Monthly Archives: December 2007

Qualcomm (QCOM) Loses A Big One

A Federal judge has told Qualcomm (QCOM) that it can no longer make chips based on three patents held by rival Broadcom (BRCM).

According to The Wall Street Journal "the chips are used in two kinds of third-generation cellular networks — one called EV-DO, which Qualcomm developed, and another called WCDMA that is supported by a broader array of chip makers."

Reuters quotes Broadcom’s general counsel as saying "Broadcom should not have to compete against companies that use Broadcom’s own patented technology against us, and this injunction puts a stop to Qualcomm doing just that."

Douglas A. McIntyre

Posted on: December 31, 2007 – 10:19 pm in Law, ,

Backward & Forward, Cramer In 2007 To 2008

2007 was one volatile year and for now it appears that will be the norm for at least the start of 2008.  Everyone’s favorite market pundit or least liked pundit is obviously Jim Cramer.  If you love Cramer or can’t stand him it really doesn’t matter.  He signed a new multi-year deal with CNBC recently.  Here are some of his major calls this year that will still be referred to in 2008:

Here were Cramer’s TOP 9 STOCKS FOR 2007, with a call broken down for each one.  Borat would say HI FIVE on some and NOT SO NICE on others, as would be expected.  Cramer’s 14,582 year-end DJIA target…..Friday’s close was 13,365.87……although we did hit 14,279.96 on OCT11, 2007.  Cramer also gave a batch of price targets on most of theDJIA components:

Cramer’s Stock Picks FOR 5-YEARS OUT:

SOME LISTS: His list of recession proof stocks compared to ours.  We are updating our
Defensive Stocks For The First Half Of 2008" currently.  Cramer gave a huge list of companies he expects to benefit from the alternative energy traders (SGR, FWLT, BWA, OMG, FSLR, FTEK, WFR, TTEK, ZOLT, BP, SPWR, CY, CPST, ITRI)… Jim Cramer pondered which US companies China would want to acquire, about 3 months before sovereign funds started buying into US companies.  Cramer’s mortgage winners and losers…… Here were his MAJOR BULL MARKET STOCK PICKS(MHS, CVS, AGN, CELG, GENZ, CEPH, RIG, HAL, EMR, CAT, CMI, UTX, KO,PEP, CL, GS, SKS, VFC, UNP, CSX, BA), some of which are DJIAcomponents.  Cramer produced a "MUST OWN" list of stocks, many of whichare up significantly and some are down (WHR, BDK, ATI, BGC, HON, ASD, JCI, MDR, FWLT, CAT, TEX, DE, QCOM)

Cramer spent lots of time on International stocks that most US investors might not cover on their own.  He made a big call on Mercadolibre (MELI) (also BIDU, GOOG) with some emphasis on buying immediately, right before it made a huge run up.  Cramer’s Hidden Video Game Investment Perfect World (PWRD, ATVI, ERTS, VIA) was one he said could run more than 50% for 2008.  Cramer made 5 TOP CHINESE PICKS (CEO, CHL, SSW, FMCN, BIDU, GMR).  We’ll see in 2008 if any of his Canadian OIL TRUSTS get acquired in 2008 (BTE, CNE, PGH, PVX, PWE, AAV, GDI).  Cramer also went over his top picks from Europe for American investors (TOT, SI, ABB, PHG, BF)

ON TECHNOLOGY:  Cramer’s NEW HORSEMEN OF TECH…. will the list change in 2008???  Did Cramer Say $1,000.00 on Google, Or Is It $600.00? That was in May 2007.  Cramer Gave Monster Price targets to Baidu.com (BIDU, GOOG).. will these targets change in 2008? Cramer was very positive on all the GPS stocks,although we’d expect that Cramer will change his tune in 2008 now thatthe holiday madness is behind us (GRMN, UA, CROX, NVT, TRMB, SIRF).

Would it be fair not to include the Barron’s attack on Cramer from summer for those of you that criticize his every word?

ON WARREN BUFFETT…. Cramer noted that BROOKFIELD ASSET MANAGEMENT in Canada may be the next Berkshire Hathaway (NYSE:BRK/A) NYSE: BAM). Cramer reviewed 10 Warren Buffett stocks for analysis and then reviewed 10 More Warren Buffett stocks:

Will his buyout of ALCOA (AA) prediction come true in 2008??? Cramer gave a list of stocks that had bought back so much stock that they might be taking themselves private.

Join our free email distribution list for other Cramer calls or for updates we send out regarding IPO’s, spin-offs, restructuring, reorganization, activist investors and more.

Happy New Years from the 247WallSt.com team!

Jon C. Ogg
December 31, 2007

Posted on: December 31, 2007 – 8:01 am in Cramer, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Merrill Lynch (MER) To Raise More Capital? Or Sell BlackRock Stake?

Press reports are saying that Merrill Lynch (MER) may have to raise more capital to offset huge Q4 losses. Merrill Lynch & Co. is in talks with Chinese and Middle Eastern sovereign-wealth funds to raise capital by selling another "big" stake in the company, Britain’s Observer reported. The US investment company has already taken in more than Singapore’s Temasek Holdings.

Merrill’s stock is down by almost half this year to $53. Another raise of capital could create dilution which would take the shares lower.

The company has another option, and it would be surprising if it is not on the table. Merrill owns about half of money manager Blackrock (BLK), a company with a market cap of over $14. Shares in BLK are trading at $219, near their 52-week high.

Time for Merrill to stop selling stock and unload one of its assets.

Douglas A. McIntyre

Posted on: December 31, 2007 – 7:27 am in Financial Stocks, ,

Europe Markets 12/31/2007

Markets in Europe were mixed at 7.20 AM New York time

The FTSE fell .5% to 6,444. Barclays (BCS) was down 1.1% to 501. BHP Billiton (BHP) was down 1.1% to 1544.

The CAC 40 fell .4% to 5,603. Alcatel-Lucent (ALU) fell 1.8% to 4.89. ST Micro (STM) fell 1.2% to 9.73.

Data from Reuters

Douglas A. McIntyre

Posted on: December 31, 2007 – 7:20 am in International Markets, , ,

Biggest Change In US Markets: “Small Ball” Companies Rise To The Top

Over in the world of baseball where steroid-built great apes hit 60 home runs a season, there is still a place for what is known as "small ball". That approach to the game is based on hitting singles, bunting, stealing bases, and playing superior defense.

In the US stock market this year, "small ball" beat steroids at almost every turn, and that is likely to continue going into 2008. GM (GM) was a great home run hitter in 2007. It cut $9 billion in operating expenses and got as good a UAW contract as anyone could imagine. But, it sells a product which costs $25,000. In a tough economy most consumers can’t handle that.

In the financial sector, stock market success has been based on the ability to lend billions of dollars to consumers, LBO companies, and funds that hold risky financial instruments. It is another industry that deals in huge sums and it had a bad year.

In the capital goods area, the market saw some of the same. Cisco (CSCO) sells routers that can go for six and seven figures. Its customers are finding that a little rich and its stock will end the year near a low. Boeing (BA) relies on huge orders. A slight product delay, like the one it hit with its 787, will tank the shares every time. One of those planes costs about $250 million. 

Yahoo! (YHOO) has a problem that is not dissimilar. Most of the display advertising campaigns it runs cost hundreds of thousands of dollars. Car and financial service companies spend a lot of that money advertising on the Internet.

In the world of "small ball", Google (GOOG) did well. Most of the customers for its revenue driver, Adsense, are small and medium-sized companies. Many are only investing a few thousand dollars a year buying the Google text ads. But, the firm has hundreds of thousand of those little customers.

McDonald’s (MCD) is the quintessential "small ball" player. It ends the year near a 52-week high. The company still has Dollar Meals. A consumer can feed a family of four at the fast food place for $25. Procter & Gamble (PG) ends the year near its high. Razors and soap will always sell, and they are cheap.

Pepsi (PEP) and Coke (KO) leave 2007 near their 52-week tops. A soft drink still costs $1 most places. BUD will close the year near its high.

The lesson of stock prices in 2007 will probably carry well into 2008. Companies that sell expensive things to consumers and businesses are having trouble doing well. People in the US feel poor now. So do many companies. Fear closes the pocketbook.

The hero of the broken economy is a heavy set man who has just had a shave. He holds a beer in one hand and a hamburger in the other. He just spent $15, and he does not feel that he has to spend another dime.

Douglas A. McIntyre

Posted on: December 31, 2007 – 6:32 am in Research, , , , , , , , ,

Banks Go To Market To Raise Money In Record Numbers

The FT writes "according to data from Dealogic, commercial and investment banks raised equity worth $83bn in the final six months of 2007 – an increase of more than 20 per cent on the same period last year." That does not include the money that they have raised from sovereign funds.

The reason behind the need for capital is clearly the disintegration in the market for sub-prime based financial instruments. But, where that ends is still not clear. That means big banks and investment firms will be in the market for extra money in 2008.

In terms of potential dilution to current shareholders it is worth breaking down what may happen. Bear Stearns (BSC) has a market cap of under $13 billion. If it has to raise $5 billion, current shareholders could see the stock price fall from $87 to under $60 based on dilution alone.

Over at Countrywide (CFC), the problem could be worse. The mortgage lender only has a market value of $5.25 billion. It would only have to raise $2 billion to take its shares from their current low of $8.75 to below $5. With a market cap of $12 billion, the same kind of math could apply to Washington Mutual (WM).

To put the matter plainly, if US financial institution raise another $50 billion during 2008, the dilution could knock down the value of holdings by current shareholders by at least that much.

Some financial institutions could cut the value of their current shares by as much as half.

Douglas A. McIntyre

Posted on: December 31, 2007 – 6:01 am in Banking, , ,

Markets In Europe And Japan Fall Apart For The Year, The US Holds Its Own

The Nikkei 225 will end the year down about 11%. The FTSE 100 will be slightly better than flat. The Swiss market will be down 3% and a number of other indices in Europe will close the year in the red.

It is perhaps a bit cruel to compare these markets to the Shanghai Composite, which is up 100% in 2007. Comparing them to the US markets may be more reasonable.

What happened to the old world exchanges? Clearly they had financial shares which fell due to the sub-prime financial troubles. Their car companies may not have done well because of the pullback in spending in many regions. Even shares in Toyota (TM), the most successful car company, are down 20%. The large pharma companies in these regions have done badly because of competition from generics.

But, the real reason that Japan and Europe are down is the same reason that they are not likely to recover. The saving grace for US markets has been tech. Japan and Europe do not have it, and it is almost certainly too late to get it. That is not to say that Sony (SNE) and ST Micro (STM) are not good companies. But, they are not in the league of Microsoft (MSFT), Cisco (CSCO), Google (GOOG), Intel (INTC), or Hewlett-Packard.

Europe and Japan will under-perform the US markets, perhaps from years, because they do not have the key industry that drives growth–tech. It may be an accident of history, but hardware, software, and the internet were largely built in the US and it remains that way.

As a coda, it is worth remembering that much of the rise in the markets in China is based on oil, telecom, and manufacturing companies. They are no less vulnerable than their counterparts in Europe. It is just that the time horizon is different.

Douglas A. McIntyre

Posted on: December 31, 2007 – 5:48 am in Index, , , , , , ,

Nintendo’s Secret Weapon: The DS

The Nintendo DS is three years old. By the standards of video game consoles, that is a life time. But, according to The New York Times in the US "the hand-held DS outsold the Wii in November 1.53 million units to 981,000, according to sales figures compiled by NPD Group."

That means that the DS is outselling not only the Wii but also the Sony (SNE) PS3 and Microsoft MSFT) Xbox 360. Those game consoles cost about three times what the DS does, but they are also much harder to use.

The lesson of the DS may be that the core "gamer" universe is not getting much bigger. It is populated by 20-somethings and teenagers which can make their way through a thick instruction manuals, if they need one at all. They have friends who are up at all hours to play on the internet. They understand the complex video games that have come to market in the last five years For them, the $500 investment in an Xbox 360 or PS3 is worth it.

That leaves million of people who like to play more simple games, games that can be enjoyed by younger children and older adults. This is a huge market, and its wants a video game unit of its own, one that is easy to use and easy to carry.

The dynamics of video gaming are changing, and an old console from Nintendo is sitting right in the sweet spot.

Douglas A. McIntyre

Posted on: December 31, 2007 – 5:31 am in Consumer Electronics, ,

This Week on Stockhouse December 24 to 28

Markets wrapped up the final full trading week of the year on a minor note as the credit crunch of 2007 continued to play out. Major financial institutions began to look at covering credit-related losses through asset sales, while countries all over the world digested the news of the assassination of Pakistan’s Benazir Bhutto. Gold prepared to end the year on a high note as it looks to trade above $800 at month’s end for the first time in history.

On Monday…

Nancy Zambell of Financially Fit encouraged investors to spend some time ensuring that their portfolios are up to snuff for the end of the year in It’s the season for your portfolio check-up!

Luke Brocki focused his sights on a few uranium companies that grabbed some end-of-year gains in Late December uranium stocks rally.

A look at the Bakken oil formation and the companies active there came courtesy of community regular Stacey Laliberte in Saskatchewan’s red-hot Bakken oil formation.

More community news came from littleguy123 as he finished off a multi-part series on the new “Axis of Evil” with some interesting theories about high-flying bonuses for CEOs of troubled financial companies, in Buying “loyalty” with billions in “bonuses”.

On Tuesday…

Merry Christmas!

On Wednesday…

Holiday festivities continued with Boxing Day in Canada.

Then on Thursday…

Matt Stiles put his neck on the line for the betterment of all when he recapped his predictions, successful or not, for 2007 – and then dove in with more for 2008. A great end-of-year read from one of Stockhouse’s own is called Themes for 2008, part one.

Buzz returned to collect thoughts from SH members on the red-hot commodity known as potash in More life left in potash plays.

For news about small stocks that made big moves in Thursday trading, please read the

Stockhouse U.S. Small and Micro-cap Stock Report.

Finally, on Friday…

Part two of Matt Stiles’ six-part Themes for 2008 series found the globe-trotting Canadian hunkering down for a heart-to-heart with Canada’s economic prospects for the New Year.

Stockhouse staff writer Sean Mason delivered a year-end wrap-up of ten of the most sought-after stocks on Stockhouse for 2007. Part one, called Top-10 stock searches of 2007, appeared Friday, with part two scheduled for next week.

In Buzz on the Boards, TD enjoyed the spotlight as one of not very many financial institutions that have weathered the credit storm better than most, in TD takes the high road.

Posted on: December 31, 2007 – 5:21 am in Uncategorized

Media Digest 12/31/2007 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, Singapore says that it has no interest in controlling UBS (UBS) in which it has made a large investment

Reuters writes that IBM (IBM) is in talks to buy Israeli start-up XIV Information Systems for $300 million.

The Wall Street Journal writes that the British government is probing possible bribes paid by Glaxo and AstraZeneca to the regime of Saddam Hussein.

The New York Times writes that in battle between Sony’s (SNE) Blu-ray nor Toshiba’s HD DVD high definition formats, most consumers are staying on the sidelines.

The New York Times reports that the once hot market for handset ring tones is slowing down.

The New York Times writes that the Nintendo DS is even more popular than the Wii in the US.

The New York Time writes that the price of oil has firmed above $96.

The FT writes that commercial and investment banks raised equity worth $83 billion in the final six months of 2007.

Barron’s writes that BNY Mellon is undervalued as a play for global wealth management.

Bloomberg writes that European stocks are heading for the first annual drop since 2002.

Douglas A. McIntyre

Posted on: December 31, 2007 – 4:35 am in Press Digest, , ,

Asia Markets 12/31/2007

Most markets in Asia were closed.

The Hang Seng rose 1.6% to 27,813. China Mobile (CHL) rose 2.2% to 137.9. CNOOC rose 3.1% to 13.28.

Data from Reuters

Douglas A. McIntyre

Posted on: December 31, 2007 – 4:13 am in Uncategorized,

In 2008, A Train Wreck For Car Sales (GM)(F)

The final month of 2007 looks pretty bad for car sales, and going into next year, things could get worse.

According to MSNBC "December sales are expected to fall around 4 percent, which would bring the full-year total for U.S. auto sales to 16.1 million vehicles, the lowest volume since 1998."

Some Wall St. analysts see Ford’s (F) sales falling as much as 12% in December. GM (GM) could be down more, due to a drop in sales to rental fleets. It is the kind of "bad news is good news" that Detroit passes around these days. We don’t make money selling to rental fleets, so that business is being cut. What is not mentioned in the same breath is that no one else stepped up to buy those cars.

In a recent interview Jerry York, an adviser to billionaire investor Kirk Kerkorian; financier Wilbur Ross; and Thomas Stallkamp, a former Chrysler president said that 2008 vehicle sales in the US could fall as low as 14.5 million. That could suck well over $35 billion in revenue out of the market next year.

The car experts at Edmunds believe that there are other trends which will undermine new car sales and profits next year. Incentives are expected to stay high. On US models, this could average about $3,000.

One of the most important trends which could undermine American new car sales is the moved to certified pre-owned vehicles, the high end of the used car market. Edmunds writes "certified pre-owned vehicle sales will rise as consumers will look to spend less and seek a greater sense of security in their next used vehicle purchase."

Ford and GM are trading near 20 year lows. It is hard to imagine, but that could get worse in 2008.

Douglas A. McIntyre

Posted on: December 29, 2007 – 9:41 am in Autos, ,

Why Are So Many Turnarounds Failing? (EK, PFE, RAD, TYC)

We compiled a list of many companies that just haven’t been able to turn themselves around.  On some we offered a road out and on others we feel sorry for the management because getting out of the holes that the companies have dug just might not be possible.

Most of these that were covered ended up being tech stocks of some sort as many of those have remained in the gutter. But there are many major economy stocks that are underperforming against their potential.  These non-technology companies in here still have a shot at executing a turnaround, but after years of failure you can imagine an activist or worse might start rearing its head.  These are not at all the only turnarounds that could manage to turn their ships, but these are some that we covered.

Eastman Kodak (NYSE:EK) is in a pickle and frankly we are shocked that shareholders haven’t revolted against Antonio Perez as CEO.  He was one our CEO’s TO GO for 2007, although we didn’t add him on the 2008 list.  This company has to rapidly implement its layoffs and restructuring rather than dribbling it out over a 10 year period.  They need to go back after more of the digital space.  They are trying, but nowhere near enough.

Pfizer (NYSE:PFE) has seen its share of skepticism.  It has been dead money and the new CEO is running out of "getting used to the job" time.  What is interesting is that a boost could come straight from a couple of acquisitions of companies with blockbuster drugs about to hit market.  Their drug pipeline might also not be as bad as we think. If the company gets off its duff, it could be one of the better drug companies with upside.  It was also reviewed under our 2008 Dogs of the Dow stocks.

Rite Aid (NYSE:RAD) has been another utter and complete failure of a turnaround.  This new CEO is actually very well respected and very well thought of.  She also didn’t make up excuses in the last two reports as to fake reasons for a failure.  She needs to make 2008 the year of execution of a turnaround.  It is possible.  This was also Jim Cramer’s #2 Speculative Stock for 2007.

Tyco International Ltd. (NYSE: TYC) is a turnaround that even though it started its turnaround has only managed a 360.  Its Tyco Electronics (NYSE: TEL) and Covidien (NYSE: COV) spin-offs have yet to rapidly reward shareholders.  The good news is that by early 2008 we will have at least two quarters of operations under the belt at each unit.  After that we expect that analysts will be able to adequately make their decisions on how to assign earnings targets.  The Tyco-stub is either one hell of a value stock, or it’s just a value trap.  We’ll know soon. 

These stocks may all be covered in newsletters because many now fit in the 10 STOCKS UNDER $10 newsletter category and many fall under the Special Situation Investing Newsletter category. 

On a separate note, we gave two different groups of stocks whose shares could actually double in 2008.  Our first list was of the more active names that are low-priced, and our second list was the screened group of stocks that was of known stocks that are just not quite as actively traded.  Lastly, we also gave a list of stocks that could drop another 50% in 2008 if these operators stumble or others that just don’t get their you know what together.

2007 had its share of great IPO’s and stinky IPO’s.  We showed a solid list of IPO’s that performed with stellar returns that came public in 2007.  And of course there is that smelly and stinky list of IPO’s that lost more than half of their value since coming public in 2007 as well.  Believe it or not, some of these could be winners if they manage to do the right thing.

We issued a GUIDELINES for turnarounds.  For starters we avoided financial stocks, lenders, housing related, autos, and most retail names because the problems there are so bad that they will get fixed when the industry pressure allows them to get fixed.  Those might continue there march south until finally too much is too much, and while we feel that may be close we aren’t hanging our hat on any date yet.  It just hasn’t worked.

You can join our free email distribution list for previews on other IPO’s, spin-offs, reorganizations, restructurings, merger-arb, speculation, and other aspects of M&A.  Here you may get some forethoughts on developing situations before the full data is published.

Jon C. Ogg
December 29, 2007

Posted on: December 29, 2007 – 8:01 am in Turnarounds, , , ,

52-Week Low Club (December 28, 2007)

Some of these stocks hit 52-week lows and recovered off of lows so they won’t have a low close.  But these did all touch or breach the 52-week lows.  At the end we also broke out retail stocks, financial stocks, airlines & transports, and hotels.  A separate report could have been compiled for REIT’s as well, but many of those were left off because of room or volume. There were enough 52-week lows today that you might even wonder if there had been a mini-crash in the markets.  Here are the 52-week lows for December 28, 2007:

  • Advanced Micro Devices (NYSE: AMD)… imagine if the company got Hector Ruiz to leave.
  • American Greetings (NYSE: AM)…again.
  • AstraZeneca (NYSE:AZN)… new entrant.
  • Carmike Cinemas (NASDAQ:CKEC)
  • ChipMOS (NASDAQ:IMOS)
  • Corp. Office Property (NYSE: OFC)
  • Cryptologic (NASDAQ: CRYP)
  • Diebold (NYSE:DBD)
  • Fortune Brands (NYSE:FO)
  • Group 1 Auto (NYSE: GPI)
  • Infinera Corp. (NASDAQ: INFN)
  • Introgen (NASDAQ:INGN)
  • Japan Smaller Cap Fund (NYSE: JOF)
  • Lamar Advertising (NASDAQ: LAMR)
  • Legget & Platt (NYSE: LEG)
  • Martha Stewart (NYSE: MSO)
  • Marvell Tech (NASDAQ:MRVL)
  • Mattel (NYSE:MAT)
  • McClatchy (NYSE:MNI)
  • Micron Tech (NYSE:MU)
  • NGAS Resources (NASDAQ:NGAS)
  • Nortel Networks (NYSE:NT)
  • Owens Corning (NYSE:OC)
  • Omnicare (NYSE:OCR)
  • Prestige Brand (NYSE: PBH)
  • PC-Tel (NASDAQ:PCTI)
  • Ruth’s Chris (NASDAQ:RUTH)
  • SanDisk (NASDAQ: SNDK)
  • Theravance (NASDAQ:THRX)
  • Tractor Supply (NASDAQ:TSCO)
  • Wendy’s (NYSE: WEN)
  • World Fuel Services (NYSE:INT)
  • U-Store-It (NYSE:YSI)

Retail Stocks on 52-week lows: Ann Taylor (NYSE:ANN), Big Lots (NYSE:BIG), Borders Group (NYSE:BGP), Bon Ton Stores (NASDAQ:BONT), Chico’s FAS (NYSE:CHS), Finish Line (NASDAQ:FINL), Liz Claiborne (NYSE: LIZ), Macy’s (NYSE: M), Office Max (NYSE:OMX), Petsmart (NASDAQ:PETM), Stage Stores (NYSE:SSI)

Financial stocks on 52-week lows: Bear Stearns (NYSE: BSC), Citigroup (NYSE:C), Canseco (NYSE: CNO), Discover Financial (NYSE: DFS), Fifth Third Bancorp (NASDAQ:FITB), Fortress Investment (NYSE: FIG), MBIA Inc. (NYSE: MBI), Washington Mutual (NYSE:WM)… urgh!  When does it stop?

Airlines/Transports on 52-week lows:  Airtran Holdings (NYSE: AAI)…again.  Did they launch a Friends Die Free rewards plan?  Continental Airlines (NYSE:CAL), Fedex (NYSE:FDX), Mesa Air (NASDAQ:MESA), Northwest Airlines (NYSE: NWA)… near $100 oil is a real pain.

Hotels Hitting 52-week lows: Host Hotels (NYSE: HST), Lasalle Hotel (NYSE: LHO), Starwood Hotels (NYSE:HOT), Sunstone Hotel (NYSE: SHO), Wydham Worldwide (NYSE:WYN).  Maybe these all wish they could get the private equity buyers back in the sector.  If only they could still borrow.

These CEO’s new year’s resolutions are all the same: "In 2008 I want to keep my stock off the 52-week low lists."

Jon C. Ogg
December 28, 2007

Posted on: December 28, 2007 – 3:01 pm in HI/LOW, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Macy’s: Growth Through Closures.. Expect Others To Follow (M, KSS, SHLD, TJX, JCP)

In a slowing retail environment, Macy’s (NYSE: M) has decided it’s time to close some stores.  This may not sound like a great ‘growth strategy’ for a retailer, but some companies reach the size that sometimes growth has to occur during actual contraction.  It has slated 9 stores to be closed. 

Macy’s isn’t stopping all growth plans, although if this review gets sharper it could lead to a flat store count through time. It opened 10 new stores and one furniture gallery in 2007. In 2008, Macy’s expects to open five stores, with an additional six to eight new locations currently planned for 2009.  Macy’s currently operates more than 850 department stores, so this is a small drop in the bucket and will only have a limited impact in longer-term sales models.

Below are the nine stores getting the boot:

  • Washington Square in Indianapolis, IN (opened in 1974);
  • Prien Lake Mall in Lake Charles, LA (opened in 2003);
  • Rolling Acres Mall in Akron, OH (opened in 1978);
  • Canton Centre in Canton, OH (opened in 1968);
  • Randall Park Mall in North Randall, OH (opened in 1976);
  • Crossroads Mall in Oklahoma City, OK (opened in 1986);
  • Valley View Center in Dallas, TX (opened in 1973);
  • Sharpstown Center in Houston, TX (opened in 1961);
  • Family Center at Riverdale in Riverdale, UT (opened in 2003).

I don’t know if these other stores are in good areas that are just being used for cost cutting, but if you have ever been to Sharpstown Mall in Houston you might not doubt why the company is pulling out.

It sure sounds like Macy’s may have something in common with winter skinny dippers: shrinkage.  But in all honesty and joking aside, Macy’s may actually need to review even more stores for possible closure if the performance or the retail environment continue to soften.  With their stock hitting 52-week lows you can expect reviews to be stricter and tighter in a weak 2008.

This may have other ramifications in the retail superstore centers and mall operators.  There are many redundant stores in major cities and many geographic locations throughout the country that just aren’t worth the effort for some retailers to continue in.  If you want to try to guess who else may start the downsizing of underperforming stores in a weaker economy take a look at the competitors:

  • Kohl’s (NYSE:KSS) operated 834 stores as of the end of last quarter.
  • Sears (NASDAQ:SHLD), as of February 2007, operated many more stores than Macy’s and we know Eddie Lampert wants to start making money again on his investment.
  • TJX (NYSE: TJX), as of November 2007, operated 851 T.J.Maxx stores, 778 Marshalls, 287 HomeGoods, 130 A.J.Wrights in the U.S. alone with others located elsewhere in Canada and Europe.
  • J.C.Penney (NYSE: JCP) as of November 2007, had more than 1,000 stores in the U.S. territory.

If this gets Macy’s off that 52-week low club, it’s hard to imagine that other department store operators won’t follow suite with selective closures in the 1% to 2% area.

Jon C. Ogg
December 28, 2007

Posted on: December 28, 2007 – 2:12 pm in Retail, , , , ,

Shaw Group’s SEC Inquiry Ends (SGR)

The Shaw Group Inc. (NYSE: SGR) has just announced that it has received notification from the Securities and Exchange Commission that the SEC’s Division of Enforcement has completed its informal inquiry.  The company first announced this inquiry in June 2004.

The Division of Enforcement does not intend to recommend any enforcement action.  This had been a hanging chad so to speak, although after having dug around into the scope of this we had surmised that nothing of any consequence would really come from this.

Shaw Group shares closed at $59.77 Thursday, and while it hasn’t yet traded it appears that shares are indicating up around $60.50 initially.  The 52-week trading range is $28.60 to $77.30.

Jon C. Ogg
December 28, 2007

Posted on: December 28, 2007 – 8:59 am in Infrastructure, SEC,

2008 Tech Kickoff: Macworld Versus Consumer Electronics Show, CES (MSFT, AAPL, INTC, MCZ, S)

January is always an interesting month for gadget lovers, techies, programmers, computer geeks, gamers, and more.  The year is always kicked off with the biggest event of the year as the Consumer Electronics Show, the CES, starts the year.  A week later we get the beloved Macworld exposition from Apple (NASDAQ: AAPL).  These are both huge events.  CES is a bigger event as far as an entire industry in concerned, and Macworld has been  one of the launch platforms for Steve Jobs’ new product directions.  We wanted to give you a breakdown of some of the events and resources in one central location:

CES, the Consumer Electronics Show January 07 to January 10, 2008 in Las Vegas:

List of some public exhibitors at CES: 8X8, Amcor, Analog Devices, Audiovox Electronics Corporation, Broadcom, Corel, Delphi, Digicom Digital, Directed Electronics, DIRECTV, Dolby Laboratories, Entropic Communications, Gemstar-TV Guide, Imation Corp, Immersion Corporation, iRobot, Jabil Circuit, Leggett & Platt, LG Electronics, LG.Philips LCD, Mad Catz Interactive, Microvision, Motorola, Palm, Philips, Silicon Image, Synaptics, Texas Instruments, Visteon, Xilinx, XM Satellite Radio…

MACWORLD: Macworld will be held at San Francisco’s Moscone Convention CenterJanuary 14-18, 2008.  Keynote address will be held on Tuesday,January 15, 2008 at 9:00 a.m. at Moscone West.

CES has a one week jump so by the calendar alone it will already have more data on exhibitors and the exact schedule.  But these are the two tech events to watch in the first two weeks for technology companies in 2008.

Jon C. Ogg
December 28, 2007

Posted on: December 28, 2007 – 8:48 am in Technology Companies, , , , , , , ,

Technology CEO’s Who Need to Go in 2008 (ALU, AMD, BBND, CC, SYMC)

2007 has been a volatile year in the stock market, but there are many key technology CEO’s who just aren’t making a passing grade. 247WallSt.com has issued a brief list of some recognized CEO’s in technology whose shareholders would likely be rewarded if the CEO was axed or stepped down.  We think these CEO’s have a great shot at getting the ax in 2008.

We decided to run a GUIDELINES FOR CEOs TO GO.  Most of these CEO’s have a recent history of disappointment, and calling a CEO out can’t be just over stock prices. The CEOs have proven their need to be called on to go. Out of 24/7 Wall St.’s CEO list for 2007, six of the eight that we called on to be fired were fired or finally forced out.  Here’s the full list, with a brief sentence and a link to the full explanations for each:

  • Amir Bassan-Eskenazi of BigBand Networks (NASDAQ: BBND) has no street-cred left.  Usually it takes a long time to do a job this badly and an email from a former engineer there sent comments that were more harsh about him than we’d publish.  BigBand has been one of the worst IPOs of 2007 (full list here).  This management of the company has alienated everything that would yield any trust. Here’s why the founder needs to go become a full-time golf hobbyist.
  • Hector Ruiz of Advanced Micro Devices (NYSE: AMD) was a simple choice for a tech CEO who needs to go.  Even though he wants to stay that he won’t be allowed to. Intel Corp. (NASDAQ:INTC) isn’t just winning, it’s running away with trophy from the processor war. Here’s why he’s toast, even if he won’t admit it. 
  • Patricia Russo of Alcatel-Lucent (NYSE: ALU) isn’t here because we needed to be an equal opportunity offender. We feel that she is only still listed as CEO because she is American and can be used to keep CIFIUS oversight happy.  The French now own so many American patents from that merger that Alcatel needs to pretend to oversight regulators that Lucent is still around. Alcatel needs a new token American, and here’s the backgrounder.
  • Philip Schoonover of Circuit City (NYSE: CC) needs to scoot over. Can you count a retailer as a tech?  Yes, if that is what they sell.  Scoonover figured out the best way to stop selling technology there and the last results were so shameful that the company will likely lose money for the Christmas quarter.  Here’s why employees of Circuit City put this on the Circuit City employee Intranet.
  • John Thompson of Symantec (NASDAQ: SYMC) was a tough CEO to put on this list.  I like him personally and professionally as a CEO that seems to be a very straight shooter.  The diversification strategy away from security alone was one we thought would work out, but Wall Street was against this from the start because of no cost real cutting opportunities and because of a focus shift.  The acquisitions since have been dismissed by Wall Street and this tech stock is no longer considered a growth story.  Wall Street talks, here’s the full piece on it.

Many of these names routinely end up in the 24/7 Wall St. "10 Stocks Under $10" weekly newsletter.

Jon C. Ogg
December 28, 2007

Posted on: December 28, 2007 – 8:01 am in Management Change, Technology Companies, , , , ,

Citigroup (C) May Have To Sell Smith Barney

The market was full of talk yesterday about Goldman Sachs predictions that Citigroup (C) might have to write-off another $18.7 billion in CDOs in the fourth quarter. Word was that the big bank may have to cut its dividend by 40%.

Today’s Wall Street Journal writes that Citi and HSBC (HBC) are considering selling some of their modest-sized units. For Citi that might include its auto loan business or stakes it owns in financial services companies in South America. It is not clear what those businesses would bring, but it is not likely that the figure would be $5 billion or $10 billion.

Citi does have a business that is fairly independent of its retail banking, commercial bank, and investment bank operations. Smith Barney has 9.3 million client accounts and those represent almost $1.6 trillion in assets. Compare that to TD Ameritrade (AMTD) which has 6.4 million accounts and about $300 billion in client assets.

AMTD has a market cap of $8 billion. Smith Barney is probably worth 50% more than that, or $12 billion. A bank which is better off, like Wachovia (WB)  which also has a large broker network, might view the asset as attractive.

Citi could obviously use the $12 billion and it is not clear that parting with Smith Barney does the firm any real harm. It is likely to be the first big asset to go.

Douglas A. McIntyre

Posted on: December 28, 2007 – 6:37 am in Banking, , , ,

Turnarounds That Haven’t Turned Around: Tyco International (TYC, TEL, COV)

Tyco International Ltd. (NYSE: TYC) is a hard turnaround to call as one that hasn’t turned around because it has already begun its long-term initiatives to enhance shareholder values.  The problem is that it has been unsuccessful so far.  The company completed the spin-off of Tyco Electronics (NYSE: TEL) and Covidien Ltd. (NYSE: COV) on July 1, 2007.  Because of these spin-offs, Tyco was a much harder stock to cover and to use valuations and historical data on.  In fact, analysts from large brokerages and bulge bracket firms have had a hard time breaking down the de-conglomerized conglomerate.  We also want to caution that many figures used actually vary from source to source and this made analysis not as straightforward here in this case.

First, let’s look at the spin-off companies.  Tyco Electronics (NYSE: TEL) traded at $39.81 on a dividend adjusted basis at the end of July 2 and have fallen down to the mid to low-$30’s before a recent recovery. But even north of $37.00 shares are still down.  Tyco Electronics has a equally mixed coverage spread between Buy/Hold and an average price target of roughly $41.00 from analysts.  Covidien (NYSE: COV), the medical products entity, shares traded at $43.24 on a dividend adjusted basis at the end of July 2 and have traded in mostly in a high-$30’s to mid-$40’s basis since.  With a $44+ handle this one still has a mixed verdict depending upon whom you ask.  Covidien has a mixed opinion from a thin group of analysts and an average price target of roughly $47.50.  It seems that offspring aren’t being thought of as great growth vehicles.

But back to Tyco International Ltd. (NYSE: TYC).  Tyco International shares took a serious hit in late 1999, but they recovered sharply and hit new highs in 2001.  By early 2002 the accounting scandals and the Koz issues came full circle and shares were crushed.  On an adjusted basis the stock lost more than two-thirds of its value.  2003 to the end of 2004 were great years to own shares, but this hasn’t really been the case since then.

Back before these spin-offs were completed, we noted how there appeared to be a phantom premium in Tyco shares just because of the hype around the break-up and because of the craze surrounding private equity and shareholder initiatives.  What appears to have happened is that now the street has given it a more proper valuation or at least a more realistic one, and as we noted not all bad stories have to have sad endings.

On an adjusted basis Tyco International (NYSE:TYC) shares were over $50 at the July 1 date, but they have never been back.  Shares trade around $40 now and have been as low as $38-ish over recent weeks.  If you trust the "average price targets" from analysts, that appears to be around $50.00 from a much smaller group than in prior years.

Just last week a court approved some $3.2 Billion in investor class action law suit settlements over the accounting fraud took the company down.

We do caution against using any solid earnings forecasts because many analysts have not fully adjusted their opinions to reflect the "new" Tyco in a post spin-off world.  First Call has Fiscal September-2008 EPS at $2.61 (a 15.5 forward P/E ratio) and fiscal September-2009 EPS at $3.24 (a 12.5 forward P/E ratio), although we still question some of these since the spin-offs.  If the company can achieve those estimates, then there are few who could argue against this being one of the better value plays out there.

Most of our "turnaround stocks that haven’t turned around" are troubled companies in troubled predicaments that may have a very hard time making a turnaround come to fruition.  But Tyco may be one of the exceptions.  That phantom premium may be in the rear view mirror.  Its value is also now easier to see since the spin-offs have been completed and are basically two quarters on their own.  Who knows, maybe 2008 to 2009 will be Tyco’s time to shine.

Jon C. Ogg
December 28, 2007

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Posted on: December 28, 2007 – 6:29 am in Conglomerates, Turnarounds, Value Investing, , ,