Daily Archives: June 12, 2008

Capstone Backlog & Contract May Trump Earnings (CPST)

Capstone Turbine Corporation (NASDAQ: CPST) has reported its long awaited earnings after today’s close.  The microturbine energy systems manufacturer posted earnings of -$0.07 EPS on a 60% revenue gain to $9.3 million.  First Call had estimates at -$0.05 EPS and $9.27 million.

The company further disclosed that its order backlog is now at $27.9 million, which represents a 113% sequential increase from last quarter and more than a 450% gain over the same quarter in 2007.  To compare the backlog for reference its entire 2007 sales were about $21 million.

Frankly, we weren’t really looking at earnings as we disclosed in our full earnings preview because of the  thin broker and analyst coverage that we thought the best focus was likely its backlog and its body language on its ability to secure newer and steady orders.

Besides earnings, the company secured a 3-year National Account Agreement with OfficePower, Inc. In addition, OfficePower placed its initial order under the agreement for approximately $3.5M including the first order for C1000 MicroTurbine® systems to be deployed in the U.S. market.

Shares closed up 1.5% at $3.41 today and its shares are down 1.7% at $3.41 in after-hours trading.  This has been our top alternative energy pick and up more than 200% for our "10 Stocks Under $10" weekly subscriber letter and we aren’t really surprised at all in the overall lack of gains after such a large run.  Who knows, maybe it will give an entry again for new money….

Jon C. Ogg
June 12, 2008

Posted on: June 12, 2008 – 4:24 pm in Alternative Energy, Earnings,

Minority Holder Want Carl Icahn Fired (XOHO, BIIB, YHOO, MOT)

There was interesting event in a 13D filing today right after the close, and that will be worth some news and gossip alike.  An investment firm called Amalgamated Gadget LP, which is roughly a 6.6% shareholder of XO Holdings Inc. (NASDAQ: XOHO), has sent a letter to billionaire activist investor Carl Icahn.  The group has said that Carl Icahn is in clear violation of his fiduciary duties to minority shareholders and further is calling for Icahn’s resignation from the board of directors.

Amalgamated also said Icahn and his affiliates act to give their XO debt and holdings an advantage and preference at the detriment of XO Holdings’ minority shareholders.  Further, Amalgamated wants Carl Icahn and his affiliates to place their common holdings of XO Holdings into a blind voting trust and to refrain from exercising any managerial control of the company.

On a fully diluted basis, Carl Icahn and affiliates own or control close to 60% of XO Holdings. 

We have frequently wondered how Carl Icahn is managing all of these efforts ourselves, despite the fact that his career has been a huge success.  His activist activities in biotech stocks seems more than odd, particularly in Biogen Idec (NASDAQ: BIIB).  His Motorola (NYSE: MOT) efforts have been a dud and his Yahoo! (NASDAQ: YHOO) play is looking like a total bust now.  Despite Jim Cramer recently endorsing those names based upon Icahn the issue of a huge loss being a huge loss speaks for itself.

Jon C. Ogg
June 12, 2008

Posted on: June 12, 2008 – 3:41 pm in Activist Investor, Management Change, , , ,

50%-Plus IPO Gainers of 2008 (ATAI, IPI, TITN, V)

IPO’s have been much lower in numbers of late because of current market conditions.  But companies that came public have still managed to see their share of winners with the likes of ATA Inc. (NASDAQ: ATAI), Intrepid Potash (NYSE: IPI), Titan Machinery Inc. (NASDAQ: TITN), and Visa Inc. (NYSE: V) all fitting into the IPO-winners category with gains of 50% or more.

ATA Inc. (NASDAQ: ATAI) has seen a 51% gain since its January 28 IPO after its near 1% gain today.  This one is thin volume and has had a post-IPO range of $8.02 to $17.45.  ATA’s IPO priced at $9.50.  At least no one confused this one with the former ATA Airlines.

Intrepid Potash (NYSE: IPI) has been a real winner and by the name you’d put this one in the "Land of Duh!" category.  This one is up over 80% since the April 21, 2008 IPO at $58.00.  Its IPO priced at $32.00 and its post-IPO trading range is $43.36 to $61.37.

Titan Machinery Inc. (NASDAQ: TITN) is technically a 2007 IPO as it came public on December 5, 2007.  But it is the single best post-IPO performer with a gain of more than 200%.  That is even after a 4% drop today to $26.17 late in the day.  Its IPO priced at $8.50, but its post-IPO trading range over the last seven months is $11.50 to $27.79.  Take a guess why… ag-equipment.

Visa Inc. (NYSE: V) has been a beast since its March 19, 2008 IPO, even though it is already more than $10.00 off of its highs.  Shares are up some 80% from its $44.00 IPO pricing, although its post-IPO trading range is $55.00 to $89.84.  Even if you just count the post-IPO lows that you could have bought it at, it’s still up close to 45%.

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 12, 2008

Posted on: June 12, 2008 – 3:01 pm in IPOs, , , ,

52-Week Low Club (ELY, GHS, GE, GM, GFI, MRK, Q, SHLD, JAVA, TSCM, VIA.B, CBS, AMR, AAI, DAL, UAUA)

Today’s 52-week low list was full of some of the usual suspects, and you can count airlines as the top group of 52-week lows after that breather in oil prices did not hold.  There were also many other stocks that hit 52-week lows today, and we didn’t even bother including any of the usual suspects in financials.  Here is a sample of the 200+ we saw today:

  • Callaway Golf (NYSE: ELY) is seeing the same old same old, fewer golf club and accessories being bought as consumers are strapped and have to actually work rather than play golf.
  • Gatehouse Media (NYSE: GHS) keeps sliding… is Chapter 11 near?
  • General Electric Co. (NYSE: GE) is getting farther and farther away from that $33.75 fair value we assigned for the end of 2008.
  • General Motors (NYSE: GM) is still appearing here, poorer consumers can’t qualify for new cars.
  • Gold Fields Ltd. (NYSE: GFI) is a surprise with high gold prices.
  • Merck Co. Inc. (NYSE: MRK)
  • Qwest Communications (NYSE: Q), wasn’t too long ago they juiced a huge dividend.
  • Sears Holdings (NASDAQ: SHLD) hit a 52-week low but that didn’t hold.
  • Sun Microsystems (NASDAQ: JAVA) is learning that the reverse stock split game isn’t a winning formula.
  • TheStreet.com (NASDAQ: TSCM) as financial subscribers may be less willing to shell out hundreds of dollars if their bullish investments have a hard time being that bullish.
  • Viacom (NYSE: VIA.B) and CBS Corp. (NYSE: CBS) as Sumner Redstone can’t save a crummy environment.

This list was far longer looking than you would guess by this short review.  Here are some of the airlines that hit new 52-week lows:

  • Airtran Holdings Inc. (NYSE: AAI), AMR Corp. (NYSE: AMR), Delta Air Lines (NYSE: DAL), and UAL Corp. (NASDAQ: UAUA).

Jon C. Ogg
June 12, 2008

Posted on: June 12, 2008 – 2:35 pm in HI/LOW, , , , , , , , , , , , , , , ,

Yahoo!, Google, Microsoft Ties Getting More Complicated (YHOO, GOOG, MSFT)

The WSJ has reported that that long-standing rumor of a search advertising deal between Google (NASDAQ: GOOG) and Yahoo! Inc. (NASDAQ: YHOO) is close to being consummated.

Yahoohas concluded talks with Microsoft without reaching a deal, and isclose to a search-advertising pact with Google. Full article comingsoon.

You can expect that a large billionaire activist investor by the name of Carl Icahn will be keying in on this before the end of the day.  If Microsoft Corp. (NASDAQ: MSFT) was going to have any interest incoming back to the table, that may be turning into mere wishfulthinking depending on how in-depth this deal really will be.

Google shares are up 1% and yahoo! shares are now down 2.5% at $25.49.  Perhaps Jerry Yang should watch his share price before he signs that deal. 

As a reminder, some have argued that any such "ad search" deal would come under antitrust review even though it isn’t a merger.

Jon C. Ogg
June 12, 2008

Posted on: June 12, 2008 – 1:40 pm in Internet, , ,

Charter Communications Extends Debt Refi Date (CHTR)

Charter Communications, Inc. (NASDAQ: CHTR) has extended the early participation deadline for the pending private offer of its indirect units until 11:59 PM ET on June 27, 2008 and the exchange ratio range will remain as previously announced.  The original May 29 offer was a modified dutch auction for the exchange of up to $500 million principal amount of CCH II’s existing 10.25% Senior Notes due 2010 for additional 10.25% Senior Notes due 2013 of CCH II.

Holders must submit tenders in the range of $1,047.50 to $1,077.50 principal amount of new notes per $1,000 principal amount of old notes with amounts in the range specified in increments of $2.50 principal amount of New Notes per $1,000 principal amount.  The clearing exchange ratio does include an early participation payment of $30.00 in new notes per $1,000.00 in principal amount.

We have covered Charter in our weekly "10 Stocks Under $10" newsletter frequently, and have noted over and over how the company needs to do something about its debt and capital levels.  As of march 31 it listed some $15.157 Billion in assets.  That sounds fine on the surface, except that more than $9.2 Billion of that was fluff assets of goodwill, intangibles, and the beloved "other assets."  As of that date it carried more than $20.6 Billion in long-term debt. 

Its credit facility at the end of 2007 was $6.844 Billion.  The good news is that if this is fully tendered it will put off the maturities somewhat.  Below is a debt schedule of maturities (besides the revolving credit facility) coming dues in 2008 to 2010 (with principal amounts in Millions) from the annual report:

  • Charter Communications, Inc.  5.875% convertible senior notes due 2009 $49
  • Charter Holdings 10.000% senior notes due 2009 $88
  • Charter Holdings 10.750% senior notes due 2009 $63
  • Charter Holdings 9.625% senior notes due 2009 $37
  • Charter Holdings 10.250% senior notes due 2010 $18
  • Charter Holdings 11.750% senior discount notes due 2010 $16
  • CCH II 10.250% senior notes due 2010 $2,198

There were 398,227,512 shares of Class A Common Stock and There were 50,000 shares of Class B Common Stock outstanding as of January 31, 2008.  If it can put the large maturity dates off further and further, maybe it won’t need a recapitalization as we fear.

Jon C. Ogg
June 12, 2008

Posted on: June 12, 2008 – 12:28 pm in Bonds, Cable Companies,

Berkshire Hathaway & Buffett, The True Anheuser-Busch Winners (BRK.A, BRK.B, BUD)

Everyone has reported on the huge acquisition offer from InBev for Anheuser-Busch Companies Inc. (NYSE: BUD).  What is interesting above and beyond the global beer initiatives and consolidation is that Berkshire Hathaway, Inc. (NYSE: BRK.A, BRK.B) owns a fairly massive slug of the company stock.  As Budweiser is an easy brand to recognize it easily fits within Buffett’s "hold forever" strategy.

According to the most recent filings, Warren Buffett’s holding and operating company owns a combined amount of 35,563,200 shares as of March 31, 2008, which is roughly a 4.99% stake.

With a $62.00 share price this morning this represents a stake worth some $2.2 Billion.  That ought to allow Buffett and friends to recapture some cash to either make more acquisitions or to add to the cash arsenal for future deals.

You can see the full list of Warren Buffett and Berkshire Hathaway holdings.

This was one of our "brands that could disappear" as far as US ownership is concerned.  Recently we ran "Top US Brands Foreigners Could Buy With Cheap Dollars (SKS, HSY, WFMI, STZ, BUD, ETFC, S, LEAP, X, AA, LAMR)" which you can see.

Jon C. Ogg
June 12, 2008

Posted on: June 12, 2008 – 9:21 am in Buffett, Mergers and Buy Outs, , ,

Qualcomm Surprises, Again (QCOM)

Qualcomm Inc. (NASDAQ: QCOM) is seeing a very positive reaction this morning after the company raised guidance. 

The company sees earnings at $0.54 to $0.55 EPS, above its prior targets of $0.50 to $0.52 EPS.  Its Revenues are now expected to be above its earlier estimates of $2.5 to $2.7 Billion.  On last look, First Call had estimates at $0.52 EPS on $2.61 Billion in revenues.

The CDMA chip royalty company now sees Q3 results to be better than anticipated on increased demand for its next-generation cell phones and other devices now that it shipped 86 million Mobile Station Modem chips.

Shares are up over 3.5% at $47.94 in early trading, and its 52-week trading range is $35.17 to $49.50.

Jon C. Ogg
June 12, 2008

Posted on: June 12, 2008 – 8:50 am in Earnings, Semiconductor, WiMAX, Wireless,

Claymore ETF Hits The Frontiers… ‘Emerging’ Emerging Markets (FRN)

Claymore Securities Inc. has launched the Claymore/BNY Mellon Frontier Markets ETF (NYSE: FRN). This ETF is the first U.S.-listed ETF that gives access to up to 41 countries that are "less developed than traditional emerging markets," which are called "frontier markets" on Wall Street.

The "FRN" ETF seeks to replicate The Bank of New York Mellon New Frontier DR Index.  Potential countries for inclusion in the Index include Bahrain, Jordan, Kuwait, Lebanon, Oman, Qatar, United Arab Emirates, Egypt, Ghana, Kenya, Malawi, Mauritius, Morocco, Nigeria, Tunisia, Zimbabwe, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Kazakhstan, Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia, Ukraine, Bangladesh, Pakistan, Papua New Guinea, Sri Lanka, Vietnam, Peru, Chile, Colombia, Ecuador, Jamaica, Panama and Trinidad & Tobago.  The index only includes companies with float-adjusted market capitalizations of more than $100 million that have depositary receipts that trade on U.S. exchanges or the London Stock Exchange.

Jon C. Ogg
June 12, 2008

Posted on: June 12, 2008 – 8:40 am in ETF,

Lehman Cleans House (LEH)

If you thought things couldn’t get weirder in the brokerage firm stocks, guess again.  Lehman Brothers Holdings Inc (NYSE: LEH) has essentially fired its CFO Erin Callan and its COO Joseph Gregory. Technically Callan is going to another department, although it doesn’t take a rocket scientist to figure this out.

This report comes within 72-hours of its $2.8 billion quarterly loss expectations and after a large financing.

Ian Lowitt, the current chief administrative officer, will become CFO; and Bart McDade, global head of equities, will become the COO of Lehman.

This isn’t the way to instill confidence in Wall Street.  Shares are down over 8% at $21.75 right at the open and we’ve already seen over 17 million shares.

Jon C. Ogg
June 12, 2008

Posted on: June 12, 2008 – 8:32 am in Brokerage Firms, Management Change,

Citigroup Pans Ethanol… On Flooding (VSE, BIOF, ADM)

Ethanol stocks appear to be under pressure this morning.  Citigroup has downgraded the group to a SELL rating, partially based upon the Midwest flooding.  VeraSun (NYSE: VSE) and BioFuel Energy (NASDAQ: BIOF) were cut to a "SELL" rating from "BUY" and Archer Daniels Midland (NYSE: ADM) was cut to "HOLD" from "BUY."

Over the last week and a half the flooding has caused irreparable damage to this year’s corn market.  Corn prices have risen and are likely to destroy margins despite the subsidy. Cash costs are running above sell-through rates for small and mid-sized producers and Citi even believes some may be  forced to shut down over the coming months. 

Jon C. Ogg
June 12, 2008

Posted on: June 12, 2008 – 7:35 am in Alternative Energy, Analyst Calls, , ,

Top 10 Pre-Market Analyst Calls (ADM, ASMI, CN, CHU, FIG, BEN, MSO, NT, RYL, TER, VSE)

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

  • Archer-Daniels (NYSE: ADM) cut to Hold at Citigroup.
  • ASM Intl NV (NASDAQ: ASMI) started as Underperform at Jefferies.
  • China Netcom (NYSE: CN) and China Unicom (NYSE: CHU) raised to Hold at Deutsche Bank.    
  • Fortress Investment (NYSE: FIG) cut to Neutral at Credit Suisse.
  • Franklin Resources (NYSE: BEN) raised to Outperform at KBW.
  • Martha Stewart (NYSE: MSO) cut to Neutral at JPMorgan.
  • Nortel (NYSE: NT) raised to Overweight at JPMorgan.
  • Ryland Group (NYSE: RYL) raised to Buy at UBS.
  • Teradyne (NYSE: TER) started as Neutral at Piper Jaffray.
  • VeraSun Energy (NYSE: VSE) cut to Sell at Citigroup.

Jon C. Ogg
June 12, 2008

Posted on: June 12, 2008 – 7:14 am in Analyst Calls, , , , , , , , , , ,

Starbucks (SBUX) Rushes Into Europe

Starbucks (SBUX) is going to put another 150 stores in Europe. They are closing them in the US, so perhaps it all balances out.

The coffee chain has come up against competition from places like McDonald’s (MCD) and Dunkin Donuts in the US. And, the economy does not support people who can buy $5 a cup coffee.

Maybe Europe is different. But, McDonald’s is there along with a recession.

Starbucks is doing a clever job of hedging its bets as it expands on the continent. Instead of opening its own stores, it will "license 150 new locations in Britain, France and Germany over the next three years in a deal with UK group SSP," according to Reuters.

The news seems to be telling about Starbucks level of confidence in itself as a company. It could open its own stores in Europe, take all of the risk and all of the reward. Instead, it is inching in. That says a great deal about the firm’s view of itself.

Starbucks is not only doing poorly, it is losing its appetite for putting its own capital, both financial and human, on the line.

Douglas A. McIntyre

Posted on: June 12, 2008 – 5:34 am in Food, ,

GM (GM) Runs Out Of Ground

Investors figure the only way that GM (GM) makes it out of its current troubles is that its overseas operations make money to offset trouble in the US. In the domestic market, GM is faced with losing share to Honda (HMC) and Toyota (TM). Worse, the size of the total market for vehicles is falling.

The program got a blow when the head of GM Europe said things there are as bad as they were in the 1980s. According to Reuters,  "General Motors Corp’s head of European operations said rising oil prices, high commodity costs and the strength of the euro could drive European sales down to levels not seen in decades."

The GM 10-Q shows that it has a market share of 10% in Europe. The division had operating income of $112 million last quarter. If the company’s business in the region falters, that leaves GM Latin America and GM Asia to carry the load. Latin American made $483 million in the latest period and Asia made $200 million. That does not leave much left for GM to bet on.

Much of this is GM’s own fault. Fuel costs in Europe are up like they are everywhere. The largest US car company still sells Hummers in Germany. A picture is worth a thousand words.

GM has not gotten on to the idea that people want cars that don’t use much gas.

Douglas A. McIntyre

Posted on: June 12, 2008 – 5:17 am in Autos, , ,

AIG (AIG): Better To Keep A Frightened Board Than Throw It Out

Some of AIG’s (AIG) big investors wanted to throw out management. But, that was not enough for them. With the smell of blood in their nostrils they have decided that the board of directors should go as well.

The big players in the matter, which include billionaire Eli Broad and fund manager Shelby Davis "said in a letter sent to the board Wednesday that "significant and immediate changes at both the management and board level are clearly called for," according to The Wall Street Journal.

They have a point. The insurance company has lost $13 billion in the last two quarters and has had to raise $20 billion. The shares are down by more than 50% from their 52-week high and now trade at $33.26. That means about $100 billion in market cap has gone.

The activists probably have the wrong approach. Putting in a new board take time. The crowd would have to get up to speed on the company’s operations and troubles. If the board came in with new management, no one would know what is going on. That is unless they bring back Hank Greenberg, former CEO and one of the oldest men in the world.

The AIG board is not entirely made up of doofuses. One of the members is President of the American Museum of Natural History. That looks bad under the circumstances. Another is President and Chief Executive Officer of WQED Multimedia. He probably needs to go.

But, there are some smart CEO-types and the former COO of Citigroup (C) on the board, and they probably have a good idea of what to do with the mess.

Broad, Davis, and their friends don’t want to replace the board, no matter what they say. They have the current group sweating like hogs. They are going to do the right thing. They should be left alone.

Douglas A. McIntyre

Posted on: June 12, 2008 – 4:59 am in Financial Stocks, ,

Citigroup (C): Pandit As Pollyanna

One of the hedge funds that Citigroup (C) bought from its CEO Vikram Pandit’s money management company, an operation called Old Lane, has gone belly-up. Pandit got $165 million from the deal and was eventually made head man at Citi as a booby prize. To overcome the embarrassment, he can hide in the executive washroom for a day. By the time he comes out other, more pressing problems, will be barreling down on the bank.

Pandit’s sin is not that he made a sale to Citi which did not work out. He has done something much worse. On his watch as CEO, he has accomplished next to nothing. The firm’s stock dropped below $20 yesterday. It is the first time it has been that low since March. The perception is that Citi is still one of the weak Wall St. firms that it not in the midst of a turnaround.

Pandit’s hand may be weak, but he has played it poorly. In April, the new man in the corner office said he would cut Citi operating costs by 20%. There is absolutely no evidence that the program is even under way. Shareholders expected him to gut the place of assets which are not critical to operations, Smith Barney often makes that list, but, whatever the list, nothing has been done.

Pandit now looks like a man who believes that Citi will fix itself because the credit markets will eventually fix themselves. If he waits the current storm out, things will be fine.

What Pandit may not have noticed is that the tempest is getting worse. Standing by and waiting for the end is not a winning strategy. Having the hedge fund he sold to Citi being closed is humiliating. The way he is running the bank is worse.

Douglas A. McIntyre

Posted on: June 12, 2008 – 4:38 am in Banking,

Media Digest 6/12/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to Reuters, InBev made $46.3 billion offer for Anheuser-Busch (BUD).

Reuters reports that AIG (AIG) shareholders are demanding board changes.

Reuters writes that the GM (GM) Europe sales chief sees a sales slump.

Reuters reports that Saudi Arabia is bringing the oil producers and consumers together for a summit on the high price of oil.

Reuters reports that Starbucks (SBUX) will open 150 more stories in Europe.

Reuters writes that Washington Mutual (WM) said it had no regulatory problems as its shares sold off.

Reuters reports that continuing concerns about its balance sheet drove Lehman (LEH) shares down.

The Wall Street Journal writes that Citigroup (C) is closing a fund founded by its CEO.

The Wall Street Journal writes that the CEO of Martha Steward (MSO) resigned.

The Wall Street Journal reports that Palm (PALM) will sell its new smartphone through Verizon Wireless.

The Wall Street Journal writes that Ford (F) is accelerating the pace of cutting down its size.

The Wall Street Journal writes that Senators opposed to the Sirius (SIRI) deal with XM (XMSR) are pressing their case.

The New York Times writes that commodities price increases are showing no let-up.

The New York Times writes that the SEC is proposing tighter rules for credit rating companies.

The FT writes that US companies are being taken to task for racial barriers.

Bloomberg write that corn climbed to a record as floods hurt production in the Midwest

Douglas A. McIntyre

Posted on: June 12, 2008 – 2:56 am in Press Digest, , , , , , , , , ,

Asia Markets 6/12/2008 (TM)(LFC)(SNP)(SNE)

Markets in Asia were down sharply.

The Nikkei fell 2.1% to 13,889. NEC fell 4.5% to 547. Sony (SNE) fell 2.8% to 5130. Toyota (TM) fell 2.7% to 5400.

The Hnag Seng dropped. 1.6% to 22,960. China Life (LFC) fell 2.4% to 28.40. China Petroleum (SNP) dropped 2.7% to 7.35.

The Shanghai Composite moved down 2.2% to 2,958.

Data from Reuters

Douglas A. McIntyre

Posted on: June 12, 2008 – 2:34 am in International Markets, , , ,