Daily Archives: April 22, 2008

American Water Works IPO Looks Slightly Under Water (AWK)

American Water Works Co. (NYSE: AWK) is coming back on the US market.  The deal has priced this evening and will trade on the NYSE on Wednesday morning.  A trader has noted that the IPO went from warm, to cool, and now it is pricing under the range. 

Gross proceeds are roughly $1.25 Billion.  This IPO will now be 58 million shares at a price of $21.50 per share.  Unfortunately, that isn’t exactly off to a great start.  This is lower than the original share price indication terms and under the expected number of shares being sold.  Just a few weeks ago the largest US water utility was going to sell 64 million shares at a range of $24.00 to $26.00 per share.

It seems that if we are in the midst of a housing crisis, maybe being the water utility has more nuances than you’d imagine. Considering how there are not enough water instruments for US investors currently, this is a huge disappointment for what could have been one of the largest IPO’s of 2008.

Goldman Sachs, Citigroup, and Merrill Lynch are the lead managers; and co-managers are Credit Suisse, JPMorgan, Morgan Stanley, UBS, Edward Jones, Janney Montgomery Scott, Societe Generale, Wachovia Securities, Boenning & Scattergood, HSBC, The Stanford Group and Williams Capital Group were listed as the underwriters.

You can join our open email distribution list to hear about other IPO’s, key financings, secondary offerings, and other special situation previews.

We have made our calls around for syndicate desks and traders that could still be reached, and this is coming from more than one group on the pricing and share count. 

Elsewhere in water, we covered a desalination play.

Jon C. Ogg
April 22, 2008

Jon Ogg is a producer of and editor for both the Special Situations newsletter and the "10 Stocks Under $10" weekly newsletter for 247WallSt.com; he can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 22, 2008 – 7:13 pm in IPOs, Water,

Cramer Takes His Gas To El Paso & Nabors (EP, NBR)

In light of EARTH DAY, Jim Cramer came on MAD MONEY on CNBC with a natural gas pick tonight.  His pick tonight is El Paso Corp. (NYSE: EP) which is the largest domestic natural gas pipeline with some 42,000 miles of pipeline.  At under $18.00 per share, Cramer noted that this is a catch-up play.  It was only up 3% this year and he thinks the stock should be worth $22.00.  He also likes its expansion as the cheapest natural gas play out there and with recent insider buying in the stock.

Shares of El Paso closed up marginally today at $17.78, and shares traded up almost 3% to $18.28 after the Cramer tout.  Its 52-week trading range is $14.80 to $18.56.

Cramer also came on and touted Nabors Industries Ltd. (NYSE: NBR) tonight as one of the largest land driller for natural gas.  In fact, he even brought on the CEO, Gene Isenberg for a brief interview.  They were talking about how oil was so high compared to natural gas for so long.  As far as a developing rig shortage, Isenberg says any of the idle rigs will be used in the U.S. or internationally.  The company also talked about its shales that are available in the U.S. and Canada.  As far as higher potential taxes, he said that producers will have to be realistic and they will have to drill if it is economical.  NBR closed at $37.90, right at the top of its prior $23.61 to $38.00 52-week trading range (but intraday high today was $38.61).

Jon C. Ogg
April 22, 2008

Jon Ogg is a producer of and editor for both the Special Situations newsletter and the "10 Stocks Under $10" weekly newsletter for 247WallSt.com; he can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 22, 2008 – 5:22 pm in Cramer, Oil & Gas, ,

Plug Power Backer Files To Unplug (PLUG)

Plug Power Inc. (NASDAQ: PLUG) has just filed a shelf registration for a secondary offering of 39.5 million shares of common stock.  Based on recent prices that translates to a $135+ million offering, and that compares to market cap of $282.6 million after a 5% stock price drop today.

These shares may be offered and sold from time to time by Smart Hydrogen, Inc., which is a stockholder of Plug Power Inc.  It appears that all proceeds if and when shares are sold will go to the shareholder.  It appears that this holding also came about from a 2006 private placement where the company received $217 million in gross proceeds.

Plug Power, Inc. is a low-priced early stage company which engages in the design, development, and manufacturing of fuel cell systems for stationary and motive markets.

You can join our open email distribution list to hear about other secondary offerings, IPO’s, key financings, secondary offerings, spin-offs and other special situation previews.

This is one we have screened several times in the recent years, but the company has not been in the real "revenue generation stage" that we like to see.  But interestingly enough, this one has been public this entire decade and back in the tech bubble its shares briefly traded  at a price of more than $100.00.  That is one of the reasons why we have been keeping this one on our watch lists for that newsletter. 

The company is one we have also been watching as 2008 and 2009 are supposed to be years where product sales start to look real, although these are still small.  We currently have two other alternative and renewable (or less-brown) green energy stocks as active picks for our "10 Stocks Under $10" weekly newsletter.  PLUG is not currently on that list.

Shares closed down about 5% at $3.21 today, and the 52-week trading range is $2.42 to $4.75.

The company offers GenCore, a hydrogen fueled Proton Exchange Membrane (PEM) fuel cell system to provide back-up power to businesses and governments in critical infrastructure.  Its GenDrive is a hydrogen fueled PEM fuel cell system to provide motive power to light industrial vehicles. Its "developing products" include GenSys as a natural gas or liquid petroleum gas fueled continuous power system to support off-grid electric generation products, and a high-temperature polybenzimidazole combined heat and power fuel cell system for light commercial and residential applications.

Jon C. Ogg
April 22, 2008

Jon Ogg is a producer of and editor for both the Special Situations newsletter and the "10 Stocks Under $10" weekly newsletter for 247WallSt.com; he can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 22, 2008 – 4:49 pm in Alternative Energy, Secondary Offering,

SPAC/Blank Check IPO Filing: Angelo, Gordon Acquisition Corp.

Angelo, Gordon Acquisition Corp., a Blank Check company or a Special Purpose Acquisition Company, has filed to come public via an IPO.  The company has filed to sell some 30 million units at the traditional $10.00 per unit price, with each unit consisting of one share of common stock and one warrant with a $7.50 strike price.  JPMorgan is listed as the sole underwriter for the offering.

Angelo, Gordon Acquisition Corp. is a newly organized blank check company formed on February 28, 2008 for the purpose of consummating a merger, exchange, acquisition, reorganization or other business combination with one or more operating businesses.  Efforts in identifying a target business operation will not be limited to a particular industry or group of industries.  As no set business segment nor a segment has been even listed at, this is more of a Blank Check company rather than a SPAC.

The sponsor company, Angelo, Gordon, has investment disciplines which encompass four principal lines:
(1) private equity and special situations,
(2) distressed debt and leveraged loans,
(3) real estate and
(4) hedge fund strategies.

Angelo, Gordon is also an SEC-registered investment adviser and, combined with its affiliates, has in excess of $18 billion of assets under management including committed but not yet drawn capital.

You can join our open email distribution list to hear about other SPAC IPO’s, Blank Check updates, traditional IPO’s, key financings, secondary offerings, spin-offs, mergers and other special situation previews.

Jon C. Ogg
April 22, 2008

Jon Ogg is a producer of and editor for both the Special Situations newsletter and the "10 Stocks Under $10" weekly newsletter for 247WallSt.com; he can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 22, 2008 – 4:23 pm in IPOs

Sirtris Major Buyout Premium From GlaxoSmithKline, Public Under a Year (SIRT, GSK)

GlaxoSmithKline (NYSE: GSK) has announced that it has entered into a definitive acquisition pact with Sirtris Pharmaceuticals Inc. (NASDAQ: SIRT).

The drug giant will pay approximately $720 million via a cash tender offer of $22.50 per share.  Sirtris closed down 4% at $12.23 today on less than 90,000 shares.

As a result of the buyout, GSK will enhance its metabolic, neurology, immunology and inflammation research efforts with the establishment of a presence in the field of sirtuins.  This recently discovered class of enzymes is believed to be involved in the aging process and Sirtris Pharmaceuticals has established a drug discovery capability to exploit sirtuin in human diseases, which could generate multiple clinically and commercially products. To date, Sirtris has been in the development of a treatment of Type 2 Diabetes Mellitus.

You can join our open email distribution list to hear about other mergers, IPO’s, key financings, secondary offerings, spin-offs and other special situation previews.

Interestingly enough, Sirtris has only been public less than a year,and its trading range has been almost entirely in a range of $10 to $20since.  Based on no major stock move in the last 5-days and based onstock options having an extremely low open interest, it looks like amerger actually occurred that it doesn’t appear traders caught anymajor wind of.

Here was the original filing, which showed JPMorgan, CIBC, Piper Jaffray, JMP Securities, and Rodman & Renshaw as its underwriters.

Jon C. Ogg
April 22, 2008

Jon Ogg is a producer of and editor for both the Special Situations newsletter and the "10 Stocks Under $10" weekly newsletter for 247WallSt.com; he can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 22, 2008 – 4:07 pm in Biotech, Mergers and Buy Outs, ,

Broadcom Trumps Revenues (BRCM)

Broadcom Corp. (NASDAQ: BRCM) has issued earnings of $0.14 EPS on a GAAP basis on $1.032 Billion in revenues.  First Call has EPS on a non-GAAP basis as $0.28 so we’ll have to see the break-down of those numbers.  First Call had revenue expectations of $992 million.

The CEO comments are dictating the real trend here, "..first quarter results came in much stronger than we expected, driven primarily by greater demand within our traditional wireline businesses… a record revenue level and strong cash flow from operations and to fund an aggressive share repurchase program…"  But this is the real issue at hand: "While we remain cautious on the macroeconomic front, based on strong ordering trends from our customers throughout the first quarter, we expect solid revenue growth for the second quarter within each of our three major target markets."

Unfortunately, no formal guidance was given.  That will likely come in the conference call. Shares closed down 1.1%% at $23.55 in normal trading, and this one is up over 6% to $to $25.05 in after-hours trading.  The 52-week trading range is $16.38 to $43.07. 

We’d note that this move up, assuming it holds, will take this stock into overbought levels but the stock is also still well under its 200-day moving average of $28.32.

Jon C. Ogg
April 22, 2008

Posted on: April 22, 2008 – 3:46 pm in Earnings, Semiconductor,

Yahoo! (YHOO): Earnings Hogwash

Yahoo! (YHOO) had the bad judgment to start its earnings PR talking about what the company would look like in two years. "we believe we can significantly accelerate our revenue growth, return to our historically high margins, and double our operating cash flow by 2010." No one cares. And the results for the quarter were nothing more than mediocre.

The search engine and content giant was expected to post earnings of $0.09 EPS on $1.32 Billion revenues (ex-TAC revenues).  For Q2, it is expected to post $0.11 EPS on revenues of $1.37 Billion; and for fiscal 2008 it is expected to see $0.44 EPS on $5.63 Billion.

As it turned out revenues were $1,818 million for the first quarter of 2008, a 9 percent increase compared to $1,672 million for the same period of 2007. Revenues excluding traffic acquisition costs ("TAC") were $1,352 million for the first quarter of 2008, a 14 percent increase compared to $1.183 billion for the same period of 2007.

Non-GAAP net income (excluding one-time gains) for the first quarter of 2008 was $150 million or $0.11 per diluted share compared to non-GAAP net income of $154 million or $0.11 per diluted share for the same period of 2007.

Yahoo! forecast Q2 revenue in a range of $1.73 billion to $1.93 billion and for the full year $7.2 billion to $8 billion.

Douglas A. McIntyre

Posted on: April 22, 2008 – 3:38 pm in Earnings,

VMware Doesn’t Repeat Prior Disappointment (VMW, EMC)

VMware Inc. (NYSE: VMW) decided not to make a repeat of last quarter’s earnings disappointments.  The king of virtualization posted net income of $43 million on $438 million in revenues. Reported EPS was $0.11 net, but $0.22 from an operational EPS basis.

Second quarter 2008 revenues are expected to increase approximately 55% compared to the second quarter of 2007, which would translate to roughly $458.5 million; First Call has estimates of $422.3 million.

VMware said that it als "continues to expect" 2008 revenue growth of approximately 50% over 2007, which translates to $1.988 Billion; First Call has estimates at $1.99 Billion.

Diane Greene, CEO, sums it up easily, "….We are seeing customers progress more rapidly through the virtualization adoption path; many are now moving right into a VMware-based architecture…."

Shares have rallied 12% in after-hours to $65.00, which is partly helped by the 3.22 million shares (listed as 32% of the free float, although that may be wrong after lock-up and employee dilution).  As a reminder, shares of the parent, EMC Corp. (NYSE: EMC), are set to report earnings tomorrow morning before the open.

Jon C. Ogg
April 22, 2008

Jon Ogg is a producer of and editor for both the Special Situations newsletter and the "10 Stocks Under $10" weekly newsletter for 247WallSt.com; he can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 22, 2008 – 3:28 pm in Earnings, Software, ,

SPAC/Blank Check IPO Filing: GF Acquisition Corp. (GFX)

Last night, we saw another SPAC IPO filing with the SEC.  GF ACQUISITION CORP. filed as a Specialty Purpose Acquisition Company to come public via a sale of 8 million units at $10.00 per unit in an $80 million filing,

Pali Capital and Morgan Joseph are the underwriters and the total came to 9.2 million units or $92 million if the overallotment is exercised.  Each unit consists of one share of common stock along with one warrant with a $7.50 strike price.

GF Acquisition Corp. is a newly formed blank check company that has not identified any target companies nor is it limited to any specific sector.  This will trade under the proposed ticker of "GFX" on the American Stock Exchange.  While we have this listed as a SPAC, it is more accurately a real BLANK CHECK company since it has no earmarked targets.

This is not management’s first pony ride in the world of SPAC’s.  Ronald Valenta, John Johnson and certain initial stockholders were responsible for organizing General Finance Corporation, another blank check company which completed an initial public offering in September 2006 and raised gross proceeds of $69 million. In September 2007 General Finance paid approximately $64 million to complete the acquisition of RWA Holdings Pty Limited and its subsidiaries, or Royal Wolf.

Two of the company’s initial stockholders and members of the board of directors currently serve as executive officers of General Finance.  Ronald Valenta is a member of its Board of Directors and is the President and Chief Executive Officer of General Finance, and John Johnson is the Chief Operating Officer of General Finance.

You can join our open email distribution list to hear about other SPAC’s, Blank Check Companies, IPO’s, key financings, secondary offerings, spin-offs and other special situation previews.

Jon C. Ogg
April 22, 2008

Jon Ogg is a producer of and editor for both the Special Situations newsletter and the "10 Stocks Under $10" weekly newsletter for 247WallSt.com; he can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 22, 2008 – 2:56 pm in IPOs,

The 52-Week Low Club (DAL)(AMR)(LCC)(UAUA)

Delta Air Lines Inc (DAL) Fuel costs, faltering earnings. Drops to $6.70 from 52-week high of $21.85.

AMR (AMR) Another airline. Sells off to $7.05 from 52-week high of $29.47.

US Airways Group (LCC) Fly boys. Down to $6.75 from 52-week high of $45.65.

UAL (UAUA) Ditto. Dips to $12.78 from 52-week high of $51.60.

Omnicell (OMCL) Cuts profit outlook. Down to $11 from 52-week high of $31.12.

Novellus Systems  (NVLS) Drop in Q1 profit. Sells down to $20 from 52-week high of $34.

Douglas A. McIntyre

Posted on: April 22, 2008 – 2:55 pm in HI/LOW, , , , , ,

CostCo (COST): As Inflation Rises, Food Hoarding Begins

Shoppers are raiding CostCo (COST) for rice and wheat. At least the are paying for it, for the time being anyway.

The discount retailers CEO says that "enough is enough". CostCo is prepared to ration the commodities so that the chain does not come up short in a real emergency. James Sinegal, Costco’s chief executive officer, told Reuters, If a customer came in and said, "I want 10 pallets of flour, we’d probably say, ‘No, we can’t give you that. We can give you one pallet’."

With the price of some food up by three times over the last year perhaps customers only want to get a little bit ahead of the curve. Those are the same shoppers who are building bomb shelters.

Douglas A. McIntyre

Posted on: April 22, 2008 – 1:48 pm in Food,

Yahoo! Earnings Likely A Sideshow (YHOO, MSFT)

Yahoo! Inc. (NASDAQ: YHOO) reports earnings today after the close, and hopefully we get one more glimpse of what is going on inside Jerry Yang’s head.  The search engine and content giant is expected to post earnings of $0.09 EPS on $1.32 Billion revenues (ex-TAC revenues).  For Q2, it is expected to post $0.11 EPS on revenues of $1.37 Billion; and for fiscal 2008 it is expected to see $0.44 EPS on $5.63 Billion.  Unfortunately, today isn’t about Yahoo!’s earnings….

Today is about the Microsoft Corp. (NASDAQ: MSFT) buyout.  Jerry Yang will have pulled all the stops possible for this quarter.  The problem is that iof the results are strong then the company should be bought.  If the results are weak, then it should be bought.  Steve Ballmer has supposedly noted that today doesn’t matter, although that old deadline for "come on board or jump ship for less money" is looming.  In fact, the only real issue about earnings that does matter is if Jerry Yang can somehow pull a miracle off and convince anyone the company is better off on its own. 

Steve Ballmer already put the heat on the company in his last written gesture after the buyout offer by noting Yahoo!’s core business has softened and the economy has softened, and he even warned that he’d make a lower offer if Microsoft has to go hostile.   Since a buyout is afoot, the chart doesn’t matter.  Options traders are braced for a move of up to about $2.00 in either direction.

Despite Ballmer’s comments that he doesn’t need to lower the bid, there just aren’t any natural bidders that seem to be present in any form that can really outbid Microsoft’s buyout.  If Microsoft walks away, then these share prices of just under $30.00 are toast.

Jon C. Ogg
April 22, 2008

Posted on: April 22, 2008 – 12:22 pm in Earnings, Internet, ,

OPEC Could Increase Production 5 Million Barrels A Day By 2012

AFP is reporting today that OPEC’s secretary general, Abdalla Salem El-Badri, has stated that the cartel "plans to lift production capacity by five million b/d by 2012." El-Badri’s also noted that OPEC planned to boost production capacity by nine million b/d by 2020. So far, the report has had no impact on oil prices, which are up $0.80 to $118.28/b.

Really, there’s no reason to expect this sort of news to have any impact at all on oil prices. OPEC’s excess capacity stands at two or three million b/d, depending on whose numbers you believe, so doubling that in four years doesn’t mean much. Current OPEC production stands at about 32 million b/d. The stated increase by 2012 raises production to 37 million b/d and the increase by 2020 raises capacity to 41 million b/d. The U.S. EIA has predicted OPEC liquids production to reach 40 million b/d by 2012 and 46.7 million b/d by 2020. That is not a formula for lower oil prices.

OPEC is also concerned about "demand security;" that is, if they pump it out, will there be a buyer for it? OPEC expresses concern about expanded development of biofuels, essentially threatening to slow down production until the rest of the world guarantees a market for its oil. Russia has had mixed success with its demand security position for its natural gas exports to Europe, but what success Russia has had only strengthens OPEC’s hand.

The short version of this story is that even if crude oil production could reach expected demand levels, the price for that oil will not fall. Ever.

Paul Ausick

Posted on: April 22, 2008 – 11:01 am in Oil & Gas

Apple (AAPL): The Mac Finally Moves Beyond Consumers, Sells To Small Businesses

The knock on sales of the Apple’s (AAPL) Mac has been that they are limited to consumers, colleges, and media companies. But, as Mac purchases grow at a rate of close to double that of PCs,  Apple is beginning to get adoption by selling a lot of Macs to small and medium-sized businesses.

Apple sold over two million Macs in the last quarter, up 53% from the same quarter a year ago. Most analysts think the next quarterly report will show that Apple sold over two million Macs again.

Research firm Gartner says its expects the market share of the Mac to go from 6% in the US and Europe this year to 12% in 2011. Part of the reasoning behind the prediction is that many computer users prefer the Mac OS system to Windows Vista. That preference is going beyond consumers and into businesses. Polling firm ChangWave says that "Apple is also likely to crack the historically resistant corporate market." The company’s figures show Mac adoption at enterprises is already increasing at a robust pace.

Part of the move toward Mac enterprise sales may be lead by IBM (IBM). The huge hardware and software company wants to offer an alternative to PCs and the Microsoft (MSFT) Windows Platform. Starting late last year, IBM Research began looking at how well the Mac would perform in a business environment. Results so far have been extremely positive. An IBM endorsement would open a lot of doors at big companies.

The really large barrier to the Mac at companies with a lot of employees is IT departments that do not want to support two sets of computers and two operating systems. The bigger the operation, the harder it will be for the Mac to get in. To some extent the fact that the Mac can run Windows will help overcome this.

The problem of system support is much less acute at smaller businesses where computer use can be a matter of a relatively small number of people deciding what hardware and software they want. Based on Census data, of the 5.9 million businesses in the US, almost 2.8 million have 1 to 4 employees. Over one million businesses have 5 to 9 people.

If Mac market share does double over the next three years, Apple will almost certainly have to rely on greater business adoption. For the time being it is the smaller companies where the Mac faces the least resistance.

Douglas A. McIntyre

Posted on: April 22, 2008 – 10:33 am in PC Companies, ,

More Bad News from the Oil Patch (BHI, BJS, SII)

Three more oil field services companies reported earnings today, and there isn’t much good news in any of the announcements. Baker Hughes (NYSE:BHI) reported EPS of $1.27, which includes a one-time gain of $0.06/share, on revenue of $2.67 billion. First Call estimates were EPS of $1.20 on revenue of $2.69. In pre-market trading this morning, the stock has been off more than $1.00.

BJ Services (NYSE:BJS) reported EPS of $0.43 on revenue of $1.28 billion, missing First Call estimates of $0.55/share and revenue of $1.26 billion. The stock is being punished, down nearly $5.00 in pre-open trading.

Smith International (NYSE:SII) matched First Call estimates exactly, reporting EPS of $0.87 on revenue of $2.37 billion. SII closed at $78.01 yesterday, near its 52-week high, and there’s been no pre-open trading yet today. But, it’s hard to see how SII can avoid the sector meltdown.

Combined with yesterday’s announcements, the market for oil field services stocks is definitely downbeat. EPS and revenue growth estimates are modest for the whole sector, about 4%-5% for 2008. North American growth is expected to pick up somewhat, but mostly in the Canadian oil sands. Pricing pressure is also expected to continue in North America.

Every company is looking to grow its international business, but it’s hard to see how any single company comes up the big winner in that scenario. The Saudis are not expanding exploration or production, Russian oil production is actually falling, West Africa is fraught with danger, and even the new discoveries offshore Brazil won’t be in play for some time.

Tough pricing competition and anticipated lower levels of E&P by the majors point to lower expectations for the sector for the remainder of 2008.

Paul Ausick

Posted on: April 22, 2008 – 8:37 am in Earnings, , ,

Intrepid Potash IPO Set To Trade (IPI)

Last week, Intrepid Potash Inc. (NYSE: IPI) went from a hot IPO to a scorcher in the agriculture and fertilizer sector.  That was after the price target and share offering were hiked considerably.  The original range was $24.00 to $26.00 for 24 million shares.  Then the range went to $27.00 to $29.00 for 30 million shares.

Now this IPO has priced 30 million shares at $32.00 per share, and it is probably safe to assume that the 4.5 million shares earmarked for the overallotment will be exercised.

Goldman Sachs, Merrill Lynch, and Morgan Stanley were the final joint-book running managers of the offering with RBC Capital Markets and BMO Capital Markets Corp. listed as co-managers  in the deal.

You can join our open email distribution list to hear about other IPO’s, key financings, secondary offerings, spin-offs and other special situation previews.

Last night on CNBC’s MAD MONEY, Jim Cramer came out with his own play book for this hot IPO.   While we do not like seeing IPO’s get touted like this before they even come public, he did at least note the cautious side of the trade as well rather than all bullish calls.

The first indications seen this morning were around $40.00, although this can easily go higher or lower by the time this one actually opens.

Jon C. Ogg
April 22, 2008

Jon Ogg is a producer of and editor for both the Special Situations newsletter and the "10 Stocks Under $10" weekly newsletter for 247WallSt.com; he can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 22, 2008 – 7:52 am in Agriculture, IPOs,

AT&T (T) Up On Big Wireless, Fiber Increases: Bad News For Cable And Sprint (S)

AT&T (T) had a good quarter, powered by its wireless service.

For the quarter ended March 31, 2008, AT&T’s revenues totaled $30.7 billion, up 6.1 percent versus reported results in the year-earlier quarter. The company reported first-quarter 2008 net income totaled $3.5 billion, up 21.5 percent from $2.8 billion in the year-earlier first quarter, and reported earnings per diluted share totaled $0.57, up 26.7 percent from $0.45 in the first quarter of 2007.

Total wireless revenues increased 18.3 percent versus the year-earlier first quarter to $11.8 billion. Wireless service revenues, which exclude handset and accessory sales, grew 17.1 percent to $10.6 billion. Wireless data revenues grew 57.3 percent versus results in the year-earlier first quarter to $2.3 billion,.

Growth in AT&T U-verse TV service, the company’s next-generation IP-based video service, continued its strong ramp during the first quarter, achieving a net subscriber gain of 148,000 to reach 379,000 in service. AT&T expects a further ramp in the quarters ahead and is on track to reach its target of more than 1 million subscribers by the end of 2008

The growth in U-Verse is bad news for cable firms like Comcast (CMCSA) and Time Warner Cable (TWC) who are seeing the fiber products from AT&T and Verizon (VZ) eating into their customer bases.

On the wireless front, the AT&T success is probably bad for Sprint (S), the No.3 player in the market. It has been trying to gain subscribers in a US market which is nearly saturated in terms of total wireless subscribers. Growth from AT&T may well be coming at Sprint’s expense. AT&T appears to continue to post successful sales of the Apple (AAPL) iPhone. It is the exclusive US distributor of the handset.

Douglas A. McIntyre

Posted on: April 22, 2008 – 7:33 am in Telecom, , , , , ,

Lehman Brothers Initiates Major Tech (AAPL, DELL, EMC, HPQ, IBM, NTAP, JAVA)

Lehman Brothers has initiated major technology companies in new analyst coverage this morning.  The broker has a mixed call in the sector.

Overweight rated stocks are Apple, Inc. (NASDAQ: AAPL) with a $195.00 target; IBM (NYSE: IBM) with a $144.00 price target; and Hewlett-Packard (NYSE: HPQ) with a $59.00 price target.

Equal-Weight rated stocks are Dell, Inc. (NASDAQ: DELL), EMC Corp. (NYSE: EMC), Network Appliances (NASDAQ: NTAP), and Sun Microsystems (NASDAQ: JAVA).

So far, almost all of these names are close to unchanged in quiet pre-market trading.

Jon C. Ogg
April 22, 2008

Jon Ogg is a producer of and editor for both the Special Situations newsletter and the "10 Stocks Under $10" weekly newsletter for 247WallSt.com; he can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 22, 2008 – 7:22 am in Analyst Calls, Technology Companies, , , , , , ,

Good Eats At McDonald’s (MCD)

McDonald’s (MCD) had a blow-out quarter.

Global comparable sales increased 7.4%, Revenue rose 6% to $5.615 billion. Operating income was up 24% to $1.463 billion.

Earnings per share were $0.81, up 31% versus $0.62 in 2007, and included $0.05 per share of currency benefit.

For the quarter, Europe and Asia/Pacific, Middle East and Africa both delivered double-digit revenue and operating income growth. Europe’s revenues rose 23%.

McDonald’s U.S. delivered solid quarterly results with comparable sales up 2.9% and operating income increasing 5%

Douglas A. McIntyre

Posted on: April 22, 2008 – 7:19 am in Earnings,

Top 10 Pre-Market Analyst Calls (ADS, GRMN, HST, JEF, MHS, NCC, RHT, CRM, BRLC, VLTR)

These are some of the top analyst calls that we are focusing on this Tuesday morning in pre-market trading hours:

  • Alliance Data (NYSE: ADS) raised to Overweight at JPMorgan.
  • Garmin Ltd. (NASDAQ: GRMN) started as Neutral at JPMorgan.
  • Host Hotels & Resorts (NYSE: HST) Cut To Hold From Buy By Deutsche Bank.
  • Jefferies Group (NYSE: JEF) Cut to Neutral at Banc of America.
  • Medco Health Solutions (NYSE: MHS) raised to Buy at Jefferies.
  • National City (NYSE: NCC) raised to Buy at Deutsche Bank; Downgraded to Underperform at Bear Stearns.
  • Red Hat (NYSE: RHT) started as Buy at Piper Jaffray.
  • Salesforce.com (NYSE: CRM) started as Buy at Piper Jaffray.
  • Syntax-Brillian (NASDAQ: BRLC) raised to Outperform at Robert W. Baird.
  • Volterra Semi (NASDAQ: VLTR) raised to Buy at Piper Jaffray.

Jon C. Ogg
April 22, 2008

Jon Ogg is a producer of and editor for both the Special Situations newsletter and the "10 Stocks Under $10" weekly newsletter for 247WallSt.com; he can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 22, 2008 – 7:01 am in Analyst Calls, , , , , , , , , ,