.

Douglas A. McIntyre

Posted on: November 4, 2007 – 10:43 am in Press Digest, , , , , , , , , , , , ,

As Japanese Move Away From PCs Will US Consumers?

Just when shares in Hewlett-Packard (HPQ), Dell (DELL), and Apple (AAPL) were doing so well, it appears that, in Japan, consumers are moving toward game consoles and smart phones for their daily digital needs. It makes some sense. The level of processor power in products like the Sony (SNE) PS3 is remarkable, and the highest end smartphones can do everything from connecting to the internet to running PC applications. The new Google (GOOG) phone may extend the number of applications that will run with some ease on handsets.

According to The Associates Press "the PC’s role in Japanese homes is diminishing, as its once-awesome monopoly on processing power is encroached by gadgets such as smart phones that act like pocket-size computers, advanced Internet-connected game consoles, digital video recorders with terabytes of memory."

There is no reason that this trend will not move to the US. Almost 200 million people have accounts with AT&T (T) Wireless, Verizon Wireless, Sprint (S), or T-Mobile. High-end phones from Apple, Motorola (MOT), Nokia (NOK) and Samsung are using 3G networks and better processors to run photos, video, data, and music downloads.

The purchase of PCs is actually dropping in Japan. The AP reports overall PC shipments in Japan have fallen for five consecutive quarters, the first ever drawn-out decline in PC sales in a key market, according to IDC. The trend shows no signs of letting up: In the second quarter of 2007, desktops fell 4.8 percent and laptops 3.1 percent.

With handset sales running over one billion a year and PC retail prices as a potential barrier to purchases in countries like China and India, look for the $200 smartphone to begin to steal sales from the PC in earnest over the next two or three years.

Douglas A. McIntyre

Posted on: November 4, 2007 – 9:41 am in PC Companies, , , , , , , , ,

A Google (GOOG) Phone Deal Monday Could Drive Sprint (S) Shares

It now appears that Google (GOOG) will announced its new mobile phone product on Monday with its first US partners being T-Mobile and Sprint (S), according to Fortune.

“Any device Google brings would be a big positive for the entire wireless industry,” says Robert Laikin, CEO of wireless distribution company Brightpoint speaking to the business magazine. That change may not be welcome at the two largest cellular service providers, Verizon Wireless and AT&T (T). They rely on closed operating systems to control what software and services will run on their handsets.

The new Google mobile OS will have the company’s search, G-mail, maps, and YouTube services on it. But, it will allow developers to build their own applications for the phones, a sharp departure from the proprietary platforms that now rule the industry.

The deal with Sprint gives Google access to a customer base of over 50 million. And, it gives the No. 3 cellular provider a much needed product to help increase it moribund subscription growth.

A strong partner and a weak one. How novel.

Douglas A. McIntyre

Posted on: November 4, 2007 – 7:03 am in Wireless, , ,