Seeking Alpha
Profile|
( followers)  

TECHNOLOGY AND INTERNET

AT&T: China's Great Wall of Telecom Regulation

The Wall Street Journal reports although AT&T was one of the first U.S. telecom carriers to enter China some 25 years ago, it continues to face some of the same struggles. The barriers are still too high, as AT&T earns more in India than in China, despite the former's much smaller market size. AT&T's latest expansion in China is the opening of an Internet data center in Shanghai, its second in the country. Revenues from China grew 40% this year, its fastest market in Asia, but regulation requiring a local partner and capping equity ownership at 49% with high capitalization requirements is a big obstacle. ATT-T-1yr-chart-12-08-06 Not to mention, foreign telecom companies to this day, have no presence in providing phone call and Internet access services. An AT&T senior executive commented, "... India is a much more open telecommunications environment than mainland China." But given the high growth rate and future potential, "We're very keen to see some changes in the regulatory framework (in China)."
• Sources: The Wall Street Journal
• Related commentary: Time For Wireless Carriers to 'Unlock' Customer Handsets, Will AT&T Let Its Bid To Acquire BellSouth Die? Conference call transcript: AT&T Q306
• Potentially impacted stocks and ETFs: AT&T (NYSE:T). China Telecom/Wireless Stocks: China Telecom (NYSE:CHA), China Netcom (NYSEARCA:CN), China Mobile (NYSE:CHL) and China Unicom (NYSE:CHU). ETFs: iShares S&P Global Telecommunications (NYSEARCA:IXP), iShares Dow Jones US Telecom (NYSEARCA:IYZ), Telecom HOLDRs (NYSEARCA:TTH), Vanguard Telecom Services (NYSEARCA:VOX)

Promising New Memory Chip Prototyped By IBM, Macronix and Qimonda

Scientists from IBM, Qimonda AG and Macronix International will today disclose promising research results on "phase-change" memory -- one of the technologies pegged to replace both flash memory (used in USB thumb-drives and camera/portable device memory) and possibly even standard hard drives. Phase-change memory promises a low-cost solution to the leakage problems and electrical demands of nano-scale flash memory, while functioning at more than 500x the speed. Intel, along with partner Ovonyx and STMicroelectronics, announced another prototype phase-change memory device earlier this year. The IBM/Qimonda/Macronix team created phase-change memory cells of just 20 nanometers -- three times smaller than advanced flash chips currently on sale.
• Sources: Press release, Wall St. Journal, AFX, Inquirer
• Related commentary: Wikipedia on phase-change memory, Intel Previews Potential Replacement for Flash, Goldman On IT Trends: What Tech Companies Stand To Gain?, IBM: You Don't Need a Computer to See Its Growth Potential -- Barron's Conference call transcripts: IBM Q3 2006, Intel Q3 2006,
• Potentially impacted stocks and ETFs: IBM (NYSE:IBM), Macronix (MXIC), Qimonda (QI), Competitors: Intel (NASDAQ:INTC), STMicroelectronics (NYSE:STM)

MEDIA

Liberty to Acquire DirecTV and to Regain Sports Networks

Liberty Media will regain control of regional sports cable channels in Pittsburgh, Seattle and Denver, as part of an LINTA 12-11-06agreement with News Corp. Liberty will sell its $11 billion position in News Corp. and will acquire 38.6% of DirecTV Group Inc., News Corp's satellite-TV firm. However, to meet the requirements for a tax-free trade, 5% of the assets handed over to Liberty must be operating businesses, and since DirecTV is an investment, News Corp is including its three sports networks as part of the deal as along with cash. Liberty originally owned the networks, but traded them for a stake in News Corp. when the two companies established a joint-venture in the mid-90s. News Corp's revenue from its regional sports networks increased 30% from last year on rising popularity of local programming and high subscription fees paid by cable companies.
• Sources: Wall Street Journal
• Related commentary: News Corp. and Liberty Media Looking to Wiggle Out of as Much as $4.5 Billion in Taxes, News/Direct TV Swap--What is John Malone Smoking?, News Corp-Liberty Media DIRECTV Share Swap Nearly Complete, What Liberty- News Corp Deal Means for Shareholders. Conference call transcripts: News Corp. F1Q07
• Potentially impacted stocks and ETFs:
Liberty Media (NASDAQ:LINTA), (LCAPA), News Corp (NASDAQ:NWS), DIRECTV Group (NASDAQ:DTV). Competitors: Time Warner (NYSE:TWX), Viacom (NASDAQ:VIA), Comcast(NASDAQ:CMCSA), EchoStar Communications (NASDAQ:DISH), TiVo (NASDAQ:TIVO), Cablevision (NYSE:CVC). ETFs: PowerShares Dynamic Media Portfol. (NYSEARCA:PBS)

ENERGY AND MATERIALS

CSN Tops Tata Bid for Corus Group

Cia. Siderurgica Nacional of Brazil has exceeded Tata Motors' improved offer of 500 pence a share for Corus Group Plc. by Corus Group 12-11-0615 pence. On Friday, the Indian auto manufacturer raised its inital bid by about 10% to £4.7 billion ($9.18 billion) in an attempt to preempt CSN's unofficial offer of 475 pence. The intensity of the bidding war over the British steelmaker is an indication of the aggressive consolidation in the steel industry; Corus is one of the last available suppliers. CSN has indicated that it is the best partner since it owns some of the world's largest iron-ore mines , while Tata views Corus as a convenient supplier as the Indian automaker expands its operations into Europe. In London, Corus' shares rose 0.7% to 500 pence after Tata's improved offer.
• Sources: Bloomberg, Wall Street Journal, Marketwatch
• Related commentary: India's Auto Industry Attracting More Investment, Steel Industry Primer, Brazil's CSN Attempting to Steal Corus from Tata Steel
• Potentially impacted stocks and ETFs: Corus Group plc (NYSE:CGA), Tata Motors (NYSE:TTM), Companhia Siderurgica Nacional (NYSE:SID) • ETFs: Market Vectors - Steel (NYSEARCA:SLX), SPDR Metals & Mining (NYSEARCA:XME)

Delta & Pine Merger Deja Vu: Monsanto Hopes This Time is Different

In what may seem like Deja Vu all over again, crop-biotech leader Monsanto Co.'s second attempt in a decade to acquire Delta & Pine Land Co. - the nation's last publicly listed traditional seed company - has again run into major opposition.dlp Though Wall Street has essentially already assumed the merger is a done deal, pricing Delta & Pine stocks (pictured) at just a shade under Monsanto's $42-per-share offer price, there is growing pressure for the justice department to get involved on antitrust grounds. Monsanto crop-biotech competitors DuPont and Swiss-based Syngenta AG, both in the midst of trying to gain market share from Monsanto, have lobbied for Justice Department involvement as have the governors of several southern and midwest states. DuPont said in a statement, "We have serious concerns about the impact that it would have on farmers, the agriculture industry and ultimately consumers." The last time the merger was proposed, the Clinton administration's Justice Department looked into the case for 19 months without a resolution leading to the ultimate dissolution of the merger, followed by a two-billion dollar lawsuit against Monsanto. To cover its bases this time, Monsanto has offered Delta & Pine $600 million if the deal doesn't have justice department approval by August 2007; the company has also offered to divest from its cottonseed business in an attempt to avoid the antitrust charges. Delta & Pine is the nation's leading cottonseed provider.
• Sources: WSJ, AP, Monsanto-Delta & Pine Merger [TheStreet]. Conference call transcripts: Monsanto F4Q06 (Qtr End 8/31/06)
• Related commentary: Tense Mating Dance Between Monsanto and D&PL Ends in a Merger, Monsanto 10-K: Execs Will Pay If They Cook the Books
• Potentially impacted stocks and ETFs: Monsanto (NYSE:MON), Delta & Pine Land Company (DLP), DuPont (NYSE:DD), Syngenta AG (NYSE:SYT). ETFs: iShares Dow Jones US Basic Mater. (NYSEARCA:IYM), Vanguard Materials ETF (NYSEARCA:VAW), Materials SPDR (NYSEARCA:XLB)

Gold 2007: Shiny Opportunity or Fool's Prospect?

Gold is currently down 14% from its $732 May high, but according to analysts surveyed late last week by Bloomberg its six-year rally is far from done. One factor juicing gold prices is the weak U.S. dollar. Louise Yamada of Yamada Technical Research says, "Gold is the purest play against the dollar," as countries trying to diversify dollar holdings buy gold. She sees gold above $730 next year and $3,000 gold within a decade. Deutsche Bank AG's chief metals economist Peter Richardson says made gold his favorite pick for 2007. JPMorgan Chase & Co. analysts John Normand and Jon Bergtheil on Gold Chart 11 12 06Dec. 7 said, "If you can only make one commodity investment," gold is the "choice for 2007." Five of the past six bear dollar markets led to a gold rally, and with the dollar now down 13.8% against the euro, it is in for its worst year since 2004. Gold is up 22% on the year and headed for its sixth straight annual gain, a streak unmatched since it was unpegged from the dollar in 1971. Gold bears cite the unlikelihood of gold continuing to outperform indefinitely, hidden strength in the dollar, or the possibility that the dollar/gold relationship will undo. But bulls say gold remains cheap relative to other assets: Gold's $850 high in 1980 is equivalent to $2,100 of today's dollars. Seen another way, an ounce of gold was worth 23 barrels of oil in 1980; today's it's worth just 10. Of the 30 traders interviewed, 12 advised buying gold, 10 said to sell, and 8 were neutral.
• Sources: Bloomberg
• Related commentary: Return To The Gold Standard?, Gold Increasingly Used As Hedge Against Currencies; Gold ETFs Growing, Dow-to-Gold Ratio Tells a Bearish Picture, Buying Bullion: The Smart Metals Investment, Dollar Breakdown to Ignite Gold Market, Who Owns The World's Gold - And Who's Buying, Who's Minding the Mint?
• Potentially impacted stocks and ETFs: Newmont Mining Corp. (NYSE:NEM), LIHIR GOLD LTD ORD (LIHR), Barrick Gold Corp. (NYSE:ABX), Goldcorp Inc. (NYSE:GG), AngloGold Ashanti Limited (NYSE:AU). ETFs: Market Vectors Gold Miners ETF (NYSEARCA:GDX), SPDR Metals and Mining ETF (XME)

TRANSPORTATION

Sabre Holdings To Be Sold For $4 Billion+

Travel-booking company Sabre Holdings, owner of the Travelocity site, is in advanced talks to be sold to private equity investors for more than $4 billion, according to a New York Times report this morning. Two investor groups are competing to buy Sabre: the favorite is a group led by Silver Lake Partners and Texas Pacific Group, with a rival bid led by Apollo Group. Sabre was originally American Airlines' reservation system, but now serves all the major air carriers. This would be the second recent, major private equity acquisition in the travel reservation industry -- just last week Blackstone-owned Travelport, which operates Orbitz.com and CheapTickets.com, agreed to buy Worldspan, which operates reservation systems for Delta and Northwest, for $1.4 billion. Steady cash flow attracts private equity investors to this sector. A $4 billion price tag would represent an approximate 7% premium to Sabre's Friday closing price of $28.32.
• Sources: New York Times, Wall St. Journal
• Related commentary: Bloomberg: Travelport Agrees to Buy Worldspan for $1.4 Billion, NYT: Travelport Expands With Worldspan Deal Conference call transcripts: Sabre Holdings Q3 2006
• Potentially impacted stocks and ETFs: Sabre Holdings (TSG) Competitors: Priceline (NASDAQ:PCLN), Expedia (NASDAQ:EXPE), Travelzoo (NASDAQ:TZOO), Ctrip.com (NASDAQ:CTRP)

AEROSPACE AND DEFENSE

Raytheon Hopes to Shed Aircraft Unit; Goldman, ONEX Hope to Buy

Defense company Raytheon may sell a large minority stake in its aircraft unit to Toronto-based ONEX Corp. and Goldman Sachs by year's end, Bloomberg quotes a person with knowledge of the deal as saying.rtn While Raytheon management would maintain a majority stake in its aircraft unit, the deal would allow the company to focus more heavily on its defense business. Because the deal involves Canadian ONEX, it requires Defense, State and Treasury Department approval before it can go through. With corporate jet makers set to deliver a record 1,000 units next year, Raytheon's aircraft unit has not kept up, seeing its global market share decrease from 20 to 16 percent. Shares of Raytheon are up 30% this year.
• Sources: Bloomberg, AP
• Related commentary: Raytheon, Northrop Grumman Report Strong Earnings, A Gold Star for Raytheon
• Potentially impacted stocks and ETFs: Raytheon (NYSE:RTN), Goldman Sachs (NYSE:GS). Competitors: Honeywell International (NYSE:HON), Boeing (NYSE:BA), Northrop Grumman (NYSE:NOC), Lockheed Martin Corporation (NYSE:LMT). ETFs: iShares Dow Jones US Aerospace & Defense (NYSEARCA:ITA), PowerShares Aerospace & Defense (NYSEARCA:PPA).

FINANCIAL

Goldman Seeking Alpha -- Hires Amaranth Traders

Over the weekend, The Wall Street Journal Online published a story saying Goldman Sachs will hire 17 traders from Amaranth Advisors, a hedge fund that gained international notoriety for its collapse in September, losing 70% of its $9.5b in assets. Bloomberg reports some Amaranth traders have already started working at Goldman. The hires include 14 credit specialists in New York and three in Singapore, who will all be led by Gregg Felton, former manager of Amaranth's debt investments. Goldman is seen taking on more risk despite the Amaranth implosion, as its Global Alpha Fund is down nearly 12% y-t-d through November, compared to a 14% gain by the S&P 500 Index. A Goldman spokesman declined to comment on the Amaranth hires and the Alpha Fund. The WSJ said Amaranth's letters to investors acknowledged its credit team as being its most profitable in early 2006.
• Sources: Bloomberg, The Wall Street Journal
• Related commentary: Hedge Fund Replication Strategies: What's Under the Hood?, Goldman's New 'Hedge Fund Clone': A Good Idea?, Amaranth: Tip of the Iceberg, In Bid To Catch Competitors, Morgan Stanley Will Buy 20% of Avenue Capital, JP Morgan's Hedge Fund Business Flying High
• Potentially impacted stocks and ETFs: Goldman Sachs (GS). Competitors: Morgan Stanley (NYSE:MS), Bear Sterns (NYSE:BSC), Lehman Bros. (LEH) and Merrill Lynch (MER). ETFs: iShares Dow Jones US Broker-Dealers (NYSEARCA:IAI), streetTRACKS KBW Capital Markets (NYSEARCA:KCE), Financial Select Sector SPDR (NYSEARCA:XLF)

INTERNATIONAL

The Yuan Dilemma; Stocks, Not Economy Overheating?

Late last month, a New York Sun journalist wrote an article entitled, "Wal-Mart Slowdown May Signal End to China Dividend." In fact, it's not only a Wal-Mart slowdown, it's also the U.S. government, led by Treasury Secretary Paulson that could kill the so-called "China Dividend." Last Friday, China's central bank announced it will sell 160 billion Chinese yuan ($20.45b) of one-year notes today to national banks in another attempt to prevent over-investment and overheating of the economy. ChinaYuan-USD-1yr-chart-12-08-06 ShanghaiComp-SP500-1yr-chart-12-08-06 While the central bank tries to slow bank lending and remove some liquidity, it avoided having to raise interest rates. Market participants, aware of the central bank's meeting, sent stocks lower by nearly 3% on Friday, but seem to like the middle approach by the central bank, as the Shanghai Composite rebounded today for a 4.15% gain (see accompanying charts: Shanghai Composite out-performance of S&P 500 and incremental yuan appreciation against US$). Paulson and company are set to visit China this week to put pressure on Beijing to let the yuan appreciate against the U.S. dollar. While this is seen as beneficial for U.S. manufacturers, it will make imports more expensive (the opposite is true for China), further eroding the China dividend. There are numerous implications of a stronger yuan and heated debate among economists and politicians rages on.
• Sources: The Wall Street Journal, New York Sun
• Related commentary: China: What to Do with Foreign Reserves At $1 Trillion and Counting?, McKinsey Survey: China Tech Moving Up Value Chain, Investing in China: Rapid GDP Growth Rates Indicate Prosperous Future
• Potentially impacted stocks and ETFs: Wal-Mart (NYSE:WMT). ETFs: PowerShares DB G10 Currency Harvest Fund (NYSEARCA:DBV), Euro Currency Trust (NYSEARCA:FXE), iShares Lehman Aggregate Bond (NYSEARCA:AGG), iShares Lehman 1-3 Year Treasury Bond (NYSEARCA:SHY), iShares Lehman 7-10 Year Treasury (NYSEARCA:IEF), iShares Lehman 20+ Year Treas Bond (NYSEARCA:TLT), iShares Lehman TIPS Bond (NYSEARCA:TIP)

ACTIONABLE BARRON'S CALLS

Barron's articles likely to move stocks today, excerpted from Seeking Alpha's One-Page Barron's Summary

  • Barron's cover story offers nine strategists' predictions for 2007 -- in a word, bullish. All nine called for an up-year for stocks, though the most optimistic of the bunch sees equities rising by a mere 13%. Sectors favored for 2007 are health care, technology, consumer-discretionary and staples. Tickers mentioned as market outperformers: General Dynamics (NYSE:GD), Merrill Lynch (MER), Dean Foods (NYSE:DF) and Weatherford International (NYSE:WFT).
  • Gatehouse Media (GHS) IPOed in October at $18 and currently trades at $20.50 on its 6% yield. The company could be hurt by its high P/E ratio (37 vs 12-15 for the industry), its heavy leverage, and by competitors raising dividends. Its strategy of focusing strictly on local small-town papers is being undermined as Yahoo! Inc. (NASDAQ:YHOO) and Google Inc. (NASDAQ:GOOG) move in on local markets. Barron's likes Gannett Co. Inc. (NYSE:GCI) and Lee Enterprises Inc. (NYSE:LEE) better.
  • Vito Racanelli says Alcon Inc. (NYSE:ACL), the U.S.'s only "fully integrated eye-care company" operating in pharmaceutical, surgical, and consumer products, is the victim of Wall Street myopia -- traders are fixated on new drugs and temporary sales drops. He likes its management, extensive R&D, and the likely effect of now-turning-60 baby-boomers on its bottom line. Within two years, Barron's says, shares (currently 113) could be trading at $140.
  • Decently priced bets on outsourcers are hard to come by with Infosys Technologies Ltd. (NYSE:INFY) up 35.2% on the year and competitor Cognizant Technology Solutions Corp. (NASDAQ:CTSH) up 60%. But Barron's likes the new kid on the block, Electronic Data Systems Corp. (NASDAQ:EDS), whose main business is installing and maintaining computer systems for the Marines, GM, and the like, since its June $380m purchase of Mphasis got it a diverse global workforce of 20,000 support technicians. Eagle Global Advisors' Thomas Hunt III says Infosys has no competitive advantage EDS can't match, and that market share is Infosys' to lose; he sees net income rising from 2% to 6.5%.
  • The much publicized rumors of Liberty Media Capital (LCAPA) Chairman John Malone swapping his company's $11b stake in News Corp. (NWS) with News Corp.'s Rupert Murdoch in exchange for the latter's 38.6% stake in DirecTV Group Inc. (DTV) has Mark Veverka puzzled. Despite very respectable numbers and a picturesque chart, Veverka says DTV's well-known customer service shortcomings are symptomatic of the difficulties inherent in pulling decent profits out of satellite TV. In a previous piece Veverka said DTV's only saving grace was its exclusive NFL rights, which, once eroded, "watch out down below."
  • Based on a recent patent filing, Veverka speculates that notwithstanding earlier rumors of a Disney/Apple merger, a "new era of cooperation" may be underway between Walt Disney Company (NYSE:DIS) and Apple Computer Inc. (NASDAQ:AAPL). Apple should enter the mobile-phone market next year with its iPhone and Disney still seems to want to become a wireless provider. How, where and when they join forces remains to be seen.
  • Medtronic Inc. (NYSE:MDT) surged recently on strong quarterly sales figures. Its CEO says MDT can ramp up sales at a 15% pace for the next five years -- doubling its present $11.3b revenues. Barron's Bill Alpert likes its wireless telemetry which lets doctors monitor pacemaker/ICD functions remotely, its 57% U.S. market share, and says among competitors Boston Scientific Corp. (NYSE:BSX) and St. Jude Medical Inc. (NYSE:STJ) MDT's the only company with enough money to develop technology to detect heart attacks before they happen. The company awaits a FDA review of its 'Chronicle,' which wirelessly monitors blood pressure, giving doctors advance warning of heart symptoms, and calls 'Chronicle' "the most important product we're going to release in the next five years." Barron's sees shares, now at $53, soon trading in the 60s.
  • Nortel (NT) shares are neutral over the last 3 years and down 25% this year. Last week's 10-1 reverse stock split brings the networking giant back under the radar of industrial investors. Barron's likes the stock, citing CEO' Mike Zafirovski's proactive settling of litigation, new reporting recruits and management reductions, and renegotiating crucial contracts -- essential if not glamorous moves. Charter Equity analyst Ed Snyder says earnings next year could reach $2, and shares $30. Barron's says bigger gains may follow.

MUST-READS ON SEEKING ALPHA TODAY

U.S. Markets: Is Someone Manipulating This Rally?
Long Idea: Three Great Stocks Nobody Knows About
Short Idea: Sandisk May Experience an Aggressive Decline This Week
Internet: The CNET Train Wreck?
Telecom: What's 'Over-The-Horizon' for Comtech Telecom?
Hardware: Sun: Investors Still Looking For Clear Daylight
Software: Survey Finds Red Hat Customers Willing To Stay With Company if it Cuts Prices
Consumer Electronics: Research in Motion Needs to Get Moving
Media: Will Movie Gallery Get a Second Chance?
Healthcare: Osteotech Is Boning Up For An Aging America
Retail: Sally Beauty Holds Enthusiastic Investor Presentation
Transport: Gol Refuses to Fall
Gold: U.S. Gold Moving To AMEX - I'm Staying Long
Energy: MMC Energy: Ready To Roll
Financial: A General Insurance Brokers Story
Asia: The Yuan Dilemma; Stocks, Not Economy Overheating?
ETFs: Cornerstone Fund's Fixed Distribution Policy Not Good For Shareholders
IPO Analysis: This week's IPOs (I, II)
Sound Money Tips: Real Cool Uses for Your Cellular Phone
Jim Cramer: Latest stock picks

Have Wall Street Breakfast emailed to you every morning before the market opens (free/no spam).

Source: Wall Street Breakfast