Daily Archives: March 4, 2008

Applied Materials Solar Strategy Paying Off (AMAT, CY, SPWR)

Applied Materials (NASDAQ: AMAT) saw a major run on Tuesday.  Despite a warning out of Intel the night before, the company is diversifying out of chip cap-ex and equipment dominance into a strategy of being a solar play.  This morning the semiconductor equipment maker disclosed in an SEC Filing a $1.9 Billion solar equipment sales agreement.  This is technically being listed as a total purchase price for the equipment and related services outside of post-warranty services that will be provided by Applied materials for approximately $1.9 Billion.

The sales agreements are with a private non-US corporation where it will supply equipment and installation and warranty services for several solar factories being constructed by the buyer. These factories will feature Applied SunFab equipment that will collectively produce an annual expected output of solar PV modules capable of generating electricity on a "gigawatt scale."

We have covered a $475 million acquisition made last year that was going to allow Applied Materials to get away from its chip cap-ex strategy into also being one of the solar leaders in a field that is booming.  On what was a negative day on Wall Street, shares closed up 7.6% to $20.32, and that is now toward the upper-end of the $16.13 to $23.00 trading range over the last 52-weeks.  Applied Materials’ market cap is $27.8 Billion and its fiscal October-2007 revenues were $9.734 Billion. 

If you have paid attention to Cypress Semiconductor (NYSE: CY) and its partial spin-off of SunPower (NASDAQ: SPWR) you will understand that it did show an incredible return for a while.  While Cypress has been cut in half over the last year, it did literally move almost 300% from bottom to top before giving back its gains.

Who knows, maybe we’ll get a spin-off of Applied SunFab down the road.

Jon C. Ogg
March 4, 2008

Posted on: March 4, 2008 – 5:34 pm in Alternative Energy, Semiconductor, , ,

SPAC IPO FILING: Oasis Group, Inc.

Oasis Group, Inc. is yet another special purpose acquisition company, or SPAC, that has filed to come public via an IPO.  The company has filed to raise $300 million with a sale of 30 million units, with each unit consisting of 1 share at $10.00 per share and 1 warrant with a $7.50 strike price.  The sole book-runner is listed as Bear Stearns and it will trade under the ticker "OGH" on AMEX.

While no business has been set in stone, its first objective is to acquire businesses or assets in the lodging or hospitality sectors, with a particular focus on hotels, resorts and related businesses.

Beny Alagem, is its Chairman, CEO & President, and the filing says he has over 30 years of experience acquiring, building, operating and selling private companies. Through Alagem Capital Group, LLC and its affiliates, Mr. Alagem has invested in the lodging and hospitality, commercial and industrial real estate, technology, and telecommunications sectors. ACG’s current investments are focused on lodging and hospitality. ACG acquired The Beverly Hilton in Beverly Hills, California in December 2003 and the Hilton Los Cabos Beach & Golf Resort in San Jose del Cabo, Mexico in April 2006.

Jon C. Ogg
March 4, 2008

Posted on: March 4, 2008 – 4:57 pm in IPOs, ,

Good News For Sprint (S) And AT&T (T): Mobile Ads

More and more mobile phone users are open to seeing mobile ads, especially if they offset the cost have of their calling and data plans. Reuters writes that a study by Nielsen shows "almost a third of people who use data services such as text messaging or Web surfing are open to advertising if it lowers the overall bill."

Over the last 30 days, the study showed that 28% of US mobile phone users recall seeing an ad. That total hit 58 million people.

As cell phone subscriber numbers grow more slowly due to saturation, US mobile operators like Sprint (NYSE: S) and AT&T (NYSE: T) are looking for new sources of revenue. Advertising could be critical to profit margins in the industry and, fortunately, the trends are good because people are cheap.

Douglas A. McIntyre

Posted on: March 4, 2008 – 4:52 pm in Wireless, ,

The 52-Week Low Club (FNSR)(TRSA)(C)(S)

Fremont General (FMT) Fear of Chapter 11 grows. Falls to $.39 from 52-week high of $13.80.

Verasun Energy (VSE) High commodity prices kill ethanol stocks. Down to $7.76 from 52-week high of $21.47.

Hertz Global Holdings (HTZ) Low travel, high fuel costs. Sells down to $10.59 from 52=week high of $27.20.

McClatchy (MNI) Picture for newspapers gets worse by the month. Drops to $9 from 52-week high of $36.97.

Citigroup (C) Concern that bank will need more money. Drops to $21.23 from 52-week high of $55.55.

Sprint (S) Market still worried that competition is taking subscribers. Sells off to to $6.70 from 52-week high of $23.42.

Cell Therapeutics (CTIC) Company issues senior notes and pushes debt sky-high. Sells down to $.67 from 52-week high of $7.56.

Tessera Technologies (TRSA) Patent lawsuit stayed by ITC. Shares down to $11.11 from 52-week high of $46.43.

Finisar (FNSR) Misses quarterly numbers. Drops to $1.15 from 52-week high of $4.21.

Douglas A. McIntyre

Posted on: March 4, 2008 – 4:32 pm in HI/LOW, , , , , , , ,

Lazard Defends FuelCell Energy Ahead of Earnings (FCEL, FTEK)

Lazard Capital Markets’ Sanjay Shrestha has come out defending FuelCell Energy (NASDAQ: FCEL) ahead of tomorrow’s earnings report.  The firm expects another strong quarter from the company.  It also notes a an attractive risk/reward metric and is maintaining its BUY rating.

Lazard has forecast revenues of $17 million and a loss per share of $(0.26), versus consensus of $16.2 million and $(0.26).  Here are some pending projects noted by Shrestha: "We expect FuelCell to report another solid quarter of additional bookings traction in key markets and ongoing cost/ kW reductions. During the quarter, the company announced more than 9MW of new awards, including a 3.9MW contract with the Linde Group and a 4.8MW order from POSCO Power."

Lazard is also looking for an update on the CT150 projects totaling 16.2MW recently approved by the Connecticut Department of Public Utility Control, and anticipates an update on the status of the 19.6MW Danbury "Triangle" project.

This target price of $15 represents more than a 100% gain from today’s prices and this stock has seen a 52-week trading range of $6.15 to $13.14.  This target reflects a 30x multiple on two potential revenue scenarios and EPS of $0.90-$1.20 over the next 4-6 years.

We would also note that Fuel Tech, Inc. (NASDAQ: FTEK) is scheduled to report earnings after the close tomorrow.  We recently gave a full preview on this one, and the companies are similar in name only.

Jon C. Ogg
March 4, 2008

Posted on: March 4, 2008 – 2:33 pm in Alternative Energy, Analyst Calls, ,

Upek IPO Bites The Dust

The market is starting to take its toll on IPO’s for many companies.  Upek Inc. has just joined the ranks of other companies that have filed to withdraw an IPO.  Its filing with the SEC says that the reason is due to market conditions.

Upek is based in Emeryville, California and provides security software and other products to the biometrics and fingerprint-authentication market.

Another IPO falls by the wayside.

Jon C. Ogg
March 4, 2008

Posted on: March 4, 2008 – 2:14 pm in IPOs,

Defensive Stocks Only A Partial Sanctuary (KO, BUD, KFT, MCD, MO, PG, CL, MRK, JNJ)

Defensive stocks are often the stocks that investors try to use as a safe harbor to wait out the storms.  We have covered many of these and even gave our own list of defensive names with a value strategy earlier this year for the first half of 2008.  But today we are focusing on the actual leaders in "defensive go-to stocks".

These go-to names are Coca-Cola (NYSE: KO), Anheuser-Busch (NYSE: BUD), Kraft (NYSE: KFT), McDonald’s (NYSE: MCD), Altria (NYSE: MO), Procter & Gamble (NYSE: PG), Colgate Polmolive (NYSE: CL), Merck (NYSE: MRK), and Johnson & Johnson (NYSE: JNJ).

These are not all of the defensive names at all, but these are the major stocks that investors have flocked to in defensive stock trading strategies in recent months:

STOCK      LAST        CHANGE   
KO            $59.28    +$0.26; +0.44%   
BUD         $46.57    -$0.40; -0.85%   
KFT          $30.87    -$0.33; -1.06%   
MCD         $52.81    -$0.35; -0.66%   
MO           $73.23    +$0.21; +0.29%   
PG            $65.64    -$0.71;  -1.07%   
CL            $76.35    -$0.49; -0.64%   
MRK         $43.59    -$0.47;  -1.07%   
JNJ          $62.43    +$0.20; +0.32% 

Recently we have offered a full grouping of stocks and trends for a bear market and for a recession, and hopefully that won’t be too prominent all year.  Unfortunately, it isn’t feeling like anything better.

With the S&P at 1312 and some change, it is at a critical level right now.  The low close for 2008 so far in January on the S&P 500 Index was 1,310.50 and the intra-day lows were far worse at 1,270.05.

Jon C. Ogg
March 4, 2008

Posted on: March 4, 2008 – 2:01 pm in Defensive Stocks, , , , , , , , ,

Good News For AT&T (T), Sprint (S), And Verizon (VZ): Mobile Broadband Up

Use of mobile broadband, PCs connected to the internet over cellular networks spiked up 154% from the Q4 06 to Q4 07. The total number of unique computers hooked up at the end of last year was 2.168 million. The number does not include WiFi consumers.

The news is good for Verizon Wireless, AT&T (T), and Sprint (S). Now that cell phone penetration is high in the US and unlikely to grow at the rate it has over the last decade, new users who need a line to connect PCs is a potentially huge market. It is not hard to see the total moving to 10 million customers or more over the next two or three years.

According to comScore, the people using mobile broadband tend to be well-off with heaviest use among people with household incomes of over $100,000 a year.

Douglas A. McIntyre

Posted on: March 4, 2008 – 12:40 pm in Telecom, , ,

Rep Gene Green Talks About Sirius (SIRI) Merger: No Issue If One Goes Out Of Business

24/7 Wall St. spoke to Rep Gene Green of Texas. He is Congress’s most vocal opponent of the Sirius (NASDAQ: SIRI) merger with XM Satellite (NASDAQ: XMSR). He has been vilified by none other than Jim Cramer for working against the deal by suggesting strongly to the FCC that putting the two companies together would be wrong.

In our interview with Green he likened a merger of XM and Sirius to the DirecTV (NYSE: DTV) combination with Echostar (NASDAQ: DISH) which the FCC killed because it would represent a monopoly.

We asked Green whether he was concerned that one of the satellite radio companies might fail. Both have heavy debt and significant operating losses. Green did not appear to think that the financial problems of the companies had any bearing on the issue. He suggested that if one company fails, the FCC should auction off its spectrum to another company that might want into the business.

Green views the debt that Sirius and XM have built up as the cost of getting into the business. That may be his reason for any lack of sympathy about where the companies find themselves financially.

Green also thinks that one of the most interesting proposals being debated to move the merger along would be for the two companies to give up half of their spectrum once a business competition is complete. That would allow that FCC to conduct another auction, and, presumably, create yet another satellite radio company in the market.

Douglas A. McIntyre

Posted on: March 4, 2008 – 12:23 pm in Interview, Mergers and Buy Outs, Satellite, , , ,

Google (GOOG) Keeps Picking Up Market Share

The rich get richer. Despite all of the concerns about the rate at which people click on Google’s (GOOG) text ads, at least it share of the market is still growing.

Based on data from Hitwise, Google’s piece of the US market rose from 65.98% in January to 66.44% in February.

Yahoo!’s (YHOO) share fell slightly from 20.94% to 20.59%. Microsoft’s (MSFT) inched up slightly from 6.9% to 6.95%.

A combined Yahoo!/Microsoft search platform would only end up with about 27% of the search market. No wonder no one things The Justice Department will care about a buy-out.

Douglas A. McIntyre

Posted on: March 4, 2008 – 11:29 am in Internet, , ,

E*Trade (ETFC): The Prince Becomes A Frog

E*Trade (ETFC) investors cheered when they heard that the company’s chairman, a former senior executive at JP Morgan (JPM) was taking over as CEO.

The reality of the situation did not take long to come around. The new man said that the firm would not be sold, at least as far as he knows. Worse, it began to dawn on Wall St. that ETFC still have $12 billion of home equity loans on its balance sheet. The value of those is probably dropping by the minute.

E*Trade is down 13% today to $3.77.

Citadel put money into E*Trade but that left the company with $1.7 billion in debt. If write-offs in the home equity business hit the levels that the some analysts think they will, the brokerage will be insolvent in another quarter or two.

Bernanke told bankers today that the foreclosure problem is getting worse. He asked for their help. There is little reason to believe that they have any to give.

For most homeowners, especially those whose property values are down 10% or more the home equity loan may be what puts them in a position where their mortgages exceed the value of their homes.

That means that being a home equity lender like E*Trade puts it at the bottom of a hill under a lot of junk being pulled down by gravity.

Douglas A. McIntyre

Posted on: March 4, 2008 – 11:22 am in Brokerage Firms,

Would Apple Risk A Share Buyback? (AAPL)

Apple Inc. (NASDAQ: AAPL) shareholders get to vote on nominations for Apple’s board of directors today.  We also saw that proxy firm Glass Lewis& Co. advised holders to elect Chief Executive Steve Jobs, William Campbell, Millard Drexler, Andrea Jung and Eric Schmidt to the board of directors.  But the proxy firm advised shareholders to withhold votes for Al Gore, Arthur Levinson, and Jerome York.

But what else can happen when boards get together with shareholders?  Yesterday there was market talk going around trading desks that some were hoping for a share buyback plan to be announced to drive its shares back up.  We would classify that as a rumor, but we’d hope it was an untrue one.  Apple does have over $18 Billion in cash (probably closer to $20 Billion now) and equivalents as of last quarter and its market cap is currently north of $107 Billion.  While Steve Jobs & Co. could quite easily afford a share buyback, this would be a gesture of focusing solely on the share price rather than on the opportunities in the market.  Of course there is an obligation to shareholders and we don’t refute that.  At $120-ish, shares are down about 40% from their highs at the end of 2007.  But they are also still up almost 50% from their year-lows.  To show performance even further, shares are still up more than 15-fold over the last five years.

Apple is still going to grow, even if not at as high of rates than the past.  Buybacks are loved by some and hated by others.  There are many cases where they are the best solution.  But sometimes they are complete wastes of capital and ineffective.  Pretend the company announced a $5 Billion stock buyback plan for a moment.  That would only absorb one single day’s worth of trading volume.  Triple that number and you absorb only 3 days worth of trading volume. That would be nothing short of a waste of what is a paramount growth in capital that can be used for a major event down the road.  The company has been reluctant to announce a stock split, yet that would be easier to explain.

Chief Financial Officer Peter Oppenheimer will speak tomorrow, March 5, at approximately 2:00 PM EST at the 2008 Morgan Stanley Technology Conference.  Almost $20 Billion in cash is a giant number that will in all probability become even more giant.  But that isn’t always a bad thing.  A stock split would effectively provide the same sort of shareholder reward, and it would cost them next to nothing.  Some would love a buyback.  You know where we stand on that issue.

Jon C. Ogg
March 4, 2008

Posted on: March 4, 2008 – 10:13 am in Consumer Electronics, PC Companies, Rumors, Shareholder Issues, Stock Buybacks, Technology Companies,

Motorola (MOT) Expects North America To Be Tough

Motorola (MOT) may not do well in the rest of the world, but its sales in North America has been solid.

Investors probably can’t take the handset company’s performance in its home market for granted anymore.

The CEO at MOT today said that he expects to see "particularly rugged" competition in North America in the handset business in 2008 and into 2009 according to Reuters. The company’s shares dropped to $9.58, near their 52-week high.

It is surprising that they did not go lower.

Douglas A. McIntyre

Posted on: March 4, 2008 – 9:48 am in Wireless,

Citigroup (C) Hits Multi-Year Lows

Share of Citigroup (NYSE:C) dropped as low as $22.09 this morning, their lowest level in over eight years.

The head of Dubai International Capital said that Citi would need to raise more money. CNBC said the bank may have to cut 30,000 jobs.

In addition, Merrill Lynch cut its earnings forecasts for the bank

Douglas A. McIntyre

Posted on: March 4, 2008 – 9:42 am in Banking,

Goldman Sachs Changes On Conviction Buy List (RCL, ETN)

Goldman Sachs has made some changes to its prized CONVICTION BUY LIST today.  These may seem even a bit counter-cyclical when you look at the companies and the economic trends we are witnessing, but that’s what makes a ball game.

Royal Caribbean Cruises Ltd. (NYSE: RCL) has been added to the Conviction Buy List because it has easy comps and better valuations than its extended competitors in lodging and gaming.  It also sees less downside risk here versus other sectors after an 18% drop so far in 2008.

Eaton Corp. (NYSE: ETN) was also raised to Conviction Buy with an 8% upside to targets.  It was down 7% from the start of February and the firm believes Eaton is more defensive than others in the group with economic weakness and credit market turmoil.   On a longer-term basis, it sees 47% upside to a $121 with historical averages.

Jon C. Ogg
March 4, 2008

Posted on: March 4, 2008 – 8:46 am in Analyst Calls, ,

Goldman Sachs Defends Federal-Mogul With Upgrade (FEMO)

Federal-Mogul Corp. (Pink Sheets: FEMO) was raised from a Neutral to a Buy rating at Goldman Sachs this morning.  Goldman Sachs noted that the 29% sell-off since its post-bankruptcy issuance has created a unique entry point.  Its 6-month target is $27.00, which leaves an implied upside of greater than 30% compared to Monday’s close.  The firm notes that its end market positioning is very defensive.  It notes that 40% of sales come from the less cyclical after-market.  It also likes its estimated implied free cash flow yield of about 11.2% already factoring in a recession, and back-end loaded growth and Carl Icahn owning more than 75% of the company is also discounted at the current price.

Federal-Mogul has only been post-emergence under the new ticker since early January and its shares have fallen from $26.00 to under $20.00, before closing at $20.48 yesterday.  There are far too few analysts that cover this so far to derive a real consensus for an outlook, although that may change in the coming weeks and months.

Jon C. Ogg
March 4, 2008

Posted on: March 4, 2008 – 8:35 am in Analyst Calls, Autos,

Clearwire Guidance Makes WiMAX Look Like 14.4kbp Modem Speeds (CLWR)

Clearwire (NASDAQ: CLWR) has just posted earnings this morning, and so far shares are taking a hard hit.  The near-broadband WiMAX operator and service provider posted on $45.4 million in service revenues, a 91% growth rate year over year; First Call had estimates at $46 million.  Its adjusted EBITDA was $83.1 million.  None of this really matters right now if you look further down at the guidance for 2008.

Clearwire ended the year with approximately 394,000 subscribers, reflecting a 91% increase of approximately 188,000 subscribers during the year.  It also noted that the coverage market was approximately 16.3 million people covered by its network in 50 domestic and international markets, which is compared to approximately 9.6 million people in 36 markets at the end of 2006.

Average Revenue Per User for Q4-2007 was just over $36.00, slightly below the year-ago quarter due to an increase in holiday season sales promotions and slightly higher international bad debt expense. Consolidated churn was 2.4% in Q4-2007 fourth quarter, while domestic churn was 2.1% in the same period.

The company did offer several bits of guidance for 2008.  It sees a 23% to 35% growth in total POP’s covered to 20 to 22 million, and expects a 29% to 35% subscriber growth to end 2008 with 510,000 to 530,000 subscribers.  It also sees revenues growing another 36% to 42% to a range of $205 to $215 million.  First Call has 2008 revenue estimates at more than $270 million and even the lowest estimate seen for 2008 is $206.9 million. 

Shares are now down 10% at $13.00 in pre-market trading.  Unfortunately, despite a $0.49 gain yesterday to $14.40, shares were north of $17.00 last week.

Jon C. Ogg
March 4, 2008

Posted on: March 4, 2008 – 8:21 am in Earnings, Earnings Warning, Internet, WiMAX, Wireless,

SPAC IPO FILING: Market Street Acquisition Corp. (GHC)

Market Street Acquisition Corp. is yet another special purpose acquisition company that has filed for an initial public offering.  It is registering to sell 35 million units at $10.00 per unit, with each unit representing 1 share and 1 warrant with a $7.50 strike price.  Bear Stearns is listed as the sole book-runner for the offering.  No stock ticker was designated, although it will trade on AMEX.

The company intends to acquire one or more operating businesses in the global consumer products and services industry, which relates to the commercial delivery of products and services directly to the consumer in both the United States and the international marketplace. Even more specifically, it will focus on acquiring a company that offers a branded consumer product or service that can be expanded globally. Targeted sectors include, but are not limited to, branded consumer products and services, hospitality, entertainment, health, beauty, wellness, apparel, retail, marketing, restaurants and beverages.

This is not the sponsor company’s first dibs in a SPAC here. Global Consumer Acquisition Corp.(AMEX: GHC) is a blank check company that trades currently and it was formed in 2007 the sponsor to acquire businesses in the global consumer products and services industry.

Jason N. Ader is Chairman, CEO & President, and he founded and serves as the president and CEO of Hayground Cove Asset Management, LLC.  Since 2007, Mr. Ader has also served as Chairman of Global Consumer Acquisition Corp.  Since 2006, Mr. Ader has served as Chairman of the Board of India Hospitality Corp., a blank-check company formed to acquire Indian businesses or assets in the hospitality, leisure, tourism, travel and related industries that successfully completed its acquisition of related flight catering, restaurant and hotel businesses in India in July 2007.

Jon C. Ogg
March 4, 2008

Posted on: March 4, 2008 – 7:54 am in IPOs,

Top 10 Pre-Market Analyst Calls (BKS, BBY, CMO, COP, DBD, DDS, LLNW, NOVL, SFLY, VG)

Below are the top analyst calls that 247WallSt.com is looking at this morning in early trading:

  • Barnes & Noble (NYSE: BKS) downgraded to Underweight at JP Morgan.
  • Best Buy (NYSE: BBY) downgraded to Neutral at Banc of America.
  • Capstead Mortgage (NYSE: CMO) started as Outperform at Bear Stearns; started as Outperform at RBC Capital.
  • ConocoPhillips (NYSE: COP) downgraded to Equal-weight at Lehman Brothers.
  • Diebold (NYSE: DBD) raised to Outperform at Robert W. Baird; downgraded to Hold at Jefferies.
  • Dillards (NYSE: DDS) raised to Neutral at Credit Suisse.
  • Limelight Networks (NASDAQ: LLNW) raised to Hold at Jefferies.
  • Novell (NASDAQ: NOVL) downgraded to Hold at Jefferies.
  • Shutterfly (NASDAQ: SFLY) started as Outperform at William Blair.
  • Vonage (NYSE: VG) raised to Peer Perform at Bear Stearns.

Jon C. Ogg
March 4, 2008

Posted on: March 4, 2008 – 7:32 am in Analyst Calls, , , , , , , , , ,

Intel Warning Worse For Flash Memory Makers Than For Intel (INTC, SPSN, SNDK, MU)

Intel Corp. (NASDAQ: INTC) came out last night and warned of lower margins.  The culprit was only listed as lower than expected NAND flash memory chip prices.  So tonight Intel now said it is looking for 54% margins, plus or minus 1%.  Its previous guidance was 56%, plus or minus 1%.  The interesting part is that Intel said all other expectations are consistent with the prior guidance given with its last outlook.

Shares are indicated down about 3% in early market trading this morning, which is far better than the situation would be if Intel had warned about processor sales.  We would note that this had recently been downgraded at Goldman Sachs and at AmTech.  We also just last week were pondering if Intel would have to lower its guidance again.    

As this looks and feels like a bear market more and more each day, it is impossible to try to say that there is good news here.  But if you break this down and if you take the reason offered at face value for this being tied only to flash memory, then you might be able to make the argument that its core operations are at least in good shape.
There wasn’t any super-fishy activity in its near-month options trading, so this news didn’t look spring loaded in a market that has had a hard time pricing in any bad headlines.

As the news was specific to NAND flash memory chips, it is hittingthose flash memory stocks the worst of the others.  SanDisk Corp.(NASDAQ:SNDK) is perhaps the pure-play for flash memory stocks, and itsshares are putting in new 52-week lows.  Its trading range over thelast year was $23.40 to $59.75.  Spansion Inc. (NASDAQ: SPSN) isanother go-to stock in flash memory, and its shares traded down almost3% in after-hours trading last night. Unfortunately, it has had a pooryear with its 52-week trading being $2.69 to $12.83.  This news is notgoing to bode well for a turnaround at Micron Tech (NYSE: MU) that just won’t turn around, although maybe it will force the company to more rapidly pursue some of the active divesting strategies we have laid out.  Its shares are indicated down more than 1.5% this morning.

Intel shares are down about 3% at $19.38, still above that $18.05 low for the last 52-weeks.  If this was news about weak processor sales that would be looking much worse.

Jon C. Ogg
March 4, 2008

Posted on: March 4, 2008 – 7:17 am in Earnings Warning, Semiconductor, Technology Companies