Wall Street Breakfast: Must-Know News

• Shareholder sues BoA. A Bank of America (BAC) shareholder has filed a legal suit against the company, seeking class action status on behalf of all shareholders eligible to vote on the acquisition of Merrill Lynch. The suit names Kenneth Lewis and John Thain as defendants and faults the two for failing to disclose the full extent of Merrill's losses; the Dec. 5 vote to approve the merger was based on an Oct. 31 proxy statement that hadn't been revised to reflect Merrill's poor Q4 performance.
• Sony slips. Sony (SNE) warned it will post a ¥260B ($2.9B) annual operating loss on falling demand, a strengthening yen and restructuring costs. The forecast is down from an earlier projection of a ¥200B profit, and far worse than earlier consensus estimates of a ¥100B loss. It will be Sony's first operating loss in 14 years, and its biggest loss ever, as the company has fallen behind Apple (AAPL) in portable music, Nintendo (NTDOY.PK) in video games and is losing money on its flat screen TVs. As part of the restructuring plan, Sony said it may consolidate TV production in Japan into one plant, but analysts call for more drastic steps to turn the company around. Shares -2.8% in Japan (7:00 ET).
• Rescue buyout for Satyam? Media reports say Indian firm Larsen & Toubro, which holds around a 4% stake in Satyam (SAY), is considering presenting a rescue plan to Satyam's board. Investment banking and government sources said L&T would put a price on its bid once KPMG and Deloitte, Satyam's new auditors, release updated audit results. L&T denied the reports. Satyam's board will begin a two-day meeting today to discuss how to secure emergency funding.
• AIG selling prized business. AIG (AIG) has begun the sale of its prized Asian life insurance unit, and hopes to pull in as much as $20B on the unit to help repay its government loans. The unit boasts 20M policyholders across 13 countries, employs 200,000 tied agents and last year made an aggregate operating profit of around $2B. AIG has expressed an interest in selling 49% of the unit, but would consider a complete sale, and could be willing to accept shares as acquisition currency. Potential bidders include HSBC (HBC), Prudential Financial (PRU) and China Life (LFC).
• Apple regains some shine. Apple (AAPL) posted better-than-expected quarterly earnings yesterday (more details below), giving depressed shares a healthy boost with gains of over 8% after hours. Overseas demand for iPods, Mac computers and iPhones offset a slowdown in U.S. sales, pushing quarterly sales past $10B for the first time vs. consensus estimates of the first profit drop in five years. The company posted a cautious outlook for FQ2, forecasting EPS of $0.90-1.00 vs. $1.13 consensus and revenue of $7.6-8B vs. $8.2B.
• Germany's 'Bad Bank Lite.' The German government is working on a new 'Bad Bank Lite' rescue plan that could help the industry get hundreds of billions of euros of bad assets off its books. According to media reports, the government would take on the bad assets of banks and absorb associated losses, and would also get a claim on future gains. A similar model was successfully used with East German banks after reunification in 1990. The government could take as much as €300B-€400B in bad assets, though the banks themselves would choose which assets to divest.
• BoJ forecasts deflation. Bank of Japan voted unanimously to maintain interest rates at 0.1%, and lowered its assessment of the economy. BoJ now sees a longer contraction until recovery starts to kick in by the second half of fiscal 2010. Japan will slip back into deflation during the contraction.
• Retail sales. Retail chain store sales rose 1.1% from a week ago, ICSC reported, and fell 1.8% Y/Y. "Being a low volume month with little incentive to spend will continue to make January a tough month for retailers." According to Redbook, national chain store sales fell 2.5% in the first two weeks of January, worse than the expected -2.2%, noting retailers don't tend to read too much into January. Shops are building very cautious inventories for the spring season.
• Housing index drops. NAHB's Housing Market Index came in at a record low of 8 vs. 9 consensus. However its index of prospective buyers rose to 8 vs. 7 in December, while its index of home sales for the next six months inched up to 17 from 16. "Clearly, conditions in the nation's housing market aren't getting any better," said NAHB chairman Sandy Dunn, "and they aren't going to get any better until the federal government takes substantial action to encourage qualified buyers to get back in the market."

Earnings: Thursday Before Open

• AmerisourceBergen (ABC): FQ1 EPS of $0.73 beats by $0.04. Revenue of $16.9B (+4.6%) vs. $17.2B. (PR)
• AU Optronics (AUO): Q4 EPS of -$0.95 misses by $0.42. Revenue of $1.80B (-62.5%) vs. $1.81B. (PR)
• Baxter International (BAX): Q4 EPS of $0.91 beats by $0.02. Revenue of $3.13B (+4.1%) vs. $3.15B. (PR)
• Fifth Third Bancorp (FITB): Q4 EPS of -$3.82 misses by $3.83. Tier 1 capital ratio of 10.59%. Net loss of $2.2B from goodwill impairment, credit actions, higher credit costs and market valuation adjustments. (PR)
• KeyCorp (KEY): Q4 EPS of -$1.13 misses by $1.11. Revenue of $1.045B (-15.6%) vs. $1.176B. (PR)
• Knight Capital Group (NITE): Q4 EPS of $0.56 beats by $0.18. Revenue of $330.2M (+28.2%) vs. $261.8M. (PR)
• Lockheed Martin (LMT): Q4 EPS of $2.05 beats by $0.13. Revenue of $11.1B (+2.7%) in-line. (PR)
• Nokia (NOK): Q4 EPS of $0.26 misses by $0.02. Revenue of $12.7B (-19.2%) vs. $13.1B. Shares -10.4% premarket.(PR)
• Potash (POT): Q4 EPS of $2.56 beats by $0.28. Revenue of $1.87B (+30.7%) vs. $1.85B. (PR)
• SunTrust Banks (STI): Q4 EPS of -$1.08 misses by $1.15. Revenue of $1.93B (+8.8%) vs. $2.16B. (PR)
• Taiwan Semi (TSM): Q4 EPS of $0.07 in-line. Revenue of $1.96B (-32.1%) vs. $1.95B. (PR)
• UnitedHealth (UNH): Q4 EPS of $0.78 in-line. Revenue of $20.45B (+9,4%) vs. $20.35B. (PR)

Earnings: Wednesday After Close

• Amdocs (DOX): FQ1 EPS of $0.55 in-line. Revenue of $754M (+1.6%) vs. $792M. Sees FQ2 EPS of $0.47-0.51 vs. $0.57 and revenue of $700-720M vs. $793M. (PR)
• Apple (AAPL): FQ1 EPS of $1.78 beats by $0.39. Revenue of $10.17B vs. $9.75B. Gross margins 34.7% vs. 31.9% consensus. Macs 2.52M in line. iPhones 4.36M vs. 4.6M. (8-K)
• Burlington Northern Santa Fe (BNI): Q4 EPS of $1.79 beats by $0.05. Revenue of $4.37B (+3%) in-line. Commits $2.7B in capital expenses for 2009, $150M lower than 2008. (PR)
• eBay (EBAY): Q4 EPS of $0.41 beats by $0.02. Revenue of $2.04B (-6.5%) vs. $2.12B. Sees Q1 EPS of $0.32-0.34 vs. $0.40, and revenue of $1.8-2.05B vs. $2.1B. Skype growth 26% to $145M. Active users +1% to 86.3M. Gross merchandise volume +1% to $11.47B. (PR)
• F5 Networks (FFIV): FQ1 EPS of $0.40 in-line. Revenue of $166M (+7.4%) in-line. While some sales are being pushed into later quarters, others are postponed indefinitely. (PR)
• Kinder Morgan Energy Partners L.P. (KMP): Q4 EPS of $0.24 misses by $0.29. Revenue of $2.29B (-6.4%) vs. $3.41B. (PR)
• Polycom (PLCM): Q4 EPS of $0.42 beats by $0.02. Revenue of $263M (-0.1%) in-line. (PR)
• Seagate Technology (STX): FQ2 EPS of -$0.23 misses by $0.18. Revenue of $2.27B (-33.6%) vs. $2.46B. Sees FQ3 revenue of $1.6-2B vs. $2.19B. (PR)

Today's Markets

• Asia markets closed lightly up. Nikkei +1.9% to 8,052. Hang Seng +0.6% to 12,658. Shanghai +1.0% to 2,005. BSE +0.4% to 8,814.
• In Europe at midday, London +1.2%. Paris +0.8%. Frankfurt +1.0%.
• U.S. futures: Dow -0.6%. S&P -0.6%. Nasdaq +0.3%. Crude +1.4% to $44.18. Gold +0.01% to $850.20.

Thursday's Economic Calendar

• 7:00 MBA Mortgage Applications
  8:30 Housing Starts
  8:30 Jobless Claims
  4:30 PM Money Supply
• Notable earnings before Thursday's open: ABC, AUO, AVT, BAX, BBT, BEN, CIT, CMA, CY, EAT, ESI, EXC, FITB, HBAN, IGT, JNS, KEY, LMT, LUV, MTB, NITE, NOC, NOK, ORI, POT, SHW, STI, TCB, TSM, UNH, UNP, UST
• Notable earnings after Thursday's close: AMD, CBST, CNI, COF, ED, FII, GOOG, ISRG, MSCC, MSFT, PBCT, SNV, SYNA, TPX, WERN, WFR

Seeking Alpha editor Eli Hoffmann contributed to this post.

Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.

After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.

Comments

[AndrewBaker:]

Yes, so BofA is unpopular as are all the banks (except maybe JP Morgan where Jamie is doing as good job, and Wells Fargo who are also well amanged), and they are also near bankrupt and perhaps would be if not for hand-outs, TARP and guarantees: but we need them. Sure, sack the bloated and bad executives, and find better managers, but support them so they can get back on a decent footing. The government is not going to nationalize them. They have said so and it's against the American way of doing things; so stop being scared of their stock. Buy bank and financial stocks and it will become a self-fulfilling prophecy that they will then do well when such support is seen. Look at AIG: from a basket case to starting to do things to make things come good. I'll short to make a buck, and have shorted financials, but now is the time to go long on their stock and long on our future vision of once more being a financially sound economy admired, sometimes grudgingly, by the rest of the world.

Jan 22 08:40 AM

[axelrod608:]

Good job. Keep those breakfast buffets coming. Always informative and timely.

As I watched our new Prez and a roomful of his picks take the oath of office I was struck as they all swore to uphold and defend the Constitution, and later the same day map out the strategy for the next round of bailouts.

It makes one wonder if any of them ever actually read the Constitution, which contains an assortment of good ideas including the one which lays out the proper way to handle failing companies. Bankruptcy is the Constitution's mandate for dealing with our current financial mess.

And there's not a word in the Constitution authorizing anyone or any branch of government to bail out failing individuals or businesses using federal funds.

We have totally lost our way. Our leaders treat our Constitution as an old decrepit second cousin they let sleep in the attic and feed occasionally. Drag him out occasionally for show and family photos.

I don't know about anybody else, but the "change" I was hoping for included going back to the ways our founding fathers instructed us to follow in the operation of government. Then again, I wasn;t naive enough to actually believe it would ever happen.

Tax and spend, borrow and spend - there's no real difference. Looks like we get to settle for a "change" of names on the doors and desks.

Jan 22 11:14 AM

[jrheintz:]

Axelrod;

You are right in my camp. I fail to see why so many citizens are so washy about fully expressing them selves. Just say it like it is:

The people we elect really bring nothing new to the table , just warmed over hash, and we eat it up by taking a postion of supporting the party.
Lets face it, we don't have any idea what the party wants support on, except, donations. Which is one thing we need to drop, now. for if they fail to obtain money they will get-the-picture-quick. Start the ball rolling on imposeing term limits of two terms, it works in Neb, very well, without any hitsch.

I keep reading about what trouble the banks are causing, they need to stop their bad lending practice's, Hey they are held hostage by the clown's in Washington. If the political crowd would follow the constiution these poeple would have been in receiversip long ago and we would not have this problem to-day. Stop making excuses and get rid of the real
cause of all our country's problems, the politcian.

Good morning and have a great day

Jan 22 12:54 PM

[notsosmart:]

i dont get the dumb-dumbs that thought change was coming.its too late. too ingrained in the dc system.keep the sheeples worried about stem cell research,abortion & same sex marriage while they are beeing fleeced.also make sure they know the latest sport scores.

Jan 22 12:56 PM

[PainfullyAware:]

Unfortunately, the Constitution is not highly regarded by the masses or the leaders of America. Alas, it has been relegated to a "Historical Reading Requirement" rather than the law of the land.

Without agreement of respect and regard for this document "Because I Say So" becomes the ruling Ideology.

When people finally realize that the "Concept of Money" is at the root of government we may actually see a turn around in attitude. Money is power.

Down with the Corpratocracy !!!

The buddy system is great if benevolent people are involved; It is the opposite if the contrary is true.

Evil always seeks the seat of power. Power given is not so easily taken back. Consider that the Devil may occupy the seat intended for angels in the issuance of governmental power. The price to good people for apathy in public affairs is to be ruled by evil.

The Worst Is Yet To Come.

Safety will be found in Real Estate or tangible assets.

The Reset Continues.



On Jan 22 11:14 AM axelrod608 wrote:

> Good job. Keep those breakfast buffets coming. Always informative
> and timely.
>
> As I watched our new Prez and a roomful of his picks take the oath
> of office I was struck as they all swore to uphold and defend the
> Constitution, and later the same day map out the strategy for the
> next round of bailouts.
>
> It makes one wonder if any of them ever actually read the Constitution,
> which contains an assortment of good ideas including the one which
> lays out the proper way to handle failing companies. Bankruptcy
> is the Constitution's mandate for dealing with our current financial
> mess.
>
> And there's not a word in the Constitution authorizing anyone or
> any branch of government to bail out failing individuals or businesses
> using federal funds.
>
> We have totally lost our way. Our leaders treat our Constitution
> as an old decrepit second cousin they let sleep in the attic and
> feed occasionally. Drag him out occasionally for show and family
> photos.
>
> I don't know about anybody else, but the "change" I was hoping for
> included going back to the ways our founding fathers instructed us
> to follow in the operation of government. Then again, I wasn;t naive
> enough to actually believe it would ever happen.
>
> Tax and spend, borrow and spend - there's no real difference. Looks
> like we get to settle for a "change" of names on the doors and desks.

Jan 22 12:59 PM