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Media Digest (5/23/2012) Reuters, WSJ, FT, Bloomberg

247wallst — Wed, 23 May 2012 10:31:38 +0000

Merkel and Hollande will fight over stimulus for the eurozone at the EU summit. (Reuters)

The OECD expresses concerns that Europe could slip into a deep recession. (Reuters)

The EU debt crisis pushes global shares lower. (Reuters)

Morgan Stanley (NYSE: MS) cuts its Facebook (NASDAQ: FB) ratings just before the IPO. (Reuters)

Sony (NYSE: SNE) and Samsung try to get retailers to discount their TVs less. (WSJ)

AOL’s (NYSE: AOL) Patch local website project continues to draw the ire of investors. (WSJ)

The Congressional Budget Office says that gridlock in DC could cause a recession in 2013. (WSJ)

SAP (NYSE: SAP) will buy Ariba (NASDAQ: ARBA) for $4.3 billion. (WSJ)

South Korea will continue to import oil from Iran despite U.S. and EU sanctions over the Iran weapon’s program. (WSJ)

The International Monetary Fund says the UK needs to create stimulus programs. (WSJ)

Dell’s (NASDAQ: DELL) earnings are hurt as it attempts to move beyond PCs as its major line of sales. (WSJ)

Ford’s (NYSE: F) credit rating is upgraded from “junk” status. (WSJ)

CalSTRS, the second-largest U.S. public pension fund, will vote against Walmart (NYSE: WMT) directors in the wake of a bribery scandal. (FT)

EU banks would be damaged if Greece leaves the eurozone, as they have almost $1.2 trillion in debt from Spain, Portugal, Italy and Ireland. (FT)

Mazda and Fiat to build a sports car. (Bloomberg)

Douglas A. McIntyre

Filed under: Press Digest Tagged: AOL, ARBA, DELL, F, FB, MS, SAP, SNE, WMT

Social Media Drag Down, Does Web 1.0 Rule? (GSVC, SVVC, SINA, LNKD, RENN, SOCL, YHOO, AOL, GOOG)

Administrator — Mon, 21 May 2012 13:31:01 +0000

It is no shocker today that the social media shares are heading lower this morning. The Facebook shenanigans with its shares now down over 4% at $36.50 on almost 8 million shares is taking its toll elsewhere as you would expect. Should investors ask for a “claw-back” here? And by the way, Web 1.0 stocks are headed up as Web 2.0 stocks are heading lower

GSV Capital Corporation (NASDAQ: GSVC) is down 3.4% at $12.70. Firsthand Technology Value Fund, Inc. (NASDAQ: SVVC) is down 2.4% at $18.80 on over 17,000 shares.

SINA Corporation (NASDAQ: SINA) got a huge bump ion on its “Chinese version of Twitter” pop last week but after peaking above $59.00 mid-week the stock is indicated down less than 1% under its $53.11 close from Friday. Keep in mind that this one may act differently as its 52-week range is $46.86 to $128.17.

LinkedIn Corporation (NYSE: LNKD), Facebook’s only real competitor based in the U.S., is trading down 2% at $97.01 on 50,000 shares.

Renren Inc. (NYSE: RENN) is down 8.3% at $4.52 on over 300,000 shares.

Global X Social Media Index ETF (NASDAQ: SOCL) will follow these lower if all of these remain where they are.

Yahoo! Inc. (NASDAQ: YHOO) is up 4% at $16.04 on 2 million shares and AOL Inc. (NYSE: AOL) has not traded due to its NYSE listing but is indicated higher along with Yahoo! Google Inc. (NASDAQ: GOOG) is up 0.4% at $602.40.

JON C. OGG

Filed under: Internet Tagged: AOL, GOOG, GSVC, LNKD, RENN, SINA, SOCL, SVVC, YHOO

What Will Yahoo! Do with Its Billions?

247wallst — Mon, 21 May 2012 10:33:37 +0000

Alibaba will buy back 20% of its shares held by Yahoo! (NASDAQ: YHOO). The consideration Yahoo! will get is $7.1 billion. That sum is “composed of at least $6.3 billion in cash proceeds and up to $800 million in newly issued Alibaba preferred stock.” The deal contemplates an Alibaba initial public offering that will, over time, allow Yahoo! to sell most or all of its remaining shares.

The announcement is a coup for Yahoo!’s interim CEO Ross Levinsohn, although the buyout must have been in the works long before he began his job earlier this month. What Yahoo! did not say as its reported on the agreement is what it will do with the money. That will be as crucial to Yahoo!’s share price, and perhaps its future, as anything the company has done in the past year — with the possible exception of changing CEOs twice.

Yahoo!’s market cap is just short of $19 billion, so the firm certainly could offer a dividend. That will not satisfy shareholders who have concerns about the viability of the portal company over the longer term. Yahoo! could buy back close to 20% of its shares and automatically raise its earnings per share. Shareholders may not be impressed with that move. Share buybacks rarely have been a way for shareholders to gain long-term value in troubled companies.

Beyond a these traditional uses of capital to enhance shareholder value are others that are more radical. One is a special dividend. Microsoft (NASDAQ: MSFT) did this in 2004. AOL (NYSE: AOL) plans to make a similar move with the just over $1 billion it got from the license and sales of some of its patents to Microsoft. Each was part of a plan to get cash on its balance sheet to shareholders immediately. The sum per share, however, in Yahoo!’s case would be relatively modest. Yahoo! has more than 1.2 billion shares outstanding.

If none of these is the route Yahoo! takes, the board and management are left with the option of making a quick M&A deal to enhance the company’s position as a content company. Yahoo!’s weakness in social media is obvious. But the $4 billion it has left after taxes may not be enough to buy a social media firm. Twitter, for example, has a valuation of at least $8 billion, based on the last time it raised money. If Yahoo! could raise additional cash to make an offer, a bidding war would ensue. Yahoo! does not have access to the capital necessary to win an auction. There are plenty of smaller social media companies, but not many that would make Yahoo! a force in the sector.

Yahoo! could also buy a large traditional media company and try to strengthen that company’s online presence. Yahoo! has the traffic to make such a plan work. Among the corporations it could afford is Gannett (NYSE: GCI), the largest newspaper company in the United States. It has a market cap of $3 billion. But, aside from Warren Buffett of Berkshire Hathaway (NYSE: BRK-B), who can afford to own newspapers as a hobby? Not a single analyst on Wall St. believes that papers have much of a long-term future.

Yahoo! is about to have a lot of money. Along with that will be a several options for what to do with it, none of which is terribly attractive.

Douglas A. McIntyre

Filed under: Management Change, Mergers and Buy Outs Tagged: AOL, BRK-B, featured, GCI, MSFT, YHOO

Google’s YouTube: The One Horse Race In Online Video

247wallst — Sat, 19 May 2012 15:26:26 +0000

The argument that Hulu can become a company which can be valued in the billions of dollars or that portals can completely change, for the positive, the value of ad dollars they receive because of video marketing messages, are both severely undercut by the lead that Google’s (NASDAQ: GOOG) YouTube has over any “competitors”.

No one need look any further than the April Comscore video audience rating data for April.

Comscore reports that 37 billion videos were watched online during the month. Over 17 billion of those were watched on Google sites, which is essentially a measurement of YouTube. Google sites has 158 million unique viewers of video over the course of the month, compared to the overall national total of 181 million. The next closest sites were Yahoo!’s (NYSE: YHOO) with 53 million unique visitors–a third of Google’s. Among the other portals, AOL (NYSE: AOL) had 38 million, and Microsoft sites (NASDAQ: MSFT) 43 million. Among traditional media companies Viacom (NYSE: VIA-B) with 41 million was the top of its category.

The data tells two things. First, YouTube barely contributes revenue to Google’s sales. Despite the fact that much of the content on YouTube is posted by amateurs, the site has build a large inventory of premium content and a video rental business. This still has shown very little in results. The second point which is closely related to the first, is that neither YouTube’s video ad revenue or rental revenue is significant. This is discouraging news for those companies which believe that either VOD or video ads will radically change their fortunes.

YouTube continues to be the marker for the size of the US online video market. It is very likely to be the marker for revenue as well.

Douglas A. McIntyre

Filed under: Research Tagged: AOL, GOOG, MSFT, YHOO

What’s Important in the Financial World (5/16/2012) New Greek Elections, Oil Prices Fall

247wallst — Wed, 16 May 2012 10:43:32 +0000

It appears increasingly likely that concerns about the future of Greece will depress equity markets worldwide. Politicians in the country have failed to set a coalition government, despite several efforts. The chance that Greece will withdraw from the eurozone has heightened as new elections may be called in a matter of days. Those elections could be held a month from now. Politicians who reject austerity measures as a means to gain financial aid likely will do extremely well. The relationship of the southern European country to its neighbors is in limbo. But the actions of such a small nation have pulled down stocks in Asia and Europe, and they continued to do so today. Most major indexes have fallen many of the days in the past two weeks. Part of the cause for the sell-offs may be concerns about a global economic slowdown, but each piece of news from Greece is the trigger for additional lack of belief in equities.

Oil Prices Fall

WTI crude reached a six-month low, which is positive news for nearly everyone other than the oil and gas industry. The price moved below $92, down from close to $110 less than 90 days ago. One reason is that U.S. supplies of oil are higher than expected. But the most substantial reason is belief that demand in Europe will be historically low for this time of year. A drop in the rapid expansion in China’s gross domestic product may also be a cause for lower prices. The most important effect on the U.S. economy is that gasoline prices are plummeting. The cost for a gallon of regular based on a nationwide average calculated by the AAA is $3.728, compared to $3.727 the day before and $3.907 a month ago. The fall from the year ago price of $3.955 is extraordinary. The price of premium appears ready to drop below $4 for the first time in months. There is school of thought among some economists that whatever factors might slow U.S. GDP growth in the middle of this year will be partially offset by the lower cost of gas for American families that live paycheck to paycheck. With regular gas above $4, many could not be consumers of anything other than bare necessities. As gas prices fall, that should change.

GM and Facebook

Investors do not seem to care that General Motors (NYSE: GM) has dropped Facebook as an advertising medium. The press made a great deal of the news, but GM’s investment was only a few million dollars over the past year. Maybe skeptics about Facebook’s future reason that other very large advertisers will be unhappy with the result of their marketing on the social network and will withdraw as well. But, in the face of the GM news, Facebook as raised the number of shares it will sell in its initial public offering to 421 million, according to several media reports. That is up 25% from the number expected just a few days ago. This would set the amount of money collected by Facebook at $16 billion and value the company at over $110 billion. Many analysts believe that Facebook’s valuation is much too high. But that has not stopped a nearly insatiable appetite for ownership in the company. Perhaps Facebook users want to be shareholders are well. It works that way with Apple (NASDAQ: AAPL), so there is a precedent.

Relational Investors vs. Pepsi

Shareholder activist firm Relational Investors has bought $600 million of PepsiCo (NYSE: PEP) shares, according to the Wall Street Journal. Large companies are not immune from the kind of attacks recently experienced by AOL (NYSE: AOL) and Yahoo! (NASDAQ: YHOO). The market has been concerned about the stewardship of Pepsi CEO Indra Nooyi for some time. Soda sales have dropped in many parts of the world, in part because of health concerns. That has caused Pepsi and rival Coca-Cola (NYSE: KO) to rely more on sales of bottled water, noncarbonated drinks and snacks. Soda sales have been so huge for so long that replacing them is almost impossible. PepsiCo is too large for almost any one shareholder to attack. Its market capitalization is more than $100 billion, so the Relational Investors position is inconsequential, whether or not the group has reasonable concerns.

Douglas A. McIntyre

Filed under: Market Open Tagged: AAPL, AOL, GM, KO, PEP, YHOO

What Yahoo! Will Buy To Expand Its Content Franchises?–The List

247wallst — Mon, 14 May 2012 17:49:07 +0000

New interim CEO of Yahoo! (NASDAQ: YHOO), Ross Levinsohn, needs to make his mark quickly. After firing 2,000 people, his predecessor had plans to move the Internet portal into e-commerce, a business Scott Thompson knew well. As the current EVP of Yahoo!’s global media business, a title he still holds, its very likely that Levinsohn will try to grow their media franchises.

According to AllThingsD’s Peter Kafka, it’s something he thinks the new CEO will try: “If Levinsohn gets to run Yahoo the way he wants to run Yahoo, he’ll focus on getting the most out of its media business, because that’s his strength.”

Yahoo! could afford to increase its content holdings if it sells off some of its largest assets. The company may soon have a war chest of over $10 billion if it disposes of stakes in Alibaba and Yahoo! Japan. This money will be added to cash on hand. Yahoo! also has no long-term debt.

There’s at least one publicly traded company that Levinsohn might consider. If it buys Demand Media, (NYSE: DMD)Yahoo! could add a huge number of unique visitors in one move. In the most recent Comscore online research measurement, it had 64 million US unique visitors.

While it’s not doing well as well as it once was, that’s probably why Yahoo! could acquire it inexpensively. Demand’s shares have fallen from $16.40 to $8.50 in the last year. The firm’s traffic was battered when Google (NASDAQ: GOOG) changed the way it treated Demand’s sites for how the search company assigns page rank, and therefore traffic. But that happened a year ago.

Demand has become a slow growth corporation, but still has a huge audience. Unfortunately, its quarterly revenue in the last period was a tiny $86 million, up only 8% from the same period a year ago. The company lost almost $2 million in the same period. Yahoo! would have to find a way to get a better yield from Demand’s audience to make it a smart acquisition. But Demand could be bought at a low price. Its current market cap is is only $675 million.

There are many more opportunities among privately held startups. Yahoo! could follow AOL’s (NYSE: AOL) lead and buy premium properties one by one. It could also match the categories AOL believes have the best yields. 24/7 Wall St. has identified the most likely targets in the event Yahoo! goes down that path. Where 24/7 Wall St. has already valued these properties in its annual blog valuation piece, those numbers have been used as a benchmark for probable acquisition price.

Filed under: Media, Mergers and Buy Outs Tagged: AOL, DMD, featured, GOOG, YHOO

The Rise of AOL’s Tim Armstrong

Trey — Thu, 10 May 2012 10:04:23 +0000

By now, it was assumed, Yahoo! (NASDAQ: YHOO) would have a new “change agent” CEO and Tim Armstrong of AOL (NYSE: AOL) would have been forced out of his job because of low ad revenue growth, losses at the Patch local websites and a stock that had dipped to just above $10. Things did not turn out that way. After it posted better-than-expected earnings, AOL’s shares reached a 52-week high above $26. And Armstrong said he planned to do several things in the near-term that should defuse the concerns that activist investor Starboard Value has made about the firm’s prospects. Based on the past history of proxy wars at public companies, he probably would have won the challenge from Starboard Value. His resume, to his credit and that of his board, is clean.

Armstrong showed Wall St. what his board must have expected when it recently extended his contract, much to the chagrin of critics who believed his turnaround plan was too flawed to ever succeed. Armstrong decided over a year ago that he not only wanted to buy the Huffington Post, but he also wanted to increase its staff of journalists. He increased his bet on tech content through a purchase of website TechCrunch. That appearing to go badly when founder Michael Arrington had a dust up over whether AOL should invest in his new venture fund. Arrington is gone. Armstrong is not. TechCrunch appears to be fine. And AOL remains an aggressive investor in content.

Armstrong has become more adroit than many investors believed he could be. Starboard Value suggested AOL had some valuable patents. Armstrong and his management had already figured that out, it appears. Microsoft (NASDAQ: MSFT) bought and licensed some of that intellectual property for $1.06 billion. Armstrong says he will return that money to investors in one form or another.

AOL’s revenue is traditionally broken into two pieces. Its Internet access business is profitable but shrinking. Its online display and search ad operations are not profitable and barely stagnant. AOL has used the profits from the one to support the other. Most investors do not like the system. They want the ad unit to sustain the content businesses.

Armstrong has brought himself some time to rekindle the ad business. He did that with the Microsoft deal and evidence of a very modest upward move in advertising sales. Holders of the stock and the media likely will give him a few short quarters to prove that his theory about how a turnaround could work plays out, or does not. Armstrong will need to prove that he can do what rivals MSN and Yahoo! have not. That is, milk advertising out of a market that has abandoned portals for niche sites and Facebook, which currently has the lion’s share of display inventory in the United States. Recent evidence that advertisers are not as enamored of Facebook as most investors believe may eventually help AOL and its rivals.

The best way to look at Armstrong’s tenure at AOL is that he was a failure in the eyes of many from early on. His prospects were down to none. It has only taken a few months to alter that. He is, for now, the last man standing in the portal business. He has garnered enough support that shareholders have become nearly benevolent.

Douglas A. McIntyre

Filed under: Media Tagged: AOL, featured, MSFT, YHOO

24/7 Wall St. Closing Bell (AIG, COP, HSY, PSX, DMD, AOL, AGU, DTG, M, MPEL, TM, SODA, AMCX, MT, ESRX, MCP, JWN, NUAN, HNR, KSS, PEIX, CPWM, AMRS, ACI)

Paul Ausick — Wed, 09 May 2012 20:06:42 +0000

The major US stock indexes opened sharply lower again this morning as investors consider Greece’s commitment to the austerity measures it had previously agreed to. Renegotiating the deal seems out of the question (more coverage here) and there is even the threat that the EU will not pay the first tranche of the bailout deal when it is due tomorrow (more coverage here). US oil inventories rose last week, putting more pressure on prices today (more coverage here).The US dollar index rose today, now up 0.43% at 80.077. The GSCI commodity index is down -0.5% at 648.60, with commodities mixed on the stronger dollar. WTI crude oil closed down -0.5% at $96.71/barrel and Brent crude trades up 0.02% at $112.75/barrel. Gold settled down -0.6% today, at $1,594.20/ounce, the yellow metal’s first sub-$1,600/ounce closing since December.

The unofficial closing bells put the DJIA down nearly 97 points to 12,835.44 (-0.75%), the NASDAQ fell more than11 points (-0.39%) to 2,934.71, and the S&P 500 fell 0.67% or more than 9 points to 1,354.61.

There were several analyst upgrades and downgrades today, including American International Group Inc. (NYSE: AIG) raised to ‘buy’ at Goldman Sachs; ConocoPhillips (NYSE: COP) resumed as ‘neutral’ at Credit Suisse; The Hershey Co. (NYSE: HSY) raised to ‘buy’ at Argus; Phillips 66 (NYSE: PSX) started as ‘outperform’ at Credit Suisse; and Demand Media Inc. (NYSE: DMD) raised to ‘buy’ at Citigroup.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: AOL Inc. (NYSE: AOL) is up 3.8% at $26.55; Agrium Inc. (NYSE: AGU) is down -2.2% at $82.69 (more coverage here); Dollar Thrifty Automotive Group Inc. (NYSE: DTG) is up 0.2% at $80.68; Macy’s Inc. (NYSE: M) is down -3.6% at $38.07 (more coverage here); Melco Crown Entertainment Ltd. (NASDAQ: MPEL) is down -0.2% at $13.96; Toyota Motor Corp. (NYSE: TM) is up 3.1% at $80.58; and SodaStream International Ltd. (NASDAQ: SODA) is up 28% at $37.35.

On Wednesday we are scheduled to get earnings from AMC Networks Inc. (NASDAQ: AMCX), ArcelorMittal (NYSE: MT), Express Scripts Holding Co. (NASDAQ: ESRX), Molycorp Inc. (NYSE: MCP); Nordstrom Inc. (NYSE: JWN); Nuance Communications Inc. (NASDAQ: NUAN); Harvest Natural Resources Inc. (NYSE: HNR); Kohl’s Corp. (NYSE: KSS); and Pacific Ethanol Inc. (NASDAQ: PEIX).

Other standouts from today include the following stocks:

Cost Plus Inc. (NASDAQ: CPWM) is up 21.9% at $21.92 after posting a new 52-week high earlier today. The company is being acquired by Bed Bath & Beyond Inc. (NASDAQ: BBBY) for $495 million.

Amyris Inc. (NASDAQ: AMRS) is down -21.7% at $1.98 after posting a new 52-week low of $1.89 earlier today. The biofuels and biotech company posted much higher-than-expected shortfalls in both EPS and revenues.

Arch Coal Inc. (NYSE: ACI) is up 10.1% at $8.37. The coal miner had no news today, but investors are piling in at a very low price. Volume today topped 25 million shares, more than double Arch’s daily average.

Stay tuned for Thursday. Fed Chairman Ben Bernanke and Minneapolis Fed President Naryana Kocherlakota are giving speeches. We have noted the following events on the schedule (all times Eastern):

8:30 a.m. – International trade report
8:30 a.m. – New claims for unemployment benefits
10:30 a.m. – EIA weekly natural gas storage report
1:00 p.m. – 30-year note auction
2:00 p.m. – Treasury budget
4:30 p.m. – Federal Reserve balance sheet and money supply

Paul Ausick

Filed under: General Tagged: ACI, AGU, AIG, AMCX, AMRS, AOL, BBBY, COP, CPWM, DMD, DTG, ESRX, HNR, HSY, JWN, KSS, M, MCP, MPEL, MT, NUAN, PEIX, PSX, SODA, TM

24/7 Wall St. Closing Bell (F, WYNN, COF, BP, SYNC, CHTR, HL, OMX, THC, WEN, RST, PDC, AOL, CTL, AGU, DTG, M, MPEL, NWS, CSCO, TSLA, TM, PCLN, FOSL, DNDN, AVL)

Paul Ausick — Tue, 08 May 2012 20:07:27 +0000

The major US stock indexes opened sharply lower this morning as weak performance in the European markets as traders try to figure out what last weekend’s elections mean. Crude oil was also sharply lower this morning. The three major indexes have all come back from losses greater than -1% in the afternoon, but still look set to finish the day down at least -0.5%. The US dollar index rose today, now up 0.14% at 79.716. The GSCI commodity index is down fractionally at 652.27, with commodities mixed on the slightly stronger dollar. WTI crude oil closed down -1% at $97.01/barrel and Brent crude trades down -0.23% at $112.90/barrel. Gold settled down -2.1% today, at $1,604.5/ounce, after briefly falling below $1,600/ounce earlier in the day.

The unofficial closing bells put the DJIA down more than 76 points to 12,932.01 (-0.59%), the NASDAQ fell more than 11 points (-0.39%) to 2,946.27, and the S&P 500 fell -0.43% or nearly 6 points to 1,363.71.

There were several analyst upgrades and downgrades today, including Ford Motor Co. (NYSE: F) maintained as ‘buy’ with a target price of $19 at Argus; Wynn Resorts Ltd. (NASDAQ: WYNN) maintained ‘outperform’ with a target price of $166 at Credit Suisse; Capital One Financial Corp. (NYSE: COF) raised to ‘hold’ at Argus; BP plc (NYSE: BP) cut to ‘underweight’ at Barclays; and Synacor Inc. (NASDAQ: SYNC) cut to ‘underperform’ at BofA/ML.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Charter Communications Inc. (NASDAQ: CHTR) is down up 5.5% at $65.24 after posting a new 52-week high of $66.18 earlier today (more coverage here); Hecla Mining Co. (NYSE: HL) is up 4.1% at $4.04 (more coverage here); OfficeMax Inc. (NYSE: OMX) is up 10.5% at $4.85; Tenet Healthcare Corp. (NYSE: THC) is up 1.4% at $5.11; The Wendy’s Co. (NASDAQ: WEN) is down -4.3% at $4.66 (more coverage here); Rosetta Stone Inc. (NYSE: RST) is up 18.4% at $12.64; and Pioneer Drilling Co. (NYSE: PDC) is up 5.5% at $8.03.

On Wednesday we are scheduled to get earnings from AOL Inc. (NYSE: AOL), Agrium Inc. (NYSE: AGU), CenturyLink Inc. (NYSE: CTL), Dollar Thrifty Automotive Group Inc. (NYSE: DTG), Macy’s Inc. (NYSE: M), Melco Crown Entertainment Ltd. (NASDAQ: MPEL), News Corp. (NASDAQ: NWS), Cisco Systems Inc. (NASDAQ: CSCO), Tesla Motors Inc. (NASDAQ: TSLA), Toyota Motor Corp. (NYSE: TM), and priceline.com Inc. (NASDAQ: PCLN).

Other standouts from today include the following stocks:

Fossil Inc. (NASDAQ: FOSL) is down -36.8% at $79.50. The fashion accessories company revealed a weak forecast today. More coverage here.

Dendreon Corp. (NASDAQ: DNDN) is down -24.6% at $8.81. The drug maker’s earnings were not as strong as expected. More coverage here.

Avalon Rare Metals Inc. (AMEX: AVL) is down -24% at $1.67 after posting a new 52-week low of $1.58 earlier today. The rare earths miner is delaying a feasibility study. More coverage here.

Stay tuned for Wednesday. Cleveland Fed President Sandra Pianalto and Philadelphia Fed President Charles Plosser are giving speeches. We have noted the following events on the schedule (all times Eastern):

10:00 a.m. – Wholesale trade report
10:30 a.m. – EIA weekly petroleum status report
1:00 p.m. – 10-year note auction

Paul Ausick

Filed under: General, HI/LOW, Market Close Tagged: AGU, AOL, AVL, BP, CHTR, COF, CSCO, CTL, DNDN, DTG, F, FOSL, HL, M, MPEL, NWS, OMX, PCLN, PDC, RST, SYNC, THC, TM, TSLA, WEN, WYNN

AOL’s Resurrection

247wallst — Tue, 24 Apr 2012 10:41:36 +0000

AOL (NYSE: AOL) will release its earnings on May 12. No matter how well they match or fail to match consensus estimates, the company looks nothing like it did a quarter ago. AOL has begun the renaissance promised two years ago, and again for 2012. The transformation happened suddenly, unexpectedly and more quickly than most experts would have imagined.

The most obvious signs of the AOL change are the Pulitzer Prize won by The Huffington Post and the sale of 800 patents and some patent licenses to Microsoft (NASDAQ: MSFT) for $1.06 billion. Microsoft already has sold some of those patents to Facebook for $550 million. It is assumed that the social network will use them in part to batter Yahoo! (NASDAQ: YHOO) in the growing intellectual property war between them. No matter what the eventual fate of the patents is, AOL got more money for them than expected.

There is a temptation to say that AOL’s stock price has gotten ahead of itself. Shares trade at nearly $25, which is close to its high since the company relisted as a standalone public company. And the price is well more than twice its 52-week low of $10.06. Analysts continue to make the point that AOL’s primary business — its display ad operation — is slow-growing and losses money. Its ISP business, which is profitable, continues to shrink. AOL’s revenue is expected to fall almost 5% in the quarter that just ended to $526 million. Quarterly EPS for the period are expected to rise from $0.04 a year ago to $0.10 this. Investors will be particularly sensitive to whether advertising actually fell in the quarter just ended. Rival Yahoo! faces a similar problem. Social network Facebook as sucked up a great deal of display inventory, at the expense of the market share of the portal companies. Facebook’s quarterly earnings show it continues to gain revenue quickly in the display business.

AOL has promised to return much of the $1 billion it got from Microsoft to shareholders. It is not clear whether that will be in the form of a dividend, a one-time special dividend, or share buybacks. Once the money is paid, the predominant theory is that AOL shares will fall again. Quarterly numbers will also press shares up or down.

Whatever happens in the next several months, AOL is on the move in a way it has not been since it became public again. That, in and of itself, is stunning given the years of skepticism it has faced.

Douglas A. McIntyre

Filed under: Earnings Tagged: AOL, MSFT, YHOO