Daily Archives: December 19, 2007

ETF LAUNCH: iShares Emerging Market Bond Exchange (EMB)

Today marked the debut of the iShares to track an emerging market bond index. 

The iShares Emerging Market Bond Exchange Traded Fund ETF (NYSE:EMB) that listed and began trading on NYSE Arca under the ticker symbol "EMB." This ETF tracks the performance of the EMB which measures JPMorgan EMBI Global Core Index.

This ETF traded 47,900 shares on its debut trading session.

Jon C. Ogg
December 19, 2007

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

Posted on: December 19, 2007 – 8:17 pm in ETF, ,

NetSuite Prices At Even Higher Premium (N, ORCL)

NetSuite (NYSE: N) has priced its IPO, and the price has been raised yet again.  The company is selling 6,200,000 shares at a price of $26.00.  The lead underwriter is Credit Suisse and W.R. Hambrecht is listed as the only co-manager.  Underwriters have an overallotment option of some 930,000 shares. 

  • The first range was listed as $13 to $16…
  • Then $16 to $19….
  • Then $19 to $22….
  • Now $26 is the formal pricing…

This is a Larry Ellison funded company, so it may get to ride high above and beyond its own merits since Oracle (NASDAQ:ORCL) blew the doors off the numbers and traded up over 6% in after-hours trading. This is being touted as one of the more successful OpenIPO auction formats, and you can find more information on that here. 

Please note…. Many brokerage and research firms have tended to avoid participating in these structures as it is deemed competition the traditional underwriting, so one thing to consider is that some broker/research companies that might have covered this may not cover it down the road.  But that also means that if the firms aren’t in the underwriting syndicate that they could also jump in with coverage almost immediately.  We won’t know that until later.

We cover and preview many pending IPO’s, back door plays in IPO’s, spin-offs, and more for our once or twice weekly open email distribution list.

Investment banking departments are starting to wind down already for the rest of the year, so as far as hot IPO’s are concerned this could be 2007’s last key IPO.

Jon C. Ogg
December 19, 2007

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

Posted on: December 19, 2007 – 7:31 pm in IPOs, , , ,

Cramer’s Execution Face-Offs (DPZ, PZZA, WAG, CVS)

Tonight’s MAD MONEY on CNBC was a different section than the normal stock picking.  Jim Cramer wanted to cover execution of a business model (or business plan):

  • Cramer’s first face-off was in the pizza group of food and restaurants between Papa John’s International (NASDAQ:PZZA) and Dominos Pizza Inc. (NYSE:DPZ). 
  • Secondly, Cramer compared CVS Caremark (NYSE:CVS) to Walgreen’s (NYSE:WAG).

In the pizza face-off, Cramer noted how Papa Johns (NASDAQ:PZZA) was confident on the conference call, how they were positive about the environment despite rising food and energy prices and more, while Dominos (NYSE: DPZ) was apathetic and not positive.  He also noted how this will bring about a company that deserves a higher multiple.  Papa John’s fell 2% to $22.64 today but rose almost 1% to $22.80 on his call (52-week trading range $21.76 to $34.86.  Dominos fell 1.5% today to $12.75 and fell another 0.5% to $12.69 in after-hours trading (52-week trading range $12.25 to $35.67 per-dividend).  We noted in the past how Dominos had looted its books to make that one-time shareholder pay-off.

In the second execution comparison for competitors, Cramer noted how Walgreens (NYSE:WAG) used to be the GO-TO stock in the group but has fallen off track.  CVS Caremark (NYSE:CVS) has started executing better and changed its weakness with the Caremark cost containment company to win as patents go from label to generic in the coming years.  Walgreens is a good pharmacy according to Cramer, but CVS now is winning because of execution and now has an extra edge.  CVS is also adding stores more strategically and more thought out.  In the past Cramer noted this as a MAJOR BULL MARKET PICK.

CVS shares closed up almost 1% today at $39.49 and rose another 0.5% to $39.68 after-hours (52-week range $29.44 to $42.60).  Walgreens hasn’t traded in after-hours to speak of and closed down 2.3% today at $36.38 (52-week trading range $35.80 to $49.10).

For those of you always looking for "CRAMER PICKS TO MOVE" you’ll want to count tonight as  "more educational rather than bold stock picking."

Jon C. Ogg
December 19, 2007

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

Posted on: December 19, 2007 – 6:31 pm in Cramer, , , , ,

Capstone Order Receipt Propels Interest (CPST)

Capstone Turbine Corp. (NASDAQ:CPST) is continuing its progress in moving more and more operational in a "greening" business climate.  Capstone announced that it has received the first order for its new C65 liquid fueled microturbine from DoCoMo Engineering (part of NTT DoCoMo) in Japan.

It isn’t a huge order and financial terms were not disclosed but it is further progress into more order generation.  The order is for two microturbines for system integration, scheduled to ship early next spring.  As NTT serves 52 million subscribers, the bulls tomorrow will probably be calling for more tomorrow (see quote below).

  • Just a few weeks ago 24/7 Wall St. listed this in its "10 STOCKS UNDER $10" weekly newsletter (currently eligible for holiday discount) back when this stock was at $1.25 per share.  We noted the stock had been called a potential double by one of our favorite alternative energy analysts (Sanjay Shrestha at Lazard Capital Markets), but we noted how after we had dug around that this could be much more than a double if it delivers.  In fact, we stated, "…this one could have exponential growth potential that could make $2.50 go from less than a Big Mac all the way up to a full Happy Meal."  This one is still on target and at $1.61 in after-hours trading is up significantly from that $1.25 level we keyed in on.  Back in the bubble days, this had a $90+ stock price briefly.

In August, Capstone announced that it had begun development of the liquid fueled C65 microturbine and expected to begin taking orders. The C65 liquid fueled product has a net power output of 65 kilowatts and will provide the same technology advantages as previous microturbines.  The C65 liquid fueled microturbine is being developed for diesel fuel, but also to operate on biodiesel and ethanol.

NTT’s President Mr. Shingo Kita said, “We have been interested in Capstone Turbine’s environmentally friendly microturbine technology for some time now… NTT DoCoMo Group has always been an early adopter of new technology and today has over 1,000 remote cell sites using back-up generation technology….. we believe that there will be additional opportunities to apply this new technology within our remote cell sites.”

As this is expected to have a mere $43-ish million in revenues in all of 2008 and under $10 million per quarter currently, you can probably guess what the small cap alternative energy traders are going to be saying in chat rooms Thursday.

Jon C. Ogg
December 19, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the SPECIAL SITUATION INVESTING NEWSLETTER and he does not own securities in the companies he covers.

Posted on: December 19, 2007 – 6:07 pm in Alternative Energy,

Intuit Continues Diversification Strategy (INTU, ECHO)

Intuit Inc. (NASDAQ:INTU) is continuing to diversify away from being a tax and "Quickbooks" company.  It has signed a new agreement to acquire Electronic Clearing House Inc. (NASDAQ:ECHO) for $17.00 per share in cash.  The total purchase price is approximately $131 million on a fully diluted basis. 

Electronic Clearing House is a provider of e-payment processing solutions for checks, debit cards, credit card processing, check verification, collection, and guarantee services and automated clearing house capabilities.

This isn’t the first dance for these two.  Intuit had previously signed a definitive agreement to acquire ECHO in December 2006, but the parties mutually terminated the arrangement in March 2007.

Shares were halted shortly after the announcement. ECHO closed the day up 2% at $7.90 and the 52-week range is $7.70 to $18.73.  At $17.00, this is greater than a 100% premium acquisition.  Intuit’s market cap is $10 Billion, so the size or price of this is irrelevant for all practical purposes.

We noted with its last earnings how the company’s diversification away from tax prep was a boost, and this is one more incremental move in that direction.

Jon C. Ogg
December 19, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the SPECIAL SITUATION INVESTING NEWSLETTER covering buyouts, merger-arb, spin-offs, and more.  He does not own securities in the companies he covers.

Posted on: December 19, 2007 – 5:25 pm in Mergers and Buy Outs, Software, ,

3Com Mixed Results For Bulls & Bears; Still Hopes For Merger Approval (COMS)

3Com Corp. (NASDAQ: COMS) posted what may be one of its last quarterly financial results for its fiscal second quarter ended November 30, 2007:

  • The company posted earnings with non-GAAP net income was $13.0 million, or $0.03 per diluted share on a non-GAAP basis, compared with net income of $7.8 million, or $0.02 per share, for the second quarter of fiscal year 2007.
  • On a GAAP basis, 3Com’s net loss in the quarter was $35.6 million, or -$0.09 per share. 
  • Revenue in the quarter was $317.8 million compared to revenue of $333.0 million in the year before period. 
  • First Call had non-GAAP estimates at $0.02 EPS and revenues pegged at $326.8 million. So it beat slightly on non-GAAP earnings but revenues were light.

The net loss increase was listed as being primarily tied to purchase accounting related to the acquisition of Huawei’s 49 percent ownership of H3C.  In its second quarter, 3Com generated $6.4 million in cash from operations.

The company is noting its merger progress, sort of.  3Com and affiliates of Bain Capital (and Huawei) continue to work together towards closing the previously announced proposed acquisition of the company. The transaction is expected to be completed by the first quarter of calendar year 2008, subject to receipt of 3Com shareholder approval, customary regulatory approvals and other customary closing conditions.  We had featured this as a company that management couldn’t fix, so it needs the merger.

If those revenues stay soft there, you’d wonder if Bain & Huawei want those regulatory approvals to go through.  We have 3Com under review for our next "10 Stocks Under $10" weekly subscriber newsletter.

Shares are actually up marginally by under 1% at $4.45 in after-hours trading after closing up 0.5% at $4.42 today.   With a $5.30 buyout there is still a 19% merger-arb spread on this deal, so there is still a perceived risk that the deal could get blocked.

Jon C. Ogg
December 19, 2007

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

Posted on: December 19, 2007 – 5:12 pm in Earnings, Mergers and Buy Outs, Technology Companies, , ,

Oracle Flies Past Targets & Taking Share (ORCL, SAP, IBM)

Oracle Corp. (NASDAQ: ORCL) just posted earnings.  Its GAAP EPS was $0.25 but non-GAAP was $0.31 EPS on revenues of $5.3 Billion.  First Call had estimates at $0.27 non-GAAP EPS on revenues of $5.04 Billion.  Look at these metrics individually:

  • software license revenues up 35%, the strongest growth of any quarter in ten years,
  • software license sales up 38%
  • applications new license sales grew 63% compared to SAP’s new license sales growth rate of 15%

QUOTES FROM OFFICERS:

  • Charles Phillips, president, said, "We like our growth strategy of expanding beyond ERP into high-end industry specific vertical software in contrast to SAP’s strategy of moving down market to sell ERP systems to small companies."
  • CEO Larry Ellison said, "Our database and middleware new license sales grew 28% in Q2. We continue to take market share from IBM in both product categories."

While the earnings guidance is not yet out, this last quarter was a phenomenal report and it is really hard to call anything bad so far.  When it offers guidance, First call has next quarter’s estimates at $0.29 EPS and $5.19 Billion in revenues and it has fiscal May 2008 shows estimates at $1.22 EPS on almost $21.5 Billion.

Oracle’s stock closed down 2.3% at $20.76 today, and shares are at $21.70 in after-hours trading.  The 52-week trading range is $15.97 to $23.00.

Jon C. Ogg
December 19, 2007

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

Posted on: December 19, 2007 – 4:12 pm in Earnings, Software, , ,

The 52-Week Low Club

Darden Restaurants (DRI) Bad earnings, downgrades. Falls to $28.30 from 52-week high of $47.60.

SLM (SLM) Buy-out dead. New CEO. Margins for product poor. A mess. Down to $22.35 from 52-week high of $58.

Mens Wearhouse (MW) Nothing special. General retail malaise. Trades down to $28.43 from 52-week high of $56.64.

Exar Corporation (EXAR) Cuts revenue estimates. Falls to $7.60 from 52-week high of $15.24.

Douglas A. McIntyre

Posted on: December 19, 2007 – 4:11 pm in HI/LOW, , , ,

Worthless Ratings Agencies (MHP, MCO, ABK, ACA, MBI, DHI, BX, SCA)

We have been pretty critical of the ratings agencies not being on their toes and calling on things far too late.  In fact, I have been an anti-fan of theirs all the way back to Enron.  Today is another prime example of ratings agencies being late.  They might even be analyzing a 2000 Gore-Bush vote recount at this point.  McGraw Hill’s (NYSE:MHP) S&P and Moody’s (NYSE:MCO) sure seem to have perfected worthless ‘objective’ coverage.

ACA Capital (OTC:ACAH) was downgraded today to junk status under the "BBB" rating at S&P.  Congratulations. Like that was a difficult one to see coming.  This one is up big today on hopes (rumors) that the brokerage firms may band together to save it, although they would likely be doing this to save their own exposure from it failing more than seeing this one as a good investment.

D.R.Horton (NYSE: DHI) was downgraded by Moody’s to junk status: Ba1 is the new rating after having been at Baa3, the lowest investment grade out there.  There shouldn’t be a single homebuilder in the U.S. with an investment grade rating and there shouldn’t have been since 2006.  If you tried selling a house in 2006 in a non-hot part of the country you’d know why this is so.  The truth is that homebuilders are now just land banks and using the balance sheets for guidance is pure wizardry.  We have asked "Which Homebuilder Goes to Zero First?" for good reason.

S&P took its outlook on AMBAC (NYSE: ABK) and MBIA (NYSE:MBI) to negative from stable.  Where has S&P been?  These companies have had known exposure to this mess for weeks now. At least AMBAC said it could get its rating stabilized.  Security Capital Assurance’s (NYSE:SCA) XL Capital Assurance unit is also on negative credit watch, so investors might as well get ready for that "AAA" rating to go away too.  Blackstone Group (NYSE:BX) has a unit called Financial Guaranty Insurance Co. that the community has called "FGIC" (or pronounced ‘Fij-ic’) forever.  S&P has it under review as well.

Moody’s (NYSE: MCO) just maintained some of its own "Aaa" ratings on Monday, so there is a turf war. If you can recall a housing executive saying the housing market "was going to suck" a while back, it might ring a bell.  We don’t have to say that the ratings agencies suck, because they already know that they do.  Maybe the conspiracy theorists are right.  Maybe if these ratings agencies were truly objective (and actually analyzed these in the manner that we all were counting on them to) that would have never allowed much to really happen in the financial markets.

Most of these stocks have traded lower on the day, but they all have recovered far off lows and some are actually up on the day.  If you take a look at what we’ve said here you’ll know we have noted how their business models in covering debt issues are full of conflicts of interest top to bottom.  No wonder.

Jon C. Ogg
December 19, 2007

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

Posted on: December 19, 2007 – 3:38 pm in Analyst Calls, , , , , , , ,

Oracle Earnings To Glimmer Into 2008 Enterprise Spending (ORCL, BEAS)

After today’s close, we will get to see the highly expected earnings report out of Oracle (NASDAQ: ORCL).  First Call has estimates at $0.27 EPS on revenues of $5.04 Billion.  The company usually holds off on offering guidance until its conference call, so until that is given we will probably consider the initial earnings report as somewhat incomplete data.  Next quarter’s estimates are $0.29 EPS and $5.19 Billion in revenues.  Fiscal May 2008 shows estimates at $1.22 EPS on almost $21.5 Billion.

The pricing in stock options today isn’t indicative of more than a 2.5% expected move, although with shares down 2% ahead of results we admit that this may be off.  Analysts have an average price target of almost $25.00 as of now, and that is higher than in the past when the shares were under $20.00.  Its 52-week trading range is $15.97 to $23.00, and since early November this traded under $20.00 and near $23.00.  So this report could easily cause a stronger directional move than options pricing would indicate.

Oracle’s market cap today is over $106 Billion even after the drop.  Another key metric, perhaps more than the actual report on an "after currency basis" will be its business spending expectations for 2008.  Since Oracle is last among software companies to report and since it is almost two-months later than other software companies right ahead of the end of 2007, this may have more impact in the overall software sector than others.

As Larry Ellison has been unloading shares, this has been given a greater notice of late.  While many feels he has been opportunistic in selling at the top, he does still have more shares than he could get rid of in years.  We may get to hear about any future plans for BEA Systems (NASDAQ:BEAS), although that is presumable dead in the water until the next BEA Systems stock drop.  But there is one word we expect to hear in the outlook and "looking ahead comments" that has been a somewhat vacant initiative at Oracle: VIRTUALIZATION.

Lastly, NetSuite (Ellison backed it) will have its IPO tomorrow and that range was just recently bumped up in its expected pricing.

Jon C. Ogg
December 19, 2007

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

Posted on: December 19, 2007 – 1:22 pm in Earnings, Software, , , ,

Turnarounds That Haven’t Turned Around: Motorola (MOT, NOK, RIMM, CSCO)

Motorola Inc. (NYSE: MOT) has been a serial disappointment for shareholders and its turnaround has never come to a real fruition.  There was a period that Ed Zander was deemed as a savior, but by 2007 everyone figured out that Zander was an emperor wearing no clothes.

The company has made inroads with its Motorola Q, but when your competitors are Nokia (NYSE:NOK), Research-in-Motion (NASDAQ:RIMM), and many more it gets really hard to stand out in the crowd.  Recent forecasts may make for a tough 2008 for Motorola.  Recent strong sales of its new phone have failed to matter.

Motorola didn’t make an answer to Cisco Systems (NASDAQ: CSCO) after that tech and networking beast acquired Scientific Atlanta and didn’t gobble up a retail networking equipment play for a broader offering.  It wasn’t able to make Freescale a winner on its own, so it jettisoned it (employees used to refer to it as ‘Freefall’). 

After having spent six years in Chicago before moving away, let me be the first to tell you that it is a relief not having to read day in and day out about how the city’s top tech company is restructuring every month.  In fact, I can recall in too many years the number of times that Motorola was handing out pink slips.  It seems that the company has been doing layoffs or restructuring itself for 10 to 15 years. 

So Zander has been forced out.  Carl Icahn may make another big run at the company.  Its options are more limited for 2008 compared to 2007 because it has worked down much of its cash and liquidity.  It is possible that the endgame is a break-up of the company into 3 or 4 companies.  We have that under review for the Special Situation Investing Newsletter and that verdict is still outstanding.  Who knows for sure.

What is for sure is that it will be nice when one day this can be evaluated as an operating company with reliable earnings and reliable earnings projections.  We have yet to find a Dr. Pangloss analyst or institutional investor that can yet say that in the same sentence as Motorola.

With shares around $16.00, its 52-week trading range is $14.87 to $20.91.  Shares are actually still up 100% from the 2002 lows, but it has been too long to count since there have been $30 or $40 handles on this one. 

Maybe 2008 can be its year.  And maybe not.

Jon C. Ogg
December 19, 2007

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

Posted on: December 19, 2007 – 12:51 pm in Turnarounds, Wireless, , , ,

Turnarounds That Haven’t Turned Around: Yahoo! (YHOO, GOOG, NWS, MSFT, EBAY)

If there has been a disappointing return of a tech and web giant it has been that of Yahoo! (NASDAQ:YHOO).  We aren’t calling for any new fresh management axes or anything like that, not yet anyhow.  Last year we were one of the first to call for Terry Semel to get out of dodge.  Jerry Yang hasn’t proven himself to be again-worthy yet and that verdict is still quite a ways off.

The real problem that Yahoo! is truly facing is that Google (NASDAQ:GOOG) has eaten its lunch.  Search is still growing, but it seems that through time that Google is still winning.  Microsoft (NASDAQ:MSFT) is also hellbent on becoming a beast in online advertising.  For a company in perpetual change that is becoming a harder challenge.  We aren’t even discussing the YouTube and social networking comparisons to MySpace, LinkedIn, and Facebook. Same goes for mobile spectrum and wireless initiatives.

So far Wall Street is still confused about Panama.  It is still not known and hasn’t been a proven Google killer and Panama could end up as dated as Van Halen’s Panama.  Yahoo! has been making progress on its challenge to AdSense, although after speaking with some small business merchants whose business merchant accounts were shut off right after Thanksgiving there are many unhappy people here.  So the verdict is still out there.

We expect more DSL access pact changes, we’d expect more changes to the beloved Yahoo! Finance, and much more.  The recent Alibaba stake has also yet to materialize into anything more than a bullish head-fake, and Yahoo! Japan is still another potential source for the company to unlock value.

Unfortunately, Yahoo! has not made an aggressive layoff plan that Wall Street expects.  Part of the reason may be that Internet companies are still supposed to be growth companies and a round of large layoffs doesn’t exactly ring "the greatest growth stock" to investors’ ears.  It is also likely that both Google and Microsoft would be there to gobble up fired Yahooligans and Yahoo! probably wouldn’t have much of a leg to stand on in non-compete cases to protect its internal business if it fires them (even with a severance package).

There are likely going to be some spending cuts in certain aspects of the business, although right now this might be too widespread to bother picking and choosing what percentages may get allocated to its multiple business lines.  Yahoo!’s biggest trick it may engineer is by cutting costs and allowing the attrition to lower headcount without formally announcing cuts.  With a combined strengthening Google and a Microsoft comeback, we are not yet certain that in a softer 2008 economy that Wall Street is extremely comfortable with 2008 targets.  Those newspaper companies are also getting pretty desperate and it is hard to imagine that 2008 is all of a sudden going to be a resurgence year for print (or 2009 or 2020).  If the company doesn’t somehow get its forward earnings up then the company will not even be at a trading discount on its EPS multiple.

But there is a potential light at the end of the tunnel that may keep Yahoo! shares from being hit endlessly.  If Yahoo! falters in 2008 it is very possible that a buyer may step up to the plate.  News Corp. (NYSE:NWS) has been fingered by many as a would-be buyer.  Viacom’s ad-pact just signed with Microsoft may have removed it from being able to thought of as an LBO-buyer, although many have the belief that Microsoft might try a deal or even that a merger with eBay (NASDAQ:EBAY) could be at least possible.  Would Bezos try a truth or dare deal?  The truth is that as of all known data, any deal is mere conjecture and pondering at this time.  NBC may also not be a candidate since many think that will soon become its own entity, despite what the parent G.E. states.  There is of course the angle that one of the Middle Eastern sovereign funds may offer to take a significant stake.

Despite all of its problems, Yahoo! does still have a lot going for it, and if you go back to mid-2002 shares are still are still up 200% and no one seems to discuss that anymore.  Jerry Yang may be doing a much better job than Wall Street knows and it’s always possible that the company may finally post a significant upside to earnings one quarter.  And maybe not. The recent stock performance believes not.  That is the Internet for you. It just can’t be forgotten that the knife cuts both ways.  Yahoo!’s endgame has not been decided yet.  And its turnaround has not yet manifested.

With a $23+ handle, it is at the bottom of its $22.27 to $34.08 trading range.  At the end of 2005 and start of 2006, Yahoo! shares traded north of $40.00.

Jon C. Ogg
December 19, 2007

You can join our open email distribution list to hear about other turnarounds, spin-offs, buyouts and more. 

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

Posted on: December 19, 2007 – 11:58 am in Internet, Turnarounds, , , , ,

Tribune (TRB) Deal In Trouble

The deal for a group, lead by investor Sam Zell, to buy The Tribune Company (TRB) may be in trouble. According to The Chicago Tribune "Tribune Co. executives were sweating out aggressive last-minute questioning Tuesday from bankers reluctant to fund the final portion of a debt-laden $8.2 billion deal."

If the deal breaks apart it will be a brutal blow to TRB shareholders. Shares are down 6% today, but the offer to take the company private has kept the stock fairly high. Over the last six month TRB shares are up 10%. Those of rival Gannett (GCI) are off 35%.

In the absence of a buy-out, it would not be hard to imagine a correction from the current price of $31.41 down to $20.

Douglas A. McIntyre

Posted on: December 19, 2007 – 10:47 am in Old Media, ,

China’s Gushan Environmental’s IPO Already Debuts On NYSE (GU)

Some IPO’s make it to market pretty fast in several weeks and some take many months.  The largest Chinese biodiesel producer called Gushan Environmental (NYSE: GU) is already coming to market today.  We just noted its filing on December 4.  This may be one of the fastest IPO’s from the filing date on record.

The company set 18 million shares at $9.60 per share, but this is under the original range of $11.50 to $13.50.  Merrill Lynch was the lead underwriter in the syndicate and co-managers were listed as CIBC World Markets and Piper Jaffray.

The company is profitable and plans to more than double its production by the end of next year.   China & biodiesel… This might make you wonder why its pricing was sub-par.

Jon C. Ogg
December 19, 2007

Posted on: December 19, 2007 – 9:44 am in Alternative Energy, China, IPOs, Oil & Gas, , ,

Union Pacific Warning, Warren Buffett Can Buy Rails Cheaper (UNP, CSX, BNI, NSC, CNI, BRK/A)

Union Pacific Corp. (NYSE:UNP) has just lowered earnings guidance for its fourth quarter 2007.  It said earnings will be reduced by approximately $0.20 per diluted share.  This warning is two-fold:

  • primarily reflects the rapidly rising diesel fuel costs and the corresponding lag in fuel surcharge recoveries;
  • it has been experiencing softer than anticipated volumes in recent weeks, which are largely related to recent weather events.

Union Pacific is now forecasting fourth quarter earnings in a range of $1.70 to $1.80 per diluted share, down from its prior forecast of $1.90 to $2.00 per diluted share. Full year 2007 earnings expectations are also impacted and are now in the range of $6.76 to $6.86 per diluted share.  UNP is quick to point that this represents more than 14% increase versus 2006 earnings of $5.91 per share.

Fourth quarter 2007 diesel fuel costs should average roughly $2.60 per gallon. This would be a 34% increase from last year’s fourth quarter level. It stated that diesel fuel costs averaged $2.43 per gallon in the month of October, increased to an average of $2.66 per gallon in November and are expected to be over $2.70 per gallon in December.  Fuel costs for the fourth quarter are now expected to be over $200 million higher than the fourth quarter a year ago. In November and December alone, fuel costs will be approximately $65 million higher than originally anticipated.

UNP notes that the fuel surcharges on these higher costs will not be recovered until 2008 as there is roughly a two month lag in the Company’s fuel surcharge programs between diesel fuel expense and surcharge recovery.  Warren Buffett’s Berkshire Hathaway (NYSE: BRK/A) had been an aggressive railroad buyer in recent filings although it appears that he had lightened up on these in the recent notes as well. If he is still interested in buying railroad stocks they just got cheaper.

UNP shares are down over 5% at $121.98, down from a $129.43 close on Tuesday, and it has a 52-week trading range of $89.58 to $137.56.  As Union Pacific is the largest of the rails and a harbinger for transportation, you can see this impacting key rail stocks:

  • Burlington Northern Santa Fe C (NYSE: BNI) shares are down almost 2.5% at $81.70 with 52-week trading range $71.51 to $95.47.
  • Canadian National Railway Comp (NYSE: CNI) shares are down 1.4% at $47.65 with a 52-week trading range $41.57 to $58.49.
  • Norfolk Southern Corp. (NYSE: NSC) shares are down almost 3% at $48.55 with a 52-week trading range $45.38 to $59.77.
  • CSX Corp. (NYSE: CSX) shares are down almost 2% at $42.85 with a 52-week trading range $33.50 to $51.88.

It’s pretty hard to imagine that trucking stocks will have that great of an open.  They hog diesel fuel and gasoline too.

Jon C. Ogg
December 19, 2007

Posted on: December 19, 2007 – 9:29 am in Buffett, Transports, , , , , ,

Total Systems Services Finally Its Own Company (TSS, SNV)

Total Systems Services, Inc. (NYSE:TSS), also called TSYS, is finally getting the completion of its spin-off of majority outside ownership so that it will be its own company.  Synovus (NYSE: SNV) has announced the distribution ratio for the previously-announced spin-off of the shares of TSYS common stock currently owned by Synovus.

On December 31, 2007, Synovus will distribute 0.484 of a share of TSYS common stock for each share of Synovus common stock outstanding with a record date of 5:00 p.m. Eastern time on December 18, 2007.  Instead of receiving fractional shares for amounts of less than one TSYS share, Synovus shareholders will receive cash.

Synovus currently owns 80.6% of TSYS. The distribution of the 159,630,980 TSYS shares owned by Synovus will be made to Synovus shareholders on December 31, 2007 and will be done on a tax-free status to Synovus and its shareholders.

Synovus Financial closed at $24.10 yesterday and its 52-week trading range is $21.91 to $33.82.  TSYS shares closed at $26.72 yesterday and its 52-week trading range is $25.48 to $35.05.

You can join our own open email distribution list to hear about spin-offs, break-ups, merger-arb spreads, reorganizations, restructurings, and other key special situations.

Jon C. Ogg
December 19, 2007

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

Posted on: December 19, 2007 – 9:02 am in Shareholder Issues, Value Investing, ,

Microsoft (MSFT) Flanks Google (GOOG), Yahoo! (YHOO) With Viacom (VIA) Deal

Microsoft (MSFT) got a very nice boost to its online advertising strategy. The company formed a partnership with Viacom (VIA). Under the terms, Microsoft will run certain long form and short video programs on MSN and the Xbox 360. It will also get to sell remnant advertising on all of the Viacom sites. Perhaps most important, Redmond’s Atlas ad serving business will handle all of Viacom’s US internet properties.

It is safe to assume that Google (GOOG) would have liked the ad serving deal for its DoubleClick acquisition and that Yahoo! was also anxious to pick up such a large client.

Perhaps, MSFT is actually taking its advertising business seriously now.

Douglas A. McIntyre

Posted on: December 19, 2007 – 8:58 am in Internet, , , ,

Goldman Sachs Key Oil Services Research Changes (WFT, DO, SLB, BHI, DRC, BJS, DO)

Goldman Sachs is rolling its primary coverage responsibilities for oil services stocks to Charles Minervino from Arjun Murti and Daniel Boyd.  Murti is remaining the lead Oils analyst at Goldman Sachs; and Boyd will continue to co-cover the services sector and will maintain the lead coverage of drillers and OSV’s.  Below are some key coverage changes:

  • Weatherford (WFT) is being ADDED to the CONVICTION BUY LIST.
  • Schlumberger (SLB) raised to Buy from Neutral, $106 price target remains.
  • Dresser Rand (DRC) raised to Neutral from Sell, target raised from $35 to $40.
  • BJ Services (BJS) downgraded to Sell from Neutral, target cut from $26 down to $23.
  • Baker Hughes (BHI) downgraded to Neutral from Buy, target cut from $96 to $90.
  • Diamond Offshore (DO) REMOVED from the CONVICTION BUY LIST but maintained Buy with slight estimate decrease.

Jon C. Ogg
December 18, 2007

Posted on: December 19, 2007 – 8:31 am in Analyst Calls, Oil & Gas, , , , , ,

Pre-Market Stock News (DECEMBER 19, 2007) (ATU, ADCT, CEM, CSUN, DGIT, ETFC, AMTD, FITB, FRPT, GIS, GOOG, HOV, JOYG, LMC, MS, PALM, PHG, S, VIA, MSFT)

Below is a summary of many of the top headlines and news bits from individual stocks affecting share prices in pre-market trading this Wednesday:

  • Actuant (ATU) $0.52 EPS vs $0.48 estimate.
  • ADC Telecom (ADCT) traded down 4% after-hours. It filed a $400 million convertible note offering, and Cramer said it was a safe stock to play for Verizon and AT&T network build-outs.
  • Chemtura (CEM) said it will review Strategic Alternatives, including a possible sale of the company.
  • China Sunergy (CSUN) named Kenneth Luk as its Chief Financial Officer.
  • DG FastChannel (DGIT) shares are up 5% after it raised its 2007 and 2008 guidance.
  • E*Trade (ETFC) rose almost 4% in conjunction with
  • Fifth Third (FITB) warned of more credit losses but increased its dividend.
  • Force Protection (FRPT) traded down over 20% again after lower portion of Mine Resistant Ambush Protected vehicles for U.S. Marines.
  • General Mills (GIS) $1.14 EPS vs $1.13 estimates.
  • Google (GOOG) said its application to bid for spectrum was accepted by the FCC.
  • Hovnanian (HOV) losses reached $7.42 on lower sales and added charges and write-downs.
  • Joy Global (JOYG) $0.80 EPS vs $0.75 estimates.
  • Lundin Mining (LMC) stock indicated up almost 2% after it said it will repurchase up to 19.6 million shares of common stock.
  • Morgan Stanley (MS) posted -$3.61 net but had $5.7 Billion in mortgage write-downs totaling roughly $9 Billion in charges now; it is also in pact with China Investment for $5 billion investment.
  • Nike (NKE) reports earnings after the close today.
  • Oracle (ORCL) posts earnings after the close today.
  • Palm (PALM) lost 9% after wider losses than expected and even lower guidance ahead.
  • Philips (PHG) plans a $7.2 Billion share buyback.
  • Sprint (S) named Hesse from Embarq as its new CEO.
  • TD Ameritrade (AMTD) rose 4% after it raised guidance.
  • Viacom (VIA) in long-term digital content and advertising pact with Microsoft.

Jon C. Ogg
December 19, 2007

Posted on: December 19, 2007 – 8:15 am in Pre-Market Activity, , , , , , , , , , , , , , , , , , , ,

Top 10 Pre-Market Analyst Calls (AEM, NILE, BP, GLDN, PCZ, MXIM, NMX, OXY, QELP, BRCD, WDC, STX, ELX, RVBD)

These are not the only analyst and research notes out there affecting stocks the morning, but below are the top research calls that 24/7 Wall St. is focusing on in pre-market trading this Wednesday:

  • Agnico-Eagle Mines (AEM) raised to Buy at Merrill Lynch.
  • Blue Nile (NILE) raised to Buy from Hold at Citigroup.
  • BP plc (BP) downgraded to Neutral from Overweight at J.P.Morgan.
  • Golden Telecom (GLDN) downgraded to Neutral from Overweight at J.P.Morgan.
  • Maxim Integrated (MXIM) raised to Buy from Hold at Citigroup.
  • NYMEX Holdings (NMX) raised to Buy from Hold at Deutsche Bank.
  • Occidental Petroleum (OXY) raised to Overweight at Morgan Stanley.
  • Quest Energy Partners (QELP) off quiet period: started in coverage as Outperform at FBR, as Outperform at RBC Capital Markets and as Outperform at Wachovia.
  • Petro-Canada (PCZ) downgraded to Underweight at Morgan Stanley.
  • BANC OF AMERICA neutral on many tech names: Brocade (BRCD), Seagate (STX) & Western Digital (WDC) both started as Neutral.  Riverbed Tech (RVBD) started as Neutral. Emulex (ELX) started as BUY.

Jon C. Ogg
December 19, 2007

Posted on: December 19, 2007 – 8:02 am in Analyst Calls, , , , , , , , , , , , , ,