Daily Archives: February 20, 2008

S&P Small Cap 600 Index Changes Worth Noting (ONB, ASVI, TEX, PQ, HH)

Standard & Poors is making some key changes to its S&P Small Cap 600 Index.  The following additions and deletions will take after the close of trading on Monday, February 25, 2008:

  • Old National Bancorp (NYSE: ONB) will replace A.S.V. Inc. (Nasdaq: ASVI), which is being acquired by Terex Corp. (NYSE: TEX).  Old National Bancorp closed up 3.7% today at $16.15, and its 52-week trading range is $12.99 to $19.45.  A banking stock in this environment, with more than a 5% dividend yield.
  • PetroQuest Energy Inc. (NYSE: PQ) will replace Hooper Holmes Inc. (AMEX: HH), because Hooper had a market cap of a mere $59 million and S&P likes to have a $300 million million market cap to be maintained.  PetroQuest surged almost 7.5% today in regular trading after earnings topped views, and shares were up another 3.7% to $14.89 after the index add.  Its 52-week trading range is $10.02 to $15.99 and its market cap at the close was $708 million.

While the S&P Small Cap 600 Index is less tracked than the S&P 500 Index, this index is one we like to track because when companies come in for the first time onto the Small Cap Index it represents what would be deemed "virgin index Buying" because the funds that track the various S&P indexes do not currently hold these stocks as of yet if they track index performance.

Jon C. Ogg
February 20, 2008

Posted on: February 20, 2008 – 6:05 pm in Index, , , , , ,

Options Traders Spark Marvell Interest (MRVL)

Marvell Technology Group Ltd. (NASDAQ: MRVL) was the subject of a lot of buzz today.  There wasn’t any news out on it, but there were enough options that traded today that would account for almost 5 million shares on a leveraged basis.

We asked around after several inquiries came in throughout the day, and most of the inquiries seemed to revolve around the options trading rather than anything steadfast that sounded like there was an an imminent development.  One source noted to me some "chatter" that Tokyo Electron was the name he heard that may have an interest.  The truth is that there will be know way to know if Marvell is really in play or not without knowing everything management is doing currently.  Because of it being perceived as near-fabless model, that also narrows the field.

34,933 contracts traded for the March-2008 $10 Calls, and the open interest was merely 2,188 contracts.  In the March $12.50 Calls, there were 12,517 contracts that traded hands but the open interest on that was already 30,931 contracts.

Earnings are scheduled for March 6, 2008, so it is too early for traders to start playing this in hopes that there is some earnings blowout coming.  Shares briefly traded under $10.00 recently, but they have also been cut in half over the last year.  To make things worse, shares are down from over $30.00 just two years ago.

Shares rose almost 5% today to $10.99 on above average trading volume.  On last look shares were up about another 2% to $11.23 and had traded some 300,000 shares in after-hours activity.

Jon C. Ogg
February 20, 2008

Posted on: February 20, 2008 – 5:40 pm in Options, Semiconductor,

Capstone Continues Order Receipts (CPST)

Capstone Turbine Corp. (NASDAQ: CPST) keeps on delivering new orders.  Now that the company is at the revenue stage, it keeps winning orders.  After today’s close, the company announced that it has received an order for approximately $1.9 million from a multinational oil and gas company.  The order is for Capstone’s C65 Class I Div 2 Microturbine systems for use in resource recovery applications on unmanned oil platforms.

As far as how this pertains to existing comparisons, Capstone generated $9.2 million in revenues last quarter.  It also listed a backlog of some $13.1 million as of the end of 2007.

This is our favorite small cap alternative energy play, and we have been featuring this in our "10 Stocks Under $10" weekly letter since the stock was around $1.20.  Capstone labels itself as the world’s leading clean technology manufacturer of microturbine energy systems.  We noted long ago how Lazard Capital markets gave this one a $2.50 target.  We feel this one has the potential og going up much more than that, and we keep this under our "under $10" screens daily.

Capstone shares closed down 1.2% in normal trading today, but shares are up some 3.8% to $1,63 in after-hours trading.

Jon C. Ogg
February 20, 2008

Posted on: February 20, 2008 – 4:14 pm in Alternative Energy,

The 52-Week Low Club (T)(VZ)(LVLT)(BX)(SHRP)

Verizon (VZ) bottomed at $33.30 after downgrades due to cellular service price wars.

HCC Insurance (HCC) Weak quarterly results. Trades down to $24.25 from 52-week high of $24.45.

AT&T (T) drops to $32.95 from 52-week high of $42.97 due to cell service pricing competition.

Blackstone (BX) sells off as LBO business goes to hell. Falls to $15.70 from 52-week high of $38.

Sara Lee (SLE) Bread prices up, but nobody doesn’t like Sara Lee. Moves down to $12.97 from 52-week high of $18.15.

Sharper Image (SHRP) Goes Chapter 11. Drops to $.29 from 52-week high of $14.16.

Nutrisystem (NTRI) Bad earnings keep moving the shares down. Falls to $16.32 from 52-week high of $74.09.

3Com (COMS) Deal to take company private loses altitude. Falls to $2.84 from 52-week high of $5.11.

Level 3 (LVLT) Too much debt. Too little earnings. Slides to $2.12 from 52-week high of $6.77.

Douglas A. McIntyre

Posted on: February 20, 2008 – 4:00 pm in HI/LOW, , , , , , , , ,

Netease & Sina Set To Lead Chinese Web & Tech Stocks (NTES, SINA, BIDU)

Today we’ll get to see earnings out both Sina Corp. (NASDAQ: SINA) and Netease.com Inc. (NASDAQ: NTES).

Sina Corp. (NASDAQ: SINA) estimates for the Chinese online media company from First Call are $0.33 EPS on $69.14 million in revenues.  Next quarter estimates are $0.26 EPS on $65.87 million in revenues. Estimates for fiscal 2008 are $1.49 EPS on $333.86 million in revenues.

Analysts have an average price target north of $55.00 on Sina.  Options trading looks a bit difficult to use for a prediction too, but the pricing-in range looks to be a move of $1.90 to $2.75 in either direction.  Sina’s stock currently sits right under its 50 and 200-day moving averages, which are $43.07 and $44.12 respectively. 

Sina’s shares were down less than 1% in early afternoon trading at $42.95, and Sina Corp.’s 52-week trading range is $31.19 to $59.27

Netease.com Inc. (NASDAQ: NTES) estimates for the Chinese interactive online and wireless company from First Call are $0.30 EPS on $75.9 million in revenues.  Next quarter estimates are $0.30 EPS on $76.44 million in revenues. Estimates for fiscal 2008 are $1.24 EPS on $328.46 million in revenues.

Analysts have an average price target north of $22 on Netease.  Options are a bit of a guessing game, but it looks like traders are braced for a move of up to $0.50 to $0.68 in either direction.  The chart here may play some influence as well, as its shares have just recently gotten above the $18.15 200-day moving average and the 50-day moving average is $18.75.            

Netease shares were down almost 2% in early afternoon trading at $18.34, and its 52-week trading range is $13.45 to $24.00.

Keep in mind that Baidu.com (NASDAQ: BIDU) has already reported earnings last week, and its shares are down roughly 4% since that report.  That being said, these two could still influence Chinese web and Chinese tech stocks that trade in the U.S. tomorrow.

Jon C. Ogg
February 20, 2008

Posted on: February 20, 2008 – 2:35 pm in ADR, China, Earnings, Internet, , ,

Major Biotech Movers (AGEN, CEGE, ENCY, IDMI, IMCL, ONXX, PFE, NTII, OXGN, PSDV, SIRT)

Antigenics Inc.  (NASDAQ: AGEN) A study for Cancer vaccine, Oncophage, for the treatment of metastatic melanoma showed mixed results this morning. Shares are down almost 7% to $2.17. The 52 week range is $1.54 to $5.42.

Cell Genesys, Inc. (NASDAQ: CEGE). Shares continue to climb following report Friday citing that vaccine candidate GCAX showed immune response in prostate cancer patients. Shares are trading at $2.93 in mid-day trading. The 52 week range is $1.78 to $7.30.

IDM Pharma, Inc. (NASDAQ: IDMI). Downgraded by Rodman & Renshaw. Shares plummet over 18% to $2.57. The 52 week range is $0.57 to $10.75.

Imclone Pharmaceuticals (NASDAQ: IMCL). Halted testing for competitor Onyx Pharmaceuticals (NASDAQ: ONXX) in the lung cancer drug market and a 4.96% stake purchase by Steve Cohen’s hedge fund, SAC Capital, pushed Imclone up early Tuesday. Shares have returned down to $38.41 in mid-day trading. The 52 week range is $27.50 to $47.94

Neurobiological Technologies Inc. (NASDAQ: NTII) Received a $2.1 million quarterly royalty payment for sales of Memantine, a moderate-to-severe Alzheimer’s disease treatment, from Merz Pharmaceuticals GmbH. Shares have showed little reaction, trading at $2.67. The 52 week range is $2.06 to $19.53.

Oxigene Inc. (NASDAQ: OXGN) Secures $40 million committed equity financing facility. Shares are down over 3% and trading in at $2.05 with a 52 week range of $2.01 to $5.12.

Onyx Pharmaceuticals (NASDAQ: ONXX). Shares are down by $3.47 to $29.62, a 10% drop after being murdered yesterday due to a Phase III testing halt for its lung cancer drug Nexavar. Shares fell almost 25% yesterday. The 52 week range is $23.65 to $61.18.

Today, Pfizer (NYSE: PFE) announced offer to buy all issued and outstanding shares of Encysive Pharmaceuticals (NASDAQ: ENCY) for $2.35 per share, a transaction valued at $195 million in equity. Pfizer will acquire the rights to THELIN, a treatment for PAH currently in pre-Phase III clinical testing in the United States. Pfizer is up almost $0.10 to $22.45 in mid-day trading. The range is $21.56 to $27.73. Encysive is up 110% to $2.27. The 52 week range is $0.59 to $5.02.

Psivida Ltd.  (NASDAQ: PSDV)  Received first R&D payments from Pfizer of $500,000 in part of an over $160 million agreement. Shares are down over 2% at $0.78. The 52 week range is $0.39 to $2.99.

Sirtris Pharmaceuticals, Inc. (NASDAQ: SIRT). Co-founder to present first In-Vivo, pre-clinical data showing SIRT1 activation has the ability to suppress tumor formation in cancer of the intestine and colon. Shares are down trading at $11.59 with a 52 week range of $9.81 to $21.99.

Rachel Lopez
February 20, 2008

Posted on: February 20, 2008 – 1:13 pm in Biotech, , , , , , , , , , ,

Sprint (S) To Give Away Cell Phone Calls For Free

Now that its rivals (AT&T NYSE: T) and Verizon Wireless have gone to $99.99 a month unlimited calling plans, Sprint (NYSE: S) needs to get it in gear. It has had trouble adding new wireless subscribers for the last two years while the two larger companies have put on more customers every quarter over the same period.

Sprint’s merger with NexTel killed its subscriber service reputation which has done damage to the company’s revenue and operating income. A recent study by the University of Michigan showed it in last place for customer satisfaction among US wireless providers The company sacked its CEO and has added an activist investor, Ralph Whitworth, to its board, an action it probably would have liked to avoid.

According to Reuters "Sprint has yet to respond (to its competition), but analysts say it could be considering an unlimited calling plan for as low as $60 a month in a bid to stem customer defections."

With its stock down from over $25 less than two years ago to just over $8 now, it may have to give its service away to get new customers.

Douglas A. McIntyre

Posted on: February 20, 2008 – 12:16 pm in WiMAX, , ,

Mortgage Malaise IPO: Hatteras Financial Corp.

Hatteras Financial Corp., a REIT, or a real estate investment trust, submitted an IPO filing this morning. The proposed maximum aggregate amount in securities is listed as $200 million, although this number is for filing purposes only. The underwriter is listed as Keefe, Bruyette & Woods. Hatteras has applied to trade on the New York Stock Exchange.

Hatteras is externally managed by Atlantic Capital Advisors, LCC, and was formed in September 2007 to invest solely in agency securities, or “adjustable-rate and hybrid adjustable-rate single-family mortgage pass-through securities guaranteed by a U.S. Government agency.” In November 2007, they generated $157.1 million through a private offering and in February generated $158.8 million in a second private offering. The company intends to leverage its capital primarily through short-term borrowings because they believe that it will reduce the impact of changes in the interest rate. They believe that the current situation in the housing market and the low interest rates provide an opportunity to earn a strong return for shareholders. As of December 31, 2007, their portfolio had a weighted average market value of $1.6 billion.

Hatteras intends to capitalize on the infrastructure, business network, and experience of its manager, Atlantic Capital Advisors. Hatteras and Atlantic’s CEO, Michael R. Hough, is also the CEO of ACM Financial Trust, a private REIT.

Hatteras joins an assortment of what appears to mortgage vultures that are emerging to capitalize on the disarray of the current mortgage markets.  We have been pounding the table on the Annaly Capital Management (NYSE: NLY) spin-off Chimera Corp. (NYSE: CIM) even before they came public as having the right expertise and model for pulling this off.  The Blackstone Group (NYSE: BX) has also made its vulture ventures known.  Octavian recently went vulture too, although this was on an international scope.  Even hedge fund Marathon announced plans to go vulture investing with TCW Group. Recently, MFResidential Investments submitted a fairly similar IPO filing.

Rachel Lopez
February 20, 2008

Posted on: February 20, 2008 – 11:30 am in Financial Stocks, IPOs, REIT, , ,

SPAC IPO FILING: Delos Acquisition Corp

Delos Acquisition Corp., a SPAC, or special purpose acquisition company, submitted an IPO filing Tuesday. The filing shows $150 million proceeds targeted at $10.00 per unit, each unit will consist of one share of stock and one warrant. The proposed maximum aggregate amount in securities is listed as $172,500,000, although this number is for filing purposes only.  The sole underwrite for the IPO is listed as Morgan Stanley. Delos has requested to trade on the American Stock Exchange.

The filing specifies that they will intend to initially focus on businesses in the business/information services industry in North America; however, they are not limited to this industry or geographic region.  In evaluating a potential target, Delos will use the following criteria: Competitive industry position; Experienced management team; Established track record; Potential for earnings and growth; Diversified Customer and Supplier Base.

Mel Bergstein, the Chairman of the Board and Chief Executive Officer, currently acts as Chairman of Diamond Management & Technology Consultants, Inc., a leading consultancy firm. Prior to Diamond, he held high management positions at Technology Solutions Company and Computer Sciences Corporation. He also has over 20 years of management consulting experience at what is now Accenture. The Vice Chairman and CFO is Michael Mikolajczyk, also a member of the Board at Diamond Management & Technology Consultants, Inc.

Delos joins a wave of recent SPAC IPO filings. SPAC’s and mortgage securities-related players are dominating the group of companies brave enough to go public in the wake of a looming recession.

Rachel Lopez
February 20, 2008

Posted on: February 20, 2008 – 11:22 am in IPOs, ,

AmTech Outlines Possibilities of NVIDIA/AMD Merger (NVDA, AMD)

Shares of Advanced Micro Devices (NYSE: AMD) are trading up 4% today at $6.78 in early morning trading.  The company is the beneficiary of another research note out of Doug Freedman at American Technology Research, who has outlined potential scenarios for the possibilities of NVIDIA (NASDAQ: NVDA) acquiring AMD. 

For starters, he notes that the positives outweigh the negatives as both would benefit from a business combination.  Freedman notes that other suitors are possible but NVIDIA would likely be the most motivated here.  This even notes that the combined company could be what is needed to move beyond a 20% CPU company.

AmTech does address antitrust concerns over the graphics chipsets in combining NVIDIA and ATI, mainly by noting that Intel (NASDAQ: INTC) has very little friends in regulatory circles (intel recently disclosed a New York AG inquiry).  This also addresses NVIDIA’s fabless model as another hurdle, but it notes that it believes AMD has explored pursuing a fab-lite model.

This even shows some pro forma results for the combined companies.  For 2008, it would expect $11.336 Billion in revenues with gross profit margin of 45%, $1.048 Billion operating income and $2.47 Billion in EBITDA.  For 2009, it also assumes that 45% gross profit margin and would have a combined $12,527 Billion in revenues, $1.482 Billion in operating income, and EBITDA of $2.68 Billion.

AmTech has maintained a neutral rating on NVIDIA and maintained its Buy rating on AMD.  The company still needs to get Hector Ruiz out of the way first, although that is becoming redundant.

Jon C. Ogg
February 20, 2008

Posted on: February 20, 2008 – 10:34 am in Analyst Calls, Mergers and Buy Outs, Semiconductor, , ,

Sharper Image’s New Holiday: Day of the Dead (SHRP)

The Sharper Image (NASDAQ: SHRP) is beyond looking like "The Duller Image."   If this was turned into a western movie, it might be called "The Good, The Bad, and the Fugly."  The ailing retailer has now filed for Chapter 11 bankruptcy protection.

Since 2004, sales have continually declined, with sales down by 26% last fiscal year. Last week, the company hired Ron Conway, an expert in crisis management. Following the sale of inventories, the company stated that it will close 90 of its 184 stores.   We have previously noted that this one became such a disaster that they might want to consider shutting the stores.  Unfortunately there looks like very little is left.

Even a year ago this one we noted at $9.75 as not being able to recover from its own image. We have noted this one as a company likely to disappear in our weekly "10 Stocks Under $10" newsletter. Shares are down 60% in early trading down to $0.56.  Its 52-week trading range had been $1.41 to $14.16.

As a reminder, its Chairman Jerry Levin has also filed for a SPAC IPO of JWL Partners.  We can’t say yes/no on most pending SPAC’s since they have no operations, but Sharper Image hasn’t exactly been one of his greatest resume building companies.

Jon C. Ogg
February 20, 2008

Posted on: February 20, 2008 – 10:08 am in Retail, ,

3Com Stumped by CIFIUS (COMS)

3Com Corp. (NASDAQ: COMS) has announced this morning that the company along with affiliates of Bain Capital Partners, LLC and Huawei Technologies have withdrawn their joint filing to CIFIUS, the Committee on Foreign Investment in the United States, regarding its proposed merger transaction.

While the company said it was disappointed that it was unable to reach a mitigation agreement with CIFIUS for securing merger approval, the parties remain committed to continuing discussions.  3Com’s board of directors approved the merger back on September 28, 2007.  It looks like 3Com is going to have to go back to basics and focus on its own business plan for the time being. 

Bain had already offered up a unit of the company to secure approval in a move that might have ultimately lowered the price shareholders were set to receive, and the new range would have been $4.50 to $5.00 rather than the original $5.30 per share buyout terms.

After that disclosure yesterday, 3Com shares fell from over $4.00 down to under $3.80.  Last Thursday shares were as high as $4.20 and shares were almost up at $5.00 when the merger was announced.  Shares are halted in pre-market trading.

UPDATE: at 9:08 AM EST, 3COM shares are trading down 15% at $3.15, which will be a new 52-week low.  Its 52-week trading range is $3.22 to $5.11.

 

Jon C. Ogg
February 20, 2008

Posted on: February 20, 2008 – 8:53 am in Mergers and Buy Outs, Technology Companies, , , ,

CMGI Adds To ModusLink Via Acquisition (CMGI)

CMGI Inc. (NASDAQ: CMGI) has announced an acquisition this morning of a company called Open Channel Solutions, Inc., which is a provider of entitlement and e-business management solutions.

This acquisition was all cash and was listed as a total value of $24.5 million for OCS.  CMGI is paying out a net purchase price of $11 million for a minority interest and the repayment of debt that OCS currently holds.

CMGI said that this will be neutral to 2008 earnings and accretive thereafter.  In its integration of OCS into ModusLink, the company provides solutions that manage entitlements for software licenses, maintenance & support subscriptions, hardware features and rights-managed content.

Interestingly enough, this company was spun-off of Modus Media International back in 2001.  After CMGI acquired Modus Media international in 2004, CMGI took a minority interest in the company and it has been held as an @Ventures investment since. 

If you adjust for its reverse stock split, CMGI shares have seen a trading range over the last 52-weeks of $9.66 to $26.00.

Jon C. Ogg
February 20, 2008

Posted on: February 20, 2008 – 8:29 am in Cult Stock, Mergers and Buy Outs, Software, , ,

Suntech Power Earnings Miss Hits Solar Names Early (STP, FSLR, SOLF, LDK)

Suntech Power (NYSE: STP) missed earnings this morning and shares are paying the price.  The solar player posted $0.34 EPS, $0.02 worse than the First Call consensus of $0.36 EPS.  Its revenues rose 82.5% year over year to $397.5 million, but the consensus estimate there was $419.6 million.

To top it off, Suntech issued lower guidance for Q1-2008: it sees revenues of $370 to $380 million versus $455.04 million consensus; for Fiscal 2008 it sees revenues if $1.9 to $2.1 Billion versus $2.24 Billion consensus.

Suntech Power (NYSE: STP) is trading down a monster 17% at $37.99 in early pre-market trading; its 52-week trading range is $31.41 to $90.00 and its market cap was almost $7 Billion before this drop.  Solar stocks tend to trade in tandem with each other, and this is taking at least somewhat of a toll on many other names in the sector:

  • First Solar (NASSDAQ: FSLR) down 2.6% pre-market at $206.40;
  • Solarfun Power Holdings Co. Ltd. (NASDAQ: SOLF) down 5% at $15.45;
  • LDK Solar (NYSE: LDK) -4.8% at $33.00 on very thin volume.

For whatever it is worth, there have been other instances where these stocks get hit on a piece of news from another player, only to recover.  But an earnings miss with the multiples that these stocks carry is just not very well received regardless of much these have come off of their highs.

Jon C. Ogg
February 20, 2008

Posted on: February 20, 2008 – 8:03 am in Alternative Energy, Earnings, Earnings Warning, , , , , ,

Garmin Earnings Hard To Knock

Garmin Ltd. (NASDAQ: GRMN) posted earnings above plan at $1.31 EPS versus First Call consensus of $1.11, while revenues were $1.22 Billion versus the $1.05 Billion consensus estimate. 

Despite the concerns that GPS systems are slowing, Garmin issued a slight upside in guidance for fiscal 2008 with its earnings put above $4.40 EPS versus $4.40 consensus estimates and it sees revenues exceeding $4.5 Billion versus $4.26 Billion consensus.

Garmin has also announces that its board of directors approved a 5 million shares buyback plan.

As of last look, there were more than 10.68 million shares listed as being in the short interest.  Shares are indicated up nearly 7% at $74.25 in pre-market trading, and the 52-week trading range is $50.01 to $125.68.

Jon C. Ogg
February 20, 2008

Posted on: February 20, 2008 – 7:49 am in Consumer Electronics, Earnings, Technology Companies, Wireless,

Top 10 Pre-Market Analyst Calls (T, CHK, KOF, CMCSA, KEY, LLNW, LUKOY, MTH, PPG, VZ)

These are not the only analyst calls today, but these are the top ten calls that 247WallSt.com is looking at this morning:

  • AT&T (NYSE: T) downgraded to Neutral from Outperform at Credit Suisse.
  • Chesapeake Energy (NYSE: CHK) started as Buy at Jefferies.
  • Coca-Cola FEMSA (NYSE: KOF) downgraded to Hold from Buy at Citigroup.
  • Comcast (NASDAQ: CMCSA) downgraded to Neutral from Outperform at Credit Suisse.
  • KeyCorp. (NYSE: KEY) downgraded to Underperform from Sector Perform at RBC Capital.
  • Limelight Networks (NASDAQ: LLNW) downgraded to Market Perform from Outperform at Oppenheimer.
  • Lukoil (NASDAQ: LUKOY) raised to Buy from Hold at Citigroup.
  • Meritage Homes (NYSE: MTH) raised to Buy from Neutral at UBS.
  • PPG Industries (NYSE: PPG) downgraded to Hold from Buy at Citigroup.
  • Verizon (NYSE: VZ) downgraded to Neutral from Outperform at Credit Suisse.

Jon C. Ogg
February 20, 2008

Posted on: February 20, 2008 – 7:38 am in Analyst Calls, , , , , , , , , ,

Sharper Image (SHRP) Files For Bankruptcy

After years of falling sales, Sharper Image (NASDAQ: SHRP) has filed for bankruptcy.

Bloomberg writes “Sharper Image is in a severe liquidity crisis that is attributable to a host of factors,” Rebecca Roedell, chief financial officer of San Francisco-based Sharper Image, said in court papers. “The foregoing has been compounded by the ever- tightening and volatile credit and financing markets.”

Shares are down over 30% in the pre-market, trading at $1.

Douglas A. McIntyre

Posted on: February 20, 2008 – 7:17 am in Retail,

Europe Markets 2/20/2008 (HBC)(DB)(SI)(ALU)

Markets in Europe were down over 1% at 7 AM New York time.

The FTSE fell 1.5% to 5,880. HSBC (HBC) was off 1.7% to 268.25. London Stock Exchange was down 3.5% to 1510.

The DAXX was off 1.3% to 6,909. Duetsche Bank (DB) was off 1.7% to 74.56. Siemens (SI) was off 1.5% to 88.62.

The CAC 40 traded down. 1.3% to 4,823. Credit Agricole was off 3.7% to 17.19. Alcatel-Lucent (ALU) was off 2% to 4.2.

Data from Reuters

Douglas A. McIntyre

Posted on: February 20, 2008 – 7:04 am in International Markets, , , ,

How Verizon (VZ) Became The Next Comcast (CMCSA)

Verizon (NYSE: VZ) has been the cock of the walk, but that has changed. Yesterday, the shares hit a 52-week low at $35.19.

The large run-up in Verizon’s stock last year was based on two things. The first was that its new fiber-to-the-home TV and broadband service was picking up customers from cable companies like Comcast (NASDAQ: CMCSA). That sent Comcast shares to multi-year lows. Comcast’s latest earning showed that the impact of Verizon’s initiative was less than expected. More recently the phone company said that it could not get HD set-top boxes to many of its new fiber customers. Motorola (NYSE: MOT) had fallen behind in making them. All of a sudden, the $23 billion that Verizon put into the fiber project did not look quite so good.

Then the market was hit with news of a cellular price war between Verizon Wireless and AT&T (NYSE: T). T-Mobile got in on the action just or fun. Cellular revenue is what has driven Verizon’s revenue and operating income over the last several years as it has lost landline business to VoIP.

Six months ago, Comcast looked like it was down and out, perhaps for a very long time. Two significant problems at Verizon have forced it to replace the cable company in Wall St’s dog house.

Douglas A. McIntyre

Posted on: February 20, 2008 – 6:49 am in Telecom, , ,

Brother, Can You Spare A Loaf Of Bread?

Soon a loaf of bread will be more expensive than a Krugerrand. The price of gold may be rising, but the price of wheat is up more and going up faster.

"Wheat has more than doubled since May, reaching a record $11.53 a bushel on Feb. 11," according to Bloomberg. That is nothing but bad news for everyone everywhere with the possible exception of farmers.

Wheat may be a better measure of inflation than oil. It is used in a wide variety of human foods worldwide and it is also used for livestock. That means inflation by the ton. While the Fed tries to fight a slowdown along with central banks in other parts of the world, the biggest concern is that low rates may drive inflation. The cost of wheat and other grains is driving inflation all by itself. Lower interest rates are not helping at all. Rate may even have to be moved up if wheat and other commodities fuel inflation.

China said its inflation rate was just over 7% in January. But, the cost of food moved up over 15%. The same trend is likely to hit the US because of wheat and milk prices. Fundamentally, prices for grain and food are being decoupled from interest rates.

The other danger of rising grain prices is that the cost of alternative fuel goes up, in particular biofuels. They may seem like a neat way to drive down oil prices over time. That does not work if biofuel costs more than oil.

Economists will argue that the leading indicators of how things are going should be interest rates and oil prices.

That is wrong, The real indicator is wheat.

Douglas A. McIntyre

Posted on: February 20, 2008 – 6:37 am in Agriculture