Netflix (NASDAQ: NFLX) is still the leader in the streaming video business, despite recently stumbles. It has more than 20 million subscribers. Amazon.com (NASDAQ: AMZN) and Apple (NASDAQ: AAPL) offer similar products. Kiosk firm Redbox bought the old Blockbuster Express from NCR (NYSE: NCR) and set a video on demand joint venture with Verizon (NYSE: VZ) to compete with Netflix. The Redbox brand is bolstered by it 25,000 rental locations.

The streaming VOD business has not knocked the set-top box from on top of most televisions. Cable TV, which added VOD several years ago, still holds the high ground along with improved satellite TV. AT&T (NYSE: T) and Verizon have tried to crowd into the living room with fiber to the home products that are bundled with superfast broadband to make them more attractive,.

And the streaming business is no longer isolated to the home. Many streaming products work on PCs. More challenging to the entire streaming industry is that people are willing to watch video on smartphones, despite the tiny size of their screens.

Comcast faces more than Netflix as competition. VOD and video streaming now have a small army of competition, and it is hard for any one of them to show that it has a product substantially better than all the others.

Douglas A. McIntyre

Aeroflex Holding Corp. (NYSE: ARX) Raised to Conviction Buy List at Goldman Sachs.
Amerisafe, Inc. (NASDAQ: AMSF) Maintained Underperform as Bear of the Day at Zacks.
Applied Materials Inc. (NASDAQ: AMAT) Raised to Outperform at Oppenheimer.
Arcelor Mittal (NYSE: MT) Raised to Buy at Citigroup.
BP PLC (NYSE: BP) Started as Underweight at Morgan Stanley.
British American Tobacco plc (NYSE: BTI) Raised to Overweight at CRedit Suisse.
Carrizo Oil & Gas Inc. (NASDAQ: CRZO) Started as Outperform at Oppenheimer.
China Life Insurance Co. Ltd. (NYSE: LFC) Raised to Buy at Goldman Sachs.
Dole Food Company Inc. (NYSE: DOLE) Raised to Overweight at JPMorgan.
Intermune, Inc (NASDAQ: ITMN) Started as Outperform at Credit Suisse.
LinkedIn Corporation (NYSE: LNKD) Started as Hold at Argus.
McDonald’s Corporation (NYSE: MCD) Reiterated Buy with $102 target at Argus.
The McGraw-Hill Companies, Inc. (NYSE: MHP) Raised to Buy at Argus.
NCR Corporation (NYSE: NCR) Started as Buy at Oppenheimer.
Onyx Pharmaceuticals Inc. (NASDAQ: ONXX) Raised to Buy at Goldman Sachs.
Patterson-UTI Energy Inc. (NASDAQ: PTEN) Raised to Outperform as Bull of the Day at Zacks.
Plains All American Pipeline, L.P. (NYSE: PAA) is the Value stock of the day at Zacks.

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JON C. OGG

An Apple (NASDAQ: AAPL) patent lawyer may leave the firm (Reuters)

China bank lending picked up. This could cause more inflation (Reuters)

Cisco (NASDAQ: CSCO) may fire 10,000 workers (Reuters)

Sprint Nextel (NASDAQ: S) has received subpoenas from nine states with regard to the AT&T (NYSE: T) buyout of T-Mobile (Reuters)

Apple filed new patent claims against HTC (Reuters)

Markets were upset over concerns that Italy’s debt situation was worse than thought (WSJ)

Hedge funds have started to invest more in private internet companies (WSJ)

China Mobile (NYSE: CHL) plans to build out 4G networks (WSJ)

Shareholders sued News Corp over the effects of the UK scandals (WSJ)

NCR will buy Radiant Systems for over $1.1 billion (WSJ)

Cisco will update its high-end switching product (WSJ)

Amazon (NASDAQ: AMZN) will try to get the online sales tax issue on the statewide ballot in California (WSJ)

EU finance ministers suggested that bailout facilities be expanded (NYT)

As part of an $8.2 billion mortgage settlement Bank of America (NYSE: BAC) will turn over home loans to other customer, which could accelerate foreclosures (NYT)

Starbucks (NASDAQ: SBUX) reorganized to drive overseas growth (NYT)

Dunkin Donuts will raise $460 million in an IPO (NYT)

Banks have offered attractive rates to get more hedge fund business (FT)

Alcoa (NYSE: AA) earnings doubled (FT)

China’s satellite surveillance technology has begun to rival America’s (FT)

News Corp has lost $7 billion in market cap over the last four days (Bloomberg)

Portugal’s GDP will fall this year and next because of austerity measures (Bloomberg)

The People’s Bank of China said money supply grew in the People’s Republic last month (Bloomberg)

Moody’s said a number of Chinese companies have poor governance (Bloomberg)

Douglas A. McIntyre

Now, the company is fighting with bondholders over terms for restructuring Blockbuster’s debt of about $900 million. The dispute, according to The Wall Street Journal, involves a group of bondholders who are willing to eliminate $300 million in debt for a “lion’s share” of Blockbuster’s new equity. The sticking point is that the group is willing to invest $30 million in new money in the re-tooled Blockbuster, but Blockbuster wants $100 million.

The company is also negotiating with bondholders who are owed around $630 million, trying to get the creditors to cancel $20 million in quarterly amortization payments. Apparently, these bondholders, who are senior to the other group, want their “lion’s share” of the company as well in exchange for eliminating these payments.

A third option is that NCR Corp. (NYSE:NCR) would save the day with an investment in Blockbuster. NCR makes the video rental machines for Blockbuster, which has installed more than 4,000 of the machines as of the end of the first quarter. NCR has offered no comment on the idea.

Blockbuster is also the target of an angry shareholder who is putting himself up for a board seat. The shareholder, Gregory Meyer, owns 620,000 shares of Class A common stock (0.44%) and 25,000 shares of Class B common stock. Blockbuster issued a statement this week saying that electing Meyer “would be a mistake.”

It wouldn’t be the first mistake that the company’s shareholders have made. Blockbuster shares are trading today at $0.35. Tell me that’s not the result of a series of mistakes.

Paul Ausick

AOL Inc. (NYSE: AOL) Started as Outperform at Bernstein.
Burlington Northern Santa Fe (NYSE: BNI) Cut to Neutral at Baird.
Corning Inc. (NYSE: GLW) Started as Buy at Jefferies.
F5 Networks (NASDAQ: FFIV) Cut to Market Perform at William Blair.
NCR Corp. (NYSE: NCR) Raised to Overweight at JPMorgan.
Nokia (NYSE: NOK) Raised to Hold at Societe Generale.
SunTrust Banks (NYSE: STI) Started as Buy at Janney (late Thursday).
TJX Cos. (NYSE: TJX) Started as Perform at Oppenheimer.
ValueClick (NASDAQ: VCLK) Started as Hold at Lazard.
Yahoo! (NASDAQ: YHOO) Raised to Buy at Kaufman Bros.

You can join our open email distribution list to hear more news on key analyst calls, top day trader alerts, mergers and acquisitions, Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

Jon C. Ogg

Blockbuster has a new rival. RedBox, which has over 20,000 kiosks set up to allow customers to rent DVDs for $1, is taking business from Blockbuster stores.

Blockbuster is expanding its own kiosk business with help from NCR (NYSE:NCR) which builds cash machines. NCR is about to announce that it will buy DVD kiosk operator DVDPlay Inc which has 1,300 kiosks, according to The Wall Street Journal. The move should allow NCR to have almost 4,000 kiosk locations by the end of the year. The Blockbuster brand may help increase customer traffic to these points of sale. That is clearly the gamble that NCR is taking.

The kiosk business may help NCR’s revenue and profits because it is net new revenue to the company. For Blockbuster, the math is much more complex. The rental chain’s annual revenue will be close to $4 billion in its current fiscal year. Kiosk sales may not be nearly enough to offset the sales attrition at its existing stores.

Blockbuster’s other challenge is to get net new customers. It is not clear that the firm benefits from having existing customers renting from kiosks rather than its store locations. It has to maintain many of its stores even if they are expensive to run. A rental from a kiosk may simply cause store-based rental traffic to drop further.

The kiosk business may be profitable, but is probably not large enough to do Blockbuster much good.

Douglas A. McIntyre

Reuters:   Citigroup (NYSE:C) could sell $20 billion in shares soon.

Reuters:   Hershey (NYSE:HSY) is near a decision on Cadbury (NYSE:CBY).

Reuters:   GM named a new head of Chevrolet.

WSJ:   A large number of Americans are renting homes instead of owning them.

WSJ:   More firms in the US and UK are putting limits on executive pay.

WSJ:   Apple (NASDAQ:AAPL) is changing the way iTunes works to extend its reach on the internet.

WSJ:   Some hedge funds made large sums betting against the sovereign debt of weak countries.

WSJ:   Credit Suisse (NYSE:CS) named a new chairman.

WSJ:   VW bought a stake in Suzuki.

WSJ:   Oracle (NASDAQ:ORCL) will defend its deal to buy Sun Microsystems(NASDAQ:JAVA) in meetings with the EU.

WSJ:   AT&T (NASDAQ:T) is facing problems with the large amounts of data being sent over its 3G network.

WSJ:   IBM (NASDAQ:IBM) is adding to its cloud computing capacity.

WSJ:   AOL (NYSE:AOL) becomes a public company today.

WSJ:   Wholesale sales increased as did inventories.

WSJ:   Neiman Marcus is working on plans to sell less expensive clothes.

WSJ:   Large oil companies are aggressively seeking to drill in Iraq.

WSJ:   Medtronic (NYSE:MDT) received a subpoena over one of its heart devices.

WSJ:   NCR (NYSE:NCR) and Blockbuster (NYSE:BBI) will increase kioks in a challenge to Redbox.

WSJ:   China is trying to balance more economic stimulus with too much liquidity in markets.

WSJ:   Pfizer/Wyeth and Merck/Schering-Plough (PFE)(MRK) merger deals are being probed for insider trading.

WSJ:   The IPO market in Hong Kong is starting to falter.

NYT:   AIG (NYSE:AIG) is returning to success selling annuities but it is doing so though operations that do not use its name.

NYT:   Chinese consumers are buying goods aggressively as the stimulus package there helps the middle class.

NYT:   CIT exited Chapter 11.

NYT:   Ford (NYSE:F) may use stock to pay its obligation to a retiree fund.

NYT:   The CEO of GE (NYSE:GE) attacked executive greed.

Bloomberg:   A new poll shows Americans want the government to spend on jobs and send the tax bill to the rich.

Douglas A. McIntyre

Barclays (BCS) Cut to Sell at Societe Generale.
Cadbury (CBY) Cut to Underweight at JPMorgan.
CBS (CBS) Cut to Sell at UBS.
China Life Insurance Co. Ltd. (LFC) Cut to Neutral at UBS.
China Mobile (CHL) Cut to Neutral at UBS.
Diebold (DBD) Cut to Neutral at Baird.
Emulex (ELX) Cut to Sector Perform at RBC.
NCR (NCR) Cut to Neutral at Baird.
Philips (PHG) Cut to Sell at Societe Generale.
Quality Systems (QSII) Cut to Sell at UBS.

JON C. OGG

• ACADIA Pharmaceuticals (ACAD) Raised to Neutral at Banc of America.
• ACE Limited (ACE) Raised to Outperform at Wachovia.
• Asset Acceptance Capital (AACC) Cut to Underperform at Jefferies.
• Bankrate (RATE) Cut to Hold from Buy at Collins Stewart.
• Gymboree (GYMB) Cut to Market Perform from Outperform at FBR.
• Kimco Realty (KIM) Cut to Neutral from Outperform at Credit Suisse.
• Marsh & McLennan (MMC) Raised to Buy from Hold at Citigroup.
• Marvel Entertainment (MVL) Started as Market Weight at Thomas Weisel.
• NCR (NCR) Raised to Outperform from Neutral at Baird.
• Willis Group (WSH) Cut to Hold at Citigroup.

Jon C. Ogg
July 8, 2008

• AGCO Corp. (NYSE: AG) Raised to Outperform from Neutral at Credit Suisse.
• American Axle (NYSE: AXL) raised to Buy at Citigroup.
• Anheuser-Busch (NYSE: BUD) cut to Hold at Deutsche Bank.
• Ascent Solar Tech (NASDAQ: ASTI) Started as Outperform at Cowen.
• Chipotle Class (NYSE: CMG) Started as Overweight at JPMorgan.
• Edison International (NYSE: EIX) Cut to Neutral from Buy at Goldman Sachs.
• Exelon Corp. (NYSE: EXC) Raised to Buy from Neutral at Goldman Sachs.
• General Motors     (NYSE: GM) cut to Hold at Citigroup.
• GlaxoSmithKline (NYSE: GSK) Cut to Underweight at Morgan Stanley.
• NCR Corp (NYSE: NCR) started as Overweight at Lehman Brothers.

Jon C. Ogg
May 27, 2008