Daily Archives: February 4, 2008

Biogen-Idec Earnings Preview (BIIB, DNA)

On Wednesday, we’ll get to see earnings out of Biogen Idec Inc. (NASDAQ: BIIB). The estimates from First Call for the biotech company are $0.80 EPS on $835.16 million in revenues.  Estimates for fiscal 2008 are $3.30 EPS on $3.58 billion in revenues.

Despite this stock having been much higher, analysts have an average price target north of $61.00.  Its hard to blame the analysts for not being more bullish since Biogen failed to attract any serious bidder.  Because of that failed bidding process, we’d throw the chart out the window for any long-term patterns and even for longer-term moving averages.  But on a short-term basis it looks like $55.00 held just about the entire time as support and shares are only about 5% under where they were before the company announced it was under strategic review.  If today’s stock price and options were to remain static, we’d say options traders were braced for a move of up to $1.80 to $2.25 in either direction.  We’ll also get to see if Carl Icahn is having any "company acknowledgment or capitulation" in his quest to add three board members.

Since we saw the numbers out of Genentech (NYSE: DNA) for Rituxan, we already have much of the key data for Biogen-Idec revenues.  The rest will boil down to earnings and expense management, along with any new drug data and guidance.

Biogen Idec Inc.’s 52-week trading range is $42.86 to $84.75.

Jon C. Ogg
February 4, 2008

Posted on: February 4, 2008 – 6:31 pm in Biotech, Earnings, , , , , , , ,

SPAC IPO FILING: Corporate Acquirers Inc.

Corporate Acquirers Inc., is a SPAC, or special purpose acquisition company, that submitted an IPO filing today. The filing shows $100 million proceeds targeted at $10.00 per unit, each unit will consist of one share of stock and one warrant with a $7.50 strike price.  The total proposed maximum aggregate amount in securities is listed as $211,000,100 in securities, although this number may be merely for filing purposes. The underwriting group is listed as Deutsche Bank Securities and Pali Capital, Inc. It has requested it be listed on the American Stock Exchange and no ticker has been determined.

The filing shows that Corporate Acquirers Inc. does not have any specific industry or geographic focus. They did specify that in evaluating potential targets, the following criteria may be used: Established companies with positive cash flow; strong competitive position in industry; experienced management team; and a diversified customer and supplier base.

Corporate Acquirers Inc.’s Chairman, President and Chief Executive Officer is G. Richard Thoman. He has been a top executive in a variety of industries including financial services, food, technology, and consumer and business-to-business marketing. Stephen R. Wilson is the Vice-Chairman and CFO. He has 25 years of experience in management, finance, and planning globally.

Rachel Lopez
February 4, 2008

Posted on: February 4, 2008 – 6:14 pm in IPOs, , , ,

SPAC IPO FILING: K Road Acquisition Corp.

K Road Acquisition Corporation, a SPAC, or special purpose acquisition company, submitted an IPO filing last Friday. The filing shows $300 million proceeds targeted at $10.00 per unit, each unit will consist of one share of stock and one warrant.  The total proposed maximum aggregate amount in securities is listed as $345,000,000 in securities, although this number is merely for filing purposes.  The lead underwriter is listed as Credit Suisse. It has requested to be listed on American Stock Exchange.

The filing specifies that they will focus on the North American energy industry, particularly on power sector businesses or assets. In identifying a target, the management will evaluate based upon the following criteria: History of profitability and free cash flow; strong management team; opportunities for add-on acquisitions; spin-off or divestitures from larger companies; defensible business niche; and a diversified customer and supplier base.

The company expects to capitalize on the significant experience and expertise of its management in the energy sector. The chairman, president, and CEO of K Road Acquisition Corp is William Kriegel. He was the former founder, chairman, president and CEO of Sithe Energies, Inc., now one of the world’s largest independent power companies. With David Tohir and Barry Sullivan, Mr. Kriegel established K Road Power and K Road Ventures. Both companies invest in energy focused technologies and assets.

Rachel Lopez
February 4, 2008

Posted on: February 4, 2008 – 6:08 pm in IPOs, Oil & Gas, ,

Murdoch Grows Operating Income In 7 of 8 Segments (NWS)

NEWS CORP (NYSE: NWS, NWS-A) has just posted earnings of $832 million or $0.27 EPS.  Its consolidated operating income for the second quarter was $1.4 billion was up 24% versus the $1.1 billion reported a year ago.

Below is the consolidated Operating Income from each unit, with comparisons from Dec-2007 to Dec-2006 and a POS. or NEG. note (positive or negative) ahead.  Seven of the Eight units showed positive growth in operating income:
NEG.    Filmed Entertainment  $403M vs. $470M       
POS.    Television   $245M vs $112M   
POS.    Cable Network Programming  $337 vs $275M
POS.    Direct Broadcast Satellite Television     $62M vs. -$12M
POS.    Magazines and Inserts     $85M vs. $74M         
POS.    Newspapers and Information Services  $196M vs. $170    
POS.    Book Publishing  $67M vs. $54
POS.    Other  $23M vs. $1M

Frankly, we are not really concentrating on any EPS numbers because the integration from the monumental Dow Jones acquisition.  Same goes for guidance.  But what is obvious as can be is that the Rupert Murdoch model is working.  We can’t show you too many newspaper and magazine operators that are showing this strong of operating income for these segments.

These media conglomerate earnings take quite a bit of time to digest the fall-out for the entire sector because of so man moving parts.  The NWS-A more active shares closed down 0.3% at $19.35 in regulartrading and are essentially unchanged in after-hours trading.  The52-week trading range for NWS-A shares is $17.19 to $25.40. 

Stay tuned for Disney earnings tomorrow and Time Warner earnings on Wednesday.

Jon C. Ogg
February 4, 2008

Posted on: February 4, 2008 – 5:00 pm in Earnings, Media, , ,

The 52-Week Low Club (DTG)(SCMR)(VYYO)

Dollar Thrifty Automotive (DTG) Rental car company stocks fall as DTG cuts outlook. Drops to $16.27 from 52-week high of $55.30.

Ryanair Holdings (RYAAY) Airline warns of rough ride ahead. Sells off to $27.81 from 52-week high of $49.72.

Worldspace (WRSP) No news from the satellite radio company but share take a dive. Falls to $1.05 from $5.66.

Sycamore Networks (SCMR) Stock has been weak for weeks after weak earnings. New low at $3.34 down from 52-week high of $4.35.

Vyyo (VYYO) Unpleasant earnings. Sells off to $1.52 from 52-week high of $9.17.

Douglas A. McIntyre

Posted on: February 4, 2008 – 4:45 pm in HI/LOW, , , ,

Rambus Earnings: Heads or Tails? (RMBS)

Rambus Inc. (NASDAQ: RMBS) has just posted earnings with a net loss of 0$0.14 EPS on revenues of $40.5 million.  First Call had estimates of -$0.10 EPS and $40 million in revenues.  There may be items in that net loss number, so we’d evaluate the conference call and items listed in the press release before hanging our hat on any numbers..

Rambus noted its cash and equivalents at December 31, 2007 were $440.9 million.  The company noted a rise in litigation expenses up $4.4 million sequentially as general litigation expenses for the quarter were $16.1 million.

No guidance was offered, so treat this as an incomplete report.  Shares closed up 1.3% at $20.13 in regular trading today, and after the report shares were just trading down about 1% at $19.86 in thin volume after-hours trading activity.  The 52-week trading range is $12.05 to $23.95.

Jon C. Ogg
February 4, 2008

Posted on: February 4, 2008 – 4:29 pm in Earnings, Semiconductor, ,

Synchronoss Up On Results (SNCR)

Synchronoss Technologies, Inc. (NASDAQ: SNCR) has just posted earnings of $0.22 EPS non-GAAP on revenues of $36.4 million.  First Call had estimates of $0.20 EPS and $35.65 million in revenues.  The company ended December with cash and cash equivalents of $95.9 million.

Stephen G. Waldis, President & CEO: “From a long-term perspective, we believe Synchronoss is well positioned to benefit from multiple growth opportunities, including e-commerce, wireless, VOIP and most importantly, the trend towards converged services…."

Unfortunately, Synchronoss did not offer actual guidance, so until that is given this is probably considered an incomplete report. 

Shares closed at $23.25, up 3.30%, in regular trading today, and after the report shares were just trading at $24.00, up 2.35%, in after-hours trading activity.

Jon C. Ogg
February 4, 2008

Posted on: February 4, 2008 – 4:19 pm in Earnings,

Biotech News Day (February 4, 2008) (AMAG, AOB, AMGN, CELG, MNTA, OMRI, SVA, STEM)

Below are some of the top issues affecting biotech shares today:

  • AMAG Pharmaceuticals, Inc. (NASDAQ: AMAG), a biopharmaceutical company developing iron compounds to treat anemia, saw shares rise 4% to $56.00 after brokerage firm Robert W. Baird initiated coverage with an OUTPERFORM rating.
  • American Oriental Bioengineering Inc. (NYSE:AOB) shares are down almost 7% at mid-day with relative high volume trading to $9.50 on no real news.
  • Amgen Inc. (NASDAQ:AMGN) stock shows no reaction to deal with Japanese drug giant Takeda Pharmaceutical. Takeda is to purchase Amgen’s Japanese unit for up to $902 million plus royalties on sales in exchange for access to 13 of Amgen’s new drugs. Amgen hopes this will curb costs and provide cash as their high-selling anemia drug sales slow due to safety issues. 
  • Celgene Corporation (NASDAQ:CELG) shares are down $1.76 to $57.94 at mid-day. Although earnings reported last Thursday met Wall Street expectations, the outlook for the success of its multiple myeloma cancer treatment, Revlimid, is mixed. Today, the company released Phase II data and news for its psoriasis drug CC-10004. The recent study showed positive results and the company announced plans to increase dosages. 
  • Momenta Pharmaceuticals Inc. (NASDAQ:MNTA) shares continued to take a beating after they announced their earnings release date this morning. They had a rough quarter after the FDA rejected their genetic blood-thinner in November, losing about 60% of its share price. Shares are down $0.37 to $7.54 at mid-day. 
  • Omrix Biopharmaceuticals, Inc. (NASDAQ:OMRI) shares are slightly recovering today after a sharp plummet over the last 2 weeks following the FDA approval for competitor ZymoGenetics’ (ZGEN) Recothrom, that will compete with Omrix’s Evithrom in the thrombin drug market. Omrix announced last Friday that their CFO is resigning. Shares are up 4% to $21.27 on relatively heavy trading volume at mid-day. A month ago, shares were trading at over $30. 
  • Sinovac Biotech Ltd. (AMEX:SVA), the Chinese vaccine provider, has shares up over 5% to $4.11 at mid-day after Sinovec announced the private placement of 2,500,000 common shares for $9.75 million to Sansar Capital Management. 
  • StemCells Inc. (NASDAQ:STEM) stock continued to rise after news last Thursday that it plans to collaborate with Casey Eye Institute to study their leading product candidate, HuCNS-SC, a probable treatment for retinal degeneration which is a leading cause of blindness. Shares are up over 15% at mid-day to $1.77.

Rachel Lopez
February 4, 2008

Posted on: February 4, 2008 – 2:41 pm in Biotech, , , , , , , ,

Can Barry Diller Even Focus on Earnings? (IACA, LINTA)

On Wednesday morning, we’ll get to see earnings out of IAC/InterActiveCorp (NASDAQ: IACI).  Frankly, this one has more questions than answers today.  We do not know if Barry Diller is going to be able to focus on results in the Q&A or if he is going to be discussing the Malone-Diller war as Liberty Media (NASDAQ: LINTA) CEO Malone has Barry Diller under fire.  It’s amazing what a difference a year can make, because he was listed as one of our own "most entrenched CEO’s" at the time and his fate is currently more than uncertain.

The estimates from First Call for the online and off-line media company are $0.55 EPS on $1.83 billion in revenues.  Estimates for next quarter are $0.36 EPS an $1.57 Billion in revenues and estimates for fiscal 2008 are $1.80 EPS on $6.82 billion in revenues.

Analysts have an average price target north of $33.00.  We are not really relying on options as a predicting tool because of the developments in the infighting that has come up and because of the pending break-up of the company. If we were looking at options as a tool today with static prices, we say options traders were expecting a price move of up to $1.00 to $1.25 in either direction.

This stock is up from its recent lows of $23.30 in January, but we’d take note that until this last bounce it has looked like one rolling low after another fake-out recovery.  The current prices are important as the 50-day moving average is $26.31; its 200-day moving average is $30.03.  Keep an eye on those as these numbers will likely change slightly by Wednesday.

Shares were just downgraded to Hold at Stifel Nicolaus on Monday morning over the current fate being questioned.  We actually have IAC/Interactive up for formal review right now for our own Special Situation letter, and once we have the revenue figures out of each unit we’ll be making a formal report for subscribers on this.

IAC/InterActiveCorp’s 52-week trading range is $23.30 to $40.99.

Jon C. Ogg
February 4, 2008

Posted on: February 4, 2008 – 2:30 pm in Earnings, Entertainment, Internet, , , ,

Dumb Enough To Buy The Brooklyn Bridge

Owning a toll bridge or a toll road would seem like a license to steal. It is, if you can get the asset at a good price.

With real estate and financial assets going through a period as bad as any in 25 years, institutional investors are looking at infrastructure plays. And, funds are being formed to go after the same properties.

According to Portfolio "Stanford’s Collaboratory estimates that more than 72 new infrastructure funds have been introduced since the beginning of 2006 and that more than $160 billion has been raised during that period for infrastructure investment."

With that much money chasing a limited pool of infrastructure properties, the dynamics of these investments may start to look like real estate did five years ago. The best real estate, both commercial and residential, had plenty of buyers. Buyers were, in fact so abundant that prices moved irrationally high.

A bridge may bring a good yield, but only if it is to be had at a bargain, Among other things, someone has to pay for the up-keep.

Douglas A. McIntyre

Read More »

Posted on: February 4, 2008 – 2:25 pm in Infrastructure

Akamai Technologies Earnings Preview (AKAM)

On Wednesday after the close of trading, we’ll get to see earnings out of Akamai Technologies Inc. (NASDAQ: AKAM). The estimates from First Call for the internet content enhanced-delivery technology provider are $0.37 EPS on $174.61 million in revenues.  Estimates for the next quarter are $0.38 EPS and $183 million in revenues; fiscal 2008 are $1.65 EPS on $803.93 million in revenues.

Analysts still have an average price target north of $43.00, yet the stock used to trade significantly higher.  If the share price and options were both kept static, it appears that options traders would be pricing in a move of up to $1.67 to $1.82 in either direction.   This stock has actually been performing well with roughly a 20% gain off of January’s lows, although we would note that the key moving averages above may be some key resistance levels.  The 50-day moving average is $33.17 and the 200-day moving average is $37.83.

We’ll see if the fears competitive pressures that have been contributing to the volatility have been overdone or if the competition is real.  Because of the nature of this business and growth in online media delivery that has more demand to be faster and faster, we’d expect this to be a very pivotal quarter for the company. 

Akamai Technologies Inc.‘s 52-week trading range is $25.06 to $59.69, so you can see there is quite a ways to go before he stock makes any significant share prices are challenged.  If you are an Akamai Tech shareholder stay tuned after the company’s conference call because we have an opportunity to ask management a few questions directly.

Jon C. Ogg
February 4, 2008

Posted on: February 4, 2008 – 1:17 pm in Earnings, Internet,

Earnings Expectations From Disney (DIS)

On Tuesday, we’ll get to see earnings out of Walt Disney Co. (NYSE:DIS). The estimates from First Call for the entertainment giant are $0.52 EPS on $10.04 billion in revenues.  Estimates for fiscal September 2008 are $2.13 EPS on $37.04 billion in revenues.

Analysts have an average price target north of $38.  The chart on this one has been rather ugly with only the last two weeks being a period of relief.  Shares are currently under the 50-day moving average of $31.26 and well under the 200-day moving average of $33.24.  If Monday’s trading prices are any indicator and were left static, it appears that options traders would be pricing in a move of up to $0.50 to $0.55 in either direction.

We have even made a hint at Disney being nearly recession proof, although recession-resistant is probably more appropriate.  We still wonder if Disney is putting its Hannah Montana brand at risk over the Wal-Mart outlet sales, although maybe that means it’s already peaked if you can find idiot parents willing to spend hundreds of dollars for one ticket for their kid to see a concert.  Despite some recalled toys from Chinese lead paint, Disney is expected to be mostly insulated from that issue.

Walt Disney’s 52-week trading range is $26.30 to $36.79.

Jon C. Ogg
February 4, 2008

Posted on: February 4, 2008 – 12:20 pm in Earnings, Entertainment, ,

What To Expect From Boston Scientific Earnings (BSX)

On Tuesday morning, we’ll get to see earnings out of Boston Scientific Corp. (NYSE:BSX). The estimates from First Call for the medical device developer are $0.09 EPS on $2.13 billion in revenues.  Estimates for fiscal 2008 are $0.50 EPS on $8.21 billion in revenues.

It is a bit interesting that shares are suddenly up 5% late Monday morning to $13.00 today, and we’d probably attribute most of this to short covering as many traders have been betting against this one for longer than investors would want to remember (41.9 million shares short on last look). 

Analysts have an average price target north of $15.00, and we’d be the first to note that this one is now up about 20% from recent lows put in just on January 9, 2008.  We are choosing not to use options as an indicator because of the low share price and because of conflicting calculations ($0.20 expected, versus another $1.10 calculation).

This chart has surprisingly been recovering while no real sentiment has changed on Wall Street.  Banc of America raised its rating to a BUY in mid-January after a 15-month period of negative ratings.  BSX stock has gotten back above its 50 day moving average of $12.07.  Its 200-day moving average is roughly $13.84.  This chart is starting to look more interesting than the story of recent years.

The company has already announced major layoffs expected.  That isn’t enough.  We recently called CEO James Tobin one of ten CEO’s in America that needs to be fired.  We still think it highly possible that company will either break itself up or will look at more divestitures.  There is also a real chance here that the company will continue small sales here and there.

Boston Scientific Corp’ 52-week trading range is $10.76 to $18.47.  Shares were over $40 in 2004, so at $13 or at $15 or at $18 there are still going to be many unhappy campers here that have owned BSX shares.

Jon C. Ogg
February 4, 2008

Posted on: February 4, 2008 – 11:46 am in Earnings, Medical, , ,

Itron: Lazard Still Looking For New Highs (ITRI)

Itron Inc. (NYSE: ITRI) shares are being given a positive note this morning.  Analyst Sanjay Shrestha of Lazard Capital Markets is maintaining his Buy rating and $115.00 target.  This number is based on a 25 forward multiple of $4.60 EPS targets from Lazard for forward 2009 estimates.

Shrestha noted a visit to CenterPoint on its "intelligent grid" initiative, which it does not expect the awards from that project to materialize until the latter part of 2008.  Shrestha also noted a 40,000,0000 advanced metering instrument endpoints nationwide and for those companies in the industry.  Shrestha noted that 2008 will be a year or project awards with the meaningful part of revenues and earnings from these coming in 2009 and beyond.

Please keep in mind that this is not saying there are 40 million units that Itron will win, as this appears to be more of an industry-wide total opportunity.  Itron shares are down 0.7% late morning at $87.23, and the 52-week range is $57.83 to $112.92.  A $115.00 target would be an all-time high for this stock.  Another analyst at a competing firm has a $120.00 price target and the average target is over $104.00, so this call isn’t out of the ordinary.

Jon C. Ogg
February 4, 2008

Posted on: February 4, 2008 – 11:19 am in Analyst Calls, , ,

AmTech Removing Intel From Focus List (INTC)

American Technology Research is removing Intel (NASDAQ: INTC) from its FOCUS LIST this morning.  AmTech is still maintaining its  official Buy rating and its $27.00 price target on the stock and noted that the 12-month outlook remains upbeat.

Doug Freedman, Managing Director of Research at American Technology Research, noted specifically that risk/reward is now more balanced than when the firm added Intel to this list on January 22.  Freedman noted on seasonality and sentiment:

  • "Near-term we believe the stock will be sentiment-driven as January data points come out, and as the PC food-chain will likely be seasonally weak.  We believe Intel remains well-positioned to gain share, firm up ASPs and grow margins to guidance in 2008. Near-term, we believe data points around the PC food-chain will be mixed as a combination of seasonality and macro factors impact guidance and sentiment…. We view valuation as compelling and view INTC under $20 as a good long term investment."

This is still a bullish call on a longer-term basis, but it is much more muted than the "we’d buy right here right now"call from January.

Jon C. Ogg
February 4, 2008

Posted on: February 4, 2008 – 9:50 am in Analyst Calls, Semiconductor, , ,

Goldman Sachs Removes Google From Buy Lists (GOOG)

Goldman Sachs is making a ratings change on Google (NASDAQ: GOOG) this morning.  Google has been removed from the Goldman Sachs Technology Framework Favorite Growth List after seeing shares drop some 14.1% since being added to the list on January 18, 2008 (compared to up 5.3% for the S&P 500 Index).  The stock is also being removed from the Goldman Sachs Conviction Buy List due to underperformance to date.

Goldman Sachs notes that there is no official ratings change as there is no change to its Buy rating on the stock.  This notes a belief that the recent drop is due to concern over its potential exposure to a macroeconomic slowdown.  Goldman remains positive with a compelling valuation even after it lowered estimates ahead.  The firm also noted that Google can maintain approximately 20% revenue earnings growth from 2009 to 2012.

This technology list has some stop loss features that trigger removals. Goldman Sachs’ 2008 year-end price target is $700.00.

Jon C. Ogg
February 4, 2008

Posted on: February 4, 2008 – 7:48 am in Analyst Calls, Internet, ,

Top 10 Pre-Market Analyst Calls (AXP, COF, DFS, ADBL, RATE, BRCM, CVC, CRL, CVD, GME, HAL, PALM, STI)

These are not the only upgrades and downgrades affecting shares in pre-market trading today, but these are the initial calls that 247WallSt.com is focusing on:

  • American Express (NYSE: AXP), Capital One (NYSE: COF), and Discover Financial (NYSE: DFS) downgraded to Sell at UBS.
  • Audible (NASDAQ: ADBL) downgraded to Market Perform at JMP Securities; downgraded to Hold at Jefferies.
  • Bankrate (NASDAQ: RATE) downgraded to Hold at Citigroup; downgraded to Neutral at Merriman Curhan Ford.
  • Broadcom (NASDAQ: BRCM) downgraded to Neutral from Overweight at JPMorgan.
  • Cablevision (NYSE: CVC) raised to Buy from Hold at Deutsche Bank.
  • Charles River (NYSE: CRL) and Covance (NYSE: CVD) raised to Buy from Neutral at UBS.
  • Gamestop (NYSE: GME) raised to Buy from Hold at Citigroup.
  • Halliburton (NYSE: HAL) raised to Overweight from Neutral at JPMorgan.
  • Palm (NASDAQ: PALM) raised to Overweight from Underweight at JPMorgan.
  • SunTrust (NYSE: STI) downgraded to Underperform from Neutral at Robert W. Baird.

Jon C. Ogg
February 4, 2008

Posted on: February 4, 2008 – 7:16 am in Analyst Calls, , , , , , , , , , , , ,

Europe Markets 2/4/2008 (BCS)(VOD)(SI)(ALU)

Markets in Europe were modestly higher at 7.05 AM.

The FTSE was up .6% to 6,066. Barclays (BCS) is up 2.2% 482.5. Vodafone (VOD) is down 1.7% to 178.2.

The DAXX is higher by 1.3% to 7,056. BMW is up 3.3% to 38.69. Siemens (SI) is up 2.2% to 91.38.

The CAC 40 is trading up .7% to 5,012. Alcatel-Lucent (ALU) is up 2.8% to 4.39. Societe Generale is off 2.4% to 85.68.

Data from Reuters

Douglas A. McIntyre

Posted on: February 4, 2008 – 7:07 am in International Markets, , , ,

Murdoch Could Buy Yahoo! (YHOO): With Google’s Help

News Corp (NWS) would probably love to own Yahoo! (YHOO). In December, in the US, Murdoch’s online properties had 81,8 million unique visitors. Most of that is due to MySpace. Yahoo! had 136,6 million users for the same period. Google had 132,9 million.

For Murdoch, combining the world’s largest social network with the world’s largest portal would yield a huge pool of online ad inventory, perhaps the largest in the world. It would allow him unprecedented access to the web for his properties like Fox and The Wall Street Journal.

Murdoch’s problem is that he can’t afford Yahoo!. News Corp has a market cap of $61 billion and Yahoo! sits at $40 billion. Even if Yahoo! Japan and the portal company’s stake in China e-commerce company Alibaba were sold off, a buyer would have to come up with at last $25 billion.

There is somewhere Murdoch could go to get that money. Google (GOOG) would almost certainly advance News Corp a few years of money against having the exclusive search franchise for Yahoo!. Google has already given News Corp guarantees from search results sold on MySpace. What could News Corp get for the rights? Probably $4 billion a year. A five year advance would give News Corp another $20 billion for a takeover fund. Murdoch could also cut out most of the R&D spending and staff at Yahoo! pushing operating income way up.

Google would get what it wants. It will have pushed Microsoft to the back of the search engine line. Murdoch would own the world’s largest internet platform. Perhaps Google’s founders would even let Murdoch fly on their new 747,

Douglas A. McIntyre

Posted on: February 4, 2008 – 6:16 am in Mergers and Buy Outs, , , ,

Banks Bleed Anew As LBO Debt Sits Unsold

With all those subprime write-downs hitting bank and investment house balance sheets it would be nice for them to off-load some of the LBO debt they have taken on over the last year. No such luck.

According to the FT "the group of banks backing buyers Apollo Management and Texas Pacific Group are having trouble selling on the leveraged buy-out debt to third parties. With the bulk of the debt remaining on their books, the banks are sitting on a sizeable loss." And, that is only the tip of the iceberg. S&P reports that banks are holding $150 billion in syndicated debt.

As the Fed cuts rates, the yield on many LBO bonds falls as well. That makes them less attractive, especially with the risk they carry giving leverage to newly private companies with a potential recession coming.

The carnage is not over yet. Other large deals like BCE (BCE) are still in the wings and there is plenty of debt sitting on bank books from transactions finished last year.

It would not be too outrageous to believe that 20% of the loans for LBOs will have to be written off by financial firms. That is about $30 billion. Most of the money is probably spread over a dozen large banking operations, but that is still $2.5 billion each, on average. Some of the more aggressive LBO lenders are probably sitting on bad money pools which will require write-downs of closer to $5 billion.

Who said the banking crisis was over?

Douglas A. McIntyre

Posted on: February 4, 2008 – 5:51 am in Banking,