Daily Archives: June 16, 2008

Alcatel-Lucent Scores $1 Billion Chinese Order (ALU)

Alcatel-Lucent (NYSE: ALU) announced after the close that it has signed a $1 Billion (one billion dollars) framework agreement for 2008 with China Mobile where it will provide mobile communication equipment and services to Chinese mobile giant. 

The agreement was secured through Alcatel-Lucent’s flagship company in China, Alcatel Shanghai Bell.  Alcatel-Lucent will provide China Mobile with the following:

  • mobile core network solutions,
  • wireless network solutions,
  • TD-SCDMA equipment,
  • applications,
  • transmission & IP router equipment,
  • and the related services.

As far as $1 Billion and how that relates to 2008, First Call has estimates for the telecom equipment company projected north of $26 Billion for the entire fiscal 2008.

Alcatel-Lucent closed up 1.6% at $6.73 along with tech shares today in regular trading.  Late after-hours trading has the stock up roughly 4% at $7.00, although listed volume and this far into after-hours may be very different than tomorrow.  Its 52-week trading range is $5.08 to $14.57.

Jon C. Ogg
June 16, 2008

Posted on: June 16, 2008 – 5:40 pm in China, Telecom,

Cost Plus & Pier 1 Brace For War (PIR, CPWM)

It hasn’t even been a week, and it appears that the proposed acquisition where Pier 1 Imports, Inc. (NYSE: PIR) wants to acquire the operations of Cost Plus Inc. (NASDAQ: CPWM) is going to go rather hostile.

Early this morning, Cost Plus issued a statement saying the company is unanimously rejecting the Pier 1 offer to acquire the company after determining that the offer is not in the best interest of the company and its shareholders.  Its statement pretty much says it all:

  • We believe that our strategic plan, which is yielding positive results, will provide Cost Plus shareholders with superior and compelling long-term value as an independent company. Despite your statements to the contrary, Cost Plus has significant liquidity to pursue its business objectives and to deliver improvement in our core business metrics…. Your proposal to combine our operations is not attractive from either a financial or a strategic perspective. It is both distracting and ill-timed given the difficult retail environment and the progress we have made investing in and improving our business.

After today’s close, Pier 1 came out swinging on its own and it doesn’t look like they are going to go away no matter "distracting" this may be.  It even notes its terms and conditions as "subject to only limited conditions that are customary for transactions of this type, which are confirmatory due diligence, the negotiation of a definitive acquisition agreement and the receipt of all necessary shareholder and regulatory approvals."  Unfortunately, when you are engaged in a stock for stock merger where the premium has shrunk to a near take-under those are fairly strong conditions.  Pier 1 plans to take this issue straight to Cost Plus shareholders.

Pier 1 goes further and notes that it could yield roughly $50 million in cost savings and give shareholders the chance for upside in execution.  The original offer would have been valued at $4.00 per share based upon the 0.60 shares of Pier 1 per Cost Plus share.  But with a $5.97 closing price today the offer price at a full swap is only $3.58.  Cost Plus shares closed up at $3.46 today and its 52-week trading range is $3.46 to $9.00.

If Pier 1 wants this company, on the surface it is going to take more money or a larger share offer.  Otherwise many Cost Plus shareholders are going to have to use the worst investment strategy of simply crossing their fingers and hoping things get better, because that exchange ratio isn’t going to get too many holders that excited.

Both stores have their niches, and both have their current problems that overlap.  This merger saga is far from over.

You can join our open email distribution list to hear about other mergers, IPO’s, secondary offerings, private financings, activist investors, and more.

Jon C. Ogg
June 16, 2008

Posted on: June 16, 2008 – 5:03 pm in Mergers and Buy Outs, ,

Tiger/Mediate: Nike/Callaway (NKE, ELY)

What sort of would it be if you could only bet on sporting events by the results only?  Who knows how much the bets were on the actual match going into sudden death today, but you can bet it was significant.  It turns out there were traders pushing around brands of public companies as well, mainly that of Callaway Golf Co. (NYSE: ELY) and that of Nike Inc. (NYSE: NKE).

The reason is rather simple.  Nike is now almost synonymous with Tiger Woods, and Callaway Golf is a large endorser of Rocco Mediate.  To add more of a small twist Callaway shares have been under pressure because of recent earnings news.

Callaway shares rose 3% to $12.66 in regular trading as the pure-play golf apparel and equipment company, and its 52-week trading range was $12.00 to $19.49.  Callaway’s shares are down over 1% at $12.50 in after-hours trading.

Nike Inc. (NYSE: NKE) closed down almost 0.9% at $68.38, and shares were down 0.2% at $68.19 in after-hours trading.  As it is exponentially larger and far more diversified this was hardly the play.  Its 52-week trading range is $51.50 to $70.60.

This was almost a huge day for Callaway, but based upon the news and coverage the company won either way.  Whether or not that translates to a stock event… that’s a different issue entirely. 

Jon C. Ogg
June 16, 2008

Posted on: June 16, 2008 – 4:15 pm in Apparel, Entertainment, ,

Adobe Earnings Footnote (ADBE)

Adobe Systems Inc. (NASDAQ: ADBE) has reported it earnings after the close.  The software maker posted $0.40 net EPS and $0.50 non-GAAP EPS on $886.9 million in revenues, and both were above First Call expectations $0.46 EPS on $880 million in revenues. 

The company guided next quarter to $0.45 to $0.47 non-GAAP EPS with a revenue range of $855 to $885 million.  First Call had estimates of $0.45 EPS on $877.9 million.  Adobe is targeting an operating margin of approximately 29% on a GAAP basis and approximately 38.5% on a non-GAAP basis.

As shares appear to be within the range of fairly valued, traders are selling the news.  Shares closed up 0.3% at $42.85 in regular trading and shares are down about 2% at $42.00 in after-hours trading. 

Jon C. Ogg
June 16, 2008

Posted on: June 16, 2008 – 3:43 pm in Earnings, Software,

The 52-Week Low Club (PPC)(PBG)(RCL)(GHS)(ACAD)

Pilgrim’s Pride (PPC) Downgraded by Credit Suisse. Down to $15.67 from 52-week high of $41.

Pepsi Bottling Group (PBG) Still troubled by problems at one of Coke’s bottlers. Down to $29.22 from 52-week high of $43.38.

Royal Caribbean Cruises (RCL) Getting killed like the rest of the travel industry. Down to $25.40 from 52-week high of $43.96.

Gatehouse (GHS) Analyst encouraging company to drop dividend to save money. Down to $2.79 from 52-week high of $19.60.

Acadia Pharmaceuticals (ACAD) Major drug trial failure. Sharp sell-off to $4.30 from 52-week high of $17.33.

Douglas A. McIntyre

Posted on: June 16, 2008 – 3:00 pm in HI/LOW, , , , ,

Franklin Resources Chairman Sells $40+ Million in Stock (BEN)

A fed filing today from FRANKLIN RESOURCES INC. (NYSE: BEN) indicates that Chairman of the Board Charles Johnson sold 400,000 on June 13 in two transactions at $104.78.  The value of the transaction before fees was $41.912 million.

Normally this might show up as a huge flag because of the size, but after looking further at that filing he still holds more than 35.4 million shares in direct ownership and holds more than 9 million more in his IRA, 401K, and in spouse’s Trust.

Franklin Resources has a market cap north of $25 Billion and trades over 1.8 million shares on an average daily volume.

Jon C. Ogg
June 16, 2008

Posted on: June 16, 2008 – 2:31 pm in Financial Stocks, Insider Activity,

Intel Solar: Start-Up & Spin-Off (INTC, GS)

Just when you thought alternative energy and solar couldn’t get hyped any more by any new players, well guess again.  Intel Corp. (NASDAQ: INTC) announced it is spinning off key assets of a start-up business effort inside the company’s "New Business Initiatives" group to form an independent company called SpectraWatt Inc.

Intel Capital is also leading a $50 million investment round in SpectraWatt, with investments from others such as Cogentrix Energy, LLC, a wholly owned subsidiary of The Goldman Sachs Group, Inc. (NYSE: GS), PCG Clean Energy and Technology Fund, and Solon AG. The transaction is expected to close in the second quarter of 2008.

SpectraWatt will manufacture and supply photovoltaic cells to solar module makers. In addition to focusing on advanced solar cell technologies, SpectraWatt will concentrate development efforts on improvements in current manufacturing processes and capabilities to reduce the cost of photovoltaic energy generation.

The company is still in the concept stage without facilities.  It expects to break ground on its manufacturing and advanced technology development facility in Oregon in the second half of 2008 with first product shipments expected by mid-2009.

This won’t be adding anything down to Intel’s bottom line numbers for quite some time.  Even if Intel was the full $50 million and realized a 100-bagger it would still be $5 Billion down the road, and that compares to a $121 Billion market cap today.

You can join our open email distribution list to hear about other mergers, IPO’s, secondary offerings, private financings, activist investors, and more.

Jon C. Ogg
June 16, 2008

Posted on: June 16, 2008 – 1:59 pm in Alternative Energy, Semiconductor, ,

GE (GE): A $100 Billion Share Buy-Back

GE (GE) shares reached a five plus year low today, at $28.38 as a JP Morgan analysts called for the company to sell off more units.

While GE has auctioned off some modest parts of its portfolio of companies, the core businesses are still relatively intact and the company’s board shows no interest in changing that.

GE already has a 4% or better yield, so adding to that may not draw in many new shareholders.

What GE could do is buy-back a third of its shares, about $100 billion worth. It has about 60% of that cash on its balance sheet. With $16 billion in operating income, it would not have not have much trouble borrowing the rest.

The GE board has run out of alternatives if it wants to defend its current state of affairs. If its view of the correct course for the future is to keep the company as it is, then it has the chance to demonstrate that buy eating its own cooking.

The shares are cheap now. The GE board would tell Wall St. that. It can also prove it.

Douglas A. McIntyre

Posted on: June 16, 2008 – 1:22 pm in Conglomerates,

Nokia (NOK) Offers New Smartphone, No RIM (RIMM) Blackberry Service

Nokia (NOK) has come to market with two smartphones aimed at business users. They do not have RIM (RIMM) Blackberry e-mail services, so new customers and IT officers will have to start from scratch if they want to use the handsets as their primary source of portable mail.

Not likely.

According to Reuters, "The new sliding model E66, and the E71, with full keyboard, both start shipping in July and will retail for around 350 euros ($538)."

Since the handsets have bypassed the Blackberry service, maybe Nokia can do a deal with failing smartphone company, Palm (PALM).

Douglas A. McIntyre

Posted on: June 16, 2008 – 1:01 pm in Wireless, , ,

Sirius (SIRI) Faces The Music

The day it was clear the Sirius (SIRI) and XM Satellite (XMSR) would get the FCC green light for their merger was supposed to be a red letter day. With the agency’s staff and chairman now behind the deal, what could go wrong.

In spite of all the seemingly positive news, shares in Sirius are only up 5% today. They would do better if Howard Stern said he would add an hour to his program every day.

The old excuses for the stock prices of the companies staying low is that they have too much debt, not enough revenue, and are not growing quickly due to competition from devices like the iPod.

The explanation may be less complex than that. The FCC wants to limit what the new merged company can charge subscribers for the service and what they can charge for receivers. This pulls the pricing power away from the new operation, and makes it almost certain that margins will be modest if they exist at all.

The government is writing a business plan for Sirius and XM that almost guarantees that their deal will be a failure.

Douglas A. McIntyre

Posted on: June 16, 2008 – 11:33 am in Satellite, ,

Adobe Braces For Earnings (ADBE)

Adobe Systems Inc. (NASDAQ: ADBE) is set to report earnings after today’s close of trading.  The estimates from First Call are $0.46 EPS on $880 million in revenues.  As far as what is ahead, analysts expect next quarter to show $0.45 EPS on $977.9 million.  The quarter after next is also the fiscal year end and estimates for fiscal NOV-2008 are $1.90 EPS on $3.59 Billion in revenues.

Shares have been more volatile than in the past, and shares are up more than 25% from its March lows.  On average analysts have a price target north of $48.00 per share. 

As a reminder, options expiration is this coming Friday and options trading looks more active so far today compared to most normal trading days.  So far it looks like options traders are only expecting a move of up to $1.40 in either direction.

Its 52-week trading range is $30.70 to $48.47.  With a forward P/E ratio of about 22.2 and an expected 13% earnings growth from 2008 to 2009 and with the stock neither close to its 52-week highs or lows, guidance will likely be the most critical aspect for determining the valuations.

Jon C. Ogg
June 16, 2008

Posted on: June 16, 2008 – 10:58 am in Earnings, Software,

Boardwalk Fully Committed on New Pipeline (BWP, CHK)

Boardwalk Pipeline Partners LP (NYSE:BWP) announced that it has signed a 10-year binding agreement with Chesapeake Energy (NYSE:CHK) for natural gas transportation on Boardwalk’s new Fayetteville Lateral pipeline. The pipeline is expected to begin operations in the third quarter and reach its phase-one capacity of 800 million cf/d during the first quarter of 2009. Full capacity of 1.3 billion cf/d is expected in 2010. Originally targeted at a capacity of 1.2 billion cf/d, the deal with Chesapeake will require additional compression facilities and further approval from the FERC.

Boardwalk stock dropped more than $3.00 last week after its follow-on offering of 10 million shares priced at $25.30. Boardwalk previously announced that it had fully committed its new Gulf Crossing pipeline at 1.4 billion cf/d. That pipeline is scheduled to be in full operation in 2011.

The company surely hopes that today’s announcement gives the stock a little boost. EPS for the first quarter of 2008 was $0.60; average analyst estimates for the second quarter are $0.35 EPS. That seems a bit gloomy, given that the latest stock offering only increased outstanding shares by about 9%. So far today Boardwalk shares are up about 0.5% at $25.13 in the first ten minutes of trading.

Paul Ausick
June 16, 2008

Posted on: June 16, 2008 – 8:41 am in Oil & Gas, ,

McClatchy (MNI) Bleeds To Death, Cuts Workforce

McClatchy posted disastrous advertising revenue numbers for May. Total ad sales at the company fell 16.6%. Total revenue was down.15.1%. With the top line falling that fast, it is hard to say how long the company can last as an independent entity.

Online advertising was up a modest 12.9%, not nearly enough to offset disappearing print revenue. Total classified advertising fell 27.4%.

McClatchy also announced that it would cut 10% of its workforce, roughly 1,400 employees.

By some miracle, McClatchy CEO Gary Pruitt will keep his job. He made the comment that "We have been transitioning steadily and successfully from a traditional newspaper company to an integrated multimedia company for some time."

There is no evidence that the statement is true.

Douglas A. McIntyre

Posted on: June 16, 2008 – 8:20 am in Old Media,

Fertitta Takes Landry’s (LNY)

Landry’s Restaurants, Inc. (NYSE: LNY) has announced that it has entered into a definitive agreement with Fertitta Holdings, Inc.

Fertitta has agreed to acquire all outstanding common stock for $21.00 per share in cash.  This represents a premium of approximately 37% over the closing share price of the Company’s common stock on April 3, 2008.  This was the last day before disclosure of the revised offer made by Mr. Fertitta to acquire the company.  The total value of the transaction is approximately $1.3 billion, which includes approximately $885.0 million of debt.

Fertitta is a newly formed entity wholly owned by the company’s Chairman, President, CEO and original founder, Tilman J. Fertitta.  Mr. Fertitta beneficially owns approximately 39% of the Company’s outstanding shares of common stock. 

In short this is nothing short of a management led buyout, and one that many thought was a dead deal before the revisions.  Shares closed at $16.79 on Friday and the equity market cap of the stock was $271 million.

As with most management led buyouts where the founder controls a huge portion of the stock, there are likely to be any "higher bids" that magically come from elsewhere.  The only issue here that might seem to come up is that this acquisition price still buries shareholders who owned this stock before 2008.  Whether or not those older shareholders can mount any demands for denial or demands for money is another issue all together.

You can join our open email distribution list to hear about other mergers, IPO’s, secondary offerings, private financings, activist investors, and more.

Jon C. Ogg
June 16, 2008

Posted on: June 16, 2008 – 8:14 am in Food, Mergers and Buy Outs,

Clean Diesel Technologies Signs Another License (CDTI)

Clean Diesel Technologies, Inc. (Nasdaq:CDTI) has announced a strategic license agreement with Hilite International, Inc., a supplier of automotive powertrain components headquartered in Cleveland.  The company also has design and manufacturing facilities in North America, Europe and Asia.

This agreement is a worldwide, non-exclusive agreement which enables Hilite to license Clean Diesel’s ARIS airless injection technology for selective catalytic reduction control of vehicle oxides of nitrogen emissions in global original equipment manufacturer markets. Hilite chose to incorporate Clean Diesel’s SCR and EGR-SCR technologies into its own portfolio of SCR technologies to enable their customers to optimize fuel efficiency while
minimizing harmful emissions.

Hilite International has also obtained rights to Clean Diesel’s patented combination of the use of exhaust gas recirculation in conjunction with SCR for reducing fuel consumption while meeting stringent emissions standards.

Financial terms were not readily available, but as far as the size of Clean Diesel Tech it generated only $4.925 million in revenues during all of 2007 and its market cap is a mere $105 million.

Jon C. Ogg
June 16, 2008

Posted on: June 16, 2008 – 6:43 am in Alternative Energy, Autos,

Top 10 Pre-Market Analyst Calls (AG, T, VZ, GME, GE, IVGN, PPC, SNDK, SPWR, WEN, YRCW)

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

  • AGCO Corp. (NYSE: AG) Raised to Outperform from Market Perform at Wachovia.
  • AT&T (NYSE: T) & Verizon (NYSE: VZ) Cut to Neutral from Buy at UBS.
  • GameStop (NYSE: GME) Raised to Neutral from Sell at Goldman Sachs.
  • General Electric (NYSE: GE) Cut to Neutral from Outperform at JPMorgan.
  • Invitrogen (NASDAQ: IVGN) cut to Neutral from Buy at Banc of America.
  • Pilgrims Pride (NYSE: PPC) Cut to Neutral from Outperform at Credit Suisse.
  • SanDisk (NASDAQ: SNDK) Raised to Market Perform from Underperform at JMP Securities.
  • SunPower (NASDAQ: SPWR) Raised to Outperform from Neutral at Credit Suisse.
  • Wendy’s (NYSE: WEN) Raised to Equal Weight from Underweight at Morgan Stanley.
  • YRC Worldwide (NASDAQ: YRCW) Raised to Neutral from Underweight at JPMorgan.

Jon C. Ogg
June 16, 2008

Posted on: June 16, 2008 – 6:29 am in Analyst Calls, , , , , , , , , , ,

Apple (AAPL) Financial News Flash 10128

Deutsche Telekom (DT) is set to sell the new Apple (AAPL) iPhone for $1.54 to push demand. The sale will come with a large subscriber commitment to monthly use and an equally large bill.

The sell-off in Apple shares on Friday was their third down day in a row.

The CEO of Google (GOOG), Eric Schmidt, said that competition between the search engine company and Apple would not force him to quit Steve Jobs’ board of directors.

Reuters writes that AT&T (T) may have given up too much in its new 3G iPhone deal with Apple because it will be paying a part of the cost of the phone for subscribers.

Barron’s writes that "there are still some caveats that anyone considering buying Apple shares must ponder, including the biggest one: the effect of the rumors about CEO Steve Jobs’ health."

The San Jose Mercury News reports that "Apple’s soon-to-open online App Store has triggered a scramble among software developers to write business plans aimed at making money off Apple’s iPhone."

Douglas A. McIntyre

Posted on: June 16, 2008 – 5:24 am in Press Digest, , , ,

IBM (IBM) Advances Solar Power

IBM (IBM) is doing something important and will probably make money at it to boot.

According to The Wall Street Journal, "Tokyo Ohka Kogyo Co. will work with IBM to develop processes and equipment for the production of thin-film photovoltaic solar cells that convert sunlight into electricity." The thin-film technology is cheaper to produce and should sell for much less that current technology. That means that the price point for solar energy will come down and its ability to compete with oil product like gas will improve markedly.

Good for them. "IBM, We Bring Good Things To Living, We Bring Good Things To Life".

Douglas A. McIntyre

Read More »

Posted on: June 16, 2008 – 5:13 am in Technology Companies,

Cisco’s (CSCO) Bogus Projections For Online Video Growth

Cisco (CSCO) sees an explosion of online video use. Most analysts think that this has already happened, but the router company says otherwise. Since they make their money from hardware which manages much of the internet, the prediction may be self-serving.

According to The Wall Street Journal, Cisco "is projecting a sixfold jump in Internet traffic between 2007 and 2012, as online video becomes the biggest driver of global data communications."

The prediction is flawed in several respects. First among them is that YouTube and its video-sharing peers are not growing as fast as they once were. Watching user-created content of babies throwing food across the room and Ronald Reagan singing "America The Beautiful" has lost some of its charm. Major media companies are still having trouble figuring out how to make money online, so that source of video content may not grow much either.

The other roadblock to Cisco’s (CSCO) wild dream is the broadband carriers, most of them humongous phone and cable companies. They are sick of 20-year-old shut-ins using file-sharing programs to download scores of movies at a time. The carriers claim this overtaxes their capacities, slowing down the internet for everyone else and costing them millions of dollars. Almost all of the firms in this business plan to limit the amount of bandwidth people can use, or charge the heavy consumer. Either way, this will encourage less video viewing, not more.

Otherwise, the Cisco projections are just fine.

Douglas A. McIntyre

Posted on: June 16, 2008 – 5:03 am in Technology Companies,

Sony (SNE) To Launch New Show Online, Alienate Customers

Sony (SNE) is about to launch it new "Angel of Death" program online. It hopes the trick will get people to buy the DVD of the show down the road. Content companies now release this kind of programming without putting it on to TV or into theaters. The "junk" content makes more money that way. It is cheap to produce and would not hold up the the tastes of people who go to the movies to see "Shrek III".

The launch has one flaw, and perhaps a fatal one. According to The Wall Street Journal, "The series will be released online eight minutes at a time, over 10 weeks, on various Sony-affiliated Web sites." Of course, consumers are anxious to go back to their PCs ten times to see a program which was not worthy of theater release.

Sony’s move is an example of how not to use the internet. It is not a medium for promotion gimmicks. Online media consumers can get too much YouTube and premium content for free. NBC releases many of its TV shows gratis for online viewing, as do other large media companies.

Asking people to watch programming ten minutes at time is like asking them to put burning sticks into their eyes.

There are a lot of takers for that one.

Douglas A. McIntyre

Posted on: June 16, 2008 – 4:49 am in Internet,