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Electronic Arts Inc. (NASDAQ: ERTS) signaled about six weeks ago that the video game industry wasn’t recession-proof. It turns out that the company (and likely the sector) is not even as recession-resistant as many had once hoped. The video game giant said that it will fall short of estimates due to lower-than-expected sales across North America and Europe. The company noted that its holiday line-up is not meeting sales expectations. So much for the couch potato and stay-at-home demographics holding up.
Daily Archives: December 9, 2008
More Recession Carnage For Video Games (ERTS, ATVI, GME, THQI, TTWO)
Online Video: 15 Billion Views And Not A Dime Of Profit? (GOOG)(MSFT)(NWS)(VIA)(YHOO)
New data released by comScore shows that US internet users watched more than 15 billion videos last month. Almost 40% of those were watched on Google (GOOG) sites, most of them on YouTube. The search company as much as admits that it has not come up with a way to make money on this business. It is not clear that is different for any of the other large online firms which offer large libraries to consumers.
The Dynamics Of OPEC Increase Get More Complex
OPEC ministers are indicating that when they meet later this month, they may cut production by two million barrels a day. That would be on top of a similar cut in September. Neither the action three months ago or threat of tighter supply has kept crude from slipping toward $40.
The plans of the cartel are complicated by the news that the worldwide demand for oil will drop in 2008 for the first time since 1983. Under the circumstances, if OPEC wants to push prices back toward $60 or $70, production will have to be curtailed by three or four million barrels. If that does not work, there may be additional adjustments next year.
The 52-Week Low Club (IFX)(NCX)(TARG)
Infineon Technologies (IFX) Downgraded due to cash burn. Falls to $.99 from 52-week high of $13.06.
NOVA Chemicals (NCX) CEO leaves. Drops to $4.96 from 52-week high of $25.21.
Targanta Therapeutics (TARG) FDA won’t approve drug. Sells off to $.83 from 52-week high of $10.
Douglas A. McIntyre
Posted Without Comment: Chrysler Refuses To Give Congress Its Financials
Chrysler would like several billion dollars as a part of the initial car company bailout and says that it is close to bankruptcy. In an essay in Bloomberg, Jonathan Weil points out that the firm refuses to give Congress its financial statements because the company is "private".
The plan the troubled car company gave the Senate banking committee was 14 pages.
"A Chrysler spokeswoman, Shawn Morgan, confirmed that the secret package didn’t include the company’s financial statements, audited or otherwise. She said the reason Chrysler doesn’t divulge such information, or the names of its board members, is “because we’re a private company.” A spokesman for Cerberus, Peter Duda, gave me a similar answer. When taxpayers rescue an outfit like Citigroup Inc., at least we know whom to blame."
Douglas A. McIntyre
US Rushes To Catch Russia In Czar Total, Currently Down By 26 To 13
It is relatively easy to count the Russian czars. There were twenty-six from Ivan IV to Nicholas II. That does not count the grand princes that ruled before them, but it still puts Russia in the lead among nations for total czar count.
America began its czar tradition in 1973 when John A. Love was made the first energy czar during the Arab oil crisis. He was quickly followed by William E. Simon who ran the Federal Energy Administration. In 1982, the government added a Drug Czar, Jerome Jaffe. He was followed by eleven more people including the current holder of the position, John. P Walters. These fellows have to be considered minor czars since they appear to exist in title only and are rarely mentioned in dispatches.
Which Major Energy Stock Is Best For 2009? (XOM, VLO, SLB, CHK, KMP, KMR)
Energy stocks have taken a pounding since crude oil prices started falling in July. In virtually every part of the energy business, share prices for the premiere companies are off by as much as 70%. We have reviewed Exxon Mobil Corp. (NYSE:XOM), Valero Energy Corp. (NYSE:VLO), Schlumberger Limited (NYSE:SLB), Chesapeake Energy Corp. (NYSE:CHK), Kinder Morgan Energy Partners LP (NYSE:KMP), and Kinder Morgan Management LLC (NYSE:KMR) to see which of the majors in each group may offer the best returns or the most safety in 2009. While the price of oil may be the largest factor, each company has its own merits and pitfalls that could affect shares in 2009.
When Lower Guidance Is Good (BRCM, TXN, NSM)
Broadcom Corporation (NASDAQ: BRCM) followed the path of other chip stocks and came out with lower guidance last night. This was on the heels of atrocious guidance from Texas Instruments (NYSE: TXN) and National Semiconductor (NYSE: NSM). Both companies also supply chips for mobile markets and for the communications sector. What is interesting is that this is actually being deemed good news.
The 24/7 Wall St. CEO Of The Year: James A. Skinner Of McDonald’s (MCD)
Today
24/7 Wall St.named its annual CEO of the Year James A. Skinner of McDonald’s (MCD). He was picked from a field of ten executives which we profiled over the last ten days.
Skinner was chosen on the basis of his company’s stock price and financial performance compared with others in its own industry group and all large companies traded on US markets. Only firms with market caps of more than $5 billion were considered. 24/7 Wall St. reviewed revenue growth, operating margins, balance sheets, return on assets, and return on equity.
Clayton Williams Unwinds (CWEI)
Clayton Williams Energy (NASDAQ:CWEI) is a small-cap oil & gas E&P company that has seen its share price fall by more than 70% a 52-week high of $122.50 to close yesterday at $33.81. The company announced that it has terminated "substantially all" of its oil and gas derivative contracts for $99.3 million in cash.
Duncan Energy & Enterprise Swap Cash for Assets (DEP, EPD)
Duncan Energy Partners L.P. (NYSE:DEP) announced yesterday that it had purchased limited partnership interests in several midstream assets belonging to Enterprise Products Partners L.P. (NYSE:EPD). These two companies have more in common than just anagrammatic stock tickers. The general partner of Duncan Energy is wholly-owned by Enterprise, so the exchange of $730 million in Duncan cash for shares in some Enterprise assets in the state of Texas resembles a bookkeeping entry.
IPO Markets in 2008, Worst in Decade
It is no secret that the IPO market has gone to hell in a hand basket. How many deals have we had since summer in the U.S. and abroad? One real IPO came and couple re-IPO’s hit here in the U.S., and volume has been dangerously thin elsewhere. A new year-end update from Ernst & Young outlines the case that IPO’s have fallen by more than half from 2007. This may even be the worst IPO year since 1995.
Pali Research Cuts Disney (DIS) To Neutral, Citing Valuation Gap
Pali Research took the bold step of downgrading the Mouse House, The Walt Disney Company (DIS), to neutral saying the valuation gap with its large cap media peers cannot be ignored.
Pali notes that Disney trades at 13.1x their 2009 estimates, versus 8x for Viacom (VIA.b), 9x for News Corp (NWS.a). Pali said Disney deserve a premium given its superior asset mix, but they can no longer rate the stock a Buy.
Merck Bares All In Pipeline Presentation (MRK)
Merck & Co., Inc. (NYSE: MRK) today outlined its drug pipeline and has reaffirmed its guidance given last week. Merck plans to emerge next year and into the next decade leaner and more responsive to customer needs and with a strong drug candidate pipeline.
Fannie Mae (FNM) And Freddie Mac (FRE) Could Still Trade Down To Zero
Some investors are still clinging to the hope that the share prices of Fannie Mae (FNM) and Freddie Mac (FRE) will recover with financial help from the federal government. Both stocks trade below $1 and could still face delisting from the NYSE.
Over the last few days, more news has come out that would indicate the the common shareholders of the two firms will get nothing.
Pre-Market Analyst Upgrades & Downgrades (ADSK, CVA, SFD, MMM, ATU, BLK, CBEY, ITW, RFMD, ROP, UPS)
These are some of the top pre-market analyst upgrades and downgrades we are seeing this Tuesday morning:
- AutoDesk (ADSK) Started as Buy at KeyBanc.
- Covanta (CVA) Started as Buy at Jefferies.
- Smithfield Foods (SFD) Raised to Buy at Deutsche Bank.
- 3M (MMM) Cut to Underweight at Barclays.
- Actuant (ATU) Cut to Neutral at Baird.
- BlackRock (BLK) Cut to Market Perform at Wachovia.
- Cbeyond (CBEY) Cut to Underperform at Jefferies.
- Illinois Tool Works (ITW) Cut to Underweight at Barclays.
- RF Micro Devices (RFMD) Cut to Neutral at UBS.
- Roper (ROP) Cut to Hold at Citigroup.
- UPS (UPS) Cut to Neutral at JPMorgan.
Jon C. Ogg
December 9, 2008
Washington Post Investigation: Fannie And Freddie Knew Of Dangers
The Washington Post once again did what it does so well. It uncovered some nasty documents, in this case about Fannie Mae (FNM) and Freddie Mac (FRE).
"Internal Freddie Mac documents show that senior executives at the company were warned years ago that they were offering mortgages that could pose dangers to the firm, hurt borrowers and generate more risky loans throughout the industry."
"At Fannie Mae, top executives were told it was necessary to develop `underground’ efforts to buy subprime mortgages because of competitive pressures, although there were growing risks and borrowers often didn’t understand the terms of the loans, documents show."
It is likely that no one did anything about its because both the companies and their managements were making so much money. It was ever thus.
Douglas A. McIntyre
Cutting Wall St. Bonuses Doesn’t Work (MS)(MER)
John Thain of Merrill Lynch (MER) and John Mack of Morgan Stanley (MS) looked like men in hostage video tapes with guns held to their heads as they were forced to forgo their 2008 bonuses. It made for good theater. It made shareholders and regulators feel that they have leverage. But, over the long haul it sabotaged the financial industry.
Suppliers: The Other Catastrophe In The Auto Sector
If the federal government puts $15 billion into the car companies, it will have made a start at fixing The Big Three. It may take another $100 billion to finish the job, and, if the recession runs on and the Japanese keep making better cars, the whole rescue could fall apart.
The piece of the car industry puzzle which is not being addressed is what happens if a substantial number of the auto supply firms go under?
No Fixing The Housing Crisis While People Feel Poor
The theory about the economy, which probably has the benefit of being true, is that while the housing market is broken, the rest of the country’s financial problems will remain largely unsolved. Too many banks hold mortgages or mortgage-back paper. Too many consumers rely on the value of their homes for a sense of economic safety and collateral for their mortgages.
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Today’s top tickerspy Indexes Home Furnishing R... +14.1% Ethanol and Biofu... +5.1% Electronics Retai... +2.1% Diabetes Stocks +2.0% Memory Chip Stock... +2.0% 
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