Wall Street Breakfast

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MACRO AND HOUSING

Fannie Mae and Freddie Mac to Help Subprime Borrowers -- WSJ

Government-backed mortgage finance companies Fannie Mae and Freddie Mac are expected to announce today that they will provide means by which struggling subprime mortgage holders can avoid foreclosure. Fannie Mae CEO Daniel Mudd will testify before the House Financial Services Committee, where he is expected to unveil a new product line that will give borrowers the option of refinancing out of the kind of adjustable-rate mortgages that characterize subprime loans. Fannie Mae will also ease its credit requirements to allow more borrowers to qualify. In addition, Fannie Mae will buy 40-year loans as well as 30-year loans in the secondary market, which should "shave the monthly payment by about 5%." Freddie Mac Chairman and CEO Richard Syron is expected to tell the committee that his company will be putting 30- and 40-year subprime loans with reduced margins and longer fixed-rate periods into the market by the summer.
Sources: Wall Street Journal, Reuters
Commentary: Fannie Mae and Freddie Mac: OFHEO Releases Harsh Judgments • Freddie Mac Moves to Contain Subprime Fallout • California, Fannie Mae Sever Ties With New Century
Stocks/ETFs to watch: Fannie Mae (FNM), Freddie Mac (FRE). Competitors: Citigroup Inc. (C), Countrywide Financial Corp. (CFC), Wells Fargo & Co. (WFC). ETFs: Rydex S&P 500 Pure Value (RPV), iShares Lehman 7-10 YR Treasury Bond (IEF), iShares Lehman 20+ YR Treasury Bond (TLT)
Conference call transcripts: Freddie Mac Q4 2006

TECHNOLOGY

Intel Unveils New Products Including System-On-A-Chip Processors

Intel announced twenty new products at its semiannual developer conference, which is being held in Beijing for the first time ever. One of two system-on-a-chip (SoC) products -- a new area for Intel -- is code-named "Tolapai." In 2008, Tolapai is expected to reduce chip sizes by 45% and power consumption by around 20%, compared to standard four-chip design. Tolapai is designated for use in devices such as industrial-control systems and special-purpose handheld computers used by businesses, according an Intel spokesman. The second SoC is unnamed, but will be used in digital set-top boxes and networked media players. Also, a working version of its 45nm Penryn processor was on display. Intel's CTO says Penryn will begin production "late this year" and be on sale by year's end. Intel announces Q1 earnings after the market closes today. Its shares gained 1.1% to $20.69 during normal trading yesterday.
Sources: Press releases [i, ii], Bloomberg, The Wall Street Journal
Commentary: Intel Unveils ‘Tolapai’ System-On-A-Chip Program • Intel Details Penryn and Nehalem Processors • IBM Announces 3-D Chip Stacking • Intel Q1 Earnings Conference Call Transcript (later today)
Stocks/ETFs to watch: Intel (INTC). Competitors: Advanced Micro Devices (AMD), International Business Machines (IBM). ETFs: Semiconductor HOLDRs (SMH), iShares Goldman Sachs Semiconductor (IGW), SPDR Semiconductor (XSD)

INTERNET

Microsoft/Tellme Rolls Out Free 411 Service, Adobe Flash Rival

Tellme Networks, soon to be acquired by Microsoft Corp. for a rumored $800 million, is set to announce today a free directory assistance mobile website in the U.S. that will allow users to voice-search for local businesses and have information returned by voice or mobile phone screen. The service is similar to a service launched by Google this month, but distinguished by the option for screen based answers (Google's service does provide SMS answers). Voice activated search is considered a key element to mobile internet access. While Google dominates traditional search, Tellme co-founder Angus Davis says mobile search is still "entirely up for grabs." Financial Times says that ultimately 411 service will moved to the ad-supported model; for the time being Microsoft/Tellme is offering its service free of ads. Separately, Microsoft introduced yesterday its rival to Adobe System's ubiquitous Flash video software -- Silverlight. The company says its program is cheaper and easier for Web developers than Flash, and hopes it will encourage developers to use other Microsoft web development tools. Adobe, in turn, plans to introduce new technologies this week that will make Flash video encoding cheaper. It also plans to preview its new Adobe Media Player, a free program that will directly compete with Microsoft's Windows Media Player.
Sources: Silverlight press release, Adobe Unveils Next Generation Internet Video Solution [PR], Financial Times, Seattle PI, 24/7, Wall Street Journal, Bloomberg
Commentary: Hold the Phone: Google Petrifies the U.S. Directory Assistance Business • Adobe and Microsoft Take Their Duel to Web Video • Google Continues to Dominate Internet Search
Stocks/ETFs to watch: Microsoft Corp. (MSFT), Adobe Systems Inc. (ADBE), Google Inc. (GOOG)

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Microsoft, AT&T Press for Review of Google-DoubleClick Deal

Microsoft and AT&T, concerned that Google's $3.1 billion acquisition of online ad network DoubleClick will give it a stranglehold on the Internet advertising market, are urging regulators to investigate the deal for antitrust violations. The deal, announced on April 13, will position Google as the sole broker of Internet advertising, according to a statement released by AT&T. Microsoft, which has itself been a regular target of antitrust allegations, claims that the threat implied by the deal to competition for online ads -- as well as the lack of clarity about the amount of personal information Google will now be able to collect -- requires "close review and scrutiny." The DoubleClick purchase pulls Google far ahead of the field in the $28.8 billion global online ad market and gives it the capability to provide advertisers with graphical display ads as well as text ads. Brad Smith, Microsoft's general counsel, claims the acquisition will give Google an 80% share of the ad market displayed on third-party sites. The purchase, which some analysts believe was too expensive, will likely feed speculation that Seattle-based online ad company aQuantive Inc. is an acquisition target. aQuantive's shares gained 12% to $32.01 yesterday.
Sources: MarketWatch, Bloomberg, Seattle PI
Commentary: DoubleClick Acquisition: Google Heads Microsoft Off At the Pass • Despite Google's DoubleClick Acquisition, Microsoft May Be In the Lead • Google-DoubleClick Deal Makes aQuantive More Attractive
Stocks/ETFs to watch: Microsoft Corp. (MSFT), AT&T (T), Google Inc. (GOOG). ETFs: iShares Goldman Sachs Technology (IGM), iShares Goldman Sachs Software (IGV), First Trust Dow Jones Internet Index (FDN), First Trust IPOX-100 Index (FPX)
Conference call transcripts: Microsoft F2Q07 (Qtr End 12/31/06), Google Q4 2006

Yahoo Adds McClatchy to Ad Partnership

Yahoo announced yesterday that it is expanding its online advertising alliance with newspapers to include the McClatchy Company. The Tribune Co. and Gannett, which are constructing their own online ad network and with whom McClatchy had held talks, have not joined the Yahoo consortium. Newspapers are eager to tap online ad revenue as print ad sales continue to decline. Yahoo and the papers will sell ads on one another's sites, and they will share revenue according to an unspecified breakdown. Content from the papers will appear on Yahoo's channels. Over the next year and a half, the papers' sites will incorporate Yahoo's graphical ad and search technology. The papers are located in 44 states and their sites bring in an estimated 50 million visitors a month. The Panama ad-system upgrade, the newspaper alliance, and Yahoo's just-announced exclusive deal to provide search and ad services to several Viacom sites are expected by some analysts to boost Yahoo's share of the search market, which was 28% in Q1 -- flat with Q4 -- against rival Google's 48%.
Sources: Reuters, MarketWatch, Wall Street Journal (I, II)
Commentary: McClatchy Abandons Tribune and Gannett For Yahoo Ad Project - WSJ • The McClatchy Company: Focusing on Local Online Expansion • Viacom and Yahoo Sign Exclusive Search-Ad Deal
Stocks/ETFs to watch: Yahoo! Inc. (YHOO), The McClatchy Company (MNI), Belo Corp. (BLC), E.W. Scripps (SSP), Lee Enterprises (LEE). Competitors: Google Inc. (GOOG), Gannett Co., Inc. (GCI), Tribune Co. (TRB), The New York Times Company (NYT). ETFs: Internet HOLDRs (HHH), First Trust Dow Jones Internet Index (FDN), PowerShares Dynamic Media Portfolio ETF (PBS), PowerShares Dynamic Leisure & Entertainment (PEJ)
Conference call transcripts: Yahoo! Q4 2006, The McClatchy Company Q4 2006

MEDIA

Time Warner Mulls Its Options With Future of Cable Stake- WSJ

The Wall Street Journal reports that Time Warner Inc.'s management is currently weighing whether their company should reduce its stake in Time Warner Cable Inc., of which it owns 84%. Management concerns stem not from present performance - the cable systems business is currently the parent company's top earner. Rather, as News Corp. got rid of its stake in DirecTV Group last month as its subscriptions growth slowed, Time Warner believes the internet will increasingly replace cable as the primary entertainment source for cable-style programing in the U.S., with the ensuing result being a decrease in margins at Time Warner Cable. While the Journal believes it's unlikely Time Warner will sell its entire stake in Time Warner Cable, a reduction in its stake size and diversification into other businesses is seen as likely. According to Pali Capital analyst Richard Greenfield, "Both companies would trade better if they were separated." Management will present several alternatives for its intentions with Time Warner Cable to the board next month as part of the company's annual strategic review. Among the possibilities may be an attempt to purchase a major internet player, like News Corp. did with MySpace. Time Warner already owns AOL, a unit which has been raised as a spinoff possibility.
Sources: Wall Street Journal, Reuters, TradingMarkets.com
Commentary: Time Warner Cable: Stock in Steady Slide • Time Warner's Attempts to Embrace New Media • What Will Pay For The Online Video Explosion? Transit Bandwidth Inflation
Stocks/ETFs to watch: Time Warner Cable Inc. (TWC), Time Warner Inc. (TWX). Competitors: News Corp. (NWS), Viacom, Inc. (VIA), Comcast Corporation (CMCSA), DIRECTV Group, Inc. (DTV), Cablevision Systems Corporation (CVC), EchoStar Communications (DISH). ETFs: PowerShares Dynamic Media Portfolio ETF (PBS), PowerShares Dynamic Leisure & Entertainment (PEJ)

Comcast to Supply and Distribute Content for NBC-News Corp Venture

An online content distribution agreement between Comcast and NBC-News Corp was announced yesterday for the latter party's unnamed online video venture set to launch this summer. Comcast joins a list of distribution partners including AOL, MSN, MySpace and Yahoo!. It will also supply content from its own networks such as E!, Style and Golf Channel to the venture. This is NBC-News Corp's first content deal. Comcast meanwhile, plans to launch a new video content website itself, called Fancast, following its acquisition of Fandango last week. Comcast.net reportedly attracts 15 million unique visitors monthly. The NBC-News Corp venture is regarded as a challenge to Google's YouTube. CBS announced its own online video distribution plans last week. Comcast will also distribute CBS shows on its websites. Shares of Comcast lost 1% to $27.89 yesterday. GE lost 0.06% to $35.36, News Corp gained 0.6% to $25.27, CBS rose 0.8% to $31.70 and Google gained 1.7% to $474.27.
Sources: MarketWatch, Financial Times
Commentary: Comcast: “Business Is On Fire” • Comcast Acquires Fandango, To Launch Video Site in Threat to Apple, Google • Comcast Set to Launch Entertainment Site
Stocks/ETFs to watch: Comcast (CMCSA), News Corp (NWS), General Electric (GE). News Corp - NBC Venture Distribution Partners: Time Warner (TWX) - AOL, Microsoft (MSFT) - MSN, Yahoo! (YHOO) and News Corp - MySpace. Competitors: CBS Corp (CBS), Google (GOOG), Apple (AAPL). ETFs: Consumer Discretionary SPDR (XLY)
Conference call transcripts: Comcast Q4'06, GE Q1'07, News Corp. F2Q07, CBS Q4'06, Google Q4'06, Apple F1Q07

RETAIL

Black & Decker Shares Jump On Upped 1Q Guidance

Shares of power-tool maker Black & Decker jumped $5.29, or 6.32%, to $89.01 in after hours trading after the company announced it was upping its first quarter EPS guidance to well above the previously guided range. In a statement released after yesterday's closing bell, the company raised its first quarter EPS guidance to $1.60, from a previous projection of EPS in a range of $1.25-$1.30. Thomson Financial consensus estimates were looking for EPS of $1.26. The company credited strong international performance by its power tools and accessories segment, as well as "favorable order patterns" in the U.S., for its increased outlook. However, due to the continued expectation of a "challenging economic environment," the company only expects to up its full year guidance slightly from its current projected range of $6.25-$6.55 a share when it reports earnings on April 25.
Sources: Press Release, AP, TheStreet.com, Reuters
Commentary: Cramer's Take on BDK • And The Hot Christmas Present This Year Was...
Stocks/ETFs to watch: The Black & Decker Corporation (BDK). Competitors: Illinois Tool Works (ITW), Home Depot (HD), Lowe's Companies (LOW)

TRANSPORT AND AEROSPACE

GM's Chinese JV Forecasts 20% Sales Increase This Year

General Motors' Chinese commercial vehicle JV is forecast to increase sales by more than 20% this year and is expected to continue to lead the Chinese market's minivan segment, a GM executive said today. The JV, which involves GM, SAIC Motor (China's largest automaker) and Wuling Automotive, manufactures small trucks, minivans, and the Chevrolet Spark minicar. GM and SAIC are also reported to be in talks to manufacture Wuling-brand cars in Indonesia. GM's overall vehicle sales in China -- the second-largest car market in the world -- rose 25% in Q1. In other news, GM is considering a "multiple increase" in auto parts sourcing from India, according to CEO Rick Wagoner. "We hope to increase our sourcing significantly over the current level, perhaps as much as five-fold over the next two years," he said. GM is aiming for 10% of the rapidly growing Indian market by 2010. It competes in that market with Suzuki, Hyundai, Tata Motors, Toyota and Honda.
Sources: Reuters (I, II)
Commentary: GM's Q1 Sales Strong in China, but Likely Down in U.S. for March • So What If GM Relies On Overseas Markets? • Auto Stocks: Some Speeding Ahead, Some Stalling
Stocks/ETFs to watch: General Motors Corp. (GM). Competitors: Ford Motor Co. (F), Toyota Motor Corp. (TM), Daimlerchrysler AG (DCX), Tata Motors Ltd. [ADR] (TTM), Honda Motor Co. Ltd. [ADR] (HMC). ETFs: PowerShares FTSE RAFI Consumer Goods (PRFG), PowerShares FTSE RAFI US 1000 (PRF), Rydex S&P 500 Pure Value (RPV), iShares Dow Jones Transportation Index ETF (IYT)
Conference call transcripts: Q4 2006

FINANCIAL

Washington Mutual: Riskiest Portfolio in U.S. - WSJ

A Wall Street Journal study released today says Washington Mutual Inc. was the #1 U.S. lender to investors and second-home buyers -- which are considered riskier loans than loans to primary occupants. 15% of WaMu's loans were non-primary residence, vs. 13% for Countrywide, 11% at Wells Fargo, 9% at JP Morgan Chase, and 5% at Citigroup. Citigroup and WaMu had the highest concentrations of high interest-rate loans, generally associated with subprime borrowers. High interest-rate loans (over 7.72%) were 32% for Citigroup, 29% at WaMu, 25% at Countrywide and 19% at Chase and Wells Fargo. While it is not clear how many of the high-risk loans remain on lenders books instead of sold to investors, a lender can sometimes be forced to repurchase bad loans, and risks lower bids on future loan packages it wants to sell if earlier loans were fraught with defaults. WaMu reports Q1 earnings after the close.
Sources: Wall Street Journal
Commentary: Why I'm Underweight the Financial Sector: Sometimes Bad Gets Worse • Subprime Fiasco: A Bargain Hunt For Value Players? • Washington Mutual Challenged By Inverted Yield Curve • Washington Mutual: Good, Bad and Ugly On Quarterly Earnings
Stocks/ETFs to watch: Washington Mutual Inc. (WM), Citigroup Inc. (C), Countrywide Financial Corp. (CFC), Wells Fargo & Company (WFC), JPMorgan & Chase Co. (JPM). ETFs: PowerShares Dynamic Banking (PJB), streetTRACKS KBW Bank (KBE)

Fremont General Lands Buyer for $2.9 Billion in Subprime Loans

Shares of mortgage lender Fremont General surged 33% yesterday to $9.62 after it announced it has secured a buyer for approximately $2.9 billion of its subprime mortgages. It has also signed a letter of intent with the same buyer to sell most of its residential real estate business. The discounted sale of the subprime loans will result in a pretax loss for Fremont of about $100 million. The buyer has not been identified, but some analysts speculate that it could be Fortress Investment Group LLC. Last month, Fremont was given a cease-and-desist order by the FDIC instructing it to exit the subprime mortgage business. It subsequently sold $4 billion of subprime loans to an unnamed buyer, for which it took a pretax loss of $140 million. The company will hold onto its commercial real estate business, which was profitable as of last month. Fremont has a $6.42 billion commercial loan portfolio concentrated in California, New York and Florida.
Sources: Business Week, TheStreet.com, Reuters, MoneyCentral
Commentary: Fremont Sells $4B in Loans at a 3.5% Discount, Shares Climb • Fremont General: Subprime Sale Isn't a Done Deal • Housing Double Dips Offer Short Opportunities
Stocks/ETFs to watch: Fremont General Corp. (FMT). Competitors: Bank of America Corp. (BAC), Countrywide Financial Corp. (CFC), Accredited Home Lenders Holding Co. (LEND), New Century Financial (NEWC.PK). ETFs: iShares Cohen & Steers Realty Majors (ICF), iShares Dow Jones US Real Estate (IYR), Vanguard REIT ETF (VNQ)

Apollo Investment To Buy Innkeepers USA Trust For $1.5 Billion

U.S. hotel REIT Innkeepers USA Trust agreed yesterday to a $800 million all-cash buyout offer from Apollo Investment Corp., valuing each of its shares at $17.75. Innkeepers, which is the owner of the Residence Inn, Hampton Inn and Summerfield Suites chains and owns 74 hotels nationwide, saw its shares jump more than 9% on the news from a closing price of $16.45 Friday to a close of $17.96 yesterday. Including debt, the deal is valued at $1.5 billion. Innkeepers will pay its first quarter dividend on April 24 after which it will suspend further dividend payments.
Sources: Press Release, Wall Street Journal, Bloomberg, BizJournal, TheStreet.com
Commentary: Investing in Real Estate: REITs and Your Home • LaSalle Hotel Properties Raises Dividend by 21%
Stocks/ETFs to watch: Innkeepers USA Trust (KPA), Apollo Investment Corp. (AINV). Competitors: FelCor Lodging Trust (FCH), Hospitality Properties Trust (HPT). ETFs: DJ Wilshire REIT (RWR), Vanguard REIT ETF (VNQ)

HEALTHCARE/BIOTECH

FDA Lifts All Restrictions on Boston Scientific's Minnesota Guidant Plant

Boston Scientific's shares rose over 7% yesterday -- their biggest gain since February 2005 -- on news that the FDA has cleared its St. Paul cardiac rhythm-management device plant for operation. The plant was originally owned by Guidant, which Boston Scientific purchased for $27.5 billion last year. Guidant recalled 109,000 defibrillators in 2005 because of electrical and battery defects, prompting the FDA to inspect the plant. The FDA then sent Guidant a warning letter about deficiencies at the plant in December 2005, all of which have now been resolved. Boston Scientific is now free to seek approvals for new devices in the $10 billion-a-year global market for pacemakers and implantable cardioverter defibrillators [ICDs]. "[T]he competitive dynamics have changed over the past year and it remains to be seen how successful and quickly (Boston Scientific) will be able to take back lost ICD market share," said Bank of America analyst Glenn Novarro. Boston Scientific has yet to resolve a second warning letter about quality control problems at plants in Massachusetts, Minnesota and Indiana.
Sources: MarketWatch, Reuters, CNN.com, Bloomberg, 24/7 Wall Street
Commentary: Bypassing Surgery - Will Stents Survive The Bad News? • Boston Scientific Addresses Quality Issues at JPMorgan's HealthCare Conference • JNJ, Boston Scientific Heart Stents Are Safe, Says FDA
Stocks/ETFs to watch: Boston Scientific Corp. (BSX). Competitors: Johnson & Johnson (JNJ), Medtronic Inc. (MDT), St. Jude Medical Inc. (STJ), Abbott Laboratories (ABT). ETFs: iShares Dow Jones US Medical Devices (IHI)

MUST-READS ON SEEKING ALPHA TODAY

U.S. Market:	Asset Class Yield Historical Comparisons 1/94-3/07
Housing:	CME Housing Futures Show More Price Depreciation Expected
Long Idea:	The Long Case For Broadridge Financial Solutions
Short Idea:	The Short Case on Sovereign Bancorp
Internet:	Phil Davis' Google Earnings Play
Telecom:	AT&T: Stronger Growth Prospects Than Other RBOCs
Networking:	Nortel Launches 'My Business' Program
Hardware:	IBM Earnings Preview: Citi Expects EPS Below Consensus
Chips:	Attention Bottom Fishers: Credence Systems Appoints CFO
Software:	Interwoven Looks Strong Ahead of Today's Announcements
Consumer Electronics:	Nokia Displays $310,000 Cell Phone
Media:	Blockbuster's Online Focus is Killing its Competitive Advantage
Healthcare:	Sierra Health/UnitedHealth Merger Seems Good to Go
Biotech:	Diversa Demonstrates Failed Rally
Retail:	The Short Case on American Woodmark Corporation
Transport:	Goldman Ups Magna's Price Target On Chrysler Bid
Gold:	What is Goldcorp Doing With All That Cash?
Energy:	Energy Fuels: Part of the American Nuclear Renaissance
Financial:	Fairfax Financial Boosts Stake in Newspaper Publisher Torstar to 18%
Asia:	Japan: Best and Worst Performing ADRs Last Week and YTD
ETFs:	David Fry's Market Outlook for Tuesday
Hedge Funds:	RPI: Crystal Ball For Hedge Fund Manager Success?
Small-Caps:	Biloxi Marsh Lands Posts 11th Straight Profitable Year
IPO Analysis:	David Rubenstein On An Imminent Carlyle IPO
Sound Money Tips:	Last Chance to Deduct
Jim Cramer:	Latest stock picks
Earnings Call Transcripts:	Citigroup Q1 2007 • Royal Philips Electronics Q1 2007

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