Daily Archives: December 7, 2007

The 52-Week Low Club

Smith & Wesson (SWHC) Particularly bad earnings report. Drops to $6.68 from 52-week high of $322.80.

Macrovision (MVSN) Wall St. upset with takeover of Gemstar-TV Guide (GMST). Down to $18.60 from 52-week high of $30.05.

BigBand Networks (BBND) Never recovered from IPO and poor earnings early on. Down to $5.10 from 52-week high of $21.63.

Palm (PALM) Poor guidance. Late release of key product. Off to $5.33 from 52-week high of $19.50.

Savvis (SVVS) Bad Q4 outlook. Down to $23.72 from 52-week high of $53.47.

Douglas A. McIntyre

Posted on: December 7, 2007 – 4:06 pm in HI/LOW, , , , ,

The Week of Stock Buybacks (DELL, KDE, IBM, ACL, WU, IAAC, HBIO, PMRY, EDGW, KNXA, TRF, MT, CLDN, HGRD, FUL, PNSN)

This was an active week in share repurchases, and many key stocks announced new buyback plans or gave updates to their buyback plans.  Below are the key buybacks 247WallSt.com reviewed:

  • Kenexa (Nasdaq: KNXA) announced on November 8, 2007 that it authorized the repurchase of up to 2 million shares of the company’s common stock, and it has already completed the repurchase of over 1 million shares since the approval of the repurchase program.  It only has about 25.5 million shares outstanding.
  • Edgewater Technology, Inc. (NASDAQ: EDGW) announced that its Board of Directors authorized the purchase of up to $5.0 million of the Company’s common stock; approximate market cap is $87 million.
  • Harvard Bioscience, Inc. (NASDAQ: HBIO) has authorized the repurchase of up to $10 million of its common stock over the next 24 months; shares rose 5% Friday and its market cap is $130 million.
  • Pomeroy IT Solutions, Inc. (NASDAQ:PMRY) authorized a somewhat unusual program to repurchase up to $5 millionof its outstanding common stock.  In addition, the Board adopted awritten trading plan under Rule 10b5-1 of the Act to facilitate therepurchase of its common stock. Rule 10b5-1 allows the Company topurchase its shares at times when the Company would not ordinarily bein the market because of the Company’s trading policies or thepossession of material non-public information. Pomeroy’s market cap is$86 million.
  • Alcon, Inc. (NYSE:ACL) approved a new share repurchase program that allows for the purchase of up to $1.1 billionof shares of outstanding common stock targeted over a twelve monthperiod.  The $1.1 billion share repurchase program provides for a purchase of shares from the company’s majority shareholder,Nestle, S.A. Specifically at a rate of three shares fromNestle for every share acquired by the company in the market. This new program is in addition to thecompany’s existing repurchase program, under which, as of December 5,2007, the company has remaining authorization to repurchase up to 2.8million shares. It is anticipated that the new repurchase program willcommence in the first quarter of 2008.
  • The Western Union Company (NYSE: WU) authorized an additional $1 billionfor purchases of its common stock through 2009, and this is in additionto the approximately $300 million remaining under previous sharerepurchase authorization. With a $1.3 Billion total plan, it has $17Billion market cap.
  • International Assets Holding Corp. (NASDAQ:IAAC) renewed the Company’sshare repurchase authorization for an increased amount of $5,000,000 in shares of common stock.  The renewal will be effective January 1, 2008. IAAC’s market cap is $226 million.
  • 4Kids Entertainment (NYSE:KDE) saw its shares rise on a 1 million share buyback of around $11 million; market cap is $157 million.  FULL REVIEW with value investor synopsis.
  • Dell (NASDAQ:DELL) was the biggy of the week, but you wouldn’t haveknown it if you saw the stock trades.  It is reinstating its sharerepurchase plan and will spend up to $10 Billion in share buyback.  Its market cap is $55.8 Billion.  FULL COVERAGE.

Read More »

Posted on: December 7, 2007 – 1:54 pm in Stock Buybacks, The Week, , , , , , , , , , , , , , , ,

10 CEO’s That Need To Leave in 2008: James Tobin of Boston Scientific (BSX, BIIB, JNJ, ABT)

James Tobin, the CEO of Boston Scientific (NYSE:BSX) is likely to find himself in front of the shareholder firing squad in 2008.  In early 2004 this stock was above $40 and had enjoyed an incredible stock performance from the beginning of 2001 to early 2004.  But that was then.  Shares sit under $13.00 today, and every little rally seems to be reversed by bad news.  If you pull up a chart you’ll see a pattern of what looks like a long downward staircase. Tobin has has been with BSX since 1999, and he served as Biogen’s (NASDAQ: BIIB) President & CEO from 1997 to 1999. 

With a Harvard M.B.A., Tobin is probably not at all incompetent and we openly admit that there was a period of time that the company flourished.   But the current path is not working at all and all of the problems have happened under his tenure and under his guidance.

Co-founder and Chairman Peter Nicholas (Jr.) needs to step back in and get new blood in to run the day to day operations.  He has been chairman since 1995 and served as CEO from 1979 to 1999, so he could even perhaps step in as interim-CEO until a replacement is found.  Nicolas is only a few years older than Tobin.

  • Things haven’t gotten any better since the 2006 closure of the Guidant buyout, and if memory serves correctly that was valued around $27 Billion (stock and debt) at the time and Boston Scientific’s market cap is currently just under $20 Billion.  Johnson & Johnson (NYSE:JNJ) is probably extremely glad they didn’t buy that after they lost the bidding for it.
  • Boston Scientific is in the position that now it has to keep reviewing units and operations for possible sale, which has been ongoing.
  • Back in July it reportedly settled its pending federal lawsuits against the company alleging harm from faulty defibrillators and pacemakers for $195 million, so maybe there can be at least some good news occasionally.
  • But its stent business has been under fire from more and more reports showing that stents aren’t as safe as originally believed.  Stent sales have suffered industry-wide.  But now Abbott (NYSE:ABT) is nipping its heels with its own new Xience stent, and many reports have discussed how Xience is superior to BSX’s Taxus stent.
  • Recently it posted losses after its acquisition and divestiture charges, and unfortunately its GAAP EPS forecast looks like we are set to expect yet another quarterly loss on a GAAP basis.
  • Even the Wall Street analysts have all thrown in the towel on BSX.  The average target is down to about $16.00 and you have to stretch to find any real positive recent analyst calls besides Lehman maintaining an Outperform rating, but their target is only $16.00 too.

We ran a break-up value analysis before certain changes have been made inside the company, and we are reviewing what value can be derived ahead for our Special Situation Investing Newsletter subscribers.

If the company stays on its current path, we might even get to begin featuring Boston Scientific stock for our STOCKS UNDER $10 LETTER.  Yep, things seem to be that bad there.

GUIDELINES FOR CEO’s THAT NEED TO GO

Jon C. Ogg
December 7, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: December 7, 2007 – 12:12 pm in Management Change, Medical, , , ,

Would Nintendo Risk A Hail Mary Strategy To Meet Insatiable Wii Demand (NTDOY, SNE, MSFT) (7974.JP)

If there is one thing you still hear about as being immune from a weak consumer and from any Christmas spending concerns it is that Nintendo’s Wii is in such high demand that the darned things are extremely difficult to find.  Apparently everyone in the Western hemisphere has decided they want to be "Wii-nies."  Nintendo’s (OTC: NTDOY) stock has come back from the grave

The WSJ just reported today that Nintendo has been far too conservative in its forecasts and in its supply and demand models.  That is likely because it wasn’t all that long ago that Nintendo was thought of as a dead system when rivals Sony (NYSE: SNE) were going gangbusters with the Play Station franchise (PS3 excluded now) and the Microsoft (NASDAQ: MSFT) Xbox franchise doing as well as it has.

What is becoming more than obvious is that despite the company remaining focused on cash flows and being extremely conservative, this video game system hasn’t just done better or even far better than the company expected.  It is continuing to be a shining star and demand is out-pacing what it can currently even come remotely close to supplying.  The company already said it was trying to ramp up manufacturing. 

But here is our suggestion: go take your designs to more outsourced manufacturing companies (or EMS players) and see what they can do for you.  Unfortunately, with there being only 18 days to Christmas they won’t be able to fill the gap in time for the holidays.  But one thing that the company could do is try offering a voucher guarantee if they can secure more manufacturing.  It is of course only an option if they can land more outsourced manufacturing.  It’s also a risk because if they fail to deliver it will be a huge round of negative press about Nintendo being unable to live up to promises and it ruining many holiday dreams (remember we’ve all been a bunch selfish children that want what we want now).  But it would also keep its customers that just can’t find the systems from automatically buying a Playstation or an Xbox 360 because they wanted a new system.

I called the two GameStop stores I go to for games (30’s and 40’s somethings can be gamers too) and neither store has any Wii’s in stock and both said they don’t think any of the local GameStop’s have any Wii’s in stock.  One told me that they won’t know if they get any in before Christmas.  There is just one small problem with the voucher idea.  The problem is that both GameStop’s told me they are not allowed to even have a waiting list and they are first come first serve.

When American consumers want to buy something and can’t, let’s just say they aren’t exactly great at saving and waiting.  They just buy the competitors’ products.

Jon C. Ogg
December 7, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: December 7, 2007 – 11:03 am in Video Games, , , ,

Smith & Wesson (SWHC) Troubled As Crime Falls

Smith & Wesson (SWHC) shareholders are having an awful day. The stock is off 28% to $7.10 and hit a 52-week low of $6.68. The period high is $22.80.

Part of the reason is that gun inventories are building up. The company said that net product sales for the quarter ended October 31, 2007 were $70.8 million, an increase of 39.4% over the comparable quarter last year. Net income was $2.9 million, or $0.07 per fully diluted share, for the quarter ended October 31, 2007 was $87,000 higher than the comparable quarter last year.

But, the company added some poor news which was that an industry-wide inventory buildup, accentuated by lower retail traffic, caused order activity to slow beginning in October. SWHC added that several manufacturers responded with significant discounts on both long guns and handguns. This caused increased price competition in the channel and served to exacerbate already inflated inventory levels.

It may be tough for the company that crime is down. A look at US crime rates over the last few years shows that most violent crimes are dropping. While the US population rose from 285.3 million in 2001 to 299.4 million last year, violent crimes fell from 1.439 million in 2001 to 1.418 million in 2006.

A drop in criminal activity may be hurting the gun business.

Douglas A. McIntyre

Posted on: December 7, 2007 – 10:31 am in Earnings Warning,

Macrovision (MVSN) Crushed On Gemstar-TV Guide (GMST)

Macrovision (MSVN) says that it will raise $800 million as part of the financing for its buy-out of Gemstar-TV Guide (GMST).

The market does not seem to like the debt or the deal. Macrovision shares are off 25% to $19.60 and hit  a 52-week low of $18.60 earlier in the day.

The Gemstar-TV Guide (GMST) shareholders are undoubtedly enraged. Shares in that company are down 25% to $4.47. They have a 52-week high of $7.28.

It is hard to see why many of the GMST shareholders would want to sell. Rupert Murdoch’s News Corp (NSW) is in favor of the deal and owns a control block of shares.

But, before a rough third quarter, shares of Gemstar were stepping up nicely. The had traded up as much as 120% on the year.

Gemstar should walk away. They probably won’t even have to pay a break-up fee.

Douglas A. McIntyre

Posted on: December 7, 2007 – 10:13 am in Mergers and Buy Outs, , ,

National Semi, Some Ammo For Bulls & Bears Alike (NSM)

National Semiconductor (NYSE: NSM) posted revenue of $499 million versus consensus $498.4 million and reported $0.33 EPS versus consensus of $0.31.  The problem is that the February quarter end was guided down to -1% to -5% sequentially, and Wall Street was only bracing for almost a 1% drop.  This will also hit margins.

We’ve seen at least one analyst call that is staying positive after earnings.  American Technology Research’s Doug Freedman has maintained his Buy rating and $31.00 price target this morning: "We do not view a dramatic downturn for NSM as likely from here and are therefore maintaining our Buy rating given the low valuation. Our $31 price target is based on 18.5x our forward 12-month EPS (CY09) of $1.66. Our CY08 revenue (up 8.8%) estimate continues to call for a stronger than seasonal summer off of two lower than seasonal quarters to start the year."  Freedman also noted the pronounced seasonality is due to inventory control.

Last week, Goldman Sachs lowered its estimates on National Semi along with its detailed chip and major stock sector call where it lowered earnings estimates and cut price targets on so many stocks and sectors in its coverage universe.  Last month, UBS downgraded National Semi to a Neutral rating from its prior Buy rating.

It appears that JMP Securities raised its rating to an Outperform today, although we haven’t reviewed the full note.

We’ve already seen forecasts out of enough downstream buyers by now that this drop shouldn’t be a huge surprise to anyone.  Handset makers like Nokia (NYSE: NOK), and Ericsson (NASDAQ: ERIC) have already shown caution ahead, and no one is expecting anything great out of Motorola (NYSE: MOT) at this point.

National Semi’s shares closed yesterday at $23.51 and its 52-week trading range is $21.54 to $29.69.  Shares are down almost 2% pre-market at $23.06.   We generally have the bar set fairly low for companies trading in the lower third of their 52-week trading bands. 

Jon C. Ogg
December 7, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: December 7, 2007 – 9:14 am in Earnings, Semiconductor, , , ,

Top 10 Pre-Market Analyst Calls (AXP, COF, DFS, ATVI, HANS, JCP, LEN, MFE, SWHC, TGT, YGE)

These aren’t the only analyst calls we are watching, but these are the top ten that 247wallst.com is reviewing:

  • Activision (NASDAQ: ATVI) raised to Buy from Neutral at Piper Jaffray.
  • Hansen Natural (NASDAQ: HANS) started as Buy with $58 target at UBS.
  • JC Penney (NYSE: JCP) raised to Overweight from equal weight at Lehman.
  • Lennar (NYSE: LEN) downgraded to Hold from Buy at Deutsche Bank.
  • McAfee (NYSE: MFE) downgraded to Market Perform from Outperform at FBR.
  • Smith & Wesson (NASDAQ: SWHC) downgraded to Neutral at Cowen & Co, and downgraded to Underperform at Rodman & Renshaw.
  • Sunpower (NASDAQ: SPWR) raised to Buy from Hold at Jefferies.
  • Target (NYSE: TGT) downgraded to Neutral from Buy at Banc of America.
  • Yingli Green Energy (NYSE: YGE) raised to Buy from Neutral at Banc of America.
  • CREDIT CARD DOWNGRADES: Merrill Lynch downgrades American Express (NYSE: AXP), Capital One (NYSE: COF), and Discover Financial (NYSE: DFS).  Capital One (NYSE: COF) also downgraded to Underweight at Morgan Stanley.

Jon C. Ogg
December 7, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: December 7, 2007 – 8:13 am in Analyst Calls, , , , , , , , , , ,

Macrovision (MSVN) Buys Gemstar-TV Guide (GMST)

Macrovision (MSVN) is buying Gemstar-TV Guide (GMST) for $2.8 billion.

The price is a 29% premium over the 10-day price average of GMST.

Douglas A. McIntyre

Posted on: December 7, 2007 – 6:56 am in Mergers and Buy Outs, ,

Europe Markets 12/7/2007

Markets in Europe moved higher at 6.15 AM New York time.

The FTSE is up .9% to 8,542. Rio Tinto (RTP) was up 1.4% to 5660. Vodafone (VOD) was down .7% to 184.7

The DAXX is trading up .6% to 7,984. SAP (SAP) is up 1.4% to 36.07. BMW is up 1.9% to 91.05.

The CAC 40 is up .8% to 5,719. Alcatel-Lucent (ALU) is up 3% to 5.46. AXA (AXA) is up 2% to 28.5.

Data from Reuters

Douglas A. McIntyre

Posted on: December 7, 2007 – 6:17 am in International Markets, , , , ,

Big Three Cut Production Of Most Profitable Products

It is no secret that Detroit makes its biggest money on SUVs and pick-ups. That is a huge problem. The US companies are launching smaller cars as fast as they can to try to bring in the consumers who want more fuel-efficient vehicles. But, the Japanese already have these cars in dealers, and they have had them there for years.

But, even if the Big Three can launch attractive, fuel-efficient sedans and crossovers, moving away from light trucks is going to hurt. The margins on $30,000 pick-ups are much greater than they are on $20,000 four-door cars. In other words, the change in product mix will hurt the bottom line.

That means that Detroit is facing a very tough storm. Vehicle sales in the US are expected to fall well below this year’s level of 16 million as 2008 comes around. Some pessimists put the domestic sales number for next year below 15 million. The would take about $25 billion of revenue out of the US car market.

Combine a multi-billion drop in sales with worse margins on the product mix and the Big Three resurrection will die early in 2008

Douglas A. McIntyre

Posted on: December 7, 2007 – 6:08 am in Autos

JP Morgan (JPM) Chief Predicts Bank Mergers

Jamie Dimon, head of JP Morgan (JPM), predicts that there will be a large number of bank mergers, especially in the US and Germany.

Dimon may be right. It makes sense for battered financial institutions to band together and cut out redundant costs. Weak assets of divisions which are not strategic can be sold off to raise cash. Regulators would probably not block deals because they are concerned about the health of the financial system.

But, the plan for putting together big banks and perhaps investment houses has a weakness. First, history says it does not necessarily work. Citigroup (C) is one of the most "merged" companies in history. It has banking, brokerage, wealth management, and insurance pieces. Many analysts argue that the reason the big bank is in so much trouble is that it is too large and complex.

There is another reason that mergers may not take place. The Wall Street Journal pointed out today that no one knows how bad the balance sheet problems are at Countrywide Financial (CFC). And, that is after several months of concern about the company’s future. No one knows how bad the problems are at Citi affiliates SIVs. In other words, much of the trouble in the financial markets is still hiding in places where it cannot be seen.

Merging makes sense, but not when the risks of a combined entity cannot be known until after the fact.

Douglas A. McIntyre

Posted on: December 7, 2007 – 5:58 am in Mergers and Buy Outs, , ,

Short Interest For NYSE, November 30: Big Bets Against Financials, Tech

The November 30 short interest of NYSE traded stocks shows that the market is predicting a further drop in financial and tech stocks. The numbers compare to November 15, 2007.

The short interest in Countrywide (CFC) rose 18.8 million shares to 131.3 million. Washington Mutual (WM) share short moved up 17.4 million ot 92 million. Share short in Wells Fargo (WFC) rose 11.2 million to 64.8 million. Short interest in Wachovia (WB) and Bank of America (BAC) was also up sharply, as did shares short in Fannie Mae (FNM) and Freddie Mac (FRE)

In the tech sector, shares short in AMD (AMD) moved up 11.6 million to 79.8 million. Short interest in Micron (MU) rose 7 million to 65.7 million.

Largest Short Position

Company                                             Shares Short

Ford (F)                                               158.2.million

Countrywide                                         138.3 million

Washington Mutual                                92.0 million

Qwest (Q)                                              81.2 million

AMD                                                     79.8 million

Home Depot (HD)                                   66.8 million

Micron                                                   65.7 million

Wells Fargo                                           64.8 million

Best Buy (BBY)                                     60.9 million

Tenet                                                    60.0 million

GM (GM)                                              59.9 million

CVC                                                     57.6 million

Time Warner (TWX)                               57.1 million

Halliburton (HAL)                                   54.6 million

GE (GE)                                               52.7 million

Fannie Mae (FNM)                                50.6 million

Largest Increase In Short Positions

Company                                              Increase In Shares Short

Fannie Mae                                           26.6 million share increase

Mylan                                                   20.9 million

Countrywide                                          18.8 million

Washington Mutual                                17.4 million

Freddie Mac (FRE)                                 16.2 million

Qwest                                                   14.5 million

AMD                                                     11.6 million

Well Fargo                                             11.2 mllion

Largest Decreases In Short Positions

Company                                               Drop In Shares Sold Short

CVS (CVS)                                            Down 10.1 million shares

Chesapeake Energy                               Down 9.9 million

Bristol-Myers (BMY)                               Down 9.8 million

GE (GE)                                                Down 8.9 million

AT&T (T)                                                Down 8.4 million

Data from NYSE

Douglas A. McIntyre

Posted on: December 7, 2007 – 4:31 am in Short Interest, , , , , , , , , , , , , , , , , , ,

Media Digest 12/6/2007 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, the former head of UnitedHealth gave up $400 million in stock options to settle chages with the SEC and the company.

Reuters writes that the head of Rio Tinto (RTP) say a bid to takeover the company by BHP Billiton (BHP) is dead.

Reuters reports that James Murdoch will take over News Corp (NWS) operations in Europe and Asia.

Reuters reports that the head of JP Morgan (JPM) is predicting a wave of bank mergers.

Reuters reports that PC company Acer gave an up–beat assessment of its PC sales prospects.

The Wall Street Journal writes that the head of Dow Jones (DJ) and The Wall Street Journal are leaving and will be replaced by senior News Corp executives.

The Wall Street Journal said that the Big Three automakers will cut pick-up production in January, a sign of trouble in their turnaround efforts.

The Wall Street Journal says that global outsourcing has cause delays in Boeing’s (BA) 787 launch.

The Wall Street Journal writes that the Nintedo Wii shortage is to some extent due to the company’s cautious mangement.

The Wall Street Journal writes that AMD (AMD) is facing a late release of its most important new chip.

The Wall Street Journal reports that AT&T (T) believes that its Asia revenue will grow 20% next year.

The New York Times writes that several airlines are testing email and web access on their flights.

The New York Times reports that Dell (DELL) will sell computers at Best Buy (BBY) stores.

The New York Times writes that Palm (PALM) says it will miss its next quarter revenue estimates.

The FT writes that MBIA (MBI) is looking at ways to raise cash.

Barron’s writes that a Morgan Stanley analysts fells that Comcast (CMCSA) shares have hit bottom

CNN Money writes that Fannie Mae (FNM) has set a $25 per share price for its new capital raise.

Douglas A. McIntrye

Posted on: December 7, 2007 – 4:10 am in Press Digest, , , , , , , , , , , ,

Asia Markets 12/7/2007

Markets in Asia were mixed.

The Nikkei rose .5% to 15,956. Kobe Steel rose 3.7% to 364. Pioneer rose 4.6% to 1122. Sony (SNE) fell 1.5% to 5910.

The Hang Seng fell 2.4% to 28,842. China Netcom (CN) fell 5.1% to 23.35. CNOOC fell 3.6% to 13.88.

The Shanghai Composite rose 1.1% to 5,092.

Data from Reuters

Douglas A. McIntyre

Posted on: December 7, 2007 – 3:47 am in International Markets, ,