Wall Street Breakfast

by: SA Editors
SA Editors
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.
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Consumer Confidence Reaches Five-Year High

The consumer confidence index ticked up to 110.3 in January from a revised 110.0 in December, its highest since May 2002. The Conference Board, a private organization that administers the gauge, said consumer attitudes about the present have been favorably influenced by the improved job market but that their attitudes about the future remain guarded. According to the Board, the index "suggests a moderate improvement in the pace of growth in early 2007," which in turn implies that the Fed is likely to keep interest rates steady at 5.25% at its next meeting. The percentage of respondents who said jobs are hard to find fell from 21.3% to 19.7%, the lowest since August 2001. The present situation index rose from 130.5 to 133.9, but the expectations index fell from 96.3 to to 94.5. Economists do not consider the index to be a particularly accurate forecaster of consumer behavior, but it does reflect changes in the labor market and the effects of gas prices.
• Sources: MarketWatch, Bloomberg, ABC News
• Commentary: Economic Report Summary: Consumer Sentiment Reaches 3-Year High

• ETFs to watch: S&P 500 Index (NYSEARCA:SPY), NASDAQ 100 Trust Shares ETF (QQQQ), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Russell 2000 Index ETF (NYSEARCA:IWM), iShares Lehman 1-3 Year Treasury Bond ETF (NYSEARCA:SHY), iShares Lehman 7-10 Yr Treasury Bond ETF (NYSEARCA:IEF), iShares Lehman 20+ Year Treasury Bond ETF (NYSEARCA:TLT)


SanDisk Tanks on Weak Guidance Citing Flash Glut and Falling Prices

Shares of SanDisk dropped more than 10% in extended trading yesterday following its Q4 earnings release. The focus was on SanDisk's warning of an oversupply of NAND flash memory chips leading to a forecast of further price declines in Q1 on top of a 17% decline q-o-q. Although sales surged 55% to $1.16b, it was its first Q4 loss since 2002 at -$35.1m, or -$0.17/share (compared to earning $133.9m, $0.68/share last year), due to costs related to its acquisition of msystems. SanDisk-SNDK-1yr-chart-01-30-07 Q1 sales guidance of $700m - $800m was well short of analysts' average estimate of $925m. SanDisk's CEO commented, "In the first quarter of 2007 we expect continuing robust demand for our mobile OEM products, seasonally lower retail sales, and a decline in margins due to the prevailing challenging market pricing for flash memory." In its conference call, SanDisk's president/COO said its MP3 business achieved 74% revenue growth in Q4 as unit sales doubled, maintaining its #2 ranking in U.S. market share while gaining a couple of percentage points on an annual basis, according to NPD. Its Sansa MP3 products accounted for 14% of product revenue in Q4.
• Sources: SanDisk Q4 2006 Earnings Call Transcript, Earnings release, Bloomberg, MarketWatch
• Commentary: SanDisk Earnings Preview: Margin Recovery?

• Stocks and ETFs to watch: SanDisk (SNDK). Competitors: Micron Tech. (NASDAQ:MU), Intel (NASDAQ:INTC), Toshiba (OTCPK:TOSBF), Samsung -- not traded in U.S., see iShares MSCI S. Korea Index (NYSEARCA:EWY), 20% of assets. [Portable music players] Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Sony (NYSE:SNE), Creative Tech. (OTCPK:CREAF)

Motorola's Shares Jump on News of Icahn Seeking Board Seat; Some Analysts Skeptical

Motorola has confirmed it received notice Carl Icahn is seeking nomination to its Board of Directors at its 2007 annual shareholder meeting (date TBA). Icahn is said to own 33.5 million shares (1.4%). The WSJ reports Icahn said in an interview he wants Motorola to use all of its $11.2b in cash to repurchase shares he says are priced "unrealistically low." Motorola-MOT-1yr-chart-01-30-07 Motorola has bought back $4.7b shares of an approved $8.5b since May '05. Icahn also said he was infuriated by Motorola's comment in its latest conference call that it has no plans to adjust its debt level. Analyst comments: A Kaufman Bros analyst suggests this is the first step towards restructuring and possibly a recapitalization or breakup (he estimates a $35 - $40/share "sum-of-the-parts" valuation). A T. Rowe Price manager says he's "not so sure this is a broken company that needs someone to tear it apart and fix it." Cowen & Co. says Motorola's problems are on the marketing and product side, and he's not sure how Icahn can help. Motorola's shares opened 6.5% higher yesterday at $19.50, adding nearly another one-half percent to close at $19.58.
• Sources: Motorola press release, MarketWatch [I, II], WSJ, List of Icahn's holdings at Stockpickr.com
• Commentary: Motorola: Icahn Seeking Board Seat; Could Restructuring Follow?

• Stocks and ETFs to watch: Motorola (MOT). Competitors: Nokia (NYSE:NOK), Telefonaktiebolaget LM Ericsson (NASDAQ:ERIC). ETFs: HOLDRS Broadband (NYSE:BDH), HOLDRS Wireless (NYSEARCA:WMH), iShares Goldman Sachs Semiconductor (IGW), iShares Goldman Sachs Networking (NYSEARCA:IGN)

Juniper Networks Sales Growth Worst In Four Years On Stiff Competition

Juniper Networks shares fell in after hours trading after the company announced its weakest sales growth in four years and provided guidance below what analysts were expecting.jnpr The main reason for the loss in sales growth: stiff competition from networking industry leader Cisco which took market share as well as a delay in spending on a network upgrade by Verizon. By the numbers, fourth-quarter revenue rose 3.5% to $595.8 million vs. Bloomberg consensus estimates of $600.6 million in sales. Juniper has yet to report net earnings for the past three quarters, a result of an options backdating probe that will cost the company an additional $900 million. Juniper forecast 2007 profits in a range of $0.80-0.81 a share; analysts were expecting $0.84. Shares fell $1.19, or 6%, to $18.63 in after hours trading on the news.
• Sources: Juniper Networks Q406 Earnings Call Transcript, Press Release, Bloomberg, MarketWatch, TheStreet.com
• Commentary: Redback-Ericsson: A Competitive Threat to Juniper and Cisco?

• Stocks and ETFs to watch: Juniper Networks (NYSE:JNPR). Competitors: Cisco (NASDAQ:CSCO), Alcatel-Lucent (ALU), Ericsson (ERIC), Nortel Networks Corp. (NT). ETFs: Internet Architecture HOLDRs (NYSE:IAH), iShares Goldman Sachs Networking (IGN)


Yahoo! To Launch 100 Brand-Specific Websites

Yahoo plans to unveil 100 sites as part of its new initiative called "Brand Universe," Yahoo's head of games, entertainment and youth properties, Vince Broady, said yesterday.yhoo The sites will be part of Yahoo's expansive network of online content and will draw on already existing content as well as content created specifically for the new sites. The company has already built a Brand Universe site around the newly released Nintendo Wii; yesterday it announced plans for six more themed sites on Harry Potter, video games Halo and the Sims, television shows “The Office” and “Lost” and Transformers toy line, TV show, comic books and the upcoming movie. In terms of cooperation with the companies Yahoo will be promoting through Brand Universe and hopefully (for its sake) monetizing through targeted advertising, Broady says: "We'd like to work with brand owners... but we don't necessarily need [them]."
• Sources: Wii "Brand Universe" Site, New York Times, L.A. Times, Variety
• Commentary: Yahoo Suffers 61% Hit to Profits, but Panama Boosts Shares

• Stocks and ETFs to watch: Yahoo! (NASDAQ:YHOO). Competitors: Google (NASDAQ:GOOG), Microsoft (MSFT). ETFs: Internet Architecture HOLDRS (IAH), Internet HOLDRs (NYSE:HHH), First Trust Dow Jones Internet Index (NYSEARCA:FDN)


Time Warner Boosts Earnings on Strong Cable Sales

Time Warner Inc., the world's biggest media company, said its Q4 profits rose 34% to $0.44/share ($1.75 billion) from $0.28/share ($1.3 billion) in Q4 2005. Net of one-time items it would have earned $0.22 a share, in line with analyst estimates. Revenues were $12.47 billion, up from Time Warner 31 01 2007 ChartQ4 2005 revenues of $11.52 billion and in line with analyst estimates. Cable sales were up as the company lured subscribers from telephone and satellite-TV rivals by offering all-in-one packages of cable internet and broadband services; revenues from its AOL unit were down. Last year the company defended itself from a campaign by activist investor Carl Icahn to break up the company; since then, shares have gained 35%, while rivals news Corp. and Walt Disney Corp. rose 20% and 18% respectively. TWX issued 2007 guidance in the "mid-to-high teens." Shares fell $0.53 yesterday to $41.50.
• Sources: Press Release I, II, Bloomberg, MarketWatch,
• Commentary: Apple TV: Direct Attack on Cable TV's Business Model

• Stocks and ETFs to watch: Time Warner Inc. (NYSE:TWX). Competitors: News Corp. (NWS.A), Viacom Inc. (NYSE:VIA), Walt Disney Company (NYSE:DIS), Comcast Corp. (NASDAQ:CMCSA), The DirecTV Group Inc (DTV), EchoStar Communications Corp. (NASDAQ:DISH). ETFs: Internet HOLDRS (HHH), Vanguard Consumer Discretionary VIPERs (NYSEARCA:VCR), PowerShares Dynamic Large Cap Growth (NYSEARCA:PWB), PowerShares Dynamic Media Portfolio ETF (NYSEARCA:PBS), First Trust DJ Internet Index ETF (FDN)

E.W. Scripps' Weak Guidance Sends Shares Sharply Lower

E.W. Scripps Co. reported its upcoming earnings will badly miss estimates, sending shares sharply lower.ssp Looking forward, EPS will come in between $0.39-0.43; analyst estimates had been for EPS of $0.52. Shares dropped $2.65, or 5.1%, to $49.51 on the news. Scripps is feeling the sting of a declining print news industry as sales are expected to slide 7% for its newspaper unit. In addition, profits from Scripps Interactive, a network of comparison-shopping websites such as Shopzilla and uSwitch will likely fall by as much as 35%.
• Sources: Press Release, Bloomberg, MarketWatch
• Commentary: Scripps Leaves Traditional Media Behind

• Stocks and ETFs to watch: The E.W. Scripps Company (NYSE:SSP). Competitors: Belo Corp. (NYSE:BLC), Lee Enterprises (NYSE:LEE)


US Airways Beats Street on Q4 Profit

Lower fuel bills and higher fares combined to give US Airways a higher-than-expected Q4 profit, the airline reported yesterday. Net income was $12 million, or $0.13/share, versus a loss last year of $261 million, or $3.27/share. Excluding one-time items, profit was $0.91/share, ahead of Street expectations of $0.80. The upside surprise was due in part to US Airways' participation in ten industry-wide fare US Airways 31 01 2007 Charthikes last year. Revenue rose to $2.8 billion from $2.6 billion a year earlier. Sales rose 8.8% to $2.79 billion. The results reflect fuel hedge costs, debt refinancing, and the 2005 merger with America West that brought US Airways out of bankruptcy. The company earned $304 million for the full year, or $3.50/share, versus a loss last year of $537 million, or $10.64/share. US Airways paid 4.6% less for fuel in Q4 than it did a year ago, but fuel remains its biggest operating expense. The company had no comment on the status of its $9.9 billion hostile bid for bankrupt Delta Airlines, an offer it will retract tomorrow unless Delta's creditors request a delay in a Feb. 7 bankruptcy hearing on the stand-alone plan submitted by Delta managers. US Airways shares fell 2.4% to close at $53.10. Share prices fell across the sector as the price of crude spiked $1.59 to $55.60.
• Sources: Press release, MoneyCentral (I, II), Bloomberg, New York Times, Reuters
• Commentary: Deal or No Deal? US Airways Reportedly Sweetens Offer by $1B for Delta

• Stocks and ETFs to watch: US Airways Group, Inc. (LCC), Delta Airlines (DALRQ.PK). Competitors: AMR Corporation (AMR), Southwest Airlines Co. (NYSE:LUV), UAL Corp. (UAUA), JetBlue Airways Corp. (NASDAQ:JBLU). ETFs: streetTRACKS DJ Wilshire Small Cap Growth (Pending:DSG)


Tata Steel Wins Corus in an All-Night Auction

In an auction that went 'the full nine rounds' and lasted into the early hours of the morning, India's Tata steel triumphed in its takeover bid for Corus at a final price of 603 pence ($11.82), a 49% premium on its closing price before Tata Steel declared its intent to buy Corus on Oct. 20, 2006, Corus Group 31 01 2007 Chartand five pence higher than CSN's bid of 603 pence. Tata's original offer was for 455 pence a share. Corus Shares closed yesterday at 563 pence, and jumped this morning to 602.5 pence (+7%); Tata shares dropped 7.7% on the news. A Tata executive said investors were taking the short view and defended the price paid, saying, "Tata and Corus are stronger together and will be able to compete effectively in an increasingly global environment." The deal creates the world's fifth largest steelmaker.
• Sources: MarketWatch, Wall Street Journal
• Commentary: Bidding War for Corus Steel in Final Days

• Stocks and ETFs to watch: Corus Group (NYSE:CGA), Tata Motors Ltd. (NYSE:TTM), Companhia Siderurgica Nacional [CSN] S.A. (NYSE:SID). Competitors: Arcelor Mittal (NYSE:MT), POSCO (NYSE:PKX), United States Steel Corp. (NYSE:X). ETFs: Market Vectors Steel (NYSEARCA:SLX), SPDR Metals & Mining (NYSEARCA:XME), iShares Dow Jones US Basic Materials Index (NYSEARCA:IYM), Vanguard Materials VIPERs (NYSEARCA:VAW), PowerShares Dynamic Basic Materials (NASDAQ:PYZ), PowerShares FTSE RAFI Basic Materials ETF (PRFM), SPDR Material (NYSEARCA:XLB), Rydex S&P Equal Weight Materials (NYSEARCA:RTM)


Chicago Merc Posts Record Q4 Profit, But Shares Fall As Results Disappoint

The Chicago Mercantile Exchange yesterday posted a 35% rise in Q4 profit on record volumes across all its product lines, but its shares dropped as the results fell short of expectations. Net income rose to $102.6 million, or $2.91/diluted share, against $76.3 Chicago Merc 31 01 2007 Chartmillion, or $2.18, a year ago. Revenue went up 26% to $281.3 million. Analysts had forecast earnings at $2.97/share on $286.8 million in revenue. For the full year, CME reported a $407.3 million profit, up almost 33% from 2005. Full-year revenue was $1.08 billion, up 22% from a year ago. CME shares tumbled 5% on the report before recovering to $568.25, a 1.3% drop. Operating expenses were $123 million in the quarter, up 15% from a year ago, while capex went up by $4 million to $29 million -- "a great problem to have," according to CEO Craig Donohue, who plans to continue to spend on "long-term growth opportunities." The rate per contract [RPC], a critical measure of profitability, came in at $0.655 in Q4, up from $0.641 in Q3 but down from $0.678 cents in Q4 2005. This unexpectedly substantial decline was compensated for by surging investor interest in derivative products. Average daily volume was up 29% from Q4 2005 to 5.4 million contracts. CME is planning to merge with competitor CBOT Holdings Inc. by mid-2007, an $8 billion deal that will result in the world's largest derivatives exchange. The merger is contingent upon approval by the DoJ, which is conducting an antitrust review.
• Sources: Press release, MarketWatch (I, II), TheStreet.com, MoneyCentral (I, II)
• Commentary: CME To Gap Up On Earnings Miss? It Usually Does

• Stocks and ETFs to watch: Chicago Mercantile Exchange Holdings Inc. (NASDAQ:CME). Competitors: CBOT Holdings Inc. (BOT). ETFs: iShares Dow Jones US Broker-Dealers (NYSEARCA:IAI), Rydex S&P 500 Pure Growth (NYSEARCA:RPG), streetTRACKS KBW Capital Markets (NYSEARCA:KCE)



U.S. Markets: Government Bond Market: Repricing Itself For a Lengthy "Do Nothing"
Housing: Considering Housing Vacancy Rates In Terms of Supply and Demand
Long Idea: Powershares Cleantech Portfolio: Capitalize on the Clean Energy Trend
Short Idea: NutriSystem Stock Loses Weight
Internet: eBay Prohibits Virtual World Trading, IGE To Benefit
Telecom: Radio Spectrum: The Oil of the 21st Century?
Hardware: The Spirit of Honest Debate: Xerox Responds To Criticism
Software: Vista’s Debut: So-so
Consumer Electronics: Activision Deactivates Years Of Financials
Media: Satellite Radio: Breaking Down The OEM Picture
Healthcare: Betting Big on Anti-Smoking Trend
Retail: Has Cott Corp Lost Its Fizz?
Transport: Why Bears are Betting Against Thor
Gold: PowerShares vs. iShares vs. streetTracks Gold and Silver: Material Differences
Energy: OMNI Energy Services: An Undervalued Gem
Financial: CME To Gap Up On Earnings Miss? It Usually Does
Asia: Sina To Benefit From Chinese Online Ad Strength
ETFs: Steel ETF SLX Gaining Strength
Hedge Funds: Icahn Sets His Sights on Motorola
Small-Caps: Ciphergen: Partnering with the Big Boys
Sound Money Tips: Tips on the Top Online DVD Rental Memberships
Jim Cramer: Latest stock picks
Conference Call Transcripts: NDS Group F2Q07, American Electric Power Q4 2006, Lexmark Q4 2006, Procter & Gamble F2Q07, Sony F3Q06, Kellogg Q4 2006, Burger King F2Q07, Merck Q4 2006, Entergy Q4 2006, Colgate-Palmolive Q4 2006, Juniper Networks Q406, SanDisk Q4 2006, Flextronics F3Q07, Keynote Systems F1Q07, Harris F2Q07 (Qtr End 12/29/06), Websense Q4 2006, Biosite Q4 2006, CheckFree F2Q07, Creative Technology F2Q07

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