Wall St. has abandoned MSO shares because consumers have abandoned the firm’s products. Shares trade just over $3, down from more than $18 five years ago. That gives the company a market capitalization of only $207 million. Another sign of investor disinterest is that the stock trades, on average, less that 150,000 shares a day.

Investors lack interest for one simple reason: MSO has lost money four calendar years in a row. Revenue in 2007 was $328 million. Last year, that number fell to $221 million. First-quarter figures continued the trend. Revenue fell to $49.8 million from $52.7 million in the same period a year ago. The company had a net loss of $3.6 million.

MSO has attempted to build its some of its business on a series of partnerships with retailers and other companies that sell goods to consumers. The most recent misstep in this direction was a deal with JCPenney (NYSE: JCP) made in January. JCPenney invested $16.6 million in MSO and set a housewares partnership between the two companies. Macy’s (NYSE: M) challenged the deal because it claims to have an exclusive relationship with Martha Stewart Living. The fight has become less important that the original decision. Macy’s is healthy. JCPenney is a wreck that lost 20% of its sales last quarter. Under new CEO Ron Johnson, JCPenney will be lucky to remain a viable competitor in its range of the department store industry.

It is impossible to say with any conviction what happened to Martha Stewart Omnimedia. Its founder was once an important consumer brand on her own. That period is now nearly five years gone.

Douglas A. McIntyre

Hewlett-Packard (NYSE: HPQ) posts better-than-expected earnings and says it will fire 27,000 people. (Reuters)

Oracle (NASDAQ: ORCL) loses an important ruling in an intellectual property suit against Google (NASDAQ: GOOG). (Reuters)

Shareholders sue Facebook (NASDAQ: FB) because of trouble with its IPO. (Reuters)

Facebook may move to the NYSE (NYSE: NYX). (Reuters)

Some large investors receive warnings from analysts that projections of Facebook’s earnings have come down. (WSJ)

Chesapeake Energy (NYSE: CHK) increases drilling on the Utica Shale in Ohio. (WSJ)

Sony (NYSE: SNE) will sell part of its LCD business to Sharp. (WSJ)

The head of sales at Research In Motion (NASDAQ: RIMM) departs. (WSJ)

Yields on German bonds fall to all-time lows as capital moves to safety. (WSJ)

General Electric (NYSE: GE) says its industrial profit margin will rise in 2013. (WSJ)

Oil falls below $90 for the first time since October. (WSJ)

Royal Dutch Shell (NYSE: RDS-A) will begin to drill in far north areas of Alaska. (NYT)

Martha Stewart will once again become chairperson of Martha Stewart Living Omnimedia (NYSE: MSO). (NYT)

A deal for financial coordination among EU nations will be put off until a June meeting. (FT)

Shale gas helps the U.S. lower emissions. (FT)

Large companies turn over CEOs less than in the downturn, according to Booz & Company. (FT)

BMW will triple its output in China. (Bloomberg)

Detroit turns off street lights to save money. (Bloomberg)

Douglas A.McIntyre

The kinds of crimes these executives commit generally fall into one of two categories. In the first case, CEOs mean to profit directly from their actions, including offenses such as insider trading and embezzlement. Examples of this include Tyco’s CEO Dennis Kozlowski and Adelphia’s CEO Jonathan Rigas, who each stole millions of dollars from their companies.

In most other cases of executive white-collar crime, however, CEOs are not stealing directly from their companies. Instead, they are trying to ensure the safety of their jobs by promoting the appearance of success of their companies through fraud, false accounting and bribery, among others. In seven of the 10 cases, executives inflated company profits or failed to represent gains or liabilities. In nearly every case, the CEO was in league with other executives, many of whom also charged and convicted.

The irony is that while these corporate leaders were trying to make their companies look better, they usually succeeded only in putting them through a period of severe financial hardship, as was the case with Rite Aid. In several cases, such as Adelphia and Enron, the financial revelations were so severe, causing total bankruptcy. In a few cases, Tyco for example, the company continued to perform well, despite the crimes.

24/7 Wall St. examined the CEOs who have been arrested while heading Fortune 500 corporations.

Johnson also made several mistakes early on. The first is that the “price value” proposition made to shoppers is very complex. Some merchandise is labeled as “everyday value.” Johnson created two other discount ranges. One of these changes monthly. The other offers steep cuts in prices every first and third Friday. That is a lot for a consumer to follow, at least among those who are casual shoppers.

Johnson also set a merchandise deal with an 16.6% investment in Martha Stewart Omnimedia (NYSE: MSO). He must not have done much due diligence about Stewart’s existing deals with retailers. Macy’s promptly sued to block the arrangement. It claimed it had a preexisting one that prevented a deal with JCPenney. Johnson looked like a fool. In addition, the Stewart brand is considered old and worn out. Its value was questionable even before the Macy’s action.

Ron Johnson has been unable to convince investors that the obvious is not true. The turnaround of a major retail chain in an already crowded market of successful companies and in the midst of an e-commerce onslaught is impossible. The JCPenney stock price now reflects that realization. All of the gains made when Johnson joined have been lost. JCPenney’s share price is back where it was before his appointment was announced.

Douglas A. McIntyre

The unofficial closing bells put the DJIA down nearly 11 points to 13,268.65 (-0.08%), the NASDAQ rose more than 9 points (0.31%) to 3,059.85, and the S&P 500 fell -0.25% or more than 3 points to 1,402.31.

There were several analyst upgrades and downgrades today, including Chesapeake Energy Corp. (NYSE: CHK) cut to ‘neutral’ at R.W. Baird; ConocoPhillips (NYSE: COP) cut to ‘underperform’ at BofA/ML and started as ‘overweight’ at JPMorgan; RadioShack (NYSE: RSH) raised to ‘buy’ at Auriga; STMicroelectronics NV (NYSE: STM) raised to ‘buy’ at Goldman Sachs and raised to ‘neutral’ at Citigroup; and Assurant Inc. (NYSE: AIZ) 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: Barrick Gold Corp. (NYSE: ABX) is down -2.8% at $39.30 (more coverage here); Marathon Oil Corp. (NYSE: MRO) is down -4.4% at $28.85; Mastercard Inc. (NYSE: MA) is down -0.8% at $452.14; Allergan Inc. (NYSE: AGN) is down -4.3% at $92.29; Yamana Gold Inc. (NYSE: AUY) is down -2.6% at $14.36; Time Warner Inc. (NYSE: TWX) is down -1.6% at $37.30; The Clorox Co. (NYSE: CLX) is down -3.3% at $67.74; Rowan Companies Inc. (NYSE: RDC) is up 1.3% at $34.97; R.R. Donnelley & Sons Co. (NASDAQ: RRD) is down -7% at $11.79; Martha Stewart Living Omnimedia Inc. (NYSE: MSO) is down -1.2% at $3.41; and IAC/InterActiveCorp. (NASDAQ: IACI) is up 3.3% at $50.34 after posting a new 52-week high of $52.77 earlier today.

Tomorrow we get earnings from First Solar Inc. (NASDAQ: FSLR), Diana Shipping Inc. (NYSE: DSX), Corinthian Colleges Inc. (NASDAQ: COCO), Apache Corp. (NYSE: APA), Orbitz Worldwide Inc. (NYSE: OWW), and Western Refining Inc. (NYSE: WNR) among many others.

Other standouts from today include the following stocks:

Chesapeake Energy is down -13.5% at $16.95 after posting a new 52-week low of $15.86 earlier today. The natural gas producer reported weak results and more troubles for CEO Aubrey McClendon. More coverage here.

Comcast Corp. (NASDAQ: CMCSA) is down -1% at $30.29. The cable company reported good earnings this morning. More coverage here.

Savient Pharmaceuticals Inc. (NASDAQ: SVNT) is down -18.8% at $1.51. An analyst has said that the company insolvent. More coverage here.

Stay tuned for Thursday. Philadelphia Fed President Charles Plosser, Atlanta Fed President Dennis Lockhart, and San Francisco Fed President John Williams are speaking at a conference. We have noted the following events on the schedule (all times Eastern):

• 7:30 a.m. – Challenger job cut report
• 8:30 a.m. – New claims for unemployment benefits
• 8:30 a.m. – Productivity and costs report
• 10:00 a.m. – ISM non-manufacturing index
• 10:30 a.m. – EIA weekly natural gas storage report
• 4:30 p.m. – Federal Reserve balance sheet and money supply

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Paul Ausick

The unofficial closing bells put the DJIA up more than 28 points to 12,980.30 (0.22%), the NASDAQ rose more than 22 points (0.74%) to 2,988.97, and the S&P 500 rose 0.62% or more than 8 points to 1,374.09.

There were several analyst upgrades and downgrades today, including First Solar Inc. (NASDAQ: FSLR) maintained ‘buy’ but target price lowered to $50 at Argus (more coverage here); Mastercard Inc. (NYSE: MA) started as ‘neutral’ at UBS; Walgreen Co. (NYSE: WAG) cut to ‘underperform’ at BofA/ML; Wendy’s Co. (NYSE: WEN) cut to ‘neutral’ at Janney; and SandRidge Energy Inc. (NYSE: SD) cut to ‘sell’ at Canaccord Genuity.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Cal Dive International Inc. (NYSE: DVR) is up 8.8% at $3.16; Edison International (NYSE: EIX) is up 1.9% at $42.65 after posting a new 52-week high of $44.40 earlier today; Nektar Therapeutics (NASDAQ: NKTR) is up 2.4% at $7.35; Seaspan Corp. (NYSE: SSW) is up 6.1% at $18.32; Sotheby’s (NYSE: BID) is down -10.2% at $35.32 (more coverage here); Dresser Rand Group Inc. (NYSE: DRC) is down -1.2% at $51.91; James River Coal Co. (NASDAQ: JRCC) is up 10.7% at $6.34; Kroger Co. (NYSE: KR) is up 2.2% at $24.32; and Martha Stewart Living Omnimedia Inc. (NYSE: MSO) is down -3.2% at $4.36.

Other standouts from today include the following stocks:

American Realty Trust Inc. (NASDAQ: ARCT) is up more than 73% at $10.40. The commercial real estate company came public this morning at $6/share, along with a tender auction to purchase up to $220 million worth of shares at a price not higher than $11/share and not less than $10.50/share.

Pegasystems Inc. (NASDAQ: PEGA) is up nearly 34% at $37.50. The business software maker beat earnings estimates last night.

Cenveo Inc. (NYSE: CVO) is up nearly 26% at $4.91. The printing company reported better-than-expected earnings last night, and has kicked off a tender offer to redeem about $460 million in debt.

Tudou Holdings Inc. (NASDAQ: TUDO) is down nearly -17% at $13.30. The Chinese online video company reported better-than-expected revenues last night, but soaring costs led to a net loss.

FriendFinder Networks Inc. (NASDAQ: FFN) is down nearly -14% at $1.76. The adult social networking company’s credit rating was cut this morning by S&P.

Stay tuned for Friday. Chicago Fed president Charles Evans and St. Louis Fed president James Bullard are giving speeches. There are no other events of note scheduled for tomorrow.

Paul Ausick

Fed president Richard Fisher says there is no need for QE3. (Reuters)

Panasonic posts a quarterly loss of $2.6 billion. (Reuters)

Martha Stewart Omnimedia (NYSE: MSO) says a provision in its deal with Macy’s (NYSE: M) would let it move ahead with its new JCPenney (NYSE: JCP) deal. (Reuters)

The U.S. plans to spend $2.8 billion to upgrade the F-16. (Reuters)

The Senate will pass a bill that makes it illegal for members of Congress to engage in insider trading. (WSJ)

Glencore and Xstrata may merge because of the rise in value of natural resources. (WSJ)

Bank “rainy day” funds may be run down by a need to boost earnings. (WSJ)

PetroChina (NYSE: PTR) will buy into Canadian shale assets to ensure future supply. (WSJ)

Corporate profits have risen but the portion paid out in taxes has fallen. (WSJ)

The Government Accountability Office says many hospitals overpay for devices. (WSJ)

The Obama Administration will accelerate the approval of wind farms off the East Coast. (WSJ)

Facebook will push advertisers to use its Sponsored Stories to increase its revenue. (WSJ)

Google (NASDAQ: GOOG) will try to add to the security of its Android mobile-device software to combat hackers. (WSJ)

The head of Dow Chemical (NYSE: DOW) says Europe is in a recession. (WSJ)

New York Times (NYSE: NYT) profits fall as digital revenue fails to grow enough to offset print. (WSJ)

CME Group (NASDAQ: CME) will set an insurance program to help farmers after the collapse of MF Global. (WSJ)

A St. Louis Federal Reserve report shows that startup growth has slowed. (WSJ)

Excess natural gas supplies could cause a price crash in the spring. (WSJ)

The Securities and Exchange Commission allows big banks to avoid some sanctions. (NYT)

The National Institute of Economic and Social Research says the UK will be in recession this year. (NYT)

Greek tax reform has not overcome the nation’s inability to collect taxes. (NYT)

China may put money into the European Stability Mechanism/European Financial Stability Facility to help the region. (FT)

In testimony before Congress, Bernanke expresses concern about the growth of the economy. (FT)

Greece faces more trouble in its effort to remain in the eurozone as its rescue falters. (Bloomberg)

Deutsche Bank will not take European Central Bank loans in a move to protect its reputation. (Bloomberg)

Douglas A. McIntyre

Several media reports say that Johnson will lay off several thousand workers. The cuts make sense from a financial standpoint, but their announcement should have been handled better. Press leaks made it appear that JCPenney is desperate to cut costs, which is probably true. There is no need to telegraph the retailer’s problems, though. It could have shown the need to carefully cut costs as part of a broader strategy.

JCPenney set a deal to distribute Martha Stewart Omnimedia (NYSE: MSO) products in its stores. It took a 16.6% equity position in the media company for which it paid $38.5 million. Rival Macy’s (NYSE: M) says it has an exclusive arrangement for Stewart products that dates from 2007. JCPenney management, which includes Johnson, must have known of the risk of a Macy’s action. And Martha Stewart’s brand is aged. Her company is in trouble, which probably would have accelerated without the JCPenney infusion. Now, JCPenney has the distraction of a legal battle that involves its larger and more successful rival.

In addition to these tactical problems, JCPenney’s fortunes continue to erode. Same-store sales are expected to show erosion for the past quarter. Revenue dropped 2.3% in the five weeks that ended December 31, compared to the same period last year.

JCPenney will host a two-day discussion about its prospects on January 25 and January 26. It has been described by the company as an event at which senior management “will outline the Company’s plan to transform JCPenney into America’s favorite store.” The characterization of the event is grandiose. It implies that new management already has most, if not all, of the answers for stemming a long-term decline. The change actually will have to be very gradual. JCPenney’s sales and brand are too badly damaged. Recent events show that the task of fixing the company becomes more difficult with each passing week.

Douglas A. McIntyre

Macy’s (NYSE: M) sues Martha Stewart Omnimedia (NYSE: MSO) over a deal the media company did with JCPenney (NYSE: JCP) that may have broken an exclusivity agreement. (Reuters)

India’s central bank shifts it emphasis from inflation to growth. (Reuters)

Texas Instruments (NYSE: TXN) reports its chip demand has risen, but it will shutter two factories. (Reuters)

International Monetary Fund leader Largarde warns that the eurozone must promote growth in addition to austerity. (WSJ)

The European Union agrees to begin to embargo Iran oil. (WSJ)

The Organisation for Economic Co-operation and Development says in its “Going for Growth” report that nations should cut tax benefits for mortgages. (WSJ)

Dice Holdings (NYSE: DHX) reports that Silicon Valley engineer pay moved beyond an average of $100,000. (WSJ)

AT&T (NYSE: T) sets plans to give T-Mobile $1 billion in spectrum as part of a deal breakup pact. (WSJ)

A second bailout of Portugal is likely. (WSJ)

AMR, parent of American Airlines, tells employees that vested benefits will not be undermined if pension programs are ended. (WSJ)

Falling demand for coal will undermine industry profits. (WSJ)

Lee Enterprises will leave Chapter 11 with much of its long-term debt deferred. (WSJ)

Federal and state authorities are close to a deal with banks over mortgage violations that could total $25 billion. (WSJ)

The Energy Information Administration expects oil prices to reach an average of $146 by 2035. (WSJ)

A mortgage deal between banks and the government could cut one million mortgages by about $20,000 each. (NYT)

Eurozone finance ministers are closer to an arrangement to create a permanent bailout fund. (NYT)

Germany may back a permanent bailout fund for the eurozone in exchange from more stringent budget rules. (FT)

NYSE Euronext (NYSE: NYX) and Deutsche Boerse may be unable to block an European Commission veto of their merger. (Bloomberg)

S&P cuts Societe Generale’s ratings. (Bloomberg)

Douglas A. McIntyre

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