Daily Archives: April 16, 2008

IBM (IBM): The Recession’s First Recession-Proof Company

The market was buoyed by Intel’s (NASDAQ:INTC) earnings. It should have been. Gross margins were good, Year-over-year results were fine. If there was any concern about the quarterly report is was the drop of key P&L numbers from Q4 07 and guidance which was modest.

Intel’s news did not cause traders to handle live snakes or speak in tongues. Its shares moved up a little under 6% for the day. Looked at in the context of the last several years, Intel still trades well below the highs it made in 2004 and 2005. It is also,at $22.13, well below its 52-week high of $29.77. There is enough concern about the global PC and server markets to have kept Intel traded in a relatively narrow range for the last three months.

IBM (NYSE:IBM) is another matter altogether. It made a case with its earnings and forecasts that it will be completely unaffected by the present recession even if it lasts the year. After hours, IBM traded close to $125. That puts it back near its highs from 2000 and 2001 when it was considered one of the flagship’s of the US economy. It is any wonder? The company, more a hardware than a software shop at the time, had operating margins of 14% in 2000. IBM then went into a decline which lasted for nearly five years.

The art of IBM management was to change the company’s business enough so that it was not vulnerable to any one sector of its operations, any industry with a high concentration of its customers, or any single geographic area.

The results of the rebuilding of the company showed. IBM had first quarter 2008 EPS of $1.65 per share from continuing operations, up 36%. Revenue for the first quarter was $24.5 billion, an increase of 11 % from the same period a year ago. While revenue in the Americas was up a modest 8%, in every other region the numbers improved by double digits.

IBM’s three main divisions, global technology, global business, and software all has sales increases of between 14% and 18%.

Pre-tax operating margins are back above 13%, back in the neighborhood of IBM’s banner year in 2000.

IBM beat analyst estimates and raised its full-year earnings forecast to at least $8.50 per share from a February projection of at least $8.25. But, that is beside the point.

Almost all of America’s larges tech companies rely on one or two major businesses to drive the numbers. Microsoft (NASDAQ:MSFT) has its Windows and Office franchises. Cisco (NASDAQ:CSCO) has its switching and routing operations. Orcacle (NASDAQ:ORCL) has its database and applications software enterprises.

IBM has five major businesses, and all, except its systems operation, are doing well. Even as a laggard the systems division’s gross margins are 37% and growing.

For all practical purposes, IBM is trading at an eight-year high, in the teeth of a recession. That is unprecedented. It might be so even in a good economy, but it is Houdini-like now, a trick which none of IBM’s peers have mastered.

Douglas A. McIntyre

Posted on: April 16, 2008 – 6:42 pm in Technology Companies, , , , ,

TD AMERITRADE & E*TRADE, Brace For Earnings (ETFC, AMTD, SCHW)

On Thursday, we’ll get to see earnings out of TD AMERITRADE Holding Corporation (NASDAQ: AMTD) and E*TRADE Financial Corporation (NASDAQ: ETFC).  In fact, that will already mark the actual end of the discount brokerage firms and their earnings trifecta as Charles Schwab Corp. (NASDAQ: SCHW) already posted its earnings on Tuesday.

The estimates for the TD AMERITRADE from First Call are $0.31 EPS on $615.66 million in revenues.  Next quarter estimates are $0.32 EPS on $ 603.41 million in revenues. Estimates for fiscal Sept-2008 are $1.34 EPS on $2.45 billion in revenues.

Analysts have an average price target north of $21.00 and TD America’s 52-week trading range is $13.82 to $21.31.  Joe Moglia & Co. shares closed up over 3.5% at $17.58 Wednesday.

The estimates for the E*Trade from First Call are -$0.10 EPS on $ 363.94 million in revenues.  Next quarter estimates are -$0.03 EPS on $ 404.16 million in revenues. Estimates for fiscal Dec-2008 are -$0.12 EPS on $1.65 billion in revenues.

Analysts have an average price target north of $4.30 and E*Trade’s 52-week trading range is $2.08 to $25.79.  Anything toward that higher half or double-digits may be irrelevant for now, but we have had this under close review for our weekly "10 Stocks Under $10" letter because we think this one might not be able to stay independent forever.

As far as which earnings report will be better, it is actually an easy call.  Joe Moglia didn’t have the same financial asbestos that E*Trade had, but the one with the most leveraged opportunity will probably be E*TRADE.  E*TRADE has been having a rough week as investors are probably bracing for more excuses that more financial asbestos was found in the lunch room, but that really should be expected and anything "not bad" should be met with relief.

Yesterday, Charles Schwab Corp. (NASDAQ: SCHW) reported earnings that met analyst estimates. Profit rose by 12% to $305 million for EPS of $0.22 on $1.3 billion in revenues. Shares rose after its earnings on Tuesday by $1.22 yesterday to $19.95.  Charles Schwab’s 52-week range is $17.41 to $25.72.

Jon C. Ogg
April 16, 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 16, 2008 – 4:10 pm in Brokerage Firms, Earnings, Financial Stocks, , ,

AVANT Scores Pfizer Pact For Brain Cancer (AVAN, PFE)

Pfizer, Inc (NYSE: PFE) has signed an agreement with the much smaller AVANT Immunotherapeutics (NASDAQ: AVAN).  The two have announced an agreement where Pfizer will be granted an exclusive worldwide license to its CDX-110 therapeutic cancer vaccine candidate and the agreement also gives Pfizer exclusive rights to the use of EGFRvIII vaccines in other potential indications.

CDX-110 is currently under both Fast Track and Orphan Drug designations by the FDA for GBM, and the company just put out positive Phase II data yesterday.

Terms of the licensing and development agreement are for Pfizer to make an upfront payment to AVANT of $40 million and Pfizer will also make a $10 million equity investment in AVANT. Pfizer will fund all R&D costs for these programs. AVANT is still eligible to receive milestone payments of more $390 million for the successful development and commercialization of CDX-110 and additional EGFRvIII vaccine products.  It can also reveive double-digit royalties on any product sales.

GBM is the most common and aggressive form of primary brain tumor, with very poor prognosis. There are an estimated 10,000 new cases of GBM annually in the United States, which predominantly affects adults aged 45 to 70. The current standard treatment for patients with GBM includes surgical resection, radiotherapy with concurrent temozolomide and then adjuvant temozolomide chemotherapy.

You can join our open email distribution list to hear about other special financings, back door plays into IPO’s, spin-offs. break-ups, and other special situations we frequently preview.

Shares of AVANT were up marginally by 0.3% today at $10.05, but shares had surged by more than 30% to $14.50 after this news was released.  Its 52-week trading range is $4.80 to $15.96.  Before this after-hours surge, AVANT’s market cap was just under a mere $17 million (yep, seventeen).

Jon C. Ogg
April 16, 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 16, 2008 – 3:52 pm in Biotech, ,

Gilead Sciences… The Beat Goes On (GILD)

Gilead Sciences, Inc. (NASDAQ: GILD) posted results after the close today.  Its Q1 revenues surged to $1.26 billion and non-GAAP earnings was $522.1 million, or $0.54 EPS.  First Call had estimates at $0.48 EPS on $1.22 billion in revenues. 

Gilead had cash and equivalents of $2.59 billion and generated $577.1 million of operating cash flows, which was offset by repurchases of $815.8 million of common stock.  As of March 31, 2008, Gilead had approximately $2.15 billion remaining under this share repurchase program.

Its own product sales accounted for $1.14 Billion in Q1 revenues, up 36% because of a strong HIV franchise led by the continued strong uptake of Atripla.

Shares closed up 1.4% at $51.80 in normal trading, and shares rose 2.8% to $53.26 in after-hours trading.  Its 52-week trading had been $35.22 to $53.20.  Despite a 10-fold to 20-fold gain this decade, the company just keeps doing better and better.

Jon C. Ogg
April 16, 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 16, 2008 – 3:37 pm in Biotech, Earnings,

IBM Earnings Surge… New Name: International Buyback Monster (IBM)

Shares of International Business Machines Corp. (NYSE: IBM) are initially surging after earnings.  Big Blue posted $1.65 EPS on $24.5 Billion in revenues, while estimates from First Call were $1.45 EPS on $23.71 billion in revenues. It also guided 2008 higher to $8.50 EPS, above its February guidance of $8.25 EPS. It also spent $2.7 Billion on stock repurchases in Q1.

The slowdown isn’t everywhere at all companies: Global Technology Services revenues up 17%, Global Business Services revenues up 17%, Software revenues up 14%, non-U.S. revenues now are 65% of total, even US revenues up 6%.

Sam Palmisano said 2008 is off to a good start and noted, "We feel good about the rest of the year."  In the current climate, that’s all that is required.

The backlog is up $2 Billion from last year and flat sequentially with estimated services backlog (Strategic Outsourcing, Business Transformation Outsourcing, Integrated Tech Services, Global Business Services, and Maintenance) of $118 billion, adjusting for currency.

Shares rose almost 3% today to $120.47, and shares are up over 3% at $124.50 in after-hours immediately after the report.  The prior 52-week high was $121.46.

Jon C. Ogg
April 16, 2008

Posted on: April 16, 2008 – 3:26 pm in Earnings, Technology Companies,

Ebay (EBAY) Good Q: PayPal Magnficent, Skype A Dog

Ebay (NASDAQ: EBAY) shares rallied modestly into the close, up 1.7% to $32.09. The company posted first quarter revenue of $2.19 billion, up $424 million from the same period last year. Revenue growth was driven primarily by Marketplaces net transaction revenues, the ongoing expansion at PayPal, Skype and the company’s global classifieds business.

Ebay recorded net income on a GAAP basis of $460 million or $0.34 per diluted share, and non-GAAP net income of $562 million or $0.42 per diluted share

Wall St. estimates for the quarter were for $0.40 EPS on $2.11 billion in revenues, and estimates for fiscal Dec-2008 are $1.68 EPS on $8.79 billion in revenues.

PayPal had a strong quarter with $582 million in net revenue, an increase of 32% year-over-year. Net total payment volume (TPV) for the quarter was $14.42 billion, an increase of 34% year-over-year.

Skype is still a dog and Ebay is unlikely to ever get its money back from the acquisition. Skype continued its strong growth trajectory, reporting $126 million in revenue for the quarter, representing 61% year-over-year growth

Douglas A. McIntyre

Posted on: April 16, 2008 – 3:20 pm in Earnings,

The 52-Week Low Cub (SWY)(NOC)(HCSG)(HANS)

Safeway (SWY) Food prices hurting retailing margins. Falls to $25.75 from 52-week high of $38.31.

Northrop Grumman  (NOC) Q1 charge still weighs on shares. Sell off to $69.48 from 52-week high of $85.21.

Healthcare Services (HCSG) First quarter profit drop. Down to $14.54 from 52-week high of $25.25.

Hansen Natural (HANS) No news. Commodities costs could weigh on beverage maker. Sells off to $32.04 from 52-week high of $68.40.

Douglas A. McIntyre

Posted on: April 16, 2008 – 2:47 pm in HI/LOW, , , ,

Wilbur Ross & Sovereign Wealth, Heading For Banks

It was almost amazing that private equity funds never did go acquire many banks, despite the lending woes that came to pass.  For some time there was value there before the logic and rationale behind credit evaluations were tossed out the window.  We had discussed this with many groups last year and the answer was always that the private equity firms were sitting out to avoid the relative valuation erosion as peer-pressure drove down the value of the solid companies.

Wilbur Ross may soon be making a change to this approach of avoiding the group.  Last week there many reports out of Reuters, Crains, and others discussing Ross’s intent to go after depository institutions.

Bloomberg ran an interesting article on this today with more finite plans and more finite terms.  This noted that he plans to seek about $4 Billion from investors that include sovereign wealth funds that would be earmarked to acquire U.S. depository banks.

This article today notes that Ross intends to package banks that can be invested into.  If this comes to pass, it’s essentially a billionaire’s regional and community bank fund.  What is even more interesting is that this would allow sovereign wealth funds to get a back door into investing in financial institutions that they’d otherwise be under CFIUS or local media and regulatory pressure to stay out of.   

We screened and then evaluated many mid-sized and smaller banks in 2007 with market caps in the $400 million to $2 Billion for our own special situation investing newsletter.  We looked for those institutions that were either in geographically recession-resistant markets or that hadn’t exposed their books and shareholders to the lunacy of leverage in financial instruments that sound more like science fiction that they do financial instruments. 

We actually found many that were rather attractive, but there was little point in getting in front of a melting freight train.  many also do not have the proper stock option hedging instruments that can be traded or that are liquid enough for those to qualify for our special situations letter.  But there are many that did fit the bill and with the financial crisis being at least partly lightening up, it looks like its time to dust off that list.

You can join our open email distribution list to hear about key private equity trends, changes, calls, buybacks, IPO’s, special financings, restructurings and more.

Jon C. Ogg
April 16, 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 16, 2008 – 1:44 pm in Banking, Financial Stocks, Private Equity

Picking Apart Gilead Ahead of Earnings (GILD)

After today’s close, we’ll get to see earnings out of Gilead Sciences Inc. (NASDAQ: GILD). The estimates for the biopharmaceutical company from First Call are $0.48 EPS on $1.22 billion in revenues.  Next quarter estimates are $0.45 EPS on $1.22 billion in revenues. Estimates for fiscal Dec-2008 are $1.90 EPS on $5.08 billion in revenues.

Analysts have an average price target north of $54.00.  Interestingly enough, options traders appear to only be expecting a move of up to $1.40 to $1.55 in either direction.  At $51.80, shares are incredibly higher than the 200-day moving average of $43.61 and also well above the 50-day moving average of $47.97.

Gilead’s regiments for treating AIDS, HIV, Flu, hepatitis, bacteria, hypertension, and more have all quietly helped the company become a biotech giant with a market cap of $48 Billion after a 10-fold to 20-fold return this decade.

Gilead has a habit of beating earnings expectations overall, andanalysts have taken its earnings estimates higher during a time whenmost sectors are seeing analysts lower estimates.  While this has seena major stock performance, it is expected that the company will have16% earnings growth and 18% revenue growth from 2008 to 2009.

Gilead Sciences Inc.’s 52-week trading range is $35.22 to $53.20.  After seeing a major return in the company this decade with very few disappointments, it would be easy to try picking apart the company in the currently more cautious environment. But its performance and growth so far have spoken for themselves, and all of its treatments seem to be protected from the economy along with most biotechs.

Jon C. Ogg
April 16, 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 16, 2008 – 1:03 pm in Biotech, Earnings,

Can IBM’s Backlog Continue Its Earnings Momentum? (IBM)

After today’s close, we’ll get to see earnings out of International Business Machines Corp. (NYSE: IBM). The estimates for Big Blue from First Call are $1.45 EPS on $23.71 billion in revenues.  Next quarter estimates are $1.75 EPS on $25.32 billion in revenues. Estimates for fiscal Dec-2008 are $8.25 EPS on $104.76 billion in revenues.

If one company has scored in technology and IT-trends of late, it is IBM.  Shares are close to a 52-week high at a time everyone else is far from that.  The company’s backlog of $118 Billion and aggressive share buybacks are a major part of this, and investors will likely key in on those two issues today.

Options traders appear to be braced for a move of up to $3.25 or so in either direction, although that number was less yesterday before today’s near-2% gain to $119.40.  Analysts have an average price target north of $127.00.  The only issue at hand on the chart is that this has spent most of the last 6-weeks between $115.00 and $119.00 on trading.  IBM’s 52-week trading range is $93.91 to $121.46.

IBM has been one of the few steadily positive standouts in tech, while most of the sector has been having problems in at least one area of their operations.  As so much of IBM’s revenues are now from outside of the U.S., the weak dollar should be working in its favor.

Jon C. Ogg
April 16, 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 16, 2008 – 11:41 am in Earnings, Technology Companies,

Pegging eBay’s First Earnings Under CEO Donahoe (EBAY)

After today’s close, we’ll get to see earnings out of eBay Inc. (NASDAQ: EBAY). The estimates for the online auction platform from First Call are $0.39 EPS on $2.08 billion in revenues.  Next quarter estimates are $0.40 EPS on $2.11 billion in revenues, and estimates for fiscal Dec-2008 are $1.68 EPS on $8.79 billion in revenues.

Last quarter, eBay offered guidance for fiscal 2008 non-GAAP earnings of $1.63 to $1.67 on revenues of $8.5 to $8.75 Billion, while First Call had estimates at that time of $1.66 EPS on roughly $9 Billion in revenues.  At that time, analysts had an average price target of almost $40.00.  As of now, analysts have an average price target north of $35.00.

On last look, options traders appear to be bracing for a move of up to $1.05 in either direction.  eBay is now well above its 50-day moving average of $28.61, but it is currently bumping up against its more solid 200-day moving average of $32.64.  Shares are now up almost 30% from the 52-week lows that were just put in last month.

Just recently, Merrill Lynch raised it to BUY from Neutral.

eBay’s 52-week trading range is $25.10 to $40.73, and shares are up more than 3% at $32.60 shortly after 12:00 PM EST. 

What may make this more interesting than earnings and guidance issued before is that the call will be under new CEO John Donahoe. Meg Whitman was auctioned away.

Jon C. Ogg
April 16, 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 16, 2008 – 11:28 am in Earnings, Internet,

Biotech Busine$$ Daily (ACAD, AMLN, CVTX, HALO, KOSN, MCU, NVAX, POZN, REGN, SIRT)

If you thought biotech news was getting quiet going into earnings season, think again.

Acadia Pharmaceuticals Inc. (ACAD) presents Phase II data on pimavanserin, a treatment  for Parkinson’s disease psychosis (PDP) at the 60th American Academy of Neurology Annual Meeting today. According the results from the study, pimavanserin is safe and effective at improving psychosis scores without hindering motor abilities. Shares are up $0.46 to $8.36 on a 52-week range of $7.63 to $17.33.

Amylin Pharmaceuticals Inc. (NASDAQ: AMLN) up almost 3% in mid-morning trading. They announced that the earnings call is schedule for March 21. Trading at $30.42 on a 52-week range of $23.75 to $53.25.

CV Therapeutics, Inc. (NASDAQ: CVTX) soaring today after they announced Tuesday that they will receive $185 milliion from TPG-Axon Capital for rights to the sales of Lexiscan, a drug for patients that are unable to exercise during heart tests and was granted FDA approval last Thursday. Shares are up over 15% to $8.63 on a 52-week range of $5.41 to $13.74.

Halozyme Therapeutics, Inc. (NASDAQ: HALO) announced pre-clinical findings in combinations of bisphosphonates and rHuPH20 at the American Association for Cancer Reseacrch conference today. The study showed that a combination of these molecules could reduce local irritation from chemotherapy by allowing a subcutaneous route of administration. Shares are up over 10% to $5.99 on a 52-week range of $4.19 to $11.00.

Kosan Biosciences Inc. (NASDAQ: KOSN) is still steadily rising after Monday announcement that Phase II testing for Epothilone KOS-1584 initiated. The drug targets patients with non-small cell lung cancer. Shares are up over 11% to $2.00 today. Monday, shares opened at $1.50. The 52-week range is $1.28 to $6.53.

Medicure Inc. (AMEX: MCU) up by 40% with the announcement that Phase II results for MC-1 and lisinpril for patients with type-II diabetes and hypertension will be presented at Arteriosclerosis, Thrombosis and Vascular Biology (ATVB) Annual Conference today. The data from the study was previously released. Shares are up 40% to $0.09 on a 52-week range of $0.05 to $1.64.

Novavax, Inc. (NASDAQ: NVAX) reported positive results in preclinical studies of Trivalent, a seasonal influenza vaccine. Phase II testing is hoped to begin in the third-quarter this year. Shares are up over 5% to $2.51. The 52-week range is $2.24 to $4.38.

Pozen, Inc. (NASDAQ: POZN) skyrocketing today on news that migraine drug Treximet has received FDA approval. They partnered with GlaxoSmithKline (GSK) for development of the drug. It is a follow up for Glaxo’s similar drug, Imitrex, which is set to lose patent protection in 2009. Pozen up 34% to $14.19 on a 52-week range of $8.29 to $19.75. Glaxo is up marginally to $42.57.

Regeneron Pharmaceuticals Inc. (NASDAQ: REGN) moving higher than the rest today on no new developments. Shares are up $1.37 to $19.60 on a 52-week range of $13.55 to $28.74.

Sirtris Pharmaceuticals, Inc. (NASDAQ: SIRT) published a report by Scientific Advisory Board Co-Chairs that showed first in-vivo data demonstrating that SIRT1 enzymes suppress tumor development in colon cancer cells. Shares are up almost 5% to $12.56 on a 52-week range of $9.50 to $21.99.

Rachel Lopez
April 16, 2008

Posted on: April 16, 2008 – 11:18 am in Biotech, , , , , , , , , ,

IPO Filing: Rhino Resource Partners (RRLP)

Rhino Resource Partners, L.P. has submitted its IPO paperwork thismorning. The filing shows for $115 million proposed maximum offering price,although this number is for filing purposes only. 5 million shares representing limitedpartner interests will be listed on the NASDAQ Global Market under the ticker “RRLP.”The sole-book runner for the deal is Lehman Brothers and has been allotted 750,000in underwriting options.

Rhino Resource Partners is a limited partnership engaging incoal property control and operation with assets in Colorado,Central Appalachia, the IllinoisBasin, and NorthernAppalachia. In 2007, the company sold 8.2 million tons of coal andproduced 7.1 million tons. They sell their coal to steam and metallurgicalmarkets such as electric utility companies. Their sponsor, Wexford Capital providesaccess to potential acquisitions and manages $7 billion in assets. IncludingRhino’s assets, Wexford controls 19.7 million tons of proved and probable Coloradocoal reserves that Rhino believes will be sold to them in the future. Followingthe offering, Wexford will own an 84.6% limited interest in Rhino.

In 2006 (year ending March 31) and 2007 (year endingDecember 31), Rhino generated revenues of $363 million and $403 million,respectively, and net incomes of $31.6 million and $32.2 million respectively.As a limited partnership, nearly all earnings are distributed to shareholders tax-freeeach quarter. The company intends to use the proceeds from this offering to repayoutstanding debt of $67 million on their credit facility and to reimburse RhinoHoldings for capital expenditures.

You can join our open email distribution list to hear about key calls, buybacks, IPO’s, special financings, restructurings and more.

Rachel Lopez
April 16, 2008

 

Posted on: April 16, 2008 – 11:12 am in IPOs,

AMR (AMR) Posts $325 Million Loss, Can It Stay Independent?

AMR (NYSE: AMR) reported that it lost $325 million in the first quarter as fuel charges rose $665 million over the same period last year.

AMR also disclosed that it has reached a definitive agreement to sell American Beacon Advisors, Inc., its wholly owned asset-management subsidiary, to Lighthouse Holdings, Inc., which is owned by investment funds affiliated with Pharos Capital Group, LLC and TPG Capital, two leading private equity firms. AMR will receive total consideration of approximately $480 million.

AMR reported first quarter consolidated revenues of approximately $5.7 billion, an increase of 5.0 percent year over year. AMR ended the first quarter with $4.9 billion in cash and short-term investments, including a restricted balance of $426 million, compared to a balance of $5.9 billion in cash and short-term investments, including a restricted balance of $471 million, at the end of the first quarter of 2007. The year-over-year decrease in the Company’s cash and short-term investment balance is primarily related to AMR’s total debt payments of approximately $2.3 billion in 2007, including prepayment of approximately $1 billion.

AMR’s Total Debt, which it defines as the aggregate of its long-term debt, capital lease obligations, the principal amount of airport facility tax-exempt bonds, and the present value of aircraft operating lease obligations, was $15.2 billion at the end of the first quarter of 2008, compared to $17.5 billion at the end of the first quarter of 2007. AMR’s Net Debt, which it defines as Total Debt less unrestricted cash and short-term investments, was $10.7 billion at the end of the first quarter of 2008, compared to $12.2 billion at the end of the first quarter of 2007.

The financial data still begs the question of whether AMR can stay in business as an independent company? The company had interest expenses of $194 million in the first quarter. If fuel costs continue to rise and the recession cuts revenue, it will be hard.

Douglas A. McIntyre

Posted on: April 16, 2008 – 10:48 am in Airlines,

Is Google (GOOG) Making Money On Video? It Has Tons Of Traffic (YHOO)(TWX)(VIA)(DIS)(NWS)(MSFT)

New comScore data shows that the number of videos viewed online moved up 66% in February compared with the same month last year. US internet users viewed over 10 billion videos for the most recent month measured.

The $64,000 question is whether any of the big companies spending substantial sums to host and send these videos over the internet are making a dime. Google has not shown there is any substantial revenue in it. Perhaps that will change when it reports its quarterly earnings.

It would seem more likely that the premium video content from sites like Yahoo! (NASDAQ: YHOO) and Viacom (NYSE: VIA) could bring in significant revenue from commercials. Google’s YouTube video is primarily user-generated and is unlikely to be attractive to marketers.

Based on the comScore numbers below. the investment in video content by major internet and media companies is massive.

Property                                    Videos         Share (%) of
                                                (000)            Videos
Total Internet                         10,089,048          100.0
Google Sites                          3,567,202            35.4
Fox Interactive Media                 586,236             5.8
Yahoo! Sites                             293,120             2.9
Microsoft Sites                          293,085             2.9
Viacom Digital                           218,011             2.2
Time Warner – Excl. AOL           132,734             1.3
Disney Online                           130,609             1.3
AOL LLC                                  114,853             1.1

Minutes spent watching video also give Google a huge advantage:

Property                             Unique Viewers       Average Minutes
                                                (000)               per Viewer
Total Internet                           134,739                203.8
Google Sites                             81,791                109.4
Fox Interactive Media                 55,741                 10.9
Yahoo! Sites                             37,111                 16.6
Microsoft Sites                          27,080                 18.8
Time Warner – Excl. AOL           21,329                 14.6
Viacom Digital                           21,280                 29.3
AOL LLC                                   20,970                  7.3
Disney Online                           13,245                 10.3

Data from comScore.

Douglas A. McIntyre

Posted on: April 16, 2008 – 10:19 am in Internet, , , , , , ,

Why Northwest Air (NWA) Is In Trouble

Investors should hope that airlines will do what they can to keep business. Northwest Airlines (NYSE: NWA) seems to want to do the opposite.

I tried to get a ticket for my son to fly from New York to Detroit. I went online, put in my credit card and was told that because my name is different from my son’s, I had to call their "800" number. When I did, I was told their was a $15 fee to buy the ticket over the phone, even though it could not be down at nwa.com.

I told the reservation agent I would book on American NYSE: AMR). I did. No hassles. No extra charges.

No wonder NWA needs to merge with Delta (NYSE: DAL). They are trying to put themselves out of business.

Douglas A. McIntyre

Posted on: April 16, 2008 – 9:41 am in Airlines, , ,

Canpotex Owners Surge On Potash Price Hikes For China (POT, MOS, AGU, MOO)

There was a significant agreement out of Canada between it and China, via Canpotex (Canadian Potash Exporters).  Canpotex is the world’s largest exporter of potash.  Canpotex announced potash price increases between Canpotex and Sinofert in China, which actually will be paid out the rest of 2008.

This calls for shipment of 1 million metric tons of potash at $576 per metric ton, which appears to be a $400 per metric ton increase over the 2007 price.

This is going to add significantly again to fertilizer and potash players involved, and all are trading higher in pre-market trading.  Companies which own Canpotex are Mosaic Inc. (NYSE: MOS), Potash Corp. of Saskatchewan Inc. (NYSE: POT), and Agrium Inc. (NYSE: AGU).

Pre-market movers are:

  • Mosaic Inc. (NYSE: MOS) up over 3.7% at $132.40, above the $129.93 high over the last 52-weeks.
  • Potash Corp. of Saskatchewan Inc. (NYSE: POT) up 4% at $184.41, 52-week range is $58.87 to $185.49.
  • Agrium Inc. (NYSE: AGU) up over 4.5% at $82.70; above the $80.67 high over the last 52-weeks.

These are actually up enough that they are moving the key ETF, the Market Vectors Global Agribusiness ETF (AMEX: MOO) by over 2% to $61.50.  That 52-week trading range was $40.19 to $60.62.

Where is that IPO from Intrepid Potash?

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Jon C. Ogg
April 16, 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 16, 2008 – 8:20 am in Agriculture, China, , , ,

Financial Earnings Winners & Losers (BLK, JPM, NITE, MER, WFC)

BlackRock, Inc. (NYSE: BLK) posted a 25% gain in earnings, but reported $1.90 EPS versus $2.00 estimates; Assets under management are now $1.364 Trillion.  Shares are trading down by 2% pre-market.

JPMorgan Chase (NYSE: JPM) $0.69 EPS vs. $0.64 est.; $2.6 Billion markdowns; expect weakness to continue and expects capital market stress to continue; sees issues affecting results for remainder of 2008 or longer; shares are trading up over 2% in pre-market.

Knight Capital Group, Inc. (NASDAQ: NITE) $0.35 EPS vs. $0.30 estimates; trading volume surged in dollar terms and decreased in volume for march, noted de-leveraging of financial markets; stock trading up over 6% pre-market.

Merrill Lynch (NYSE: MER) is taking another $6.8 Billion in write-offs according to WSJ, although shares are up almost 1% pre-market.

Wells Fargo (NYSE: WFC) posted an 11% decrease in earnings but earnings were $0.60 EPS vs $0.57 est; setting aside $2.03 billion to cover delinquencies and defaults among mortgages and other loans; non-performing assets up 16% to $4.5 billion as of March 31, up from $3.87 billion at December 31, 2007; Shares are trading up over 7% in pre-market trading.

Jon C. Ogg
April 16, 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 16, 2008 – 7:52 am in Banking, Earnings, Financial Stocks, , , , ,

News Corp (NWS) MySpace: Taking Failed Model Abroad

Fox Interactive, the online division of News Corp (NWS), will miss its numbers. A few of the marketing executives there lost there jobs. It would seem that the primary culprit is MySpace, the world’s largest social network. According to ZDNet Fox said "it has reshuffled its management and ad operations–a sign that problems monetizing MySpace persist."

The value of social networks probably peaked last year when No.2 property Facebook got a $15 billion valuation during a round of financing. But, making money on these business is going to be very hard.

A great deal of the revenue flowing to MySpace today comes from a three-year deal with Google. The search company has the exclusive right to provide its search services. In exchange its sells its Ad Sense program on MySpace and guarantees $900 million in revenue sharing. The arrangement probably masks the weak revenue picture at the social network.

Now, MySpace plans to push hard to get overseas. According to The Wall Street Journal "Despite its aggressive expansion overseas, MySpace, which has about 110 million monthly users globally, is losing momentum to U.S. rival Facebook, and other fast-growing upstarts."

But, that may not matter. Marketers are growing wary of social networks. Their members are hard to target. Many of them reveal little about themselves and most do not want to see ads when they go to look at information about their friends and relatives.

As online advertisers look for places to invest their dollars vertical content sites, portals, and Google still look much better. They allow for targeting by both interest and demography.

MySpace may move overseas, but it cannot escape the fact that it is a bad venue for marketing dollars.

Douglas A. McIntyre

Posted on: April 16, 2008 – 7:34 am in Internet, ,

Top 10 Pre-Market Analyst Calls (MO, HLF, ITT, M, MCK, NTRI, PM, SLM, STT, YGE)

These are 10 of the top calls that 247WallSt.com is looking at this morning:

  • Altria (NYSE: MO) cut to Neutral at JPMorgan.
  • Herbalife (NYSE: HLF) started as Overweight at Lehman Brothers.
  • ITT Industries (NYSE: ITT) cut to Neutral at Credit Suisse.
  • Macy’s (NYSE: M) cut to Underweight at JP Morgan.
  • McKesson (NYSE: MCK) Started as Buy at Jefferies.
  • Nutrisystem (NASDAQ: NTRI) started as Underweight at Lehman Brothers.
  • Philip Morris International (NYSE: PM) started as Overweight at JP Morgan.
  • Sallie Mae (NYSE: SLM) Cut to Underweight at Morgan Stanley.
  • State Street (NYSE: STT) cut to Neutral at Merrill Lynch.
  • Yingli Green Energy (NYSE: YGE) started as Overweight at Lehman Brothers.

Jon C. Ogg
April 16, 2008

Posted on: April 16, 2008 – 6:54 am in Analyst Calls, , , , , , , , , ,