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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TECHNOLOGY

Palm Buyout Likely This Week - Sources

According to a report published Monday on tech-news website Unstrung (which is connected with the communications news site Light Reading), a Palm Inc. buyout could be finalized by Thursday, at a price of $20 or more per share, according to sources close to the situation. Nokia Corp. is the leading vendor bidder, but Palm management is said to favor a private equity buyer -- either Texas Pacific Group or Silver Lake Partners. Motorola Inc., the sources say, has been reconsidering its position, and may try to block Nokia with its own bid in an effort to get out of its low-price war with Nokia and concentrate on Palm's higher-end Treo 680, and in order to placate activist shareholder Carl Icahn who has been pushing for a seat on Motorola's board. Morgan Stanley, which was hired by Palm to explore its options, wants a deal closed by Palm 20 03 2007 ChartMarch 22, the day Palm is due to report its FQ3 2007 earnings, the sources say. In Monday trading, Palm shares closed up 1.8% to $18.14 and were up another 1.5% in after-hours trading, Nokia shares were up 1.42% to $22.16, and Motorola shares closed up 0.55% to $18.29.
Sources: Unstrung
Commentary: Palm: Sale Seems UnlikelyAre Palm's Days Numbered?Palm As a Buyout Target: Suitors Abound
Stocks/ETFs to watch: Palm Inc. (PALM), Nokia Corp. (NYSE:NOK), Motorola Inc. (MOT). Competitors: Research In Motion Ltd. (RIMM), Apple Computer Inc. (NASDAQ:AAPL). ETFs: streetTRACKS Morgan Stanley Technology Index Fund (NYSEARCA:MTK), HOLDRS Wireless (NYSEARCA:WMH), HOLDRS Broadband (NYSE:BDH)
Related: Light Reading
Conference call transcripts: Palm F2Q07 (Qtr End 12/1/06) Earnings Call TranscriptNokia Q4 2006 Earnings Call TranscriptMotorola Q4 2006 Earnings Call Transcript

Report: Gateway May Be Acer Target - Shares Climb

Shares in famed computer maker Gateway Inc. shot up as much as 8.4% Monday, and closed up 6.7% on speculation it may be an acquisition target. A group of ThinkEquity analysts said in a note yesterday that when Acer Inc. CEO J. T. Wang said his company was "hoping to make an acquisition this year," Gateway Inc 20 03 2007 Charthe meant Gateway. Spokesmen from both companies declined to comment on the speculation. In September, Gateway rejected a $450 million offer for its retail business. Last month it said it would lay off more workers and cut $20-25 million in expenses. Its Q4 revenue, which dropped 9%, missed Street forecasts. Activist investor and 10.7% shareholder Harbert Management/Firebrand has been pressuring Gateway to de-classify its board and appoint three of its designees to the board, saying in a letter to its CEO: "There is nothing wrong with Gateway that can't be fixed with what's right with Gateway."
Sources: AP, Seeking Alpha
Commentary: Consumer PCs: HP and Gateway are Hot, Dell is NotConflicting Calls On PC Sector: Sell Dell, Buy GatewayGateway Reports Solid Quarter But Problems Linger
Stocks/ETFs to watch: Gateway Inc. (GTW). Competitors: Dell Inc. (NASDAQ:DELL), Hewlett-Packard Co. (NYSE:HPQ), Lenovo Group Ltd. (OTCPK:LNVGY), International Business Machines Corp. (NYSE:IBM). ETFs: SPDR Technology (NYSEARCA:XLK), iShares Goldman Sachs Technology Index Fund (NYSEARCA:IGM), iShares Dow Jones US Technology Index (NYSEARCA:IYW)
Conference call transcript: Gateway Q4 2006 Earnings Call Transcript

FTC Clarifies Rambus' Royalty Matters, Shares Rise 6% in After-hours

After the market closed yesterday, Rambus reported the FTC "has stayed portions of its remedy order In the Matter of Rambus Inc." The FTC says its remedy is intended to be "forward-looking" and issued guidelines for acceptable collection of royalties related to past use of its technologies including SDRAM and DDR SDRAM. Rambus-RMBS-chart-03-19-07 The Senior VP and general counsel for Rambus commented, "The Commission’s opinion confirms our ability to collect payments due for use of our technologies in the past and allows us to retain royalties already paid, removing significant uncertainty for the market." The FTC is also allowing Rambus to collect royalties in excess of its Feb. 2 remedy order. Rambus said it "plans to appeal both the FTC’s liability and remedy orders in their entirety." Rambus' shares traded 5.65% higher to $20.95 in after-hours activity on volume of about 1.1 million, after losing 1.2% to $19.83 in normal trading.
Sources: Press release, Reuters
Commentary: Rambus Surges on FTC Patent-Royalty RulingFTC Rules Against Rambus, Shares Plummet 26% [Aug. '06]WSJ Options Scandal Scorecard
Stocks/ETFs to watch: Rambus (NASDAQ:RMBS). Competitors: Micron Tech. (NASDAQ:MU), Qimonda AG (QI)

Take-Two Says Considering Possibility of a Sale, Shares Jump 8%

Yesterday Take-Two announced a rescheduling of its annual meeting of shareholders in order for its board to review the actions of a dissident shareholder group (45+% stake) seeking control of the company and also to "evaluate alternative courses of actions ... including a possible sale of the Company." Analysts' reactions varied, but Take-Two's shares gained 8.4% to $22.61, for their highest close since Sept. '05. Take-Two-TTWO-chart-03-19-07 An S&P analyst, who is maintaining his "hold" rating, commented, "We view its possible acquisition as potentially favorable, but we think the news is already built into the current share price." JP Morgan downgraded it to "neutral" from "overweight," pointing to 'significant risk' at its current valuation and future uncertainty. GameSpot says it spoke with WedBush Morgan analyst Michael Pachter, who rates it a "sell" and said, "I can't see a sale happening, unless there is truly a 'greater fool' out there." Also, Nollenberger Capital analyst Todd Greenwald told GameSpot, "Ubisoft might be able to pull it off. Other than that, Activision and Elevation Partners are the only other real possibilities I see. I don't see a News Corp. or Viacom going for it."
Sources: Press release, Forbes, GameSpot, Reuters
Commentary: Take Two: Subpoenas Slash Hopes for a SaleTake-Two's Loss of $0.30 a Share Enough To Beat EstimatesTake-Two's Shares Jump as Investor Group Plans to Take Action
Stocks/ETFs to watch: Take-Two Interactive Software (NASDAQ:TTWO). Competitors: Activision (NASDAQ:ATVI), Electronic Arts (ERTS), Konami (NYSE:KNM), Nintendo (OTCPK:NTDOY), Sony (NYSE:SNE)

INTERNET

Yahoo Expands Its Mobile Search

Yahoo!, which has lagged competitor Google in web search, said Monday it has expanded the reach of its popular new oneSearch service. It said oneSearch will now be accessible on more than 85% of all mobile phones through the mobile web, as well as through the gamma version of Yahoo! Go for Mobile 2.0. The service, it said, "has already started to change the mobile search game by fundamentally improving the way consumers’ access and use the Internet on their mobile phones." OneSearch is designed to make searching for local information as quick and comprehensive as possible. For Yahoo Inc 20 03 2007 Chartexample, if a consumer wants to go to a movie, they type the name of the movie into the search box and the search results return user ratings, local theaters the movie is playing at, news headlines and more. Users need to enter a zip code or city name in order to facilitate oneSearch's localized results. Yahoo! said oneSearch would roll out in additional country/language versions in over the coming months. Yahoo! shares were up 0.5% yesterday to $30.03.
Sources: Press Release
Commentary: Yahoo Introduces New Mobile ServicesYahoo! Aims for Lead in Mobile Search SpaceRumor Has It: Google Might Be Building A Phone
Stocks/ETFs to watch: Yahoo! Inc. (NASDAQ:YHOO). Competitors: Google Inc. (NASDAQ:GOOG), Microsoft Corp. (NASDAQ:MSFT), Time Warner Inc. (NYSE:TWX), LookSmart Ltd. (NASDAQ:LOOK), Baidu.com Inc. (NASDAQ:BIDU). ETFs: Internet HOLDRs (NYSE:HHH), First Trust Dow Jones Internet Index (NYSEARCA:FDN)
Related: Yahoo! oneSearch, Yahoo! Go --The Internet to go
Conference call transcript: Yahoo! Q4 2006 Earnings Call Transcript

RETAIL

McDonalds Close to Selling Its Latin American Branches

According to a leading Brazilian newspaper, Valor Economico, McDonald's Corp., the world's #1 restaurant chain, may announce this week that it will sell its Latin American outlets to an investment fund. The most likely buyer was Brazilian fund Pactual, and the deal could be worth about $600 million -- much less than McDonalds was asking -- the unnamed sources said. McDonalds announced in October it would convert 2,300 of its McDonalds 20 03 2007 Chartrestaurants, including some of its 1,656 Latam restaurants which currently boast $1.66 billion in sales, to 'developmental licensee ownership,' through which McDonald's collects royalties but doesn't own the restaurants. McDonald's said yesterday that the "evaluation process for Latin America is ongoing and no final decisions have been made at this time."
Sources: Reuters
Commentary: McDonald's CEO Comments On The Chinese MarketWhy Durable Competitive Advantage MattersRonald McDonald's Rivals May Not Be Grinning - Barron's
Stocks/ETFs to watch: McDonald's Corp. (NYSE:MCD)
Related: More McDonald's In Latin America [NY Times Archives]
Conference call transcript: McDonald's Q4 2006 Earnings Call Transcript

TRANSPORT AND AEROSPACE

Emboldened By Bankruptcy, Parts Makers Finally Telling Detroit 'No'

Detroit's part makers are starting to push back - and the timing can't be worse for the Big 3 automakers. The Wall Street Journal reports Navistar International Transportation Corp., which has made diesel engines for Ford Motor Co. for 30 years, cut off all engine shipments to its single biggest customer, the result of a monetary dispute. For years the Big 3 have been squeezing the parts makers when they needed to trim their own costs; now those days are ending as many of the parts makers have been driven into bankruptcy by money-losing contracts. Of the 10 parts makers mentioned in the WSJ piece, six are in Chapter 11 and a seventh is being kept out of bankruptcy by Ford. The non-bankrupt parts makers have stayed afloat through other businesses. There are several reasons the parts makers are in an improved bargaining position: bankruptcy has forced the Big 3 to back off on their demands for fear of losing additional supply sources; some, like Delphi Corp., have sought bankruptcy reorganization, in order to dump unprofitable contracts and excess labor/factories; private equity has intervened in some cases and said 'no' to unprofitable contracts for the sake of keeping up volume; finally, growing steel industry demand has given many parts makers additional pricing power when facing off against the Big 3.
Sources: Wall Street Journal
Commentary: Chinese Auto Parts Now Top Quality And Taking Market ShareHighland Capital Challenges Delphi's Current Reorganization PlanTough Times for Auto Parts Makers Should Continue
Stocks/ETFs to watch: Ford (NYSE:F), General Motors (NYSE:GM), DaimlerChrysler (DCX), Delphi Corporation (OTC:DPHIQ), Magna International (NYSE:MGA), Lear Corporation (NYSE:LEA), Visteon Corporation (NYSE:VC), Johnson Controls (NYSE:JCI)

The Eagle Has Landed: EGL Inc. Being Bought Out By CEO

EGL Inc.'s CEO, Chairman and largest shareholder got consent to take his company private for $1.7 billion.eagl James Crane is leading a group including Centerbridge Partners L.P. and Woodbridge Co. to buy the logistics and freight forwarder for $38-a-share, all cash. After Crane's initial offer of $36 a share was rebuffed, he upped his offer price to $38 to seal the deal. EGL Inc. shares have risen 28% since Crane made his initial offer. Apollo Management LP, which had also made an offer for EGL, said its superior offer of $40-a-share, remains on the table. Crane will continue in his role as CEO after the merger. EGL shares rose $2.20, or 6.29%, to $37.16 in trading yesterday; it rose an additional 1.7% after hours to $37.80.
Sources: Press Release, Bloomberg, MarketWatch, Briefing.com
Commentary: Seeking Alpha M&A page
Stocks/ETFs to watch: EGL, Inc. (NASDAQ:EAGL). Competitors: Expeditors International of Washington (NASDAQ:EXPD)

ENERGY AND MATERIALS

TODCO Shares Surge On Hercules Buyout

Hercules Offshore announced yesterday that it had signed a definitive agreement to buy TODCO, the U.S. Gulf's largest fleet of shallow-water rigs, in a cash and stock offer.the When the dust settles on the deal, TODCO shareholders will own 64% of the merged company and Hercules shareholders will own the remaining 36%. Hercules offered 0.979 of its shares plus $16 in cash for the much larger TODCO, valuing the company at $2.3 billion, or $42.01 as of its closing price Friday. TODCO shares rose $6.46, or 19.71%, to $39.24 on news of the merger; Hercules shares fell 10% in intraday trading to pierce 52-week lows before recovering to a loss of just $1.25, or 4.70%, to $25.32. According to Hercules CEO Randy Stilley, "this transaction positions Hercules Offshore as one of the leading shallow water oil service providers globally." The merged company will operate in 10 countries; Hercules is funding the merger largely through a senior secured term loan facility underwritten by UBS.
Sources: Press Release, Bloomberg, TheStreet.com, MarketWatch
Commentary: Cramer's Take on HEROStill Cautious on Gulf of Mexico Driller Stocks
Stocks/ETFs to watch: Hercules Offshore, Inc. (NASDAQ:HERO), TODCO (THE). Competitors: Parker Drilling Company (NYSE:PKD), Transocean Inc. (NYSE:RIG), Noble Corporation (NYSE:NE), Diamond Offshore Drilling (NYSE:DO), Pride International, Inc. (NYSE:PDE), Helmerich & Payne, Inc. (NYSE:HP), GlobalSantaFe Corporation (NYSE:GSF)
Related: A Nicely Rigged Drilling Combo - Motley Fool

FINANCIAL

Morgan Stanley to Open First Vietnam I-Bank

Morgan Stanley announced yesterday it plans to open Vietnam's first full-service investment bank, in partnership with Vietnam's State Capital Investment Corp., the strategic investment arm of the Vietnamese government. People familiar with the matter said Morgan Stanley would appoint the new company's CEO, and SCIC would name its chairman. Morgan Stanley expects to begin operations in Q4 with a full range of investment banking Morgan Stanley 20 03 2007 Chartservices. Morgan Stanley CEO John Mack says Vietnam, one of Asia's fastest-growing markets, is "important to our emerging market growth strategy," as global banks continue to forge into Asia. Vietnam gained entry into the World Trade Organization in January; its 8% GDP growth is second in Asia to China's 10%+. Morgan Stanley shares were up $0.61 yesterday to $75.02.
Sources: Wall Street Journal
Commentary: Investing in Vietnam [Global Guru]Vietnam is the New IndiaEmerging Markets: When to Hold 'Em, When to Fold 'Em
Stocks/ETFs to watch: Vietnam Opportunity Fund (VTOPF.PK), Morgan Stanley (NYSE:MS)
Related: Vietnam's Economy on Wikipedia

Mizuho Cuts FY Guidance; Plans to Accept Citi's Offer for Nikko

In a statement to the Tokyo Stock Exchange after trading finished today, Mizuho Financial Group said it is cutting its fiscal year (ending this month) guidance for net income by 25% to ¥540 billion ($4.6b). Separately, Bloomberg reports Mizuho plans to sell its 4.8% stake in Nikko Cordial to Citigroup. MizuhoFG-8411-NikkoC-8603-Citigroup-chart-03-19-07 Mizuho lowered its guidance from its prior forecast in November, due primarily to an increase in bad loan costs, which a Macquarie analyst says "isn't a surprise and is probably a one-off cost." Also, Mizuho says its earnings from stock trading decreased. Regarding Citigroup's revised bid of ¥1,700 yen/share to acquire Nikko, a Mizuho spokeswoman told Bloomberg it plans to accept Citi's offer. This helps Citi's chances of gaining majority control, but three of Nikko's four largest shareholders have previously said it is worth at least ¥2,000/share. A JP Morgan analyst in Tokyo commented, "Overseas funds cannot keep asking for a higher price as Citigroup will just walk away." Nikko's ordinary shares lost 0.53% to ¥1,676 ($14.22 at ¥117.9/$1) today, while Mizuho gained 0.66% to ¥762,000 ($12.93 ADR equiv).
Sources: Press release, Bloomberg [I, II]
Commentary: Nikkei Shimbun: Mizuho Will Sell Stake in Nikko to CitigroupJapan: Best and Worst Performing ADRs 03/09 - 03/16Japan's Mega Banks' Profits Drop Double Digits
Stocks/ETFs to watch: Mizuho Financial Group (NYSE:MFG) (JP:8411), Nikko Cordial (OTC:NIKOY) (JP:8603), Citigroup (NYSE:C). Competitors: Mitsubishi UFJ Fin. Grp. (NYSE:MTU), Mitsui Sumitomo Fin. Grp. (OTC:SMFJY), Nomura Holdings (NYSE:NMR). ETFs: iShares MSCI Japan Index (NYSEARCA:EWJ), iShares S&P/TOPIX 150 Index (ITF), iShares S&P Global Financial Index Fund (NYSEARCA:IXG)

INTERNATIONAL

BoJ Holds at 0.5%, Yen Weakens, Nikkei Adds to Yesterday's Gains

The Bank of Japan voted unanimously to keep the uncollateralized overnight call rate at 0.5%. The yen continued to face selling pressure against the US$ (last trading at ¥117.9) following yesterday's reversal, which helped the Nikkei 225 rise (0.9%) for a second day. Economists expected the decision, pointing to concerns over consumer prices and spending, and say the BoJ is likely tracking the effects of last month's hike. Global-Central-Bank-Rates-03-20-07 BoJ Governor Toshihiko Fukui says the bank is adhering to its "gradualist" strategy. He commented recent weakness in global stocks "appears to be a healthy correction" and reevaluation of risk. In its monthly economic report, the BoJ maintained its view the economy is "expanding moderately," saying private consumption has been firm and production is "expected to follow an increasing trend." Price weakness is expected in the immediate future due to lower commodity prices. The BoJ releases its closely watched tankan (quarterly short-term economic survey of business) on April 2 and its next policy meeting is April 9 - 10.
Sources: BoJ press release and monthly report, Associated Press, Bloomberg
Commentary: James Grant's Long Case for the YenChina's Central Bank Raises Interest Rates 0.27%As The Carry Trade Unwinds: Potential Effects Abroad
Stocks/ETFs to watch: Mitsubishi UFJ Fin. Grp. (MTU), Mizuho Fin. Grp. (MFG). ETFs: iShares MSCI Japan Index (EWJ), iShares S&P/TOPIX 150 (ITF), BLDRS Asia 50 ADR Index (NASDAQ:ADRA), CurrencyShares Japanese Yen Trust (NYSEARCA:FXY)

MUST-READS ON SEEKING ALPHA TODAY

U.S. Market: Domestic and International Stocks: Absolute and Relative Valuation Analysis
Housing: How the Sub-Prime Mortgage Crisis Could Spread
Long Idea: Timberwest: How to Profit From Inflation
Short Idea: Why are Insiders Selling Omniture?
Internet: Four Reasons To Buy eBay Now
Networking: Nortel: The Charlie Brown of Networking?
Hardware: Could a Dell/Apple Partnership Work?
Chips: Advanced Micro: Growing Concerns About Near-Term Results
Software: 10 Reasons Why Microsoft's Vista Has Missed It's Mark
Consumer Electronics: Nintendo Wii Wins Console Sales Battle in February
Media: Old Media Discovers the Value of Internet: Can Gannett Pull It Off?
Healthcare: Pfizer: This Guru Favorite May Be Just What the Doctor Ordered
Biotech: SuperGen Gaining Momentum On Promising MDS Drug
Retail: California Pizza Kitchen: Why I'm Losing My Appetite
Transport: The Story from The Pep Boys Conference Call: Finally a Happy Ending
Gold: John Hussman: Buy Signal For Gold Stocks From Gold-XAU Ratio
Energy: How The Polysilicon Shortage Affects Solar Energy Stocks
Financial: NovaStar: De-REIT-ing Itself?
Asia: The Subprime Solution: Containing Global Contagion
ETFs: ETF-Based 401(k)s Reduce Excessive Fees
Small-Caps: Smallcaps Worth Watching: Overhill Farms, Rochester Medical, Smith Micro
IPO Analysis: Implications of A Blackstone IPO
Sound Money Tips: Find Free Storage Online
Jim Cramer: Latest stock picks
Conference Call Transcripts: Nortel Networks Q4 2006
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