Daily Archives: June 5, 2008

Vanguard Splitting Some ETF’s; A Smart Move (VTI, VWO, VXF, MER)

There has been an interesting development in ETF Land, and it may actually help Joe Q. Public in its ability to own shares in each of these ETF’s.  Vanguard Group is going to split the shares on a 2 for 1 basis on three of its most popular exchange traded funds.

A 2 for 1 split will occur in the shares of the following ETF’s:

  • The $10.8 billion sized Vanguard Total Stock Market ETF (AMEX: VTI) which closed at $141.25 and has an average daily volume of 530,000 shares;
  • The $7.6 billion sized  Vanguard Emerging
  • Markets ETF (AMEX: VWO) which closed at $102.96 and has an average daily trading volume of 934,000 shares;
  • and the $13.3 billion sized Vanguard Extended Market ETF (AMEX: VXF) which closed at $107.25 which has an average daily trading volume of 113,000 shares.

The truth is that stock splits on the surface do not matter other than it being a mental game.  On an ETF it cannot create an artificial impact on the holdings as the underlying holdings cannot be affected by a move of this sort.  But what it can easily do is make it easier for retail investors to buy 100 shares of each, and that in turn may help increase the trading volume and liquidity of each ETF.

Normally we view stock splits with some caution, but this move actually makes sense.  This could actually portend a similar ETF share split out of several other ETF families whose ETF’s are less actively traded than many ETF’s and whose share prices are much higher.  Merrill Lynch (NYSE: MER) is a prime example of an ETF series parent who might want to watch this move closely.  Its HOLDRS ETF series can only be purchased in lots of 100 shares because of those old distribution rights that were in the ETF’s.

Now if Vanguard could just keep its founder John Bogle from publicly bashing ETF’s every time he makes television appearances…..

Jon C. Ogg
June 5, 2008

Posted on: June 5, 2008 – 7:41 pm in ETF, Stock Splits, , , ,

Will Lehman (LEH) Pre-Announce Earnings?

CNBC is reporting that Lehman (LEH) may pre-announce earnings. Fears about huge losses in the last quarter have taken the stock from over $37 five trading days ago to under $30 early yesterday. Shares had a big rally today and closed at $33.85.

The fact that Lehman is thinking of putting out earnings two weeks before its usual date would almost certainly be an indication that the firm has done better than expected.

According to a source at the network, "CNBC has learned that one new capital-raising option now being discussed is something similar to what’s known as a "rights offering," whereby Lehman would approach existing shareholders and get them to buy stock in the company, possibly at a discounted price."

Douglas A. McIntyre

Posted on: June 5, 2008 – 6:02 pm in Earnings,

No Benefit of Doubt for Focus Media (FMCN)

Focus Media Holding Ltd. (NASDAQ: FMCN) has just posted earnings.  Despite beating estimates, Wall Street isn’t trusting its guidance issues "from the earthquake."

Total GAAP revenues grew 214.7% year-over-year to $161.6 million.  GAAP net loss for the first quarter was $53.8 million or -$0.42 EPS (ADS) after a non-recurring loss of $79.3 million resulting from the restructuring.  On a non-GAAP basis outside of restructuring and other items it recorded $44.8 million in net income with $0.34 non-GAAP EPS.  First Call had estimates at $162 million in revenues and $0.33 EPS.

This is probably not a huge shock when you consider its business, but the company noted that the earthquake in Sichuan province is going to bring down some adjusted ad numbers:

  • It put next quarter revenues at $190 to $195 million and EPS at $0.40 to $0.41 on 133 million total average ADS.  First Call has estimates of $0.46 EPS on $201.9 million.
  • It revised revenues to $820 million to $850 million, down from previous guidance of between $860 million to $890 million.  Full year 2008 non-GAAP net income is now expected to be between $240 million and $260 million, or $1.76 to $1.91 per fully diluted ADS based on 136 million annual average total ADS outstanding, as down from the previous guidance of between US$260 million and US$280 million.  First Call has estimates at $1.95 EPS on $882 million in revenues.

Because this ad company has a premium to it and because of the China syndrome, Wall Street isn’t giving the company any break at all over the earthquake being tied to the revenues.  Shares were up 2.6% today at $36.79 in regular trading, but shares are down almost 7% at $34.31 in after-hours trading.

Jon C. Ogg
June 5, 2008

Posted on: June 5, 2008 – 3:35 pm in China, Earnings, Earnings Warning, Entertainment,

Grand Theft Auto IV Leads Take-Two (TTWO)

Take-Two Interactive Software, Inc. (NASDAQ: TTWO) has posted results well above estimates.  It reported $539.8 million in net revenues, up more than 150% from last years $205.4 million due to the explosive Grand Theft Auto IV hit.  The company’s net income came in at $98.2 million, or $1.29 EPS.  First Call had revenue estimates at $499.1 million and earnings at $1.13 EPS.

The company noted that Grand Theft Auto IV sold 6 million units globally in the first week and that through May 31 it has sold some 11 million units to retailers and 8.5 million have been sold through to customers.

Guidance was put at $325 to $375 million in revenues and $0.45 to $0.55 EPS for next quarter, while First Call is $325.5 million in revenues and $0.33 EPS.  It offered fiscal October-2008 guidance at $1.4 Billion to $1.5 Billion in revenues and $1.65 to $1.85 EPS, while First Call estimates are $1.41 Billion in revenues and $1.53 EPS.

Shares closed up 1.2% at $27.65 in regular trading, yet it appears that shares are flat in after-hours trading.

Jon C. Ogg
June 5, 2008

Posted on: June 5, 2008 – 3:15 pm in Earnings, Video Games,

The 52-Week Low Club (BRLC)(PFE)(NOK)(WBS)

Webster Financial (WBS) Bank needs to raise cash. Falls to $21.77 from 52-week high of $46.40.

Pfizer (PFE) Concerns about product pipeline. Sells down to $18.45 from 52-week high of $27.33.

Nokia (NOK) Drop in consumer spending will hurt cellphone sales. Trades down ot $26.36 from 52-week high of $42.22.

Syntax Brillian (BRLC) CEO is out. Crushed down to $.51 from 52-week high of $7.14.

Douglas A. McIntyre

Posted on: June 5, 2008 – 2:59 pm in HI/LOW, , , ,

Broadcom’s Great Sales & Options Techniques (BRCM)

If you read through the indictment charges reported around the web on Broadcom Corp.’s (NASDAQ: BRCM) co-founder and former CEO Henry Nicholas, it reads like something fit for tabloids.  The thing is that it isn’t. 

Nicholas and former CFO William Ruehle also conspired in the options backdating scheme according to this, and it noted that Nicholas sold more than $1 Billion in company stock.

It gets better though.  If you will recall an employee alleging that he had been forced on certain issues you will get a kick out the rest of the charges.  Reuters reported that Nicholas was also charged with spiking customers’ drinks with ecstasy, distributing cocaine, and other drug charges.  Also alleged were hiring prostitutes for himself and for business associates.  To top that off, bribes and "threats of violence" were alleged as well.

The good news is that is all likely going to fall on him and his co-conspirators as the company has at least settled part of the matter.  Where did the guy learn his client entertainment tricks?  You’d think he must have worked on Wall Street.

Broadcom shares are up over 3% today at $29.05.  It looks like the only aspect to this story for shareholders from here is the entertainment aspects of the case.

Jon C. Ogg
June 5, 2008

Posted on: June 5, 2008 – 2:38 pm in Law, Semiconductor,

Level 3 (LVLT): Overbought Stock Of The Year, Or Will Company Be Bought?

It made some sense for Level 3 (LVLT) to be up yesterday. It was. It moved from $3.53 early on June 3 to $4.07 yesterday.

LVLT did sell its publishing business for $129 million, but that was expected.

Today, the stock is up to $4.48 on almost 90 million shares. On a good day it clears 24 million.

As 24/7 Wall St. pointed out yesterday, JP Morgan may have made some good comments about the company, but that would not account for a spike that has taken it to a level approaching three times its 52-week low of $1.68. The one call that also helped was UBS raising its price target, although its rating was maintained as Neutral. 

LVLT has said it will break even this year, but the company says that every year.

The firm does have a huge short position of 238 million shares as of the last time the NYSE posted numbers.Would that drive the shares up almost 14% in a day? Probably not.

No one should be astonished if a buyer is having a look at the goods. LVLT does have $6.8 billion in debt, but its market cap is only $6.8 billion.

Since the company is trading for less than three times revenue on a market value plus debt ratio, there could be a buyer.

Douglas A. McIntyre

Posted on: June 5, 2008 – 2:15 pm in Telecom,

Insiders at MBIA & Ambac Buy Shares (MBI, ABK)

We have seen numerous transactions today in different FORM 4 filings where executives at both MBIA Inc. (NYSE: MBI) and AMBAC Financial Group Inc. (NYSE: ABK) have gone out into the open market to acquire shares.  This is generally thought of as a show of force where executive buy shares after negative news, and yesterday’s negative credit review of both companies caused that drop.

MBIA’s Chairman Joseph Brown also bought 159,000 shares of common stock at $5.91 per share today, giving him 2,611,456 shares of direct ownership.

Ambac’s Chairman and CEO Michael A. Callen bought 10,000 company shares on Thursday for $2.60 per share.  Director Laura Unger disclosed transactions from June 3 for purchases of $103,334 shares at $3.00 in two transactions.  Jill Considine, Philip Duff, and Henry Wallace all also each bought 33,334 shares at $3.00 on June 3.

So far, it seems to at least partly be working after the drumming these guys took yesterday.  MBIA shares are up 4.6% today to $5.89 and Ambac shares are currently flat at $2.49.

Jon C. Ogg
June 5, 2008

Posted on: June 5, 2008 – 11:37 am in Financial Stocks, Insider Activity, ,

FCC Chairman Martin On SIRIUS (SIRI) Merger

The artful dodger FCC chairman Kevin Martin hit the airwaves on CNBC today,

When he was asked about the merger between Sirius (SIRI) and XM Satellite (XMSR) he said the the FCC has a rule that will not permit the marriage which means that they need to look at it long and hard. He acknowledged that the two companies have made concessions on pricing to try to close the deal.

When asked about timing, he reminded that anchor that the proposal was not like any other that the commission had reviewed.

In other words, he is in no hurry, even if the wait kills the two companies. Each is still running net losses and has over $1 billion in debt.

Douglas A. McIntyre

Posted on: June 5, 2008 – 10:50 am in Mergers and Buy Outs, ,

More Cuts At Ford (F), Bill Ford Keeps Chairman’s Job

Ford (F) will be cutting 15% of its white collar expenses before August 15.

According to Reuters, Ford said "We told employees today we are going to cut salaried work force-related expenses by 15 percent and complete the actions by August 1."

Oddly enough, the CEO will not be taking a pay cut, and chairman Bill Ford, who almost wrecked the company, will also still be around.

Douglas A. McIntyre

Posted on: June 5, 2008 – 9:43 am in Autos,

Verizon Wireless (VZ)(VOD) Buys Alltel

The big wireless merger has gone through.

Under the terms of the agreement, Verizon Wireless will acquire the equity of Alltel for approximately $5.9 billion. Based on Alltel’s projected net debt at closing of $22.2 billion, the aggregate value of the transaction is $28.1 billion.

Verizon Wireless expects to realize synergies with a net present value, after integration costs, of more than $9 billion driven by reduced capital and operating expense savings. Synergies are expected to generate incremental cost savings of $1 billion in the second year after closing.

According to the companies, Alltel and Verizon Wireless both use a common network technology, which provides advantages of a seamless transition for Alltel customers, ease in integrating the two companies’ networks, and scale efficiencies in operating the larger integrated network.

Douglas A. McIntyre

Posted on: June 5, 2008 – 9:05 am in Mergers and Buy Outs, ,

Syntax-Brillian CEO Out, For Now (BRLC)

Syntax-Brillian Corporation (NASDAQ:BRLC) is up to some more changes today.  The company has appointed Greg Rayburn as Interim-CEO with an effective date of June 4, 2008.   It says that Rayburn will replace James Ching Hua Li on an interim basis, who will take an indefinite leave of absence from the company to address personal issues.

Under Board approval granted on June 4, 2008, Mr. Li will be compensated according to the original terms and conditions of his employment agreement during his leave of absence and will continue to serve as a director of the Company.

Rayburn was appointed Syntax-Brillian’s Interim Chief Operating Officer on April 16, 2008 and is a Senior Managing Director and the Practice Leader of FTI Palladium Partners, the interim management practice of FTI Consulting, Inc.

He has  previously been CEO of International Outsourcing Services, LLC from 2007 to 2008; Chief Executive Officer of Muzak Holdings LLC from 2005 to 2006; Chief Operating Officer of aaiPharma Inc. from 2004 to 2005; Chief Restructuring Officer of WorldCom, Inc. from 2003 to 2004; and Chief Executive Officer of Sunterra Corporation from 2000 to 2002.

Syntax-Brillian shares are down some 5% at $0.70 today in the first 25 minutes of trading and shares met the 52-week low this morning.  Its 52-week trading range is $0.69 to $7.14.  Eighteen months ago this was a $10.00 stock.

The Company also announced the resignation of two directors:
Man Kit (Thomas) Chow, effective May 28, 2008;
and Christopher C.L. Liu, effective May 30, 2008.

This stock is one we have had under question for far too long to think much good is happening there.

Jon C. Ogg
June 5, 2008

Posted on: June 5, 2008 – 8:58 am in Management Change,

IPO FILING: Britannia Bulk Holdings (DWT)

Britannia Bulk Holdings Inc. filed to come public via IPO last night, although the range has already been set for the British shipping company.  It plans to sell 8,333,333 shares in a price range of $17.00 to $19.00 per share.  It has also proposed to take the ticker "DWT" on the New York Stock Exchange.

Underwriters are listed as Goldman Sachs, Banc of America, Dahlman Rose & Co., and Oppenheimer.  The underwriting has also been given an over-allotment option of up to 1.25 million shares.

The company is an international drybulk shipping and maritime logistics company in transporting drybulk commodities in and out of the Baltic region.  Its current owned fleet consists of 22 vessels, which includes 13 drybulk vessels, five of which are ice-class, five ocean-going ice-class barges, and four ice-class tugs.  The company has also contracted to purchase an additional six Panamax ice-class drybulk vessels, which are scheduled to be delivered between June 2009 and September 2010.

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

Jon C. Ogg
June 5, 2008

Posted on: June 5, 2008 – 7:25 am in IPOs, Transports,

Continental Joins Capacity Cuts & Job Cuts (CAL, UAUA)

Continental Airlines Inc. (NYSE: CAL) announced that it plans to cut 3,000 jobs and that CEO and President will lower their salaries for the remainder of the year.  As far as addressing capacity, Continental plans to reduce its capacity by furloughing 67 of its mainline aircraft from the fleet.

UAL Corp. (NASDAQ: UAUA) made a similar move just yesterday, and other airlines have made numerous cuts to capacity or have increased fees.  Fuel costs are much more of the issue, even much more than a slowing economy.

Interestingly enough, there were at least two airline stocks that were upgrades by analysts this morning.

Jon C. Ogg
June 5, 2008

Posted on: June 5, 2008 – 7:07 am in Airlines, ,

Top 10 Pre-Market Analyst Calls (ADBE, ATI, CAT, HOTT, MOT, NWAC, UAUA, URI, VRSN, VMED)

These are ten of the analyst calls we are focusing on this Thursday morning:

  • Adobe Systems (NASDAQ: ADBE) cut to Neutral at Cowen & Co.
  • Allegheny Tech (NYSE: ATI) Cut to Neutral from Overweight at JPMorgan.
  • Caterpillar (NYSE: CAT) cut to Sell at UBS.
  • Hot Topic (NASDAQ: HOTT) Raised to Outperform from Market Perform at FBR.
  • Motorola (NYSE: MOT) Cut to Underperform from Perform at Oppenheimer.
  • Northwest Airlines (NASDAQ: NWAC) Raised to Overweight from Equalweight at Lehman.
  • UAL Corp. (NASDAQ: UAUA) raised to Overweight at Lehman Brothers
  • United Rentals (NYSE: URI) cut to Neutral at UBS.
  • VeriSign (NASDAQ: VRSN) Cut to Neutral from Overweight at JPMorgan.
  • Virgin Media (NASDAQ: VMED) Raised to Overweight at Morgan Stanley.

Jon C. Ogg
June 5, 2008

Posted on: June 5, 2008 – 6:47 am in Analyst Calls, , , , , , , , , ,

Wal-Mart (WMT) Erases All Doubt, Fuels Recession Concerns

The stories about the death of Wal-Mart (WMT) have been disappearing over the last few months as the world’s largest retailer posted remarkable sales.

Now, there is nothing left to argue. During May, same-store sales rose 3.9% over the year-ago period. For a business the size of Wal-Mart that figure is remarkable. Worldwide revenue was up almost 10% in May, with international rising well over 16%.

The theory has emerged recently that, as a recession takes hold, shoppers will move from other chains to Wal-Mart to get lower prices.

If that is right, it is going to be one hell of a recession.

Douglas A. McIntyre

Posted on: June 5, 2008 – 6:43 am in Retail,

Verizon And Alltel: Too Much Power In Two Sets Of Hands

Word from Vodafone (VOD), which owns part of Verizon Wireless, and other sources is that Verizon is looking at a purchase of Alltel, another cellular carrier. TPG Capital and Goldman Sachs Capital Partners own Alltel now.

According to the FT, "Adding Alltel’s 13.2m subscribers to Verizon Wireless’s 67.2m would create the largest wireless carrier in the country." The Justice Department, which spends its time vetting things like the Sirius (SIRI) merger and Microsoft’s (MSFT) antitrust activity, probably won’t look at the Verizon deal at all. But, maybe it should.

The wireless industry in the US is down to two companies–Verizon Wireless and AT&T (T). Earlier this year, both companies set $99.99 unlimited voice and data plans. Sprint (S) and T-Mobile had to come up with plans to best or match that, whether it was good for them financially or not.

For about $27 billion, Verizon Wireless can put the No.2 carrier and No.5 carrier together. Sprint’s entire market cap is $26 billion, which shows how much Verizon is willing to spend to further corner the market.

Verizon would make the argument that Sprint and T-Mobile are true competition. But, Sprint is on life support and loses customers every quarter, and T-Mobile is too small to matter in a market where Verizon and AT&T will have two-thirds of the market.

When competitors have no pricing leverage and one deal can take over 10% of the competitive capacity out of the market a duopoly is all that remains.

Douglas A. McIntyre

Posted on: June 5, 2008 – 5:22 am in Telecom, , , ,

Useless News Of The Day: Ford (F) And GM (GM) Do Well In JD Power Quality Survey

Everyone in the car industry waits for the once-a-year JD Power Initial Quality Study to come out. The poll looks at how many defects a car has in the first 90 days after the buyer picks it up at the dealership. If the vehicle loses a wheel going of the lot, the vehicle gets a bad grade.

Most of the headlines about the survey this year are that GM (GM) and Ford (F) moved up in the study and Toyota (TM) and Honda (HMC) moved down.

The fact of the matter is that most cars and trucks are extremely well built now. More than a decade ago Detroit caught onto the notion that its products needed to work as well as imports.

The JP Power rankings are based on complaints per 100 vehicles. Toyota had 104 and Ford had 112. Although that is not a very big difference, it put the Japanese company in fourth place and the US company in the No.8 spot.

Detroit may make very good cars and trucks now, but it make too many trucks and not enough cars. With gas prices at $4 a gallon, Ford and GM can’t make any money with their current product mixes. Even if their cars got relatively poor grades in Powers, they would be better off if they didn’t sell trucks at all.

Douglas A. McIntyre

Posted on: June 5, 2008 – 4:56 am in Autos, , , ,

Useless News Of The Day: RIM (RIMM) Blackberry Can Be Used To Trade Stocks (AAPL)(GOOG)(SCHW)(AMTD)(NOK)(ETFC)

It is almost impossible to understand why business people could not use their RIM (RIMM) Blackberry devices to trade stocks until now. The Blackberry can run e-mail applications and the new versions can be used to browse the internet. Other similar devices from Apple (AAPL), Samsung, and Nokia (NOK) can be used as little TVs and GPS devices. Google’s (GOOG) mapping feature works on most of them

Today, E*Trade (ETFC) announced that people with a Blackberry can trade stocks while they are walking around town, having lunch, or riding in a car. The AP writes that the new application "will allow users to trade stocks and options, set up portfolio watch lists and get news."

Since E*Trade (ETFC) almost went out of business when it was caught holding too many mortgage securities, perhaps the product will give it an edge over rivals Schwab (SCHW) and TDAmeritrade (AMTD). But, it is likely that one of them will set up a deal with the Apple iPhone.

Then, it won’t matter.

Douglas A. McIntyre

Posted on: June 5, 2008 – 4:42 am in Wireless, , , , , , ,

Useless News Of The Day: Ballmer And Gates Fought Eight Years Ago (MSFT)

The top story at WSJ.com today is that Bill Gates and Steve Ballmer, heads of Microsoft (MSFT), had a series of fights over control of the company. That was eight years ago. It may be a nice human interest story. But, Ballmer is CEO and Gates is "retiring" to give his money away to worthy causes.

The financial paper writes that "Things became so bitter that, on one occasion, Mr. Gates stormed out of a meeting in a huff after a shouting match in which Mr. Ballmer jumped to the defense of several colleagues." That must have been an Aha! moment. The two men have know each other since 1973 when they were both at Harvard. It is hard to imagine that, over the decades, they agreed on everything.

The story goes on to say that the duo struggled over who would run the world’s largest software company and that the argument went on for almost a year.

Over the period since the big blow-ups, shares of MSFT have gone from $53 to $27. There was a special dividend in there, so that comparison is not entirely fair. Nonetheless, the stock has not done terribly well. But, Gates and Ballmer are still friends.

Douglas A. McIntyre

Posted on: June 5, 2008 – 4:30 am in Management Change,