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Macro and Housing

New-Home Starts Sink As Sales Slow, Inventories Rise

Technology and Internet

As Oracle Digests Acquisitions, Earnings Surge

  • Summary: Oracle (NYSE:ORCL) posted fiscal first quarter results yesterday, announcing earnings growth of 29% and revenue growth of 30%. Up 32% this year and having hit its highest price in four years last week, the stock jumped 13% to $18.28 after-hours. In the last year, Oracle spend $20 billion on acquisitions including PeopleSoft, Siebel and twenty additional companies. Analysts were split in their interpretation of ORCL's strong performance last quarter with bulls applauding a successful integration of the acquisitions as bears saw an attempt to close the year with strong numbers. Some of this quarter's stats: Net income: $670 million (13 cents a share), compared with $519 million 910 cents a share) last year. Excluding items, profit was $931 million (18 cents a share), surpassing Wall Street's projections of 16 cents a share. The company expects next quarter net income to rise to $877.8-$909.7 million. Revenue: $3.59 billion, up from $2.77 billion last year. Next quarter revenue is predicted to increase to $4.09-$4.16 billion. Database technology: Expectations were that revenue in this area was waning, but sales rose 15% to $576 million. Read the full article.
  • Related links: Full conference call transcript. William Trent looks at SAP's stumbling. Jason Wood's summary of Oracle's analyst day last quarter and F4Q results. See also: Oracle CEO Ellison Attacks SAP and Its CEOOracle's On Fire: Reports Another Blowout Quarter, Pokes SAP in the EyeOracle's New Direction Pleases Both Customers and Shareholders.

Yahoo Warns Of Weakness In Web-Ad Sales

Analysts React to Yahoo Warning

  • Summary: The following is a summary of analyst reactions (and their current ratings, if any) to Yahoo’s (YHOO) warning that ad growth is slowing, primarily on its auto and finance sites: Zack's Equity Research: Analyst Steve Biggs (“Buy” with a $40 price target) posits that Yahoo has more exposure to traditional advertising (including auto & financial services), as opposed to Google’s (GOOG) reliance on “paid search”, which is a more attractive (advertising) option for small companies. WR Hambrecht & Co.: Analyst Denise Garcia (“Buy”) is still bullish on internet advertising. Despite weak spending from the auto and financial services sector, Denise still expects on-line advertising growth to hit 29% this year. Riley Asset Management: CEO Ned Riley said that as internet advertising matures and takes market share from print advertising, it becomes more exposed to general economic cycles. Internet advertising has a growing exposure to a slowing economy. Miller Tabak: Equity strategist Peter Boockvar sees the Yahoo warning as a reflection of a slowing US economy. Since auto and financial services are heavy advertisers, companies relying on advertising income will feel the pinch. Piper Jaffray & Co: Analyst Safa Rashtchy (“Outperform”) thinks that the slowdown in auto advertising is temporary, and will pick up as new car models are launched later this year and early next year. Cowen & Co.: Analyst James Friedland (“Outperform”) is concerned that this can become an issue for the entire online advertising sector. His “big question” is whether or not this will hit search side advertising, i.e., Google, as well. Read the full article.
  • Related Links: Piper Analysts Recommend Yahoo Following Recent SelloffMessage from Yahoo's Warning: Broader Economy Still Impacts Online Properties. Conference call transcripts: Yahoo Q2 2006, July 18, 2006.

Energy

Ethanol Producers Find Tough IPO Environment

  • Summary: Hawkeye Holdings (HWY), one of this week's eight scheduled IPOs, announced that it has delayed the offering due to market conditions. According to Dealogic, this is the 33rd potential IPO this year to postpone its offering for this reason. Two additional ethanol producers have recently filed for IPOs: Dallas-based ASAlliances Biofuels filed a preliminary prospectus last Friday, and US BioEnergy (USBE) filed for a $300 million IPO in August. The three companies have very short operating histories: Hawkeye began production in November 2004, and ASAlliances is pre-revenue stage having been formed less than two years ago. Both are owned by private equity firms. US BioEnergy was formed in 2004 as well. The two "successful" ethanol IPOs of the year--VeraSun (VSE) and Aventine (AVR)--are trading below their IPO prices. Read the full article.
  • Related Links: Extensive coverage of the ups and downs in the ethanol sector. Highlights from Hawkeye and US BioEnergy's IPO filings. WSJ's warning last week that the ethanol sector was becoming overly frothy. Coverage of the ethanol sector. ♦ See also Seeking Alpha's IPO analysis

Transport

UPS, Teamsters Begin Negotiations

Ford Digs Deep on Buyouts For Salaried Workers

  • Summary: Ford Motor Co. (NYSE:F) announced Friday that it will offer substantial "separation packages" to much of its white-collar workforce, along with "retention bonuses" for key employees, in a bid to reduce its U.S. workforce by over one-third. This staff reduction is a critical element of Ford's plan to implement an annual cost savings of $5 billion by the end of 2008. Meanwhile, Ford's credit ratings have been cut once again by both Standard & Poors and Moody's, bringing the company into below-investment-grade status -- the same level as competitor General Motors (NYSE:GM). Read the full article.
  • Related links: Can Ford Survive? Investors Need to KnowJerry Flint Believes Detroit's Luck Has Run OutBarron's Nine Tips for Ford's New CEO

Boeing Group Gets U.S. Border Pact

  • Summary: Defense contractor Boeing Co. (NYSE:BA) has won an estimated $2 billion contract from the Department of Homeland Security to help to secure America's border with Mexico. Boeing will lead a team of companies in the first phase of the department's Secure Border Initiative [SBI]. That phase, called SBInet, is intended to create a "virtual fence" along the border through the use of technology like motion sensors, cameras, unmanned aircraft and cellular telephones. In securing the contract, Boeing beat other teams led by Lockheed Martin (NYSE:LMT), Northrop Grumman (NYSE:NOC) and Raytheon (NYSE:RTN). Read the full article.
  • Related links: Boeing Is Set for Takeoff ♦ 9/11: Its Lasting Impact on the Economy and Defense Stocks; Conference call transcripts: Boeing Q2 2006, July 26, 2006

Retail, Consumer Products and Restaurants

Clairborne to Bring Juicy Apparel Line To China Market

  • Summary: Liz Claiborne is set to introduce its Juicy Couture label to China and other Asian countries over the next four years. The emphasis will be on mainland China with a planned grand total of 24 retail stores and 23 shops within other stores in Asia. Some are saying Liz is late to the market, but China only fully opened its retail industry to foreign retailers last December per its '01 WTO accession. The program director at the Raffles Design Institute in Beijing says the following about niche foreign brands with emphasis on street wear, "[Chinese consumers are] definitely interested in it. It's got a sort of 'bling' appeal, and it's very American. (It's) probably the biggest youth style that's around at the moment for people under 30." As for the threat of knockoffs, which Liz/Juicy already has to contend with, a retail-apparel specialist comments, "If you're good enough to copy, then that means you've made some sort of name for yourself here." Read the full article.
  • Related links: Big Name U.S. Retailers Eye China's OpeningGrowth in China’s Luxury Goods Market to be Fueled by 2nd Tier CitiesApparel Labels Making Major Push Into Retail

INSIDE TRACK: TJX Insiders Sell As Shares Climb To 52-Week High

Financials

Lehman Acquires Stake in Electronic Market

International

HEARD IN ASIA: China's High-Tech Exporters Stand to Gain From Tax Changes

  • Summary: China's announcement late last week to implement a revised export tax rebate policy in an attempt to better balance its increasingly controversial trade surplus has actually been a boon for most stocks affected by the policy, regardless if negatively or positively. The new policy partially cuts VAT rebates for select low-end, low value-added export products while in some cases giving full 17% rebates to higher-end (value-added) products such as in tech and equipment. A Goldman Sachs economist reports, "The increase in the export-tax rebate rates in high-tech products and technical equipment may incidentally boost rather than slow down China's export growth." Even stocks of firms involved in low-end, low value-added products are rising because the amount of rebate lost is rather insignificant to overall net income. Read the full article.
  • Related links: China's Latest Attempt to Cut Its Trade SurplusChina's Trade Surplus Widens; Potential Collaboration with U.S. in Oil Field DevelopmentChina's Surging Exports to Europe

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Notable articles on Seeking Alpha today: Why Shlomi Cohen thinks Marvell and Sandisk are potential acquisition targets, and who he thinks Buffett's after next; Chad Brand goes searching for shorts; Eric Savitz asks "Will anyboday buy downloadable video?"; five tips for low-cost home decor; John Hussman sees hidden weakness in recent market action; Jim Cramer's latest stock picks.

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Source: One Page Annotated WSJ Summary: Wednesday Sept. 20