- H-P grabs 3Com, takes on Cisco. Hewlett-Packard (HPQ) agreed to acquire networking-equipment maker 3Com (COMS) for $2.7B, or $7.90/share - a 39% premium to Wednesday's close. With 3Com, H-P - the world's largest PC maker - gains a networking business that competes directly with Cisco's (CSCO) core business of routing and switching, and a strong foothold in China, which accounts for half of 3Com's revenue. Analysts were largely enthusiastic about the deal, saying 3Com was one of the biggest values in the networking space, second only to Cisco in the breadth of its enterprise portfolio. Cisco responded swiftly, saying on its blog that networking acquisitions "only validate the fact that networking is becoming the platform for all forms of communications and (information technology)." H-P also preannounced Q4 EPS of $1.14 vs. consensus of $1.12, and revenue of $30.8B vs. $29.8B. After hours, HPQ was -0.6%, and COMS was +35%.
- UTech buys GE Security for $1.8B. GE (GE) agreed to sell its fire alarm and security systems unit to United Technologies (UTX) for $1.82B in cash, as had been widely speculated. UTX said its customers "will see increased breadth and depth of product offerings" as a result of the deal. The unit includes Edwards Systems Technology, which GE bought for $1.4B from SPX Corp. (SPW) in 2005. The business offers building management systems that help control commercial structures during fires, earthquakes and other emergencies, and would take United "beyond just perimeter and access security," one analyst said.
- Benmosche stays put. AIG (AIG) CEO Robert Benmosche told employees Wednesday in an internal memo he remains "totally committed to leading AIG through its challenges" despite his frustrations with government curbs on compensation at the company. The reassurance came after reports Benmosche might bail after just three months at the helm, saying strict compensation rules made it almost impossible to retain talent. In the memo, he called the pay curbs a "barrier" that "stand in the way of restoring AIG's value" and repaying its debt.
- World banks prop up dollar. Central banks say they've been snapping up dollars this week in an effort to stem its slide and hold down the value of their currencies. While Geithner continues to pay lip service to maintaining a strong dollar, Washington has yet to take any concrete steps to stop the bleeding, which is beneficial to U.S. exports and tourism.
- TARP repayments reduce gov't borrowing. The U.S. will borrow "substantially less" than initially anticipated, with banks already repaying rescue funds and more "significant repayments" ahead, Treasury's Geithner says. Reduced borrowing, a narrowing of the current account deficit, and signs that Americans are saving more all contribute to global confidence that the U.S. can rein in its deficit, he said today in Singapore.
- High oil prices could derail recovery. The IEA revised its 2010 world oil demand forecast slightly higher, but warned that rising crude prices could smother the fragile economic recovery. IEA now expects global oil demand to rise to 86.2M barrels a day, up 140K from October. Rising stock markets, a weak U.S. dollar, and rebounding world economies have driven crude prices up almost 80% this year, despite a persistent overhang in oil inventory which now stands at 60 days of forward cover.
- Foreclosures fall, but for how long? Foreclosures slowed for a third straight month, but remain sharply higher than a year ago. The number of homeowners who received foreclosure notices fell 3% month-on-month to 333K, up 18.9% from the same month in 2008. Rick Sharga of RealtyTrac, which released the report, cautioned the improvement was likely temporary: “It’s good to see that foreclosures have slowed down marginally, but we don’t really think it’s a trend." The firm predicts 3.2-3.4M properties will go into foreclosure in 2009, up from 2.3M in 2008.
- Art auction smokes projections. A very positive art auction at Sotheby's (BID) has some thinking the art-market recession may be on the mend. Sotheby's brought in $134.4M at an auction of post-war and contemporary art Wednesday night in Manhattan, including a smoky sheet of dollar bills by Andy Warhol that went for $43.7M. Total proceeds blew away Sotheby's' internal estimate of $67.9-$97.7M, and also outdid its $125M sale of a year ago. 52 of the 54 works offered found buyers.
- Turkeyless Thanksgiving for BofA? Bank of America (BAC) may miss its internal deadline of naming a new CEO by Thanksgiving, due in part to its inability to zero in on a clear frontrunner, and amid worries that the process must be approved by the Fed.
- Mortgage apps rise. Mortgage applications rose 3.2% from a week ago, led by a 11.3% gain in refinancing, which now accounts for 71.5% of all applications, up from 66% last week. MBA said the average 30-year mortgage rate fell to 4.9% from 4.97% in last week's survey. Freddie Mac's weekly survey of mortgage rates comes out at 10:00.
Earnings: Before Open
- AECOM Tech (ACM): FQ4 EPS of $0.48 beats by $0.02. Revenue of $1.63B (-0.2%) in-line. Sees 2010 EPS of $1.90-2.00 vs. $2.03. (PR)
- EnCana (ECA): Q3 EPS of $1.03 misses by $0.14. Revenue of $3.88B (-64.2%) vs. $3.08B. (PR)
- Kohl's (KSS): Q3 EPS of $0.63 beats by $0.02. Revenue of $4.05B (+6.5%) in-line. Sees Q4 EPS of $1.14-1.24 vs. $1.25. (PR)
- Urban Outfitters (URBN): Q3 EPS of $0.36 beats by $0.01. Revenue of $506M (+6%) in-line. Operating margin 19% vs. 17.1% in Q2. (PR)
- Wal-Mart (WMT): Q3 EPS of $0.84 beats by $0.03. Revenue of $98.66B vs. $99.88B. Sees Q4 EPS of $1.08-1.12 vs. $1.12 consensus. "The sales environment continued to be difficult this quarter, but customer traffic is up throughout the company." (PR)
Earnings: Wed. After Close
- Advance Auto Parts (AAP): Q3 EPS of $0.69 beats by $0.03. Revenue of $1.3B (+6%) in-line. Third-quarter same-store sales increased 4.7%. Shares -3.7% AH. (PR)
- Applied Materials (AMAT): FQ4 EPS of $0.13 beats by $0.10. Revenue of $1.5B (-25%) vs. $1.3B. Expects revenue growth of more than 30% in fiscal 2010. Reports "increased net sales and profitability in our semiconductor equipment business, with improved demand and financial performance in all of our segments." Shares +0.7% AH. (PR)
- Computer Sciences (CSC): FQ2 EPS of $1.40 beats by $0.05. Revenue of $4B (-5%) in-line. Shares -2.9% AH. (PR)
- Ctrip.com (CTRP): Q3 EPS of $0.44 (RMB3.03) beats by $0.12. Revenue of $80M (+47%) vs. $72M. Sees Q4 revenue of $100M-104M vs. $75M. Shares +10.5% AH. (PR)
- Green Mountain Coffee Roasters (GMCR): FQ4 EPS of $0.34 beats by $0.01. Revenue of $222M (+65%) vs. $217M. Shares -9.1% AH. (PR)
Asia markets headed lower Thursday. Europe stocks are flat at midday, and futures are under some selling pressure.
- Asia: Nikkei -0.7% to 9804. Hang Seng -1% to 22398. Shanghai -0.1% to 3173. BSE -0.9% to 16696.
- Europe at midday: FTSE flat at 5266. CAC -0.2% to 3808. DAX flat at 5669.
- Futures: Dow -0.3$ at 10230. S&P -0.3% to 1092.50. Nasdaq -0.4%. Dec. crude -0.8% to $78.65. Gold +0.1% to $1,116. Dec. 30-year Tsy -0.34% to 118-31. 10-year -0.12%. Euro -0.3% vs. dollar. Yen and pound are flat.
- 3:30 Geithner speaks
7:00 MBA Mortgage Applications
8:15 Bloomberg Washington Summit
8:30 Initial Jobless Claims
10:00 FDIC: Final Ruling on Prepaid Assessments
11:00 EIA Petroleum Inventories
1:00 PM Results of $16B, 30-Year Bond Auction
2:00 PM Treasury Budget
4:30 PM Money Supply
- Notable premarket earnings: ACM, ECA, KSS, URBN, WMT
- Notable postmarket earnings: BBI, DIS, JWN
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