Daily Archives: April 11, 2008

Cramer Tours Kremlin & Politburo (MTL, WBD, CTCM, SEDC, CETV, TRF, RSX)

This week on CNBC’s MAD MONEY, Jim Cramer highlighted how Russia has many very promising prospects for emerging markets investors.  He gave many ways to play the country with ADR’s of public Russian companies that trade in the U.S.  We only wanted to run a single summary since this was his fixed series going all week. Here were his picks this week for Russia:

  • Cramer’s Russian pick from Monday was in metals and mining pick of Mechel (NYSE: MTL) for steel demand being driven in Russia, China, and the Middle East.
  • On Tuesday, Cramer picked Russian food producing giant Wimm-Bill-DANN (NYSE: WBD) with more than 30%of Russian dairy and as the number 2 and number 3 producer of baby foods and juice products.
  • Cramer’s pick on Wednesday, he gave his top pick that night as CTC Media (NASDAQ: CTCM), the fourth largest television broadcaster in Russia with 42 television stations and 30% longterm growth.
  • On Thursday, Cramer picked Central European Distribution (NASDAQ: CEDC) as a vodka and liquor distributor in Russia and Eastern Europe.
  • Friday’s Cramer pick from Russia was Central European Media Enterprises Ltd. (NASDAQ: CETV), which invests in, develops, and operates national commercial television channels and stations in Central and Eastern Europe.

As far as going abroad, you’ve always heard 247WallSt.com talk about ETF’s and Closed-End funds as trading vehicles that offer significant upside without as much individual portfolio risk due to a single company.  The longest running fund we used for investing in Russia is the Templeton Russia and East European Fund Inc. (NYSE: TRF) and the Market Vectors Russia ETF (NYSE: RSX).

If you have followed Cramer, he’s given many similar country category picks over the course of a week, particularly in BRIC countries.  As far as another BRIC series Cramer has run for Brazil, Russia, India, and China:

You can join our open email distribution list to hear about special financings, secondary offerings, IPO’s, M&A, and more previews for other special situations in various stages.

Jon C. Ogg
April 11, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 11, 2008 – 6:07 pm in ADR, Cramer, Mutual Funds, , , , , , ,

Journal Register, Unfit For Listing (JRC)

Journal Register Co. (NYSE: JRC) has been given notice by the NYSE that its shares are slated to get booted off of the prestigious exchange.  The NYSE said in its statement that the company failed the 30-day $1.00 average for 30 consecutive days.  The exchange even cited its "abnormally low price" in the decision.

We have featured this one on numerous occasions via our own "stocks under $10" and the "Old Media / New Media" weekly newsletters as one that was going to buckle under its own weight.   We’ve even started identifying which newspaper stocks might actually be worth buying at today’s prices and those should survive the digital migration.  But just F.Y.I., Journal Register isn’t one of them.

Have you ever been on an airplane that lost it’s primary hydraulic system with over an hour left in your flight?  It’s scary, trust me on that.  The 52-week high is $6.48.  It even used to be $15.00 and even over $20.00.  This looks like a recapitalization is heading the company’s way in a hurry after shares closed at $0.265 today.  That will be just as scary as losing the primary hydraulic system.  The company waited far too long to explore its alternatives. We’ve even speculated last summer about the possibilities that the company would be at risk of servicing its debt.

We recently even noted that this stock could be one of the stocks that go to zero. Journal Register is hanging out with Elvis, Marilyn Monroe, Bogey, and James Dean.  Yep, it’s the Boulevard of Broken Dreams.

You can join our open email distribution list to hear about special financings, secondary offerings, IPO’s, M&A, and more previews for other special situations in various stages.

There is nothing wrong with being listed on the pink sheets.  Despite the fact that getting information becomes nearly impossible, and despite the issues of no one wanting to own pink sheet stocks, and despite the fact that many institutions are barred from owning pink sheet stocks… yep. Nothing wrong at all.

Jon C. Ogg
April 11, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 11, 2008 – 4:31 pm in Media,

52-Week Low Club (AIR, AVR, LNG, CLX, CTAS, DELL, XXIA, LNET, MNST, PNCL, SSCC)

These are far from all of the lows, but these are many highlighted stocks that traders will care about.  The prices for today are based on the last hour of trading and prior ranges rather than the closing prices for this Friday.

AAR Corp. (NYSE: AIR) hit a new low today on no direct news from a 52-week range of $22.06 to $39.42.  Shares were down over 7% late in the day at $20.91.  Hmm.. products, services, and maintenance to the airlines.  Go figure.

Aventine Renewable Energy Holdings, Inc (NYSE: AVR) down to a new low despite an upgrade by Broadpoint Capital. Ethanol stocks have dipped this month after a report that corn-supplies will be tight this year. Hit a new low of $4.22 late in the day from a 52-week range of $4.39 to $20.85.

Cheniere Energy Inc. (AMEX: LNG) down today on a downgrade by Lehman Brothers yesterday, despite announcements that its LNG terminal in Louisiana will begin to receive shipments on August 12. Shares down over $2.00 to new low of $16.17 off a 52-week range of $18.40 to $43.50.  This huge drop almost seems counterintuitive with sub-projects coming online and with energy prices in the stratosphere, but that downgrade from Lehman yesterday is ruling the roost.

Clorox Co. (NYSE: CLX) down to lowest points since 2004. Thursday, a Bernstein analyst estimated that third-quarter earnings could be lower than previously expected. Shares hit as low as $55.16 earlier today on a 52-week range of $55.37 to $69.36.  Maybe the public realized how bad bleach is for the water supply.

Cintas Corp. (NASDAQ: CTAS) dropped to a new low after a downgrade by Lehman Brothers. Shares hit a new low of $27.35 before recovering late in the day on a 52-week range of $27.41 to $41.04.  Uniform sales… what gets cut as employees get fired and as businesses trim expenses? Oh yeah, uniforms.

Dell Inc. (NASDAQ: DELL) fell along with the market today with the other computer companies. They just happened to hit a new low. They dropped to $18.44 on a 52-week range of $18.53 to $ 30.77.  The good news is that late in the day shares were back above the prior low.  The bad news is that nothing is going its direction.

Ixia (NASDAQ: XXIA) taking a hit from downgrades by JMP Securities and Ferris Baker Watts. They also cut their own guidance for first quarter estimates. It hit a new low of $6.30 off a 52-week range of $6.51 to $10.70.

LodgeNet Interactive Corporation (NASDAQ: LNET) down to a new low of $5.70 today. Apparently good hospitality isn’t enough keep the shareholders comfortable. The 52-week range is $5.90 to $38.11.  As people cut back, maybe those in-hotel movies are easier to cut spending on.

Monster Worldwide, Inc. (NASDAQ: MNST) hit a new low today with a 52-week range of $23.00 to $50.28. It shouldn’t be out of a job anytime soon but if it is, it will know where to look.  Shares down almost 4% at $22.20 late in the day.

Pinnacle Airlines Corp. (NASDAQ: PNCL) taking a hit in the wake of Frontier Airlines bankruptcy scare. Hit a new low of $8.22 on a 52-week range of $8.43 to $20.34.  Stock edged back above that $8.50 level in last 20 minutes today.

Smurfit-Stone Container Corp. (NASDAQ: SSCC) dipped to a new low off a 52-week range of $6.65 to $14.08.  Shares were at $6.35 in the last 20 minutes today, down almost 8%.  paperboard and packaging… what gets cut when stuff stops selling stores?  Oh yeah, the packaging.

Jon C. Ogg
April 11, 2008

Posted on: April 11, 2008 – 2:55 pm in HI/LOW, , , , , , , , , , ,

Is National City The Next Bank Takeunder? (NCC, BNS, KEY, FITB)

National City Inc. (NYSE: NCC), has fallen on reports that the Bank of Nova Scotia (NYSE: BNS), the second largest Canadian lender by assets, has offered an minority investment in the troubled bank.

National City has written down some $333 million in the fourth quarter, largely due to its exposure to the wonderful Florida and Ohio housing markets.  The bank has also been noted recently as being under pressure from regulators to boost its capital and reserves or to find a potential buyer before first quarter results are released this month.

Supposedly both KeyCorp (NYSE: KEY) and Fifth Third Bancorp (NASDAQ: FITB) have offered bids or investments that are that articles have called as being "too low" for National City to swallow.   Frankly, Fifth Third is another bank that has been deemed as one of the potential targets out there, so we’d have more questions than answers on that situation.  Elsewhere, Consair Capital has also been noted as "considering a bid" while Warburg Pincus LLC has gone away.

Interestingly enough, this potential deal would allow Bank of Nova Scotia to further access U.S. markets.  Until any formal word or real terms surface, we’d keep this classified as a rumor for the time being rather than gospel.

National City shares are down over 3% more today at $8.60 in early afternoon trading today after the reports that Nova Scotia plans to bid.  Its 52-week range is $6.56 to $38.32.

As we have been screening this one for our special situations and for our under $10 stocks newsletters, we would warn that if a deal comes it isn’t one that would be assured generosity.  The big deals that have come to other in-trouble financial firms have been scalps and takeunders for existing shareholders.

You can join our open email distribution list to hear about special financings, secondary offerings, IPO’s, M&A, and more previews for other special situations in various stages.

Jon C. Ogg
April 11, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 11, 2008 – 11:56 am in Banking, Financial Stocks, Mergers and Buy Outs, Rumors, , , ,

Revlon Tries Reverse Stock Split Game, And Gives Guidance (REV)

If you have followed shares of Revlon, Inc. (NYSE: REV), you already know what a long-term let down this stock has been.  Despite years of having top models pedal its wares, it’s stock has been a financial disaster.

Management has decided to play one of the oldest shell games on Wall Street.  Its board of directors just announced a REVERSE STOCK SPLIT with a 1 for 10 ratio.  So now 1,000 shares will become 100 shares.  management called this an effort to appeal to a broader base of shareholders, comply with NYSE listing standards, and reduction in certain costs.

The company is also giving preliminary guidance.  It sees set sales of approximately $320 million, compared to $328.6 million in the first quarter of 2007.  First Call only shows one estimate and that was for $350 million.  Other guidance is as follows:

  • Operating income of approximately $30 million, compared to $3 million reported in Q1-2007;
  • Net loss of approximately $5 million, compared to a net loss of $35.2 million in Q1-2007;
  • Adjusted EBITDA of about $55 million, compared to $32.3 million in Q1-2007.

The company said that net sales in Q1-2007 benefited from the initial shipments related to its launch of Revlon Colorist haircolor, which was the primary driver of the change in net sales year-over-year.  But Revlon is also discussing improvements this year as "significant improvement" in it preliminary operating income, as well as its net loss and its Adjusted EBITDA in Q1-2008.  Management also called 2007 one of its best years in many and that it has remained committed to generating profitable sales growth and positive free cash flow.

Shareholders don’t really need to do much here as far as any action, because the Ron Perelman entity called MacAndrews & Forbes that has a combined Class A & B total voting power of 74% of the voting power has already approved the reverse split.

You can join our open email distribution list to hear about special financings, secondary offerings, IPO’s, M&A, and more previews for other special situations in various stages.  Revlon has also been reviewed for our weekly "10 Stocks Under $10" newsletter, although the debt has always been far too high for our preferences.

Revlon shares are now down about 6% on the news to $0.90 today.  This will mark a new-52-week low as the prior range was $0.91 to $1.48.  Five years ago, this was a $3 to $4 stock; and until early 2006 it had mostly traded in a range from $2.00 to $3.50.  Shares used to trade exponentially higher than today.

Jon C. Ogg
April 11, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 11, 2008 – 11:37 am in Consumer Goods, Earnings, Stock Splits,

AOL Money Moves To Lead Among Finance Sites

AOL Money & Finance (TWX) moved ahead of Yahoo! (YHOO) Finance in both total visits and page views during March. For the period, AOL had 409 million page views and 85.3 million visits. Yahoo!’s property had 337 million page views and 79.9 million visits. Yahoo! kept a modest lead in unique visitors at 15.8 million to AOL’s 14.7 million.

The largest change, however, was in the page views category. In January 2007, Yahoo! had a 120 million page view lead.

MSN Money continued in third place with 13.5 million unique visitors, 57.9 total visits, and 197 million page views. Dow Jones held fourth place in most categories.

Other financial websites with notable movement in audience over the first quarter were Reuters.com which went from 4.411 million unique visitors in January to 4.75 million in March, and Bloomberg.com which rose from 1.266 million to 1.798 million over the same period.

24/7 Wall St. ranked 39th among all sites with 328,000 unique visitors in March.

Douglas A. McIntyre is an editor at 24/7 Wall St. and writes for both AOL Money and MSN Money

Read More »

Posted on: April 11, 2008 – 9:47 am in Internet, , ,

Sirius (SIRI) Hits New Low, Waiting For Word

Sirius (NASDAQ: SIRI) hit a new 52-week low today at $2.45. While The Justice Department gave its plan to merge with XM Satellite (NASDAQ: XMSR) an OK, there has been no news from the FCC. Some powerful members of Congress are still concerned the combination will create a monopoly.

Sirius has even deeper problems. The company has over $1 billion in debt on its balance sheet. In an environment were risky debt is poison, investors are clearly concerned about whether Sirius can survive in its present form, especially if a shrinking economy cuts into subscriber growth and widens the firm’s operating losses.

The FCC has, in essence, take Sirius from a company which had fairly good prospects to one which is on life support. In a sharp downturn, life support may not cut it.

Douglas A. McIntyre

Posted on: April 11, 2008 – 8:54 am in HI/LOW, ,

GE’s New 2008 Fair Value: $33.75… Conglomerates Head Lower (GE, MMM, UTX, HON)

General Electric Co. (NYSE: GE) poor earnings report may be a shock to most.  When you consider that the annual preview was just given one month ago, this flies in the face of the economy and the financial malaise bottoming out around current numbers.

So what we wanted to do was come up with a fair market value based upon Jeff Immelt’s new guidance for 2008.  Immelt put guidance at $2.20 to $2.30.  If you take a mid-point of $2.25 and assign a fair market P/E multiple of 15, you derive a new fair value of $33.75 for the stock.

To make matters worse, investors in stocks will still want a return in the vicinity of 6% to 8% for taking the risk in equities versus fixed income.  If that is the case, then GE shares may see $31.25 to $31.83 for the required rate of returns to be in the stock.  Before this, GE’s shares had recovered nicely and analysts had an average target price that was north of $42.00.  Those targets will be coming down sharply.  Right before the open, GE shares are down over 11% at $32.60.  Interestingly enough, the 52-week low is $31.65.

Analysts will be looking for the fallout in other conglomerates this morning.  They’ll also hit financials, as if there are any safe zones after the news.  Management at 3M Co. (NYSE: MMM), United Technologies (NYSE: UTX), or Honeywell (NYSE: HON) might want to get their guidance for 2008 out today or Monday.  Those companies are all down this morning, but all are initially down by less than 2% right at the open as they are deemed as having lower exposure to the financial sector.

You can join our open email distribution list to hear about special financings, secondary offerings, IPO’s, M&A, and more previews for other special situations in various stages.

Jon C. Ogg
April 11, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 11, 2008 – 8:37 am in Conglomerates, , , ,

And The Government Says Inflation Is WHAT?

Import prices surged in March and some of the price jumps are a record for modern trading history.  Even the Labor Department’s reputation for under-reporting inflation statistics can’t mask the high inflation.  Oil is only part to blame as non-petroleum costs broke many records.

Overall import prices rose by +2.8% in March, after increasing an unrevised 0.2% in February.  Economists were expecting import prices to be up by +2.1% in March.

But it just goes from bad to worse.  The year over year readings show that since March 2007, import prices have risen by a whopping +14.8%.  Last year’s "year over year" levels showed that prices rose by +2.8%.

Petroleum import prices increased 9.1% last month and fell 1.9% in February, but these same prices soared by about 60.0% since March 2007.

If you take out energy costs, other import prices rose by +1.1% in March and by +5.4% since March 2007.  That year over year reading is nearly twice the level of last year. It looks like the increase in non-petroleum prices is the largest one-month increase since the index was first published monthly in December 1988.

There was a 3.6% hike in industrial supplies and materials prices, tied mostly to prices for unfinished metals.  Imported food, feeds and beverages rose by +2.5%, consumer goods rose by +0.5%, autos rose by +0.2%, and capital goods were unchanged.

The break-down by country is also rather revealing.  Prices from China rose by +0.7% and by +3.2% from Canada. Prices from the European Union prices rose by +1.6% and prices from Japan rose by +0.1%.

The good news is that EXPORT prices are also rising.

The bad news is that this is all inflationary as hell.  At least we aren’t seeing 10% yields on CD’s and 9% or higher on mortgages.

As far as the critics calling for China being unfair with having its peg to the US Dollar…. be careful what you wish for.

Jon C. Ogg
April 11, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 11, 2008 – 7:58 am in Economy

TriZetto Gets Apax Private Equity Buyout (TZIX)

TriZetto Group Inc. (NASDAQ: TZIX) is being acquired. Private equity firm Apax Partners will acquire health-care software company for $1.4 billion, or $22.00 per share.  This represents a 25% premium to Thursday’s closing price, and is slightly more than a 5% premium to the 52-week high of $20.85.

Apax has made deals in the hospital and drug sectors, so this isn’t its first prom dance.  It also has some $35 Billion in "funds under its advice." It appears that private equity money is still willing to look at deals in medical technology and information management that helps hospitals and medical companies.

What is interesting is that BlueCross BlueShield of Tennessee and The Regence Group, both of which are customers of TriZetto, are providing "an undisclosed portion" of the funding for this transaction and they will be equity investors in the newly private company.  Regence is a combination of several BlueCross BlueShield operations in the U.S.

TriZetto shares used to trade significantly higher, but that was back in 2000 when we were in the bubble days.  While this may take six months to close the merger, it doesn’t look like there are too many holders that will pan this deal.  Of the analysts that cover the stock, the average price is just north of $24.00.

You can join our open email distribution list to hear about special financings, secondary offerings, IPO’s, M&A, and more previews for other special situations in various stages.

Jon C. Ogg
April 11, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 11, 2008 – 7:18 am in Mergers and Buy Outs,

Morgan Stanley Already Filing To Lower MSCI Stake (MXB, MS)

MSCI Inc. (NYSE: MXB) has filed to sell up to 30,861,235 shares in a secondary offering.  Unfortunately, all of the shares are from selling holders.  Those selling holders are Morgan Stanley (NYSE: MS) and Capital Group International, Inc, so none of the sold shares will go to MSCI’s coffers.

MSCI is provider of investment decision support tools to investment institutions.  It produces index and risk and return portfolio analytics for use in managing investment portfolios, which are used by institutions in equity, fixed income and multi-asset class instruments.

Based on yesterday’s prices of $27.01 in the filing, this would allow a sale of up to $833 million.  Its market cap is $2.85 Billion as a reference to the size of the potential securities sale.  Shares closed at $28.49 yesterday and the trading range since its November 2007 IPO is $22.06 to $38.40.

Morgan Stanley is the majority owner, hence the MSCI name.

You can join our open email distribution list to hear about special financings, secondary offerings, IPO’s, M&A, and more previews for other special situations in various stages.

Jon C. Ogg
April 11, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 11, 2008 – 7:00 am in Financial Stocks, Secondary Offering, ,

Top 10 Pre-Market Analyst Calls (ANF, BLK, BP, CKR, DO, G, RRGB, SPR, WMGI, ZRAN)

Below are the top 10 pre-market analyst calls that 247wallst.com is focusing on:

  • Abercrombie & Fitch (NYSE: ANF) cut to Neutral at JP Morgan.
  • BlackRock (NYSE: BLK) Cut to Market Perform from Outperform at Wachovia.
  • BP plc (NYSE: BP) raised to Overweight at JPMorgan.
  • CKE Restaurants (NYSE: CKR) started as Outperform at FBR.
  • Diamond Offshore (NYSE: DO) raised to Overweight at JPMorgan.
  • Genpact (NYSE: G) started as Outperform at Robert W. Baird.
  • Red Robin Gourmet (NASDAQ: RRGB) cut to market Perform at Wachovia.
  • Spirit Aerosystems (NYSE: SPR) started as Outperform at FBR.
  • Wright Medical (NASDAQ: WMGI) raised to Overweight at JPMorgan.
  • Zoran (NASDAQ: ZRAN) cut to Underperform at Jefferies & Co.

Jon C. Ogg
April 11, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 11, 2008 – 6:32 am in Analyst Calls, , , , , , , , , ,

GE (GE) Falls Over

It is time for Jeff Immelt to leave. His plans for GE’s long-term future are a wreak.

GE’s pitch that being in many businesses is better than one and being in businesses in many parts of the world fell apart like a cheap clock today. Infrastructure is the one and only good operation at GE and that has been true for two years. That fact was dragged further into the daylight by the company’s most recent results. They are the strongest argument yet that everything other than the company’s largest unit should be spun-out.

GE (NYSE: GE) missed most of Wall St’s estimates for the first quarter. Earnings were $0.44 compared to a First Call consensus of $0.51 and revenue was $42.2 billion compared to a guess of $42.7 billion.

For the second quarter, the company also guided low, at EPS of $0.53 to $0.55 versus a Wall St consensus of $0.58.

“Demand for our global Infrastructure business remained strong, but our financial services businesses were challenged by a slowing U.S. economy and difficult capital markets,” GE Chairman and CEO Jeff Immelt said

The only operating unit at the company which did well was the huge infrastructure business. Its revenue rose 23% to almost $15 billion. Operating income was up 17% to $2.588 billion.

NBC Universal continued to be a modest performer. Revenue in that part of GE’s business was up 1% and operating profits ticked up slightly to $712 million.

The financial businesses at GE were a disaster. GE Money operating income was down 19%. Commercial Finance was off 20%. The industrial and healthcare businesses also turned in dreadful performances.

Posted on: April 11, 2008 – 5:43 am in Conglomerates, Earnings Warning,

New Refineries Could Help Push Up Price Of Oil

New refineries will be opening soon in China and some countries in the Middle East. This may force other facilities in the US and Europe out of the business. The older plants are not as efficient and have high costs. The latest plants will be high-tech and have better operating margins.

According to Reuters "The U.S. market for refined gasoline imports could disappear by 2020 as mandated use of biofuel such as ethanol takes an increasing share of demand."

The refining business has been hurt because much of the rising price of oil cannot be passed on to gas, diesel, and jet fuel distributors. With gas prices nearing $4 in some markets, trying to push higher prices at the refining level is a move with very little leverage.

As economics forces US companies out of the refining industry the country becomes dependent on overseas suppliers for both crude and refined products. That is a strategic vulnerability the country hardly needs.

It is not the business of the federal government to subsidize oil companies the way it does banks and brokerages. But, if gas goes toward $5 because of high crude costs and a lack of US-based refining capacity, the Feds may wish they had taken some of the money earmarked for Citigroup and given it to refining facilities in Texas.

Douglas A. McIntyre

Posted on: April 11, 2008 – 5:02 am in Oil & Gas

Verizon (VZ) And Time Warner Cable (TWC) Have At It

Verizon (NYSE: VZ) went sniveling into US District Court to complain that Time Warner Cable (NYSE: TWC) was running misleading ads about the phone company’s new fiber optic TV and broadband product. TWC better do all the lying it can. Verizon’s new product is, according to most analysts and the company, taking cable customers from the cable company. Time Warner Cable’s shares are down over 30% during the last year.

According to The Wall Street Journal "Verizon says that Time Warner Cable’s ad implies FiOS requires a satellite dish for TV service and that it isn’t able to bundle together high-speed Internet, video and phone calls." Since VZ is betting $23 billion on its product it may not be amused by the cable company claims.

There is after all, a lot at stake. Cable firm have been taking phone customers for the better part of five years. They have offered VoIP as a cheap alternative to regular phone service. The cable guys quaintly call their product the "triple play" of voice, broadband, and TV".

It was a good game while it lasted. But, with fiber-to-the-home, telephone companies can offer a similar service. It might even be argued that fiber has more bandwidth than most cable connections, making it easier to deliver a large number of HD programming channels.

Lying and cheating to get customers is nothing new in business. The cable companies just may have to do a bit more of it over the next few years.

Douglas A. McIntyre

Posted on: April 11, 2008 – 4:43 am in Cable Companies, ,

As Frontier (FRNT) Goes Down, AMR (AMR) Can’t Stay Afloat

Frontier (NASDAQ: FRNT) filed for Chapter 11 joining ATA and Aloha Air. According to MarketWatch "The airline said the decision was taken after its principal credit-card processor unexpectedly said it would start withholding "significant proceeds" received from the sale of its tickets." But, like the others, it was the victim of high fuel prices and shrinking passenger prospects.

The news also came that Delta’s (NYSE: DAL) pilots had elected to approve a new contract which will allows their company to merge with Northwest (NYSE: NWA). Whether the combination will come soon enough to save the carriers is a matter of conjecture. The marriage announcement is said to be less than a week away.

One airline which is not likely to make it through the current turbulence is AMR (NYSE: AMR), parent of American Airlines. The company’s CEO said yesterday that current flight cancellations due to FAA inspections would cost the firm tens of millions of dollars. It is not money AMR can spare.

In most industries staying out of Chapter 11 is a badge of honor. The sole exception to that is the airline business where bankruptcy is embedded in the culture like ticks are on the hide of a deer.

AMR is one of the few large US airlines which stayed out of a significant financial mess over the last decade. In the most perverse sort of way, a Chapter 11 filing four or five years ago might have spared AMR from its current perilous state.

One advantage that carriers like Northwest have in the present difficult economic environment is that they used their trips through the Chapter 11 process to tear away debt as well as employees which they deemed to be redundant. By several accounts, NWA has saved over $2 billion a year because it went through bankruptcy.

All of the large US airlines are at risk now. Fuel costs are up sharply and passenger revenue and revenue miles are likely to fall as the economy keeps people off commercial carriers The very rich can continue to operate their own fleets of private jets.

The present financial trouble does not strike each large US airline equally. Largely because of an advantage of Chapter 11, NWA has $6 billion in debt to its $3 billion in cash. At AMR, long-term debt totals $15.6 billion compared to its $4.6 billion in cash. Last year, AMR’s EBITDA was only about two times it interest expenses. By paying all of its bills over the years, AMR has been placed at a great disadvantage.

AMR had very modest operating income of $965 million last year compared to its $22.9 billion in revenue. The market has figured out the problem. While shares in other national carriers are off about 50% in the last six months, AMR is off 60%. That is a significant negative premium, a vote saying AMR is in a different bucket than its competitors are.

Several carriers reported falling traffic for March. At AMR, domestic traffic fell 5.9% for the month.

At some point soon, the dropping revenue effect and rising expenses cross where interest payments matter.

Those lines are crossing now at AMR and it puts the company at great peril.

Douglas A. McIntyre

Posted on: April 11, 2008 – 4:29 am in Airlines, , , ,

Streaming Media Names Industry Hall Of Fame, 24/7 Wall St. Editor Lands A Spot (MSFT)(RNWK)(AKAM)(GE)(CMCSA)

Streaming Media Magazine and Streamingmediia.com have released their list of the twenty-five most important people in in the streaming media industry over the last decade.

“I suppose if you extend the baseball metaphor, these 25 people would really make up the streaming media hall of fame,” said Eric Schumacher-Rasmussen.

According to Streaming Media "We began the selection process by issuing a call for nominations on StreamingMedia.com and to our Streaming Media discussion lists. From a list of more than 75 nominees, we picked the 25 who most clearly fit the bill, either for the technology they’ve created and advanced or the ways in which they’ve implemented solutions as end users."

The list includes Rob Glaser, CEO of Real Networks (RNWK), Stephen Condon, head of marketing at Verisign (VRSN), Michael Gordon, founder of Limelight Networks (LLNW), George Kliavkoff, Chief Digital Officer of GE’s (GE) NBC Universal division, Tom Leighton, co-founder of Akamai Technologies (AKAM), Andrew Olson, SVP Comcast (CMCSA) Interactive Media, Ben Waggoner, Silverlight division of Microsoft (MSFT), and Douglas A. McIntyre, Editor of 24/7 Wall St.

Posted on: April 11, 2008 – 4:00 am in Media, , , , , , , ,

Media Digest 4/11/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to Reuters, Bernanke says that the current financial system can be fixed.

Reuters writes that Google (GOOG) is using Frank Quattrone as its investment bank advisor.

Reuters reports that banks involved in the Clear Channel (CCU) buy-out argued that the case against them should be dismissed.

Reuters reports that Delta (DAL) and its pilot’s union have reached an agreement that will let a merger with Northwest (NWA) move forward.

The Wall Street Journal writes that most observers believe that a Microsoft (MSFT) deal to buy Yahoo! (YHOO) is the most likely outcome of the struggle between the two companies.

The Wall Street Journal writes that Fontier Airlines (FRNT) has filed for Chapter 11.

The Wall Street Journal reports that a poll of economists shows they believe the economy will ger worse.

The Wall Street Journal writes that Verizon (VZ) is in a legal dispute with Time Warner Cable (TWC) about connection speeds of the two company’s broadbands offerings

The Wall Street Journal reports that Lehman (LEH) repackaged some of its unsold buyout loans into a new security that it used as collateral to obtain cash loans from the Fed.

The Wall Street Journal writes that profits at Genentech (DNA) rose on solid revenue gains.

The New York Times writes that George Soros has given a dire forecast for the economy.

The New York Times reports that March retail sales for most big chains were weak.

The FT writes that AMR (AMR) has cancelled another 1,500 flights.

The FT reports that Wal-Mart (WMT) had strong March sales and lifted its outlook.

The FT writes that a number of airlines want compensation for delays in Boeing’s (BA) 787.

Bloomberg writes that GE’s (GE) push for revenue overseas may help the company weather the US downturn.

Douglas A. McIntyre

Posted on: April 11, 2008 – 2:52 am in Press Digest, , , , , , , , , , , ,

Asia Markets 4/11/2008 (TM)(CN)(PTR)

Markets in Asia were mostly higher.

The Nikkei rose 2.9% to 13,324. Mazda was up 8.9% to 367. Toyota (TM) was up 2.5% to 4950.

The Hang Seng rose 1.6% to 24,580. China Netcom (CN) was up 3.6% to 22.9. PetroChina (PTR) was up 1.8% to 10.26.

The Shanghai Composite rose .6% to 3,493.

Data from Reuters

Douglas A. McIntyre

Posted on: April 11, 2008 – 2:25 am in International Markets, , ,