Daily Archives: December 14, 2007

The 52-Week Low Club (FNSR)(CNXT)

CDC Corp (CHINA) Ugly earnings. Falls to $4.15 from 52-week high of $11.45.

Finisar ((FNSR) No recent news. Fiber optic equipment maker falls to $1.38 from 52-week high of $4.21.

Conexant (CNXT) Second day of sell-off. Down to $.92 from 52-week high of $2.20

Retail Ventures (RVI) Bad quarter. Sells off to $4.15 from 52-week high of $23.30.

Quiksilver (ZQK) Apparel company drops outlook. Drops to $8.87 from 52-week high of $16.08.

Black & Decker (BDK) Housing hurts financial results. Down to $71.95 from 52-week high of $97.01.

Marriott (MAR) Travel stocks continue to sell off. Down to $31.34 from 52-week high of $52.

Starwood Hotels (HOT) Ditto. Weekly hotel room revenue numbers weak. Drops to $46.22 from 52-week high of $75.45.

Douglas A. McIntyre

Posted on: December 14, 2007 – 4:54 pm in HI/LOW, , , , , , , ,

When Cold Weather Can’t Even Save Zumiez (ZUMZ)

After perusing the 52-week lows mid-day there was one key standout as the last name on the list: Zumiez (NASDSAQ:ZUMZ). 

Recently this posted a disappointing sales growth of 5.6% on same-store-sales.  Analysts were looking for an 8% gain on average, and this was well under the 12% growth seen in November 2006.  Zumiez isn’t ONLY a winter gear apparel company since it sells apparel and skating equipment and more.  But it is thought of by many as a winter sport equipment and apparel company.  The cold weather isn’t helping as it is hitting new 52-week lows heading into Christmas.  Maybe a recession is even worse for snowboarders than it is for home sales.

The stock performance has now been bad enough that it had two different class action lawsuits filed against it.  With shares down 5.6% at $22.71, its 52-week trading range before today was $23.78 to $53.99.  This was over $50.00 briefly at an all-time high just at the beginning of October.

It isn’t a super expensive stock based upon the easy metrics with consensus estimates at roughly 24-times JAN-2008 EPS targets and around 19-times JAN-2009 EPS targets.  Maybe these estimates are coming way down and the multiple only sounds cheap today but won’t be cheap tomorrow.

One of these two scenarios comes to mind: you have to wonder if this is just gravitating toward a market multiple, or if the company has gone from shinola to merely a mediocre store overnight.  There’s a third possibility too.  Maybe it’s just a grossly oversold stock.

Jon C. Ogg
December 14, 2007

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

Posted on: December 14, 2007 – 2:17 pm in Apparel, HI/LOW,

Amazon (AMZN) Valuation And The Great E-Commerce Debate

The online e-commerce business is booming this year. The total value of goods bought online is up 19% for the period from November 1 through December 11 to $20.49 billion. This past Monday total sales hit $880 million for the day, up 33% over last year.

The head of online research firm comScore said online holiday spending was on track to hit the firm’s $29.5 billion forecast.

That is one side of the story. The other is presented by Bloomberg: "Online sales in November and December may rise 20 percent, a record low for the industry, and slower than the 26 percent pace of a year earlier." In other words it is nice that online spending is up, but it has slowed enough to create real concern.

With two sides to the debate, it would be good to have a proxy. The largest e-commerce website is Amazon (AMZN). It had 57.6 million unique visitors in October. That makes it almost twice the size of Wal-Mart.com (WMT).

Over the last month, Amazon shares are up 17%. The Nasdaq is flat for that period.  Wal-Mart’s shares up up about 5% which probably reflects concerns about store traffic for the holiday season. Rival Target (TGT) is down 7% for the period.

But, if e-commerce is sick, Amazon shareholders are fools.

Douglas A. McIntyre

Posted on: December 14, 2007 – 2:04 pm in Internet, , ,

Nintendo Executives Follow 24/7 Wall St. (NTDOY, MSFT, SNE, GME) (7974.JP)

Just one week ago 24/7 Wall St. suggested that Nintendo (OTC:NTDOY) might try a Hail Mary Pass and offer a voucher with a guarantee if they can ramp more from manufacturing or if it can outsource more capacity.  The company launched a deal via GameStop (NYSE:GME) today for "rain-checks" so that if you pay the full console price that you can get your Wii by the end of January.  Hmmmmm, sounds awfully familiar….. 

If you look at how strong the data is you’d wonder how many Wii systems Nintendo could have sold if it actually had them in stock. The NPD data for the latest release shows the following console sales for last month:

  • Nintendo Wii at 981,000 units;
  • Microsoft Xbox 770,000 units;
  • Sony PS3 440,000.

We noted how American consumers are impatient, but this might just satiate at least some of the demands.  This is actually a pretty good number for Microsoft (NASDAQ:MSFT) but shows that Sony’s (NYSE:SNE) PS3 is a dud and still considerably underperforming.

Jon C. Ogg
December 14, 2007

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

Posted on: December 14, 2007 – 1:14 pm in Video Games, , , , , , , ,

A New Goldman Sachs Index? You Bet Your Life (GS)

Goldman Sachs Group, Inc. (NYSE: GS) has launched the first index that will allow the market to measure, manage, and trade exposure to longevity and mortality risks in a standardized, transparent, and real-time manner. 

Longevity and mortality are the risks that realized lifespan differs from expected lifespan, creating an economic consequence, often a price change in an asset or liability.  Holders of mortality risk — typically institutions such as insurance carriers and reinsurers — are economically exposed to a decrease in lifespan (i.e. if you die 4 years after you sign up for a $200,000.00 life insurance policy), while holders of longevity risks (i.e. if you live to 100 instead of 78 and on a pension that an employer must pay)– pension funds, annuity writers, the social security trust fund or life settlement investors — are exposed to an increase.

QxX.LS, the first in an expected series of indices, will be a representative sample of the US SENIOR INSURED population over the age of 65. The initial index will reference a pool of 46,290 de-identified lives and is based on a population designed to address risks to which major market participants are exposed and is independently tracked monthly, providing real-time publication of mortality information.

Published index rules and trading calculators are available on the QxX website at http://www.qxx-index.com, ensuring observability and transparency. Hedge funds, banks and asset managers with existing positions in the cash longevity market (pensions, viatical settlements, defined benefits, etc), or those with an interest in gaining synthetic exposure to this uncorrelated risk class, will be able to use the index to either hedge existing exposure or to initiate investments.

If you have ever heard of viatical settlements or if you know someone who is over 80 and healthy still clipping a pension on top of social security, then you’ll understand that this may actually be the first of many such measurements.  Prior to that, an actuarial had to use historical data that isn’t always complete. 

This may sound heartless but it’s a great start for the long-term strength of some of these financial institutions.  Should you expect more of these index variations?  You bet your life.

Jon C. Ogg
December 14, 2007

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

Posted on: December 14, 2007 – 12:29 pm in Index, ,

Did BusinessWeek Lose $20 Million In 2007?

According to Keith Kelly of The New York Post, BusinessWeek magazine will lose $20 million this year on an ad page drop of 17%.

It is stunning because the industry has believed that business magazines and their websites get higher CPMs from advertisers than almost any other print medium. BusinessWeek.com should also be a large source of revenue.

But, the analysis would indicate that BusinessWeek, which is owned by McGraw-Hill (MHP) is worse off than the typical newspaper chain. McGraw-Hill shares trade at $45.32. near their 52-week low and down from their one-year high of $72.50

Douglas A. McIntyre

Posted on: December 14, 2007 – 11:40 am in Old Media,

Microsoft’s VMWare Killer is Toothless, VMW Safe–Citi

From Silicon Alley Insider

Microsoft (MSFT) has been threatening to mothball the stock-market moonrocket called VMware (VMW) with the launch of its own "virtualization" product Hyper-V. The Redmond team rushed Hyper-V into beta and recently demo-ed it for Citi analyst Brent Thill in San Francisco.

Microsoft is so eager to disrupt the VMware growth-train, Thill says, that it will likely release Hyper-V before the targeted launch date (about 8 months away).  continued here….

Posted on: December 14, 2007 – 11:29 am in Uncategorized

Does OPEC See A Recession?

The people at OPEC are funny. They see no reason to cut oil prices. Their analysis is that global economic growth is slowing which will cut demand for crude. So, why drop prices?

According to Reuters "OPEC, in its December Monthly Oil Market Report, estimated world economies will grow by 4.8 percent next year, down from 5.2 percent in 2007, and said there were "considerable downside risks" to the outlook."

It is the kind of tortured logic that the cartel can use when it has the oil consuming nations over a barrel. But, it is only partially true.

There may be a slowing of oil consumption in the US and Europe, but it is almost certain that China will continue to use up crude at an alarming rate as it does what it can to keep growth at a 10% level. The government there will continue to underwrite oil costs so that gas and diesel will stay cheap. In other words, businesses and consumers in China will not feel the pinch of higher oil costs. Normal supply and demand metrics will not apply there.

And, there is amble evidence that big oil producers like Saudi Arabia and Mexico are using more of the oil they produce because of growth in their own countries. Rising car and truck ownership married with big build-outs in infrastructure are already eating into the portion of production that they export as opposed to what they use at home.

There may be a recession, but it will not cut demand for crude. Rather, the demand for crude will be part of the cause.

Douglas A. McIntyre

Posted on: December 14, 2007 – 10:18 am in Oil & Gas

Palm (PALM) To Cut 10% Of Staff

According to the AP, Palm (PALM) will cut 10% of its workforce, or about 100 people

The company has been troubled by disappointing earnings and slow release of its new smartphone. The board has brought in two former Apple (AAPL) executives to help turn around the company, but their efforts may not bear fruit until the second half of 2008, if they do at all.

Shares of the company have dropped from a 52-week high of $19.50 to $5.33 and are up slightly on the news.

Douglas A. McIntyre

Posted on: December 14, 2007 – 9:19 am in Consumer Electronics, ,

Icahn May Take Another Run At Motorola (MOT)

Carl Icahn may not be done with pushing the Motorola (MOT) board to work on increasing the company’s share price.

Icahn told the FT “there is value” in Motorola, and “if that value doesn’t manifest itself I, as an activist, would think very seriously about coming back”.

It sounds like Motorola can count on it.

Douglas A. McIntyre

Posted on: December 14, 2007 – 8:42 am in Wireless,

Intel’s (INTC) Chip Revenue Growing

Intel’s (INTC) chip revenue is growing faster than the overall semiconductor market. Gartner says that the lare company’s share of the global market will be 12.2% this year compared to 11.6% last year.

Reuters reports that "the market is expected to grow 2.9 percent from last year to $270.3 billion."

The survey shows that Texas Instrumets (TXN) lost the No.2 position to Toshiba.

Douglas A. McIntyre

Posted on: December 14, 2007 – 8:27 am in Semiconductor, ,

Top 10 Pre-Market Analyst Calls (AFFX, C, DIS, DSCM, GSIC, JBLU, PNRA, UN, UNTD, DVN, KWK, NFX, EOG, FTO)

These are not the only important analyst calls out there, but these are the top analyst calls that 24/7 Wall St. is focusing on:

  • Affymetric (AFFX) raised to Buy at UBS.
  • Citigroup (C) saw its Debt rating cut from Aa2 to Aa3 and financial strength cut from A to B at Moody’s based on capital ratios.
  • Disney (DIS) raised to Buy at UBS.
  • Drugstore.com (DSCM) started as Buy at Banc of America.
  • GSI Commerce (GSIC) cut to Hold at Jefferies.
  • Jetblue Airways (JBLU) raised to Peer Perform at Bear Stearns.
  • Panera Bread (PNRA) Cut to Neutral at Sun Trust Robinson Humphreys.
  • Unilever (UN) started as Buy at Banc of America.
  • United Online (UNTD) raised to Buy at Jefferies.
  • Credit Suisse makes downgrades in oil patch: Devon (DVN), EOG Resources (EOG), Frontier (FTO), Newfield Exploration (NFX), Quicksilver (KWK).

Jon C. Ogg
December 14, 2007

Posted on: December 14, 2007 – 8:19 am in Analyst Calls, , , , , , , , , , , , , ,

China Losing Competitive Edge

The American Chamber of Commerce in Shanghai says that rising prices for doing business in China may be driving companies to move business to India and Vietnam.

According to the AP "a new labor law, due to take effect next year, has increased uncertainties over hiring and firing practices." The news service adds some companies worry that the law might restore the "iron rice bowl" of lifetime employment practiced by China’s state sector during the era of central planning that followed the 1949 communist revolution.

No one should be surprised by the trend. Manufacturing activities moved into Japan and Korea and as labor prices rose in those companies they migrated to China and Taiwan. The rotation may be hitting its next cycle.

Douglas A. McIntyre

Posted on: December 14, 2007 – 8:05 am in China

China Give Money Managers Crack At $200 Billion

Only when it involves money. The Communist Chinese government is looking for Western capitalists to run part of its $200 billion China Investment Corporation assets.

One analyst told MarketWatch that this was the largest amount of incremental money to come into the capital management business in recent memory.

The news speaks to an odd problem withing China, one that is probably born from the country’s desire to control its capital markets as tightly as possible. Across a nation of over 1.4 billion people there are not enough skilled money manager to run the country’s vast pool of capital accumulated due to its huge trade surplus.

Imagine if the US government said it would turn to China to manage the money in the Treasury.

The amount of money available to Western institutions is huge. Even with a modest fee structure, managing China funds could be worth $4 billion a year. If there are milestones for performance, the number could go over $10 billion.

China may be a economic powerhouse and growth in its GDP and trade balance may continue to drive up the amount of capital the government controls. But, the county cannot find a few thousand people within its own borders to manage all that cash.

Douglas A. McIntyre

Read More »

Posted on: December 14, 2007 – 6:55 am in China

Goldman’s (GS) Brilliant Bet Nets $4 Billion, But Does Little For Customers

The bankers at Goldman Sachs (GS) must be selected from Mensa. When Wall St. bets the wrong way, Goldman takes the other side of the trade and makes billion. The firm is the only one of its peer set with shares that are up this year. Its CEO made $70 million.

Now, word is out that a tiny group of managers at the investment house guessed that mortgage-backed securities would fall. They made the company $4 billion. According to The Wall Street Journal "Goldman’s trading home run was blasted from an obscure corner of the firm’s mortgage department — the structured-products trading group, which now numbers about 16 traders."

The bank not only hires that smartest people in the world. It lets them risk the firm’s capital and their jobs.

The story has a very troubling aspect. In other departments at Goldman, big thinkers were creating the financial instruments that put together pools of mortgages. And, the GS institutional sales department was marketing those products to other financial firms and pension funds.

Someone in Goldman had a very strong feeling that the mortgage securities market was going to be hammered. Someone fairly high up had to approve the bold move. But, word that Goldman was willing to take a gamble against the market sentiment was never passed along to customers.

And, that is troubling.

Douglas A. McIntyre

Posted on: December 14, 2007 – 6:44 am in Financial Stocks,

FDA Sets New Stent Guidelines

For Boston Scientific (BSX) the news gets worse every day. The FDA says it will set up new guidelines for testing stents, which is one of BSX’s largest businesses. According to The Wall Street Journal "the new FDA guidelines, which are expected to be more stringent than those currently in force, will probably cover items such as the numbers of patients on whom new stents must be tested and for how long"

The new government rules should not effect stents which are already on the market, but as companies like BSX begin to test new generations of the products, the fence they will have to clear may be much higher. And, the announcement is not likely to ease the concerns of doctors and patients who have seen studies that drug-coated stents can cause clotting.

BSX sold off two of its business units to a private equity firm yesterday. The company got $425 million. But, with $7.9 billion in debt, there will be more sales of businesses.

With market trends hurting its most important business, Boston Scientific will have to become a much smaller company to survive.

Douglas A. McIntyre

Posted on: December 14, 2007 – 6:34 am in Medical,

Europe Markets 12/14/2007

Markets in Europe were mixed at 6.20 AM New York time.

The FTSE was off .2% to 6,353. Northern Rock was up 9.3% to 94. BHP Billiton (BHP) was down 1.7% to 1543.

The DAXX was up a fraction at 7,929. SAP (SAP) was down 1% to 35.45. Siemens (SI) was up 1% to 105.51.

The CAC 40 was down .3% to 5,574. AXA (AXA) was off 1.3% to 27.23. BNP Paribas was down 1.3% to 73.79.

Data from Reuters

Douglas A. McIntyre

Posted on: December 14, 2007 – 6:24 am in International Markets, , , ,

Citigroup (C) Gets Back On Track

Shares in Citigroup (C) fell to close to $1 during the Latin American loan crisis in the 1970s. During the market difficulties beginning in 1987, the stock fell from $4.50 to $1.40 in 1990. The shares also lost more than half of their value during the market turmoil in late 1998.

But, each time Citi recovered. It may be hard to believe, but the bank’s shares hit an all-time high less than a year ago. They have now fallen about 50% to about $30, and, based on the strong possibility of more big write-offs, they could drop by half again to $15.

Citi began to get out in front of its problems yesterday. Instead of the future making the big bank, perhaps it is now ready to make its own future, at least within the confines of the markets and its own balance sheet.

The bank took on obligations for $47 billion worth of its affiliated SIVs. That will damage the bank’s capital base. Moody’s, already concerned about the company’s future, cuts its bond rating to Aa3, down a notch. "The bank will probably “take sizable writedowns” for securities backed by home mortgages and collateralized debt obligations, Moody’s Senior Vice President Sean Jones told Bloomberg.

Depending on which analyst Wall St. listens to, Citi could have another $10 billion in write-downs in the fourth quarter. David Hendler of CreditSights says it could take the bank two to five years to repair the damage to its balance sheet.

Investors may argue that if Citi shares get cheap enough another large bank like JP Morgan (JPM) may take them over. But, JPM is doing well now. It would be foolish to take on a repair job as tremendous as the one at Citigroup.

Citi may sell of some of its crowned jewels. It retail brokerage and wealth management businesses could be worth as much as $25 billion. Its investment bank could be worth even more.

The bank could also go to a group of sovereign government funds and raise money, as it has already done once. And, the Fed is already making moves to help money center banks. The help may increase in the form of low interest loans for financial institutions which need them. At Treasury, Paulson was willing to help build a "Super Fund" for SIVs. He activism on the part of banks is probably not over.

But, the board and new management are not wasting any time. They have started to begin to reshape the bank less than a week after finding a new CEO. Certainly the board has a big hand it this. The company got into trouble on their watch and they need to see it get out while most of them are still sitting board members.

Wall St. can’t make light of Citi’s troubles, but under Chuck Prince the company appeared unwilling to do anything to make itself better off.

Getting "better off" is already beginning at the big bank.

Douglas A. McIntyre

Posted on: December 14, 2007 – 6:15 am in Banking, ,

ACA’s Being Demoted To Pink Sheets? (ACA, BSC)

ACA Capital Holdings, Inc. (NYSE: ACA) has been notified by the NYSE that it had fallen outside of the NYSE’s continued listing standards and is now "below criteria" and will have a ".BC"status on teh NYSE tape.  This is due to its total market capitalization being less than $75 million over a consecutive 30 trading-day period and its stockholders’ equity is less than $75 million.  ACA Capital had 45 days from receipt of the notice to respond with a business plan that demonstrates its ability to achieve compliance with the continued listing standards.  But that is all for naught.

ACA Capital said in its press release that it does not believe that it can take steps which will permit it to satisfy the financial continued listing criteria of the NYSE within the 18 month cure period.  ACA Capital DOES NOT intend to submit a plan to the NYSE.  ACA Capital has been informed by the NYSE that it will commence suspension and delisting procedures as a result of the failure to submit a plan.

Shares of ACA have barely been public for a year since its IPO.  Bear Stearns (NYSE:BSC) owned a huge slug of this company.  Shares closed down $0.02 at $0.68 today, and the 52-week trading range is $0.22 to $16.55. 

ACA Capital Holdings provides financial guaranty insurance products to participants in the global credit derivative, structured finance capital, and municipal finance capital markets.  It should say "it did provide."   If this one disappears completely it is possible that it will have another round of ripples with other investment banks because it was considered one of the backstops keeping the firms out of the soup.  Whether or not that is true today compared to one-month ago is a "pending matter."

Pink Sheets here you come. 

Jon C. Ogg
December 14, 2007

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

Posted on: December 14, 2007 – 5:01 am in Financial Stocks, ,

Media Digest 12/14/2007 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, Citigroup (C) will take $49 billion of SIVs onto its balance sheet.

Reuters writes that Nissan and Chrysler may begin to partner in building new cars

Reuters reports that Acer is replacing the head of recently acquired Gateway with one of its own executives.

The Wall Street Journal says that a bet by Goldman Sachs (GS) that subprime securities would fall made the company $4 billion

The Wall Street Journal reports that Lufthansa has bought a 19% stake in JetBlue (JBLU).

The Wall Street Journal writes that AMD (AMD) said it would not repeat it many mistakes in 2008.

The Wall Street Journal also reports that Microsoft is being sued in Europe by internet browser firm Opera claiming anticompetitive behavior.

The Wall Street Journal writes that huge investment by Dubai are raising concerns about how much debt it has.

The Wall Street Journal writes that Amgen (AMGN) is hoping to reverse it bad luck with treatment that will tap the $7 billion global market for osteoporosis medications

The New York Times reports that Nintendo is still having trouble keeping up with demand for the Wii costing the company hundreds of millions in sales.

The New York Times writes that the FDA rejected Merck’s (MRK) bid to sell cholesterol drugs over the conounter.

The New York Times writes that Boston Scientifc (BSX) will sell to businesses to raise capital

The FT reports that Dow Jones (DJ) investors approved a buy-out by News Corp (NWS).

Barron’s writes that Qwest (Q) has approved its first dividend since 2001.

Bloomber writes that Moody’s cut Citigroup debt ratings.

Douglas A. McIntyre

Posted on: December 14, 2007 – 4:25 am in Press Digest, , , , , , , , ,