Daily Archives: December 9, 2007

Blackstone (BX) Tries To Buy Rio Tinto (RTP)

BHP Billiton (BHP) may not get to buy Rio Tinto (RTP). Blackstone (BX) may beat them too it. According to the Telegraph, Blackstone is gettng together a group which may include an investment arm of the Chinese government.

According to the paper "Blackstone is ready to go further and break the business up completely. This would mean undoing this year’s merger with aluminium producer Alcan."

Rio Tinto has a market cap of over $150 billion. Blackstone clearly thinks that it can get much more than that especially by selling the company’s iron ore business.

Maybe the buy-out business isn’t dead after all, but look for BHP to come back with a larger offer.

Douglas A. McIntyre

Posted on: December 9, 2007 – 10:05 pm in Mergers and Buy Outs, , ,

24/7 Wall St. CEO Of The Year Finalist: Alan Lafley Of Procter & Gamble (PG)

24/7 Wall St. has evaluated over 200 CEOs in order to select it CEO of the Year. Six finalists were chosen from the list. The measurements were based on company stock performance for the last two years, innovation, financial results, and the quality of the competition that each company faces in its markets. We also took into consideration whether the corporation was operating in an industry with special challenges.

Alan Lafley clearly learned the business the right way. He has been with P&G since graduating from business school in 1977. He became CEO in 2000.

At $74.12, Procter & Gamble (PG) shares are not just up 15% for the year, they are at an all-time high.

For the company’s fiscal year ending June 30, revenue hit $76.5 billion up from $68.2 billion the year before. Diluted EPS from continuing operations rose from $2.64 to $3.04. In the company’s first fiscal quarter for the current year, P&G increased sales and operating income in each of its divisions.

Managing P&G, an extremely comlex company, requires a level of detailed knowledge that often only comes from years of working within the organization. P&G has large businesses in health, beauty, and household care. The firm sells everything from razors to batteries to coffee to diapers.

P&G competes with scores of companies across almost every country in the world and does it extremely well.

Douglas A. McIntyre is the former editor-in-chief and publisher of Financial World Magazine which started the CEO of the Year Awards in 1981. He was also the president of Switchboard.

Posted on: December 9, 2007 – 7:25 pm in Corporate Governance,

24/7 Wall St. CEO Of The Year Finalist: Charles Schwab of Charles Schwab (SCHW)

24/7 Wall St. has evaluated over 200 CEOs in order to select it CEO of the Year. Six finalists were chosen from the list. The measurements were based on company stock performance for the last two years, innovation, financial results, and the quality of the competition that each company faces in its markets. We also took into consideration whether the corporation was operating in an industry with special challenges.

The brokerage business has been unkind this year, but shares in Charles Schwab (SCHW) are up almost 30%. Merrill Lynch (MER) shares are down well over 30%. Granted, the big broker is in a number of businesses that Schwab is not, but that may be why SCHW has a price to sales ratio of 5.8. Merrill’s is 1.8x.

Schwab was also clearly wise in not making a big bet on the mortgage business the way that E*Trade (EFTC) did. Schwab basically stayed away from the Sirens and stayed with its knitting.

Schwab has remained the premier company for high-end retail traders. In October, its total client assets rose 24% from the year before to $1.484 trillion and daily average trades by clients moved up 29% to 318.7 thousand. The company has also continued to do well managing corporate retirement accounts.

Before Charles Schwab returned to the CEO chair, the company had gotten itself into real trouble. Its shares fell to $8.27 in mid-2004. They now change hands at $24.55, near a five-year high. Doing that in the current financial services environment is nothing short of amazing.

Douglas A. McIntyre is the former editor-in-chief of Financial World Magazine which began the CEO of the Year Awards in 1981. He is also the former president of Switchboard.

Posted on: December 9, 2007 – 7:12 pm in Corporate Governance, , ,

24/7 Wall St. CEO Of The Year Finalist: Lloyd Blankfein Of Goldman Sachs (GS)

24/7 Wall St. has evaluated over 200 CEOs in order to select it CEO of the Year. Six finalists were chosen from the list. The measurements were based on company stock performance for the last two years, innovation, financial results, and the quality of the competition that each company faces in its markets. We also took into consideration whether the corporation was operating in an industry with special challenges.

Blankfein has only been the head of Goldman Sachs (GS) since June 2006, but it would be hard to find a more difficult time in which to lead a major financial institution. The mortgage crisis and near-collapse of private equity have done significant and, perhaps, permanent damage to some of the world’s largest investment and money center banks.

Since the beginning of the year, shares in Goldman are only up 10%. But, Wall St. has to look at that performance relative to the competition. Shares in Morgan Stanley (MS) are down over 35% during that period. Merill Lynch (MER) is off about the same amount and Citigroup (C) is down nearly 40%. Overseas, shares of Credit Suisse (CS) are off 12% and UBS (UBS) is down 16% so far this year.

Goldman was smart enough to keep its business risks spread geographically and across business lines and its bets on the mortgage markets have been modest. Goldman did have problems in its huge Global Alpha fund, but the company has been adroit at trading and proprietary investing. It has also kept its position as one of the world’s leading debt and equity underwriters and M&A advisers.

In a very bad year, Goldman was the only firm in its industry that did relatively well.

Douglas A. McIntyre is the former editor-in-chief of Financial World Magazine which began the CEO of the Year Award in 1981. He was also president of Switchboard.

Posted on: December 9, 2007 – 7:07 pm in Corporate Governance, , , , , ,

24/7 Wall St. CEO Of The Year Finalist: Steve Jobs Of Apple (AAPL)

24/7 Wall St. has evaluated over 200 CEOs in order to select it CEO of the Year. Six finalists were chose from the list. The measurements were based on company stock performance for the last two years, innovation, financial results, and the quality of the competition that each company faces in its markets. We also took into consideration whether the corporation was operating in an industry with special challenges.

If the choice of CEO of the Year were based only on results any analyst who worshiped at the altar of the obvious would pick Steve Jobs of Apple (AAPL). The consumer electronics company’s stock price is up 160% for the last two years.

In the fiscal year ending September 29, Apple had revenue of $24 billion, up from $19.3 billion the previous year. Net income was $3.5 billion, up from just under $2 billion the year before. Even more astonishing, Apple’s revenue in the 2003 fiscal year was only $6.2 billion while operating income was $57 million.

While the iPod has now been a success for almost five years, Jobs created the iPhone and resurrected the Mac during the last year. Mac unit sales were over seven million in the last fiscal. Apple has taken PC share in a market which includes HP (HPQ) and Dell (DELL). In handsets, the company is up against Nokia (NOK) and Motorola (MOT). Jobs clearly does not care what the size of his competition is.

Based on almost all analyst estimates, Apple will have record sales for Macs, iPods, and iPhones in the quarter ending December 31. The iPhone has been launched in most major countries in Europe and in the US. That leaves the rest of the world, particularly Asia., for adding to the iPhone franchise.

Jobs only big problem now may be what to do with the $15 billion in cash the company has accumulated.

Douglas A. McIntyre is the former editor-in-chief and publisher of Financial World Magazine which began the CEO of the Year Awards in 1981. He is also the former president of Switchboard.

Posted on: December 9, 2007 – 6:59 pm in Corporate Governance, , , , ,

24/7 Wall St. CEO Of The Year Finalist: Rupert Murdoch Of News Corp (NWS)

24/7 Wall St. has evaluated over 200 CEOs in order to select it CEO of the Year. Six finalists were chosen from the list. The measurements were based on company stock performance for the last two years, innovation, financial results, and the quality of the competition that each company faces in its markets. We also took into consideration whether the corporation was operating in an industry with special challenges.

Even if Rupert Murdoch had not bought social network giant MySpace for what appears to have been the absurdly low price of $580 million and had not made his audacious buy-out of Dow Jones (DJ), the head of News Corp (NWS) would have been remembered as one of the great media barons.

Shares in News Corp are flat this year, but rivals including Disney (DIS), Time Warner (TWX), and CBS (CBS) are down.

Murdoch has done an excellent job of managing a complex, global company while continuing to expand. In the September quarter, revenue moved from $5.9 billion last year to $7.1 billion in 2007. With the exception of the corporation’s small book and magazine operations, all of the company’s divisions grew. The company’s film and cable businesses did particularly well. The Fox Network has turned out to be one of News Corp’s biggest and best creations. Wall St. sometimes forgets that there were only three viable networks just a few years ago. Operating income is also up in the company’s newspaper businesses, which is highly unusual in the current climate.

Murdoch deserves extra points for guts. Most media companies are simply managing their current assets. MySpace is likely to have revenue of over $700 million this year, impressive given what Murdoch paid for it a short time ago. Smaller rival Facebook was recently valued at $15 billion.

And, Murdoch fought a long but winning battle to buy Dow Jones and may well create one of the largest business news platforms in the world by marrying it with his new Fox Business operations. It remains to be seen whether News Corp can justify the $5 billion price for Dow Jones, but very few chief executives would have even dreamed of making the acquisition.

Douglas A. McIntyre is the former editor-in-chief and publisher of Financial World Magazine which began the CEO of the Year Awards in 1981. He is also the former president of Switchboard.com

Posted on: December 9, 2007 – 6:50 pm in Corporate Governance, , , , ,

Will GE Change Its Tune On Annual Outlook? (GE)

General Electric has its upcoming investor ANNUAL OUTLOOK meeting on Tuesday, December 11, 2007, and this will be an event to watch.  The meeting will begin at 3:00 PM EST and we’ll get to see some of its forecasting ahead.  Last Monday, First Call’s consensus for 2008 was pegged at $2.50. It now appears that First Call has 2008 consensus set at $2.49.

There were some key analyst calls this last week ahead of Tuesday’s event, although these are very short summaries and other reports may have been issued:

  • Last Monday Citigroup maintained its Buy rating but actually lowered some of the 2008 earnings per share targets down to $2.45 from $2.50 and took its price target down to $45.00 from $48.00.
  • On Wednesday, Deutsche Bank also maintained its buy rating, but slightly lowered estimates and took its $47.00 price target down to $44.00.
  • Lehman reiterated its "Overweight" rating on Thursday but took its target down from $48.00 to $45.00.

The good news is that the bar has been lowered.  The bad news is that the negative sentiment has crept into the stock as General Electric won’t be entirely immune from what is almost a certainly weak US consumer in 2008 despite strength in international orders, airline engines, power stations and other areas.   GE’s stock chart is also under pressure now that it broke under and was unable to stay above its 200 day moving average ($37.79) for a second time.  That adjusting level may act as some larger resistance the second time around.  Shares were challenging $42.00 just two-months ago.

We are still impressed that the company thinks of itself as a growth company with plans for 20% return on capital.  That isn’t a mandatory target every single quarter nor likely is it a firm commitment every year, but it’s still impressive for a company worth $376 Billion in market cap.

So the bar has now been lowered.  We’d also expect more of the same from analysts lowering price targets or earnings per share targets on Monday and Tuesday ahead of the event.  They don’t always act in unison, but the pack mentality seems more frequent than coincidental.

Jon C. Ogg
December 9, 2007

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

Posted on: December 9, 2007 – 2:40 pm in Conglomerates, , ,

24/7 Wall St. Apple (AAPL) Article At MSN Money

24/7 Wall St. readers can see our latest take on Apple (AAPL) at the "Top Stocks" section of MSN Money. 

A year ago, Apple was an iPod company that happened to sell some Macs. But, now Wall Street is looking to the Mac as the core driver   continued here…..

Posted on: December 9, 2007 – 11:38 am in Consumer Electronics

Orascome, Big Middle East Cellular Povider, Goes On The Block

The large Middle East mobile provider Orascom, has been put on the market. The company has 65 million customers which would make it as large as any provider in the US.

Speculation in The Times of London is that Deutsche Telekom (DT) and Vodafone (VOD) may be bidders. But, now that the US market is maturing, no one should be terribly surprised if AT&T (T) or Verizon (VZ) make a bid.

Douglas A. McIntyre

Posted on: December 9, 2007 – 6:46 am in Uncategorized, , , ,

Renault Beats Out GM (GM) In Russia

GM (GM) was hoping to take a controlling interest in large Russian car maker Avtovaz to expand its footprint in the fast-growing market. Many analysts believe that Russian will pass all other countries in Europe to become the No.1 vehicle market in that reason.

But, the US car company’s plans were dashed when Renault picked up 25% of Avtovaz, according to The Times of London. Renault paid $1.25 billion for its piece.

Douglas A. McIntyre

Posted on: December 9, 2007 – 6:40 am in Earnings,