Daily Archives: June 9, 2008

RIM (RIMM) Ignores Apple’s (AAPL) iPhone

When Apple (AAPL) came out with its new 3G iPhone today, shares in Steve Jobs’ company fell. Shares at rival smartphone company Research-In-Motion (RIMM) rose.

The new iPhone has a number of features, including more advanced e-mail functions, which would make it a threat to RIMM, but that market did not see that, at least at first blush.

Part of that may be the iPhone’s pricing. While the initial reaction to a much lower price point for the new handset was that it will drive unit sales, companies rarely walk away from revenue if they don’t have to. Apple would make the case that a $200 iPhone will sell better than one at $400, but RIMM has not be faced with making that kind of price cut to keep its sales strong.

One of the key advantages of the Blackberry is that it is not meant to be an iPhone. Its major attractions are not multimedia features or a large series of software downloads. The Blackberry is prized for its focus on e-mail and corporate managements and IT departments depend on that to make the device a utility and not a repository of endless possibilities.

There is not much in the iPhone that threatens the strength of the Blackberry. It is a box with a keyboard.

Douglas A. McIntyre

Posted on: June 9, 2008 – 6:01 pm in Wireless, ,

Cramer Endorses Motorola & Yahoo!, Sort Of (MOT, YHOO)

On tonight’s MAD MONEY on CNBC, Jim Cramer came out and said he is doing the unthinkable: He’s saying you can probably buy both Motorola Inc. (NYSE: MOT) and Yahoo! Inc. (NASDAQ:).

He says that you can’t believe in what the companies are currently doing because they have destroyed great brands and have destroyed shareholder value.  His reason is simple for liking these, and that is that Carl Icahn is up the you know what of both boards at the companies.

He thinks that Motorola will do a break-up of some sort and he thinks that ultimately Yahoo! is going to have to capitulate in some fashion.  We won’t bother with Cramer’s scenarios or suppositions because these have both been over-covered to death on Wall Street.

Jon C. Ogg
June 9, 2008

Posted on: June 9, 2008 – 5:52 pm in Activist Investor, Cramer, ,

The 52-Week Low Club (TASR)(EK)(GHS)(MNI)(WB)(WM)(MBI)(ABK)

Washington Mutual (WM) Concerns about the financial crisis burn like wildfire. Drops sharply to $6.14 from 52-week high of $44.19.

AMBAC (ABK) Sells off to $2.02 after downgrades. The 52-week high was $89.33.

MBIA (MBI) Also hit by downgrades and drops to $4.78 from 52-week high of $68.98.

Wachovia (WB) Flamed. Down to $18.22 from 52-week high of $54.54.

Gatehouse (GHS) Newspapers still hit hard. Falls to $3.50 from 52-week high of $19.64.

McClatchy (MNI) Another newspaper company sells off to $7.77 from 52-week high of $28.73.

Eastman Kodak (EK) Commodities costs are killing margins. Dips to $13.48 from 52-week high of $30.20.

Taser (TASR) Lawsuit set-back. Falls to $6 from 52-week high of $19.26

Posted on: June 9, 2008 – 5:47 pm in HI/LOW, , , , , , , ,

Safaricom Soars in Kenya IPO (VOD, GAF, EZA, TRAMX)

Today was a feature we have loosely been covering on occasion, and that is investing on the final frontier here on Earth: Africa.  Interestingly enough, Vodafone Group plc (NYSE: VOD) is tied into this company with ownership.

Kenya’s IPO of a 25% stake in Safaricom saw high enough demand that it’s IPO was oversubscribed by the tune of almost 5-times.  Its value was about $800 million depending on which currency conversion dates you use.  This was offered at a price of 5 shillings (close to $0.08), and shares closed on the first day at 6.95 shilling on the local market after hitting a high of around 8 shillings.  This closing price gives the closing value via market capitalization of about $4.5 Billion.

Safaricom is the nations largest mobile telecom operator with over 10 million users, which sells airtime for as little as pennies and allows micro-payments to purchase small increments in airtime.

This had unfortunately seen its IPO delayed, and more peaceful times allowed the demand to surge.  Whether or not the coalition holds up or not, well all we can say it that it is Africa and political instability is all part of the risk and reward equation there.  The success of this IPO may lead to several other IPO filings and other pricings in other infrastructure stakes in the East Africa nation.

Vodafone owns a 40% stake in the offering via its Kenyan unit called Vodafone Kenya Ltd.  Before the IPO the government owned some 60% of the company, and its stake has now been reduced down to 35% after one-quarter of the company was sold off to the public.

Interestingly enough, there are reports that many locals and first time investors were disappointed and many had borrowed money to buy shares.  The extent of that isn’t yet formalized and may not be known for several days.

So why are we covering an African IPO, particularly with all the political and event risk in most African nations?  The answer is simple: this is the last true emerging and pre-emerging spot on the globe.  It is a total and complete maze for investors to participate in the investment of Africa’s development because of the questions around corruption, cross-border issues, famine, disease, poverty, and on and on.  That is also the greatest shot for long-term gains if and when the risks in Africa become mitigated even a fraction compared to today.

In the start of January 2008, we offered 3 ETF’s and mutual funds that American investors can use to invest in the development of Africa and gave a more detailed explanation of each.  The funds were T. Rowe Price Africa & Middle East (TRAMX), iShares MSCI South Africa Index (NYSE: EZA), and SPDR S&P Emerging Middle East & Africa (AMEX: GAF).  These are not for widows and orphans, nor are they for the chicken-hearted.  As more and more opportunities arise for US investors to invest in Africa, we’ll be covering it.

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

Jon C. Ogg
June 9, 2008

Posted on: June 9, 2008 – 5:44 pm in IPOs, International Markets, Telecom, , , ,

Peplin Withdraws US IPO

An Australian company called Peplin Inc., which originally filed to come public in August 2007, has filed with the SEC to withdraw its IPO paperwork.  The emerging biotech was going to carry the "PLIN" ticker on NASDAQ.  For those who know much on the international markets, this one trades under the ticker "PEP" in Australia.

The company is requesting such withdrawal because of unfavorable market conditions that would adversely affect the offering of the securities under the Registration Statement and its decision to pursue other financing alternatives.

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

Jon C. Ogg
June 9, 2008

Posted on: June 9, 2008 – 4:38 pm in Biotech, IPOs, ,

IPO Withdrawal: CCS Medical Holdings

A company called CCS Medical Holdings, Inc. has filed with the SEC to withdraw its planned initial public offering today.   The Company has determined, due to current public market conditions, not to pursue the initial public offering to which the Registration Statement relates.

Jon C. Ogg
June 9, 2008

Posted on: June 9, 2008 – 4:30 pm in IPOs

Texas Instruments Mid-Quarter Equal for Bulls & Bears (TXN)

Texas Instruments Inc. (NYSE: TXN) has issued its mid-quarter updateafter the close on Monday.  The company put the new revenue guidancerange at between $3.33 to $3.46 billion, compared with its prior rangeof $3.24 to $3.50 Billion.  The new earnings per share range is now$0.43 to $0.47 EPS, which is with its prior range of $0.42 to $0.48.First Call has estimates at $0.46 EPS and $3.37 Billion in revenues.

Its Semiconductor-segment revenues will now come in between $3.17 to$3.28 Billion, compared to its prior range of $3.08 to $3.32 Billion.As far as Education Technology revenues, it sees $160 to $180 million,which is unchanged from prior targets.

Shares of the chip giant closed up almost 0.3% at $31.33 in regulartrading today.  Shares have fluctuated between slightly lower andslightly positive in after-hours trading.  This one has enough room forthe bulls and bears alike.

Jon C. Ogg
June 9, 2008

Posted on: June 9, 2008 – 4:16 pm in Semiconductor,

CMGI Internal Guidance Breaks Major Move (CMGI)

After the close of trading today, CMGI Inc. (NASDAQ: CMGI) reported its quarterly numbers.  Unfortunately for holders, the reaction isn’t a strong one. 

The ModusLink owner and incubator for tech and alternative energy announced a loss at -$0.05 EPS on $239.2 million in revenues.  There was only one real estimate out there and that was for $0.08 EPS on $282.1 million in revenues.  Keep in mind that the company counted its non-GAAP operating income of $7.6 million and it also claimed a 230 basis point improvement in gross margin.  Its operating income after items was listed as $10,000.00.

The company lowered its own prior fiscal 2008 guidance and put the new range at $1.05 to $1.10 Billion in revenues with operating in come at 2% to 2.5% of revenues.  Back in March, the company guided to a range of $1.10 to $1.15 billion in revenues and operating income, before any restructuring expenses, to be approximately 2.0% to 2.5% of revenue.   The company also noted that restructuring charges would run in the $5 to $8 million range this year, which looks in line with prior targets it set.

Its cash and cash equivalents and available-for-sale securities of $248.6 million at the end of the third quarter and continued to have no outstanding bank debt.

Unfortunately for shareholders, the stock is being hit in after-hours trading by about 14% down to $12.83.  Before this drop shares had recovered almost 40% from the March lows.  Missing a single estimate is one issue, but lowering your own guidance is another.  That’s holding true even for this cult stock.

Jon C. Ogg
June 9, 2008

Posted on: June 9, 2008 – 4:10 pm in Cult Stock, Earnings, Earnings Warning,

The 24/7 Wall St. Bankruptcy Odds Watch (AMR)(UAUA)(NWA)(GHS)(DAL)(LHS)(LEH)(CAL)(WB)(F)(MNI)(AIG)

There are the 24/7 Wall St. odds that several companies will have to file for Chapter 11 between now and the end of the year. These will become a permanent part of the website and the list will be updated once a week.

AMR  (AMR)             1 in 2          Lee Enterprises  (LEE)     1 in 15      Ford (F)              1 in 35
UAL  (UAUA)            1 in 4          Lehman  (LEH)                 1 in 25      McClatchy (MNI) 1 in 35
Northwest (NWA)      1 in 5          Continental  (CAL)            1 in 25      AIG (AIG)            1 in 35
Gatehouse  (GHS)     1 in 5          Wachovia  (WB)               1 in 25
Delta  (DAL)              1 in 10        General Motors  (GM)       1 in 30

Read More »

Posted on: June 9, 2008 – 2:25 pm in Turnarounds, , , , , , , , , , , , ,

Pier One & Cost Plus Merger; 1 + 1 = 1 (PIR, CPWM)

Pier One Inc. (NYSE: PIR) saw shares tumble today on what some may think as a game changing deal where it offered to acquire rival Cost Plus Inc. (NASDAQ: CPWM), the parent of its direct competing store Cost Plus World markets.

As far as the terms before any dilution, this would have been a 31% premium for Cost Plus before any dilution metrics come into play.  The buyout terms are for 0.6 shares of Pier One for each share of Cost Plus.   

The problem is that Pier One shares have fallen and therefore lowered the potential buyout price compared to any cash offer buyout deal. With a 16% drop to $5.55 per Pier One share, this works out to a mere $3.33 for Cost Plus.

The truth is that a deal of this sort would perhaps allow the company to stabilize the bleeding of the two operations.  Both suffer from many of the same commonalities:

  1. weak consumer
  2. brutal housing markets
  3. weak dollar and dependence on foreign suppliers
  4. poor execution and inability to compete
  5. lack of pricing power
  6. lack of profitability and inconsistent turnarounds

The problem is that while Cost Plus is up on the offer, this is just a stock for stock swap and requires the faithless to take faith into another group that also its legion of faithless behind it.  Pier One did note that Cost Plus was going to soon run into liquidity issues if it does not agree to to a deal.  Unfortunately, that is correct if its books are accurate.

Lastly, this would have made great sense in 2006 before Cost Plus pared down some of its real estate ownership for a sale-leaseback arrangement.  Cost Plus shares are now only up about 7% at $3.28; its 52-week trading range is $2.65 to $9.02.

We have reviewed both Cost Plus and Pier One for our weekly "10 Stocks Under $10" newsletter.  Unfortunately, for now it appears that this merger is the mathematical equivalent of "1+1=1"… or so it seems.

Jon C. Ogg
June 9, 2008

Posted on: June 9, 2008 – 1:33 pm in Mergers and Buy Outs, Retail, ,

Yahoo!’s New Icahn Battleship: U.S.S. Defiant (YHOO, MSFT)

Yahoo! Inc. (NASDAQ:YHOO) has filed its own proxy materials for its August 1 shareholder meeting, and it is essentially asking shareholders to follow it 100% with no concessions to activist and raider Carl Icahn.  Jerry Yang and friends are seeking a re-election of all of its directors and is not including any of the Icahn-selected director candidates.

As the company noted, "…we are executing on our strategy to create value that is gaining traction. In addition, in responding to Microsoft Corporation’s proposal to acquire the company and exploring strategic alternatives, Yahoo!’s board has been focused on one central goal: how best to maximize stockholder value."

The company is still maintaining that it is open to a transaction with Microsoft if it maximizes shareholder value.  The company is also still maintaining that it is seeing gains from Panama.  It also noted that the purchases of Right Media, BlueLithium, Zimbra, and Maven Networks have all helped advance core strategies and that it is winning new or expanded relationships to the likes of WPP, Wal-Mart, CBS, and more than 770 newspapers in its newspaper publishing consortium.  It is also still looking for its new advertising management platform called AMP! from Yahoo! to grow its ad presence.

What is perhaps most important is that this says in big bold letters, "Carl Icahn Has No Credible Plan To Create Value" and even noted further, "In our opinion, Mr. Icahn and his slate are not the right individuals to guide Yahoo! as a standalone company."

Jerry Yang and friends might be right about Carl Icahn not offering any value, and they might not be right.  It is very understandable that they wouldn’t step down just because a billionaire like Carl Icahn gets up their you what. 

In the end the company should consider some of the nominees like Mark Cuban or Frank Biondi, at least if it wants to bring in new ideas and have some checks and balances.  Don’t bet your retirement money on it though.  That suggestion may be like asking the wolves to protect the sheep from predators.  The truth is that Yahoo!’s current board doesn’t want any of Icahn’s nominees regardless of who they are.  The bad news is that Yahoo! needs more shaking up even if Icahn is overstepping his boundaries.

Before the end of summer it is likely that one of these parties will make some concessions, with the key word being "some."

Our own verdict before the trial has even started is that Microsoft (NASDAQ: MSFT) saved untold billion of dollars by not acquiring Yahoo!.  We recently compiled a list for our Special Situation newsletter subscribers of eight other software, tech, and new media companies which Microsoft could acquire for close to or roughly the same amount of cash over the next twelve to eighteen months.  The company also wouldn’t find itself in as deep of regulatory reviews with any of the companies.

Jon C. Ogg
June 9, 2008

Posted on: June 9, 2008 – 12:59 pm in Internet, Management Change, Mergers and Buy Outs, ,

Saudi Arabia Pushes Oil Buyer/Seller Meeting

Even the kings and princes of Saudi Arabia are getting concerned about the rising price of crude. The are pushing for a summit meeting of the world’s largest oil producers and consumers.

According to CNN Money, "Information and Culture Minister Iyad Madani says the kingdom will work with OPEC to "guarantee the availability of oil supplies now and in the future."

May be the most coveted invitation this year.

Douglas A. McIntyre

Posted on: June 9, 2008 – 12:18 pm in Oil & Gas

CMGI Braces For Earnings (CMGI)

After the close of trading today, or shortly before the close as before, we’ll get the fiscal Q3-2008 quarterly earnings report out of CMGI Inc. (NASDAQ: CMGI).

Unfortunately there is only one real estimate out there and that is for earnings of $0.08 EPS on $282.1 million in revenues.  With only one estimate and with how this has performed after earnings in the past, it is obvious that relying only on the raw numbers is not the way to go.  Back in March, the company gave the following guidance for this Fiscal Year:

  • Revenue of $1.10 billion to $1.15 billion;
  • Operating income before any restructuring expenses, to be approximately 2.0% to 2.5% of revenue in fiscal 2008;
  • Restructuring expenses for fiscal 2008 are expected to be $5 million to $8 million.

The company also repurchased 507,000 shares for some $6 million last quarter, with it still having authorizations of $36 million available for future repurchases in its previously announced $50 million stock buyback plan.

The company has made a better transition away from being an incubator only into an operating company via its ModusLink supply chain unit. 

More interesting than elsewhere, CMGI has slowly and quietly seen a rapid share price appreciation of nearly 40% above its March 2008 lows.  While it has had a hard time staying above $15.00 in the last two weeks, its move has nonetheless been an impressive one.

As of January 31, 2008, CMGI had working capital of approximately $320.4 million compared with $319.4 million at January 31, 2007. Included in working capital as of January 31, 2008 were cash, cash equivalents and marketable securities totaling $265.2 million compared to $275.0 million at January 31, 2007. 

Its current market cap is roughly $730 million.  Shares are up less than 1% at $14.90 today, and the 52-week trading range is $9.66 to $21.80.

Jon C. Ogg    
June 9, 2008

Posted on: June 9, 2008 – 11:45 am in Cult Stock, Earnings,

Nokia (NOK) Makes Another Run At Apple’s (AAPL) iPhone

Nokia (NOK) can’t seem to get the message the consumers don’t want pseudo Apple (AAPL) iPhones.

The world’s largest handset maker will release its new N96 super-sophisticated handset later this year.

According to Reuters, "Nokia unveiled the N96 in February and it is seen as the successor to its top profit generator, the N95. It will come with 16 gigabytes of internal memory and is expected to retail around 550 euros ($870), excluding subsidies and taxes."

With the 3G version of the iPhone about to hit the market, Nokia should stick to lower end handsets.

Douglas A. McIntyre

Posted on: June 9, 2008 – 9:24 am in Wireless, ,

Oppenheimer Takes Down Citigroup (C) And Merrill Lynch (MER), Again

Meredith Whitney of Opperheimer covers financial stocks, but she clearly hates them. At least for the time being.

She is no making the point that as MBIA (MBI) and Ambac (ABK) lose their "AAA" status, companies like Citigroup (C) and Merrill Lynch (MER) face greater write-downs.

According to Bloomberg, the analyst said "Citigroup Inc., Merrill Lynch & Co. and UBS AG may post further writedowns of $10 billion on their debt holdings after the two biggest bond insurers were stripped of their AAA rankings."

Even with bad news out of Lehman (LEH) today, Citigroup (C) is holding above $20. That may not last more than another week or so.

Douglas A. McIntyre

Posted on: June 9, 2008 – 9:05 am in Financial Stocks, , , , ,

Top 10 Pre-Market Analyst Calls (ABH, ETN, HES, LECO, LPX, MVSN, MUR, NVO, SWS, WBS)

These are not all of the analyst calls affecting shares this morning, but these are ten that we are focusing on this Monday morning:

  • AbitibiBowater (NYSE: ABH) started as Outperform at RBC Capital Markets.
  • Eaton Corp. (NYSE: ETN) raised to Overweight at JPMorgan.
  • Hess (NYSE: HES) Added to Goldman Sachs Conviction Buy List.
  • Lincoln Electric (NASDAQ: LECO) started as Buy at Piper Jaffray.
  • Louisiana-Pacific (NYSE: LPX) started as Underperform at RBC Capital Markets.
  • Macrovision (NASDAQ: MVSN) raised to Buy at Piper Jaffray.
  • Murphy Oil (NYSE: MUR) cut to Underweight at JP Morgan.
  • Novo-Nordisk AS (NYSE: NVO) raised to Neutral at HSBC Securities.
  • SWS Group (NYSE: SWS) started as Market Perform at KBW.
  • Webster Financial (NYSE: WBS) raised to Outperform at KBW.

Jon C. Ogg
June 9, 2008

Posted on: June 9, 2008 – 6:33 am in Analyst Calls, , , , , , , , , ,

A $200 Billion Sovereign Fund From Brazil

Brazil says it will launch a $200 billion sovereign fund with the money from all the oil it has found off-shore. Of course, none of that oil has been brought to the surface, but that is a detail.

The FT writes that Brazil’s finance minister said “The fund will start small but once the oil begins to come in it will grow quickly, to $200bn or $300bn in three to five years."

The sovereign fund business is now so good that countries pre-announce their plans to get into it years in advance of having the money. It is akin to a large company saying what its profits will be half a decade out.

What is for certain is that Brazil’s new pool of money will make the same mistakes as the current funds from Asia and the Middle East. It can invest in failing US banks and brokerages and watch the money go down the drain. But, with oil as the source of the wealth, it will not matter. There is plenty of capital to go around.

Douglas A. McIntyre

Posted on: June 9, 2008 – 5:28 am in International Markets

Patent Pool To Drive WiMax Adoption, If Anyone Wants It (S)(CSCO)(INTC)(ALU)((CLWR)(T)

Several companies which hold most of the patents for super-fast wireless broadband technology WiMax have creating a patent pool to keep licensing fees down. Included in the new arrangement are Cisco (CSCO), Intel (INTC), Sprint (S), Alcatel-Lucent (ALU), Clearwire (CLWR), and Samsung.

According to The Wall Street Journal, "They have scheduled a conference call Monday to announce an organization, the Open Patent Alliance, to gather rights to WiMAX-related patents." PC makers will get better deals for using the tech.

Of course, none of this works if WiMax goes nowhere. So far, in the US, it has not made much progress. Sprint was going to build a national network and so was Clearwire. Neither of those worked because of the expense. Recently several companies like Intel have put cash into a new program to get that national network built.

The WiMax roll-out will be done with Sprint trying to upgrade its cellular customers. The company hopes to steal some consumers who use AT&T (T) and Verizon Wireless. But, Sprint’s customer service is consider the worst in the world. Getting people to use a new product is tough when they hate the old one from the same firm. AT&T and Verizon are also working on faster networks of their own.

It is a lot of effort to get people to buy something they may not want.

Douglas A. McIntyre

Posted on: June 9, 2008 – 5:20 am in WiMAX, , , , , ,

Corn Bread Just Got More Expensive, Better Food Through Genetics

Corn prices hit an all-time high overnight. There has been too much rain on the farms where it is raised in the US. The cost of the stuff is up 47% this year. Corn production is expected to be flat over the next 12 months.

It did not have to turn out this way. Monsanto (MON) recently remarked that it could "develop seeds that would double the yields of corn, soybeans and cotton by 2030 and would require 30 percent less water, land and energy to grow."

The fact of the matter is that Monsanto already has seeds which will grow on asphalt and barely need watering at all. Farmers and consumers of grain-based food have been afraid of gene-altered seed. They have feared it will make them glow in the dark or cause them to look like the aliens in "ET".

While there may be some truth to the fact that "new age" corn and other grains may not taste as good as the real stuff, there is little if any evidence that it causes humans to grow extra limbs or lose their hair.

It could be argued that it was not hard to see the food crisis coming. Millions of farmers have been driven off their land by political battles in place like Africa. Global warming causes odd and unexpected periods or drought and flooding. Each and every year, there are more people to feed.

The liabilities of products from companies like Monsanto, if there are any, are more than offset by the misery, human and financial, caused by food shortages and higher food prices.

Better to look like Popeye the sailorman than pay $100 for a loaf of corn bread.

Douglas A. McIntyre

Posted on: June 9, 2008 – 5:06 am in Food

Sam Zell And The Future Of News (NYT)(GCI)(MNI)(GHS)

Sam Zell took The Tribune Company private and probably regrets that every hour of every day. With the downturn in the industry, his huge debt load is like a boat anchor.

Zell has announced huge cuts in the amount of newsprint his papers like the LA Times and Chicago Tribune will use. He will chop the number of editorial pages to 50% of each property’s total. That means the home town newspaper is going to look very thin.

Zell has more debt than most news chains, but public companies like McClatchy (MNI) and Gatehouse (GTS) are not far behind him. They borrowed money to buy more newspapers. Their high long-term debt and falling revenue have taken their stocks down 50%, 60%, and in some cases 80% this year.

Zell’s move will spread from The Tribune to other newspaper operations. Revenue in the industry in now falling close to 10% a year. Even financially strong companies like The New York Times (NYT) and Gannett (GCI) can’t hold out without making similar large reductions. Online versions of their products might have saved them, but, at most of these companies, they are not even 10% of total revenue.

Internet news outlets are winning and it is just a matter of time before they will replace newspapers altogether.

Douglas A. McIntyre

Posted on: June 9, 2008 – 4:46 am in Old Media, , , ,