Daily Archives: December 13, 2007

Citigroup (C) Bails Out Its SIVs

Citigroup (C) announced that it has committed to provide a support facility that will resolve uncertainties regarding senior debt repayment currently facing the Citi-advised Structured Investment Vehicles (“SIVs”).

Citi will consolidate the SIVs’ assets and liabilities onto its balance sheet under applicable accounting rules.

Given the high credit quality of the SIV assets, Citi’s credit exposure under its commitment is substantially limited. Approximately 54% of the SIV assets are rated triple-A and 43% double-A by Moody’s, with no direct exposure to sub-prime assets and immaterial indirect sub-prime exposure of $51 million

Taking into account this commitment, Citi still expects to return to its targeted capital ratios by the end of the second quarter of 2008

Not the best news the new management could have released just after moving into the corner offices.

Douglas A. McIntyre

Posted on: December 13, 2007 – 7:53 pm in Banking,

November Xbox 360, PS3, And Wii Sales Go Wild

Sales of video game consoles in the US during November went through the roof. Sales of Sony’s (SNE) PS3 rose to 466,000 units for the month up from 121,000 units in October. Price cuts on the product almost certainly helped sales.

Microsoft (MSFT) sold 777,000 Xbox 360 consoles, up from 366,000 the month before, according to NPD Research.

The Nintendo Wii continued to lead the pack, selling 981,000 units, up from 519,000 in October.

According to MarketWatch "sales of game software in North America soared 62% to $1.3 billion for the month."

Data on online sales of holiday items indicates that game console sales bought on the internet may be running double what they were last year.

Posted on: December 13, 2007 – 7:48 pm in Consumer Electronics, ,

Intellon Prices IPO (ITLN)

Intellon Corp. (NASDAQ:ITLN) has priced its initial public offering of 7.5 million shares of its common stock at $6.00 per share.  Intellon has granted the underwriters a 30-day option to purchase up to 1,125,000 to cover over-allotments.

This one has been in the pending file since mid-July.  The shares are scheduled to begin trading Friday on NASDAQ under the trading symbol “ITLN.”  Deutsche Bank Securities Inc. was the book-running manager; and co-managers are listed as Jefferies & Company, Piper Jaffray & Co. and Oppenheimer & Co.  Originally Goldman Sachs was in the deal as a joint book-runner but they are not listed in the underwriting. All of the shares are being offered by Intellon.

Intellon is a entirely-fabless semiconductor company that designs and sells integrated circuits (ICs) for high-speed communications over existing electrical wiring to enable home connectivity in sharing and moving of content among personal computers and other consumer electronics products.  These IC’s allow consumers to share downloaded video content from a PC with a television in another room. Its largest market is the digital home, or a home enabled with high-speed connectivity among devices such as PC’s and consumer electronics products.  It also sells ICs for use in powerline communications applications in electric utility and other commercial markets to maximize power efficiency.

Jon C. Ogg
December 13, 2007

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

Posted on: December 13, 2007 – 7:39 pm in IPOs, Semiconductor, , ,

Cramer’s Latin Internet Call (MELI, BIDU, GOOG)

On tonight’s MAD MONEY on CNBC, Jim Cramer was discussing an opportunity he sees in Argentina-based Mercadolibre, Inc. (NASDAQ:MELI).  Cramer likes the model.  It hosts an online trading platform in Latin America that facilitates e-commerce and related services.  It permits businesses and individuals to list items and conduct their sales and purchases online in either a fixed-price or auction-based format.  It also provides MercadoPago for online payments to be paid and sent.

Cramer of course used the Google (NASDAQ:GOOG) and Baidu.com (NASDAQ:BIDU) analogy to derive a value, but said it’s more similar to Baidu.  He really digs its Latin America focus and he noted that this one could go from around $55.00 to somewhere around $85.00 down the road.

Even more interestingly, Cramer did something different than his normal caveats about waiting for a sell-off or a pullback.  He noted something to the tune of, "You might get it cheaper if you wait, but I wouldn’t wait too long on this one."

Mercadolibre came public at the end of Summer and every time this has pulled back it has just been a buying opportunity.   Its shares closed up 5.5% today at $53.63 and that was less than 1% under its prior 52-week highs.  Shares rose over 5% in after-hours to almost $57.00.

Jon C. Ogg
December 13, 2007

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

Posted on: December 13, 2007 – 7:03 pm in ADR, Cramer, Internet, , , , ,

Qwest’s New Dividend Above Bells (Q, T, VZ)

Qwest Communications (NYSE: Q) is seeing shares surge in after-hours trading.  The telecom provider has announced that its board of directors has declared a quarterly dividend.  The dividend is being set at $0.08 per share, and based on a $6.96 close it would be a yield of 4.5% annually.

But here is the important issue.  The board of directors expects to pay a quarterly dividend going forward.  It hasn’t issued a dividend since 2001.  The company also said it expects to complete 70% of its $2 Billion share repurchase plan by the end of 2007.

The company is hosting an analyst call this coming Monday.  If you think dividends don’t matter anymore, guess again.  Shares are up 7% at $7.50 in after-hours trading.  There are many mutual funds that have not been able to invest in Qwest (hey, that rhymes) because it has not been a dividend payer like the rest of the Bells.  ON a trailing basis, AT&T (NYSE:T) Yields roughly 4.1% on its dividend and Verizon (NYSE:VZ) pays roughly a 3.9% yield.

So if you take the after-hours pop to $7.50 into consideration, you still have about a 4.25% yield.  While Qwest did not specifically state that it was going to KEEP PAYING $0.08, the press release says, "It is the expectation of the board of directors to pay a quarterly dividend going forward."  If companies issue a dividend they rarely cut it when it is new.  Otherwise this would be a special dividend.

It sounds like a certain Denver-based telecom just opened itself to start being owned by many more fund managers.

Qwest is regularly screened for our "10 Stocks Under $10" weekly newsletter.

Jon C. Ogg
December 13, 2007

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

Posted on: December 13, 2007 – 5:27 pm in Dividend, Telecom, , ,

Apple (AAPL) Working on iPhone-Microsoft Exchange Fix

From Silicon Alley Insider

As we’ve described in the anecdotes below, the Apple iPhone is gradually infiltrating the lucrative business market. The biggest barriers to widespread corporate adoption remain:   continued…

Posted on: December 13, 2007 – 4:29 pm in Uncategorized

The 52-Week Low Club (SCA)(CNXT)(ODP)(AMD)

Security Capital Assurance (SCA) Bond insurance company does not have enough capital to keep strong bond rating. Drops to $3.56 from 52-week high of $34.52.

CSK Auto (CAO) Company gets brokerage downgrade. Falls to $4.30 from 52-week high of $19.14.

Office Depot (ODP) Still falling after warning on sales. Drops to $14.11 from 52-week high of $41.06.

Neurocrine Biosciences (NBIX) FDA rejects company’s sleep drug. Shares off to $5.01 from 52-week high of $14.88.

NII Hldgs (NIHD) Company is participating in a December 18 third-generation license auction in Brazil. No other news. Falls to $43.37 from 52-week high of $90.43.

Conexant (CNXT) No news, but down to $.95 from 52-week high of $2.21.

AMD (AMD) Bad reaction to analyst day presentations. Falls to $8.42 from 52-week high of $23.

Douglas A. McIntyre

Posted on: December 13, 2007 – 4:01 pm in HI/LOW, , , , , , ,

Dendreon A Double Already? (DNDN)

If you read 24/WallSt.com’s "Ten Stocks That Could Double in 2008" from us, you saw that Dendreon (NASDAQ:DNDN) is on that list.  We weren’t expecting a 22% pop in shares this fast.  We’d like to take credit for that pop, although the real credit belongs to CNBC’s Mike Huckman who reported that Congressmen are probing the recent failed approval process in the FDA over the review and over conflicts of interest.

We have been looking for something like this to come up, although the day-after time period was not what we were thinking.

Dendreon regularly is screened for our weekly "10 Stocks Under $10" newsletter.  Shares are now up 25% at $7.03 on almost 20 million shares and options trading activity has gone through the roof today.

Jon C. Ogg
December 13, 2007

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

Posted on: December 13, 2007 – 3:56 pm in Biotech, , ,

Recession Central, Greenspan Speaks From The Crypt…So Does Everyone Else

Almost every single day there are reports of ‘greater and greater chances that the US is heading into a recession in 2008."  We aren’t trying to stand up as a fair weather forecaster, but interestingly enough it is amazing how all the over-reporting might make it happen even…. even if we would have escaped.

Here is our own list DEFENSIVE STOCKS where investors currently try to hide if they have to keep some money in stocks.

Jon C. Ogg
December 13, 2007

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

Posted on: December 13, 2007 – 3:24 pm in Buffett, Economy, Media, , , ,

Conexant (CNXT) Takes Big Slide

One of Wall St.’s most widely traded stocks, Conexant (CNXT) is off almost 7% to $.98, breaking below $1 for the first time this year.

Volume is an unusually heavy 17.5 million shares.

Douglas A. McIntyre

Posted on: December 13, 2007 – 3:20 pm in Technology Companies,

JetBlue (JBLU) May Get Investment From Lufthansa

According to a report in The New York Times, German airline giant Lufthansa will buy 20% of US discount ariline JetBlue (JBLU).

JetBlue shares are up almost 14% on the news, trading at $7.12, still well below their 52-week high of $17.02.

Douglas A. McIntyre

Posted on: December 13, 2007 – 2:34 pm in Airlines,

AMD Tries Being Humble, But Credibility Still In Doubt (AMD, INTC, NVDA)

Advanced Micro Devices (NYSE:AMD) shares are not trading well despite its analyst meeting today.  The number two processor maker said they expect to be break-even in Q2 2008 and will show operating profits in Q3 2008.  There is just one small problem: this is hard to believe that the sales will ramp up enough and that the cost cuts or cap-ex will come in enough.

The CFO Robert Rivet said AMD expects sales to grow faster than the overall market in 2008, but no formal numbers were offered.  Same for margins.  What is interesting is that even with the delays the company reaffirmed its fourth quarter guidance.  Maybe they set the bar very low last time so they could at least meet targets.  An estimated $1.1 Billion cap-ex seems low for 2008, and that number may be too low for a company that is behind on its chips.

COO Dirk Meyer noted that the problems were related to design specifics that were straightforward to fix rather than manufacturing.  Our sources have noted the same that it isn’t the manufacturing, but we have been told from more than one familiar with the situation that an easily fix for the design teams just isn’t the case.  Either the company is right or our sources are, but based on the steady stock selling we are sticking with the opinion of our sources.

The one bright spot may be in graphics, and if the claims live up to snuff it can give NVIDIA (NASDAQ:NVDA) a run for its money.  Shares of NVIDIA are down 4% around $34.00 today (52-week range $18.69 to $39.67).

The Barcelona chip delay to Q1, although we are not necessarily trusting on this for any major production.  So this sounds like for the super-high performance quad core chips that Intel will get to keep its lead.  Intel is down about 1.2% today at $26.95, roughly in-line with the drop in the NASDAQ.

As far as what some of our cadre thinks:

  • A person who regularly trades Intel and AMD stocks just sent me the best quote that would sum up this analyst meeting: "So, perhaps this was a Bullish meeting after all… but for Intel, not AMD."
  • Another source did note that the company was at least more humble in this meeting and hardly mentioned Intel at all, although the ‘reiterated guidance’ may be hard to believe.

Maybe Mr. Ruiz doesn’t agree with the opinion of 24/7 Wall St. synopsis.  After all we are skeptical and still have more questions from the company.  Ruiz was after all one of our 10 CEO’s TO LEAVE IN 2008.

We just recently noted how AMD could actually see its stock double in our 10 STOCKS THAT COULD DOUBLE IN 2008.  But that is still by far more of an IF rather than a given.

Shares of AMD had been down almost 6% about 20 or 30 minutes ago, but now shares sit down 3% at $8.70.  Unfortunately that is still a new 52-week low close if this holds.

Jon C. Ogg
December 13, 2007

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

Posted on: December 13, 2007 – 1:52 pm in Semiconductor, , ,

Could Citigroup (C) Fall To $15?

From mid-1998 to later that year, Citigroup (C) fell from $32 to just above $13. The stock moved from almost $4.50 in February of 1987 to $1.40 in October 1990. The markets hit periods of financial turmoil during both of those times. Looking back to the Latin American loan crisis in the 1970s, Citi almost went under.

In other words, even shares in a financial institution the size of Citi can loss two-thirds or perhaps three-quarers of their value. The shares have fallen from $57 less that a year ago to about $30 now.

David Hendler of CreditSights recently wrote that he still has grave concerns about Citi’s $46 billion in CDO exposure. Hendler says it could take five years for Citi to recover from its current wounded condition and investors may not want to wait. But, if the bank is not bought or merged, the only way for shareholders to exercise their loss of patience is to sell.

The economy has not dodged a recession, at least not yet. That means that consumer credit could follow mortgages into a crater. Citi has enough business in it consumer banking operation for that to be more than troublesome.

The UBS (UBS) subprime loan hit of $10 billion last week is a sign that other huge banks like Citi may have larger than expected write-downs at the end of the fourth quarter. Then Citigroup will have to face cautious auditors. Citi has spreadsheets and figures on why it has valued illiquid assets the way it has. But, under a review, those pools of capital may be viewed differently.

The idea that Citi would have to restate earnings for part of the second half of 2007 is not out for the question. Not at all.

The market may be learning a lesson now, espcially about money center banks. Wachovia (WB) and Bank of American (BAC) both recently disclosed that the fourth quarter will be worse than Wall St. expected. Citi is not immune.

Could Citi go to $15? Certainly. At that point, it may be acquired, or, as has happened before in the company’s history, the shares may simply recover.

Douglas A. McIntyre

Posted on: December 13, 2007 – 11:39 am in Banking, , ,

Blackstone Goes Vulture in Mortgages & Loans (BX, NLY, CIM)

The Blackstone Group (NYSE:BX) this morning announced that it has closed upon the Blackstone Credit Liquidity Partners L.P. and has secured capital commitments of more than $1.3 Billion.

If you look at the news headlines about banks, mortgages, lenders, consumer credit and more, the you will realize this is a vulture fund ready to make money off of the disconnect and illiquidity that is currently present in the debt markets. In addition to this new Credit Liquidity fund, Blackstone manages 11CDOs and two private investment partnerships in its corporate debtgroup and all have aggregate capital commitments of over $11 Billion.  Here is the description for the new fund:

  • The fund was created to capitalize on the recent dislocations in the credit markets by investing in a broad range of debt and debt-related securities and instruments including bank debt, publicly traded debt securities, bridge financings, securities issued by CDOs, and other debt instruments, all on a global basis.

It takes guts to do this in today’s markets.  Right now the economy is still talking about "percentage chance of a recession" and we’ll know how this whole mess turns out in 2008 and 2009.  There are obviously going to be more problems coming in the mortgage and consumer lending markets because these are never "one and done" events.  But in time we’ll also probably see that the financial markets didn’t just throw out the baby with the bathwater.  They may have thrown mommy and all of baby’s cousins too.

Before you think this is crazy, Blackstone had announced plans to launch this before.  Blackstone, despite all of its criticism earlier in the year does at least have a history of living up to its commitments more than other private equity shops who have walked away from so many deals of late.

There is another vulture REIT that was launched as an IPO last month by the name of Chimera Investment (NYSE:CIM).  Chimera is backed by Annaly Capital Management (NYSE:NLY), and they are one of the few spots that is actually immune to today’s mortgage malaise.  If Blackstone and Annaly can find some value out there by stepping down a rung or two, maybe the market can too.

many firms try to avoid the term "vulture fund" because of the negative perception.  But regardless of what issuers call these, the vultures are circling.  And that’s a good thing.   

Jon C. Ogg
December 13, 2007

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

Posted on: December 13, 2007 – 10:09 am in Private Equity, , ,

Alternative Energy Stocks Get Favorable Research (AMSC, CLNE, ESLR, FSLR, ITRI, SPWR)

There were several different analyst calls today in the alternative energy sector.  There is new buy coverage out of UBS in some of the more active solar stocks.

Alternative Energy Analyst Calls:
American Superconductor (AMSC) started as Buy at Deutsche Bank.
Clean Energy Fuels (CLNE) started as Strong Buy at Broadpoint Capital.
Evergreen Solar (ESLR) started as Buy with a $20 target at UBS.
First Solar (FSLR) started as BUY with a $350 target at UBS.
Itron (ITRI) started as Buy at Deutsche Bank.
Sunpower (SPWR) started as Buy with a $144 target at UBS.
Jon C. Ogg
December 13, 2007

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

Posted on: December 13, 2007 – 9:36 am in Alternative Energy, Analyst Calls, , , , , ,

Goldman Sachs Changes Exchange Call on Conviction Buy List (ICE, CME)

In a coverage swap this morning, Goldman Sachs has made a change to its closely followed CONVICTION BUY LIST.  Goldman is adding InterContinental Exchange, Inc. (NYSE:ICE) and removing the Chicago Mercantile Exchange (NYSE:CME).

The ICE target has been set at $210 over the next 12-months.  Goldman is also maintaining its official buy rating on CME.  This change appears based upon valuation and relative performance since teh CME is noted as being up 26% since being added on June 14, 2007, while the S&P 500 is down about 2%.

CME shares are down almost 1% so far in pre-market trading.  ICE shares are also down about 0.4% in pre-market trading.

Jon C. Ogg
December 13, 2007

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

Posted on: December 13, 2007 – 9:21 am in Analyst Calls, Exchange, ,

How Long Until Producer Prices Drop To Consumer Prices? (TLT)

This morning we saw the release of the Producer Price index, or wholesale inflation.  Inflation is the key word today.  The headline PPI number for November came in at +3.2%.  The core-PPI after you strip out food and energy (and whatever else is volatile) was up only +0.4%.  Both were much higher than the approximate 1.6% headline estimate and the +0.2% core estimate.

But there is a real problem here.  The core year over year headline PPI is +7.2% and the core year over year change is +2.2%.  Energy prices were up 14.1%, ouch.

This number seemed like the highest I could recall and there is a reason.  This looks like biggest gain in over 30 years.  Since the late 1980’s I have always seen the rule that producers have a hard time passing price gains down to consumers, but when you see numbers like this you can’t expect that to stay the case forever.

Imagine how high these numbers would be on the core rate if the Labor Department told the truth and if their computers were accurate.

The 10-Year Treasury Note closed out with a 4.08% yield yesterday.  The yield this morning is 4.14%.  The iShares Lehman 20+ Year Treasury ETF (NYSE:TLT) is also indicated slightly lower to mirror lower treasury prices and higher yields, although it hasn’t traded yet.

Jon C. Ogg
December 13, 2007

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

Posted on: December 13, 2007 – 9:00 am in Economy, ,

Nintendo Wii Is What Online Shoppers Want

According to Hitwise, online shoppers can’t get enough of the Nintendo Wii. The research firms writes "U.S. searches for the Wii have increased 274 percent this past week compared to the previous week." Nintendo DS, Microsoft (MSFT) Xbox 360 and Sony PSP also did well.

But, no sign of the Sony (SNE) PS3. Odd, the company said sales were improving.

Top U.S. Product Search Terms Driving Traffic to Shopping and Classifieds Category by Product Type for week ending Dec. 8, 2007

Rank

Overall

Electronics

Toys

Luxury Items*

1

nintendo wii

Wii

Barbie

ugg boots

2

uggs

Digital picture frame

Build A Bear

uggs

3

ugg boots

Nintendo DS

American Girl

coach purses

4

ipod

Xbox 360

Legos

coach handbags

5

nintendo ds

Cell phones

Bratz

coach bags

6

wii console

Sony PSP

Airsoft Guns

coach purse

7

ugg

iPod

Leapster

true religion jeans

8

xbox 360

mp3 player

Thomas The Tank Engines

swarovski crystal

9

ipod nano

digital cameras

Hot Wheelz

dvf dresses

10

psp

guitar hero

Transformers

juicy couture jewelry

Note – data based on search terms sending traffic to the Shopping & Classifieds category for the one week period ending Dec. 8. 2007.

* – data based on custom category of 65 luxury retail websites.

Source: Hitwise

Douglas A. McIntyre

Posted on: December 13, 2007 – 8:39 am in Retail

Savient’s New Gout Treatment Hits Targets (SVNT)

Savient Pharmaceuticals Inc. (NASDAQ: SVNT) is seeing its shares surging in pre-market trading.  The company showed statistically significant positive results for the Puricase Phase III study in treatment-failure of gout patients. Puricase’s 8mg dosage administered by a two-hour intravenous infusion every two weeks or every four weeks met Savient’s primary efficacy endpoint.

Savient also said it plans to file for approval with the FDA in 2008 based on the positive results from these Phase III trials.  If you will recall, this was Jim Cramer’s #1 SPECULATIVE STOCK FOR 2007. 

Shares closed yesterday at $14.46, and the 52-week trading range had been $10.58 to $15.75.  It now looks like it is trading at a new all-time high of $20.95 in pre-market activity.

Jon C. Ogg
December 13, 2007

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

Posted on: December 13, 2007 – 8:38 am in Biotech, , ,

Lehman Beats on Mixed Bag (LEH)

Lehman Brothers (NYSE: LEH) is posting net income of $886 million.  On a earnings per share basis it posted $1.54 EPS versus $1.42 EPS estimates and revenues were $4.4 versus $4.25 Billion estimates.  What we noted yesterday was that Wall Street is going to look at write-downs and see what the commentary is on their future CDO and leveraged debt instrument exposure.  After that, comes the determination of whether or not it is believable or if it is fiction.

Chairman & CEO Richard S. Fuld, Jr. said, "Despite what continues to be a difficult operating environment, the Firm’s results for the quarter highlight our ability to perform across market cycles and deliver value to our shareholders. Our global franchise and brand have never been stronger, and our record results for the year reflect the continued diversified growth of our businesses. As always, our people remain committed to managing risk and providing the best solutions to our clients."

The results are lower year over year and of course the fixed income is to blame. Lehman’s Fixed Income Capital Markets segment reported revenues of $860 million, down 60% from $2.1 billion in the fourth quarter of 2006, due to the very challenging markets experienced during the period.  Fixed Income Capital Markets recorded negative valuation adjustments on trading assets by approximately $830 million after hedges and offsets.

As of November 30, Lehman Brothers’ total stockholders’ equity was $22.5 Billion, and total long-term capital was approximately $145.7 Billion. Lehman’s stated book value per common share was $39.45.

Shares initially traded up by 1% but then fell almost 3%.  It appears shares are down less than 1% now at $61.25 in pre-market trading.  It looks like we are going to have to wait for the conference call to see the true CDO and leveraged debt exposure.

Jon C. Ogg
December 13, 2007

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

Posted on: December 13, 2007 – 8:23 am in Brokerage Firms, Earnings, Financial Stocks,