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.
For breaking news and key market indexes, see
Wall Street Breakfast's Pre-Market Snapshot


Income Savings at Lowest Level Since Depression

The Commerce Department reported yesterday that Americans had a 2006 savings rate of -1% -- not only did they on average spend everything they earned, but also dipped into their savings or borrowed money to finance their spending. 2005 savings were -0.4%; this year's figure is the worst since the -1.5% figure of 1933, in the midst of the Great Depression. The rate has now been in negative territory for 21 straight months; 2005-06 is the only the second time it's ever been negative, the other being 1932-33. Economists have various theories to explain the current lack of savings, from over-reliance on a strong economy/home equity to a consumerist mentality that drives people to spend even when they can't afford. In other figures released yesterday, consumer spending rose 0.7% and incomes rose 0.5%, both in line with forecasts. The Institute for Supply Management said its benchmark index came in at 49.3 last month, down from December's 51.4; anything below 50 is considered contracting. From the Department of Labor, initial unemployment claims were down 20k to 307,000, pushing them to their lowest level in a year.
Sources: BEA Personal Income and Outlays, ISM Report on Business, DOL Initial Claims, LA Times/AP
Commentary: Negative Savings Rate: Not So WorrisomeGleaning Info from Robust GDP DataFed Policy: Bernanke Sounds the "All-Clear"Cashing Out at the Top of a Market Melt-up
Stocks/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)

Vornado Outbids Blackstone (Again) in Fight For Equity Office Properties

The continuing bidding war over REIT Equity Office Properties Trust, has led another REIT, Vornado Realty Trust, to raise its bid to $41 billion in cash and stock, topping the $38.3 billion Blackstone Group LP already has on the table.eop The deal is set to be the largest real estate takeover ever. Vornado's offer equals $56 a share, compared with Blackstone's all-cash bid of $54. Blackstone claims its offer is better because Vornado's offer includes stock which hasn't been properly discounted for. Equity Office's directors already accepted Blackstone's offer on Jan. 25; shareholders are set to vote on Monday. Equity Office Properties Trust owns the largest collection of office properties in the U.S., with a combined 103 million square feet in 543 buildings.
Sources: N.Y. Times/Dealbook, Bloomberg, N.Y. Times
Commentary: Equity Office Properties: Sam Zell's Genius, ISS Advises Equity Office Shareholders to Accept Blackstone's Bid, Blackstone Back at the Table; Raises Equity Office Bid to $38.3 Billion, Vornado Group Outflanks Blackstone in New Bid for Equity Office REIT
Stocks/ETFs to watch: Equity Office Properties Trust (EOP), Vornado Realty Trust (NYSE:VNO). Competitors: Boston Properties Inc. (NYSE:BXP), Mack-Cali Realty Corp. (NYSE:CLI). ETFs: iShares Cohen & Steers Realty Majors (NYSEARCA:ICF), Vanguard REIT Index ETF (NYSEARCA:VNQ), WisdomTree Dividend Top 100 (NYSEARCA:DTN), streetTRACKS DJ Wilshire REIT (NYSEARCA:RWR)


EA Reports Drop in Q3 Net, In-line, Shares Jump in After Hours

Electronic Arts reports net income declined 38% to $160 million, or $0.50/share, in its fiscal Q3 on slightly higher revenue (+1%) to $1.281b. Excluding costs and other items EPS came in at $0.63, beating analysts' estimates of $0.56 - $0.57. Analysts were looking for revenue of $1.26b. Although sales were negatively impacted by a shortage of new consoles launched by Sony and Nintendo during the quarter, results still beat earlier forecasts thanks to strong sales of game titles such as "Need for Speed" and "Madden NFL." Electronic-Arts-ERTS-1yr-chart-02-01-07 It expects Q4 net revenue of $550 - $600m (compared to analysts' forecast of $644.5 -$652.2m) and a GAAP diluted loss of $0.12 - $0.17/share (non-GAAP diluted EPS: breakeven to $0.03, compared to analysts' forecast of $0.01- $0.02). Chairman/CEO Larry Probst says EA plans to "... significantly increase [our] support for the Nintendo platforms." Shares of EA gained 1% to $50.54 in normal trading yesterday, but jumped 6% in extended trading to $53.55 on volume of about 1.47 million.
Sources: Electronic Arts F3Q07 (Qtr End 12/31/06) Earnings Call Transcript, Earnings press release, Bloomberg, MarketWatch, WSJ
Commentary: Electronic Arts Earnings PreviewElectronic Arts: Earnings Amidst Anxiety in the Gaming SectorGame Points: Game Console and Software Stock Update
Stocks/ETFs to watch: Electronic Arts (ERTS). Competitors: Activision (NASDAQ:ATVI), Konami (NYSE:KNM), Take Two (NASDAQ:TTWO), THQ (THQI). Game console stocks: Microsoft (NASDAQ:MSFT), Nintendo (OTCPK:NTDOY), Sony (NYSE:SNE). ETF: iShares Goldman Sachs Software Index (NYSEARCA:IGV)

WSB Sponsor
Wall Street Analyst Forum, a leading conference host for public corporations to address analysts, portfolio managers and professional investors, sponsors four annual conferences in NYC for large, mid and small-cap companies. Pre-registered Seeking Alpha readers may attend Wall Street Analyst Forum conferences free of charge. See conference schedule and attendance information.

Suit Claims Dell Got Billions in Illegal Kickbacks from Intel

Just one day after Dell CEO Kevin Rollins left the company to be replaced by Chairman and founder Michael Dell, it is being accused in a lawsuit of improper accounting in its longtime partnership with Intel Corp. The suit alleges Dell's profits were inflated through rebates from Intel that it failed to disclose. At times, it asserts, Dell was receiving illegal kickbacks of as much as $1b/year. The suit, filed late Wednesday, seeks class-Dell 02 02 2007 Chart Intel 02 02 2007 Chartaction status on behalf of Dell shareholders, and names both Mr. Dell and Rollins; the company declined to comment. Dell's accounting practices have been under SEC scrutiny over the past few months, and several suits have already been filed. The current suit focuses on payments from Intel to Dell that were made at or near the end of Dell's quarters that had a "direct, material impact" on reported profits. The payments were in exchange for Dell refusing to do business with Intel competitor AMD. The suit asserts that since 1999 Dell has designed computers based on AMD chips, but the systems were never produced as a result of the kickbacks. Intel's business practices are already under investigation by European authorities; it says the rebate programs are legal. Chuck Mulloy, an Intel spokesman, said that "at first glance it appears that some of the allegations with respect to Intel appear to have been completely made up."
Sources: Wall Street Journal
Commentary: Dell: The Problems Began In ChinaMichael Dell Has His Work Cut OutDell Cooks the Books -- Barron'sDell's Accounting Practices: No Cause For Concern
Stocks/ETFs to watch: Dell Inc. (NASDAQ:DELL), Intel Corp. (NASDAQ:INTC)

Ericsson's Earnings Beat, But Shares Down on Warning of Slower Growth

Ericsson recorded a 14% rise in Q4 net income to 9.73 billion Swedish kronor ($1.4b), or 0.61 krona/share, on 18% higher revenue to 53.7b kronor ($7.7b), beating analysts' average estimate (except sales) of 8.75b kronor, or 0.55 krona/share, on sales of 53.8b kronor (a $14m miss). Ericsson-ERIC-1yr-chart-02-01-07 Its shares are under pressure in morning trading in Stockholm, down by about 6%, due to its warning of slower growth in its main network market this year in the "mid-single digits," compared to a previous forecast of "moderate expansion" in the 5-10% range. Bloomberg quotes a Stockholm-based analyst who comments, "Longer term, 2007 should be an exciting year for Ericsson with events such as mergers among rivals, possible 3G license awards in China and some big orders in India." Sony Ericsson contributed slightly over 20% to Ericsson's earnings, after the JV saw its Q4 net triple and grew its market share by 2% to 8.7% in 2006. Ericsson proposed a dividend hike to 0.50 krona, from 0.45 krona.
Sources: Press release, Bloomberg, MarketWatch
Commentary: Sony Ericsson Triples Profits in 4Q06Ericsson's Growing Emerging Market Success Should Leave Motorola Trailing BehindEricsson Buying Redback To Fend Off Cisco In IPTV EquipmentEricsson Earnings Conference Call Transcript (later today)
Stocks/ETFs to watch: LM Ericsson (NASDAQ:ERIC). Competitors: Alcatel-Lucent (ALU), Siemens (SI), Motorola (MOT), Nokia (NYSE:NOK), Nortel (NT), Cisco (NASDAQ:CSCO), NEC (NIPNY). ETF: Wireless HOLDRs (NYSEARCA:WMH)


Monster Worldwide Jumps On Optimistic Outlook

Online job placement firm Monster Worldwide reported 4Q06 net income of $39.1 million ($0.30/share), up from $36.1 million in the year-ago quarter but missing analyst estimates of $0.33/share. Quarterly revenue reached $298.6 million (slightly above analyst expectations) from the prior year's $223.8 million, with internet ads and fees up 31% y/y. The company Monster Worldwide 02 02 2007 Chartreported total revenue of $1.12 billion for the year 2006 compared to $818.3 million in 2005, a 36% increase. Monster forecast 1Q07 revenue will be $330 million to $338 million, more than the $322.7 million average analyst estimate, according to Bloomberg. International growth was particularly strong, up 63% on the back of European gains. Following the report, MNST shares gained $2 (4%) to $51.41 in Thursday's trading.
Sources: Monster Q4 2006 Earnings Call Transcript, Press release, Bloomberg, MarketWatch, Reuters
Commentary: Monster Worldwide's Most Likely Next Move: Start Paying a DividendInternet Sector In '07: Continental Europe Will Be KeyOnline Traffic Trends: Monster and Expedia Falling
Stocks/ETFs to watch: Monster Worldwide (NASDAQ:MNST). Competitors: HotJobs.com owned by Yahoo (NASDAQ:YHOO), CareerBuilder.com owned by Gannett (NYSE:GCI), Tribune (TRB) and McClatchy (NYSE:MNI). ETFs: First Trust DJ Internet Index ETF (NYSEARCA:FDN)


Gap Begins Its Corporate Shakeout

Gap Inc., the #2 U.S. clothing retailer, yesterday named Marka Hansen to lead its largest and most important division, The Gap. The company remains on the hunt for a CEO after last week's departure of Paul Pressler. Hansen, who was head of Gap's Banana Republic unit, replaces Cynthia Harriss, a Gap Inc 02 02 2007 Chart2004 Pressler hire. Bob Fisher, Gap's interim CEO, made the announcement; the change is apparently his first step in what will likely be an executive makeover. Or, as Mark Montagna of CL King & Associates said, this is "the beginning of hunkering down and focusing on turning the company around." He liked the choice, saying she "understands the company, knows the culture, and will be able to determine a vision for the future." Shares of Gap rose $0.42 (2.2%) to $19.59 in trading yesterday.
Sources: Press Release, MarketWatch, Bloomberg
Commentary: Gap's Identity Crisis vs. J Crew's Smooth SailingHow Gap Can Get Itself Back on Track - Barron'sGap: The Short Case
Stocks/ETFs to watch: Gap Inc. (NYSE:GPS)

WSB Sponsor
Wall Street Analyst Forum, a leading conference host for public corporations to address analysts, portfolio managers and professional investors, sponsors four annual conferences in NYC for large, mid and small-cap companies. Pre-registered Seeking Alpha readers may attend Wall Street Analyst Forum conferences free of charge. See conference schedule and attendance information.


Big 3's January U.S. Auto Sales Fall To Lowest Ever As Japanese Gain

America's Big 3 automakers saw sales decline to their lowest level ever in January according to data compiled by Autodata corp.auto comparison chart GM's sales fell 17% to 244,614 vehicles while Ford's fell 19% to 165,668; DaimlerChrysler reported rising sales, with unit volume climbing 3.2% to 173,407 vehicles, largely due to a strong month for Mercedes-Benz sales which rose 37%. While the Big 3's sales fell 4.6% to a combined total of just over 50% of the U.S. market, foreign companies made up a record 49.5% of the market, including 42.1% to Asian companies, also a record. Toyota led the foreign pack with a sales increase of 9.5% to 175,850 vehicles, and Honda's sales rose 2.4% to 100,790. The loss in market share was partially voluntary as GM and Ford deliberately reduced new sales to rental-car agencies, which have proved unprofitable; some losses, however, were in sales to consumers and were not voluntary. In terms of total rankings, Ford fell from second to fourth in terms of total U.S. auto sales as both Toyota (the new number two) and Chrysler (number three) passed them.
Sources: Ford January 2007 Sales Call Transcript, Wall Street Journal, Reuters, N.Y. Times, L.A. Times
Commentary: Light Vehicle Pricing To Become More Aggressive In 2007?, American Cars: No Rewards Under the Hood, Ford's Latest Conference Call Proves Pendulum Has Swung From Automakers to Dealers, General Motors January 2007 Sales Call Transcript, Ford Q4 2006 Earnings Call Transcript
Stocks/ETFs to watch: General Motors (NYSE:GM), Ford (NYSE:F), DaimlerChrysler (DCX), Toyota (NYSE:TM), Honda (NYSE:HMC). Competitors: Nissan (OTCPK:NSANY)

British Airways Earnings Drop, So Does Debt, Shares Fly

British Airways plc, Europe's #3 airline and the U.K.'s biggest, announced this morning Q4 2006 earnings of 8.9 pence/share (£103m), down -12% from 10.3 pence/share (£117m) in Q4 2005. Revenues were £2.1 billion. Analysts had forecasted income of £109m. The airline averted a flight-attendants British Airways plc 02 02 2007 Chartstrike this week, but lost £80m in the scuffle, causing CEO Willie Walsh to cut its full-year growth guidance to 3.25-3.75% from 4.5-5%. Margins were down to 6.2% from 8.6% over increased fuel and pension costs. Passengers flown and load factor (proportion of seats sold) were flat at 8.53m and 73.7%. The company cut its net debt in 2006 by £775 million to £866 million; cash rose £203 million to £2.64 billion. British Airways plc shares are trading up 2.3% in London.
Sources: Bloomberg, MarketWatch
Commentary: British Airways: Strike That Never Was Will Still Cost ItWhich Direction For Airline Stocks?
Stocks/ETFs to watch: British Airways plc (NYSEARCA:BAB). Competitors: Air France - KLM (AKH), AMR Corp. (AMR), UAL Corp. (UAUA), Continental Airlines Corp. (NYSE:CAL), US Airways Group Inc. (LCC). ETFs: iShares MSCI United Kingdom (NYSEARCA:EWU)

Nissan's Earnings Disappoint Across the Board, Outlook Lowered

Nissan reported a 23% drop in Q3 net income to ¥104.4 billion ($862m), or ¥25.29/share, on a 1.8% rise in sales to ¥2.34 trillion ($19.3b) -- missing analysts' average estimate of ¥153.5b ($1.27b; per Bloomberg) and 3% revenue growth (per Thomson). Nissan was hurt again by a lack of new models, in addition to facing higher raw materials and energy prices. This is Nissan's first drop in profit in six quarters.Nissan-NSANY-1yr-chart-02-01-07 Its worldwide autos sales fell 3% in the quarter, led by a 16% decline in Europe. Nissan cut its full fiscal year (ending in March) net profit forecast by 12% to ¥460b ($3.8b). Nissan's Nasdaq listed shares will likely face selling pressure, as will its ordinary shares on Monday, considering its Deutsche Bourse listing is currently down about 4% (having traded as much as 5.5% lower). Nissan's ordinary shares lost 1.8% to ¥1,509 ($24.94 ADR equiv. at ¥121/$1) ahead of its earnings announcement.
Sources: Press release and IR materials, Bloomberg, MarketWatch
Commentary: Nissan to Tap Renault for 'Econocar' Design, But No 'Cross-badging'Nikkei Briefly Touches 6 Year High, But Japan ADRs LagA "Pleasant Problem" at Toyota and Honda: Full Capacity
Stocks/ETFs to watch: Nissan (OTCPK:NSANY). Competitors: Toyota (TM), Honda (HMC), General Motors (GM), Ford (F), DaimlerChrysler (DCX)


Russia and Iran Ponder an OPEC-Like Natural Gas Cartel

Wall Street Journal reports that Russia and Iran, who jointly own almost 1/2 of the earth's natural-gas resources, are contemplating forming an OPEC-like cartel -- a move that could unsettle energy markets. NG accounts for a growing share of global energy use, but thus far producer nations haven't worked together to influence markets. Speaking yesterday at his annual press conference in the Kremlin, Russian President Putin called the notion, suggested by Iranian leader Ayatollah Ali Khamenei, "an interesting idea." But he downplayed the price-fixing rationale for any alliance, saying, "We do not intend to set up a cartel, but I think it's right to coordinate our activities." The idea threatens European nations, who get about 1/4 of their NG from Russia, more than U.S. consumers who get most of theirs from within North America. Russia's interest in pooling its gas supply is unusual considering it never even joined OPEC, despite being the world's #2 oil exporter.
Sources: Wall Street Journal
Commentary: A Depression in Natural Gas Prices May Prove Bullish For ChinaGambling on Natural GasRussian Government Muscling In on Anglo-Russian Gas Field VentureChesapeake is a Natural Pick in Natural Gas
Stocks/ETFs to watch: ConocoPhillips (NYSE:COP), BG Group plc (NYSEMKT:BRG), Magellan Midstream Partners L.P. (NYSE:MMP), Plains All American Pipeline L.P. (NYSE:PAA), TEPPCO Partners L.P. (TPP), Cheniere Energy Inc. (NYSEMKT:LNG), Sempra Energy (NYSE:SRE), ExxonMobil Corp. (NYSE:XOM), COOL Energy Inc. (NYSE:CNX), Chesapeake Energy Corp. (NYSE:CHK)


U.S. Markets: Percentage of Analyst Buy Recommendations is Lowest in Over Ten Years
Housing: Equity Office Properties: Sam Zell's Genius
Long Idea: American Standard To Split Up: Good News For Investors
Short Idea: The Short Case On Atherogenics
Internet: Color On Amazon's Quarter
Telecom: Capex Spend at Comcast: Party Like It's 1999
Hardware: EMC: Possible Loser in Dell’s CEO Change, Goldman Says
Software: JDA Software: Three Challenges For 2007
Consumer Electronics: Polishing The Apple: Steve Jobs and The Options Affair
Media: DirecTV: Our HDTV Plans Are OK, Despite Accident
Healthcare: Medivation: A Miracle Cure?
Retail: Anheuser Busch Sets Up Bud.TV For Internet Reach
Energy: Investing In Climate Change: Three Key Opportunities
Financial: The Check is in the... E-Mail
Asia: Rakuten's Linkshare Goes Full-Service In Digital Ads
ETFs: Shariah-Compliant ETF To Launch in Europe
Hedge Funds: 'Implicit' Hedge Fund Regulation: The Right Direction
Small-Caps: Two Smallcaps That Got Away: OnStream Media and Optionable
Sound Money Tips: Tips on the Top Low-Cost Weight Loss Programs
Jim Cramer: Latest stock picks
Conference Call Transcripts: Celgene Q4 2006Equifax Q4 2006CVS Q4 2006Comcast Q4 2006Sabre Holdings Q4 2006Starwood Hotels & Resorts Q4 2006Ford January 2007 Sales Call TranscriptExxon Mobil Q4 2006Monster Q4 2006General Motors January 2007 Sales Call TranscriptAmazon.com Q4 2006Dolby Labs F1Q07Clorox F2Q07InfoSpace Q4 2006CA F3Q07IMS Health Q4 2006 Earnings Conference CallAnheuser-Busch Companies Q4 2006Vertex Pharmaceuticals Q4 2006Electronic Arts F3Q07SigmaTel Q4 2006Ameristar Casinos Q4 2006

Have Wall Street Breakfast emailed to you every morning before the market opens.