iPhone-YouTube deal: Bunch of hype?

Filed under: Google (GOOG), Apple Inc (AAPL), Starbucks (SBUX), Nokia Corp. (NOK), iPhone

Today, Apple (NASDAQ: AAPL) announced that Google's (NASDAQ: GOOG) YouTube will be on the iPhone.

Yes, that's the kind of thing a PR person likes to handle. How can it not generate buzz?

But is this mostly hype?

I had a chance to talk to Dipanshu Sharma, who is the founder of V-Enable and an expert on wireless, and he thinks it is:

"Apple is trying all kinds of hype pre-launch, to the point that now they are misguiding the consumer. YouTube launched a mobile version of their site last week, which works on pretty much on any handset with a high speed network connection. To run a similar experience on iPhone, the user will have to be at a Wi-Fi zone because the cellular radio that it comes with is 2.5 G (EDGE ~100Kbps), which is very slow for video. If apple is expecting their customers to be sitting at a Wi-Fi Zone and log in to a T-Mobile hotspot at Starbucks (NASDAQ: SBUX) to watch youtube, they are taking to small fraction of early adopters. It's not the mass market that has embraced the simplicity of the iPod. Creating false expectations may prove costly to Apple and its shareholders. I had a Nokia (NYSE: NOK) N80 with Wi-Fi and the only time I used Wi-Fi instead of EDGE was when I wanted to see if Wi-Fi worked. It's too much of a hassle to tell the phone which connection to use."

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
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New York Times bumps up newstand price by 25 cents

Filed under: Newspapers, New York Times'A' (NYT)

If you were in an industry that was losing customers in droves to less-expensive web-based alternatives, what would you do to try to compete? If you're the New York Times (NYSE: NYT) you would raise the price, widening the price/value gap between your product and the ones that are killing your business. The New York Times has decided to raise the price of the newspaper by 25 cents to $1.25.

The Wall Street Journal recently announced a similar step, raising their newsstand price from $1 to $1.50.

According to the Associated Press, "Newspaper publishers throughout the country are looking for additional ways to increase revenues amid a slump in advertising as marketers shift spending to other media and online. Last week the Times reported its advertising revenue for May declined 8.5 percent from the same month last year and 4.4 percent so far this year."

It looks like the industry, or at least the Journal and the Times, is admitting that it's losing it's relevance, and is going to focus on quick fixes to increase earnings rather than longer-term strategies to keep newspapers alive.

But there's probably nothing wrong with increasing the price, and the Times expects $7 million to $8 million in additional revenue in 2007, and $14 million to $16 million annually thereafter.

What will be annoying is digging around for a quarter, or waiting for a clerk to hand over the change. Maybe this will actually increase subscriptions.

Gateway recalls 14,000 laptop batteries

Filed under: Bad news, Products and services, Industry, Consumer experience, Apple Inc (AAPL), Dell (DELL), Sony Corp ADR (SNE)

Just when you thought the exploding lithium-ion battery problem was over, Gateway, Inc. (NYSE: GTW) has thrown its laptop into the ring.

Gateway announced yesterday that it is voluntarily recalling around 14,000 Samsung-made laptop battery packs that were sold for three months in 2003. The problem, according to Gateway, is that the lithium-ion battery packs can overheat, potentially causing a fire.

That's hot.

Over 10 million lithium-ion batteries have been recalled worldwide since 2006. The recall has hit computer companies blindly, including Sony Corp (NYSE: SNE), Dell Inc (NASDAQ: DELL), Apple Inc (NASDAQ: AAPL), Lenovo Group (OTC: LNVGY), and Toshiba Corp (OTC: TOSBF). Now Gateway.

Continue reading Gateway recalls 14,000 laptop batteries

Is GE a turnaround in the making?

Filed under: General Electric (GE), Boeing Co (BA)

General Electric Company (NYSE: GE) has a long, long way to go before attaining its 2000 high of $60 per share. This company has vastly under performed the markets, its peer group and any other measuring stick investors want to use. GE was a glamorous stock in the 1980's and 1990's under the watchful eye of CEO guru Jack Welch. He may have gotten out just in time!!

General Electric does suffer from the laws of large numbers.With a $400 billion market capitalization and a revenue run-rate this year of $175 billion, growing this beast is like moving the mountain. Actually, moving the mountain might be easier!. CEO Jeffrey Immelt, a lifer at GE, was hand-picked by Jack Welch back in early 2001, and Immelt took the reigns in late 2001, just after 9-11. His mission is formidable and onerous as GE flourished under Welch. Immelt's tenure has been marred by an under-performing company with a similar under-performing stock. Many shareholders and analysts, including yours truly, have done the back-of-the-envelope analysis and can say that GE broken up into various public units is worth more than $50 per share. The stock is currently at $39.15, a good 20-25% below break up value.

I have argued that breaking up GE would be good for the shareholders and its employees. New CEOs and boards of directors for the separate entities would bring new ideas, fresh perspectives and individual company expectations. GE is not only an American company, but a global giant. GE has operations and sell its products world wide.

Continue reading Is GE a turnaround in the making?

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'Sopranos' yard sale: same junk as any other yard sale in Jersey

Filed under: Television, Time Warner (TWX)

For those die-hard Sopranos fans that aren't still up in arms about last week's controversial season finale, you can enjoy the luxurious experience of heading to a warehouse in Queens to scoop up paraphernalia from the popular show's set. Furniture, rugs, lamps, books, and other items that decorated the Jersey-based sets will be available for purchase, but sources close to the show say the more "iconic" items won't be up for grabs.

What one defines as "iconic" is anybody's guess, but a Daily News reporter surmises that you probably won't be able to nab Tony's ubiquitous bathrobe or the soiled bowling-ball bag that once hid Ralphie's severed noggin. Paulie's velour track suits? One can only hope.

The sale kicked off Tuesday morning and will run through Monday.

As for the future of Time Warner Inc (NYSE: TWX)'s HBO network, rumors of a rush of cancellations have been running rampant, but there have yet to be any hard figures released. I'm willing to bet that many such threats were idle, and while HBO subscriptions might see a modest drop off with The Sopranos bidding arrivederci, plenty of viewers will remain loyal, due to laziness, tradition, loyalty, a desire to catch the big boxing matches when they air, or a deep admiration of Big Love's Bill Paxton. Well, the first four reasons are valid, at least...

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.

Pay attention to risk factors in prospectuses and 10-Ks

Filed under: Newspapers, Columns

When analyzing a potential investment, one of the best places to find information about the risks is, amazingly, in the risk factors section of the company's prospectus or 10-K. While much of what you will find there is boiler plate and probably not worth worrying about too much, anything out of the ordinary (concerns that you don't find in the risk factors disclosures for most companies) might be worth looking into.

For instance, renowned short-seller Jim Chanos made a ton of money shorting companies like Party Gaming. In an interview with the Financial Times, he was asked how he knew to short online gambling stocks: "All I had to do was read the prospectuses of some of the companies that went public in London. They should have put a skull and crossbones on Party Gaming's . . . The prospectuses clearly said that under US law their activities may be deemed to have been illegal, which is what happened."

Companies disclose pretty much every risk imaginable in their risk factors, and a lot of times you'll find something that you might not have thought of. Sometimes, you can even find, as Chanos did, a risk that the market may not be recognizing, and have a potential short candidate.

To learn more about analyzing the risk factors, take a look at this recent article from the Wall Street Journal.

FedEx flashes a caution signal

Filed under: Earnings reports, Forecasts, FedEx Corp (FDX), United Parcel'B' (UPS)

So you think monitoring the more than 100 data points that economists and analysts follow to continually take the pulse of the U.S. economy is a bit involved?

Then keep an eye on FedEx (NYSE: FDX). FedEx is a "rough data point", or a quick indicator for the strength of the U.S. economy, due to its comprehensive delivery/freight company status. Deliveries and freight movement are intrinsic to commerce, and a sustained increases in the former generally means an increase in economic growth.

Hence, Wall Street closely monitors FedEx's results and right now it is flashing a caution light. FedEx Wednesday lowered EPS guidance for Q1 F2008 to $1.45-$1.60 compared to the Reuters consensus estimate of $1.61. FedEx also said it sees earnings growth below the company's long-term 10%-15% target. FedEx shares were up $1.95 to $110.01 in Wednesday afternoon trading.

Fly Analysis: The significance? The FedEx revision provided another argument point for the bears, or those who think the market will decline in the period ahead. FedEx also said it expects results in the quarters ahead to be restrained by a slowing U.S. economy. That fact, combined with the housing sector's correction, elevated energy prices, and the recent rise in short-term interest rates, have helped support the bear's thesis that recession concerns are not misplaced, and that caution regarding deploying new money to buy stocks should be the investor's appropriate stance.

Why Circuit City could be losing for years

Filed under: Bad news, Blogs, Competitive strategy, Best Buy (BBY), Circuit City Stores (CC)

As Brian White posted this morning, Circuit City Stores (NYSE: CC) reported a big loss -- and even more ominously it withdrew its guidance. This brought back memories of what many publicly-traded high tech companies said after the dot-com crash -- they had no "visibility."

Why is Circuit City in trouble? I see three broad trends which threaten its bottom line and its ability to foresee when it will recover:

  • Consumer electronics is a complementary good -- that is, the purchase of consumer electronics typically accompanies a larger purchase. Specifically, when people buy new houses, they also tend to buy new flat screen TVs. So when the housing market is expanding, so do purchases of consumer electronics to fill up the family rooms and kids' rooms of those newly purchased homes. Thus it should come as no surprise that when the housing market collapses, the sales of those complementary goods should follow suit.
  • Competition in consumer electronics is intense. The popularity of consumer electronics products -- such as the flat screen TVs -- has attracted new entrants which compete by slashing prices. Thus what had been a growing and profitable line of business has become one with shrinking revenues and narrowing margins.
  • Circuit City is poorly managed. Circuit City is not a particularly well-managed company. While cost cutting is a natural response to reduced product margins, the way Circuit City cut costs was not that bright. As I've posted, by getting rid of 3,400 of its top paid sales people, Circuit City also caused its customers to follow the sales people to their new employers. And many of those sales people decamped to Best Buy Co., Inc. (NYSE: BBY). So Circuit City's cost reduction strategy has indeed reduced its costs but it may have reduced its revenues by even more.

I hate to say this, but with the ongoing collapse of the housing market, it could be five to eight years before enough new people start to buy a sufficient number of new houses to spur demand for Circuit City's consumer electronics. This makes me think that Circuit City is a stock I'd avoid for quite some time -- unless a private equity firm decides to take it out.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Best Buy or Circuit City.

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Wednesday Market Rap: HD, XOM, GE, KFT, and GM

Filed under: General Electric (GE), General Motors (GM), Home Depot (HD), Exxon Mobil (XOM), Options, Kraft Foods'A' (KFT), Western Union (WU)

Markets lost ground today closing about 1% lower as oil prices eased on higher investory numbers and higher bond yields. Darden Restaurants (NYSE: DRI) fell $3.41 (-7%) to $43.44 after reporting a fourth quarter loss.

Western Union (NYSE: WU) fell $1.24 (-6%) to $21.21. Home Depot (NYSE: HD) rose $1.76 (5%) to $40.03 on a sale of its supply business. Exxon Mobil Corporation (NYSE: XOM) fell $3.02 (-4%) to $82.82 as oil prices fell.

The NYSE had volume of 3.2 billion shares with 719 shares advancing while 2,565 declined for a loss of 121.44 points to close at 9,905.08. On the NASDAQ, 2 billion shares traded, 851 advanced and 2,186 declined for a loss of 26.8 to 2,599.96.

General Electric (NYSE: GE) saw heavy volume on the July 35 calls (GEGG) with over 95,000 options trading while the December 40 strike moved (GELH) with over 33,000 calls. General Motors (NYSE: GM) saw heavy volume on the September 35 calls (GMIG) with over 27,000 options trading. Kraft Foods (NYSE: KFT) saw volume on the July 37.50 calls (KFTGU) with over 24,000 options trading. Home Depot (NYSE: HD) saw heavy volume on the August 40 calls (HDHH) with over 22,000 options trading. In options there were 4.9 million puts and 5.4 million calls traded for a put/call open interest ratio of 0.91

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Do you have any deadwood in your portfolio? Check out the 18 Warning Signs That Tell You To Dump A Stock.

Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

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Oil falls on inventory data

Filed under: Exxon Mobil (XOM), Chevron Corp (CVX), ConocoPhillips (COP), Oil

A couple of days ago it looked as though we were well on our way to $70 oil, but prices have fallen over $1 a barrel today following this week's inventory data from the Energy Information Administration.

In its report the EIA indicated that oil stockpiles last week rose by an impressive 6.9 million barrels and gasoline reserves increased by 1.8 million barrels. With both oil and gasoline inventories up traders have pushed oil down $1.08 to $68.02 and for the moment has put the brakes on the recent bullish run for oil.

Refinery production has been a vital area of concern this year with American refineries being unable to maintain output levels running above the critical 90% range. Even though gasoline inventories were able to jump last week, America's refineries are not able to take responsibility for the recent upward move. The EIA reported that refinery output actually fell last week 1.6% down to 87.6%. The truth behind last week's increase was actually a rise in supplies of blending components for gasoline.

Even with today's inventory data and subsequent pullback in oil prices I do not think that we have seen the end of this current bull oil market. For now things are cooling off, but let's not forget that we are still only at the beginning of the summer driving months, and with all the violence that is taking place in the Middle East these days, there are still plenty of factors that could, and should, lead to higher prices by the end of the month. We may see oil pull back another couple of dollars down to $66, but I for one will not bet against $70 oil by the end of the month just yet.

Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.
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Kerkorian dumps plans for joint venture with Sol Kerzner

Filed under: Deals, Industry, Competitive strategy, DaimlerChrysler (DCX), General Motors (GM)

Today's Wall Street Journal reports that Kirk Kerkorian has dropped his plans to acquire two of MGM Mirage's (NYSE: MGM) gems, the Bellagio Hotel and the $7.4 billion project City Center, opting instead for a joint venture with Sol Kerzner to create a multi-billion dollar resort at the north-end of the Las Vegas strip.

That news today sent MGM shares down more than 10% in pre-market trading. The stock currently sits at $80.97, down 6.4% this afternoon.

Kerkorian's announcement to acquire the Bellagio and City Center last month seemed to put all of MGM in play, with the company forming a special committee to advise management on how to proceed. Shares of MGM Mirage -- which Mr. Kerkorian owns a 56% stake in -- have jumped as much as 27% since last month's offer.

The real question: Is MGM Mirage still a takeover target? There are a number of analysts who remain convinced that MGM is a prime candidate, possibly by private-equity players looking for land deals. MGM owns a third or more of the Vegas Strip and the land could fetch a pretty penny -- BMO Capital believes a successful bid for MGM could be worth more than $100 a share.

But what about Kerkorian? Dana Cimilluca, a writer for the WSJ, considers Kerkorian's decisions a sign that it may be time for him to retire. She says that Kerkorian has now swung and missed three times: The unsuccessful attempt to ally with another auto maker--General Motors (NYSE: GM), the failed Chrysler (NYSE: DCX) bid and now the retreat from MGM's two gems.

That may seem harsh, but hey, the man is 90.

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Britain bans sales of Take-Two's Manhunt 2, but what's next?

Filed under: Bad news, Industry, Law, Consumer experience, Rants and raves, Sony Corp ADR (SNE)

Take Two Interactive's (NASDAQ: TTWO) Rockstar Games was expected to release its latest game, Manhunt 2, on July 10 for Nintendo's (OTC: NTDOY) Wii and Sony Corporation's (NYSE: SNE) PlayStation 2 consoles. However, Britain, America's friendly Democratic neighbor, has banned sales for -- get this -- "unremitting bleakness and callousness of tone."

I think that is how my mother referred to my dress code back in high school.

The banning comes after a 14-year old British schoolboy was murdered by a friend, Warren Leglanc, age 17. The parents of the schoolboy blamed a video game for their son's death. Patric Pakeerah, the father of the murdered boy, welcomed the decision, saying "It's a video instruction on how to murder somebody; it just shows how you kill people and what weapons you use."

I'd hate to see if Mr. Pakeerah ever watched prime-time television. Or the news, for that matter.

Continue reading Britain bans sales of Take-Two's Manhunt 2, but what's next?

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Coley Pharmaceutical drug given the ax

Filed under: Bad news, Products and services, Pfizer (PFE)

Earlier this afternoon, Coley Pharmaceutical Group Inc (NASDAQ: COLY) announced that Pfizer Inc (NYSE: PFE) would discontinue the development program of an investigational drug compound - PF-3512676 - in combination with cytotoxic chemotherapy for the treatment of lung cancer. After two Phase 3 clinical trials and two Phase 2 clinical trials, an analysis by an independent Data Safety Monitoring Committee found that there was "no evidence that PF-3513676 produced additional clinical efficacy over that achieved" with cytotoxic chemotherapy alone. The DSMC said that the "risk-benefit profile did not justify continuation" of the compound trial, and Pfizer, apparently, agreed.

This news comes as a huge blow to Coley, whose main thesis drug is PF-3512676, and who is trying to become a force-to-reckon-with in the oncology field. In a statement, president and CEO Robert L. Bratzler, Ph.D., said that the announcement was "surprising, based on the signs of clinical activity observed."

On the announcement, shares of Coley were down approximately 60%. As of March 31, the company had $3.35 per share in cash. Coley will be hosting a conference call and webcast this afternoon at 4:30 p.m. (EST) to discuss this development.
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Burning up at the bagel shop - Home Depot & Nardelli won't go away

Filed under: Rants and raves, Apple Inc (AAPL), Home Depot (HD), Berkshire Hathaway (BRK.A), Scandals, Columns, FedEx Corp (FDX), Entrepreneurs

It wasn't the bagels burning up, it was the owner.

Before work I often stop by New York Bagel & Deli (NYBD) in Santa Monica for coffee, a bagel and the word on the street. Well this morning I got an earful from my friend Brian Gruntz, the owner, about the pay and severance package Bob Nardelli received for running The Home Depot (NYSE: HD)...before bailing out after failing to increase shareholder value in terms of share price. Hundreds of millions of dollars...for what?

Even though it is almost six months later, Brian still finds it outrageous that Nardelli and other CEOs are rewarded for contributing nothing to their company's bottom line, or shareholders', and often negative results due at least in part to their failure of leadership. Brian went on to rant about a story he read somewhere linking CEO performance and the construction of personal mansions, which start to pop up, like oracles, six months before their demise.

Continue reading Burning up at the bagel shop - Home Depot & Nardelli won't go away

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High-tech home gadgets: As housing fades, could these stocks shine?

Filed under: Forecasts, Consumer experience

Even as the housing boom fades, there's an argument to be made that people will get more interested in fixing up the house they have now that they are less obsessed with flipping condos in Florida.

Of course, that may not apply to the homeowners who are having trouble making payments on their hiked-up adjustable rate mortgages. But since the rich only get richer these days, it stands to reason that there would be more people willing and able to spend thousands on the sort of home appliance you could just as easily pay a few hundred for at Sears.

That makes investing in the companies that make high-tech home gadgets (see AOL slide show of some of the latest gear) an interesting proposition. If the housing market really tanks (it hasn't yet, I'd argue), these stocks would be somewhat insulated since none of them are direct plays on real estate. But if the housing market shakes its current limp and picks up steam, companies that make expensive gear for the digital home could do quite well. Meantime, some of these stocks are much cheaper than they were a short while ago.

Continue reading High-tech home gadgets: As housing fades, could these stocks shine?

Hansen has impeccable timing

Filed under: Earnings reports, Other issues, Hansen Natural (HANS)

Hansen Natural Corporation (NASDAQ: HANS), after sneaking out a disapppointing earnings report last night which caused the stock to drop when it opened this morning, disclosed today that it completed an internal stock option review. Since the review found "no evidence raising concerns" of internal misconduct, the stock naturally bounced right back to its sky-high levels -- the stock is actually up almost 2% today, despite a 3 cent earnings miss.

It looks like Hansen's stock is still riding high on a Monster Energy drink buzz, but with earnings results like last night's, how long can it last?
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NASDAQ disses Dell: Computer maker gets its third delisting notice

Filed under: SEC filings, Bad news, Dell (DELL)

Depending on who you ask, Dell, Inc. (NASDAQ: DELL) is making either slow or fast progress in returning to the top spot in global PC sales (hey, it just started in February, right?). But the troubles keep on multiplying. Dell's widely chattered-about internal accounting audit continues, as does that nagging SEC investigation. Meanwhile, exasperated shareholders who have no real idea of the financial health of their investment, are fast losing patience.

Meanwhile, another insult. Dell just received its third delisting notice from the NASDAQ stock exchange. The last notice was sent in April, and, like the first time the previous September, the company begged for a reprieve while it got its financial house in order. Which, um, might be any time now.

Dell has already asked to continue its listing as it works through its accounting review. But now NASDAQ is likely to lose patience with the computer maker, along with its shareholders. Will the exchange continue to twiddle its thumbs waiting for Dell to get it's act together? Will shareholders?

Is it OK to tap retirement money early?

Filed under: Newspapers, Columns

A piece in Saturday's New York Times look at the question: When is it OK to tap into retirement money early? The article sums it up eloquently: "Most Americans have enough difficulty building up a nest egg, and cracking it prematurely could mean living on cat food (slang for Social Security) later."

One of main problems with taking out retirement money early is that the IRS typically charges a 10% penalty, depending on the type of account. In a ROTH IRA for example, you can take out your principal any time you like because the money has already been taxed as income. But with a traditional IRA or 401(k), you'll be hit with a hefty penalty.

Continue reading Is it OK to tap retirement money early?

Smith & Wesson: a stock with the potential to make you feel lucky

Filed under: Earnings reports, Analyst upgrades and downgrades, Technical Analysis

One of the most recognizable corporate names in the land of the Second Amendment belongs to a Springfield, Massachusetts outfit that was founded in 1852.

Smith & Wesson Holding Corporation (NASDAQ: SWHC) is one of the world's largest manufacturers of firearms and the parent of Thompson/Center Arms, a maker of hunting rifles. The firm also sells police accessories, gun safety devices and alarm systems for vehicles and the home. It licenses its brand name for association with apparel, watches, sunglasses, and other consumer goods. The Smith & Wesson Academy is America's longest running firearms training facility for law enforcement, military and security professionals.

The company pleased investors last week, when it reported Q4 EPS of $0.12 and revenues of $82.6 million. Analysts had been looking for $0.10 and $72.9 million. Management also guided Q1 EPS to $0.09 ($0.08 consensus), FY08 EPS to $0.62 ($0.60 consensus) and FY08 revenues to $320-$330 million ($321.78M consensus). Subsequently, Northland Securities reiterated its "outperform" rating on the stock and Merriman spoke of a potential valuation of $21-$25. SWHC shares popped on the news and have now begun to define a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Altogether, brokers recommend the issue with one "strong buy," three "buys" and one "hold." Analysts expect a 32% growth rate, through the next year. The SWHC Sales Growth rate (59.15%), EPS Growth rate (40.91%), Return on Assets (7.14%) and Return on Equity (27.66%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 57% of the outstanding shares. Over the past 52 weeks, the stock has traded between $7.15 and $16.84. A stop-loss of $14.30 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

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Getty Images gets pumped up on music

Filed under: Deals, Google (GOOG), General Electric (GE), NIKE, Inc'B' (NKE)

Late last year, I did an interview with Steve Ellis, who is founder and CEO of Pump Audio. I thought his company filled an import need in the market - and was poised for growth in the YouTube video surge.

Well, Getty Images (NYSE: GYI) is also bullish. That is, the company shelled out $42 million to buy Pump Audio.

Basically, Pump Audio has spent the past six years developing a sophisticated system to license music to digital providers. The catalog has over 100,000 titles and has biggie customers like GE's (NYSE: GE) NBC and Nike (NYSE: NKE).

So, video creators have a way to enhance content (the search engine makes it easy to locate the right music). And, at the same time, music creators can also monetize their creations.

It's a pretty smart idea. It's also a good fit with Getty Images, which focuses on licensing businesses.

To get more insight on all this, you can check out Ellis' interview on BloggingStocks.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Retail sales coming up short

Filed under: Berkshire Hathaway (BRK.A), Circuit City Stores (CC), Wendy's Intl (WEN), Economic data

Best Buy Co Inc (NYSE: BBY), Circuit City Stores Inc (NYSE: CC) and Wendy's International Inc (NYSE: WEN) have all warned of or reported light results during the past few days, a sign that the consumer is slowing down.
  • Best Buy reported a drop in gross margins, as promotions for higher-end flat panel TVs kick in. Same store sale comps came in at a positive 3% and the company is guiding to 2% to 2.5% growth.
  • Circuit City warned last quarter that business was deteriorating, with its stock getting hit hard.
  • Wendy's reported a 3% drop in same store sales and a big miss on its EBITDA line.
Do not expect much of an uptick in consumer spending until the Fed starts dropping rates. Consumer dependency on home equity loans to finance large purchases is over, making year-over-year comparisons hard for the retail industry.
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Boeing vs. Airbus at the Paris Air Show

Filed under: International markets, Products and services, Competitive strategy, Boeing Co (BA)

The battle between Boeing Co. (NYSE: BA) and Airbus continued in the skies over Paris this week -- although I suppose the real battle occurs in plush sales offices and five state restaurants throughout the city. Billions of dollars in aircraft orders are at stake, and the corporate dog-fighting appears to be intense. The most important competition is between Boeing's 787 Dreamliner and the A350 made by Airbus. These are roughly similar planes featuring twin engines and single aisles, and both are quieter and more efficient than earlier models. Going in to the Paris Air Show, Boeing had a considerable lead over Airbus in worldwide orders for its plane. As Douglas McIntyre noted earlier on BloggingStocks, as of last week, Boeing had over 600 orders for the 787, compared to a mere 13 for the A350.

Airbus has been in trouble lately, particularly with its new jumbo jet, the A380, which was designed to replace Boeing's 747. While there seems to be considerable interest in the new double-decker plane, the A380 has had so many problems that it isn't clear when it will be ready to fly. So Airbus is pushing the smaller A350 in the meantime. But it hasn't had much luck against the 787, at least until now.

So far, the Paris Air Show has been good to Airbus. According to today's Wall Street Journal [subscription], Airbus booked three large orders for the plane from Russia's Aeroflot, India's Kingfisher Airlines and Libya's Afriqiyah Airways, for a total of nearly 80 planes. This comes after Qatar Airlines' order of another 80 planes earlier in the week. The CEO of Airbus, John Leahy, said that he expected to receive more than 200 orders for the plane this year, and these new orders certainly make that seem like an achievable goal.

But Boeing has also seen some big orders in Paris. It just announced that International Lease Finance Corporation, the largest commercial jet leasing company in the world, has ordered 50 787s for its fleet. This means that the 787 has surpassed the $100 billion mark in orders, and secures Boeing's place as the global leader in commercial aircraft production.
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Top 20 advisors: Vahan Janjigian dials up AT&T

Filed under: Newsletters, AT and T (T), Top Picks 2007

Last December, over 100 stocks were featured in our Top Picks for 2007 report. Now, at mid-year, we turn to the 20 advisors whose picks showed the strongest gains to get an update on their previous picks, as well as a new favorite stock for the second half of the year.

Vahan Janjigian, editor of The Forbes Growth Investor, chose Sirenza Microdevices (NASDAQ: SMDI) as his top pick. Although the stock rose 35% as of June 1, 2007, the issue no longer meets the requirements of his quantitative model and has thus been dropped from his coverage.

His new top stock pick for the rest of 2007 is AT&T (NYSE: T). The advisor explains, "As measured by revenue, AT&T is the world's largest telecommunications company. It provides both wireline and wireless phone and data communications services.

"The company realized cost savings of $300 million in Q1 from the BellSouth acquisition. The November 2005 acquisition of SBC Communications yielded an additional $600 million in savings in Q1.

"Better-than-expected synergies have led management to increase the 2007 operating profit margin target to 23-24%. The Wireless segment added 1.2 million net new subscribers in Q1, bringing the total to 62.2 million. Average monthly revenue per user increased 1.4% year-over- year to $49.21 per month.

"Total churn improved to 1.7%, down from 1.9% in the prior year period and 1.8% in Q4. Churn for postpaid customers hit a record low of 1.3%. These improvements helped the Wireless segment expand its operating profit margin to 38.9%.

Continue reading Top 20 advisors: Vahan Janjigian dials up AT&T

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Darden posts disappointing results

Filed under: Earnings reports, Darden Restaurants (DRI)

Darden Restaurants Inc (NYSE: DRI), the casual dining restaurant chain that owns and operates the Red Lobster, Olive Garden, Bahama Breeze, Smokey Bones Barbeque & Grill, and Seasons 52 restaurant concepts, reported disappointing earnings last night after market close -- missing the consensus on both EPS and revenues.

As analysts expected the company to trade mostly in-line with their expectations, the terrible earnings report came as a negative surprise coming from the stock that had been upgraded nine times over the course of the past year. The company traded down 3.39% in pre-market trading, after trading near lifetime highs prior to the release.

Several analysts feel that Darden's reported $55.1 million loss for Q4 is reflective of a charge-off for selling 65 Smokey Bones restaurants over the past quarter; the company put another 73 Smokey Bones' restaurants up for sale in the quarter.

Following the decision to sell many of the Smokey Bones restaurants, CEO Clarence Otis said that the company would remain optimistic about making a "major acquisition." Let's face it, with their earnings, right now they need it.
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Fired Wal-Mart pharmacist is awarded $2 million by jury

Filed under: Rumors, Wal-Mart (WMT), Employees

Wal-Mart (NYSE: WMT) just can't seem to wake up from its public relations nightmare, as a jury has awarded a former pharmacist $2 million for being discriminated against because of her gender. Cynthia Haddad, who was a female pharmacist in a Wal-Mart location, complained about being paid less than male counterparts and ended up being fired. Were these two incidents connected? A jury thought so.

Ms. Haddad was awarded $2 million for future lost wages as a result after a jury deliberated for over eight hours before coming back with the verdict. One of Haddad's attorneys replied to the verdict by saying "It sends a message that you can't treat people poorly because of who they are." In other words, the large verdict was meant to punish the retailer as well as compensate Haddad for the treatment she received.

Wal-Mart's defense in the firing of Haddad centered around an accusation that she left the pharmacy unattended and gave her computer access code to a technician so that prescriptions could be given out in her absence. Prescriptions for Plavix were filled in her absence, and once Wal-Mart discovered this, Haddad was let go. After Haddad complained about the wage inequality she received, she was given the bonus her male pharmacy counterparts had received -- and then was fired two weeks later. Was the Wal-Mart dismissal defense accurate or a trumped-up charge? The jury said it was a trumped-up charge, and Wal-Mart attorneys left the courtroom silent and with another black eye.

Top 20 advisors: Yola Edwards thinks Coke is it

Filed under: Coca-Cola (KO), Newsletters, Top Picks 2007

Last December, over 100 stocks were featured in our Top Picks for 2007 report. Now, at mid-year, we turn to the 20 advisors whose picks showed the strongest gains to get an update on their previous picks, as well as a new favorite stock for the second half of the year.

Yola Edwards, editor of The Income Investor, chose Canadian grocer Sobey's as her top pick for 2007. The stock rose 42% due to a just completed going-private transaction at $58 a share.

The Coca-Cola Co. (NYSE: KO) is her new top pick; she says, "'Coke is it,' or so the company's jingle suggested -- but the share price of Coca-Cola has been in a major downtrend since July 1998. However there are technical signs that indicate the downtrend has ended and an upside breakout is just ahead.

"Investors usually turn to a defensive stock like Coca-Cola in a slowing economic environment, and with first-quarter U.S GDP growth of 0.6%, now might be the time to try some Coke.

"With nearly 400 brands in over 200 countries, Coca-Cola is the world's largest beverage company, but Coke has apparently recognized that it hasn't been 'it' for awhile and has taken steps to join the new generation by spending $4.1 billion to acquire Energy Brands Inc., known as Glaceau, a maker of vitamin-enhanced water.

"Analysts' reactions to the purchase are mixed, calling it overpriced, while others think it's a smart strategic move despite the stiff price tag. With the transaction closing in the summer, it is expected to be accretive to the company's bottom line in 2008.

"In April, Coca-Cola reported first quarter net income of $1.26 billion, or 54 cents per share, up from $1.11 billion or 47cents per share in the prior year. Technical analysis suggests that although a pullback to the 10-month moving average at $49 would offer support and an opportunity, the stock is poised to rally to about $69 over the next year."

See all 20 stocks the advisors picked for the second half of 2007.

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Illinois Tool Works: More than just tools

Filed under: Earnings reports, Analyst upgrades and downgrades, General Electric (GE), Technical Analysis

There is a Glenview, Illinois company with a name that leads one to believe it's in the business of making tools . . . and it is. There is rather more to it, though. The firm actually consists of about 750 decentralized business units in 49 countries, and tools are just the beginning.

Illinois Tool Works (NYSE: ITW) is a diversified manufacturer of highly engineered components, industrial systems and consumables. The company's Engineered Products segment provides the construction, automotive and consumer durables markets with plastic and metal components, trusses, fasteners, adhesives, cross-laminated plastic films and laminate flooring products. The Specialty Systems segment designs and manufactures machinery, packaging systems, tools, welding products, electronic assembly materials, cooking equipment and related consumables. General Electric (NYSE: GE) is among the firm's major competitors.

ITW investors were pleased last week, when Merrill Lynch (NYSE: MER) upgraded the stock from "neutral" to "buy." The broker said the base business growth rate is positioned to begin to accelerate, due to easier comparisons and on-going strength from international end markets. Also, the company affirmed guidance ranges. It still sees Q2 EPS of 86-90 cents (88 cent consensus) and FY07 EPS of $3.27-$3.39 ($3.33 consensus). The stock popped into a bullish "pennant" consolidation pattern on the news. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Continue reading Illinois Tool Works: More than just tools

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Buybacks signal bullishness

Filed under: Home Depot (HD), Expedia Inc (EXPE)

What is most spectacular about the buybacks announced this week is not just their size, but also that they are occurring in industries whose fundamentals are at a cyclical bottom or just beginning a cyclical upswing.
TheStreet.com has an excellent chart on share buybacks announced during the last few months.

Home Depot is buying back stock while the housing construction market is still bottoming, Expedia just started reported good results earlier this year and National Semi said in its most recent conference call that the wireless semiconductor market is exiting an industry bottom.

Why is there so much cash available for these massive share buybacks? Huge returns on invested capital (ROIC) is the answer. US companies have done a great job earning their cost of capital. Even if companies do not grow revenue quickly, as has been the case with Home Depot, they generate massive free cash flow. The same can be said of Expedia and National Semi.

The massive buybacks being announced just as industry fundamentals are bottoming or beginning an upswing is a very bullish signal for these stocks.
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Morgan Stanley, defying the post-earnings sell-off

Filed under: Before the bell, Earnings reports, Goldman Sachs Group (GS), Morgan Stanley (MS), Bear Stearns Cos (BSC)

Morgan Stanley (NYSE:MS) posted quite strong numbers this morning.

Earnings from continuing operations were actually up almost 40% to $2.6 billion; On an EPS basis, the financial services firm posted $2.45 EPS versus $2.01 EPS estimates. Net revenue rose to $11.5 billion, also above plan (see yesterday's estimates).

Underwriting, advisory service, and fixed income sales rose 39% to $7.4 billion with pre-tax income in that group rose 55% to $3 billion. Wealth and asset management were impressive and the company just announced another $8 billion real estate equity investment fund this morning. Assets under management reached $560 billion, a 23 percent rise from a year earlier.

The soon to be spun-off Discover Card unit is coming out to shareholders as soon as next week, and its revenues fell a combined 13%, the only unit to show a decline,

After seeing a substantial outperforming of this morning's earnings, it is not hard to understand the stock gain. That is particularly true if you compare this run to that of Bear Stearns (NYSE:BSC) and Goldman Sachs (NYSE:GS) from last week.

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

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Wal-Mart associates to dump blue vests for polos and khakis

Filed under: Wal-Mart (WMT), Employees

After wearing blue vests with the emblazoned "How may I help you?" for as long as I can remember, Wal-Mart (NYSE: WMT) associates may be collectively dumping those tired and boring work smocks for the more hip polo-khaki combo that many retailers are opting for recently. A more casual dress for employees has been the rage at several retailers in the last decade from my experience (like Circuit City and Best Buy, for example), and it's great to see the world's largest retailer getting in on the act. Frankly, it's long overdue.

Wal-Mart even says that the new employee (oops, associates) dress code will help customers locate employees more easily. While I am not sure that is true (just looking for blue vests now will work), the idea of more customer engagement from employees who are wearing a less threatening polo-khaki getup is sure to be swell for Wal-Mart's bottom line. As the retailer digs in deeper into the consumer electronics arena and other higher-margin businesses (compared to low-margin groceries), this change could not have come at a better time. In fact, although it would have been good a year ago, the timing is better now as Wal-Mart tries to reinvent stores and become more than an "everyday low price" retailer.

Will Wal-Mart employees feel more like professional associates instead of grocery store baggers now that the dress code is being changed? Most likely, yes. Wearing a polo shirt with nicer slacks (instead of the cutoff jeans I've seen some associates wear) will present a much more professional appearance and will give associates that feeling of being more than "a Wal-Mart employee." Well, maybe. While a change in dress code for 1.3 million employees won't be a magic bullet to pump up sales and get customers back into Wal-Mart, over time it may just be part of the foundation that does just that.

Analysts calls boost Time Warner Cable

Filed under: Analyst upgrades and downgrades, Time Warner (TWX), Time Warner Cable (TWC)

Shares of cable operator Time Warner Cable, Inc. (NYSE:TWC) are indicated up more than 1% pre-market on two separate and coincidental analyst actions.

The company received an upgrade from Bear Stearns from Peer Perform to Outperform with a $45.00 target. The Los Angeles market is noted as coming together for the company on far fewer complaints.

Additionally, Wachovia initiated coverage on Time Warner Cable with an Outperform rating as well.

Earlier this week, shares were maintained as Neutral at Credit Suisse with a $41.00 target. This now marks fifteen analysts and the average positive bias appears to have a $44.00 to $45.00 price target. Earlier this month, the cable giant set August 1, 2007 as the date for its Q2 2007 earnings release date.

Jon Ogg is a partner at 24/7 Wall St.; he does not own securities in the companies he covers.
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Circuit City sees first sales loss in three years

Filed under: Earnings reports, Bad news, Products and services, Circuit City Stores (CC)

After Best Buy Co. Inc.'s (NYSE: BBY) disappointing quarterly results yesterday, competitor consumer electronics retailer Circuit City Stores (NYSE: CC) was expected to do even worse this morning when reporting results from its most recent quarter. Well, Circuit City did not disappoint and reported a $55 million loss this morning after sales at its U.S. stores fell for the first time in three years.

Circuit City's loss of $0.33 per share was a steep change from the year-ago profit of $0.04 per share as sales slipped about 4.3% to $2.49 billion for the quarter that ended on May 31. With Circuit City disappointing these past several quarters and with the current slashing of headcount and store count, can this ailing electronics behemoth get back on track? All those cost savings from these personnel and store changes should help, but Circuit City has more work to do beyond that throughout 2007.

Wal-Mart's commitment to enter the consumer electronics arena in a heavier fashion is not good news to Circuit City, which has its hands full just trying to compete with larger rival Best Buy these days. With CC shares sitting at $16.07 at the close of the market yesterday, that figure represents a decline of about 15% in 2007. And it seems poised to head even lower today as shares are down 2.6% in pre-market trading (9:16 a.m.).

Circuit City shareholders are probably a tad angry, although seasonal shifts and larger-than-expected pricing fluctuations (for the worst) in the red-hot flat-panel television market have jilted Circuit City around a bit this year (and during the last part of 2006). It may come as some relief that Best Buy cut its profit outlook for the year yesterday as well, so Circuit City can at least have a fleeting smile before the turnaround work carries on.

Top 20 advisors: David Fried flies with SkyWest

Filed under: Newsletters, Top Picks 2007

Last December, over 100 stocks were featured in our Top Picks for 2007 report. Now, at mid-year, we turn to the 20 advisors whose picks showed the strongest gains to get an update on their previous picks, as well as a new favorite stock for the second half of the year.

David Fried, editor of the Buyback Letter, chose Big Lots Inc. (NYSE: BIG) as his favorite stock for 2007, which rose 39% as of 6/1/07. Please see his original recommendation and his current opinion on Big Lots.

Fried's new pick is SkyWest, Inc. (NASDAQ: SKYW). He explains, "SkyWest, the nation's largest independently owned regional airline, is a contract carrier for United Airlines, Delta Air Lines and, most recently, Midwest Airlines.

"Nimbler than the big legacy carriers and not burdened by their bloated labor costs, SkyWest has a steady earnings stream, good cash flow, and an attractive P/E of 11. Its reputation as an efficient, low-cost operator and as the best-managed regional airline in the business was enhanced with the 2005 acquisition of Atlantic Southeast Airlines, which made SkyWest a player on the national stage.

"Since the mid-1970s, SkyWest has grown from a company with annual revenue of under $1 million to a publicly held company with annual revenues of more than $1 billion and almost 15,000 employees. SkyWest is set for continued long-term growth.

Continue reading Top 20 advisors: David Fried flies with SkyWest

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A step backward for the housing sector's recovery

Filed under: Bad news, Consumer experience, Centex Corp (CTX), D.R.Horton (DHI), KB HOME (KBH), Lennar Corp'A' (LEN), Economic data

To be sure, it was not an incrementally positive data point for the housing sector. New housing starts declined by 2.1% in May, to a seasonally-adjusted 1.47 million units -- the first decline in four months -- as builders pulled-back in the face of a rising inventory of residential homes, the U.S. Commerce Department announced Monday.

Starts of single-family homes declined 3.4%. However, overall building permits rose 3%, aided by a rise in multi-family permits.

The housing slump has been a two-edged sword for the U.S. Federal Reserve, business decision makers, and others who follow the economy. On the one hand, the slump has slowed economic growth and taken some pressure off core commodity / raw material prices - a condition that has moderated inflation. On the other hand, that same slump threatens to reduce economic activity by too great an amount -- with some Fed watchers arguing that the slump could cause a recession.

Specifically, Fed data indicated that the recession in the housing sector cut 0.9 percentage points from U.S. economic growth in Q1 1007, after cutting 1.2 percentage points in 2H 2006.

Fly Analysis: While inflation remains above the Fed's target range, Tuesday's housing data provides another data point for those who argue that U.S. economy should be moved to the front burner: U.S Q1 GDP growth came in at a scant 0.6%, according to preliminary U.S Bureau of Economic Analysis data. Further, while Tuesday's housing data does not guarantee further GDP slowing in Q2, the data does send a strong signal that those hoping for an economic boost from the housing sector are not likely to see that boost in Q2, and perhaps, for considerably longer.

Top 20 advisors: Bernie Schaeffer tunes in to RadioShack

Filed under: Newsletters, RadioShack Corp (RSH), Top Picks 2007

Last December, over 100 stocks were featured in our Top Picks for 2007 report. Now, at mid-year, we turn to the 20 advisors whose picks showed the strongest gains to get an update on their previous picks, as well as a new favorite stock for the second half of the year.

Bernie Schaeffer, editor of Schaeffers Investment Research, chose International Securities Exchange (NYSE: ISE) as his top pick for 2007. The stock has risen 40% on news that Deutsche Boerse AG plans to acquire the firm. For those who own the stock, Schaeffer recommends selling.

For his new favorite idea, the advisor turns to electronics retailer RadioShack Corp. (NYSE: RSH). He explains, "The stock has been flying high in 2007, doubling in value in less than six months and moving to a two-year high. Throughout this impressive rally, the stock has enjoyed the reliable support of its 10-day and 20-day moving averages.

"RSH shares have also benefited from their 10-week moving average, which neatly guided the equity higher following a late-April pullback in the shares.

"This performance has clearly dwarfed the accomplishments of the broader retail sector. RadioShack's weekly relative-strength measure, as compared to the AMEX Retail HOLDRs Trust, has been on the rise since January and is now at a 26-month high.

"The company has been impressive in the earnings confessional as well. RadioShack's first-quarter earnings, reported in late April, hit 31 cents per share, well above year-ago results of 6 cents per share and easily better than analysts' consensus view of 14 cents per share.

Continue reading Top 20 advisors: Bernie Schaeffer tunes in to RadioShack

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Gas slips below $3 per gallon - is this a cause for celebration?

Filed under: Consumer experience, Exxon Mobil (XOM), Chevron Corp (CVX), Commodities, Oil

At the risk of sounding like a caricature of a sitcom grandparent, I remember when I could fill up the tank of my Nissan for under $15. When a barrel of oil was cheaper than a case of beer. In short, when gas was hovering around the $1.00-per-gallon mark. Yes, I remember those days fondly ... they were less than a decade ago.

These days, we have to take what we can get, and that means being cheered when we see the price of regular unleaded fall below the $3 threshold. According to AAA, the average price of regular gasoline could drop south of the $3 mark as soon as today, breaching this zone for the first time since May 3. This would be a modest surprise to government officials, who last week predicted that American commuters and road-trippers would be dealing with $3.00 gas all summer.

Yesterday, the average per-gallon price of gas stood at $3.002, 13.4 cents higher than year-ago numbers but below the record-setting average of $3.227, hit on May 24 (just in time for all those Memorial-Day travels!).

Continue reading Gas slips below $3 per gallon - is this a cause for celebration?

Dell, HP: 40% of small businesses in India ready to buy first PC

Filed under: Competitive strategy, Dell (DELL), Hewlett-Packard (HPQ)

To those who say "the PC is dead" (umm, not really), to the commodity experts who treat the personal computer market like the FCOJ or pork bellies market, where is the next decade of PC growth going to come from?

I would venture to guess, based on industry estimates, that the majority of U.S. households these days have more than one PC. For Hewlett-Packard Co. (NYSE: HPQ), Dell Inc. (NASDAQ: DELL), Lenovo, Acer and other PC makers, it's pretty well-known by now that a vast market remains untapped in areas outside the U.S.

To that end, it's been said that up to 40% of small businesses in India are expected to start investing in PC technology in the next twelve months. The trick here is that for most of these businesses, this will be the first time ever they invest in the personal computer and related markets. That's right, it's 2007 and almost half of the small business market in India is expected to engage themselves in PC technology for the first time ever.

Will this send sales execs from HP and Dell into the stratosphere? Probably not, as these individuals know their markets, customers and potential sales powder kegs just as well as anyone. For internet companies like Google and Yahoo!, opening up the possible internet-connected floodgates of India (which has a billion+ population) would be a good thing as well. PCs this day and age without an internet connection are useless for any kind of global business transactions. Yes, these smaller businesses in India may not be there yet, but in a decade, many of them will be global businesses. PC technology will help them all launch, and PC makers will be the ones seeing visions of sugar plums dancing in their own heads as those global sales continue to mount.

Nuveen Investments going private

Filed under: Private equity

Back in 1898, John Nuveen started the firm Nuveen Investments (NYSE: JNC) to trade municipal bonds. It was a smart move. Now, the firm is a big player in the asset management space, with about $165 billion in assets under management.

Well, soon Nuveen will no longer be a public company. It announced today that private equity firm Madison Dearborn Partners LLC has agreed to a $5.42 billion buyout.

Interestingly enough, Nuveen wants to do the transaction so as to have more flexibility in pursuing its long-term growth goals. After all, it can be distracting to deal with the mind-numbing regulations of Sarbanes-Oxley and also the quarter-by-quarter pressures of Wall Street analysts.

No doubt, Nuveen's business is growing nicely. In fiscal Q1, net income increased 17% to $52.3 million.

On the news of the deal, shares of Nuveen spiked 17.15% to $63.45. The current buyout bid is $65.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
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Analyst upgrades 6-20-07: CEO, CL, HD, NYX and TWC

Filed under: Before the bell, Analyst upgrades and downgrades, Good news, Home Depot (HD), Colgate-Palmolive (CL), NYSE Group (NYX), Time Warner Cable (TWC)

MOST NOTEWORTHY: CNOOC Ltd (CEO), NYSE EuroNext (NYX), Time Warner Cable (TWC), Digital River (DRIV) and Home Depot (HD) topped today's more noteworthy upgrades:
  • Credit Suisse upgraded shares of CNOOC Ltd (NYSE: CEO) to Outperform from Neutral to reflect projections for output growth...
  • Piper upgraded NYSE Euronext (NYSE: NYX) to Market Perform from Underperform as they believe the risk/reward is balanced following the completion of the Euronext acquisition. They believe shares can move higher if the company's market share is stabilized...
  • Bear upgraded shares of Time Warner Cable (NYSE: TWC) to Outperform from Peer Perform citing the integration of the L.A. systems, which they feel is progressing smoothly, and potential for increased equity returns...
  • Jefferies upgraded shares of Digital River (NASDAQ: DRIV) to Buy from Hold on valuation as they find the risk/reward attractive at current levels and believe new customers such as Microsoft (MSFT) and Electronic Arts (ERTS) will diversify the company's revenue base...
  • Home Depot (NYSE HD) was upgraded to Buy from Hold at Stifel following the company's sale of its HD Supply unit, as well as its $22.5B repurchase program...
OTHER UPGRADES:
  • Merrill Lynch was upgraded Centene Corp (NYSE: CNC) to Neutral from Sell.
  • BB&T upgraded Airgas (NYSE: ARG) to Buy from Hold.
Analyst summaries provided by TheFlyOnTheWall.com (subscription required).
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Kerkorian bails on MGM Mirage property purchase

Filed under: Deals, Private equity, Entrepreneurs

Kirk Kerkorian's Tracinda Corp. has dropped its attempt to cherry-pick MGM Mirage's Bellagio and CityCenter properties after the corporation announced a new deal with Bahamas casino owner Sol Kerzner to build a multi-billion dollar casino complex on the Strip in Las Vegas.

Many thought that Kerkorian's intention was to nudge MGM Mirage (NYSE:MGM) onto the sale block, to see what his 56% of the remaining company assets might fetch in a buyout-friendly climate. The latest deal, with its implications for increased debt and holdings value, apparently caused him to rethink this move, at least for the moment.

MGM Mirage already has a huge footprint in Las Vegas, but remains very aggressive (i.e. carrying a considerable debt load) in pursuing further growth. Its new $725 million Detroit casino is scheduled to open late this year. The CityCenter complex in Las Vegas has tied up $7.4 billion and won't be ready until 2009, and MGM has put another $1 billion into a cooperative venture, MGM Grand Macau, opening later this year. It is also in talks about another huge development on the Cotai strip in Macau.

Those punters who jumped on the bandwagon at the initial announcement of Kerkorian's interest in Bellagio are jumping back off this morning. MGM Mirage stock was down more than 10% in early trading.

Analyst downgrade 6-20-07: BBY, BUD, MRK and SLB

Filed under: Before the bell, Analyst upgrades and downgrades, Bad news, Schlumberger Limited (SLB), Anheuser-Busch Cos (BUD), Best Buy (BBY), Merck and Co (MRK)

MOST NOTEWORTHY: Linear Technology Corp (LLTC), Anheuser-Busch (BUD), Best Buy (BBY), Bankrate (RATE) and Ensco International (ESV) were today's more noteworthy downgrades:
  • Goldman said Best Buy's (NYSE: BBY) fundamentals remain at risk after the Q1 report and cut shares to Neutral from Buy...
OTHER DOWNGRADES:
  • Merck & Co (NYSE: MRK) was cut to Market Perform from Outperform at Raymond James.
Analyst summaries provided by TheFlyOnTheWall.com (subscription required).
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FedEx Q4 profit increases on global express shipments

Filed under: Earnings reports, Good news, India, China, FedEx Corp (FDX), United Parcel'B' (UPS)

FedEx Corp.'s (NYSE: FDX) Q4 profit of $610 million rested on the back of international express shipments, according to the global cargo carrier. That was enough to outdo a laggard U.S. parcel delivery market during the same time, as FedEx net income increased to $1.96 per share from $1.82 in the year-ago quarter. This comes at the lower end of the expected range of $1.93 to $2.08 a share, but it's still a very healthy income figure nevertheless.

FedEx Q4 revenue also rose to $9.15 billion, a jump of 7.8% from the year-ago period. FedEx's air freight business in the United Kingdom, China and India worked well this past quarter, as the economies of China and India alone could have kept FedEx humming along even as cargo shipments in the U.S. fell. Is it any surprise that those two international markets are being coveted by just about any business in any sector that is wanting to grow? Nah, I didn't think so.

FedEx also appears to be making gains in the ground delivery market in the U.S., where it lags competitor United Parcel Service (NYSE: UPS). Thankfully for FedEx, its international express business is its highest-margin business -- and it's growing while its lowest-margin business (U.S. express shipping) is shrinking. This leads to (for now) a perfect combination for FedEx to rake in profit. That is, until the U.S. economy starts growing at gangbuster levels again. When will that be? Well, give me a second while I take out my crystal ball . . .

Analyst initiations 6-20-07: ASVI, TWC, TYC and UA

Filed under: Before the bell, Under Armour'A' (UA), Analyst initiations, Time Warner Cable (TWC)

MOST NOTEWORTHY: Time Warner Cable , Solera Holdings (SLH) and BioDel (BIOD) filled this morning's initiation list:
  • Wachovia is positive on Time Warner Cable's (NYSE: TWC) competitive position, growth opportunities and valuation, starting shares off with an Outperform rating...
  • Solera (NYSE: SLH) was initiated at Deutsche Bank and Citigroup with a Hold rating; Goldman started Solera with a Buy rating and JP Morgan initiated shares with an Overweight rating...
  • BioDel (NASDAQ: BIOD) was initiated at Banc of America with a Buy rating, as the company's proprietary technology Viadel enables faster uptake of insulin that more closely mimic's the body's natural first phase insulin response. Leerink started shares with an Outperform and Morgan Stanley initiated shares with an Overweight rating...
OTHER INITIATIONS:
  • A.S.V. Inc (NASDAQ: ASVI) was initiated with a Buy rating at Oppenheimer.
Analyst summaries provided by TheFlyOnTheWall.com (subscription required).
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Merrill plans takedown of Bear Stearns hedge funds

Filed under: Bad news, Bank of America (BAC), Merrill Lynch (MER), Goldman Sachs Group (GS), Bear Stearns Cos (BSC)

Don't borrow money from Merrill Lynch (NYSE: MER). It may want you to pay it back. Two Bear Stearns (NYSE: BSC) funds learned that lesson recently. BS's High Grade Structured Credit Strategies Enhanced Leverage Fund and High Grade Structured Credit Strategies Fund invested a great deal of their capital in bonds which were secured by sub-prime mortgages. Since that market has not done well as delinquencies and foreclosures have gone up, the funds have been hit by investors who want their money back.

According to The Wall Street Journal [subscription]: "As of March 31, the Enhanced Leverage fund had $638 million in investor capital and at least $6 billion in borrowings." But much of the money was invested based on a recovery in sub-prime mortgages, and that move did not pay off. Merrill wants to seize and liquidate $850 million of the assets in the two funds to get back the money that it had loaned them.

Bear Stearns is in a race against time. Other lenders to the funds, Goldman Sachs (NYSE: GS) and Bank of America (NYSE: BAC), have been attempting a work-out to pay off the loans due them so the investors in the funds will not lose most or even all of their money.

But with Merrill's plan to get its money back, it appears that the funds will be shut down.

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Examining Warren Buffett's Portfolio: General Electric

Filed under: Deals, General Electric (GE), Options, Technical Analysis

General Electric Co. (NYSE: GE) opened at $39.45. So far today the stock has hit a low of $39.09 and a high of $39.77. As of 10:50, GE is trading at $39.51, up $0.22 (0.6%).

GE surged yesterday and has reached a new one-year high today after the company's GE Energy Financial Services unit bought a stake in natural gas processor and distributor Regency Energy Partners (NASDAQ: RGNC) from HM Capital Partners for $603 million. Though GE is a notoriously flat stock lately, Warren Buffett saw potential for long-term growth when he bought nearly 8 million shares in the low 30's in Q1 2006. With its new step into the energy sector, some analysts think GE is poised to break free of its flat pattern. Recent technical indicators for GE have been bullish but deteriorating slightly, while S&P gives the stock a very positive 5 STARS (out of 5) strong buy rating.

For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $35 range. GE hasn't been below $35 since April and has shown support around $37 recently. This trade could be risky if the stock ends its moderately bullish run, but even if that happens, this position could be protected by its 200 day moving average, which is currently at $36 and rising.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent controls a long, hedged position in GE. He does not own or control a position in RGNC.
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Options update: Home Depot volatility collapses with rally on $22.5 billion buyback

Filed under: eBay (EBAY), General Electric (GE), Home Depot (HD), Research in Motion (RIMM), Oracle Corp (ORCL), Options

Home Depot Inc. (NYSE: HD ) -- volatility collapses as HD rallies on $22.5 billion buyback. HD is recently up $2.70 to $40.94. HD board approved a $22.5 billion increase in its share repurchase program and intends to buy up to this amount as soon as possible. HD will sell its supply chain unit to Bain Capital Partners, The Carlyle Group, and Clayton Dubilier & Rice for $10.3 billion. HD has a market cap of $7 billion with long term debt of $11.6 billion. HD call option volume of 19,765 contracts compares to put volume of 13,690 contracts. HD July option implied volatility of 17 is below a level of 23 from yesterday according to Track Data, suggesting decreasing risk.

Research in Motion (NASDAQ: RIMM) -- option implied volatility Flat into EPS. RIMM is recently trading up $0.32 to at $172. RIMM is expected to report EPS on 6/28. RIMM July option implied volatility of 38 is near its 26-week average according to Track Data, suggesting non-directional risk.

Oracle Corp. (NASDAQ: ORCL) -- July implied volatility at 28 into 6/26 EPS & Outlook. ORCL will release EPS after the close on 6/26. ORCL July option volatility of 28 is near its 26-week average of 26 according to Track Data, suggesting slightly larger near term fluctuations.

Option volume leaders today are: General Electric Co. (NYSE: GE) and Home Depot Inc. (NYSE: HD).

Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

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Lowe's piggybacks on Home Depot's surge

Filed under: Industry, Home Depot (HD), Lowe's Cos (LOW), Options, Technical Analysis

Lowe's Companies Inc. (NYSE: LOW) opened at $32.15. So far today the stock has hit a low of $31.15 and a high of $32.15. As of 11:15, Lowes is trading at 31.97, up 0.37 (1.2%).

After hitting a one year high of 35.74 in February, the stock has been flat in the low 30's over the past four months. Shares of Lowes are rising on the heels of competitor Home Depot's (NYSE: HD) 6% jump after announcing a buyback plan and sale of its supply unit. Recent technical indicators for LOW have been bullish but deteriorating slightly, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $27.50 range. LOW hasn't been below $27.50 since September and has shown support around $30.75 recently. This trade could be risky if home remodeling falls in popularity due to a softer housing market, but even if that happens, this position could be protected by the support the stock has found around $30 over the past 7 months.

Brent Archer is an options analyst and writer at Investors Observer. Do you have any deadwood in your portfolio? Check out the 18 Warning Signs That Tell You When To Dump A Stock.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls a position in HD or LOW.
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General Motors' $100 million bet on new diesel engines

Filed under: Good news, Competitive strategy, General Motors (GM)

While General Motors Corp. (NYSE: GM) shrinks its plant count across the U.S. as it weathers a huge downturn in the demand for many of its products, it's expanding in New York. The former largest automaker in the world is committing $100 million to an existing engine plant in Tonawanda, New York, where it will build 4.5-liter V-8 Duramax diesel engines for the Chevrolet Silverado, GMC Sierra and Hummer H2 product lines.

With GM's recent commitment to alternative-fuel technologies and gas-saving strategies, this rather large and long-term strategy for building high-output diesel engines with fuel efficiency gains of 25% should not be surprising. These new Duramax engines will release 13% less carbon dioxide into the air compared to current gasoline engines, accompanied by 90% reductions in particulates into the air compared to current GM diesel engine technology.

That $100 million will be buying a 200,000-square-foot facility renovation along with new machinery and tooling to build the all-new Duramax engines. Local companies are likely to see GM pour an additional $41 million into needed tooling and related equipment (like transport containers for the engines) for support of the newly-renovated plant after construction is completed and the new Duramax operations are underway, a little over two years from now.

Nokia lifted by restructuring plan

Filed under: Management, Nokia Corp. (NOK), Options, Technical Analysis

Nokia Corp. (NYSE: NOK) opened at $29.14. So far today the stock has hit a low of $28.79 and a high of $29.19. As of 10:55, NOK is trading at $28.81, up $0.20 (0.7%).

The stock has been rising steadily over the last six months, hitting a new 52-week high today after announcing a corporate restructuring plan. Recent technical indicators for NOK have been bullish but deteriorating slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $25 range. NOK hasn't been below $25 since April and has shown support around $28 recently. This trade could be risky if recent bullish run turns out to be a fake-out, but even if that happens, this position could be protected by the three levels of support the stock found just between $25 and $28 over the past two months.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls a position in NOK.
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Waitress to win a million bucks in CNBC's contest

Filed under: Television, Internet, Scandals, Crocs Inc (CROX), Media World

BusinessWeek reports that a waitress -- for 20 years and a welder before that -- who has never owned a stock in her life will win CNBC's Million Dollar Contest. This is sort of like winning the lottery.

And luck -- combined with playing by the rules -- may help Mary Sue Williams of St. Clairsville, OH win that $1 million. According to the last official standings, posted on May 25, she was in sixth place, with a 29% return during the two-week final round. But since many top finishers are suspected of exploiting a loophole in CNBC's trading software to inflate their returns, CNBC may disqualify the five who are ahead of her, leaving Williams the most likely winner.

She followed her mother-in-law's advice, spending about an hour a day checking the financial web site Earnings.com for companies that were about to announce their quarterly results. She figured that companies reporting earnings were the most likely to see big moves. To pick specific stocks, she used the Warren Buffett approach: invest in what you know.

Her most memorable picks included the following:

If she wins, she plans to use the money for her daughter's education. Now that's a good investment!

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has has no financial interest in the securities mentioned in this post.

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