Daily Archives: July 14, 2008

GE’s CFO Offers Long-Term Views: 24/7 Wall St. Exclusive (GE)

Everyone has seen the report from General Electric Co. (NYSE: GE) regarding Friday’s earnings.  This report and the current situation remains a glass half-full and a glass half-empty depending upon your time frame and depending upon your outlook of the conglomerate with a safety in numbers or depending upon a sum of the parts for individual growth metrics.  But 247WallSt.com got about 20 minutes in an exclusive telephone interview with CFO & Vice Chairman Keith Sherin to discuss some of the longer-term issues we are interested besides what was addressed in the company’s conference call.

Specifically, I asked Mr. Sherin about several key growth aspects for the company that have a secular or long-term growth model in infrastructure, Ecomagination, GE Oil & Gas, Medical, Airlines and transports, Finance, media, and more.  We also were able to discuss many of the divestiture plans.

First and foremost, we asked about a takeaway for the remainder of 2008 and into 2009.  To this Mr. Sherin seems more than confident about the global opportunities for the company as a whole.  He does expect some of the macroeconomic problems of today to continue and some parts may even get worse than today. But with a $55 Billion backlog in major equipment he feels the company should have a cushion and also addressed how the company has taken many steps to insulate itself against those possibilities.  On a specific basis, Mr. Sherin noted, "There is no Armageddon scenario" in regard to my bringing up the challenges in the economy.

One key issue I wanted to address was the company’s internal growth expectations for its return on capital in each of its units.  Last summer Mr. Sherin mentioned the 20% hurdle as a general goal inside the company for each of its unit combined.  I asked specifically about this to see if this has come down because of the current environment and specifically asked if a range of 12% to 16% might be more realistic.  Sherin said that despite macro-issues, the 20% does remain as the company’s goal.  I would stress that this does not translate to 20% EPS growth as a forecast because this is a different metric.  But the company is still maintaining this as a long-term internal target.  Furthermore, Mr. Sherin said that in evaluating outside opportunities there has to be a minimum of 15% in return on capital for them to be considered.

As far as individual sectors inside the company, GE continues to see strength in the financial sector and Sherin noted, "We feel very good about our financial services business model."  In response to many of the concerns around many major financials and GE in particular over recent weeks, Mr. Sherin noted specifically, "We do not have a burning platform in our financial services."  The company has unloaded mortgage operations before the mess started and you probably saw it has unloaded its Japanese lending last week.

GE ENERGY is an area that the company sees as a huge opportunity for many many years ahead.   GE was never mentioned by anyone anywhere just a few years ago in the oil and gas sector, but this is becoming a larger and larger operation via acquisitions and organic growth.  Mr. Sherin noted that he would like to see this area “double or more” over the next five years.  As far as his belief in this sector, he even went as far as saying analogously that he thinks engineering in energy related fields was where he’s told his kids to focus on for an education for the next generational opportunity ahead.  While he did not offer any specific long-term growth targets for the Ecomagination unit as a whole, Mr. Sherin specifically addressed the wind and solar opportunities there as being incredible for GE and he further went into outlining some of the growth areas there.  More specifically, and something we haven’t heard much of before, Sherin discussed how GE wants to become a major player in the batteries for alternative and renewable energy sector.

GE’s focus on healthcare is an area that the company noted last summer at a luncheon as an arena that the company would like to grow in, and Mr. Sherin noted that the company does have a “green-light” to expand in this sector as opportunities arise.  While GE did have to pull the plug on the old Abbott diagnostics business acquisition, the desire to continue growth in the sector from last summer is not one that has seemed to change at all.  The diagnostics area is a potential and Mr. Sherin also noted areas such as Healthcare IT for electronic medical records.  He further went on to discuss in life sciences the proof of therapy for genetics and identified how the company wants to play its part in the personalized medicine trends that are coming in the near future.  Unfortunately there are too many companies in each of the sectors for us to be able to guess an exact company name that could be the next GE takeover candidates in 2008 or beyond. 

Another sector we wanted to address and discuss was the current situation in the airline industry since GE has taken an active lender status here and also has a massive business in the jet engines and servicing the engines for airlines.  More specifically when I brought up our own fears about the chances of major legacy air carriers having to file bankruptcy in late 2008 or into Q2/Q3 2009 Mr. Sherin was more than prepared to address this as to GE’s stance.  He noted first and foremost, “We’ve been through airline bankruptcies before” and further stated “Our collateral position (in the airline sector) has improved since after 9/11.”  He explained that GE isn’t in the same boat as equity investors and they are much higher in the creditor line if this was to occur.

Lastly we discussed NBC-Universal and the role of media inside GE.  Sherin maintained the same tone that Jeff Immelt has stated and that NBC’s chief Jeff Zucker has taken that this remains an integral part of GE.  When asked what the internal valuation is regarding the unit, Sherin gave a figure of $40 Billion as the total value of the media unit.  If the company is going to change that stance of GE being NBC-Universal’s parent as many want to see changed, well let’s just say that the company does not want to fuel any hopes of a change there at all.

While shares are down in this Monday’s trading, we would note that despite the sell-off we saw in recent months GE was one of the few gainers during a very weak stock market. 

We gave our own 2008 fair value stock assessment on GE based upon guidance after its last big post-earnings drop.  General Electric has also been reviewed for our next SPECIAL SITUATION newsletter with scenarios that could help GE’s stock be able to surpass that level under the right scenarios even in a market-neutral environment.

Many of the issues around GE as an investment today are really going to depend upon your time frame.  The company does have a united message and does have the goal of streamlining operations.  The company also has a solid backlog and there is a definite break between how Wall Street is viewing some of the company’s exposure to macro-aspects versus the company’s comfort level on how it evaluates the current environment and its opportunities that arise.  Whether this happens in 2008 or in 2009 there is one thing for sure: the GE of tomorrow is going to look very different from your parent’s version of GE in the past.

Jon C. Ogg
July 14, 2008

Posted on: July 14, 2008 – 5:03 pm in Conglomerates, , ,

Genentech Masks a Whiff (DNA)

Genentech Inc. (NYSE: DNA) is initially looking like a severe disappointment to those who thought Cramer’s call last week was the right one.  The largest biotech in the U.S. posted $0.82 EPS on $3.23 Billion in revenues.  The company has also tightened its full-year 2008 non-GAAP earnings forecast to a range of $3.40 to $3.50 per share, revised from $3.35 to $3.45 per share.

First Call had estimates at $0.86 EPS on $3.23 Billion in revenues.  For fiscal 2008, estimates are $3.43 EPS on $13.03 Billion in revenues.

The company did have disappointing drug sales as well:
Drug            2008    2007   Change
Rituxan®     $651     $582      12%
Avastin®+    $650     $564      15%
Herceptin®   $338     $329      3%
Lucentis®     $216     $209      3%
Xolair®          $129     $120      8%
Tarceva®       $119     $102      17%

So far traders do not like this report, but the better news perhaps is that this slightly raised guidance is being treated well.  Shares closed down 3% at $75.39.  The initial reaction put shares down some 4% but they have recovered back to $75.40.

Jon C. Ogg
July 14, 2008

Posted on: July 14, 2008 – 3:12 pm in Biotech, Earnings,

The 52-Week Low Club 7/14/2008 (CAL)(UAUA)(MNI)(GHS)(WM)(FHN)(WB)(LEH)(MER)

Washington Mutual (WM) Concerns mortgage firm will make it after government takes over IndyMac. Falls to $3.03 from 52-week high of $42.93.

First Horizon (FHN) Same fears as with WM. Drops to $4.52 from 52-week high of $39.03.

Wachovia (WB) Market looking for more big write-offs. Sells down to $9.91 from 52-week high of $53.10.

Lehman (LEH) Is it the next Bear Stearns? Dips to $12.91 from 52-week high of $74.09

Merrill Lynch (MER) Joins the panic. Down to $25.47 from 52-week high of $89.23.

Sun (JAVA) Concerns that revenue is falling. Down to $8.69 from 52-week high of $25.04.

Gatehouse (GHS) Will newspaper chain makes it debt service for the year? Drops to $1.11 from 52-week high of $19.

McClatchy (MNI) Same as Gatehouse. Down to $4.82 from 52-week high of $28.73.

UAL (UAUA) As airlines cut more costs and oil rises, situation gets worse. Off to $3.36 from 52-week high of $51.60.

Continental (CAL) Another airline. Down to $6.63 from 52-week high of $38.79.

Douglas A. McIntyre

Posted on: July 14, 2008 – 2:55 pm in HI/LOW, , , , , , , , ,

Genentech Ready to Lead Biotech Earnings Bias (DNA, BIIB)

Genentech Inc. (NYSE: DNA) is set to report earnings after the close of trading today.  The largest biotech in the U.S. is expected to post $0.86 EPS on $3.23 Billion in revenues according to First Call.  For next quarter estimates are $0.87 EPS on $3.32 Billion in revenues.  For fiscal 2008, estimates are $3.43 EPS on $13.03 Billion in revenues.

So how does this rank in biotechs and drug companies?  Genentech, based on a $76.13 (after a 2% drop today) has a forward P/E ratio for 2008 of 22.2.  With a $79.9 Billion market cap, it trades at about 6.15 times revenues.  With 2009 estimates at $3.90 EPS and $14.2 Billion in revenues, Genentech trades with forward multiples for 2009 of 19.5-times earnings and about 5.6-times revenues.

Just last week, Jim Cramer named Genentech as a safe spot to hide out in during a bear market or during a tough economy.  The only problem is that we’ve heard him say that before and seen it tank thereafter.  In fact, this stock seems to have a high-$60’s to low-$80’s trading range that has been in place over the last year and it has technically qualified as a "dead money stock" since the end of 2005.

Analysts have an average price target north of $86.00 and its 52-week trading range is $65.35 to $82.20.  If you look at today’s options prices, it appears as though options traders are only expecting a move of about $2.00 in either direction after the earnings.

The issue that has been around Genentech for some time is that Wall Street analysts have either been making too bold of predictions and estimates for the company’s cancer drugs.  Of course you could also set that to be interpreted as the company not  being able to deliver.  The focus on all of its major drugs rather than a big picture of the company’s growth has won every single quarter of late. 

As a reminder, Roche owns the majority stake of Genentech so its $79.9 Billion market cap is quite misleading when you consider the real float of the stock. It also has a key drug partnership with Biogen-Idec (NASDAQ: BIIB) for its Rituxan.

Jon C. Ogg
July 14, 2008

Posted on: July 14, 2008 – 12:37 pm in Biotech, Earnings, ,

Can WaMu, National City, Or Others Find Takeunder Bids? (WM, NCC)

Washington Mutual Inc. (NYSE: WM) is looking exactly like "The Good, The Bad, and The Ugly."  The difference is that this one is real instead of a movie.  Shares are down yet another 29% to new 52-week lows.  The reality is that this represents lows not seen since the early 1990’s.  It has gotten that bad.

Forbes noted Dick Bove at Ladenburg Thalmann having noted it as one of the likely banks on the edge in a recent report along with about 100 other banks at risk.

It has become impossible to draw the line between research reports, fears, and even rumors at this point.  If a run on the bank occurs and if a banks trading parties cut them off, then they are about as good as done.

We have just seen National City Corporation (NYSE: NCC) have its shares halted with a "NEWS PENDING" status after it fell some 27% to $3.20.  The news release from National City has said they are not experiencing unusual deposit or creditor runs to address "market rumors."

Everyone keeps running break-up values on the major financial institutions.  The problem is that the balance sheets are currently still in a near-impossible situation to analyze.  The pool of bidders are likely to focus on those healthier institutions that may be up for grabs because they have seen shares plummet in sympathy.   

Perhaps a better title for this movie would be "Fall Street."

Jon C. Ogg
July 14, 2008

Posted on: July 14, 2008 – 11:08 am in Banking, Financial Stocks, Mergers and Buy Outs, Rumors, ,

Even With Fed Rescue Plan, Major Financials Sell Down (UBS)(FNM)(WM)(WB)(FRE)

Fannie Mae (FNM) and Freddie Mac (FRE) opened well up today. FRE hit a high of $9.80 up from a $7.75 close on Friday. Now, it is only up a little over 5%. The news of the government aid for the two mortgage companies did not do too much to calm investors.

Lehman (LEH) opened 11% above its Friday close. It is now down 1.5%. Wachovia (WB) is trading off 6% and Washington Mutual is falling 12%.

Before the open, Wall St. assumed that the government support would drive financial stock prices higher and keep them there.

The walk to the end of the rainbow was interrupted by two things. The first is that it has begun to dawn on investors that all the money coming in to support these ailing banks and brokerage houses will not be free. If the federal government puts $5 billion into Freddie Mac, the dilution could easily cut the company’s share price in half. If Wachovia has to raise outside money, the effect will be similar.

The larger problems is that the market cannot avoid looking the fact that the credit crisis is systemic. Shoring up trouble in one spot does not solve the problems in another. Even if Fannie Mae and Freddie Mac make it out of the crisis with their skins intact, firms like Lehman and Washington Mutual may not. Even overseas, banks including UBS are in substantial danger of being dismantled or partially taken over by the government.

It may be simplistic, but financial shares are not going to trade up consistently until housing prices begin to rise and oil prices begin to fall. These two factors block the way to the overall health of the global credit system the way that the Colossus of Rhodes blocked the entrance to that ancient island.

Financial stocks can’t be rescued one at a time. The tide has gone out too far.

Douglas A. McIntyre

Posted on: July 14, 2008 – 10:10 am in Financial Stocks, , , , , ,

Could Your Bank Be Closed By The Feds? (C)(IMB)(BAC)(NCC)

The most important financial lifeline for most small businesses and consumers is their bank. More often than not these banks are regional or local. They are easier to approach and tend to give better service than large money center banks like Citigroup (C) which have thousands of branches.

The failure of the big bank IndyMac (IMB) has lead analysts to ask how many of the nation’s 7,500 banks could go under. The New York Times reports that "the troubles are growing so rapidly at some small and mid-size banks that as many as 150 out of the 7,500 banks nationwide could fail over the next 12 to 18 months."

That number may be very, very low. During the S&L crisis which began in the late 1980s, about 1,000 banks failed. There is not reason to believe that the current mortgage failure rate and consumer credit default rate will not cause hundreds of banks to go under due to lack of adequate capital. Several large regionals like NCC (NCC) have been forced to raise billions of dollars. NCC’s shares are down almost 90%.It is still an open question whether NCC makes it, even with a huge cash infusion.

The FDIC insures most bank deposits, but if failures increase sharply, its workload will be overwhelming.

The local bank, which looked like the "safe" bank when companies like Bank of America (BAC) were writing down huge mortgages losses is not so safe any more

Douglas A. McIntyre.

Posted on: July 14, 2008 – 9:41 am in Banking, , , ,

Apple (AAPL) Sells One Million iPhones In Three Days, Little Reaction By Stock

According to Apple (AAPL), it sold one million versions of its new 3G handset worldwide during the first day it was on the market.

"iPhone 3G had a stunning opening weekend," said Steve Jobs, Apple’s CEO. "It took 74 days to sell the first one million original iPhones, so the new iPhone 3G is clearly off to a great start around the world."

In a bear market, no news is good enough. Apple’s shares are up modestly, 2.7%, to $177.50.

Douglas A. McIntyre

Posted on: July 14, 2008 – 9:10 am in Wireless,

Boeing (BA) Gets A Big Order

Abu Dhabi’s national airline today made orders for 35 Boeing (BA) 787s and 10 777s.

According to a Reuters report, the list prices of the planes are worth about $8 billion

Boeing’s shares are up 1% on the news

Douglas A. McIntyre

Posted on: July 14, 2008 – 8:30 am in Aerospace,

Key Analyst Downgrades (CSC, HPC, JBX, RMD, SAPE, HOT, TRIN, WB)

These are some of the preliminary downgrades or negative research calls seen out of Wall Street analysts this Monday morning in early morning hours:

  • Computer Sciences Corp. (NYSE: CSC) Cut to Sell from Neutral at Goldman Sachs.
  • Hercules (NYSE: HPC) Cut to Hold from Buy at Deutsche Bank.
  • Jack In The Box (NYSE: JBX) Cut to Buy from Strong Buy at Wedbush Morgan.
  • Resmed (NYSE: RMD) Cut to Underweight at Morgan Stanley.
  • Sapient (NASDAQ: SAPE) Cut to Sell from Neutral at Goldman Sachs.
  • Starwood Hotels (NYSE: HOT) Cut to Sell at Goldman Sachs.
  • Thomson Reuters (NASDAQ: TRIN) Cut to Sell from Neutral at UBS.
  • Wachovia (NYSE: WB) Cut to Neutral at UBS.

Jon C. Ogg
July 14, 2008

Posted on: July 14, 2008 – 6:31 am in Analyst Calls, , , , , , , ,

Top Early Analyst Upgrades (CIEN, DF, GENZ, LPX, M, TAP, NOV, OC, VRTX)

These are some of the preliminary upgrades or positive research calls seen out of Wall Street analysts this Monday morning in early morning hours:

  • Ciena (NASDAQ: CIEN) raised to Market Perform at JMP Securities.
  • Dean Foods (NYSE: DF) Raised to Overweight at JPMorgan.
  • Genzyme (NASDAQ: GENZ) Raised to Buy from Hold at Citigroup.
  • Louisiana Pacific (NYSE: LPX) Raised To Sector Perform from Underperform at RBC.
  • Macy’s (NYSE: M) Raised to Neutral from Underweight at JPMorgan.
  • Molson Coors (NYSE: TAP) Raised to Buy from Hold at Deutsche Bank.
  • National Oilwell Varco (NYSE: NOV) Raised to Buy at Banc of America.
  • Owens Corning (NYSE: OC) Raised to Outperform at Morgan Keegan.
  • Vertex Pharma (NASDAQ: VRTX) Started as Overweight at Thomas Weisel.

Jon C. Ogg
July 14, 2008

Posted on: July 14, 2008 – 6:27 am in Analyst Calls, , , , , , , , ,

Sony (SNE): Playstation Resurrection

When the Sony (SNE) PS3 was launched to replace the aging Playstation 2, the Japanese company had great hopes that it could maintain its No.1 spot against Nintendo and the Microsoft (MSFT) Xbox franchise. Things did not work out that way. Over the course of last year, sales of the PS3 ran well behind its two competitors.

Sony needed the PS3 to cut the huge loses in the game business, and now it looks like the console may deliver. According to Bloomberg, "The PlayStation 3 outsold the Xbox 360 in the U.S. in the first five months of 2008 after trailing Microsoft’s console in 2007."

The reasons for the improvement seem to be that the product runs Blu-ray high-def movies. Blu-ray has won out at the HD format that all of the Hollywood studios use. Sony also has gotten more exclusive video games for its console.

Now, Microsoft can explain to investors about why its gaming business is not doing well.

Douglas A. McIntyre

Posted on: July 14, 2008 – 5:45 am in Consumer Electronics, ,

The Price Of Oil: A Strike In Brazil

Workers for Petrobas, the largest oil company in Brazil, are going on strike. According to Bloomberg, the action may cut Brazilian daily oil output by more than half. In a world where even the rumor of interrupted supply can send crude up by several dollars, the news is certainly not welcome.

The labor issue adds a new wrinkle to the dynamics of oil pricing. Already in the mix are speculation, the value of the American dollar, OPEC decisions on supply, consumption increases in China and India, and political problems in Nigeria and Iran.

Among all of the problems facing oil prices over the long-term, labor could end up being the most severe. Workers see oil companies and their owners getting fabulously rich. Little if any of that is passed on to the day laborer. In countries where personal income is extremely modest, the spread between worker and owner is likely to get larger. Labor understand the economic value of shipping crude every say and the potential harm that an interruption does to a company which counts on the even flow exports of oil for its profits.

Several exporters could run into a problem not unlike the one faced by Brazil. Nigeria, Mexico, Venezuela, and Russia are probably near the top of that list. Some of the countries in the Middle East might be added. Being poor and working for a rich company is the same everywhere.

Labor movements have learned a great deal over the last century. There is nothing like a strike to get management’s attention. In the case of oil companies the repercussions are unusually broad.

Douglas A. McIntyre

Read More »

Posted on: July 14, 2008 – 5:29 am in Oil & Gas

The Government Chases Rumor Mongers, Mirages, And Ghosts

Several agencies within the federal government will start to target people and firms who spread rumors to move share prices up and down. Allegedly, this is a practices often used by short sellers to push stock prices lower.

According to The Wall Street Journal, "The Securities and Exchange Commission, under fire for not responding more vigorously to a raft of rumors that have pounded stock prices, says it is cracking down on firms or individuals that illegally spread false rumors"

What is a false rumor? It may be hard to draw a bright line. Lehman Bros (LEH) has been hurt by reports that it has been losing customers and that its write-offs are growing. The same questions are being asked about several other Wall St. firms. Of course, the reports could be true. To a large extent, the answer as to who is right may take several quarters to sort out.

A "false" rumor is obviously a tale made up to move a share price. But, as that rumor is heard by a second or third party, how do they know whether it is true or it is not? Traders make decisions as much on instinct about the quality of information as anything else. Verifying each piece of information could take days. By that time, the market has come and gone.

Rumors are as old at trading itself. Trying to prevent them is like chasing a ghost.

Douglas A. McIntyre

Posted on: July 14, 2008 – 5:16 am in Short Interest,

Fannie Mae (FNM), Freddie Mac (FRE), And Bear Strearns: Who Decides Who Lives And Who Dies?

The federal government has decided that Fannie Mae (FNM) and Freddie Mac (FRE) are too big to fail. The Fed and Treasury will offer a combination of loans and stock purchases to make sure that the two mortgage operations have adequate capital to operate smoothly. By some estimates, the government will put $15 billion into the companies, which will almost certainly push down the value of their common shares due to dilution. But, it will not wipe that stockholders out.

Investors and employees at Bear Stearns were not so lucky. Shareholders in IndyMac (IMB), which was seized by the government last week, will walk away with nothing. People with money in Countrywide would likely have done no better if Bank of America (BAC) has not bought the company, a move that some analysts say could still back-fire.

The Fed and Treasury almost certainly did the right thing. Those who believe that only the free market should determine the fate of financial institutions may want to make an exception with FRE and FNM. They hold or support almost 50% of US mortgages. Their paper is owned in great quantity by every major bank and brokerage house. A failure of one or both companies would cause hundreds of millions of dollars in bank write-offs and would hurt the chances of the average citizen getting a home loan.

The credit crisis, but most measures, is getting worse. Merrill Lynch (MER) is almost certainly close to selling assets to offset losses from its mortgage-related paper. Most large US banks, with Citgroup (C) out in front, are going to have billions more in write-downs this quarter. Many observers think those losses could continue well into next year as the mortgage markets and economy get worse.

All of this raises the $64,000 question of which financial institutions are too big to fail and which are not. It could be persuasively argued that if MBIA (MBI) or Ambac (ABK) went under, the losses at financial companies which hold their paper could be tremendous.

That brings the argument around to money center banks and brokerages. Market rumors are that Lehman (LEH) may not make it. Wachovia (WB), Washington Mutual (WM), and Citigroup (C) may reach a point of no return. Who decides if any of these gets government assistance? Congress? The Fed? The Treasury?

The credit crisis will get worse, perhaps much worse. The federal government does not have an unlimited supply of capital. If it is faced with bail-outs that run into the hundreds of billions of dollars, the vault may empty quickly.

All of this means that the decision about what happens to large US banks and investment houses will be at least somewhat arbitrary.

Those financial firms which fail earliest may actually have an advantage. At least there will be money available to support them.

Douglas A. McIntyre

Posted on: July 14, 2008 – 5:01 am in Financial Stocks, , , , , , , , , ,

BUD Board Does The Right Thing, Yahoo! (YHOO) Doesn’t

The board at Anheuser-Busch (BUD) did the right thing. It got a offer well above market to sell the company. It fought for more money. When it got the better price. It sold.

BUD stock has been stuck in the mid-$50s for some time. The beer business is OK, but it is hardly a growth industry. With a global recession underway, it is hard to see why InBev wants to buy Bud at such a high price, but, to seal the deal, it upped its offer to $70 a share. Anheuser-Busch was not likely to see its stock at that level for a long, long time. It simply did not have a way to enhance the attractiveness of its business.

Yahoo!’s situation is not dissimilar. Much of its growth is behind it. The company’s last few quarters have been disappointing. It is now a distant No.2 in the search engine market. Much of its revenue comes from the display advertising sector. That market is a modest performer, and it is not one which will take Yahoo!’s earnings up sharply.

Yahoo!’s stock has been trading in the $20 to $30 range for over two years. With quarterly results weakening, the stock is not likely to break $25 very often. Microsoft (MSFT) offered $33 for Yahoo!. The portal company’s board rejected that. Microsoft and activist investor Carl Icahn has come back several times. There has to be a deal over $30 in there somewhere.

Yahoo! is almost certainly not a $30 stock. When it broke off talks with Microsoft, its shares moved down from $33 to under $20.

The Yahoo! board should do what BUD did. Get out with a good price while it still can.

Douglas A. McIntyre

Posted on: July 14, 2008 – 4:37 am in Mergers and Buy Outs, , ,

With Extraordinary Start, Apple (AAPL) Moves To Dominate Smartphone Market

Apple (AAPL) probably sold over 425,000 3G iPhones in the first three days it was on the market. That would put it on track to hit forecasts from Piper Jaffray that the company will sell four million handsets this quarter.

According to Bloomberg, aside from shortages at AT&T (T) stores in the US, "carriers in the U.K., Germany, Canada and Japan said many shops ran out of the iPhone 3G," That is an indication that Apple’s inventory forecasting and management may have been flawed, but, going forward, it is likely to be a stumble which will be forgiven.

Piper puts its estimate for total iPhone sales this quarter at four million. And, the new 3G version was not available at all in June. Based on those numbers, Apple could sell 20 million iPhones over the next year.

Sony Ericsson, a major player in the smartphone business, sold 23 million handsets last quarter. The high end phones that make up its product mix are particularly attractive from a financial standpoint. Manufacturers like Nokia (NOK) are facing falling per-unit revenue as they sell more handsets in places like China and India. Margins on these less expensive phones are poor.

Apple has the chance to break the industry cycle of falling handset prices and margins. If it can get to 50 million unit sales a year, Apple could become the dominant global supplier of the most financially attractive products, those which have the largest margins and also bring carriers the biggest profits for subscriber data and voice plans.

New to the handset industry, Apple now has a chance to rule its sweetest spot within the next two of three years.

Douglas A. McIntyre

Posted on: July 14, 2008 – 4:15 am in Wireless, ,

Media Digest 7/14/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to Reuters, the govenment will bail-out Freddie Mac (FRE) and Fannie Mae (FNM) through a combination of stock purchases and loans.

Reuters reports that InBev will buy Anheuser-Busch (BUD) for $52 billion.

Reuters reports that Yahoo! (YHOO) rejected a proposal from Microsoft (MSFT) and Icahn to break up the company.

Reuters reports that analysts expect more banks to fail on the heels of the government taking over IndyBac.

Reuters reports the SEC and other agencies will crack down on the use of rumors by short sellers.

The Wall Street Journal reports that bond ratings agencies are likley to have new regulations not unlike those put on stock exchanges.

The Wall Street Journal writes that Nvidia (NVDA) is trying to fend off problems its new product is having with PC makers.

The New York Times writes that at least 150 banks could fail over the next year.

The FT writes that KPMG’s Global M&A Predictor sees a sharp downturn in buy-out activity by corporations.

Bloomberg with that Petrobas oil workers went on strike which could cut Brazil’s oil output by half.

Bloomberg reports that the Sony (SNE) PS3 is gaining on Microsoft (MSFT) with Blu-ray and new games.

Douglas A. McIntyreSNE

Posted on: July 14, 2008 – 2:49 am in Press Digest, , , , , , ,

Asia Markets 7/14/2008 (CHL)(SNP)

Markets in Asia were mostly lower

The Nikkei fell .2% to 13,010. Kobe Steel rose 3.1% to 296. Nikon rose 3.4% to 3330.

The Hang Seng fell .8% to 22,045. China Mobile (CHL) fell .2% to 105. China Petroleum (SNP) fell .5% to 7.35.

The Shanghai Composite rose .8% to 2,878.

Data from Reuters

Douglas A. McIntyre

Posted on: July 14, 2008 – 2:28 am in International Markets, ,