Daily Archives: January 14, 2008

Cramer’s Drug Research/CRO Stocks (CVD, PRXL)

On tonight’s MAD MONEY on CNBC, Jim Cramer came out with a positive tease early on in the contract research organization sector (CRO’s) as it pertains to drugs, biotech, and medical research.  He thinks this sector is recession proof and is set to continue growing whether the market rises or falls.  For growth and cost cutting this sector is mandatory for an ailing drug and pharma sector.  His picks tonight were:

  • His pick that does both early and late stage: Covance (NYSE: CVD) is Cramer’s best pick of the group and is 50/50 in early and late stages and a high customer diversification.  They can save customers the most by outsourcing, and the balance sheet is immaculate with new factories/offices opening.
  • Paraxel (NASDAQ:PRXL) is another he likes in the CRO sector.

This sector has seen some incredible performance over the last 12 to 18 months, yet only Quest has a $10 Billion market cap.  The multiples have gotten higher of late, but that is the price for being defensive now.  He isn’t at all convinced that today is the start of a market trend and he thinks the market will roll over again, so he wants to look at safety names besides tonight’s key oversold and overlooked tech stock picks he gave tonight.

Jon C. Ogg
January 14, 2008

Posted on: January 14, 2008 – 7:16 pm in Cramer, Drug companies, ,

Cramer Calls On Oversold & Overlooked Tech Stocks (IBM, EMC, VMW, INTC, MSFT, HPQ, GLW, AAPL, RIMM, GOOG)

On tonight’s MAD MONEY on CNBC, Jim Cramer said that after IBM (NYSE: IBM) raised its numbers that was just the excuse to rally tech as it was and oversold.  he noted, "Nothing was really wrong with tech in the first place" and he noted that the good had been sold off with the bad. This week he is going to feature overlooked tech stocks that he still likes that have been hit too hard.

In honor of IBM, Cramer is going with the cheapest of the bunch based on its hidden assets.  His pick tonight is EMC Corp. (NYSE: EMC) for several reasons, and we threw in a few things of our own here: 

  • This is the one he said he got the most questions about this weekend at a book signing.
  • We noted recently what Whitney Tilson called "The EMC Stub" when you could buy the stock for under $5.00
  • Cramer said he is a long-term and long-time bull on it.  If you watch Cramer, he’s been puzzled on this one many times.
  • He likes that EMC has the same sort of international clients that IBM has.
  • The new product line announcement today is integration of solid-state flash that uses less energy and has faster performance than traditional flash, and it is a sooner rather than later add to its business.
  • The absurdly low valuation on VMware (NYSE: VMW) is currently worth $26 Billion and it can start selling this later.  After lock-up shares come out it may start to move.  Cramer compared this one to the Cypress Semiconductor (NYSE: CY) spin-off of SunPower (NASDAQ: SPWR).
  • The market value is currently under $5.00 if you back out the VMware value now, hence THE EMC STUB.

His conclusion is that the first tech comeback play for the week is EMC. 

Cramer is going to be featuring overlooked and/or oversold tech stocks each night this week.  If you want to see some of his potential other picks for Tuesday through Friday, here were other lead-in comments he was making on tech stock activity immediately before going positive on EMC tonight:

  • He said we already have Corning (NYSE: GLW) that gave guidance and he noted Hewlett-Packard (NYSE: HPQ) said last week it was in good shape.
  • He likes Intel (NASDAQ:INTC) down here after the sell-off and expects an upside from Microsoft (NASDAQ:MSFT) with earnings. 
  • Cramer noted that Research-in-Motion (RIMM) is down too much as one of his Horsemen of Tech.
  • He still likes Apple (NASDAQ:AAPL) ahead of Macworld, and this was one of his top picks before.
  • He said he has never backed away from Google (NASDAQ:GOOG) as a great stock and still says it is going to $750 per share as one of the Horsemen of Tech.

Here is the full feature with many backgrounder items that shows the pertinent 2007 calls that he is still active in for the start of 2008.  This is an extensive list and will give you a great summary of his ongoing calls.

Jon C. Ogg
January 14, 2008

Posted on: January 14, 2008 – 6:36 pm in Cramer, Technology Companies, Value Investing, , , , , , , , , ,

More Rumors Of Big Cuts At Citigroup (C)

According to The Wall Street Journal Citigroup (C) is "expected to announce a sizable dividend cut, cash infusion of at least $10 billion and write-down of as much as $20 billion in mortgage-related investments."

Douglas A. McIntyre

Posted on: January 14, 2008 – 5:52 pm in Banking,

Verizon (VZ) FiOS Great For Subscribers, Stinks For Investors

From Silicon Alley Insider

Verizon has apparently done a good job designing and building its "FiOS" bundle of digital TV, super-fast Internet access, and phone service: It took the top spot in Consumer Reports’ February triple-play rankings. For Verizon (VZ) investors, though, it looks like a liability.  continued here….

Posted on: January 14, 2008 – 5:47 pm in Uncategorized

As Fidelity Re-Opens Magellan Fund, Investors Review Top Holdings (FMAGX, NOK, GLW, GOOG, SLB, CNQ, SPLS, T, AGN, MON)

It’s official.  Fidelity’s Magellan Fund (FMAGX) is being re-opened for new investors.  This fund at one point in 1997 became so large that the fund closed itself to new funds and outside investment commitments.  As of the last seen date Fidelity’s Magellan Fund had some $43.3+ Billion in assets under management.

  • Fidelity says that as the investor base is now 10 years older, they have had adequate redemptions and portfolio manager Harry Lang says: "We believe that the time is right to make Magellan available to a new generation of investors………… We believe that generating new sales to offset future redemptions will help stabilize the fund’s cash flows and assist Harry in most effectively directing investment strategies for the benefit of fund shareholders. It’s effectively the inverse of the reason why we limited new purchases of the fund 10 years ago. At that time, we were seeing strengthening cash inflows, and we expected that trend to continue."
  • More importantly, Harry Lang also noted, "I’ve been fortunate to find great stocks here in the U.S. and abroad to include in the portfolio. If we’re able to achieve a better balance of cash flows in the fund going forward, I’ll regularly have the cash on hand to capitalize on attractive investment opportunities as I find them."

Fidelity noted that some 85% of the funds assets are deemed for retirement (IRA, 401K etc.), and therefore the fund would seem to take more of a longer-term view.  The top 10 Holdings are unfortunately as of September 30, 2007, so we’ll have another two weeks or so before we know what the real holdings are:  The TOP 10 as of then are as follows:

  • Nokia (NOK, Corning (GLW), Google (GOOG), Schlumberger (SLB), Canadian Natural Resources (CNQ), Staples (SPLS), AT&T (T), Allergan (AGN), Monsanto (MON), Renewable Energy Corp. AS (overseas).  This list was posted on December 30, 2007, so it might be more updated than some of the aggregator financial news and data web sites that take time to update.

If you want to see the full holdings the list on their site is here.  With more than $43 Billion in assets this could create quite a lot of buying in stock names where Fidelity wants to put capital to work.  We would surmize that the fund might not add as much to some of its key holdings if it can put capital to work in some of the names it owns less of that might like to own more of. 

Also be advised that the full holdings list is 45 days old and we know for certain that many of the positions and many of the weightings have already changed from November 30, 2007.  We’d actually start screening out some of the smaller holdings off of that master list to see which are attractive in growth and/or value that will still do well in a slowing economy or even a recession.  If you were opening a decade-long closed fund, you might be tempted to disperse more of the new inflows into other names that might be under-owned or under-weighted in the fund.

Jon C. Ogg
January 14, 2008

Posted on: January 14, 2008 – 5:04 pm in Index, Mutual Funds, , , , , , , , , ,

Big Lay-Offs At Sprint (S)

According to The Wall Street Journal, Sprint (S) will lay off several thousand workers as part of a cost reduction program.

Douglas A. McIntyre

Posted on: January 14, 2008 – 4:48 pm in Uncategorized,

Genentech Earnings Win, But Drugs Miss (DNA)

Genentech (NYSE: DNA) just announced its earnings were $0.69 EPS on $2.96 billion for the last quarter, and First Call had estimates pegged at $0.67 EPS on revenues of $2.97 Billion.  The company has also guided its fiscal 2008 Earnings Per Share in a range of $3.30 to $3.47 EPS versus $3.37 estimates from First Call.

We noted that Wall Street has focused on the individual drug disappointments here from drug to drug for too long, but today’s problem is one that is hard to overlook even if you are more of a big picture sort of investor.  It isn’t that it didn’t have any significant outperformance.  Genentech missed on Wall Street expectations on all four of its top four drugs.

The good news is that shares of Genentech are only down about 2% at $69.15 in after-hours trading, and $65.35 is the 52-week low from December.  We noted that options traders were pricing in only a move of up to about $2.50 in either direction, and the $1.49 drop is well within that range.

We’ll have to see if any downgrades come in based on all top four drugs showing disappointment win over the calls of "unbelievable valuation" and "incredible valuation" calls from Wall Street analysts.  Until then, this is just an unfinished biotech earnings and post-earnings story.   

Jon C. Ogg
January 14, 2008

Posted on: January 14, 2008 – 4:18 pm in Biotech, Earnings,

The 52-Week Low Club (HAR)(TIF)(OPWV)

Harman (HAR) Cuts forecasts and that cuts stock price. Falls to $42.88 from 52-week high of $125.13.

Tiffany (TIF) Even the rich are being pinched. Down to $32.84 from 52-week high of $57.34.

Coach (COH) More rich people spending problems. Also, gets a broker downgrade. Drops to $25.15 from 52-week high of $54.

Compuware (CPWR) Expects to miss quarterly numbers. Trades off to $7.04 from 52-week high of $12.56.

Openwave (OPWV) CFO heads for the door and broker downgrades. Dips to $1.20 from 52-week high of $10.58.

Douglas A. McIntyre

Posted on: January 14, 2008 – 4:03 pm in HI/LOW, , , , ,

Biotech Finance Daily (DNDN)(MRK)(DNA)(BRCX)

Shares of ImaRx Therapeutics (IMRX) are off 15% to $1.18. The company’s news about it Transcranial Ultrasound in Clinical SONolysis clinical trial in patients with acute ischemic stroke disappointed the market a little over a week ago and shares have not recovered. The stock was at $4.75 in August.

Seattle Genetics (SGEN) announced an offering of private stock which took shares down 12% to $10.32.

Genentech (DNA) is set to report earnings after hours. The 24/7 Wall St. preview is already available.

Dendreon (DNDN) was hit with a wave of buying early in the day and is trading at three times normal volume up 8% to $6.56. Perhaps an unusual options activity in the FEB-08 $7.50 Calls is the culprit.  It had 18,457 contracts trade at that strike and the open interest before today was listed as 107,199 contracts.

BioCryst Pharmaceuticals (BCRX) is trading up 8% on well above normal volume. Named an interirm medical officer on Friday.

Compugen Ltd (CGEN) disclosed a collaboration with Merck (MRK) targeted at predicting peptides likely to activate selected G-protein coupled receptors and validating their agonistic activity. The agreement includes an option to Merck for exclusive worldwide licenses for such peptides. Shares moved up 10% to $2.06

Douglas A. McIntyre

Posted on: January 14, 2008 – 3:02 pm in Biotech, , , , , ,

Can Genentech Buck Its Long-Term Slide? (DNA, BIIB, NVS, OSIP, AMGN, BBH)

Genentech (NYSE: DNA) is set to report earnings after the close today.  First Call has estimates pegged at $0.67 EPS on revenues of $2.97 Billion.  This will also mark the end of the fiscal 2007 and estimates there are $2.92 EPS on some $11.7 Billion in revenues.

If you were a biotech bull in 2003, 2004, and 2005 your favorite large cap biotech stock was probably Genentech (NYSE: DNA).  If you traded Genentech in 2006 and 2007, remaining a bull was one painful lesson.  In fact, shares very briefly hit $100 in December 2005 and they have recently traded as low as $65.60 this month.  Shares are down today by almost 1.5% at $70.45 but so far that $70 handle is holding.

Traditionally Genentech has remained a biotech that beats earnings expectations, although that number was only a "barely beat target" last quarter.  The problem that has persisted isn’t the actual growth as much as it is analysts and investors keying in on specific drug estimates not being a blowout on all of its labels.  Revenues were only $6.6 Billion for all of 2005.  The cancer franchise is massive there, yet there always seems to be a general disappointment in one drug or another  (Avastin, Rituxan, Herceptin, Lucentis, Xolair, Tarceva, Nutropin, Activase, Raptiva). 

What we are looking at now internally is the forward valuations, which we feel are achievable in light of the company having a multi-year plan in place.  With estimates showing Fiscal DEC-2008 at $3.37 EPS on revenues of $13 Billion, we have a forward P/E ratio of just under 21 for 2008, and a price to sales ratio (based on a $74 Billion market cap) of 5.69.  For what we believe is still the key leader in its cancer franchise with what is still believed to be a large drug candidate pipeline, we can easily live with these numbers.

Trying to use the "Value Investing" approach to biotech is not always applicable.  We’d merely point you to the woes at Amgen (NASDAQ:AMGN) and Biogen-Idec (NASDAQ:BIIB).  The forward P/E ratios and the sales multiples won’t matter at all if a blockbuster drug franchise comes under target.  While biotechs have been shielded in the past, it is open season on drugs during an election year whether you are a biotech company or just an old stodgy drug company.

We still believe that investors want to own stocks.  And as the economy slows into a recession we think investors will want to own stocks that may have implied safety nets in them.  Many of the other defensive stocks had been showing bubbly valuations just last week, and that doesn’t appear to be the case here.  Now we just have to see if the focus will turn back to the overall performance of the company as a whole.  If the focus will stay on each and every drug at the company then it’s hard to imagine that there won’t be any areas that traders can say were under their investment models.

Wall Street still has an average price target north of $82 per share over the next year and there is still a high target north of $100 out there.  The chart is still one that is at-risk longer-term, but on a short-term it has recovered.  If the street takes a disappointing reaction again we could see that going back to that $65.00 handle.  If there is some horrible unexpected news then who knows where they will find support as the year lows from December and January are roughly 30-month lows.  If options are any accurate tool today it appears that options traders are only looking at an expected price move of up to $2.50 or so in either direction.

As Genentech is the bogey in biotech now, it can affect the entire sector.  It also has partnerships with Novartis (NVS), Biogen-Idec (BIIB), OSI Pharma (OSIP), and others.  It is also still majority-owned by Roche, so the earnings implications and drug comments from Genentech can be far reaching and not just in the U.S.

Genentech is key to one ETF as it represents some 36% of the Biotech HOLDRs (AMEX:BBH). 

Jon C. Ogg
January 14, 2008

Posted on: January 14, 2008 – 12:33 pm in Biotech, Earnings, , , , , , , , , , , , , , , ,

Citigroup: Forget Earnings, Look At Its Plan (C)

Citigroup (NYSE: C) is set to report earnings tomorrow morning.  While this will be the first of the big money center banks and financial conglomerates to officially report earnings, the actual earnings may be irrelevant.  Analyst targets are all over the place and consensus is for earnings to actually show a loss at -$1.00 EPS on revenues in the ballpark of $10.6 Billion.  The honest truth is that looking backward and making the actual projections for this last quarter and maybe this next two quarters is ultimately just guesswork and by now it would be hard to imagine ANY bad number being that big of a shock.

We had been working on a full preview ahead for this one and other financials this week and next, with the focus on what Vikram Pandit was going to show us in his debut earnings call as far as the future of the company.  He HAS TO be aggressive and stern (and maybe ruthless) to win Wall Street over.   

Charlie Gasparino of CNBC just made a key announcement on CNBC.  Gasparino said that Vikram Pandit will indeed show a plan for the company at tomorrow’s Town Hall meeting.  But he also noted that writedowns would be roughly $24 Billion. In addition, Gasparino noted an expected layoff plan of some 17,000 to 24,000 over the coming year; although he noted many would be from attrition or from business unit changes or divestitures.

We had made some of our inquiries with industry contacts over the last week and this is actually well within the numbers we came up with.  What we had calculated based upon conversations and other pondering pieces was something to the tune of a "Mark to Market" writedown (and an immediate challenge of mark to market versus "mark to model") of roughly $20 Billion in writedowns.  We still think these numbers are systematically guesswork.  We were actually under the belief that Pandit would take more than 20,000 jobs with the potential for up to 30,000; although that number from us would be from divestitures, attrition, AND raw layoffs.  Chuck Prince already tried to make some concessions there last year.

While Wall Street would cheer a break-up of Citigroup, it just doesn’t seem like that is going to be in the cards.  To make matters tougher, a break-up by Citigroup might not shield each unit from master liability damage awards down the road as the entire entity today is in theory at risk of lawsuits from shareholders and creditors alike.  Citi’s shares are up almost 1% at $28.82, still close to a 52-week low of $26.50.  The sector has been depressing enough that we won’t even note the real highs over the last year, but it was above $50.00.

Jon C. Ogg
January 14, 2008

Posted on: January 14, 2008 – 11:37 am in Banking, Earnings, Financial Stocks,

EU Won’t Leave Microsoft (MSFT) Alone

Now that Microsoft (MSFT) and the EU seems to have come close to settling differences on the Window Media Player, the government body is back after Redmond again.

According to Reuters "a European Union executive said it would look into complaints from rivals that Microsoft unfairly tied its Web browser to the Windows operating system and made it harder for software rivaling Office and Outlook to work with Windows."

Douglas A. McIntyre

Posted on: January 14, 2008 – 11:27 am in Software,

ETF Launch: Coal, Via Van Eck (KOL, CNX, BTU, ACI, JOYG, BUCY, TA)

This morning we have another ETF being launched that is quite sector specific.  Van Eck Associated has listed the Market Vectors Coal ETF (NYSE: KOL).  While we have noted some ETF’s being too focused for their own good, this will allow investors to be long or short coal producers without having to guess on which individual stocks will or won’t win in a volatile sector.  The ETF is unique and quite specific to global coal company stocks.

The Coal ETF seeks to replicate the total return performance of the Stowe Coal Index. The Index provides targeted exposure to 60 companies worldwide that are engaged in the coal industry.  Estimated returns will track the sector after fees and expenses and of course is subject to the risks of investing in this sector.  The gross expense ratio is listed as 1.09% and the net expense ratio is listed as 0.65%.

If you wish to the full list of components you can see it on the Fact Sheet at Van Eck’s website.  Of the ETF’s top 10 holding, 6 of the 10 are listed in the US (with ticker and weighting percentage):

  • Consol Energy (CNX) 8.06%
  • Peabody Energy (BTU) 7.95%
  • Arch Coal (ACI) 4.69%
  • Joy Global (JOYG) 4.62%
  • Bucyrus Int’l (BUCY) 4.41%
  • Transalta (TA) 4.35%

When you include the four of the top 10 not listed above (as foreign holdings) the top 10 stocks out the approximate 60 names listed in the index account for a weighting of roughly 62.4% of the entire ETF.  This will change through time due to share price changes, rebalancings, IPO’s, and a myriad of other factors, but this was the weighting listed on the site.  The commencing price of this ETF was at $40.00.

Jon C. Ogg
January 14, 2008

Posted on: January 14, 2008 – 10:15 am in ETF, , , , , , ,

Terex Wins Twice (TEX, ASVI)

Terex Corp. (NYSE: TEX) is seeing a double plus good reaction this morning.  This weekend’s version of Barron’s noted a solid long-term opportunity in shares of the company AND it is making an acquisition.

Barron’s noted that Terex shares have fallen from over $96.00 in summer down to the low-$50’s recently.  Barron’s noted that while half of its profits do come from aerial platform construction, 45% of those platform revenues are international sales.  65% of all sales are tallied up as being from abroad.  Barron’s also showed that even if it was valued at five times its expected 2008 pretax cash flow or if it were to be sold at 10 times pretax cash flow, it could bring in $100 a share.

Then this morning the company came out with an acquisition.  It is spending $488 million (compared to a $5.4 Billion market cap) to acquire construction equipment maker A.S.V. Inc. (NASDAQ:ASVI) in a stock transaction at $18.00 per share before dilution.  The company said that if a majority votes along with the deal and as long as no regulatory issues are present, that it will close this merger by the end of the first quarter.

ASVI shares are up 44% at $17.75 in pre-market trading and shares have traded in a 52-week range of $10.11 to $19.45.  Terex shares are up almost 4% pre-market at $54.95, and its 52-week trading range is 48.95 to $96.94.

Jon C. Ogg
January 14, 2008

Posted on: January 14, 2008 – 9:04 am in Infrastructure, Mergers and Buy Outs, ,

The Apple (AAPL) MacBook Air?

Apple (AAPL) may be releasing an ultra-thin notebook at MacWorld.

According to Macrumors it will have the unlikely name "MacBook Air." Maybe Michael Jordan will be there.

Douglas A. McIntyre

Posted on: January 14, 2008 – 8:04 am in Consumer Electronics,

IBM To Tech’s Rescue (IBM, CSCO, HPQ, MSFT, DELL, INTC)

IBM (IBM) has come out raised guidance this morning on strong international orders.  Big Blue put earnings at $2.80 EPS, and the First Call estimate was $2.60 EPS. and revenues came in at $28.9 Billion versus a $27.8 Billion estimate. 

The revenues included a 6-point jump in currency benefits.  These numbers were led by strong performance in Asia, Europe and emerging countries.  What is perhaps more important than if this is just overseas is that this is acting to help almost anything related to technology in early trading.

Sam Palmisano is also telegraphing the future is not going to hell in a hand basket as well:

  • “IBM is well-positioned as we begin 2008 as a result of our global business reach, solid recurring revenue stream and strong financial position. We are on track to achieve our long-term earnings-per-share roadmap objective in 2010.”

Shares of IBM closed at $96.67 on Friday and shares are up roughly 7% in pre-market trading at $105.00 with just under two hours to go before the market opens.  The 52-week trading range is $88.77 to $121.46, so shares had slid about 20% off of highs.

This is really helping technology after a miserable Friday: Cisco Systems (CSCO) +2.4%; Microsoft (MSFT) +1.5%; Intel (INTC) +1.9%; Hewlett Packard (HPQ) +1.7%; Dell (DELL) +1.9%.

IBM will release more detailed numbers and more detailed guidance on its normally scheduled earnings on January 17, 2008.  Apparently someone is tired of day in and day out selling when their business is still strong.

Jon C. Ogg
January 14, 2008

Posted on: January 14, 2008 – 7:50 am in Earnings, Technology Companies, , , , , ,

Top 10 Pre-Market Analyst Calls (ACS, DOX, BBBY, ESRX, HD, LOW, NWA, RFMD, SHLD, UA, ADP, BE, CSC, PAYX, SAPE, HEW)

These are not the only key analyst calls that may impact stocks this Monday, but these are the ones that 24/7 Wall St. is focusing on:

  • Affiliated Computer (ACS) raised to Buy from Neutral at UBS.
  • Amdocs (DOX) raised to Buy from Neutral at UBS.
  • Bed Bath & Beyond (BBBY) raised to Outperform from Neutral at Credit Suisse.
  • Express Scripts (ESRX) downgraded to Neutral from Overweight at JP Morgan.
  • Home Depot (HD) & Lowe’s (LOW) both raised to Outperform from Neutral at Credit Suisse.
  • Northwest Airlines (NWA) raised to Outperform from Neutral at Credit Suisse.
  • RF Micro Device (RFMD)raised to Buy from Hold at Deutsche Bank.
  • Sears Holdings (SHLD) downgraded to Underperform from Outperform at Credit Suisse.
  • Under Armour (UA) raised to Buy from Hold at Citigroup.

UBS Downgrades IT and Outsourcing/Business Process sector:

  • Automatic Data (ADP), BearingPoint (BE), Computer Sciences Corp. (CSC), Paychex (PAYX), and Sapient (SAPE) were all downgraded from BUY to NEUTRAL;
  • Hewitt Associates (HEW) downgraded from Neutral to Sell.

Jon C. Ogg
January 14, 2008

Posted on: January 14, 2008 – 7:36 am in Analyst Calls, , , , , , , , , , , , , , , ,

The Novices At Sears (SHLD) Screw-Up Again

Sears (SHLD) did worse than it had hoped at the end of last year and does not have cash for its share buyback.

SHLD said domestic comparable store sales for the nine-week period ended January 5, 2008 for its Kmart and Sears stores. Sears Domestic’s comparable store sales declined by 2.8% during the nine-week period, while Kmart’s comparable store sales declined by 4.2%. Total domestic comparable stores sales declined 3.5% for the nine-week period.

As a result of the lower sales and gross margin rates, we currently expect that net income for the fourth quarter ending February 2, 2008 will be between $350 million and $470 million, or between $2.59 and $3.48 per fully diluted share. In the fourth quarter of the prior year, the Company reported net income of $820 million, or $5.33 per fully diluted share.

Shares in Sears are off 12% to $84.50 in the pre-market, a new low and down from a 52-week high of $195.18.

Douglas A. McIntyre

Posted on: January 14, 2008 – 7:13 am in Retail,

Europe Markets 1/14/2008 (BCS)(BT)

Markets in Europe are modestly higher at 7 AM New York time.

The FTSE was up .1% to 6,207. Barclays (BCS) was up 2.4% to 476.5. BT (BT) is off 1.6% to 275.75.

The DAXX moved up .2% to 7,735. VW was up 1.8% to 152.92.

The CAC 40 rose .3% to 5,386.

Data from Reuters

Douglas A. McIntyre

Posted on: January 14, 2008 – 7:07 am in International Markets, ,

Amazon (AMZN) Takes On iTunes

Apple’s (AAPL) iTunes service has been invulnerable, at least until now. The consumer electronics company has alienated its music publisher partners by dictating pricing and revenue sharing. That would only makes sense. Apple does have over 70% of the digital music download market. It ought to have things its own way.

The big four music companies are now conspiring with Amazon (AMZN) to break Apple’s death grip. Amazon has gotten all of the major record companies to sign up to its new music store which delivers content without copy protection. Only one of those firms, EMI, has a similar deal with Apple.

At this year’s Super Bowl, Amazon, the record companies, and Pepsi (PEP) will launch a huge free music promotion which could lead to one billion songs being downloaded from the Amazon store. It is an audacious marketing plan. Amazon risks little. The music companies risk alienating Apple by siding with a competitor.

Apple may be in for more trouble that it imagined. If Amazon gives record companies a far cut of royalties for their content, they do not have to sell as many downloads as they do at iTunes where the cut is modest. Amazon has a customer base large enough to promote a service which can rival Apple’s in numbers.

A little greed on Apple’s part may be costing it down the road.

Douglas A. McIntyre

Posted on: January 14, 2008 – 6:51 am in Internet, ,