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TECHNOLOGY AND INTERNET

Video Game Console Makers Meet '06 Targets

The holiday shopping season for video game consoles was frantic as shipments appear to have exceeded makers' goals despite supply shortages (for Nintendo and Sony). At CES, Microsoft announced it shipped 10.4 million Xbox 360s in '06, beating its goal of 10m. Reuters quotes Bill Gates who said, "It's a complete reversal of last time ... (when) we tried coming in a year late with a big, clunky box that cost more and having less titles." Microsoft-MSFT-Sony-SNE-Nintendo-NTDOY-1yr-chart-01-05-07 Gates also talked up plans to add IPTV capability to the Xbox 360, saying "people are underestimating ... the living room device that does it all." Sony said it achieved its goal of shipping 1m PlayStation 3 units to the U.S. by year-end '06 after tight supplies at launch time and it also seemed pleased with PS2 sales. Nintendo hasn't provided an update, but the New York Times reports GameStop's COO said last Thursday that there was actually stock of PS3s at hundreds of its 3,700 outlets, but new arrivals of Nintendo's Wii were "... in really limited supply, and they virtually disappeared." The best-selling game so far belongs to Microsoft, which reports it sold 2.7m copies of Gears of War.
• Sources: Bloomberg, GameStop press release, NYT, Reuters [I, II]
• Related commentary: GameStop Holiday Sales Impress, Game Console Wars: Nintendo Leaves Microsoft, Sony Trailing Behind, Bill Gates' CES Keynote: Microsoft's Home Media Server and More, 2007 May Be Rough For Video Game Stocks
• Potentially impacted stocks and ETFs: Microsoft (NASDAQ:MSFT), Sony (NYSE:SNE), Nintendo (OTCPK:NTDOY), GameStop (NYSE:GME). Gaming software publishers: Electronic Arts (ERTS), Activision (NASDAQ:ATVI), Konami (NYSE:KNM), Take Two (NASDAQ:TTWO), THQ (THQI)

Yahoo! Aims for Lead in Mobile Search Space

In a bid to restore investor faith and aggressively drive into the mobile search market, Yahoo will announce a new version of Go, its mobile phone search software, today at the Consumer Electronics Show in Las Vegas. About 500 million people use Yahoo services via their PCs, where it is second to Google in Web search. However, as mobile phones outsold PCs by about 4-to-1 in Q3 of last year, Yahoo has opted to plunge into the mobile search market. Go's oneSearch function classifies queries by type to provide the user with a more efficient search. Yahoo will use Web ads to encourage users to download the software themselves, rather than relying on mobile service providers or handset manufacturers. The company will announce partnerships with Motorola, Nokia, Samsung and Research in Motion under which the software will be included with handsets. Competition should be fierce: Apple is working on a mobile phone and Google has introduced mobile versions of its services.
• Sources: Wall Street Journal, Bloomberg
• Related commentary: The iPhone Will Probably Be Released In 2007: Who Is Apple Up Against?, Yahoo!'s Reorg: Has Anything Actually Changed? . Conference call transcripts: Q3 2006
• Potentially impacted stocks and ETFs: Yahoo! Inc. (NASDAQ:YHOO). Competitors: Google, Inc. (NASDAQ:GOOG), Apple Computer Inc. (NASDAQ:AAPL). ETFs: Internet HOLDRs (NYSE:HHH), First Trust Dow Jones Internet Index (NYSEARCA:FDN)

Verizon Puts the Heat on Apple with Mobile TV Launch

In a move that combines telephones, television and the Web, telecom giant Verizon, in collaboration with Qualcomm, will offer full-length TV programming to its cellular subscribers by the end of March. The company announced at CES last night that popular programs from NBC, CBS, Fox, MTV and possibly ESPN will be included, as well as user-generated Internet content providers like YouTube. The new offering will put Verizon into direct competition with Apple, which provides TV content on its iPod mobile device through the iTunes Store. Verizon's collaborator, MediaFLO (a subsidiary of Qualcomm), is providing the technology to transmit high-speed video. MediaFLO's technology competes with DVB-H, the European standard, and the Verizon deal is considered a significant vote of confidence in Qualcomm's network. The technology differs from Verizon's existing video service, V CAST, insofar as it will occupy its own network and transmit at a different frequency. Its quality is expected to be closer to broadcast TV than the streaming video currently offered. MediaFLO is in talks with other phone companies about TV services.
• Sources: Press release, New York Times, Red Herrring
• Related commentary: YouTube Goes Mobile With Verizon Wireless, Verizon to Outlay $18 Billion for Upgraded Fiber Optic Network, Cable TV Access, Verizon: 2007 A 'Tipping Point' For Earnings Growth?, The iPhone Will Probably Be Released In 2007: Who Is Apple Up Against?. Conference call transcripts: Q3 2006
• Potentially impacted stocks and ETFs: Verizon Communications Inc. (NYSE:VZ). Competitors: Apple Computer Inc. (AAPL), AT&T Inc. (NYSE:T), Qwest Communications International Inc. (NYSE:Q), Sprint Nextel Corp. (NYSE:S). ETFs: Telecom HOLDRs (NYSEARCA:TTH), First Trust Morningstar Div Leaders Idx (NYSEARCA:FDL), WisdomTree High-Yielding Equity (NYSEARCA:DHS), WisdomTree LargeCap Dividend (NYSEARCA:DLN), WisdomTree LargeCap Dividend (DLN)

ENERGY AND MATERIALS

Forest Oil Corp. To Acquire Houston Exploration For $1.5 Billion in Cash and Stock

After months of pressure from activist shareholders, Houston Exploration Co. agreed to be acquired by Forest Oil Corporation for $1.5 billion in cash and stock.thx The price, which comes out to $52.47 in cash and stock for each Houston Exploration share based on Forest's stock price Friday of 31.22, represents an 8% premium over Friday's closing price (see chart). Hedge Fund Jana Partners, Houston Exploration's largest shareholder at 14.7%, was content with the deal, which will also see Forest Oil take on $100 million of Houston Exploration's debt. The acquisition is a good fit for Forest Oil; it will add more than 3,200 drill sites in Texas and the Rocky Mountain states, a nice complement to Forest Oil's existing production in those same areas according to Forest Oil CEO H. Craig Clark. "We are undertaking this significant acquisition to further strengthen our onshore North American asset base and to add drilling inventory,'' Clark said.
• Sources: Bloomberg, Wall Street Journal, Reuters
• Related commentary: Private Equity and Leveraged Buyouts: With Risk Comes Reward, Statoil to Acquire Norsk Hydro's Energy Business, Cramer's Take on FST, Cramer's Take on THX
• Potentially impacted stocks and ETFs: Houston Exploration Co. (THX), Forest Oil Corporation (NYSE:FST)

GE to Buy Vetco's Oil & Gas Unit for $1.9 Billion

Privately held Vetco International will sell its oil and gas business unit, Vetco Gray, to General Electric for $1.9 billion. The acquisition will provide GE with drilling equipment to assist it in its drive to capitalize on burgeoning global energy demand. The oil and gas equipment and services market is estimated at over $200 billion. With Chairman Jeffrey Immelt at the helm, GE's oil and gas business has surged ahead over the past few years as its traditional energy business, the manufacture of gas turbines, has stagnated. The company's oil and gas group grew about 13% to $3.59 billion in operating profit in 2005 from 2004, and the group of which it is a part, GE Infrastructure, is expected to show an operating profit of $47 billion for 2006 when the company reports on January 19. Houston-based Vetco, which has 5,000 employees in over 30 countries, is expected to generate more than $1.6 billion in sales in 2006.
• Sources: Bloomberg, Reuters, New York Times, Wall Street Journal
• Related commentary: Microsoft, GE, Intel Garner Most 2007 'Buy' Recommendations, GE and Citigroup Rallies: How Wall St. Missed It, GE Goes Nuclear. Conference call transcripts: Q3 2006
• Potentially impacted stocks and ETFs: General Electric Co. (NYSE:GE). ETFs: WisdomTree High-Yielding Equity (DHS), WisdomTree LargeCap Dividend (DLN), WisdomTree Total Dividend (NYSEARCA:DTD), streetTRACKS DJ Wilshire Large Cap (ELR)

RETAIL

Best Buy, Circuit City Surprise Analysts with Strong December Sales

On Friday, Best Buy and Circuit City reported knockout December sales that beat analyst estimates. Best Buy posted a 7% CC vs. BBY chartincrease in same-store sales, while Circuit City reported a 4.2% jump. Analysts had estimated sales growth of 4.9% for Best Buy and 3.3% for Circuit City. Both companies raised FY guidance: Best Buy raised EPS from $2.65 to $2.80 to $2.70 to $2.80/ share; Circuit City raised annual sales growth to 9-10%, up from 8-9%. Increased consumer demand combined with deep discounts for flat-panel televisions and video-game consoles were responsible for the strong holiday sales. This news follows both companies' December share drop caused by tepid Q3 results. Best Buy shares rose 16 cents to $50 on Friday while Circuit City fell 71 cents, or 3.6%, to $19.29 after the company said sales growth might slow down for the rest of Q4.
• Sources: Bloomberg, Marketwatch.com, NYTimes, Reuters
• Related commentary: Circuit City and Best Buy Show Profitless Prosperity in LCD TV Sales, How Flat Panel Retail Pain Translates Into Consumer Gains, The Housing Market is Hitting Demand for Flat Panel TVs Conference call transcripts: Best Buy F3Q07 (Qtr End 11/25/06) Earnings, Circuit City F3Q07 (Qtr End 11/30/06) Earnings
• Potentially impacted stocks and ETFs: Circuit City (CC), Best Buy (NYSE:BBY) Competitors: Radio Shack (NYSE:RSH), Wal-Mart (NYSE:WMT). ETFs: Retail HOLDRs (NYSEARCA:RTH), Consumer Discretionary SPDR (NYSEARCA:XLY)

TRANSPORT

Ford and Microsoft Unveil 'Sync,' Providing Drivers Knight Rider Like Voice Activation Features

In the eighties, only David Hasslehoff was able to talk to his on the popular TV show Knight Rider. Now, on the eve of the Consumer Electronics Show in Las Vegas and the North American International Auto Show in Detroit, Ford and Microsoft announced their latest joint innovation, 'Sync,' allowing regular Joes the ability to give their cars a range of voice activated commands.fordmicrosoft 'Sync' will allow drivers to make hands-free phone calls, listen to music via iPods and other digital media players such as Microsoft's Zune, and have cell phone text messages read aloud, all through the use of Microsoft-installed voice activation software. Without saying whether it planned to pitch the technology to other automakers, Microsoft feels its 'Sync' software could ultimately find a home in 600 million cars worldwide. Until now, Ford has lagged other major automakers in providing cutting edge software-based technology in its cars. According to Derrick Kuzak, a group VP at Ford, "Sync is what today's generation and today's drivers demand in connectivity." The company will offer Sync as a factory-installed feature on 12 of its 2008 models, meaning it will first be available in the Fall of 2007. The company ultimately plans to offer 'Sync' in all its Ford, Lincoln and Mercury models in hopes it can return to profitability.
• Sources: Press Release, Autoblog/You Tube 'Sync' Video Presentation , New York Times, PC MagazineKnight Rider Forum
• Related commentary: Autoblog, Toyota Leads December Sales Growth, But Ford Holds On To #2, Ford Increases Financing Plan To $23 Billion,
• Potentially impacted stocks and ETFs: Ford (NYSE:F), Microsoft (MSFT). Competitors: Toyota (NYSE:TM), DaimlerChrysler (DCX), General Motors (NYSE:GM), Honda (NYSE:HMC), Nissan (OTCPK:NSANY)

Toyota Rules the Roost at Auto Show

Throwing conservatism to the winds, Toyota unveiled both a big new pickup and two new luxury high-performance cars at the North American International Auto Show in Detroit this week. Up to now, Toyota has tread carefully in the U.S. market -- particularly in the area of pickup trucks, which were considered an American stronghold. But as Toyota heads past Ford as the number-two player in the U.S. and gains on GM for global leadership, it appears less concerned about political backlash. Toyota is showing the Crew Max, a large pickup aimed at buyers who haul equipment and do business from their trucks, as well as the powerful sports sedan IS-F and two-seater sports car LF-A in its Lexus luxury division. Meanwhile, Toyota will announce the location of its eighth U.S. plant soon, and may have to open a ninth as well if it is to reach its goal of producing two-thirds of the number of cars it sells in the U.S. on American soil.
• Sources: New York Times, Wall Street Journal
• Related commentary: Wagoner: GM Won't Go Down Without a Fight, Toyota Leads December Sales Growth, But Ford Holds On To #2, Toyota Production Surges to Meet Global Demand, Toyota To Become World's Largest Automaker in '07, Toyota: A Lesser Known Stock?, Lexus LS460 Crushes Sales Target in Japan Debut, No Tough Times For Toyota
• Potentially impacted stocks and ETFs: Toyota Motor Co. (TM). Competitors: General Motors Corp. (GM), Ford Motor Co. (F), DaimlerChrysler AG (DCX), Nissan Motor Company Ltd. (OTCPK:NSANY). ETFs: BLDRS Asia 50 ADR Index (NASDAQ:ADRA), iShares NYSE Composite Index (NYSEARCA:NYC)

GM Resurrects Electric Car with the Volt

Chevrolet unveiled its new electric sedan, the Volt, at the North American International Auto Show on Sunday. The car uses 'E-Flex' technology that combines a a battery-powered electric motor which can drive 40 city miles per charge GM chartand a gasoline-powered, one-liter, three-cylinder engine that is only used to generate electricity to both power the car and replenish the battery; it is not connected to the wheels. The Volt's combined range is up to 640 miles and can be recharged by plugging it in to a standard 110-volt outlet for about six hours. The gasoline engine can get about 50 m.p.g when generating electricity to drive the car and can also run on E85 ethanol. According to electric car advocates, 30 miles of battery powered driving at the average cost of 9 cents a kilowatt-hour in the U.S. would cost 81 cents; combustion-engine cars cost $2.40/gallon for regular gasoline. GM's cancellation of its previous electric car, the EV1, due to technical problems, angered environmentalists and was the basis of the 2006 movie Who Killed the Electric Car?.
• Sources: The New York Times, AP , Reuters
• Related commentary: Will GM Be Killed By The Electric Car?, So What If GM Relies On Overseas Markets?, GM Management Remains Stable , Who Killed the Electric Car?. Conference call transcripts: General Motors Q3 2006 Earnings
• Potentially impacted stocks and ETFs: General Motors Corp. (GM). Competitors: Ford Motor Co. (F), DaimlerChrysler (DCX), Toyota Motor Corp. (TM), Honda Motor Co. (HMC)

Chrysler Pounces on Minivan Market as GM and Ford Retreat

In a bid to counter a $1.5 billion Q3 loss, Chrysler is reinventing its minivans to offer bigger engines and swiveling second-row seats, among other features. The strategy could be particularly beneficial for Chrysler in view of the exit of competitors Ford and GM from the minivan market. Chrysler has led the field in minivans for 24 years, but is seeing its advantage shrink in the face of competition from "crossover" cars and offerings from Asian rivals like Hyundai and Honda. It has also been beset with reliability problems with transmissions, brakes and other components. The reliability problems will be addressed through closer collaboration with DaimlerChrysler's Mercedes unit. The company will offer "Swivel 'n Go" seats, which turn 180 degrees, in up to 40% of its minivans, and is considering offering the cars with diesel- or gasoline-electric hybrid engines. Ford and GM have canceled their minivans outright and are instead concentrating on crossover vehicles, which offer better fuel economy and a smoother ride together with an SUV look and feel. Chrysler's minivan sales fell 9.1% last year and are down 31% from their 1996 high of 538,807.
• Sources: Bloomberg, MarketWatch, Wall Street Journal
• Related commentary: Chrysler Extending Plant Closures Over Christmas in Bid to Shrink Inventory, Chrysler's Woes Continue To Weigh on DaimlerChrysler Stock. Conference call transcripts: Q3 2006
• Potentially impacted stocks and ETFs: DaimlerChrysler AG (DCX). Competitors: Ford Motor Co. (F), General Motors Corp. (GM), Toyota Motor Corp. (TM), Honda Motor Corp. (HMC). ETFs: iShares MSCI Germany Index (NYSEARCA:EWG)

AEROSPACE AND DEFENSE

Northrop Threats to Abandon Bidding Jeapordize Critical Air Force Program

WSJ reports that Northrop Grumman Corp. is threatening to boycott bidding against Boeing Co. for aerial-refueling tankers contracts because of concerns over the bidding rules, a move that could complicate one of the U.S. Air Force's most sensitive weapons programs. People familiar with the matter say bidding guidelines favor Boeing's cheaper refueling plane, ignoring the extra capabilities that Northrop's proposal airplane offers, such as cargo and passenger capacity. Over the weekend, they say, the Air Force held steamy consultations with industry officials in an effort to keep competition going; a Northrop dropout would likely delay the program which is "critical to restoring the Air Force's credibility." In 2001 two Boeing execs went to jail after a tanker contract went to Boeing without competitive bids. Northrop executives have repeatedly stated they will not be a stalking horse to exact a better price out of Boeing. While the Air Force has said it will consider cargo capacity and other functions, Northrop says the rules don't describe exactly how extra capabilities will be evaluated relative to the plane's cost, causing one insider to comment: "If one plane is 30% more capable than the other at 10% greater cost, shouldn't that plane win?"
• Sources: Wall Street Journal
• Related commentary: Defense Sector Bests the S&P 500 for a Seventh Consecutive Year, Air Force Might Hire Private Sector Contractors for Next-Generation GPS Satellite System, Defense Stocks Should Continue to Outperform in 2007, Time To Get Defensive
• Potentially impacted stocks and ETFs: Northrop Grumman Corp. (NYSE:NOC), Boeing Co. (NYSE:BA). Competitors: Lockheed Martin Corp. (NYSE:LMT), General Dynamics Corp. (NYSE:GD), Raytheon Company (NYSE:RTN). ETFs: iShares Dow Jones US Aerospace & Defense (NYSEARCA:ITA), PowerShares Aerospace & Defense (NYSEARCA:PPA)

HEALTHCARE

Caremark Favors CVS Offer Over Express Scripts, Shares Say Traders Expect More

Caremark Rx Inc., the second-largest manager of pharmacy benefits in the U.S., said Sunday it rejected a $26 billion unsolicited merger bid from Express Scripts Inc., sticking with a lower offer from the drugstore chain CVS Corporation. It's Press Release said its Board of Directors determined "that the Express Scripts proposal does not constitute, and is not reasonably likely to lead to, a superior proposal... [and] is not in the best Caremark 08 01 2007 Chart Express Scripts 08 01 2007 Chartfinancial or strategic interests of Caremark and its shareholders." The proposal, it said, lacks strategic rationale, risks customer attrition, is intentionally derailing the CVS/Caremark merger, faces significant antitrust risks, and would result in a highly leveraged and weakened business. It said it remains convinced "that its pending combination with CVS will define and lead the next evolution of the pharmaceutical services industry," allowing it to create differentiated services for customers that give them great choice. In a subsequent Press Release, CVS expressed pleasure with Caremark's rejection, saying it hoped to close the transaction in the first quarter, 2007. Express Scripts said it believes "Caremark is attempting to use antitrust as a red herring to distract stockholders from the real value differential at issue." CVS's offer is for $48.53/share, while Express Scripts Dec. 18 offer is for $58.50. Caremark shares closed Friday at $56.35, suggesting investors expect a higher price.
• Sources: Caremark Press Release, CVS Press Release, New York Times, Bloomberg
• Related commentary: Express Scripts Undercuts CVS in Brazen Bid For Rival Caremark Rx, CVS to Acquire Caremark Rx for $21 Billion, How the CVS-Caremark Merger Might Work (Or Not), Is CVS the Prescription Fix for Caremark?, CVS-Caremark Deal Would Create Pharmacy Powerhouse
• Potentially impacted stocks and ETFs: Caremark Rx Inc. (CMX), CVS Corp. (NYSE:CVS), Express Scripts Inc. (NASDAQ:ESRX). Competitors: Wal-Mart Stores Inc. (WMT), Medco Health Solutions (NYSE:MHS), Wellpoint, Inc. (NYSE:WLP). ETFs: Retail HOLDRs (RTH), SPDR Retail (NYSEARCA:XRT), PowerShares Dynamic Pharmaceuticals (NYSEARCA:PJP), iShares Dow Jones US Pharmaceuticals (NYSEARCA:IHE), SPDR Pharmaceuticals ETF (NYSEARCA:XPH)

INTERNATIONAL

China's Central Bank Still Trying to Tame the Dragon

At the bi-monthly Group of 10 central bank governors' meeting in Basel, Switzerland, China's governor Zhou Xiaochuan commented there is still too much liquidity in the market and further increases in the nation's trade surplus could result in more flexibility in the exchange rate. Bloomberg's coverage quotes Zhou saying, "We never rule out the possibility of using further measures to curb liquidity. We need to monitor further data to observe the effectiveness of the measures taken." Last week, the People's Bank implemented another 0.5% increase in deposit reserve requirements to 9.5%. Credit Suisse's chief Asia economist comments, "There is too much liquidity out there and interest rates may have to go up sooner or later." Regarding the yuan, Zhou says, "We don't know what the trend of the market demand and supply would be for this year. So far, there is more supply of foreign exchange than demand for it." Separately, Bloomberg reports 11 of 14 economists surveyed expect the Bank of Japan to raise its target short-term interest rate by 0.25% to 0.50% at its meeting ending Jan. 18.
• Sources: Bloomberg [I, II, III]
• Related commentary: China's Central Bank: Fed Rate Cut to Lift Yuan; Inflation Concerns, People's Bank Says China Should Improve Its Forex System -- But How?, Bernanke Ratchets Up Pressure On China Over Exchange Rate, The Yen's Slide: How Much Longer?
• Potentially impacted stocks and ETFs: Currency ETFs: PowerShares DB G10 Currency Harvest Fund (NYSEARCA:DBV), Euro Currency Trust (NYSEARCA:FXE). Bond ETFs: 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). China ETFs: China Fund (NYSE:CHN), Greater China Fund (NYSE:GCH), iShares FTSE/Xinhua China 25 Index Fund (NYSEARCA:FXI), JF China Region Fund (NYSE:JFC), PowerShares Golden Dragon Halter USX China (NYSEARCA:PGJ)

ACTIONABLE BARRON'S CALLS

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

  • Barron's interviews Merrill Lynch fund analysts Cynthia Mayer and Guy Moszkowski. Their picks among publicly traded mutual fund providers: (1) Franklin Resources Inc. (NYSE:BEN) and AllianceBernstein Holding LP (NYSE:AB) are the most attractive fund providers in the industry, largely due to their commanding access to fast-growing non-U.S. markets. (2) T. Rowe Price Group Inc.'s (NASDAQ:TROW) 401(k) focus stands to benefit from the Pension Reform Act, though at 20x earnings, there may not be much money left to be made. (3) John Nuveen Company (JNC) has 50% of its assets in equity funds, making it a good play on public demand for income-oriented investments. (4) Legg Mason Inc. (NYSE:LM) woes are likely a "cold streak." (5) Despite Janus Capital Group Inc.'s (NYSE:JNS) 3.5 years of improving performance, inflows are still cool; doubts linger in the investment community. (6) With 75% money market funds, the fear/greed pendulum must swing over to fear before serious gains are to be had from Federated Investors Inc. (NYSE:FII). (7) REIT holder Cohen & Steers Inc. (NYSE:CNS) stands to gain as more countries adopt the REIT structure, and investors begin to appreciate their value.
  • Medifast Inc. (NYSE:MED) CEO Bradley T. MacDonald stepped down Friday amid accusations he had been posting clandestinely to Yahoo Finance pumping his company. In September the Diabetes Care journal of the American Diabetes Association rejected a 2005 Johns Hopkins study on the influence of the Medifast diet on diabetics that had been MED's top marketing tool.
  • Bath & Beyond (NASDAQ:BBBY) claims one of the retail industry's best growth and profit margins. Wall Street's worried about a housing slump and options backdating issues, but hedge funds like Cibelli Management and Sequoia have been accumulating big positions. They like its low 2007/2008 P/E (18 and 16), its consistent growth, its 9% after tax profit (double Target's), its share buybacks, no debt, and its moderate market cap ($11b) that makes it an attractive LBO target. Currently around $38, shares could be on their way to the high $40s.
  • Tyco International Ltd.'s (NYSE:TYC) planned three-way spinoff (healthcare, electronics, and fire/security) failed to capture Wall Street's imagination. But T. Rowe Price Capital's (TROW) Appreciation Fund has been quietly amassing Tyco shares. Analyst Peter Bates sees its healthcare group going for $15-17/share, its electronics business being worth $12-14, and its fire and security unit trading at $11-14. That gives current shareholders a low-end potential of $38, and high-end possibilities of $45 -- 50% better than the $30-odd it goes for today.
  • High-definition video should drive demand for drive storage, yet Goldman recently downgraded Seagate Technology (NASDAQ:STX) from Buy to Neutral. STX is about to lose its mega-drive lead when Hitachi Ltd. (HIT) leapfrogs its 750-gig behemoth with the first terabyte drive for consumers scheduled for March. The $399 list-price means cost-per-gigabyte will dip below $0.40.
  • Sprint Nextel Corp. (S) is a standout among telecom companies -- it lost 11% in 2006 while the sector was up 30%. With only 33% analyst recommendations, contrarian value seekers should be encouraged. Sprint is buying back $6b of its stock, and betting a modest $3b on the emerging WiMax standard. With a $56b market cap and small debt load, a buyout's not out of the question. And even if it continues to struggle, the stock's cheap, which stacks the chips in investors' favor.
  • SPAC Origin Agritech (NASDAQ:SEED) shares are down 14.% to $11 on a sympathy move with SPAC holder Amaranth. Key player Richard Propper has had his share of troubles with the SEC, and investors were spooked by a four-month delay in its 2005 filing, its shifting around of its year-end, firing its auditor, and moving its shareholder's meeting to Beijing. Fans say it could be worth $21, but legal woes could drag SEED even further down.
  • Cisco Systems Inc.'s (NASDAQ:CSCO) deal for messaging-security company IronPort was well-researched and allows the networking supplier to sell clients security management products straight from their primary network vendor. Cisco has a reputation for good integrations, and its powerful sales force should help IronPort, which already supplies 40% of the nation's top 100 companies, make better inroads among the top 2,000 companies globally. This could be a wake-up call for security players Symantec Corp. (NASDAQ:SYMC) and McAfee Inc. (MFE).

MUST-READS ON SEEKING ALPHA TODAY

U.S. Markets: Rolling Correction May Foreshadow General Correction
Housing: 2007 In a Nutshell
Long Idea: Comcast Corp. Keeps The Ball Rolling
Short Idea: Crystallex International Corp: Take Your Money and Run
Internet: Jack Biddle on Google's Impending Collapse
Hardware: Cramer Level 3 Recommendation Should Bring More Upside After 6% Gain Friday
Software: A Conversation With Bill Gates At CES
Consumer Electronics: Should Steve Jobs Resign?
Media: The Dirty Truth About Sirius Satellite Radio
Healthcare: Investing in Small Cap Pharmaceuticals: Noven, Barrier, Penwest and Endo
Retail: Proxy Page 36: Home Depot Actually Thinks Nardelli's Exorbitant Severance Package Was Just
Transport: Investing In Japanese Automakers: Eye On Honda
Gold: The World's Top 20 Undeveloped Silver Deposits
Energy: Exxon - The Most Evil (and Overpriced) of the Oil Companies
Materials: A Quick Guide To Water Utility Stocks
Financial: NovaStar: Don't Say You Weren't Warned
Asia: Is the China Craze a Tech Bubble 2.0?
ETFs: Prudent Investors Should Steer Clear Of The New India ETF
Small-Caps: It's a Small-Cap World
Sound Money Tips: The Week in Review
Jim Cramer: Latest stock picks

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