As part of its ongoing strategic review process “and commitment to drive sustainable profitability through its most valuable business lines” the company notes these changes:

• Phase out its dedicated capture devices business in the first half of 2012, comprising digital cameras, pocket video cameras and digital picture frames. Kodak will instead expand its current brand licensing program, and seek licensees in these categories.
• Kodak’s Consumer Business will include online and retail-based photo printing, as well as desktop inkjet printing. 
• Kodak says that it will “continue to honor all related product warranties, and provide technical support and service for its cameras, pocket video cameras and digital picture frames.”  Good luck.
• Kodak expects annual operating savings of more than $100 million, and it will incur a separation benefits charge of about $30 million as it exits these.
• The Commercial Businesses segment includes the Digital and Functional Printing, Enterprise Services and Solutions, and Graphics, Entertainment and Commercial Films units. Kodak’s digital businesses now comprise approximately three-fourths of total revenues.         

The company claims to still have a strong position in the personal imaging market. Unfortunately, this long slow death march doesn’t seem over.  Those OTC shares are still worth $0.44 today and we have no personal expectation of any left over value unless it can monetize those patents beyond the wildest expectations.

JON C. OGG

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

Fortunately for investors in retail stocks, Target and Wal-Mart are not Sears. We just featured this one as one of the worst big stock stories of 2011, but we did not call for a bankruptcy nor did we include it on our list of stocks unlikely to survive 2012.  The most recent effort to spin off Orchard Supply Hardware Stores (NASDAQ: OSH) is interesting on the surface but it is just too small to make a difference at this point.

Unfortunately, a report on the CNN Money site did note that there are rumors of a Sears bankruptcy.  That is their story rather than ours.  Still, analysts have pounded upon Sears and some see much more downside on top of the pain and suffering we have seen in recent weeks (and years).

• In early December came word that Imperial Capital issued a “underperform (SELL) rating and said that it could go down to $6.00 in the new two to three years.
• Barclays recently cited that Sears appliance market share could fall to 31% from 39% and offer a large reward for other appliance sellers.
• On December 30, Zacks put Sears on its #5 list, a list of stocks with a “Strong Sell” rating.
• On December 28 came word that Credit Suisse was maintaining and Underperform rating… with a $20 price target objective.
• Fitch also lowered its corporate credit rating in the last week of December.
• Barron’s called for the start of 2012 that Sears could lose another 80% of its value.

Sears is up 0.1% on Tuesday at $31.46 verus a new 52-week range of $31.17 to $94.97 and its market cap is now down to about $3.35 billion.  The most recent short interest was listed as 10.88 million shares as of mid-December before the latest warning.

The saga continues. The question is whether or not this turnaround can ever come to fruition. Please feel free to take the absolute yes/no anonymous poll below.

JON C. OGG

The list includes the following still-public stocks: Alimera Sciences, Inc. (NASDAQ: ALIM); AMR Corporation (NYSE: AMR); American Apparel, Inc. (AMEX: APP); Eastman Kodak Co. (NYSE: EK); Energy Conversion Devices, Inc. (NASDAQ: ENER); FriendFinder Networks, Inc. (NASDAQ: FFN); Nortel Networks Corp. (NRTLQ); Pinnacle Airlines Corp. (NASDAQ: PNCL); Reddy Ice Holdings, Inc. (RDDY); YRC Worldwide Inc. (NASDAQ: YRCWD). 

Almost all of these have either had a form of bankruptcy or reorganization, while others have been in the rumor mill for quite some time.  We included a write-up on each, and have even have gone as far as discussing some caveats which could help some of these stocks to survive. There is even a chance that a couple of these could end up being major turnaround stocks.

Alimera Sciences, Inc. (NASDAQ: ALIM) saw a share price implosion take place in November after the FDA all but rejected its eye drug.  We covered this one at BioHealthInvestor with a near 75% drop on the news after being public less than two years.  Shares fell to $1.96 with a $61 million market cap and shares are now at $1.30 with a $41 million market cap.  The good news is that it has no debt overhang and it may be able to scrap operating costs down to nothing.  Still, we cannot see how it can fund itself through another set of trials.  Mathematically it is more than financially challenged, even if the company manages to hang on as a NASDAQ listing.

AMR Corporation (NYSE: AMR) is effectively done already.  We had been expecting an NYSE delisting notice to come for a while, even though there was a time even in the last week of the year where shares gapped up big and traded as though there may be some intrinsic post-bankruptcy value left for common shareholders.  That would not be the normal post-bankruptcy value.  While anything is possible, this one will move to the pink sheets and will trade around with a 5-ticker symbol for a while.

American Apparel, Inc. (AMEX: APP) has so far managed to avoid being delisted and so far managed to avoid a bankruptcy through a shaky history.  Still, things have been sketchy here for so long that even a near-40% jump in shares from $0.57 to $0.75 since its early December business update showed improving store sales metrics.  This company has managed to survive on less than $10 million in cash but still has a net tangible value of $56 million despite a loss in 2010 of $86 million.  Here is the caveat” American Apparel has managed to exist in this diminished state for some time and its controversial CEO has managed to hang on.  Maybe the company can pull a rabbit out of a hat and turnaround.  American Apparel often notes “going concern” as a risk under its safe harbor statements in press releases.

Read Also: Analysts Top Biotech Stocks For 2012

Eastman Kodak Co. (NYSE: EK) has done everything wrong and had everything go wrong that could go wrong.  Antonio Perez has been on our list of CEOs that need to be fired for years now and the company has stuck its head in the sand for far too long.  The bankruptcy rumors have swirled for long enough.  The real value left in the company is in the patents, but the company has not been able to make its patent machine turn into a survival machine.  The KKR board members have also resigned and that could be a sign that the private equity firm will try to force a move here so it can secure whatever value is left. At the end of September when we polled our readers, the poll response was that Kodak was more likely to go bankrupt than Greece.  Ouch.

MSLO has had prior product distribution deals with Macy’s, Inc. (NYSE: M) and also with K-Mart under Sears Holdings Corporation (NASDAQ: SHLD).  The Macy’s deal still has many key Martha Stewart products but Martha Stewart products have lost that Kmart deal and Martha Stewart has moved a home furniture, bath, paint,, kitchen and other efforts to The Home Depot Inc. (NYSE: HD).

Ron Johnson, the guru who was credited with launching the Apple Inc. (NASDAQ: AAPL) retail look, theme, and strategy, has now taken over as head of J.C. Penney and this is his first real public change of substance.  Customers will get to start entering Martha Stewart stores starting in February 2013. 

This is a 10-year commercial agreement where both companies will jointly develop an e-commerce site as well.  MSLO is expected to receive more than $200 million from J. C. Penney over the initial 10-year contract period.  Another feature of the pact is that J. C. Penney spent some $38.5 million for 11 million newly issued shares of Martha Stewart Living Omnimedia (at $3.50 a share) and it will now hold a 16.6% stake in MSLO and will have a seat on the board of directors.

J.C. Penney shares are down about 4 cents at $33.26 versus a 52-week trading range of $23.44 to $41.00.  The real win is in Martha Stewart Omnimedia shares, where they are trading up 28% at $4.06 versus a 52-week range of $2.77 to $5.49.

JON C. OGG

We just saw a mixed report from Dell Inc. (NASDAQ: DELL) last week, and they are not in the midst of a turnaround in the same manner that H-P is in.  All things considered, it would seem a shoe-in that H-P will be a disappointment on the earnings.  But…  This is setting itself up to be a contrarian’s dream.  How it will offer guidance is unclear until we know how Meg Whitman wants to communicate.

The automatic expectation from H-P’s firing of Apotheker was that the numbers were going to be awful. So, the big question boils down to the other side of “what if”… What if H-P somehow manages to report earnings which really aren’t all that bad?

Estimates from Thomson Reuters are $1.13 EPS and $32.06 billion in revenue; next quarter estimates are $1.11 EPS and $31.44 billion in revenue. We will be looking at the company’s comments around manufacturing problems for drives for its PC around the flooding in Thailand as well as any extra divesting developments on the WebOS left over from Palm.

H-P is down over 4% at $26.65 due to a weak market and the 52-week trading range is $21.50 to $49.39.  Shares have effectively bounced by 25% off the lows from September to October.  Unfortunately, that is a large bounce for a company where the turnaround has so far only been discussed in general but not shown in any detail.

With the datacenter war taking place with Cisco Systems, Inc. (NASDAQ: CSCO) and with Apple Inc. (NASDAQ: AAPL) just starting to consider how to penetrate the enterprise market, H-P has a fight ahead of it.  Also imagine this… Had this been 18-months ago, Warren Buffett might have chosen H-P shares as the tech-buy over International Business Machines Corporation (NYSE: IBM) for the huge stake.  Either way, we know what happened there now.  Just to think about how much of a mess this is, the ultimate decision to not spin off its PC unit appears to ultimately be because the charges and costs with such a spin-off would be too high to justify the effort.  How reassuring is that?

Again, our take is that the last quarter has to almost be written off.  If somehow it can show that business did not suffer as much as the headlines (and fear) might have indicated, then that would almost certainly create a more positive stance.  Right now it seems as though traders and investors are st

The chart is showing support down around $25.24 at the 52-week moving average.  The 200-day moving average does not currently come into play until $34.03, so we would not expect to come into play for weeks or even more.  Thomson Reuters has a consensus price target objective of $30.69 for H-P.

Oh, and maybe just one suggestion since there is a new sheriff running H-P town… How about considering a new logo?  PCs are not the excitement they were in the 1990s, but HP takes the cake for lame logos on its retail products.  Just a thought.

JON C. OGG

Previously, we had suggested that Goldman Sachs Group Inc. (NYSE: GS) or even Morgan Stanley (NYSE: GS) could have been considered as possible acquirers since they had become bank holding companies yet had zero banking operations.  That time has long-passed that either Goldman Sachs or Morgan Stanley would be potential acquirers.

E*TRADE’s review of strategic alternatives started in early August with an intent to maximize shareholder value.  One strategy was a possible sale.  The company’s noted, “…the Board unanimously determined that the continued execution of the company’s business plan is currently the best alternative for increasing stockholder value.”

Steven Freiberg, CEO and Interim Chairman also noted, “We will remain focused on delivering the best investing experience to our customers, strengthening our brokerage business, continuing to improve the performance of our loan portfolio and enhancing our franchise.”

The board of directors must have been looking at its stock charts upside down because continuing its path as is to maximize shareholder value hasn’t worked.  In July this was a $16.00 stock in hope that a deal would come.  Shares closed down 3.4% at $9.48 today, and the after-hours session has E*TRADE down another 4% at $9.10.

E*TRADE got far too creative during the mortgage boom and when the bubble popped it nearly assassinated this company.  Now E*TRADE continues to try to wind down many of its old legacy loans and accounts, and while things have improved there the company has not been able to walk away entirely from its prior follies.

It seems that buyers must have felt the liabilities could still be an unknown or that the black hole just goes too deep.  Its core business is an attractive one, but right now E*TRADE cannot even make good money on customers cash deposits just like its peers with short-term rates at next to zero.

E*TRADE has to remain on its own, and those who were pressing for a buyout will just have to invest in the company based upon its own internal merits.

JON C. OGG

We do not want to contribute to any rumor-mongering.  It was rumor-mongering on top of serious underlying problems and on top of serious financial leverage which helped to expedite and exacerbate the situations at Bear Stearns and at Lehman Brothers ahead of and during the financial meltdown.  We also want to note on thing: it is Friday and any ‘stabilization rumors’ would probably greatly change the very negative pre-market tone we are seeing this morning.

There have been loose reports that Jon Corzine had sought a deal with Barclays PLC (NYSE: BCS).  Frankly, the odds seem very low considering that U.K., European, and American regulators are not keen on banks and brokerage firms getting larger.  Bloomberg also reported that MF Global has drawn down on its credit lines this week as its credit ratings were cut to “junk” by both Moody’s and Fitch.

Dick Bove of Rochdale went on record this week saying that Goldman Sachs Group Inc. (NYSE: GS) may be interested in buying the company, but he clarified that this might not be an equity purchase.  He noted that it could be a reorganization purchase, which implies nothing for existing shareholders.

We also cannot expect that Jamie Dimon from J.P. Morgan Chase & Co. (NYSE: JPM) nor that Brian Moynihan of Bank of America Corporation (NYSE: BAC) will be willing at all to step in as they did during the financial crisis.  After all, these banks are being “encouraged” to limit their risk-taking activities.  Both banks, along with Citigroup, Inc. (NYSE: C), are said to be lenders in that prior Bloomberg report.

We have seen analyst downgrades this week from Keefe Bruyette & Woods as well as from Raymond James.

MF Global’s most recent earnings were no harbinger of great things.  Revenues were down by a double-digit percentage drop, compensation ratios were higher on lower revenues, charges hit the GAAP results, and even the adjusted earnings showed a loss. The company noted, “As of September 30, 2011, MF Global maintained a net long position of $6.3 billion in a short-duration European sovereign portfolio financed to maturity (repo-to-maturity), including Belgium, Italy, Spain, Portugal and Ireland. The laddered portfolio has an average weighted maturity of October 2012 and an end date maturity of December 2012, well in advance of the expiration of the European Financial Stability Facility in June 2013.”

As of yesterday’s close, MF Global had a market cap of almost $236 million.  It does need to be noted that Evercore Partners Inc. is advising the company on options for MF Global’s brokerage operations and for other options.

On Monday this was a $3.55 stock.  Shares fell to under $2.00 after earnings to close at $1.86 on Tuesday after the report.  Shares have slid each day: $1.70 on Wednesday and $1.43 on Thursday.  There are over two hours until the market opens this Friday morning and shares are indicated down close to 12% at $1.26.  Shares were down as much as 15% earlier this morning.

JON C. OGG

The news is that net income rose to $42.3 million from $39.7 million and comparable earnings that analysts use came in at $0.34 EPS as revenue rose more than 10% to $281.9 million. Thomson Reuters had estimates of $0.33 EPS and $278.87 million in sales.

For the current quarter we are already in, Akamai said revenue should come in between $303 and $315 million versus the Thomson Reuters estimate of $310.53 million.  Sales in the Q4-2010 period were $$284.7 million.

Another bit of news is that David Kenny stepped down as President after only about a year and CEO Paul Sagan has been given the additional role of president (again).  The rumor is that David Kenny is a possible Yahoo! Inc. (NASDAQ: YHOO) CEO candidate.

The takeaway is simple.  Akamai is constantly thrown around as a takeover candidate and the rumor mill has always been active there.  The rumored acquirer most recently was Google Inc. (NASDAQ: GOOG) but that was effectively denied or rejected.  We always thought that getting a high-premium buyout takes away the value and there are still too many buried shareholders who remember much higher share prices that would vote against a low-premium merger.

Now is the time to consider whether or not Akamai is turning itself around.  Shares closed at $23.78 yesterday and the 52-week range is $18.25 to $54.65.  Yep, shares had been cut in half… and then some.

Akamai shares are flying higher with gains of over 14.5% at $27.25 this morning after about 75 minutes of trading.

JON C. OGG

The data and traffic acceleration equipment maker for wide area networks reported earnings on Wednesday evening of $0.24 EPS versus $0.17 EPS a year earlier and it showed that sales rose 28% to $190 million.  The consensus data from Thomson Reuters was only at $0.21 EPS and $185 million in sales.

This was a record quarter with growth year over year and sequentially.  Riverbed also confirmed that it generated $90 million in cash flow from operations and it exited the quarter with $559 million in cash and investments after it repurchased $20 million in its own stock and after paying out $120 million for acquisitions.  Riverbed even noted strong business in Europe and in government spending.

FBR has noted the company positively so far and we would expect more positive endorsements even if this is not quite the same growth rate or upside surprise that some investors used to expect.  We have seen reports that Citi maintained a “Neutral” rating and $25 target, and that Needham & Co. maintained a “Buy” rating but lowered the target to $41 per share.  The consensus price target remains just above $30.00.

The stock chart (seen below from stockcharts.com) shows that Riverbed had already crossed back above its 50-day moving average (listed as $22.48 today) and the 200-day moving average is all the way up to $32.85.  Realistically, the true pivot point on a long-term basis is not really until the share price of $32.00 but there will be some additional real resistance at just under $26.00 as that is the price that everyone who bought Riverbed will be profitable or breakeven going back to mid-August.

Options activity is active, but the expiration date is this Friday.  Call option activity is elevated for November expirations, but it is light for December expiration.

If the company just meets expectations ahead, Riverbed trades at almost 29-times 2011 earnings and about 22-times 2012 earnings.  Since this stock was a high-speed flame-out that crashed and burned, it seems that many investors are not willing to chase the stock after a near-10% gap-up.  The good news is that investors are not calling Riverbed by the names of ”Dry Creek” or “River Bad” today.

Shares are currently up almost 9% at $24.50 and the 52-week trading range is $18.33 to $44.70.  In less than 2 hours of trading we have seen more than 7 million shares trade hands and that represents about 125% of normal trading volume for a whole day.

JON C. OGG