Daily Archives: November 13, 2007

Wendy’s (WEN) Offer From Peltz, But Price Is Secret

The Associated Press writes "billionaire investor Nelson Peltz submitted an offer to buy Wendy’s  International Inc. (WEN), but the proposed price is below what he previously said the nation’s third-largest hamburger chain is worth, according to a regulatory filing Tuesday."

At one point, Peltz said the fast food chain might be worth $37 to $41. But, the shares trade at under $31.

Triarc Co (TRY), a company owned by Peltz, made the bid.

No one would be surprised if the number was below $34 a share.

Yesterday we noted the possibility and rationale for a "take-under" scenario being quite possible..

Douglas A. McIntyre

Posted on: November 13, 2007 – 6:24 pm in Food, Mergers and Buy Outs, ,

S&P Says Mortgage Problems To Worsen In 2008

CNN Money reports "the chaos in the mortgage markets is only going to get worse in 2008 and will put a dent in U.S. mortgage bank earnings, according to a report released Tuesday by Standard & Poor’s."

Next year will be the worst for mortgage bank earnings since the 1990s, the ratings agency said.

"Negative home price trends, the shutdown of the subprime mortgage market and the continued weak state of the mortgage capital markets all translate into lower growth for the mortgage industry," said Victoria Wagner, a credit analyst with S&P.

Douglas A. McIntyre

Posted on: November 13, 2007 – 6:04 pm in Housing

The Business Day In Global Warming (XEL, FTEK, AIG, SYNM, AKNS, USBE, DASTY, CLNE, DSTI, FSLR, HOKU, PBW, GEX)

Xcel Energy’s (NYSE:XEL) 345-kilovolt transmission line along with two major 115 kV lines will deliver the power into the Minnesota High voltage transmission grid allowing delivery of the power from the Fenton Wind farm and other wind power resources from the Buffalo Ridge region of the state into the twin Cities area.  Minnesota’s largest wind farm and the state’s largest transmission line built to carry wind power into the Twin Cities were dedicated today and will soon become fully operational.  The only thing between the Twin Cities and the North Pole is a picket fence and it blew down.

Fuel Tech, Inc. (Nasdaq: FTEK) announced receipt of a FUEL CHEM® demonstration order from a new electric utility customer in the Midwestern United States on a large Powder River Basin coal-fired boiler, with chemical feed scheduled to commence later this quarter.  Unfortunately for the company shareholders, shares slid nearly 3% to $24.39 after a miserable day yesterday.

Jim Cramer recently gave a large summary of his stock picks that would win from the move to a greener U.S., although some are far from "green" companies.

Read More »

Posted on: November 13, 2007 – 5:02 pm in Alternative Energy, , , , , , , , , , , , ,

Prudential’s Aggressive Share Repurchases (PRU)

Prudential Financial, Inc. (NYSE:PRU) has declared an annual dividend for 2007 of $1.15 per share of Common Stock, which represents an increase of 21% percent over the 2006 dividend.

But perhaps even more importantly, Prudential has authorized repurchases of up to $3.5 billion of its outstanding Common Stock in calendar year 2008 under the company’s stock repurchase program.  The board of directors had previously authorized the repurchase of up to $3 billion of its outstanding Common Stock in 2007, and from January 1 to November 12, 2007, the company has repurchased approximately $2.6 billion of its Common Stock under the authorization for 2007.

At a $97.00 handle, and assuming the same amount of buybacks for 2008 as 2007, that would represent 26.8 million shares if no more shares were purchased.  If the company used its entire $3.5 Billion arsenal, it would represent about 36 million shares.  That’s not bad for a stock with an average daily volume of about 2.6 million shares.

Prudential’s 52-week trading range is $78.22 to $97.23.  Hopefully this isn’t masking some major debt issue on the books.

Jon C. Ogg
November 13, 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: November 13, 2007 – 4:14 pm in Dividend, Financial Stocks, Stock Buybacks,

Affymetrix Year-Lows On Debt..No Good Deed Goes Unpunished (AFFX)

Affymetrix (NASDAQ:AFFX) was a bit of a puzzling stock today when we saw it had hit a 52-week low after a proposed $250 million convertible note offering.  After the near-10% haircut, this has a $1.5 Billion market cap, and its triple-digit P/E ratio is a bit misleading when you you consider the $0.30 2007 estimate and the $0.51 estimate for 2008.  Revenue estimates for 2007 and 2008 ar $371.7 million and $401.2 million, respectively.

The company isn’t without troubles, because it will lose some key Roche revenues in 2008 and it has increased its patent lawsuits against Illumina.

Its recently established diagnostics business is the hopeful here, but  its partners need FDA marketing approval before that becomes a huge win.

As of September 30, its current assets were $400 million, and total assets outside of Goodwill, deferrals, and ‘other’ are in the vicinty of $600 million.  Its current liabilities are $79+ million and other longer-term debt (including another convertible note) total just under $137 million more; so total liabilities are about $216 million.

The 30-year $250 million in notes may even be used to retire a portion of its previously issued notes.  The terms and conditions will be negotiated between Affymetrix and J.P.Morgan, its underwriter.  The "use of proceeds" from this offering is for general corporate purposes.  This near-10% drop to $21.72 is a loss of of one-third its value from highs as the 52-week trading range $21.58 to $31.95.  Defending triple digit P/E stocks on announcements isn’t what 24/7 Wall St.normally does.  But in this case the financing pact may be deemed cheap.

We’ll evaluate the full spectrum of analyst comments tonight and tomorrow and after we get word of the terms and conditions of the financing, but this sell-off seems excessive for a stock that traded up to $28 last month before its quarterly report.

Jon C. Ogg
November 13, 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: November 13, 2007 – 4:03 pm in Biotech, Medical, Secondary Offering,

The 52-Week Low Club

Aca Capital (ACA) S&P cuts rating after big loss. Drops to $1.60 from 52-week high of $16.55.

Quebecor World (IQW) Refinances company, brings on new debt. Falls to $4.12 from 52-week high of $14.79.

Assisted Living Concepts (ALC) What a drag its is getting old. Poor earnings. Down to $6.95 from 52-week high of $13.18.

SPACEHAB Incorporated (SPAB) Big Q1 loss. Falls to $.11 from 52-week high of $1.23.

Inphonic Inc (INPC) A little delisting problem with Nasdaq. Down to $.03 from 52-week high of $14.49.

FOCUS Enhancements (FCSE) Weak Q3 results. Drops to $.61 from 52-week high of $1.83.

Douglas A. McIntyre

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Posted on: November 13, 2007 – 4:00 pm in HI/LOW, , , , , ,

Should Cisco Really Trade Under $30 (CSCO, JNPR, FDRY, MSFT, ALU, NT)

Cisco Systems Inc. (NASDAQ:CSCO) has traded under $30.00 since its earnings report, and 24/7 Wall St. wanted to compare and contrast this drop to a prior trough from years before. 

Cisco Systems saw its share price encroach $30 in January 2004, that was its highest price since 2001 after the tech bubble burst and its stock fell from grace in the 2000 to 2002 meltdown period when shares went from over $60.00 to down under $10.00.  But now Cisco is back to where it was back in early 2004 before its stock sold off significantly again.  After the haircut seen over the last week, 24/7 Wall St. wonders if this stock should really be trading under $30.00 on recent concerns.  Here is what Cisco has now that it didn’t have when shares nearly hit $30 in early 2004…..

On the "2004 looking out ahead" scenario, or the negatives today:

  • Cisco has a very weak auto, financial, housing and consumer business;
  • and it even hinted at the enterprise customers being spotty in the U.S.;
  • In 2004, Cisco was still mostly a routing, switching, and networking company that was putting together what looked like hodge-podge units;
  • Smaller competitors like Juniper (JNPR) and even smaller Foundry (FDRY) were able to win more business away because of one-item pricing;
  • it was buying back stock;
  • as far as an outlook at the time (18 months looking forward), in fiscal July-2005 it generated $24.8 Billion in revenues.

But it has many more positives today, and this is only a portion:

  • Estimates for fiscal July-2009 (20 months ahead) expected it to post over $46 Billion revenues;
  • It now has this much more under its belt…Scientific Atlanta for cable set-tops, WebEx for its beloved telepresence, more data security, more WiMAX, more ‘future tech’ all leading into Web 2.0 massive expansions;
  • It announced a $16 Billion China expansion plan;
  • Cisco now dominates many customer orders as being able to be able to offer a one-stop shop from the cables and all the communications equipment literally all the way down the entire line from the port on the servers to the port on your PC;
  • It has an India, China, Middle East, and Europe that is eating technology orders like the countries came out of the analog cycle just yesterday;
  • Now everyone asks on Alcatel-Lucent (NYSE:ALU) and Nortel (NYSE:NT)… "Who are they?";
  • and it is still acting like a stock buyback monster.

The truth is that we’ve left a lot out here to keep this simple, and we’ve probably omitted or just skipped other key pieces.  But 24/7 Wall St.’s $34 target set back in January for 2007 was hit right before earnings, and we even outlined ahead of this last earnings report why 24/7 wall St. felt that Cisco stock was going to either go over $35 or fall back to under $32 based on the earnings report.  Our $36 price target was hit on Microsoft (NASDAQ:MSFT) for 2007 and 24/7 Wall St. has not set a target for Cisco Systems (CSCO) and other key tech stocks into mid-2008 as of yet.  We’ll send those out in summary to our open email distribution list before we post these individually in detail on our open site.  The average target from Wall Street analysts is between $36.00 and $37.00.

Jon C. Ogg
November 13, 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: November 13, 2007 – 1:59 pm in Analyst Calls, Technology Companies, , , , , ,

How Fast Are Clients Leaving E*Trade (ETFC)?

It would be fair to assume that a number of frightened customers are leaving E*Trade (ETFC) for other brokerage firms. but there is not much solid evidence of how fast that is taking place.

One of the smaller discount brokers, TradeKing, sent 24/7 Wall St. this information:

– TradeKing is averaging 10 calls per hour since yesterday morning from people identifying themselves as E*Trade account holders with concerns about their assets and who are looking for a safe place to put their money
– Nearly one-third of TradeKing’s online customer service chat sessions have been taken up by E*Trade customers looking for more information
– Callers specifically seem to be hunting for brokerages outside the sub-prime arena that will not cost them a large increase in trading fees
– Some clients holding both E*Trade and TradeKing accounts have already begun the process of transferring assets from E*Trade into TradeKing accounts.
It is safe to assume that the number of clients moving to TD Ameritrade (AMTD) and Schwab (SCHW) is much greater.
E*Trade is up 18% to $4.20, but, if it loses enough customers, that may not last.
Douglas A. McIntyre

Posted on: November 13, 2007 – 1:04 pm in Brokerage Firms, , ,

Online Retail Sales Show Modest Increase In October

E-Commerce sales for the first month of the holiday season, October, showed a modest increase of 19% to $8.4 billion (excluding travel).

The categories that drove online sales were video games and consoles, which rose 264%. This is almost certainly good news for Nintendo and the surging Microsoft (MSFT) Xbox 360 and "Halo 3". It may also be positive for Sony (SNE), although sales of its PS3 have been soft.

Furniture, appliance, and equipment sales were up 105% for the month, according to comScore.

Douglas A. McIntyre

Posted on: November 13, 2007 – 12:53 pm in Internet, ,

SIRIUS Approves Merger, But Will Regulators Care (SIRI, XMSR)

SIRIUS Satellite Radio Inc. (NASDAQ:SIRI) announced that its stockholders voted to approve an amendment to its certificate of incorporation and the issuance of SIRIUS common stock to accomodate its merger with XM Satellite Radio Holdings Inc. (NASDAQ:XMSR).  More than 96% of the shares voted were in favor of the merger.

If this merger goes through, XM Satellite Radio holders will receive a static 4.6 shares of Sirius Satellite Radio per XM share, and each shareholder group will own roughly 50% of the combined company.  With Sirius stock trading at $3.51, this translates to an implied mnerger price for XM holders of $16.14.  XM is trading at only $14.21 today.

Unfortunately, the regulatory approval hurdles here are the big issue.  It was overwhelmingly expected that both shareholder groups would approve the deal.

Jon C. Ogg
November 13, 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: November 13, 2007 – 12:17 pm in Media, Mergers and Buy Outs, Regulation, Satellite, ,

Bank Of America (BAC) Set Write-Off, Shares Rally

Irony, they name is Wall St.

Bank of America (BAC) shares are up 3.3% on news that the firm will take a write-down because it "has suffered a $3 billion loss stemming from its exposure to collateralized debt obligations," according to Reuters.

Sure, it could have been much worse

Douglas A. McIntyre

Posted on: November 13, 2007 – 12:05 pm in Banking,

IPO Filing: Initiate Systems Inc. (INSY)

A company called Initiate Systems Inc. has filed to come public in a share sale worth up to $75 million for filing purposes.  Goldman Sachs is the lead underwriter, with CIBC World Markets as a book-runner, and co-managers are listed as Jefferies and Thomas Weisel partners.  The company has taken the proposed ticker of "INSY" on NASDAQ.

Initiate Systems provides master data management software. The company enables other organizations to leverage and share critical data with a complete real-time view of data spread across multiple systems or databases, even outside their firewalls. This allows companies to unlock the value of their data assets for competitive advantages or operational improvements. It has deployed solutions to over 100 enterprise customers across a number of different industries including healthcare, government, banking, insurance and retail.  Doesn’t this sound a lot like Big Brother?

Its revenues were $33.2 million for the year ended 2006, and it posted a net losses of $12.3 million; and revenues were $22.7 million for the six months ended June 30, 2007, and it posted a net loss of $7.2 million for the six months ended June 30, 2007.  As far as the total market opportunity, Forrester Research estimated in 2007 that the worldwide MDM market was approximately $1.1 billion in 2006 and projects that this market will grow to $6.6 billion in 2010, representing a compound annual growth rate of 57%.

In the risk section, the company and its registered public accountant have identified material weaknesses in internal controls over financial reporting.  The company was founded in 1994 as RBG Corporation with a direction of healthcare patient databases.  In 1995 it changed its name to Madison information Technologies, Inc. and ultimately became INITIATE SYSTEMS INC. in 2003.  It had 241 employees as of June 30, 2007. 

Jon C. Ogg
November 13, 2007

Posted on: November 13, 2007 – 11:55 am in IPOs, Technology Companies, ,

Google Previews First Wave of Wiki Model For Android, With Incentives (GOOG)

Google (NASDAQ:GOOG) already announced the Open Handset Alliance for its free and open platform Android for mobile devices.  But today, Google is releasing an early look at the Android SDK for developers interested in building applications for Android.  But it also announced the Android Developer Challenge, which provides $10 million in multiple awards for developers who build great applications for Android.  Developers can get a first look at the software development kit.

As an outsider, it is quite difficult thinking of and imagining all of the potential applications that could be applied to this for a mobile phone.  The potentiality of applications are literally limitless, and it’s way too soon to know who will offer applications for free and who will charge for applications.  Google’s goal is for free apps, but at the end of the day software and app developers that aren’t employees of Google will want to make money.  Focusing on a grant alone is not a sustainable model for anything besides a ".org" entity. 

What is obvious is that Android is either going to revolutionize the mobile application industry where Google proved that the masses can be tapped on an outsourced "pay for performance" model, or it is going to be a case study of why open source models are poor businesses.  We’ll all start to know the answers in 2008.

Jon C. Ogg
November 13, 2007

Posted on: November 13, 2007 – 11:14 am in Internet, Telecom, WiMAX, Wireless,

Goldman Sachs (GS) Up 6% On Positive Write-Off News

Goldman Sachs (GS) is trading up 6% on word from its CEO that the firm "does not expect to take any significant asset write-downs," according to Reuters.

There have been rumors that Goldman might be hit by the wave of financial problems which have hurt banks like Merrill Lynch (MER) and Citigroup (C).

Douglas A. McIntyre

Posted on: November 13, 2007 – 10:55 am in Financial Stocks, , ,

Some Good News Out Of Countrywide (CFC)?

Countrywide (CFC) said "it funded 48 percent fewer home loans in October than a year earlier," according to Reuters.

The news agency said Countrywide said it funded $22 billion of home loans in October, down from $41.9 billion a year earlier, but up 4 percent from September. Adjustable-rate loan volume fell 81 percent from a year earlier to $3.1 billion, while subprime loan volume totaled just $42 million, down from $3.3 billion.

It appears that most risky loan pools are dropping.

Shares were flat on the news.

Douglas A. McIntyre

Posted on: November 13, 2007 – 10:50 am in Housing,

Zecco Secures Additional $25 Million in Financing

Zecco Holdings (zecco.com) announced this morning that it has secured an additional $25 million in new funding from a number of current and new investors, bringing the total capital raised by Zecco to up over $35 million to date.

Zecco was the first to launch an ad-supported stock trading model with the goal of ultimately offering the lowest commission rates in the online investing and trading industry.  Zecco offers users a financial community and is mostly known for providing access to free stock trading.

Jeroen Veth, CEO of Zecco, said in the press release, “…With the additional funding, we anticipate our current capital is sufficient to carry us to profitability.”  That will be more than impressive if the model pays off this fast, and the company will have defied what many said didn’t seem viable from the start.  We’re still curious as to when it will come public.

Zecco is a model we have been watching and monitoring since before its launch.  It’s also a client of 24/7 Wall St.

Jon C. Ogg
November 13, 2007

Watch for similar news and anlysis in the 24/7 Wall St.subscriber-based "Old Media/New Media" Newsletter.

Posted on: November 13, 2007 – 9:59 am in Brokerage Firms, Internet,

LIN TV Heads For YouTube (TVL, GOOG)

LIN TV Corp. (NYSE:TVL) has announced the launch of its own dedicated LIN TV Channels on YouTube, giving Google (NASDAQ:GOOG) another hosted "Old Media" feather in its cap. This partnership is said to reflect LIN TV’s expansion of its local news brands and YouTube’s commitment to make compelling video accessible online. These stations will debut:

  • WISH-TV in Indianapolis,
  • WOOD-TV in Grand Rapids,
  • WTNH-TV in New Haven,
  • and WPRI-TV in Providence.

The stations will feature news, sports and entertainment clips on YouTube websites. Viewers will also be able to subscribe to receive videos, share videos and post comments.  LIN TV’s dedicated YouTube channels, while it doesn’t say this in the press release, will allow LIN TV to offer up the content without having the issues and bandwidth demand from hosting these channels.

Jon C. Ogg
November 13, 2007

This and other news analysis appears weekly in the 24/7 Wall St. "Old Media/New Media" Newsletter.

Posted on: November 13, 2007 – 9:43 am in Internet, Media, ,

SPAC IPO Filing: iStar Acquisition Corp.; iStar Going Hedge Fund (SFI)

iStar Acquisition Corp. appears to be the latest special purpose acquisition company filing for an IPO.  The company has registered to sell 57.5 million units at the traditional $10.00 per unit, with each unit consisting of one share and one warrant. The filing is actually 50 million units, but the extra 7.5 million pertains to the overallotment.

Interestingly enough, this is actually a blank check spin-off from IStar Financial Inc. (NYSE:SFI), which has a REIT status.  Banc of America is listed as the sole lead manager as of now.

The business strategy will be that of a hedge fund in alternative asset management.  Here is the company’s own description of itself: We will initially focus our search for an initial business combination on operating businesses in the alternative asset management industry. The alternative asset management industry encompasses companies that undertake the management of portfolios using a variety of investment strategies where the common element is the manager’s goal of delivering investment performance on an absolute return basis within certain predefined risk parameters. Among the areas that we intend to focus on initially are businesses that operate and manage private equity funds and/or hedge funds. However, our search will not be limited to a particular industry or geographic location.

We have our distribution list that sends out other alerts on IPO’s, spin-offs, and special situations, with more detailed data that sometimes doesn’t appear on the public site.

Jon C. Ogg
November 13, 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: November 13, 2007 – 8:41 am in Financial Stocks, IPOs, REIT, Shareholder Issues,

Oracle Joins the VMware Fight, Sort Of (VMW, ORCL, RHT, QSFT)

Oracle Corp (NASDAQ:ORCL) made its "virtualization push" public yesterday at its Oracle OpenWorld, which is seeing some mixed reaction on the day after.  The enterprise software giant has not had a public or formal answer to VMWare Inc.’s (NYSE:VMW) virtualization lead.  Oracle’s product is three times more efficient than competitors’ offerings, at least according to the company itself.  The pricing also looks different.  Customers can download "Oracle VM" for free, and the enterprise software giant will sell service contracts ranging from $499 to $999 per year.

VMware shares were hit another 8% yesterday, while Oracle shares rose almost 3%. Apparently Jefferies believes the sell-off in VMware was too much.  Thomas Weisel noted that Oracle VM roughly compares to Red Hat (NYSE:RHT) Enterprise Linux 5.0.

Just this morning, VMware unveiled VMware Server 2, its (already) next generation of the company’s free-of-charge virtualization product, which enables organizations to quickly provision new server capacity by partitioning a physical server into multiple virtual machines.  VMware Server 2 beta for Linux and Windows hosts is available for immediate download, while VMware Server 2 is expected to be generally available next year. Enterprise-class support from VMware is expected to be available for VMware Server 2 at the time of general availability.

As more and more companies enter the virtualization space with announcements, whether the virtualization products are great or not, it is hard not to take heed of Virtual Iron’s CEO comments from our exclusive interviews over the last week: "Anyone can run multiple O/S’s on a server now, but that alone won’t cut it ahead."

Quest Software (NASDAQ:QSFT) made its own announcement yesterday with its acquisition of privately held Provision Networks Inc.

The VMware Conundrum still exists.  You can expect more ‘virtualization’ announcements today from various players.  There is the "Virtualization Conference & Expo West" from yesterday and today, and UBS is hosting its "Global Technology & Services Conferences" today through Thursday.

Jon C. Ogg
November 13, 2007

Posted on: November 13, 2007 – 8:26 am in Software, , , ,

CNBC Says Merrill (MER) Will Cut 25% Of Fixed Income Staff

CNBC is reporting that Merrill Lynch (MER) may cut 25% of its fixed income staff. Total employees in equity operations should not end up being cut.

Douglas A. McIntyre

Posted on: November 13, 2007 – 8:01 am in Brokerage Firms,