Analysts are beginning to talk about how large the write-downs may be at financial institutions when earnings are reported for the next quarter.
"Everybody will have write-downs in the fourth quarter," Charles Peabody, partner at New York-based research firm Portales Partners LLC told Reuters. He believes that Goldman (GS) and Lehman (LEH) made not have hedged the mortgage exposure enough.
Douglas A. McIntyre
Local.com (NASDAQ:LOCM) has posted its quarterly results. The "local-oriented" micro-cap Internet stock posted revenue of $5.6 million (mid-range of guidance); 38% growth yr/yr and 10% sequential growth; local search revenue grew to $5.0 million. Diluted net loss after a $50.54 charge was -$0.71.
It also issued guidance: The company expects fourth quarter 2007 revenue of between $5.7 million and $5.9 million and the mid-range of local search revenue to be approximately $5.4 million, an increase of 8% over the third quarter 2007. The company expects net loss for the fourth quarter 2007 to be between $2.4 million and $2.6 million, or $0.17-$0.18 per share, which includes non-cash expenses of $0.9 million or $0.06 per share. The loss per share forecast assumes 14.2 million weighted average shares outstanding.
If you trust estimates from analysts on a micro-cap Internet stock, First Call noted -$0.57 EPS and $5.65 million revenues, supposedly with -$0.13 EPS and $6.3 million in revenues for next quarter.
This was one of our "Small Cap Internet Watch List" stocks that we feel was one of several that could end up becoming a takeover candidate under the right circumstances by a larger Internet or larger media and technology companies.
As we noted to subscribers, none of those companies are to be considered imminent. Any such deals would almost in every case be deemed very friendly to the top management at each as well, particularly since the companies that fit into these lists can adopt anti-takeover measures if they choose. Local.com just last week announced that its Bylaws were amended and restated to allow for the issuance of uncertificated securities……
Other metrics Local.com disclosed: Revenue per thousand visitors (RKV) was $168, up 95% from $86 in the third quarter of 2006 and up 10% from $153 RKV in the second quarter of 2007. All outstanding convertible notes were converted into 2.0 million shares of common stock in July. The company currently has no debt. In July it began selling subscription ad products directly to local businesses. On September 30, 2007, the Company had $18.1 million in cash and marketable securities and no debt.
Shares appear to be up slightly in after-hours trading. Frankly, 24/7 Wall St. would have liked to have seen more. But the good news here is that many traders in this cult stock are possibly going to try to treat any stability or any growth as a win.
Shares closed down over 1% at $5.08 in normal trading today. Shares were up marginally after the report, but shares have come back in since the initial reaction.
Jon C. Ogg
November 5, 2007
Jon Ogg produces the 24/7 Wall St. Special Situation Investing Newsletter; he does not own securities in the companies he covers.
Fremont General (FMT) Mortgage company debt rating cut. Falls to $1.81 from 52-week high of $17.30.
Valeant Pharmaceuticals (VRX) Drops on downgrade. Drops to $10.35 from $18.82.
Nordstrom (JWN) Retailers keep hurting. Drops to $33.71 from 52-week high of $59.70.
Merrill Lynch (MER) CEO gone. Big losses. Drops to $53.86 from 52-week high of $98.68.
Citigroup (C) CEO gone. Bigger loses. Drops to $35 from 52-week high of $57.
Novacea (NOVC) Drug trial blows up. Falls to $2.21 from 52-week high of $17.25.
Vertex Pharmaceuticals (VRTX) Problem with one of its drugs. Downgraded by analyst. Falls to $22.92 from 52-week high of $45.38.
Douglas A. McIntyre
Earnings expectations for Sun (JAVA) were modest. Wall St. was looking for a 2.5% increase in revenue to $3.27 billion. Forecasts were that EPS would be $.03, up from a ($01) loss last year.
The actual results were a bit off. Revenues for the first quarter of fiscal 2008 were $3.219 billion, an increase of approximately 1 percent as compared with $3.189 billion for the first quarter of fiscal 2007. Net income for the first quarter of fiscal 2008 on a GAAP basis was $89 million, or $0.03 per share on a diluted basis, as compared with a net loss of $56 million, or ($0.02) per share, for the first quarter of fiscal 2007.
Shares fell 2% after hours.
It appears that the anticipated improvements under fairly new CEO Jonathan Schwartz were just a cruel joke. The company was able to cut some costs. But, it cannot grow to save itself. The stock is back were it was in late 2004.
Bring back Scott McNealy. At least he was fun.
Douglas A. McIntyre
Fitch Ratings has announced the process it will employ in updating its analysis of the structured finance collateralized debt obligations (SF-CDOs) insured by the financial guaranty industry, as well as the potential implications for their ‘AAA’ Insurer Financial Strength ratings. This will only move to shed more light on the point that the worst cannot be entirely behind us nor that the end is even close. The full link to the press release is here. If you think this is a sign of the times that many more high-grade ratings aren’t going to be revised downward, then you might find yourself alone.
Fitch notes that should a financial guarantor add to its capital, or enact an effective risk mitigation strategy prior to the completion of its capital analysis, Fitch would consider the impact of such activities in formulating the conclusions from its capital analysis. Fitch expects to complete its capital analysis within the next four-to-six weeks.
The following are preliminary observations on the positioning of the ‘AAA’ rated financial guarantors, and the relative probability that each may experience erosion of their capital cushions under Fitch’s updated stress analysis. These observations are based on Fitch’s Sept. 6 study, preliminary review of each guarantor’s performance on Matrix as of June 30, 2007 and, where available, Sept. 30, 2007, and analysis to date of the risk profile of each guarantor’s SF CDO portfolios:
There has to be a reason that this looks and feels a lot like the old Resolution Trust Corp. situation after the massive personal and business implosions from the 1980’s.
to be continued……………….
Jon C. Ogg
November 5, 2007
Shares in Sun Micro (JAVA) are up as much as 2.5% ahead of earnings. The stock has been down over the last month while most big tech shares have risen.
Expectations for Sun earnings are very modest. But, with the stock well below its 52-week bottom, traders are clearly concerned that the company could miss.
Wall St. is looking for a 2.5% increase in revenue to $3.27 billion. Forecasts are that EPS will be $.03, up from a ($01) loss last year.
It’s not asking for much.
Douglas A. McIntyre
Get a Free Trial Subscription to "Ten Stocks Under $10" and follow 24/7 Wall St.’s views of the prospect for companies like Sun, Sirius, Qwest, Ford, and thousands of other low-priced stocks. Published 52 times a year.
BATS Trading, Inc. announced Monday it filed with the U.S. Securities and Exchange Commission to become a fully licensed securities exchange so that it would have the same regulations and the same status as both the NYSE Euronext (NYSE:NYX) and that NASDAQ Stock Market (NASDAQ:NDAQ). In terms of the critical metric of matched market share, BATS claims that it has established itself as the third largest market center in the U.S. just since the January 2006 launch.
Included in the BATS customer base are more than 200 broker-dealers and a broad-based ownership group of Citi, Credit Suisse, GETCO, Lehman Brothers, Lime Brokerage, Morgan Stanley, Merrill Lynch and Wedbush. BATS recently recorded one-day record volume of 774 million shares and routinely has a match rate exceeding 80 percent.
This won’t be a surprise to most exchange watchers as BATS noted even back in July that it was eying an exchange status. In short, this is moving from more of an ECN (electronic communications network) status to a full exchange status if you want a comparison. You can see its full fee schedule if you wish. With all the mergers and developments in exchanges, you just wonder if this one will ever make to a full IPO or if it will stay funded as it is by the backers.
Will saber rattling kill NASDAQ/Dubai?
Jon C. Ogg
November 5, 2007
Marvel Entertainment (MVL), the home of Captain America (RIP) and X-Men, beat Wall St. expectations and its shares are up almost 20% to $27.80.
For Q3 2007, Marvel reported that net income rose to $36.3 million, or $0.45 per diluted share, compared to net income of $13.2 million, or $0.16 per diluted share, in Q3 2006. Net sales rose from $92 million to $124 million on the strenth of the company’s licensing business.
The company also increased its guidance.
Douglas A. McIntyre
CNBC is saying the Richard Parsons will step down as CEO of Time Warner (TWX) effective the end of the year, and that the announcement will be made today. He will remain as Chairman.
Jeff Bewkes, current president, will move to the CEO job
Douglas A. McIntyre
According to a report by CNBC, Merrill Lynch (MER) has offered Laurence Fink, head of BlackRock (BLK) that CEO job at the big brokerage. Reuters says he has been given two weeks to decide.
Douglas A. McIntyre
Entergy Corp. (NYSE:ETR) is trading up over 2% right after the open. The power utility reported earnings, but perhaps even bigger than earnings is the news that the $24 Billion market cap power company is spinning off its nuclear operations.
On Nov. 3, 2007, Entergy’s Board of Directors approved a plan to pursue a separation of the non-utility nuclear business from Entergy’s regulated utility business through a tax-free spin-off of the non-utility nuclear business. SpinCo, the term used to identify the new company yet to be named, will be a new independent publicly-traded company. In addition, SpinCo and Entergy Corporation intend to enter into a nuclear services joint venture, with equal ownership.
Over the weekend, Barron’s institutional investing poll listed Starbucks (SBUX) as one of the most overvalued stocks in the market. That says a great deal since the stock was already down from a 52-week high of over $40 to $25.
Today, the shares hit a new 52-week of $24.95 today, which means that concerns over the coffee retailers growth rate persist and the shares may not have found a bottom.
Douglas A. McIntyre
IAC/Interactive (NASDAQ:IACI) has confirmed that the company will be split up into FIVE separate entities.
The New IAC under Barry Diller will be comprised of:
The four NEW-CO operations will be spun-off as the following:
Here is the structure of the new leadership, although we have to check the order of these:
Upon completion of the transaction, IAC’s shareholders will own 100% of the equity in all five companies (IAC, HSN, Ticketmaster, Interval and LendingTree). The transaction is expected to be tax-free for both IAC and its shareholders.
This will be covered very soon as a "Special Situation" for subscrbibers of the 24/7 Wall St. Special Situation Investing Newsletter where we cover buyout candidates, break-up’s, spin-offs, reorganizations, backdoor investments, and more. It’s also a safe bet that IAC and its subsidiary units will end up being covered in our "New Media/Old Media" subscriber letter.
Before IAC/Interactive shares were halted, the company had an $8.4 Billion market cap as of Friday’s $29.62 close. The 52-week trading range is $25.08 to $40.99. Shares are set to resume trade at 9:45 AM EST.
Jon C. Ogg
November 5, 2007
Dell Inc. (NASDAQ:DELL) has announced a definitive agreement to acquire EqualLogic, a provider of high-performance iSCSI storage area network (SAN) solutions uniquely optimized for virtualization. Dell will purchase EqualLogic for approximately $1.4 billion in cash.
The acquisition will strengthen Dell’s product and channel leadership in simplifying and virtualizing IT for customers globally. iSCSI SAN technology represents the fastest growing part of the storage business.
The acquisition of EqualLogic is expected to close late in the fourth quarter of Dell’s fiscal year 2008 or early in the first quarter of fiscal 2009. The company expects the acquisition to be dilutive to earnings per share, excluding the amortization of intangibles, by $0.02 to $0.05 in aggregate for Fiscal 2009 and Fiscal 2010. The acquisition has been approved by the board of directors of each company and is subject to regulatory approvals and customary closing conditions.
Dell plans to grow EqualLogic’s successful channel-partner programs with current and future EqualLogic branded products, and also plans to incorporate EqualLogic technology into future generations of its Dell PowerVault storage line available through the channel and direct from Dell.
After virtualization has been catapulted into the coming mainstream after the wildly successful IPO of VMware (NYSE:VMW) and the successful addition of virtualization at Citrix Systems (NASDAQ:CTXS), you can expect more virtualization deals in the industry down the pipe. As far as big tech trends, virtualization the the next "Next Thing."
Jon C. Ogg
November 5, 2007
IACI (IACI) will break into five companies, according to a report on CNBC. Barry Diller has been under pressure to improve the company’s stock price. The company is an odd mix of online properties like Ask.com and e-commerce plays like HSN.
The company’s online lending and real estate properties have been hurt by the current downturn
The stock is halted ahead of the open.
Douglas A. McIntyre
It’s GooglePhone day (everyone says), and Oppenheimer analyst Sandeep Aggarwal takes the opportunity to roll out some Google Mobile revenue estimates: continued…
Novacea, Inc. (NASDAQ:NOVC) has ended its Phase III ASCENT-2 clinical trial of Asentar(TM) (DN-101). Unfortunately this is Novacea’s lead investigational cancer therapy for the treatment of patients with androgen-independent prostate cancer.
The trial halt is due to an imbalance of deaths between the two treatment arms, as observed by the Data Safety Monitoring Board for the clinical study. Schering-Plough (NYSE:SGP) is Novacea’s partner on this candidate and both companies plan to fully analyze the clinical data resulting in higher death rates in the Asentar plus Taxotere treatment group.
The study was comparing the benefits of weekly Asentar plus Taxotere to the current standard of care in the treatment of androgen-independent prostate cancer. To date, more than 900 of the planned total of 1,200 patients were enrolled in this study at multiple centers in various countries, including the United States, Canada, Germany, and Central Europe.
If you look at Novacea’s pipeline, you’ll see that Asentar is the bulk of the efforts. It’s going to be a long road ahead for the company.
Shares of Novacea (NOVC) are trading down 65% to $2.50 in pre-market activity. Friday’s close was $7.19 and the prior 52-week trading range was $5.60 to $17.25. Before the implosion, Novacea’s market cap was $169.19 million. Biotechs blowing results are rarely good, but when its a Phase II or Phase III and it is your lead candidate it is as bad as one can imagine.
Jon C. Ogg
November 5, 2007
(ABT) Abbott’s investigational SIMCOR offers similar LDL lowering to simvastatin and significantly raises HDL and lowers triglycerides in Phase III studies.
(AVGN) Avigen’s AV411 shows promising initial results for neuropathic pain in study.
(AVP) Avon featured positively by Jim Cramer on CNBC’s Mad Money.
(BKC) Burger King $0.35 EPS vs $0.34 est.
(BLDP) Ballard Power confirmed reports that it has been reviewing strategic alternatives with regard to its automotive fuel cell assets due to the lengthy projected timeline to commercialization and high cost of development.
(BSX) Boston Scientific announces sale of Cardiac Surgery and Vascular Surgery businesses for roughly $750 million.
(C) Citigroup’s Chuck Prince is FINALLY out, Rubin named Chairman; Citigroup will take another major writedown; restated Q3 lower to $0.44 vs $0.47 prior.
(CLX) Clorox featured positively by Jim Cramer on CNBC’s Mad Money.
(ECA) EnCana paid $2.55 Billion to acquire the other interest in its Deep Bossier natural gas and land interests.
(ETR) Entergy $2.30 EPS vs $2.17 est.
(F) Ford and UAW reached tentative agreement on new national labor agreement.
(HGSI) Human Genome Sciences showed positive Phase IIb hepatitis C data.
(LLY) Eli Lilly showed its clotting drug works better than Plavix, but more bleeding is a risk.
(MESA) Mesa Air appoints interim CFO.
(MVL) Marvel Enterprises $0.45 EPS vs $0.29 est.; raised guidance; Sees 2008 $1.30-1.50 vs $1.26 est.
(MRK) Merck showed more positive data on GARDASIL.
(NAT) Nordic American Tanker missed earnings after one-time drydocking and repair charges.
(NOVC) NOVACEA halted its ASCENT-2 Phase III trial in its lead product candidate for advanced prostate cancer because of imbalance in deaths in trial arms.
(NUS) Nu Skin $0.26 EPS vs $0.24 est.; lowered next quarter guidance; increases share buyback plan to $100 million.
(OMRI) Omrix Biopharma $0.21 EPS vs $0.13 est; raised sales guidance.
(SYY) Sysco Foods $0.43 EPS vs $0.41 est.
(WCG) WellCare trading up 35% after preliminary results were filed, Jefferies upgrade.
Jon C. Ogg
November 5, 2007
ACA cut to Underperform at Credit Suisse.
ACW raised to Neutral at UBS.
AMSC started as Buy at Jefferies.
ATPG cut to Underperform at RBC.
BSC cut to Equal Weight at Lehman.
BSY cut to Neutral at Merrill Lynch.
CNP raised to Buy at Jefferies.
CPT cut to Neutral at B of A.
DRE cut to Neutral at UBS.
FSLR started as Sector Perform at CIBC.
GLF raised to Buy at Jefferies.
GNA raised to Outperform at CIBC.
HD cut to Hold at Deutsche Bank.
LLY cut to Underweight at HSBC.
LOW cut to Hold at Deutsche Bank.
MER cut to Equal Weight at Lehman.
NLC raised to Neutral at UBS.
PDGI raised to BUy at Jefferies.
PVTB raised to Overweight at JPMorgan.
TUES raised to Outperform at Piper Jaffray.
WCG raised to Buy at Jefferies.
WST raised to Buy at UBS.
Jon C. Ogg
November 5, 2007
News Corp’s (NWS) is launching a way for advertisers to target users at its huge social network, MySpace. The marketer’s knock against the site has been that users cannot be grouped into neat units that are easy for advertisers to reach. At Yahoo! (YHOO) and MSN, companies can place ads in content areas like finance, sports, or autos and have a good chance of hitting the consumers that they want.
According to Reuters, MySpace will release "details of how it is building discrete audiences out of nearly 110 million users worldwide in a format it calls HyperTargeting". The social network operation will begin by identifying audiences in 10 major categories, such as music, travel and sports, and is now creating 100 sub-categories within those groups. To do this, it will have to look at the web pages created by its users to be placed on the MySpace site.
Watch for the privacy police to begin to march on MySpace the way that they have on Google (GOOG). Taking and storing information about people’s habits or purchasing patterns is a "no, no" in the minds of those who wish to protect consumers from prying internet eyes.
MySpace could avoid collecting the data and go into a period of prolonged financial decline. Then, perhaps, the site could get to the point where it has so little in terms of resources that it will become useless to users. It happened that way with huge internet bubble sites like GeoCities. It’s just that no one remembers.
Douglas A. McIntyre
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