In the fourth quarter, HTC’s revenue fell 2.9% year-over-year. More telling is that revenue dropped 25% from the third quarter to the fourth. Operating profits were worse, down 36% and 23% respectively. First-quarter profits will drop as much as a third from the fourth quarter of 2011, to $2.2 billion.

The first reaction to the news was hard to dispute. Samsung is set to overtake Nokia (NYSE: NOK) as the world’s largest handset company, and smartphones will be the driver of that success. Apple has taken the number three spot in the market. Its position is marked by the fact that it sells no inexpensive handsets. Smartphones are its sole product category, which makes its success all the more impressive. HTC has been marginalized.

HTC management has to ask itself the same question that LG, Motorola (NYSE: MMI), Sony Ericsson and Nokia do. At what point does an investment in the smartphone industry become financially foolish? At what point is it better to take and hold a 5% market share with modest R&D and marketing expenditures. Put another way, at what point is it best to surrender — at least surrender that foolish hope that there is a chance to overtake Samsung, with its colossal balance sheet, and Apple with products that come nowhere close to satisfying customer demand?

HTC was the latest smartphone company to have had a hot hand. Its sales in 2010 and early 2011 were extraordinary. Its smartphones had a number of features that made them competitive to the iPhone. HTC had unlocked the secret of making features of the Google (NASDAQ: GOOG) Android operating system competitive with the Apple OS. But it could not produce a product like the iPhone 4S or Samsung Galaxy S II. It also did not have the marketing muscle to pressure Apple and Samsung in the consumer markets.

HTC’s run is over now. That may not make sense, because it was doing so well a year ago. But Apple and Samsung have grabbed market share that they can hold because of better products and better finances.

Douglas A. McIntyre

It sounds good on the surface considering how bad things have been.  The problem is that gross profit as a percent of net sales in the quarter is expected to be about 35%.  That margin was about 41% a year earlier and that implies far worse earnings.  The new earnings guidance is $0.11 to $0.13 per share.  A year earlier was $0.51 per share and Thomson Reuters was calling for $0.35 EPS.

The company blamed “a shift in mix within mobility sales towards certain lower margin smartphones and mobile devices; a higher percentage of mobility sales in the overall revenue mix, largely driven by the Company’s expansion of Target mobile centers; and the impact of a more promotional holiday season.”  That is a lot of moving parts and too many for investors.

Another blame was “in large part to the underperformance of the Sprint postpaid wireless business and reflect further unanticipated changes in Sprint’s customer and credit models.  These changes resulted in fewer new and upgrade activations and a decline in Sprint postpaid revenues in the fourth quarter compared to the 2010 fourth quarter and compared to third quarter 2011.  In addition, fourth-quarter results reflect a highly promotional holiday season and ongoing pressures on consumer spending.”

Sprint Nextel Corporation is down as well on the news by 1.4% in the after-hours.  That is nothing compared to RadioShack Corporation (NYSE: RSH) with a drop of over 17% to $8.43.

The prior 52-week low was only $9.15.

JON C. OGG

Riverbed Technology, Inc. (NASDAQ: RVBD) is getting hit very hard, perhaps even too hard, after its 53% profit gains beat expectations and revenue met estimates more or less.  The problem is that the company’s guidance for the quarter ahead remains challenging.  Riverbed was up 1.2% at $29.92 today but now the stock is down almost 13% in the after-hours session to $26.00 per share in active trading.

So, as far as Juniper is concerned, its non-GAAP profit fell to $0.28 EPS from $0.35 a year earlier while revenue fell to $1.12 billion from $1.19 billion a year earlier.  Those were more or less in-line with estimates, but the company talked about the current quarter being a challenging one and it cut sales expectations to $960 to $990 million versus a target of about $1.1 billion.  That is just heading very much in the wrong direction no matter how you cut it.  Juniper closed down 1% today and the after-hours earnings reaction has shares down almost 8% at $20.60 in active after-hours trading.

There is an old saying that a tail cannot wag the dog.  Unfortunately that is not proving to be the case this evening.  Cisco Systems, Inc. (NASDAQ: CSCO) is the king of the networking space and its shares are down 1% at $19.62 in the after-hours after closing flat at $19.83.  Cisco is in a turnaround and it is believed by many that Cisco is trying to win back much of its lost business in a leaner operating structure.  We’ll know in the coming weeks if that is true or not.

Stay tuned.

JON C. OGG

Patriot Coal officials said demand for met coal has weakened in the last few weeks, especially export demand. Demand from China, the world’s largest importer of met coal, is expected to remain weak through the first half of the year, although demand is expected to rise in the second half as Chinese and European economies begin to grow again. Total consumption of met coal could fall by 13 million metric tons in 2012.

In the late morning, Patriot Coal shares are down more than -9% at $8.18 in a 52-week range of $6.92-$29.20.

Shares in Alpha are down nearly -8% at $20.76 in a 52-week range of $15.49-$62.65.

James River shares are down more than -8% at $6.77 in a 52-week range of $5.41-$25.59.

Steel maker Arcelor Mittal is down nearly -2%, while US Steel and AK Steel are both down about -3%.

Paul Ausick

You have to love the power of a bad news break, but unfortunately it is going to happen no matter how you cut it.  It has happened in the past and it will happen in the years ahead whether workers are human or bots…  It would be generally expected that a company such as Ford would break news of this magnitude either in a formal press release or at least in an SEC filing rather than in a presentation not being watched openly as widely held as the stock is.

Ford shares went from up over 1% to down over 1% after the first CNBC report and now the stock is trading back up $0.07 at $11.87 on the day.  We have also now traded over 74 million shares and that is well over the average of the 57 million shares traded on a full normal trading day in the markets. The 52-week trading range is $9.05 to $18.97.

JON C. OGG

The aluminum giant reported earnings of -$0.03 EPS and $5.99 billion in revenues.  Thomson Reuters had a consensus grouping of -$0.02 EPS and $5.74 in revenues.  Keep in mind that it was just a week ago that analysts were looking for $0.03 EPS and less than 3 months ago estimates were up around $0.20 EPS or so.

The loss was $199 million for the fourth quarter and if you include items the loss came in at -$0.18 EPS.  The company blamed “restructuring charges associated with the closure and curtailment of high-cost production capacity, lower aluminum prices, and continued market weakness.”

Alcoa had already been talking down its expectations when it was talking about capacity shutdowns.

As you would expect, The company is forecasting for 2012 global aluminum demand will grow 7% and it expects a global deficit in primary aluminum supply.  That is above the 6.5% projection per year that Alcoa has said is required for the aluminum market doubling in size by 2020. It sees 600,000 metric tonnes as the deficit for the industry in 2012. Global industrial use/growth is projected by Alcoa as follows:

• aerospace (10-11 percent),
• automotive (3-8 percent),
• commercial transportation (2-5 percent),
• packaging (2-3 percent),
• and building and construction (4-5 percent) markets.

Alcoa shares closed up 2.9% at $9.43 on the day and the 52-week trading range is $8.45 to $18.47.  Today’s news could have been worse and the stock was already very week ahead of earnings. Shares were above $11 on October 31, 2011.  Shares may trade lower on this news, but that is proof that the market’s ability to price in the known events is dead.  So much for the efficient market theory you learned about in college.

Read Also: Stocks Priced for 12% Gain to DJIA 13,678

JON C. OGG

In its announcement Tesoro pointed out the obvious problem:

The discount of WTI to Brent during the fourth quarter narrowed by $18/bbl, dropping from $26/bbl at the end of September to $8/bbl at the end of December. This market price movement impacts fourth quarter results in two ways. First, by reducing benchmark margins at our refineries that run WTI-priced barrels and, second, by reducing the margin on long-haul foreign crude oil barrels indexed to WTI.

Every independent refiner will get hit by this to some degree and we’ve taken a look at what the impact on each might be.

Valero is expected to post EPS of $0.84 in the fourth quarter. The country’s largest refiner owns 16 refineries with a daily throughput volume of 3 million barrels. It is also one of the world’s largest makers of ethanol. Half the refineries are located along the US Gulf Coast, and in the company’s latest investor presentation, WTI margins had fallen from around $26/barrel to around $15/barrel. The company’s Brent margins have stayed relatively flat, at around $10-$11/barrel. To counteract that somewhat, Valero expects to refine about 75,000 barrels/day from the Eagle Ford shale play in the first quarter of 2012. The company is also planning to expand its distillate production to capture the higher margins available from diesel fuel, especially in Europe. Valero hasn’t said anything yet about its fourth quarter earnings, but the company’s stock is down nearly -4% on Tesoro’s report. If Valero revises its earnings estimate — which is likely — another drop of at least that amount is likely.

Marathon completed its spin-off from parent Marathon Oil Corp. (NYSE: MRO) last June. The company owns six refineries and 51% of the company’s crude supply comes from either the US or Canada. The company’s WTI-Brent differential was nearly $23/barrel in the third quarter of this year compared with less than $3.50/barrel in 2010. No data is available for the fourth quarter, but it’s difficult to see how Marathon can avoid getting caught in the same bind as Tesoro and Valero.

Western Refining owns two refineries with a total throughput of 151,000 barrels/day. The company’s operating margin through the first three quarters of 2011 is around $20/barrel. All of Western’s crude is domestically sourced and priced as WTI. This is a nice advantage when Brent pricing is more than $25/barrel higher, but as the differential narrows, Western has to come up with some other way to make profits. This company could get stung badly on WTI pricing.

CVR Energy owns two refineries with a combined throughput of 185,000 barrels/day. Both are located in the Midwest and about 75% of the feedstock is domestically sourced WTI. CVR gets some portion of its feedstock from the Bakken area, which gives the company an additional break on crude pricing because Bakken crude trades at a small discount to WTI. Rising WTI prices will certainly hurt margins for CVR, but probably not as badly as the narrower differential will hurt other refiners.

One last word about Conoco, which is planning to spin-off its refining operations into a separate company. The spin-off was set to happen by mid-2012, but unless refining margins return to what they were last summer, Conoco might have a hard time convincing investors that they’re getting a good deal from the split.

Paul Ausick

Shares had risen from under $26 to over $35 based upon Ron Johnson’s taking the helm.  Prior to that, J.C. Penney had been somewhat on life support compared to Macy’s Inc. (NYSE: M) and Saks Inc. (NYSE: SKS).  It did manage to do better than Kohl’s Corporation (NYSE: KSS).

The retail chain posted December same-store sales of 0.3% versus an expected drop of -0.1%.  Last year the company posted a same-store sales increase of 3.7%.  The outlook is as follows: “Due to the softer sales performance during the first two months of the quarter, the Company now anticipates that comparable store sales for the fourth quarter will be down slightly to last year. Earnings before one-time items identified below, are now expected to be in the range of $0.65 to $0.70 per share on a non-GAAP basis, reflecting lower sales and higher markdown activity than anticipated throughout the quarter.”  The consensus estimate had been $1.08 EPS.

Investors who missed getting in on this one may look at the news with a smile because it at least allows them a closer chance of getting in on a transformation in the making. Ron Johnson, the brains behind the retail effort of the hugely successful stores of Apple Inc. (NASDAQ: AAPL), has taken over as CEO.  For new investors, this is not a fourth quarter story.  This is not a story of guidance for the current quarter, and it may not even be a story of strong results in 2012. 

Ron Johnson is set to transform the look and feel of this company entirely.  The company has already signed a deal with Martha Stewart Living Omnimedia Inc. (NYSE: MSO) for branded merchandise for years ahead.  Johnson is going to unveil his new store design later this month (January 25) and here is a photo of the invite that was sent to me last night:

Penney’s shares are down about 6.2% at $32.75 and the 52-week range is $23.44 to $41.00.  This drop still only gets the stock back down to the prior consensus price target of $32.31 from Thomson Reuters.  Unfortunately, this turnaround story is not cheap against other retailers on a forward earnings valuation.  That happens to be the case in many turnarounds as investors sometimes pay a premium to get in line.

New investors and those on the sidelines may hope that the stock gets back into the high $20′s.  That may happen and it may not.  When you consider that Ron Johnson is likely going to revamp the company from the ground up and give a major facelift to bring the Apple-cool through the doors and when you consider that Apple’s playbook has been to “underpromise and over-deliver,” this drop may be a blessing for new and interested investors.

The good news is that the stock also offers stock options so investors van hedge their turnaround bets rather easily.  Options expire on January 20, 2012, but the February options make it easy to invest with providing downside protection of about only 5% risk in the next six weeks.  For a turnaround story under a great new retail leader, that might be a gift.

The other side of the coin is simple, even if hard to consider: What if Ron Johnson flops?  It is easy to argue that clothing, accessories and household products have no catalyst like Apple did a decade ago.

Stay tuned.

JON C. OGG

While Acme competes against Cisco Systems Inc. (NASDAQ: CSCO), shares of Riverbed Technology, Inc. (NASDAQ: RVBD) and Juniper Networks, Inc. (NASDAQ: JNPR) are the stocks suffering after posting gains in the first day of 2012.

Acme cut its targets to $1.03 to $1.05 EPS for the year on sales of $308 million to $310 million.  When it gave guidance in October, those ranges were $1.14 to $1.18 EPS on sales of $315 million to $320 million.

The stock was initially halted after a 2.9% gain to $31.81 today, but shares are down 17.5% in the after-hours session down around $26.25.  Sadly, this is going to make for a 52-week low as the range over the last year was $29.25 to $84.50.

JON C. OGG

The thirteen worst big stock and investor stories in 2011 are as follows: Bank of America Corporation (NYSE: BAC); Diamond Foods, Inc. (NASDAQ: DMND); First Solar Inc. (NASDAQ: FSLR); Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR); Hewlett-Packard Company (NYSE: HPQ); Imperial Sugar Co. (NASDAQ: IPSU); iShares Silver Trust (NYSE: SLV); K-V Pharmaceutical Company (NYSE: KV-A); Market Vectors Egypt Index ETF (NYSE: EGPT); Molycorp, Inc. (NYSE: MCP); Netflix, Inc. (NASDAQ: NFLX); Research in Motion Ltd. (NASDAQ: RIMM); and Sears Holdings Corporation (NASDAQ: SHLD).

Are there others? Of course.  We just wanted to review the worst of the biggest and most easily recognized stories out there.  Some of the explanations and criticisms here may seem a bit raw or overly colorful, but with this motley group what more could you expect…

Read Also: Ten Stocks Unlikely To Survive 2012

Bank of America Corporation (NYSE: BAC) has seen almost everything that could go wrong come its way.  The bank cannot shake the Countrywide mortgage woes, it drove away customers with proposed new banking fees, and it has been under fire by more agencies and regulatory bodies than we can easily count.  The company can hardly get in a settlement that is ultimately not challenged by an outside force. It does not seem like it will get to raise its dividend any time soon and the fear is that perhaps it will need to raise more capital on 2012 stress tests.  This was the worst performing stock out of all 30 DJIA components and not even a Warren Buffett investment managed to keep the stock from falling.  So what if it half of book value now.

Diamond Foods, Inc. (NASDAQ: DMND) became a sample of what can go wrong at a high growth food company.  Eventually the growth peaks and valuations come crashing down.  To go from a growing almond and nut products story to a company buying Pringles did not make sense to many, particularly since Diamond was going to be leveraging itself to make the deal.  Then came the accounting woes around payments to walnut farmers, and that was then followed by a director’s suicide who was inside the accounting woes story.  This was a great story that became very cloudy, just like if I poured a glass of their almond milk that I like so much to try to see through it. After running from about $50 to over $95, shares are now in the low $30-range and shares hit a low of $26.11 recently.  They could have found a rat in the milk vats and survived better than the way things turned out for them in 2011.

First Solar Inc. (NASDAQ: FSLR) went from the U.S.’s solar sector poster boy to perhaps the worst performing S&P 500 stock.  It is still the leader of the solar sector and that is why this one precedes all other solar stock implosions of 2011.  Its CEO resignation or firing came in a rather strange and sudden manner and its prospects do not look much better on the margin front for the next year.  Solar panel dumping by Chinese firms and the negative press of the government backing of the failed Solyndra only added to the fears here as short sellers were able to make a fortune here.  Shares closed out 2010 around $130 and shares went briefly north of $175 in February.  Shares are now around $33.00.  First Solar single-handedly turned many 401/K plans into 201/K plans in 2011.

Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) is one implosion which we debated whether or not should be part of a complaint for the full year.  Its accounting concerns were actually from 2010 and despite the massive share price drop the stock is actually still up for the year.  In fact, shares closed at $32.86 in 2010 and now the stock is around $46.00.  What is so bad is that the stock had been one of the best performing stocks as recently as September and the year high is above $115 for the stock.  Its growth has peaked, its advertising costs are way up, and Starbucks seems to have scored the better end of the deal between the two coffee companies. Because the stock is still up almost 50% for the year, we’ll back off.

Hewlett-Packard Company (NYSE: HPQ) may have started its woes in 2010 after firing Mark Hurd and then hiring Leo Apotheker, the former head of SAP. Still, the baffled decision to even go along with Leo Apotheker’s decision to jettison the PC business was just too much.  And now the decision to keep the PC business seems like it is because the cost of exiting it is just too high.  Palm is now dead too.  The Apotheker decision to acquire the enterprise software outfit Autonomy for $10 billion.  If you overlay a one-year chart as you can see here, you would think that H-P was a bank because its stock tracked the negative performance of Bank of America almost in unison until September.  The verdict is out on whether or not Meg Whitman is right fit here, but frankly the stock has stabilized since she took over.  H-P shares closed out 2010 at an adjusted $41.48 and shares are now close to $26.00 after hitting a low of $21.50.

Imperial Sugar Co. (NASDAQ: IPSU) was looking a lot like a transformation in the making from a sugar company to a sweetener company looking to branch out into new growth markets.  The company even went on a roadshow and got on CNBC to tell its story.  Shares even went from roughly $10 to $25 based upon the hype.  Then over the summer came news of a wider loss and things have slid further from there.  Sadly, it seems that management may have known things were not great when the story changed abruptly and there are class action suits.  Now shares are around $3.50.  This feels like getting drunk at the casino and losing your life savings with the dealers telling you “Thanks for playing.”