Dow Jones executives clash with Murdoch over WSJ Online

Filed under: Newspapers, News Corp'B' (NWS), Dow Jones and Co (DJ)

In what could could be a sign of things to come, Rupert Murdoch and executives at the Dow Jones Company's (NYSE: DJ) Wall Street Journal are trading arguments in the press about the future of the newspaper's online edition.

A few days ago, Murdoch said that he planned to make the Wall Street Journal Online free, and make up for the lost subscription revenue by selling advertising on the site. Given the Journal's status as the premier financial news source, he estimated that he could increase traffic 10- to 15-fold from its current base of about 1 million subscribers.

Well some executives at the paper responded that the "The exclusivity of Journal content provides value beyond the Web site" and that making the Journal free would reduce print subscriptions and cannibalize traffic to other Dow Jones-owned sites.

My hunch is that Murdoch is right -- online advertising is exploding and the idea of a property as valuable as this newspaper getting so little traffic makes me think there's a better way. But regardless of who is right, this is a fight Murdoch will probably win. It's been said before and it's worth saying again: Rupert gets what Rupert wants.

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George Soros and auto insurance industry profits

Filed under: Products and services, Rich in America, Personal finance, Progressive Corp,Ohio (PGR)

I'm placing this blog post squarely at the feet of George Soros. The first reason I'm doing that is because I can. The second reason I'm doing it is because Mr. Soros will never read it. The third reason is because I have the ability to understand insurance actuary tables and I can read the writing on the wall.

Is anyone out there willing to take a guess at exactly why George Soros, Progressive Insurance (NYSE: PGR), and most of the rest of the auto insurance industry is so highly motivated to promote the green movement? Do you think it's because they want more trees available for the little birdies to sing in? Is it because someone said we're running a couple quarts low on oil? Could it be that they fear "green house gases" will soon choke us all? Nope, it's about none of those things. It all comes down to percentages, money, and control.

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Can Eddie Lampert turn Sears around?

Filed under: Management, Magazines, Sears Holdings (SHLD)

BusinessWeek's Bob Reed wonders about Eddie Lampert's stewardship of Sears Holdings Corp. (NYSE: SHLD), the parent company of Sears and Kmart. While investors were buoyant about the company's prospects less than a year ago, due largely to Lampert's stellar track record as a hedge fund manager, things have soured. Sears has reported lackluster results, and the retail turnaround appears to be like most so-called turnarounds: not much is turning. Meanwhile, the stock is down about a third from its high.

Reed has this to say about the future of the company: First, consider this possibility: Lampert makes good on his word that he is going to transform Sears Holdings into a dynamic, successful retailer. He pours cash -- lots of it -- into operations, stores, and marketing. More important, he hires a top-notch merchant, a superstar executive to spotlight the five, six, or seven core retail strengths that Sears still possesses, and then embarks on a 5- to 10-year rebuilding effort.

The chances of Lampert signing on for this action? Slim to none. Spending tons of money for a far-off and uncertain payback are not part of his hedge fund manager DNA.

Exactly. His well-documented investment prowess aside, Sears is looking like it could be to Lampert what TWA was to Carl Icahn. A brilliant financial mind takes over the reins of a large, troubled company, and his tightfistedness combined with his lack of operational expertise combine to make an effective turnaround impossible, and shareholders suffer.

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Wal-Mart critics begin highlighting product safety issues

Filed under: Wal-Mart (WMT), Politics

Wal-Mart Stores, Inc. (NYSE: WMT) has plenty of opposition, from union groups to employees to media watchdogs. When issues of employee benefits, pay and overseas sourcing some into the media limelight, many Wal-Mart critics trumpet a multitude of opinions. But, you can only beat a dead hose so many thousands of times. Newsflash: Wal-Mart is not the only company that has these issues, but since it is the largest target, it takes the brunt of abuse.

Now that the holiday shopping season is in full swing, the efforts by some union-backed critics of the retailer have gone into red-hot mode. This time around, the focus is on something relatively new this year -- product safety.

This is something I dedicated an entire column to a few weeks back. Product safety has been in the spotlight this year as recalls involving toothpaste, toys, food items and more have been in the news.. Most of these recalls stem from poor product quality control and Chinese exporters who are apparently cutting safety corners.

Consumers, though, connect product quality to retailers -- not manufacturers. Are there still many dangerous products sitting on Wal-Mart shelves at this very instant? That's the fear campaign WakeUpWalMart.com is pushing this holiday season, and radio ads will be running this month with TV ads in December. Spokeswoman Sharon Weber rebutted by stating "Our commitment to low prices is never at the cost of safety. Product safety has always been and will continue to be a top priority."

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How many bottles of beer on the wall? Anheuser-Busch looks to go more upscale

Filed under: Marketing and advertising, Anheuser-Busch Cos (BUD)

Anheuser-Busch (NYSE:BUD), noting the growing premium/boutique beer market share, is taking a new tack in its 2008 marketing. It will emphasize the quality of ingredients and brewing techniques in its core brands, Budweiser and Michelob. The strategy is an attempt to give them some of the cachet that has pushed sales of imports, such as those of its equity partners Grupo Modelo and Tsingtao.

According to the Wall Street Journal (subscription), the company will drop about $30 million on this campaign, while also increasing spending on more of the youth-oriented, humor-infused messages that promote Bud Light.

BUD is reacting to two challenges: declining/flat sales of its mainstream suds, and the competition posed by the recently announced partnership of SABMiller and Molson Coors (NYSE:TAP) to mutually market their products in the U.S. Anheuser-Busch successfully raised prices on its products in 2007, but I wouldn't expect such a move in 2008, in light of this competition.

In a campaign designed to elevate public perception of the quality of a brand, the danger lies in also elevating the public perception of the brand's cost. Too often, companies fail to find the right balance that persuades the public that they are getting a bargain, better quality for the same price. Or, in the words of a current Miller High Life campaign I feel is one of the best I've ever seen, "A tasty beer at a tasty price."

In a flat beer market, BUD's increased spending might just be enough to keep from sliding back, not a result likely to bump the stock price from its doldrums of the past 12 months.

[Photo drrt]

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Freeport: Global reach, now at a bargain price

Filed under: India, China, Brazil, Mexico, Freep't McMoRan Copper (FCX), Commodities, Stocks to Buy

The market's choppy/consolidating (or perhaps worse) period continues. No single market participant can change that reality, but you can make the best of it -- specifically by looking for bargains.

Miner Freeport-McMoRan (NYSE: FCX) is one such opportunity. Freeport is the world's second-largest copper producer and a major miner of gold and molybdenum. Further, FCX's purchase of Phelps Dodge in March 2007 means that the company now has proven and probable reserves of: copper, 75 billion pounds; gold, 128 million ounces; and molybdenum, 1.9 billion pounds, net minority interests.

But perhaps most important, Freeport is one of only eight companies that have the economies of scale to compete in the global mining sector of the early 21st century. Look for continued merger/acquisition talk in the sector, but don't think of Freeport as an acquisition play: FCX has a large portion of the global copper market, geographical diversification, and enduring relationships with key customers, among other strengths, to continue to perform well in the years ahead.

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Beer slogans to inspire Anheuser-Busch

Filed under: Marketing and advertising, Anheuser-Busch Cos (BUD)

As I wrote earlier, Anheuser-Busch (NYSE:BUD) is revising its marketing of its core brands to give them a bit of the flavor of the increasingly-popular boutique beers. I thought this might be good time to suggest it reads over the list of great slogans before setting out to craft its own. Ready?

• Toohey's: How do you feel? I feel like a Toohey's.
• Labatt's: If I wanted water, I would have asked for water.
• St. Pauli Girl: You never forget your first girl.
• Courage: It's what your right arm's for.
• Bad Frog: The beer so good it's bad.
• Castlemaine XXXX: Australians wouldn't give a XXXX for anything else.
• Hemeling: Give him a right good Hemeling tonight.
• Boddingtons: It's a bit gorgeous.
• Asgaard: Asgaard. Cheers to the Vikings!
• Guinness Irish Stout: Out of the darkness comes light.
• Kronenbourg 1664 Lager: 1664. A Good Year for Beer.
• Guinness: I feel like a Guinness. I wish you were.
• Miller: No matter what what's-his-name says, I'm the prettiest and Lite's the greatest

Thanks to the database of slogans.

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Ceragon Networks (CRNT): Analysts generally like the wireless backhaul play

Filed under: Nokia Corp. (NOK), Stocks to Buy, Israel

Investment banks kicked off coverage today of a small Israeli wireless backhaul firm, Ceragon Networks (NASDAQ: CRNT). The banks generally seem to like it. I see Jeffries, Bank of America and Lehman all with buys on the small firm.

As I see it, there are a couple of issues with the current wireless infrastructure:

• Current backhaul infrastructure in emerging markets cannot handle huge traffic growth
• Because the market is quite consolidated, it's hard for new entrants to penetrate into the industry
• Carriers are looking to deploy fully-IP networks

These dynamics bode well for Ceragon, which commands about a 10% market share in its niche. Ceragon is a pure-play in the wireless backhaul and stands to benefit from robust growth driven by expansion into new markets and increasing use of data applications. The company also white-labels its products to sell through Nokia (NYSE: NOK). This dependence, while a boon for the company and helps to contribute to 35% yearly growth estimates, also entails risk as the global wireless powerhouse has been a 10% customer for the past few quarters.

"We believe that the proper comparables for Ceragon [are] those vendors directly competing in the wireless backhaul space, along with the broader communications equipment universe that service the carrier channel," the Lehman Brothers initiation report on the company said. "Given the company's revenue growth dynamics and exposure to wireless data growth, we believe that Ceragon should trade at a premium to wireless backhaul providers and legacy, lower growth vendors in the carrier channel." Lehman put a $16 price target on the firm.

Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author holds no positions in the stocks mentioned above.

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Is Merrill paying John Thain for performance?

Filed under: Newspapers, Merrill Lynch (MER), Wachovia Corp (WB)

This headline from the New York Times struck me funny: "Merrill to pay Chief $50 million, more if stock rises."

It's a great deal John Thain, the new CEO: "Heads I win, tails I make $50 million."

But maybe $50 million plus isn't so bad. Stan O'Neal was sent packing with $161.5 million after announcing an $8.4 billion write-down on mortgage losses. And then there was the whole matter of going a-courting with Wachovia (NYSE: WB) without letting the company's board of directors know.

But here's the problem: Is it really pay for performance when a guy gets $50 million for showing up, and then the possibility of another $70 million if everything goes well? Doesn't pay for performance entail the possibility of earning very little if the performance part doesn't happen?

Maybe this was what it took for Merrill Lynch (NYSE: MER) to lure someone in. If so, it's a sign of just how troubled the company is.

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Opportunity in a weakened Capital One

Filed under: Bargain stocks, Chasing Value

Capital One Financial Corp. (NYSE: COF) -- Shares in credit card giant Capital One have fallen around -12% over the past month on news that some customers are having a tough time making payments on their accounts.

Credit card charge-offs -- loans that were written off completely as bad debts -- increased from an average of 2.86% in the third quarter to 3.28% in October. Meanwhile, delinquent accounts -- a measure of the percentage of loans overdue by more than 30 days -- rose from 3.7% in September to nearly 4.9% in October.

The company went on to announce that the situation was worse in some markets, particularly those that saw the biggest increases in real estate prices during the last housing boom. Taken together, these metrics suggest that Capital One is seeing some spillover from the weakening housing market and the inability of some consumers to access credit via home equity loans.

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American Community Newspapers: Somebody read all about it

Filed under: Earnings reports, Bad news, Newspapers

American Community Newspapers (AMEX: ANE) publishes a number of small circulation dailies, weeklies, and niche advertising products, primarily with local content, in four major U.S. markets loaded with pockets of high net worth households. These newspapers are distributed free at a number of local venues. Subscription revenue accounts for only 4% of total revenues. Circulation in print is approximately 1.4 million households for the four markets combined.

Newspapers, regardless of scale, are suffering from declining circulation and declining advertising revenue. American Community Newspapers is no exception. Total revenue is down by 6.3% because print advertising revenue is also down by 6.3%. The company posted a third-quarter 2007 net loss of $2.5 million, or diluted loss per share of $0.17. Year to date, the company has posted a net loss of $7.8 million or diluted loss of $0.54 per share. The positive news is that the company is moving toward bigger and better digital products that currently generate over 5 million page views per month. Internet advertising revenue increased by 40% and shows no signs of slowing.

As long as consumers want very locally available news and information, community newspapers will limp along, not quite folding, but not profitable either. The company's stock currently trades at $3.55 per share. Without some indications of profitability, the price is still no bargain.

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NebuAD CEO explains next step in behavioral targeting

Filed under: Internet, Competitive strategy, Marketing and advertising, Market matters, Small business, Technology

After my post of last week lambasting NebuAd for using information obtained from internet service providers in order to serve ads to web browsers based on users' browsing behavior, I was contacted by the CEO of NebuAd, Robert Dykes. He agreed to talk with me about his company and the internet advertising world.

I started by asking Dykes what steps NebuAD has taken to maintain the privacy of the customers of the ISPs with which they work. Dykes told me his company realized early on the security implications of its processes.

"In formulating the structure of how our equipment would work, (at this time) the government was subpoenaing AT&T and Verizon for their data... (and) AOL's search data had become public. We realized that...we had to be extremely careful in the way we structured our equipment and what we did on the internet... so that we would never be the subject of a subpoena from the government. So our structure is such that we never have any information that would be of use to the government. (There) never would be any information there of a personal nature.

"(We) built our system such that, as we map a user over and over again... that mapping is reflected only as a hash number, not as any personally identifiable information, not even an IP address... All we track is that somebody qualified for certain interest categories...(we) don't keep the raw data about what searches they did."

Continue reading NebuAD CEO explains next step in behavioral targeting

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Hewlett-Packard reports blowout quarter

Filed under: After the bell, Earnings reports, Forecasts, Good news, Dell (DELL), Hewlett-Packard (HPQ)

Hewlett-Packard (NASDAQ: HPQ) today reported quarterly earnings that beat Wall Street analysts' forecasts for the 11th straight quarter. The company also gave earnings guidance that exceeded analysts' estimates and announced an $8 billion stock buyback.

Net income soared 28% to $2.16 billion, or 81 cents a share, from $1.7 billion, or 60 cents, a year earlier. Excluding one-time items, profit was 86 cents. Revenue jumped 15% to $28.3 billion. The largest computer maker was expected to earn 82 cents on revenue of $21.39 billion. Shares of the Palo Alto, Calif.-based company rose in after-hours trading.

In the current quarter, Hewlett-Packard expects profit of 80 cents on sales of $27.4 billion to $27.5 billion, exceeding analysts' estimates of 77-cent profit and revenue of $26.99 billion.

This underscores the challenge Michael Dell faces in turning around Dell Inc. (NASDAQ: DELL). Hewlett-Packard has been kicking their butts ever since Mark Hurd took over as chief executive.

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Illinois Tool Works (ITW): OK despite the housing downturn

Filed under: Stocks to Buy

While watching the Detroit Lions lose to the New York Giants, I was struck with a strange feeling. Once again, Detroit, the historical center of American business through the auto industry, will lose out to New York, the financial epicenter of the world. While millions of heartland Americans are stuck with mortgages they're struggling to pay back, New York and its financial machine continues to roll.

It's amazing how twisted stock picking can get after a couple of cold ones.

In all seriousness, I've been looking through a lot of the mess in housing and auto, and I have to admit, it's pretty slim pickings. What I did find, and my bad for not knowing about this jewel before, is a nifty company called Illinois Tool Works (NYSE: ITW). This company competes in industrial products in markets including welding, food equipment, polymers, industrial, construction, auto, and packaging. This company reminds me of the diversity of a General Electric (NYSE:GE) or Tyco (NYSE: TYC).

Continue reading Illinois Tool Works (ITW): OK despite the housing downturn

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Is a Citigroup-JPMorgan Chase merger the quickest way to replace Prince?

Filed under: Employees, Citigroup Inc. (C), JPMorgan Chase (JPM), Money and Finance Today

Jamie Dimon, JPMorgan Chase's (NYSE: JPM) CEO, would be a great replacement for Citigroup Inc.'s (NYSE: C) recently retired CEO Chuck Prince. The only problem is that Dimon already has a job.

But Dimon -- who was Citi ex-CEO Sandy Weill's right hand man until Weill fired him for not giving his daughter a good enough job -- would probably enjoy running a combined Citi-JPMorgan Chase. After all, after he left Citi, he took over Bank One which merged with JPMorgan Chase. And then Dimon took over from its former CEO, Bill Harrison. But a Citi-JPMorgan Chase combination would put Dimon in Sandy Weill's old slot without delay.

Such a merger would probably be couched as a merger of equals. JPMorgan Chase's market capitalization of $140 billion is currently less than Citi's ($160 billion). But at the rate Citi is falling, that valuation gap probably won't last long. Then there's the little matter of the deposit cap -- no bank can control more than 10% of U.S. deposits. With combined deposits of $1.5 trillion -- which includes Citi's international deposits -- the combined banks would probably control more than 10% of the U.S.'s $7.5 trillion (as of January 2007) in deposits.

So the merged companies would need to divest some branches if they wanted the deal to go through and Dimon would not be able to take over officially until after the merger closed. But these seem like small prices to pay to get a good CEO for Citi.

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 owns Citigroup shares and has no financial interest in JPMorgan Chase.

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Housing crushed the banks, will the banks crush everything else?

Filed under: Major movement, Rants and raves, Scandals, Citigroup Inc. (C), Merrill Lynch (MER), Politics, Housing, Federal Reserve

The banks pumped so much money into the housing market (with not so much as a whimper from the government) that it blew up in their faces. The depressed housing market exposed questionable lending practices at every level of the industry, from the solo mortgage broker to the largest of investment banks and their partners in crime, the rating agencies.

Thousands of mortgage brokers are now looking for work, as are the Chief Executive Officers of Citigroup Inc. (NYSE: C)'s Chuck Prince, and Merrill Lynch & Co,, Inc. (NYSE: MER)'s Stanley O'neal. The difference between the two groups, however, is the multi-million dollar severance packages. The ex-CEO's may have seen their reputations damaged but not their bank accounts. I wonder where they bank - offshore perhaps?

The sad housing market is old news by now, although it keeps getting sadder. The real issue now is, how do we put trust back into a banking system that has proven itself so flawed? We have been seeing almost all of the banks write down the value of their holdings on a daily basis. Now what? The banks essentially were crushed by a Frankenstein monster of their own creation. Any stock portfolio that includes financial stocks has been poisoned for the next year at least.

Continue reading Housing crushed the banks, will the banks crush everything else?

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General Motors racing Toyota to 100% electric vehicle

Filed under: Competitive strategy, General Motors (GM), Toyota Motor Corp. (TM)

General Motors (NYSE: GM) is setting itself up for what could be the largest unveiling of an electric vehicle ever in the Volt line of electrically powered vehicles. As gasoline reaches, maintains and passes the $3/gallon mark nationwide, customers have to wonder why no car manufacturer has fulfilled the need of an electric car. And one that does not have limitations that render it non-competitive to a standard gas-powered passenger car.

GM executives have recently said that the Volt is on track for sale for late 2010, and it will be a rechargeable vehicle that is 100% electric, not a hybrid. It's not only nice looking, it would eliminate gas as a variable in that daily commute. To some, that means a savings of a few hundred dollars (or more) per month. GM, however, is not going at this effort alone. Toyota is in the race as well, and there will soon be a "showdown" with GM, according to a senior GM executive last week.

The Chevy Volt should be launched in November 2010, according to GM CEO Richard Wagoner and head of global product development Robert Lutz. That's three years from now, and it's still considered an "aggressive" posture by GM's global design and manufacturing teams. Will Toyota be able to beat that deadline and deliver a solid, 100% electric offering within the next three years and once again show up its main global rival? Lutz said that by next April, one company will be able to show a prototype on the street, and the other will take a credibility hit (stating that batteries won't be able to push cars, even in three years). We'll see who is correct in about five months or so.

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Internet Brands' bland IPO

Filed under: Internet, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Initial public offerings, Technology

No doubt, internet advertising is red hot. Unfortunately, in the case of last week's IPO of Internet Brands (NASDAQ: INET), things were mostly cold. The price range on the offering was $10-$12, but the company was only able to price its deal at $8.

Internet Brands develops and acquires consumer websites, such as in the categories of automotive, travel and home improvement. It has about 45 principal websites, which include properties like CarsDirect.com, FlyerTalk.com, and DoItYourself.com. The network attracted about 26.7 million unique visitors in September.

So, what's the problem? First of all, there is not much synergy among its different categories. After all, can you really cross-sell among automotive and home improvement sites?

Interestingly enough, Internet Brands also recently purchased Jelsoft Enterprises Limited, which develops the vBulletin board platform. Why? I'm really not sure.

What's more, I think it can be tough to manage a large number of diverse sites. Basically, this is something that is better for larger organizations, such as Google (NASDAQ: GOOG), Yahoo (NASDAQ: YHOO), and Microsoft (NASDAQ: MSFT).

Finally, revenues for the first nine months of 2007 actually fell from $65.2 million to $64.9 million. There was also a net loss of $2.4 million.

The lead underwriters on the deal included Thomas Weisel Partners and Jefferies.

You can find the prospectus at the SEC website. Also, if you want to find other recent information on IPOs, then visit DealProfiles.com.

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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Whole Foods (WFMI) falls heading toward Q4 earnings

Filed under: Major movement, Earnings reports, Adobe Systems (ADBE), Whole Foods Market (WFMI), Options, Technical Analysis

Whole Foods Market Inc. (NASDAQ: WFMI) stock is trading lower this afternoon as the company approaches its Q4 earnings release tomorrow after the close. Whole Foods has been wholly unspectacular since early 2006 when investors stopped looking at it like a growth stock and more like a low margin supermarket stock. Over the last two years and eight earnings announcements, WFMI has missed estimates four times, beaten three times and matched once. Investors are expecting more of the same lackluster results tomorrow and are pushing the stock lower today. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on WFMI.

After hitting a one-year low of $36 in August, the stock has recovered some recently and hit a one-year high of $53.65 in October. This morning, WFMI opened at $44.86. So far today the stock has hit a low of $42.18 and a high of $45.09. As of 2:05, WFMI is trading at 42.45, down 2.86 (-6.3%). The chart for WFMI looks neutral but deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider a January bear-call credit spread above the $55 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.6% return in nine weeks as long as WFMI is below $55 at January expiration. Whole Foods would have to rise by more than 29% before we would start to lose money. Learn more about this type of trade here.

WFMI hasn't been above $55 at all in the past year, and has shown resistance around $50 recently. This trade could be risky if the stock finds support around $44 and moves higher again, but even if that happens, this position could be protected by the resistance WFMI formed when it topped out just above $53 in October.

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 positions in WFMI.

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First Data: the anatomy of a buyout deal

Filed under: Private equity

Back in late September, KKR closed one of the largest buyouts in history - the $29 billion transaction for First Data, which is a leading payments processing operator.

Even though the company is private, it is still publishing its financials and is having quarterly conference calls. So how are things going?

For the first nine months of 2007, revenues increased 15% to $5.9 billion and adjusted EBITDA was $1.8 billion (up 7%).

In fact, First Data's new CEO, Michael Capellas, also provided his go-to-market strategy - shedding some light on what happens in post-buyout environments.

First of all, he wants to find ways to increase organic growth. To this end, there will be more emphasis on bolstering the sales force - as well as finding ways to cross-sell offerings.

Next, the company wants to bring new product innovations to market (hey, it means more cross-selling, right?) Some of the areas include mobile ecommerce, analytics, and fraud detection.

Another big opportunity is the growth in emerging markets. Interestingly enough, Capellas is not looking for acquisitions to bulk things up on this front.

Finally, Capellas will try to cut lots of costs. Going into 2008, he thinks he can slash $200 million in annual costs.

And, this means layoffs - about 6% of the workforce. Yes, some things never change.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Yahoo! adds more newspapers to publishing consortium

Filed under: Deals, Newspapers, Internet, Yahoo! (YHOO), Technology

Yahoo (NASDAQ: YHOO), on the eve of a one-year anniversary which saw a unique publishing consortium between Yahoo and large online newspaper publishing sources, has added 17 more newspapers to its stable as of late this weekend.

Yahoo is trying to target the news-seeking crowd that wants local, flavorful content instead of generic, global (or national) news ahead of anything that competitor Google (NASDAQ: GOOG) may be able to offer. Although physical newspaper circulation has been declining for years now as news readers shift to the web, there is still a need for local content that online news aggregators are not fulfilling. Well, according to many of my news-reading relatives, anyway.

Yahoo! announced that The Columbus Dispatch and 16 regional newspapers owned by The New York Times Co. have joined its online publishing partner group. Those additions bring Yahoo!'s total to 415 daily newspapers and about 140 weekly newspapers.

Yahoo! fans are probably cheering this effort, as it could seriously turn into a much-needed victory for Yahoo in its effort to remain relevant for the millions of customers using it for news reading every day. There are still some large partners to recruit -- like The Washington Post and The New York Times -- but Yahoo is easily making progress here.

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Option update: GM volatility elevated as stock at 18-month low

Filed under: General Motors (GM), Target Corp. (TGT), General Mills (GIS), Options

General Motors-(NYSE-GM) is recently trading at $34.27 in pre-open trading, below its close of $36.03. GM is recently down on car incentive sale concerns and GMAC subprime credit exposure. GM call option volume of 27,907 contracts compares to put volume of 54,276 contracts. GM December option implied volatility of 56 is above its 26-week average of 46 according to Track Data, suggesting larger risk.

Target-(NYSE-TGT) will report Q3 EPS on November 20. TGT call option volume of 56,888 contracts compares to put volume of 16,385 contracts. TGT December option implied volatility of 51 is above its 26-week average 34 according to Track Data, suggesting larger price movement.

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

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Goldman's 'sell' on Citigroup is about five months too late

Filed under: Analyst upgrades and downgrades, Forecasts, Citigroup Inc. (C), Goldman Sachs Group (GS)

Goldman Sachs Group Inc. (NYSE: GS) analyst William F. Tonona put a "sell" rating -- Wall Street's equivalent of an F minus -- on Citigroup Inc. (NYSE: C)'s shares about five months too late. Is it any wonder that many money managers ignore analyst stock ratings entirely?

Like most analysts, Tonona seems to excel at telling investors what they already know such as "the lack of leadership at this point in Citi's storied history could not have come at a worse time." and "it will likely take the new CEO some time before he or she decides on the appropriate course of action to undertake.''

Citigroup has problems? Get out of town.

Tonona's call is a month after Deutche Bank AG (NYSE: DB) put a sell on Citigroup. At least these analysts are moving in the right direction. Five analysts rate the stock a strong buy, six a buy and seven a hold, according to Thomson Financial. Why aren't there more sells?

Looks like Citigroup investors are way ahead of the analysts who are paid big bucks to follow the stock.

Shareholder discontent, especially top stockholder Saudi Prince Alwaleed bin Talal, helped push out Chief Executive Chuck Prince on November 4 after the company announced an $11 billion write down because of declining value of subprime mortgages. Shares of New York-based Citigroup are down more than 40% this year.

Too bad analysts can travel back in time so their research can be relevant.

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Why Amazon's Kindle e-book reader will flop

Filed under: Products and services, Launches, Newspapers, Apple Inc (AAPL), Amazon.com (AMZN), Next big thing, Books, Technology

Is this the death of paper books?

This week, Amazon (NASDAQ: AMZN) unveiled its new e-book reader, the Kindle. As Beth Gaston Moon reported in her preview, the 10.3 ounce hand-held reader will retail for $399.

I had great hopes for this device, not the first to market but certainly the best. The type appears crisp, promising to be as readable as paper print. The home run here for Amazon is the content delivery system. Through an arrangement with Sprint, Amazon will deliver content to the Kindle on demand anywhere within Sprint cell network coverage, without the need to be a Sprint customer.

Other positives for marketing the device include the availability of newspaper and blog feeds via the same network, as well as free access to Wikipedia and a built-in dictionary. A high-capacity battery and the ability to expand memory via an SD card are also good selling points.

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Fed hopes Street likes candor as much as good news

Filed under: Citigroup Inc. (C), Bank of America (BAC), Wachovia Corp (WB), Housing, Federal Reserve

In almost all economic environments, the U.S. Federal Reserve is taciturn regarding its likely next monetary policy decisions.

But of late the Fed has deviated and taken a specificity-is-better route, with Federal Reserve Governor Randall Kroszner stating before a Manhattan group that another rate cut would probably provide few additional stimulative benefits for the U.S. economy.

"The current stance of monetary policy should help the economy get through the rough patch during the next few years," Kroszner said during remarks at the Institute of International Finance in Manhattan, Bloomberg News reported.

The Fed has cut benchmark interest rates twice, starting in September. The Fed Funds rate, the rate banks charge each other, now stands at 4.50%, and the discount rate, the rate the Fed charges banks for short-term loans, is at 5.00%.

In his IIF remarks, Kroszner added that he expected the housing recession to worsen, with weaker home sales, but that longer-term, he expects the U.S. economy to return to a sustainable growth rate after a difficult few months.

Fed Analysis: Kroszner's remarks were candid, if not the good news on interest rates Wall Street likes to hear from the Fed. Kroszner's candor indicates that The Fed is looking past October's 0.5% decline in Industrial Production and related, recent soft economic data, toward what the Fed believes will be an accelerating U.S. economy in Q1, stimulated by the Fed's September and October interest rate cuts. Nevertheless, the stand-pat Fed stance is likely to draw criticism in investor and economic circles if additional Q4 data reveals a barely-growing U.S. economy.

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Dolby Labs (DLB) shares in a bullish "flag" pattern

Filed under: Earnings reports, Analyst upgrades and downgrades, Sony Corp ADR (SNE), Dolby Laboratories'A' (DLB), Technical Analysis, Stocks to Buy, Technology

When you go to the movies and see that the show you have picked features "Dolby" sound, you know you are in for a treat. Some may think that "Dolby" is a technical term, but it is actually the name of the American physicist who invented the high quality audio technology that has enhanced the entertainment experience for four decades now.

Dolby Laboratories Inc. (NYSE: DLB) is engaged in the development and delivery of sound processing and noise reduction systems for the entertainment industry. The firm makes its own products and licenses its technology to other manufacturers. It has about 950 patents and 850 trademarks worldwide. In film, the Dolby Digital format has become an audio standard, being employed in more than 42,000 movie theaters. Physicist Ray Dolby founded the firm in London in 1965 and moved it to San Francisco in 1977. Sony (NYSE: SNE) is a competitor.

The company surprised the Street earlier in the month, when it reported Q4 EPS of 39 cents and revenues of $129 million. Analysts had been looking for 24 cents and $121.3 million. Management also guided FY08 EPS to $1.27-$1.37 ($1.22 consensus) and FY08 revenues to $560-$600 million ($536.04M consensus). Kaufman Brothers and Ferris Baker Watts subsequently declared the stock a "buy". DLB shares popped on the news and have since settled into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

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Serious Money: Little growth but no recession in 2008

Filed under: Rants and raves, China, Politics, Presidential elections, Serious Money, Federal Reserve

It may come to pass that all this talk of a recession, on top of the real issues of the depressed housing market, higher energy costs and tight credit, could end up being a self-fulfilling prophecy. However, if we stick to the definition -- a recession is defined to be a period of two quarters of negative GDP growth -- it won't happen.

By this measure, I just do not see a recession in the cards. The presidential election will be going fast and furious in the third and fourth quarters of the year. In addition, the third quarter will see the long awaited summer Olympics in China while the fourth has the election midway through it, plus the holidays. Even if the Federal Reserve Board is supposed to be independent, does anybody really think that there isn't a lot of winking and nodding going on in Washington DC during election years?

I would speculate that if we are going to see two quarters of negative growth, it would come earlier in the year. But we're not there yet, and although the stock market has been anemic as of late, I think solid unemployment numbers will carry us through the first quarter. I think the spring is the most likely candidate for a negative quarter but I just don't see two in a row.

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Bob Evans Farms (BOBE) shares in bullish 'flag' pattern

Filed under: Earnings reports, Smithfield Foods (SFD), Technical Analysis, Stocks to Buy

There is an outfit headquartered in Columbus, Ohio that got its start as a twelve-stool diner owned by a local farmer. He said he could not get any decent sausage for the diner and began making his own back at the farm. That was fifty-nine years ago. Both the diner and the sausage-making businesses have since prospered.

Bob Evans Farms (NASDAQ: BOBE) owns and operates full-service restaurants, under the Bob Evans and Mimi's Cafe brand names. The Bob Evans chain consists of 579 stores in the Midwest, mid-Atlantic and Southeast regions of the United States. Mimi's Cafe runs 118 restaurants, primarily in California and other western states. The company is also a leading producer of pork sausage and complementary home-style convenience foods, under the Bob Evans and Owens brand names. Smithfield Foods (NYSE: SFD) is a competitor.

The firm had good news for investors last Monday evening, when it announced Q2 EPS of 45 cents and revenues of $426.3 million. Analysts had been expecting 39 cents and $425.5 million. Management also guided FY08 EPS to $1.77-$1.84 ($1.72 consensus). The stock popped through 30-day and 50-day moving average resistance on the news and began consolidating the gain in a bullish "flag" pattern. Then, on Thursday evening, the board authorized a two million share addition to its stock buyback program. That boosted the current fiscal year authorization to five million shares and took the stock price to the top of the flag. Further upside is expected.

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Wal-Mart stocks Bratz dolls next to Jesus

Filed under: Products and services, Wal-Mart (WMT), Marketing and advertising

In case you haven't visited a toy aisle at a local Wal-Mart Stores, Inc. (NYSE: WMT) Supercenter this holiday season, don't be alarmed if you hear some religious-speak from some of the dolls and figurines.

Amid the Bratz dolls and Fisher farm animals, you'll find a decent assortment of faith-based toys, some of which proclaim to be "Jesus, the son of God," according to The Chicago Tribune.

Given its Southern roots in Arkansas and its conservative nature, it's in Wal-Mart's blood to be a purveyor of religious toys this time of year. But this is a first -- stocking faith-based toys at Christmastime (or holiday time, if you prefer that).

As a parent, are you for or against these kinds of religious-themed toys? Are they any different than scantily clad Barbies that present an unrealistic view of physical beauty? How about demon-headed boy's toys that look like something from the movie "Hellraiser?" Having a variety of toys that suits all kids, ethnicities and religious beliefs seems appropriate for a retailer that wants to be everything to everyone, all the time. Agree or disagree?

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Top five CEOs: Jobs (Apple), Schmidt (Google), Blankfein (Goldman), McNerney (Boeing), and Smith (FedEx)

Filed under: Google (GOOG), Apple Inc (AAPL), Boeing Co (BA), FedEx Corp (FDX), Goldman Sachs Group (GS)

The New York Post reports on Corporate Leader magazine's poll of the top CEOs based on a survey of analysts and investors. Here's my assessment of the top five:

• Steve Jobs, Apple Inc. (NASDAQ: AAPL). With its stock up 94.4% in the last year -- though 13% below its 52-week high -- Apple's new products this year have been outstanding. But it's a pretty pricey stock; it trades at a Price/Earnings to Growth (PEG) ratio of 1.56 on a P/E ratio of 42.3 and Earnings Per Share (EPS) growth of 27.2% to $6.26 in fiscal 2009.
• Eric Schmidt, Google Inc. (NASDAQ: GOOG). With its stock up 27.8% in the last year -- though 15% below its 52-week high -- Google continues to take share from traditional advertisers while struggling somewhat to profit from all its innovations. But it's a somewhat pricey stock; it trades at a PEG ratio of 1.39 on a P/E ratio of 49.6 and EPS growth of 35.8% to $18.19 in 2008.

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Analyst downgrades: C, FNM, UBS and PHRM

MOST NOTEWORTHY: Citigroup, Fannie Mae, UBS AG and Pharmion were today's noteworthy downgrades:

• Goldman downgraded Citigroup (NYSE: C) to Sell from Neutral citing dislocations in the credit markets, exposure to CDOs, sub-prime mortgages and other leveraged loans. The firm believes Citigroup could face $15B in CDO write downs over the next two quarters.
  
• Friedman Billings downgraded Fannie Mae (NYSE: FNM) to Market Perform from outperform, citing uncertainty of the impact from continued deterioration in the housing market and rising credit losses.
  
• UBS AG (NYSE: UBS) was downgraded to Sector Performer from Sector Outperformer at CIBC, as they expect valuation adjustments throughout the year due to write-downs on credit exposures.
  
• Citigroup lowered its rating on Pharmion Corp. (NASDAQ: PHRM) to Hold from Buy after the company agreed to be acquired by Celgene (NASDAQ: CELG).

OTHER DOWNGRADES:

• Citigroup downgraded the energy sector to Market Weight from Overweight.
  
• William Blair lowered its rating on MSC Industrial (NYSE: MSM) to Market Perform from Outperform.
  
• Goldman removed Cytec Industries (NYSE: CYT) from its Conviction Buy List.
  
• JP Morgan downgraded Smithfield Foods (NYSE: SFD) to Neutral from Overweight.

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Analyst initiations: TGH, CRNT, TESO, CML and FLY

MOST NOTEWORTHY: Textainer, Ceragon Networks, Tesco, Compellent Tech and Babcock & Brown were today's noteworthy initiations:

• Jefferies believes demand for containers will continue to be driven by the migration of manufacturing to emerging markets and that Textainer (NYSE: TGH) is well positioned to take advantage of this trend. The firm started shares off with a Buy rating and $18 target. Piper believes the world's largest company in the global container leasing industry is attractively priced at current levels and resumed coverage of Textainer with a Buy rating and $21 target. Credit Suisse initiated shares with an Outperform rating and $18 target.
  
• Jefferies also initiated Ceragon Networks (NASDAQ: CRNT) with a Buy rating and $17 target, as they believe the company is a primary beneficiary of increased spending in wireless backhaul. Banc of America believes Ceragon is positioned to benefit from increased wireless traffic growth and started shares with a Buy rating and $18 target.
  
• Friedman Billings started shares of Tesco (NASDAQ: TESO) with an Outperform rating and $37 target, citing growth from potentially revolutionary drilling techniques and larger international launch footprint.
  
• Compellent Tech (NYSE: CML) was initiated with a Buy rating and $17 target at Piper, which estimated the company will grow revenue 50%+ year/year through FY09.
  
• Babcock & Brown (NYSE: FLY) was initiated with a Buy rating and $28.60 target at Citigroup, which pointed to the company's attractive dividend yield and growth characteristics.

OTHER INITIATIONS:

• Duff & Phelps (NYSE: DUF) was initiated with a Neutral rating at UBS and a Market Perform rating and $23 target at Keefe Bruyette.
• Actuant (NYSE: ATU) was initiated with a Buy rating and $36 target at Keybanc.
  
• Susquehanna initiated Regeneration Tech (NASDAQ: RTIX) with a Positive rating.

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Target Q3 earnings preview

Filed under: Earnings reports, Target Corp. (TGT)

Although Target Corp.'s (NYSE: TGT) stock price was recently downgraded, the discount retailer still continues to run on all cylinders and still has the marketing and merchandising edge over rival Wal-Mart Stores, Inc. (NYSE: WMT). That being said, the second-largest discounter in America will be reporting earnings tomorrow.

Target is expected to hit an earnings per share figure of $0.62, which would represent a modest 6% gain from the year-ago period. Like Wal-Mart, will it beat expectations in a quarter that saw consumer confidence slip along with a rise in gas prices? The next quarter may be more telling for Target, but the previous quarter may also harbor some interesting information since it concluded before the holiday shopping season began.

Target will be broadcasting its third quarter call tomorrow morning at 9:30am CST and I'll be here to wrap up the retailer's quarter after the beans have been spilled. If you own shares of Target, what are your expectations for the Q3 period? The company from my anecdotal observations still has it, but then again it isn't immune to consumer spending trends that can change with the wind. Another question that will surely come up will be if Target is (again) going to even consider selling its credit card business, even though it has been profitable in the past. With consumer credit markets still in limbo, maybe that's exposure the retailer does not need moving forward.

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Surprise, surprise - economists finally admit the credit mess will impact economy

Filed under: Forecasts, Money and Finance Today, Economic data, Housing

I don't know why it took so long for economists to admit the current housing and credit mess will impact the economy, but the latest report from the National Association for Business Economists (NABE) expects GDP to expand just 1.5% from October through December. That's less than half the 3.9% we saw in the period of July through September.

Historically, a housing slowdown always becomes a drag on the economy, as people spend less on things related to buying or fixing up a new house. On top of a real estate slowdown we also have a credit mess that's essentially frozen much of the type of lending that fueled the housing bubble that just burst. People can no longer use their homes as piggy banks that can be tapped for whatever they want to buy.

For all of this year economists expected the economy to grow by 2.1%. That would be the weakest economic growth since 2002 when the economy grew by just 1.6% as we headed out of our last recession. NABE also lowered its growth prediction for next year to 2.5% from 2.8%, and that may even be too optimistic unless something is done to get the housing market back on track. As long as foreclosures keep rising and people are unable to sell their homes or refinance unaffordable mortgages, you won't see a turnaround in this economy.

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Why Blockbuster's turnaround will fail -- and Netflix is the next Blockbuster

Filed under: Products and services, Marketing and advertising, Netflix, Inc. (NFLX), Blockbuster Inc 'A' (BBI)

The Associated Press interviewed James Keyes, who became CEO of beleaguered rental chain Blockbuster Inc. (NYSE: BBI) in July. Not surprisingly, Keyes is optimistic about the future. The company is investing aggressively to move into the digital age and become relevant, and Mr. Keyes predicts that someday, customers will head to Blockbuster to download movies onto their cell phones, or burn them onto CDs.

But there's just one problem: what exactly is Blockbuster's competitive advantage? The large stores that the company has are more of a headache than anything else. If they really were a valuable means of moving the company into the new era, competitors like Netflix (NASDAQ NFLX) would be gunning to establish a brick and mortar presence, but they're not. Blockbuster is trying to spin its retail presence into an asset. But the $4 billion that the company lost from 2002 to 2005 exposes the stores for what they really are: a liability.

And what of Blockbuster's technological investments? They're great, but any other company can invest in new technology; and a lot of companies with much stronger balance sheets are. I'm reminded of Warren Buffett's decision to close the Berkshire Hathaway mills in 1958. The mills were antiquated and unable to compete on costs with lower-cost producers overseas. Buffett was shown plans to modernize the mills through aggressive investment, but ultimately passed. He explained the decision by saying that anyone else could modernize too, and that the cost savings would filter down to the consumer, not revive the New England textile industry. Of course, Buffett was right, and a lot of less prescient operators who did move to modernize lost their shirts.

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