October – 2008 – 24/7 Wall St.

Monthly Archives: October 2008

Buffett Gets Put In Burlington Northern (BRK-A, BRK-B, BNI)

It looks like the Oracle of Omaha is riding the Reading Railroad on the Monopoly board all over again. Berkshire Hathaway Inc. (NYSE: BRK-A) has said in a filing that it has added to its position in Burlington Northern Santa Fe Corp. (NYSE: BNI). The filing notes that Buffett and company bought an additional 825,000 shares of common stock and now holds a beneficial ownership of 64,610,418 shares of common stock.

Posted on: October 30, 2008 – 4:26 pm in Buffett, Conglomerates, Insider Activity, BNI, BRK-A

EA Spells Trouble For Video Game Sector (ERTS)

Video game leader Electronic Arts Inc. (NASDAQ: ERTS) has just reported earnings, and this sector might not be quite as immune to economic woes as you might have hoped. The company reported a loss of $0.06 on revenue of $1.126 billion. First Call had non-GAAP estimates at $0.06 and $1.08 billion in revenue. On a net basis, the company posted revenue of $894 million and a loss of $0.97. While earnings are always important, there are undercurrents here at work which are not going to sit well for long-term holders.

Posted on: October 30, 2008 – 3:36 pm in Earnings, Video Games, ERTS

Sun (JAVA): The Worst Tech Stock In The World Makes Its Case Again

There has been some debate recently about which of the well-known tech stocks is the worst. AMD (AMD) is often in the running. So is Palm (PALM).

Sun (JAVA) won the race today with spectacularly poor numbers for the last quarter.

First Call had estimates of ($.08) EPS and $3.06 billion in revenue. Sun was not even close.

Posted on: October 30, 2008 – 3:16 pm in Earnings, JAVA

The 52-Week Low Club (HIG)(CI)(AVP)(GLBL)(SYMC)(EXPE)

Hartford Financial (HIG) Big analyst downgrade. Plunges to $8.23 from 52-week high of $98.70.

CIGNA (CI) Profit drops 53%. Stock off to $15.08 from 52-week high of $56.98.

Avon (AVP) Weak guidance. Falls to $19.85 from 52-week high of $45.34.

Global Industries (GLB) Bad earnings. Analyst downgrade. Daily double. Off to $2.27 from 52-week high of $27.06.

Symantec (SYMC) Misses on earnings and give poor outlook. Moves down to $11.85 from 52-week high of $22.80.

Expedia (EXPE) Big drop-off in its core market–travel.. Sells down to $9.66 from 52-week high of $34.66.

Douglas A. McIntyre

Posted on: October 30, 2008 – 2:59 pm in HI/LOW, AVP, CI, EXPE, GLBL, HIG, SYMC

AIG Borrows From Peter To Pay Paul In Debt-Arbitrage (AIG)

American International Group Inc. (NYSE: AIG) disclosed in a filing today that four affiliates applied for participation in the Federal Reserve Bank of New York’s Commercial Paper Funding Facility. It is harder to tell which is more surprising: the billion of cumulative capital or the fact that this looks more like a financial shuffle.

Posted on: October 30, 2008 – 1:43 pm in Financial Stocks, Secondary Offering, AIG

Boeing Raising Up to $5 Billion (BA)

The Boeing Company (NYSE: BA) has filed for a shelf registration to allow its Boeing Capital Corporation unit to raise up to $5,000,000,000.00 ($ billion) via the sale of debt securities.

Posted on: October 30, 2008 – 12:45 pm in Aerospace, Bonds, Secondary Offering, BA

Just When Wall St. Thought Things At Motorola (MOT) Could Not Get Worse…

Motorola (MOT), mocked and ridiculed for being badly run for the last two years, has now let another 3,000 people go, two-thirds of them from the company’s failed handset business which only sold 25 million units last quarter and managed to lose $840 million on a 31% drop in revenue. The news was first reported by The Wall Street Journal.

Motorola today said it will not spin-off its handset division to shareholders as planned.

Now all the lay-offs can be done by a single company instead of two. It requires fewer human resource people that way. MOT has two CEOs in contemplation of breaking the firm into pieces. Each of them will keep his job whether the firm needs them or not.

Douglas A. McIntyre

Posted on: October 30, 2008 – 12:14 pm in Consumer Electronics, MOT

Voodoo Economics: How Does American Express (AXP) Fire 7,000 People?

American Express (AXP) decided to pole axe 7,000 poor souls. As is true with most mass firings, it is driving the company’s stock higher, in this case by 5% to just over $26. It still trades near the bottom of its 52-week range.

The layoffs cover 10% of the American Express work force which raises the question of what all of them have been doing up to now. That may appear to be a naive question, but perhaps not.

Posted on: October 30, 2008 – 10:51 am in Management Change, AXP

Another CEO Joins Margin Call Selling Mayhem (DNR, BSX, CHK, CBS, VIA, AIG)

Gareth Roberts, CEO of Denbury Resources (NYSE:DNR) was forced to sell 513,000 shares of the company’s stock to meet a margin call "pursuant to a real estate based loan." That was about 15% of his holdings. This is not at all the first CEO in this boat, and it isn’t just smaller company CEO’s caught up in the margin call mayhem.

Posted on: October 30, 2008 – 10:49 am in Insider Activity, AIG, BSX, CBS, CHK, DNR, VIA

Where Will Jim Cramer’s Primary Responsibilities Go? (TSCM)

TheStreet.com Inc. (NASDAQ: TSCM) reported lackluster earnings after yesterday’s close with a third quarter loss of $0.04 per share as revenue rose 4% from a year earlier to $16.7 million. But more importantly, Jim Cramer is now going to be the Chairman of the Board at TheStreet.com after the board decided to split the chairman and CEO roles. Thomas J. Clarke Jr. previously held both positions before this announcement.

Many on Wall Street have always said that Cramer was always the head honcho at TheStreet.com and this may just be a formality at this point. But it also brings up the case where you have to wonder if Jim Cramer will have to better segregate his efforts between TheStreet.com and CNBC for his MAD MONEY and break-in segments throughout the day.

Posted on: October 30, 2008 – 9:58 am in Cramer, Internet, Management Change, Media, TSCM

The Worst Looks Over At Cal Dive (DVR)

Offshore driller Cal Dive International Inc. (NYSE:DVR) reported third quarter earnings after markets closed yesterday. The company announced EPS of $0.44 on revenue of $278.7 million. Analysts had been expecting EPS of $0.36 and revenue of $258.35 million. Even better, the company’s backlog rose to a record $506 million on the heels of Hurricanes Gustav and Ike.

Posted on: October 30, 2008 – 9:38 am in Earnings, Oil & Gas, DVR

Foundry & Brocade, When Less Is Really More (FDRY, BRCD)

Brocade Communications Systems Inc. (NASDAQ: BRCD) originally announced an acquisition of Foundry Networks, Inc. (NASDAQ: FDRY) for $18.50 of cash plus 0.0907 shares of Brocade common stock. The deal valued Foundry at $19.25 per share, or about $3 billion. There had been many concerns from Wall Street that this merger was not going to get done and that was evident at the $13.00 price of Foundry yesterday. But new merger terms have emerged this morning, and this still looks like it makes sense in the new environment.

Posted on: October 30, 2008 – 9:17 am in Mergers and Buy Outs, Technology Companies, BRCD, FDRY

Exxon & Big Oil Actually Like Low Oil Prices (XOM, RDS.A, MUR)

It may be a stretch to say that oil companies actually like lower oil prices, but these oil companies keep posting great earnings even though oil has fallen from north of $140/barrel in June to the $60’s in October. Exxon Mobil (NYSE:XOM) announced record earnings excluding special items for the third quarter of $13.38 billion (EPS of $2.59). Its chairman credited the company’s "disciplined business approach" for the record quarter.

Posted on: October 30, 2008 – 8:31 am in Earnings, Oil & Gas, MUR, RDS.A, XOM

Clean Energy Tries to Sell Non-Performance (CLNE)

Clean Energy Fuels (NASDAQ:CLNE), T. Boone Pickens’s public alternative energy company for converting natural gas to auto fuel, reported preliminary third quarter results after the market closed yesterday. There was no good news. Analysts were estimating EPS of -$0.15, and Clean Energy reported a loss in the range of -$0.23 to -$0.26 per share, about eight times worse than the same period a year ago. Revenues will also miss estimates of $37.71 million.

Posted on: October 30, 2008 – 8:03 am in Alternative Energy, Earnings, Oil & Gas, CLNE

Tesoro Emanates Trends of Refiners (TSO)

After the market closed yesterday, oil refiner Tesoro (NYSE:TSO) put up some solid good news. For the third quarter, Tesoro’s EPS hit $1.86 on net income of $259 million and revenues of $8.7 billion. Analysts had expected EPS of $1.48 and revenues of $7.81 billion. The company’s share price jumped 4.55% in after-hours trading, finishing at $10.35. In the same period a year ago, Tesoro reported EPS of $0.34 on revenues of $5.9 billion.

Posted on: October 30, 2008 – 7:57 am in Earnings, Oil & Gas, TSO

GDP: The Recession Is Upon Us

The Commerce Department gave the preliminary U.S. third quarter GDP, and it has come in at levels which finally reflect the recession we have been saying we are in since the end of Q1. The new preliminary Q3 GDP was -0.3%. The good news is that this is not as bad as economists’ estimates of -0.5%. But about all you can find in that small bit of good news is that you can take comfort that the headline number could have been far worse.

Posted on: October 30, 2008 – 7:44 am in Economy

T. Boone Pickens Gets Out Of the Market

T. Boone Pickens came on CNBC this morning, and he was much more somber than in his prior appearances. When your fund is said to be down somewhere around $2 billion and facing major redemption waves, that can happen.

As far as what he is doing now, "We are out of the market and have been for several weeks."

Posted on: October 30, 2008 – 7:13 am in Interview, Oil & Gas

Top Pre-Market Analyst Upgrades (FSLR, JNS, LM, NLC, NBIX, NEM, SPLS)

These are some of the top analyst upgrades we are seeing from Wall Street this Thursday morning with about two hours to the open:

First Solar (FSLR) Raised to Buy at Merriman Curhan Ford.
Janus Capital (JNS) Raised to Neutral at JPMorgan.
Legg Mason (LM) Raised to Buy at Jefferies.
Nalco (NLC) Raised to Overweight at JPMorgan.
Neurocrine Bio (NBIX) Raised to Neutral at Piper Jaffray.
Newmont Mining (NEM) Raised to Overweight at JPMorgan.
Staples (SPLS) Raised to Market Perform at FBR.

Jon C. Ogg
October 30, 2008

Posted on: October 30, 2008 – 6:44 am in Analyst Calls, FSLR, JNS, LM, NBIX, NEM, NLC, SPLS

Top Pre-Market Analyst Downgrades (ASH, BWA, DSX, EGLE, MGM, PAAS, SONO)

These are some of the top analyst downgrades we are seeing from Wall Street this Thursday morning with about two hours to the open:

Ashland (ASH) Cut to Neutral at JPMorgan.
Borg Warner (BWA) Cut to Neutral at Baird.
Diana Shipping (DSX) Cut to Market Perform at Wachovia.
Eagle Bulk Shipping (EGLE) Cut to Market Perform at Wachovia.
MGM Mirage (MGM) Cut to Hold at KeyBanc.
Pan American Silver (PAAS) Cut to Neutral at JPMorgan.
SonoSite (SONO) Cut to Sell at Goldman Sachs.

Jon C. Ogg
October 30, 2008

Posted on: October 30, 2008 – 6:41 am in Analyst Calls, ASH, BWA, DSX, EGLE, MGM, PAAS, SONO

Will Motorola (MOT) Kill Spin-Off Of Handset Business

Motorola (MOT) missed a lot of its numbers for the third quarter. Much more important than that it fudged when it might dump its handset unit. The deal was supposed to happen in the third quarter of 2009.

If Motorola’s handset numbers get worse, the transaction may not happen at all.

Revenue fell from $8.8 billion in the period last year to $7.5 billion in the most recent quarter. MOT had an operating loss of $452 million compared to a loss of $10 million in 2007.

Posted on: October 30, 2008 – 6:24 am in Consumer Electronics, MOT, NOK

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