Daily Archives: May 13, 2008

IPO FILING: Metastorm Inc. (MSTM)

A company called Metastorm, Inc. has just filed with the SEC to come public via an initial public offering.  It will take the proposed ticked on NASDAQ of "MSTM."

It has filed to sell up to $86.25 million, although that is for filing purposes only and may change by the IPO.  The two lead managers are Jefferies and Oppenheimer, and co-managers are listed as Needham & Company, JMP Securities, and Craig-Hallum Capital Group.

Metastorm is an enterprise architecture modeling, business process analysis and business process management software, which sells as the Metastorm Enterprise™.  It enables customers to understand, analyze, automate and improve their business processes. 

As of December 31, 2007, it had approximately 1,150 customers in 37 countries, including 39 of the Fortune 100 companies, in areas such as business services, financial services, government, healthcare, manufacturing and retail.  In the fiscal year ended December 31, 2007, it generated approximately $59.7 million in total revenues, with 70% of revenues generated in North America and 30% generated in other countries.  Revenues were approximately $42.1 million in 2006, representing a growth rate of 42% and from approximately $25.3 million in 2005.

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

Jon C. Ogg
May 12, 2008

Posted on: May 13, 2008 – 5:59 pm in IPOs, Software, , , ,

IAC/Interactive vs. Liberty: Diller Trumps Malone (IACI, LINTA, LCAPA, LMDIA)

IAC/InteractiveCorp. (NASDAQ: IACI) and Liberty Media Corporation (NASDAQ: LINTA) (NASDAQ: LCAPA) (NASDAQ: LMDIA) have settled their disputes, and it looks like Barry Diller Came out on top of John Malone.

We covered this scenario in our SPECIAL SITUATION newsletter that went out on April 2, 2008 at $21.22; and the intro to subscribers was as follows:

  • ….Our current pick is IAC/Interactive (NASDAQ: IACI), and we gave three likely scenarios we believe to occur. Our downside target limits the implied risk to 12% if you hedge your transaction as we would do. The upside would be an implied 33% to more than 50% if the scenarios pan out the way we expect. Barry Diller isn’t entirely out of the soup yet and Malone may have some more tricks up his sleeve. After the ruling came out we ran the hard detailed numbers and eyeballed various probabilities for this call….

Liberty has agreed to drop its appeal and will not oppose the proposed single-tier spin-offs of HSN, Interval International, Ticketmaster and Lending Tree.  IAC advanced those filings earlier today by making its initial filings with the SEC.  This is all within our line of expectations and should clear the way to the unlocking of value.

Liberty & IAC also agreed on a number of arrangements regarding the governance of the spun off companies as follows:

  • Liberty’s right to board representation on each company,
  • a standstill agreement that limits Liberty’s ability to increase its ownership stakes,
  • and to take a variety of other actions with respect to the spun off companies.

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

John Malone may be happy with what he got here and he may not, but as far as we are concerned this looks like a clear win for Barry Diller.  IAC shares closed up 2.7% at $23.00 in normal trading today, and shares are up over 3% at $23.85 in after-hours trading.

Jon C. Ogg
May 12, 2008

Jon Ogg produces the twice-monthly SPECIAL SITUATION INVESTING subscriber newsletter and he can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: May 13, 2008 – 4:42 pm in Earnings, Internet, Law, Media, Shareholder Issues, Stock Splits, , , ,

Continental Unloading Copa Shares (CPA, CAL)

Copa Holdings, S.A. (NYSE: CPA) announced today that it has filed a registration statement for a proposed offering of 3,977,300 Class A non-voting shares of Copa Holdings by selling shareholder Continental Airlines, Inc. (NYSE: CAL).

Morgan Stanley will be the sole book-running manager, while UBS Investment Bank will be the joint lead manager of this offering.  The underwriters also have an over-allotment option to purchase up to an additional 397,700 shares from Continental Airlines.

Continental will hold about 1.3% of the outstanding Class A shares if the underwriters do not exercise the over-allotment option; and it will not own any more Class A shares if the underwriters exercise the full over-allotment option. 

Copa Holdings will not receive any proceeds from the offering.

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

Jon C. Ogg
May 12, 2008

Posted on: May 13, 2008 – 3:54 pm in Airlines, Secondary Offering, ,

Electronic Arts; Half Full & Half Empty (ERTS, TTWO)

Electronic Arts (NASDAQ: ERTS) posted a net loss of $94 million or -$0.30 EPS, but on a non-GAAP basis from operations the company showed $0.09 EPS on a "excluding a benefit basis of $919 million.  Analysts were looking for $0.00 EPS and $834.8 million in revenues.

The company gave net non-GAAP earnings guidance for the year of $1.30 to $1.70 EPS, while First Call has estimates at $1.73 EPS.  Its revenue targets are $5.0 to $5.3 Billion, while First Call has estimates at $4.9 Billion.

As a result of guidance including many factors such as mentioning the Take-Two Interactive Software, Inc. (NASDAQ: TTWO).

Evaluating this one is a case by case scenario because of all the extra items that add to and take away from numbers in this transition period for this time.

EA shares closed up 0.5% in normal trading and shares are up almost 2% at $55.67 in after-hours trading.

Jon C. Ogg
May 12, 2008

Posted on: May 13, 2008 – 3:36 pm in Earnings, Video Games, ,

Applied Materials Solar Not Enough To Carry Earnings, Yet (AMAT)

Applied Materials Inc. (NASDAQ: AMAT) posted $0.22 EPS on $2.15 Billion in revenues.  Non-GAAP net income for Q2-2008 was $362 million, or $0.26 EPS.  First Call had estimates at $0.22 EPS on $2.13 Billion in revenues.

It also showed a 9% year over year decrease and a 3% sequential decrease to $2.41 Billion in new orders.

Gross margin for Q2-2008 was 45%, up from 44.9% for Q2-2007, and up from 44.8% for Q1-2008.

This is one of the first reports where side businesses are getting as much focus as parts of the main business.  Applied is ramping display and solar businesses while addressing the challenges of a weaker global chip equipment market.

Applied shares closed up 0.25% at $19.86 in normal trading, and shares are down 1% at $19.65 after the report.

Jon C. Ogg
May 12, 2008

Posted on: May 13, 2008 – 3:18 pm in Earnings, Semiconductor,

The 52-Week Low Club (IMB)(WNR)(VVTV)(URRE)

IndyMac Bancorp (IMB) Broker report says company needs more capital. Falls to $2.15 from 52-week high of $37.50.

Western Refining (WNR)  Bad earnings and broker downgrade. Drops to $7.81 from 52-week high of $66.13.

ValueVision International (VVTV) Revenue down from last year. Sells off to $4.14 from 52-week high of $12.19.

Uranium Resources (URRE) Earnings wreck. Trades down to $4.44 from 52-week high of $14.99.

Douglas A. McIntyre

Posted on: May 13, 2008 – 3:03 pm in HI/LOW, , , ,

CNBC: An Icahn Proxy Fight For Yahoo! (YHOO): Never

CNBC is saying that Carl Icahn may start a proxy fight for control of Yahoo! (YHOO).

It will never happen.

Microsoft (MSFT) has made it clear that it does not want Yahoo!. At this point the bad blood between the two companies is such that a buy-out is almost certainly out of the question. MSFT may go after AOL or MySpace, but it will not go back with a $33 offer with Yahoo! trading at $26.50. It would ruin Steve Ballmer’s reputation as a negotiator forever.

No one else stepped up to offer even $30 for Yahoo!. It is not worth that much to any media company. Its earnings growth is too modest and its search business is being eaten by Google.

Icahn has two high profile failures right now, Motorola (MOT) and Blockbuster (BBI). He can’t make money on Yahoo!. A fight would be long and expensive.

And, he does not need a third failure.

Douglas A. McIntyre

Posted on: May 13, 2008 – 2:37 pm in Internet, , , , ,

Lazard’s Alternative Energy Calls (CSIQ, LDK, JASO)

Between late yesterday and early today, Lazard Capital Markets’ Sanjay Shrestha has keyed on many of his alternative energy picks after earnings or other news.  Among the calls are Canadian Solar, Inc. (NASDAQ: CSIQ), LDK Solar Co. Ltd. (NYSE: LDK), and JA Solar Holdings Co. Ltd. (NASDAQ: JASO).  Below are the notes for each call:

  • Canadian Solar, Inc. (NASDAQ: CSIQ) shares are up 31% to $44.85 after the company just trounced the earnings estimates.  Shrestha at Lazard maintained his buy rating.  But he raised estimates for 2008 EPS estimate to $2.15 from $1.30 and 2009 estimate to $3.40 from $1.60 to reflect the companies continued traction and capacity ramp.  His price target is now $50.00 from $24.00, reflecting a 15-times 2009 EPS.
  • LDK Solar Co. Ltd. (NYSE: LDK) was maintained as a HOLD rating, despite the company posting higher numbers than Shrestha’s estimates.  The HOLD rating reflects his view that LDK is fairly valued at current levels on the 2009 EPS estimate from Lazard of $2.20 versus consensus of $3.72.  LDK shares are down almost 3% at $36.40.
  • JA Solar Holdings Co. Ltd. (NASDAQ: JASO) has also been maintained as a BUY rating, and Shrestha noted that the $300 million convertible note offering will allow the company to ramp production faster.  Shrestha raised the MW guidance to 345 from 300 for this year, and therefor raised his estimates on earnings and revenues as well.  JA Solar’s $32.00 target is based upon a rough 20-times earnings for 2009.  JA Solar’s stock is up over 6% at $23.55 today.

Jon C. Ogg
May 12, 2008

Posted on: May 13, 2008 – 1:22 pm in Alternative Energy, Analyst Calls, , ,

Setbacks Back At Boston Scientific (BSX)

Boston Scientific (BSX) has been the "gang who couldn’t shot straight" of the medical device business for some time. It spent far too much money to buy another medical company, Guidant. For all of its trouble, BSX ended up with almost $8 billion in debt and over $15 billion in goodwill. Watch for some of that to be written off.

The next stumble for BSX was that clinical studies showed that bare metal stents, small mesh pipes used to keep arteries open, did just as well as drug-coated stents to help patients with blockages. Drug-coated stents are more profitable. When their safety was called into question,sales went off a cliff.

BSX has two significant competitors in the stent business. One is Johnson & Johnson (JNJ) and the other is Abbott (ABT). Today a major medical study showed that after two years the Abbott Xience V product was much more safe for patients than the Boston Scientific Taxus stent.

According to Reuters, "In the 1,002-patient study, sponsored by Abbott, 7.3 percent of Xience patients experienced a major cardiac event, compared with 12.8 percent of Taxus patients, researchers said."

The fact that Abbott financed the research does smell a bit.

Nevertheless, if the data is confirmed by other studies, BSX investors get to brace for another round of trouble. Its shares trade for $13, down from a two-year high of over $20. A price of $10 may end up being more realistic.

Douglas A. McIntyre

Posted on: May 13, 2008 – 12:47 pm in Medical, , ,

As Airbus Cracks Up, A Little Light For Boeing (BA)

No one wanted to be in Boeing’s (BA) shoes, at least until today perhaps. The big US airplane company has hit three delays for its 787 Dreamliner and there are rumors that union work stoppages could make that worse. The set-back threatens Boeing’s earnings forecasts and could cause 787 customers to ask for late delivery penalties.

Now the spotlight is off Boeing and pointed toward it primary competitor, Airbus. The European firm has announced more delays to it A380 super-jumbo plane which competes with a new version of Boeing’s 747.

According to Reuters "Airbus said it was unable to boost production as quickly as it hoped as it tries to recover from two years of production delays caused by problems in installing the wiring on the world’s largest passenger plane."

The injured parties from all of this news are airlines who hoped to use the new jets for more fuel-efficient and modern fleets. The carriers are facing having to use old planes which burn more gas at a time when oil prices continue to move up. Many of these carriers are already inching into positions where they cannot meet debt service.

For Boeing, Airbus, and the carriers, it is one of the few games in town where everyone loses.

Douglas A. McIntyre

Posted on: May 13, 2008 – 12:20 pm in Aerospace,

Biotech Business Daily (CHTP, CRXL, LLY, IOMI, MEDX, TRCA)

Chelsea Therapeutics International, Ltd. (NASDAQ: CHTP) falling today after first quarter earnings showed wider losses than first quarter 2007. Net loss was $8.7 million compared to a loss of $3.8 million in 2007. The wider loss was driven primarily through increased research and development expenses. Shares are down $0.44, or 8%, at $4.69. The 52-week range is $4.45 to $8.41.

Crucell NV (NASDAQ: CRXL) up today after cutting its net loss in half, posting $13.2 million in losses. The company has $120 million in new contracts for pediatric vaccine Quinvaxem to look forward to in the next two years. Revenues are on track to meet guidance. Also, the company announced this morning that Phase II testing of rabies monoclonal antibody combination product will begin in the Philipines. The product has already commenced testing in the U.S. Shares are up over 8% at $19.43 in mid-day trading. The 52-week range is $12.76 to $24.81.

Eli Lilly & Co. (NYSE: LLY) announced a partnership with TopCoder today, allowing Eli Lilly to outsource complex drug discovery through complex technology processes to the software developer. Shares are down less than 1% at $47.82. The 52-week range is $46.60 to $60.00.

Iomai Corporation (NASDAQ: IOMI) is soaring to new highs today after receiving a $189 million offer yesterday from vaccine maker Intercell AG which trades on the Vienna exchange. The offer of $6.60 per share is a 126% premium to the closing share price Monday of $2.92. As a result of the acquisition, Intercell will have full rights to Iomai’s diarrhea vaccine set to enter Phase III trials in early 2009. Shares are up a whopping 116% at $6.33 in mid-day trading on extremely high relative trading volume. The 52-week range for the biotech company is $0.70 to $4.70.

Medarex Inc. (NASDAQ: MEDX) received a boost after the company was upgraded by Needham & Co. to "Buy" from "Hold." Shares are up $0.56, or almost 8%, at $7.59. The 52-week range is $6.88 to $ 18.23.

Tercica Inc. (NASDAQ: TRCA) dropping over 15% today after posting wider net losses yesterday. The endocrine health biotech company generated a net loss of $17.5 million for the quarter, compared to a net loss of $12.4 million in the first quarter of 2007. Shares down $0.77 at $4.22 in early morning trading. The 52-week range is $4.27 to $8.11.

Rachel Lopez
May 12, 2008

Posted on: May 13, 2008 – 12:10 pm in Biotech, , , , , ,

IPO FILING: Patriot Risk Management (PRMI)

Patriot Risk Management filed with the SEC for its IPO paperwork this morning. The maximum proposed aggregate offering price for the workers’ compensation company is listed as $115 million but this number is for filing purposes only. The company intends to trade on the Nadsaq Global Market under the ticker “PRMI.” The underwriter for the offering is Friedman Billings Ramsey.

Patriot Risk Management is a workers’ compensation risk management company that provides both traditional and alternative market workers’ compensation products and services through two business components: insurance and insurance services. A majority of its business exists in Florida; however, it operates in 18 states and the District of Columbia. Patriot believes that its specialty product knowledge, low expense ratio, and hybrid business model drives strong returns and a competitive advantage in underserved markets. The proceeds from the initial public offering would be used to complete various acquisitions, pay off loan obligations, and for capital contributions for existing subsidiaries. In 2007, Patriot generated revenues of $32.9 million and a net income of $2.4 million. In 2006, revenues reached $28.2 million for a net income of $1.6 million.

You can join our open email distribution list to hear about other IPO’s, secondary offerings, special financings, mergers, spin-offs, and other special situations.
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Rachel Lopez
May 13, 2008

Posted on: May 13, 2008 – 10:57 am in IPOs,

Hughes Raises Satellite Spending Cash (HUGH)

Hughes Communications, Inc. (NASDAQ: HUGH) is under a little pressure after the company announced plans to offer a shelf registration for up to 2 million shares of common stock.

The broadband satellite network solutions and services global leader intends to offer 2 million common shares and an additional 239,000 shares will be offered by selling stockholders, including senior management members.

Joint book-runners will be Goldman Sachs and Lehman Brothers; and co-managers are Banc of America, Cowen & Co., Morgan Stanley, UBS, and Wachovia Securities.  The underwriting syndicate will also be granted an option to purchase an additional 335,940 shares of common stock for over-allotments.

The proceeds from the public offering valued at approximately $100 million from the company itself will be used for the purchase of a satellite or for general corporate purposes.  Hughes will not receive any proceeds from selling stockholders.

Shares of Hughes are down over 3% at $50.00 in early morning trading. The 52-week range is $42.00 to $61.00. The market cap currently sits around $965 million.

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

Rachel Lopez
May 13, 2008

Posted on: May 13, 2008 – 10:33 am in Satellite, Secondary Offering,

A Red Light For GM (GM)

GM (GM) says it has plenty of money on hand for tough times. So do Ford (F) and Chrysler. Based on where the two public companies trade, almost no one believes that.

As if to confirm the market’s concerns, GM says it may raise some money. According to Bloomberg "General Motors Corp., the biggest U.S. automaker, said it still has enough liquidity for its operations through 2008 and will consider cutting costs or raising more money if the U.S. economy doesn’t improve."

The statement is enough to send investors looking for their Prozac. GM has $24 billion on hand plus access to lines of credit. To think that the current cash would not be enough by double would be to acknowledge that the company could hit extremely hard times.

The worst case for GM is very possible. If US car sales drop to a rate of 14.5 million this year and GM’s market share moves down, the company could bring in billions of dollars less than it did last year. Overseas sales will not make up for that.

The possibility that GM may raise cash is an SOS from the company’s largest car maker.

Douglas A. McIntyre

Posted on: May 13, 2008 – 10:05 am in Autos, ,

Apollo Sells Stock, Pays Down Debt (AINV)

Apollo Investment Corporation (NASDAQ: AINV) has priced its proposed secondary stock offering this morning.  The company sold 22,327,500 shares at an offering price of $17.11 per share, in an approximate $382 million of gross proceeds.  As far as how this compares to the overall size of the company, Apollo’s market cap is roughly $2 Billion.

Leon Black, Chairman & CEO of "AGM" and Joshua Harris, President of "AGM" have each subscribed for $10 million and $2.5 million, respectively, at the offering price of $17.11 per share. 

Net proceeds of the offering to repay debt owed under its senior credit facility, to make investments in portfolio companies, and for general corporate purposes. 

J.P. Morgan was the sole book-runners, and co-managers were listed as Keefe Bruyette & Woods, SunTrust Robinson Humphrey, and BB&T Capital Markets.

Shares are down almost 1% at $17.12; the 52-week trading range is $12.49 to $24.17.

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

Jon C. Ogg
May 13, 2008

Posted on: May 13, 2008 – 9:23 am in Financial Stocks, Private Equity, Secondary Offering,

TJX Beats, But… (TJX)

The TJX Companies, Inc. (NYSE: TJX) did beat estimates this morning and showed that discounters and clearance merchandise retailers that get it can do well in a slowing economy.  Unfortunately, its guidance is only in-line ahead for a company where many were hoping for better results.  There is nothing really bad or anything, it just looks more representative of a fairly valued stock at a time when the stock market is trying to decide its direction.

Net income for the first quarter was $194 million, and diluted earnings per share were $0.43 compared to $0.34 last year; Q1 net sales rose 6% to $4.4 billion on a consolidated comparable store sales increased 3% over last year.  After a tax benefit adjustment, TJX would have posted earnings of $0.41 EPS, compared to an adjusted $0.37 last year.  First Call had estimates at $0.40 EPS on $4.38 Billion in revenues.

The company sees EPS guidance at $0.40 to $0.42 EPS for the coming quarter based upon a 3% comparable store sales gain.  For fiscal Jan-2009 it sees $2.20 to $2.25 EPS, but this range includes a $0.09 share benefit due to a 53rd week in the retail year; and that is based upon a 2% to 3% comparable store growth, of which about 0.5% is due to currency.  Next quarter estimates are $0.43 EPS and fiscal Jan-2009 estimates are $2.22 EPS.

TJX also spent $225 million buying back shares of common stock, which retired 7 million shares.

Jon C. Ogg
May 13, 2008

Posted on: May 13, 2008 – 8:04 am in Earnings, Retail,

Dell Scrapping XPS Gaming PC’s to Resume Alienware Growth (DELL)

Dell Inc. (NASDAQ: DELL) has apparently been having some problems in its gaming PC division.  The company’s own XPS gaming systems sales are competing against its higher-end Alienware sales.  In the report, four of Dell’s XPS gaming systems will be phased out.

The Wall Street Journal is also noting that the XPS gaming consoles have also kept people from buying the ultra high-end gaming PC units under the Alienware brand.  Dell plans to end XPS marketing campaigns like its commingled marketing with World of Warcraft.

For better or worse, after the performance of Dell shares over the last year you can count on more and more changes at Dell. 

Jon C. Ogg
May 13, 2008

Posted on: May 13, 2008 – 7:26 am in PC Companies, Video Games,

Canadian Solar Earnings Go Super-Solar (CSIQ)

Canadian Solar Inc. (NASDAQ: CSIQ) came out this morning and didn’t just beat earnings estimates; they trounced them.  The company posted $21.2 million non-GAAP income or $0.65 non-GAAP EPS on a 34% revenue rise to $171.2 million, compared to First Call consensus estimates of $0.31 EPS and $151.9 million. Guidance for Q2-2008 is now $185 to $190 million with non-GAAP income at $17 to $18 million, versus $167.6 million consensus.  It also sees shipments of approx 45MW in Q2. 

For this year, the company said it is on track to achieve previous guidance of shipping 200 to 220 MW of regular solar modules in 2008.  On a longer term basis it sees 2009 access to 200 MW of regular polysilicon and wafers, but noted its ability to secure an additional 200 MW.  Co expects to produce 100 to 150 MW of UMG (upgraded metallurgical grade) silicon products in 2009.

Shares are up over 15% this morning pre-market at $39.50 in early trading.  Before this jump, the 52-week trading range was $6.50 to $34.47.

Jon C. Ogg
May 13, 2008

Posted on: May 13, 2008 – 6:56 am in Analyst Calls, Earnings,

Top 10 Pre-Market Analyst Calls (BRL, BE, EDS, HPQ, IRM, MHP, MCO, RSH, SNH, SNN, SOV)

These are not the only analyst calls this morning, but these are some of the impact calls we are seeing this Tuesday morning:

  • Barr Pharma (NYSE: BRL) raised to Outperform from Neutral at Cowen & Co.
  • Bearingpoint (NYSE: BE) Cut to Hold from Buy at Citigroup
  • Electronic Data Systems (NYSE: EDS) Cut to Sell from Hold at Citigroup; cut to Market Perform at FBR.
  • Hewlett-Packard Co. (NYSE: HPQ) was removed from the Goldman Sachs Conviction Buy List, although its BUY rating was maintained.
  • Iron Mountain (NYSE: IRM) Started as Neutral at Credit Suisse.
  • McGraw-Hill (NYSE: MHP) and Moody’s (NYSE: MCO) both started as Buy in new coverage at Jefferies.
  • RadioShack (NYSE: RSH) raised to Market Perform at RBC.
  • Senior Housing Properties (NYSE: SNH) Cut to Market Perform from Outperform at Raymond James.
  • Smith & Nephew (NYSE: SNN) Cut to Underweight from Neutral at JPMorgan.
  • Sovereign Bancorp (NYSE: SOV) Raised to Market Perform at FBR.

Jon C. Ogg
May 13, 2008

Posted on: May 13, 2008 – 6:40 am in Analyst Calls, , , , , , , , , , ,

Wal-Mart (WMT): Better Gauge Of The Economy Than GDP

While most retailers are simply trying to stay out of Chapter 11, Wal-Mart posted an extraordinary quarter. It was even more impressive because, as the world’s largest retailer, it must fight the law of large numbers making each percentage point of growth more dear.

Wal-Mart’s (WMT) numbers showed that the recession is in full bloom and the management as much as said so. Revenue for the first quarter of fiscal year 2009 was approximately $94.1 billion, an increase of 10.2% over $85.4 billion for the first quarter of fiscal year 2008. Net income for the quarter was $3.022 billion, an increase of 6.9%.

Lee Scott,distant heir to founder Sam Walton, explained it best by saying "Our business is even more relevant to our customers today, given the current economic pressures."

It would be unfair to underestimate the role that international sales from countries like Mexico and China played. Revenue from outside the US was up 22% to almost $24 billion. That cannot mask the fact that sales in America were higher by 7%. Operating income at the company’s core Wal-Mart franchise was up 10%, better than the figure for the entire company.

There is no way that Wal-Mart could post numbers of this magnitude without taking business from other retailers. Those retailers are clearly not able to hit the low price points that Wal-Mart can.

The world’s largest retailer has become a reverse indication of overall GDP. When times are bad, it attracts huge numbers of people who need a bargain to get by.

With inflation running through the economy and a recession hurting most of the country, Wal-Mart may be in for a good, long run.

Douglas A. McIntyre

Posted on: May 13, 2008 – 5:30 am in Retail,