If you take a look at the ADRs of The Bank of Ireland (NYSE: IRE) and Allied Irish Banks plc (NYSE: AIB), these have not exactly had a good week.  They are both actually still very active in the U.S. and for all practical purposes they are wards of Ireland.  Investors today might want to consider that investing new money into these stocks may be a bit like buying into an orphanage rather than investing into a bank.

Bank of Ireland (NYSE: IRE) shares were above $1.50 last Friday and the stock hit a low of $1.20 this past Tuesday and shares closed at $1.27 on Thursday.  Now its 52-week range is $1.20 to $4.86.  Allied Irish Banks plc (NYSE: AIB) shares were at $2.66 last Friday, shares hit a low of $2.40 on Wednesday and closed at $2.42 on Thursday.  The adjusted 52-week range is $2.00 to $15.25.  The news this last week only sets up for more drama to come this summer.

Where this gets interesting is that AIB and BofI creditors are pushing back yet again.  Concessions have been made, haircuts have been taken.  Dow Jones wrote this week that a group of AIB bondholders are challenging Ireland’s new powers, saying that the government is bullying and demonizing creditors as AIB is set to impose losses of up to 90% in the subordinated debt.

Bank of Ireland has been in talks with bondholders as it is trying to raise new capital with buying back junior debt for issuing new shares under a rights issue.  It is this new rights issue price talk that is still out to late June and the talk was around 11.3 to 11.7 cents in Ireland on the local exchange.  In Dublin, those ordinary shares trade at 13.5 cents and the 52-week range is 0.133 to 1.75 in local terms.  With restructuring and creditor discussions taking place all summer and with a deep discount expected, suddenly it is no wonder that ADR shares here in America keep putting in new lows.

What we cannot help but wonder is why on earth these banks have not considered a state-side (U.S. that is) discussion.  American institutions seem more than eager to invest in garbage if trash is sold cheap enough.  Maybe the worry is that hedge funds will be able to overpower the specialists in these shares at the NYSE.

The Brink’s Company (NYSE: BCO), Command Security Corp. (AMEX: MOC), Corrections Corporation of America (NYSE: CXW), The GEO Group, Inc. (NYSE: GEO), Smith & Wesson Holding Corporation (NASDAQ: SWHC), Sturm, Ruger & Co. Inc. (NYSE: RGR), and TASER International Inc. (NASDAQ: TASR) are just some of the key companies that investors have to choose from when it comes to the safety of America.  We wanted to take a look at where these shares trade, what they are worth, and even if those crazy Wall Street analysts think they are good investments or not based upon consensus Thomson Reuters price target data.  We have not included the Homeland Security winners as those companies are motivated by a different issue.

The Brink’s Company (NYSE: BCO) may be considered more of a transportation company, but if the world was full of a bunch angels then it would not be needed.  The company is perhaps the world’s top provider of secure transportation and cash management services.   Banks and merchants have to secure, cash, jewelry, stones, and other small precious and valuable goods because there is an element of society that will literally kill for those goods.  This armed and secure transportation services operation trades with shares at $27.64 and its market capitalization is close to $1.3 billion.  Its 52-week trading range is $18.30 to $34.46. Sales in 2010 were $3.12 billion and Thomson Reuters sees 2011 revenues of $3.76 billion.  The consensus price target is roughly $36.00.

Command Security Corp. (AMEX: MOC) may have some overlaps that are not solely law enforcement, but this is a private security company with Rodgers Police, with over 6,000 armed and unarmed workers for the Secret Service, Fortune 1000 companies, and other government and/or private entities.  The difference here is that this company is tiny compared to peers/  It sometimes skips trading days.  At $1.59 it has a market cap of about $17.5 million and its 52-week range is $1.45 to $2.47.  Revenues in 2010 (March year-end) were over $145 million.  Unfortunately, this one just lost its CEO. This one is too small for most firms to cover it. 

Corrections Corporation of America (NYSE: CXW) is where you end up after being a bad boy and when you big ambition of life was “three-hots and a cot.”  The company owns and operates privatized correctional and detention facilities  in America. Only the federal government and three states have more facilities than the “Con Hotel” of Corrections Corporation with some 66 facilities that include 45 company-owned facilities with a total design capacity of approximately 90,000 beds in 19 states and the District of Columbia.  At Revenues in 2010 were 1.68 billion and Thomson Reuters has estimates of $1.73 billion for 2011 sales.  At $22.79, its 52-week trading range is $18.19 to $26.89 and its market capitalization is over $2.4 billion.  The consensus price target is roughly $30.00.

The GEO Group, Inc. (NYSE: GEO) competes with Corrections Corp. as it provides outsourced services managing correctional, detention, and mental health and residential treatment facilities in the United States, Australia, South Africa, and the United Kingdom.  At $24.58, the market capitalization is about $1.58 billion and the 52-week range is $19.01 to $25.95. Sales in 2010 were $1.27 billion and Thomson Reuters expects sales of about $1.64 billion in 2011.  The consensus price target is roughly $31.17.

Smith & Wesson Holding Corporation (NASDAQ: SWHC) and Sturm, Ruger & Co. Inc. (NYSE: RGR) are two of those companies which live on both sides of the ‘crime and defense sector’ when you think about it.  The arguments for and against guns are many, but crime and public-defending cannot go without bringing in the gun manufacturers.  The companies probably do not want this addressed too much, but whether you are cop or a hardened con chances are that you are packing a gun from one of these two companies or from their rivals.  Smith & Wesson trades at $3.45, has a 52-week trading range of $3.27 to $4.60, and has a market cap of about $208 million. S&W’s sales in 2010 (different fiscal year, April) over $406 million and Thomson Reuters sees sales of over $390 million in 2011. Strum Ruger trades at $20.73, and its 52-week range is $12.66 to $24.05 with a market cap of about $395 million.  Sales in 2010 were $255.2 million and Thomson Reuters sees sales of over $278 million in 2011.  Let’s not forget about home security operations as well.  The consensus price target for S&W is roughly $5.02 and the consensus price target for Sturm, Ruger is roughly $25.00.

TASER International Inc. (NASDAQ: TASR) is a controversial company because its Tasers (stun guns) have been the subject of many wrongful death suits against police departments and around the devices.  What is amazing is that the one feature is rarely addressed publicly… Police sometimes have to use force.  When you are attacking the police, or when you are resisting arrest and cannot be reasoned with that you have to go to the clink, would you rather have your head bashed with a baton, would you rather have a hollow-point-.44 enter your chest and exit your back the size of an orange, or would you rather be tasered?  At $4.48, its 52-week range is $3.52 to $5.17 and its market capitalization is approximately $270 million.  The company is now expected to run at profitability.  Sales in 2010 were $86.9 million and Thomson Reuters expects sales of over $98 million in 2010.  The consensus price target is roughly $5.17 but it is thinly followed.

Not including some of the defense companies and others like Tyco International Ltd. (NYSE: TYC) and Honeywell International Inc. (NYSE: HON) and Diebold, Incorporated (NYSE: DBD) makes this feel very incomplete, but we wanted to focus on pure-plays in security, weapons, prison, and others.  There are also dozens of OTC or Pink Sheet stocks that can fit in the category of crime and punishment, but we usually refrain from covering such small companies.
 
JON C. OGG

The patent risk solutions provider sold 8,430,435 shares of common stock at $19.00 per share, and shares closed up 25.7% at $23.88 on more than 6.8 million shares on the first day.  This was above the 7.3 million shares expected and was also above the $16 to $18 per share price range.  The company’s market cap is now easily worth more than $1 billion.

RPX Corporation describes itself as a patent risk solutions provider that offers defensive buying, acquisition syndication, patent intelligence and advisory services. RPX aims to help mitigate and manage patent risk for its growing client network, for a fee of course.

Goldman Sachs and Barclays Capital were the joint book-running managers for the offering, while co-managers were Allen & Company, Baird, and Cowen & Company have.  It is safe to assume that these underwriters took advantage of the overallotment option, making the real share count in the float about 9.7 million shares rather than 8.43 million shares.

What is interesting is that there are already reports that RPX is considering a rival bid for the remaining patent portfolio of Nortel Networks Corp. (NRTLQ) to trump Google Inc. (NASDAQ: GOOG) in that bid.  Where the questions arise is that Google’s bid is said to be $900 million. For RPX to bid on the Nortel patent portfolio, it is likely to need significant partners.

RPX generated some $95 million in 2010 sales, a gain of nearly 200% from the prior year.  Net income in 2010 was up six-fold to about $14 million.

JON C. OGG

Today’s news is that its principal operating subsidiary Nortel Networks Limited and certain of its other subsidiaries did obtained orders from a U.S. bankruptcy court and from the Ontario Superior Court of Justice which gave what is left of Nortel the approval for a “stalking horse” asset sale agreement.  The sale is to Google Inc. (NASDAQ: GOOG) via Google’s Ranger Inc. subsidiary.

Google is paying some $900 million for the remaining patent portfolio and patent applications.  More importantly, the bankruptcy court has now set up the bidding procedures for an auction that will allow other qualified bidders to submit higher or otherwise better offers.  These qualified bidders are required to submit offers for the patent portfolio by June 13, 2011, subject to any permitted extensions.

Any competing bids “would then be expected to proceed to an auction, currently scheduled for June 20, 2011.”

Today is not the entire death of what is left of Nortel, but it sure makes this one much closer to an end.  The question now comes down to whether or not this will make Google a patent troll or not.

JON C. OGG

Whether or not credit card data was stolen or not is not yet known.  The rest of what was compromised is bad enough that the fallout could be grave for the company.  The company admitted that users’ names, addresses, country, email address, birth date, PlayStation passwords and logins, and online ID are all believed to have been hacked.

The company said it is rebuilding the system and expects to have its services restored within a week.  It is also urging users to watch closely for identity theft attempts via phone, mail, or email.  When the service is restored, it also wants users to change account information if possible.

The Sony blog post does not immediately hint that this is as severe as the issue really is. When you read the first introduction there is really nothing more than the hint of an update rather than a “Hey, you might be hosed” public service announcement.  The post starts out in summary as follows:

• Thank you for your patience while we work to resolve the current outage of PlayStation Network & Qriocity services. We have a clear path to have PlayStation Network and Qriocity systems back online, and expect to restore some services within a week. We’re working day and night to ensure it is done as quickly as possible. We appreciate your patience and feedback. Read More

It is only the READ MORE that fessed up to the major goof here.  Hack attacks are one thing.  If the rest of this data was obtained, it may seem like common sense that credit card or alternative billing data was accessed as well.  In fairness, that may not be the case.  We won’t know if that is the case until the company makes a further update.

This is one more blow to a bruised reputation.  Things have not been what they used to be at Sony for quite some time.  At this rate, it seems that the beatings will continue…

Sony ADRs were trading above $30.50 briefly last Thursday. Those shares are down at $29.79 as of the NYSE close, but the ADRs are down another 1.3% at $29.40 in the after-hours session.  The 52-week trading range is $25.85 to $36.97.

JON C. OGG

The Gulf Coast Claims Facility run by Kenneth Feinberg, who also solved all of Wall St.’s pay problems after the credit disaster, is in charge of disbursing the money.  His latest report shows that 201,261 claims have received final payment. Just over 857,000 claims have been made. Feinberg has been attacked for the meagreness of the payments and the slow pace at which they have been made.

A group of scientists who have examined the impact of the spill say that the “health” of the Gulf is almost back to pre-spill levels. “More than three dozen scientists grade the Gulf’s big picture health a 68 on average. It was 71 before the spill and 65 back in October, the AP reports. The same scientists say that there are some dead portions of the sea floor in the spill zone and that some fish have died. But, the report is damning to those who say that the effects of the spill are extremely serious and long-lived.

The criticism of Feinberg will grow. It is unimaginable that so little of a $20 billion reserve could be used. Surely the US government must have applied some test to ask for the sum and surely BP must have looked at the problems created by the spill to accept the number. But, it does not look that way.

Assessments of the disaster have been flawed since just weeks after the explosion. It took months to determine the size of the leak. Some experts said there were huge dead patches of the Gulf in which nothing could grow or live. Other scientists presented maps that showed oil moving out of the Gulf and up the Atlantic coast as far as Virginia where it was expected to be swept toward the UK by strong currents.

Feinberg has read the scientific reports and may have concluded that the Deepwater Horizon explosion was a disaster of unprecedented magnitude. That does no mean its cost were anywhere close to what has been forecast and the BP facility will never be close to exhausted.

Douglas A. McIntyre

It will be interesting to see what regulations are and are not applied at NYSE Euronext, Inc. (NYSE: NYX), NASDAQ OMX Group Inc. (NASDAQ: NDAQ), IntercontinentalExchange, Inc. (NYSE: ICE), CME Group Inc. (NYSE: CME), and CBOE Holdings, Inc. (CBOE).  Perhaps the only police there will be themselves and each other.

FINRA has not issued any public announcement on its regulatory operations, however FINRA is not a federally funded government agency and would therefore not be under the same shutdown rules.  I placed a call into the media relations and the official answer is that FINRA is not funded by the government so it would not be closed down.  FINRA regulates the brokerage firms, regional offices, and registered representatives who sell and trade in securities. 

As a reminder, government workers are supposed to be forbidden to show up for work and are supposedly forbidden from work operations in remote offices and even from home.  How many government workers will honor that is something which we won’t address.  The markets could find themselves without the market police monitoring the situation.  The financial markets have historically wanted to be SROs, or self-regulating organizations, but even most market participants will probably agree that self-regulation without oversight would have allowed the financial meltdown to get even worse.

So, the SEC has outlined its “SEC Functions During the Federal Government Shutdown” if this comes to pass.  The full details are here.  It has outlined the following:

• The SEC will have only an extremely limited number of staff members available to respond to emergency situations involving the safety of human life or the protection of property, including law enforcement. Certain Commission systems will be operating under modified conditions.
• EDGAR will remain fully functional, but the Divisions of Corporation Finance, Investment Management, and Trading and Markets, and the Office of Compliance Inspections and Examinations will be unable to process filings, provide interpretive advice, issue no-action letters or conduct any other normal Division and Office activities.
• The IARD system will remain fully functional and will continue to accept filings but the Compliance Inspections and Examinations department will not be available.
• The CRD system will remain fully functional and continue to accept filings and the Transfer Agent Registration System will also continue to accept filings; but the Division of Trading and Markets and the Office of Compliance Inspections and Examinations will not be able available.
• The EFFS system for SRO proposed rule changes will remain functional but a day that the SEC is not open for regular business is not a “business day.”
• The Division of Enforcement will have only a limited number of staff on duty to perform critical functions even if staff will attempt to respond to allegations of ongoing fraud and misconduct.
• Investor Complaints via the Office of Investor Education and Advocacy will have a limited number of staff on duty to review investor complaints but will be unable to respond to complaints, questions, or requests for information.
• Comment Letters and Public Input can be submitted but there will only be “an extremely limited number of staff members on duty.”
• The Public Reference Room would be closed.
• Mail Delivery will have a limited number of staff on duty to process incoming mail from 8 a.m. to 5:30 p.m. Monday through Friday to take in mail and accept packages from couriers, but processing delays are expected. 
• In emergency situations, you will be able to reach an extremely limited number of SEC staff to respond to emergency situations.

The SEC’s full plan and contact data is here. 

We apologize if this is a bit dry, but if we are going to cover the financial markets at a time when the markets’ policemen are not watching we want you to know what the rules of the game will be.

JON C. OGG

Google’s revenue still comes from search advertising. The firm’s 10-K puts that number at 96% for 2010, which is barely down from 97% for the previous two years.

The second part of Google is a large laboratory for experimentation. The lab has created some successful products, the most important being the Android operating system. Android has no path to profitability as far as most analysts can tell. Its market share has passed Apple (NASDAQ: AAPL), and Research-In-Motion operating systems and will probably pass perennial market leader Symbian, the dominate OS of Nokia (NYSE: NOK).

Android is a product in search of a profit, but it may eventually have the same trouble as Google search. Its market share may crowd out that of its competitors. At least Google can tell regulators that Android does not have any sales. No one knows if that has been a successful defense against antitrust allegations because it has never happened before.

Among Google’s other experiments are YouTube, the world’s largest video site, which continues its quest to find advertisers and paid video subscriber services. Its competition includes Netflix (NASDAQ: NFLX), the nation’s cable and telecom providers and satellite TV firms.

The real challenges in Google’s experimental portfolio are the widely used map, e-mail, and news businesses. Google has also created an application system to compete with Microsoft Windows. It has had little success and it will require several more years for it to add enough features to be attractive to businesses.

Larry Page becomes Google’s new CEO this week. He has to meld a culture of engineers who work on Google’s powerful search algorithms with the intrepid engineers who spend the search firm’s money with little financial result. Every large tech company has development operations, but few have gone so far afield from the core business of their companies as Google.

Investors have often said that Google’s stock would do better if it were a search “pure play” without all the other experiments the company does tethered to it. A “Google Labs” would need some of Google’s cash hoard to operate. It still may be a good holding for investors, but it would be a risky one which some shareholders would rather exit.

Douglas A. McIntyre

The company announced today that the United States District Court for the Eastern District of Virginia granted its motion for summary judgment of non-infringement.  This was in a case that had been brought by private 01 Communique.

LogMeIn also noted that the court indicated that a written order will follow and that the case has now been removed from the trial docket on May 2, 2011. 

So how does this affect the company?  The obvious is that the company has one less legal hurdle.  Software companies are all subject to potential patent suits.  Suits rarely close down companies but they do often result in royalty agreements that need to be paid.  We wondered why on earth a public company did not acquire this company back when it was still private.  The company came public at the end of 2009 before the IPO market had fully reopened and it traded under $20.00 for most of the time into early 2010 and shares went above $40.00 before the end of 2010.

After shares have risen 14% to $48.37, it should be noted that an all-time high of $49.50 was hit today.  Thomson Reuters has 2011 estimates of $0.71 EPS and $118.44 million in revenues and 2012 estimates of $0.90 EPS and $144.31 million in revenues.  Now its market cap is $1.16 billion.

The great buying opportunity may not have passed entirely yet, but the stock will start to look too expensive to many possible acquirers if shares keep rising.  The wild card in this scenario is that a larger company could massively ramp up sales compared to what LogMeIn could do on its own.  With remote access and with the realm of data security demand out there, it is hard to know what the ultimate price could be to a buyer. 

We would still not be a buyer just on hope of a merger.  Companies should only be acquired based upon the merits of an investment as a standalone entity.  Some companies will not sell regardless of the price.  LogMeIn has one hurdle behind it and we will continue to evaluate this on its own merits.

Usually a halt on Friday comes because of merger or a rumor.  This halt at 11:53 AM was ahead of its official press release regarding its patent case win.  Shares reopened at 12:50 PM EST but the stock is now a tad lower and up 11.6% at $47.06.

 JON C. OGG

Earlier this week, Amazon.com (NASDAQ: AMZN) announced the launch of a cloud-based locker service through which a customer can store music files on Amazon’s cloud servers and then stream the music to multiple devices. Apple Inc. (NASDAQ: AAPL) and Google Inc. (NASDAQ: GOOG) are both believed to be preparing to launch similar services.

In the Sirius lawsuit, a group of subscribers have claimed that the company’s music royalty fees amounted to an abuse of Sirius’s monopoly power following its merger with XM Radio in 2008. The fees raised subscription prices by nearly 30%, according to a report in Bloomberg.

A Sirius spokesman remarked that with the increasing competition in the music-serving business, the company believes the suit is “without merit.” He’s probably right, of course, but that is not altogether a win for Sirius.

Sirius is really just a ubiquitous radio station, with DJs and talk shows (think Howard Stern), and scheduled programming. Subscribers need a Sirius player in every location where they want to listen to music. The streaming services allow subscribers to have access to more music on more devices that the subscriber already owns.

The most attractive device by far is the smartphone. Using a smartphone as a music player eliminates the need for a dedicated device like an iPod or other MP3 player. Music can also be streamed to the various Internet TV boxes coming on the market. Streaming services like Pandora, Rhapsody, Mog, Spotify, and Rdio, to name the best known, give subscribers access to as many as 10 million or more tunes that can be played on any connected device for a monthly subscription fee of around $10.

As soon as the streaming services are able to convince the music industry that CDs are history and that the new model is one in which listeners just want to listen to music without owning it, the old radio model that Sirius follows will disappear. It may take a few years, but Sirius radio will inevitably have to change or it will implode.

Another issue the streaming services face is convincing music fans that renting music is as good as owning it. Will subscribers pay $120 a year for access to millions of songs instead of, say, 8 or 10 physical CDs? It appears to be an offer that is too good to refuse, but people are always more comfortable with the devil they know than the devil they don’t.

And Sirius is one of the devils we know. It’s just a radio station with a very strong transmitter. It will survive the current lawsuit, win or lose. The real question is whether it will survive the coming shift in the way people listen to music.

When cases get life again this far after the fact, it might make some wonder if a suit review for hanging chads in Florida can get revived.  If investors had real fears there would probably be at least some reaction in the stock.  SIRIUS XM shares are flat right after the open at $1.73.

Paul Ausick