Existing-Home Sales: Biggest Drop in 18 Years
The dollar fell and Treasury yields declined on news that existing-home sales sank 8.4% in March, their steepest drop since January 1989, on poor demand hampered by bad weather. The National Association of Realtors reported that March sales came in at 6.12 million, shy of economists' expectations of 6.5 million. The decline follows a 3.7% rise in February. March sales were down 11.3% from the year-ago period. The median home price in March dropped 0.3% from a year ago to $217,000, while inventories rose to 7.3 months of supply from 6.8 months in February. The Conference Board's consumer confidence index declined to to 104, its lowest level in eight months, from 108.2. "The housing downturn is now weighing increasingly heavily on the U.S. economy," said Mark Zandi, chief economist at Moody's Economy.com. It is "starting to have an impact on consumers' psyche and also their spending. The second quarter is going to be no better than the first.'' The yield on the 10-year Treasury note fell to 4.61% from 4.64% yesterday, while the dollar fell 0.3% against the euro to $1.3621.
Sources: Existing Home Sales [NAR .pdf], Consumer Confidence Press Release, Wall Street Journal, Bloomberg, TheStreet.com
Commentary: Investing in Real Estate: REITs and Your Home • Even The NAR Expects Further Housing Price Drops • NAR Says 2007 Will Be First Home Price Drop Since Great Depression • Anderson Report: More Housing Carnage to Come, but No Recession
Stocks/ETFs to watch: Centex (CTX), Ryland (NYSE:RYL), Equity Residential (NYSE:EQR), Vornado Realty Trust (NYSE:VNO), Simon Property Group (NYSE:SPG). ETFs: iShares Cohen and Steers Realty Majors Index (NYSEARCA:ICF) and the Dow Jones Wilshire REIT Index (NYSEARCA:RWR)
SEC Charges Apple's Ex-Counsel and Ex-CFO with Options Backdating; Ex-CFO Fires Back at Jobs
Several new developments in the options backdating scandal at Apple Inc. have occurred simultaneously: the SEC has declined to sanction Apple because of its "swift, extensive, and extraordinary cooperation" with the investigation; it has filed charges against Apple's former General Counsel Nancy Heinen; it filed and immediately settled a suit with Apple's former CFO Fred Anderson; and Anderson issued a statement claiming he warned CEO Steve Jobs in 2001 that Apple would have to take a charge for its backdated option grants -- a charge it did not take. Apple has acknowledged backdating 6,428 option grants between 1997 and 2002, including one to Jobs. Anderson claims Jobs misled him about board approval of backdated options and ignored his advice to take the accounting charge, allegations that could swing regulatory attention back toward Jobs. Anderson's settlement with the SEC requires him to pay $3.5 million in "disgorgement" of options profits plus a $150,000 penalty. The SEC is charging Heinen with active participation in the backdating, to the extent of fabricating minutes of fictional board meetings, lying to auditors and violating the antifraud provisions of securities regulations. Her actions, it is alleged, led the company to underreport its expenses by almost $40 million.
Sources: SEC Press release, Wall Street Journal (I, II), Bloomberg, TheStreet.com
Commentary: Steve Jobs Steers Clear of SEC Options Backdating Probe • Polishing The Apple: Steve Jobs and The Options Affair • Feds Visit Steve Jobs At Apple HQ In Continuing Options Probe
Stocks/ETFs to watch: Apple, Inc. (NASDAQ:AAPL). Competitors: Microsoft Corp. (NASDAQ:MSFT), Verizon Communications Inc. (NYSE:VZ), Sprint Nextel Corp (NYSE:S), Motorola Inc. (MOT), Research In Motion Limited (RIMM). ETFs: Internet Architecture HOLDRs (NYSE:IAH), Vanguard Information Technology ETF (NYSEARCA:VGT), Ultra QQQ ProShares (NYSEARCA:QLD), iShares S&P Global Technology (NYSEARCA:IXN)
Conference call transcripts: F1Q07 (Qtr End 12/30/06
Sun Swings to Profit but Misses on Sales, Guidance -- Shares Drop 6.5%
Sun Microsystems swung to a profit in its fiscal Q3, but a small sales gain fell short of analyst forecasts; shares fell over 6.5% in after-hours trading. Net income was $67 million ($0.02/share) vs. a loss off $217 million ($0.06/share) last year. Sales rose 3% to $3.28 billion, less than the $3.42 billion analysts expected. For Q4, Sun said it expects a revenue increase of 15-18%, short of analyst estimates that sales would grow by 22%. It was Sun's second profitable quarter after losing over $5 billion through the 2006 fiscal year. Sun sold $1.5 billion of its computer systems, a 2% increase over last year, but 8% lower than the previous quarter. The company said it appears customers held back on server and storage purchases in anticipation of higher-performance products announced by Sun and Fujitsu -- and that it didn't seem to be losing business to competitors. CEO Jonathan Schwartz: "As we hinted (in the previous quarter), we expected the quarter would be challenging, and in fact it was."
Sources: F3Q07 Earnings Call Transcript, CNET News, AP, MarketWatch
Commentary: Will Sun Microsystems Shine Again? • Sun Wants "To Teach The Customer To Fish" • Sun: Too Much Risk, Too Little Reward
Stocks/ETFs to watch: Sun Microsystems Inc. (SUNW). Competitors: International Business Machines Corp. (NYSE:IBM), Hewlett-Packard Co. (NYSE:HPQ), Dell Inc. (NASDAQ:DELL), EMC Corp. (NYSE:EMC), Silicon Graphics Inc. (SGIC), Oracle Corp. (NYSE:ORCL). ETFs: HOLDRS Internet Architecture (IAH)
Vonage Wins Stay of Injunction, May Continue Pursuing New Customers; Shares Gain 29%
Vonage finally has some news it can smile about: after a court ruling last month that the VoIP telecom startup had infringed on three patents held by Verizon, and a judge in the case issued an injunction barring it from signing up new customers to its service, the U.S. Court of Appeals for the Federal Circuit issued Vonage a stay of the previous court's injunction, allowing it to continue pursuing new customers. The news sent Vonage's shares higher by nearly 29%, for a gain of $0.83 yesterday, to a closing price of $3.72. Still the company continues to be riddled by uncertainty about its future, as well as by increased competition from cable providers offering customers internet phone services. Even with yesterday's gains, Vonage shares are down 78% since their June 2006 IPO. A Vonage spokeswoman reassured investors yesterday, saying that while the company fights the court's original ruling, it is back to “business as usual."
Sources: Wall Street Journal, MarketWatch, TheStreet.com
Commentary: Vonage Wins Permanent Stay On Order Barring New Customers • Verizon/Vonage Patent Infringement Suit: Does 3Com Actually Own the Deed? • Competition, Lawsuits, Failing Strategies - Is Vonage a Sinking Ship?
Stocks/ETFs to watch: Vonage Holdings Corp. (NYSE:VG), Verizon Communications Inc. (VZ).Competitors: Sprint Nextel Corp. (S), Qwest Communications International Inc. (NYSE:Q), AT&T Inc. (NYSE:T), Charter Communications (NASDAQ:CHTR), Comcast (NASDAQ:CMCSA). ETFs: iShares Dow Jones U.S. Telecom Sector Index ETF (NYSEARCA:IYZ), Broadband HOLDRS (NYSE:BDH), Vanguard Telecom Services ETF (NYSEARCA:VOX)
IBM and MySQL Join Forces -- Reuters
IBM plans to join forces with rival MySQL, according to a report in Reuters. They will announce Wednesday morning an agreement to develop software that makes MySQL's open source database software compatible with programs that run IBM's System i business computers, including IBM's i5 operating system DB2 database. IBM will also sell MySQL's service products. Privately held MySQL makes its money by selling service agreements for tech support and maintenance of its open source programs. IBM and MySQL are generally considered competitors, but IBM says it realized some customers want to be able to run both companies' software, hence the partnership. IBM's DB2 is normally used for large databases in companies like banks, while MySQL is often used to run web-based database applications.
Commentary: Red Hat, MySQL : From Best Friends to Foes? • IBM and Yahoo: A Look At Post-Earnings Performance • IBM and Yahoo: A Look At Post-Earnings Performance
Stocks/ETFs to watch: International Business Machines Corp. (IBM). Competitors: Microsoft Corp. (MSFT), Oracle Corp. (ORCL), SAP AG ADR (NYSE:SAP). ETFs: iShares Goldman Sachs Software Index Fund (NYSEARCA:IGV), Software HOLDRS Trust ETF (NYSE:SWH), PowerShares Dynamic Software (NYSEARCA:PSJ)
Conference call transcript: IBM Q1 2007 Earnings Call Transcript
IBM Steps Up Dividend, Buyback Program -- Shares Up 3.5%
IBM announced Tuesday it is expanding its stock-buyback program by $15 billion, potentially reducing outstanding shares by 10%, and increasing its dividend from $0.30 to $0.40 a share. IBM said that as a result of the share repurchase, 2007 EPS growth will be 12%-14%, 1%-3% higher than previously expected. Treasurer Jesse Greene said IBM has been "very underleveraged" with only $700 million in core debt, and $10.8 billion in cash. He would not disclose how much new debt the company would take on to fund the buyback. Moody's and Standard & Poor's said the plan would not affect IBM's debt ratings, but Fitch Ratings placed IBM on Rating Watch Negative following the announcement. CEO Samuel J. Palmisano said the moves "underscore the strength of IBM's business model and our strategy" saying its fiscal strength, "gives us significant financial flexibility to use our capital to drive growth through investments in acquisitions and capital expenditures, and to increase returns to shareholders through dividends and stock repurchase." The company said it may complete a substantial portion of the repurchases during the next several months. Shares rose $3.28 (3.5%) to close at $98.49.
Sources: Press release, Fitch press release, Wall Street Journal, TheStreet.com
Commentary: Buying Amazon Could Bring IBM New Opportunities • Weak Corporate Spending Spells Trouble for Tech Stocks - Barron's • How's Business? Answers from Technology Conference Calls
Stocks/ETFs to watch: International Business Machines Corp. (IBM)
Conference call transcript: IBM Q1 2007 Earnings Call Transcript
Amazon.com Beats and Raises, Sending Shares Flying
Amazon.com reported strong first quarter earnings Tuesday after the bell, beating Wall Street's expectations and sending shares higher by nearly 13% in after-hours trading. Amazon also raised its full-year sales guidance to reflect the strength of its recent quarter and the expectation of continued earnings strength going forward. First-quarter net income more than doubled on improved electronics and clothing sales, as well as a lower tax rate, to $111 million, good for EPS of $0.26; sales jumped 32% to $3.02 billion. Consensus estimates were for EPS of $0.15 on sales of $2.92 billion. Amazon issued guidance that was to the Street's liking: revenue in the range of $2.7-$2.85 billion for the next quarter, annual sales of $13.4-$14 billion, and an operating income projection for the year of between $463 and $593 million. Analysts had been projecting revenue of $2.69 billion for Q2 and $13.37 billion for the year. The guidance given by Amazon assumes an annual growth rate of 25%-31%, slightly higher than the range predicted by analysts. The latest quarter saw a 12% increase in the number of items purchased versus the prior year period, as well as a 5% increase in traffic to its sites. Shares rose to $50.47, up $5.72 (12.78%) in after-hours trading.
Sources: Amazon.com Q1 2007 Earnings Call Transcript, Press Release, Wall Street Journal, Bloomberg, TheStreet.com, MarketWatch,
Commentary: Amazon.com: Long Term Growth In Web Services Ahead • Amazon's Ad Program Could Augment Revenue Growth • 12 Reasons for Amazon.com to Rise Substantially This Year
Stocks/ETFs to watch: Amazon.com, Inc. (NASDAQ:AMZN). Competitors: Barnes & Noble Inc. (NYSE:BKS), eBay Inc. (NASDAQ:EBAY). ETFs: Internet HOLDRs (NYSE:HHH), First Trust Dow Jones Internet Index (NYSEARCA:FDN)
Google/China Telecom Form Online Ad Alliance
Google Inc. signed an agreement with China Telecom to sell online advertising on 400 of its websites. The deal gives Google access to China Telecom's network of websites that provide local business directories and other services. China Telecom boasts a total of 30.5 million broadband users. The companies will share revenues from the online ads; financial terms were not given. This is the third partnership Google has formed with a Chinese carrier over the past year as it seeks to gain traction in the world's number two internet market; Baidu.com's market share of 58% in Q4 2006 was more than triple Google's 17%. Credit Suisse Group estimates online ad sales in China may hit $3.1 billion by 2011, seven times 2005's $420 million figure. Google also said today it is working with Intel Corp. to make it easier for chip resellers and computer makers to purchase online advertising. Internet analyst Foo Xinghua: "This is a big win for Google because Microsoft and Baidu both wanted this agreement with China Telecom... China Telecom likely picked Google because they have better technology for Web ads."
Sources: Shanghai Daily, Bloomberg
Commentary: Amazon/eBay, Yahoo/Google: Internet Trading Pairs With Good Potential • Setting the Record Straight: Baidu is No Google • Online Campaigns: The New Way Marketers Can Reach Out to Chinese Consumers
Stocks/ETFs to watch: Google Inc. (NASDAQ:GOOG), China Telecom Corp. Ltd. (NYSE:CHA), Intel Corp. (NASDAQ:INTC), Baidu.com Inc. (NASDAQ:BIDU), Microsoft Corp. (MSFT). ETFs: iShares Trust FTSE-Xinhua China 25 Index Fund (NYSEARCA:FXI), PowerShares Golden Dragon Halter USX China Portfolio (NYSEARCA:PGJ), Internet HOLDRS (HHH)
McClatchy Posts Steep Profit Drop; Misses Estimates
Shares of newspaper publisher McClatchy Company fell to a seven-year low yesterday after the company posted a sharp drop in Q1 net income on slumping classified print ads. Revenue grew on last year's acquisition of 20 newspapers from Knight-Ridder. Q1 net profit came in at $9 million ($0.11/share), a 67% drop from $27.7 million ($0.59/share) in the year-ago quarter. Excluding items, the company would have had EPS of $0.18. Revenue rose to $566.6 million from $194.5 million. Analysts were expecting an average EPS of $0.27 on $564 million in revenue, although estimates varied widely. Ad revenue dropped 5.3% from last year to $477 million in Q1. All three main categories of classifieds -- automotive, real estate and employment -- suffered double-digit percentage declines. Internet revenue grew over 5% in the quarter, but was insufficient to compensate for poor print ad performance. Last week, the company joined a consortium of papers in an online ad partnership with Yahoo. McClatchy's shares lost 3% after the report to close at $30.55.
Sources: Conference call transcripts: Q1 2007, Wall Street Journal, Chron.com, Reuters, Bloomberg
Commentary: Yahoo Adds McClatchy to Ad Partnership • Why Print Journalism Will Never Really Die • Print Media: Less Predictable Revenue Doesn't Mean It's Over
Stocks/ETFs to watch: The McClatchy Company (NYSE:MNI). Competitors: Gannett Co., Inc. (NYSE:GCI), Tribune Co. (TRB), The New York Times Company (NYSE:NYT). ETFs: PowerShares Dynamic Media Portfolio ETF (NYSEARCA:PBS)
Reuters Posts Revenue Beat but Sales Drop on Weak U.S. Dollar
Reuters Group posted a forecast-beating 6.5% rise in Q1 revenue, but said actual revenue fell 1.1% after accounting for currency fluctuations including a weak U.S. dollar. Actual revenue fell to €626 million from €633 million a year ago, during which the dollar fell 12% against the pound; forecasts had been for revenue of €623-€626. Revenue at its sales and trading unit, which accounts for over 65% of its income, was down 4%. Analysts were impressed with the underlying growth, but said they expected to shave future forecasts to account for further currency fluctuations. Reuters global market share for financial information in 2006 was 27%, a 'small improvement' from 2005. CEO Tom Glocer said the company was 'well positioned' to follow through on its full-year expectations for organic revenue growth of 6%+. Shares were up 0.7% in London trading, and have gained 8.7% in 2007.
Sources: Reuters, Bloomberg
Commentary: Reuters Group: ValueAct Capital Raises Stake • Reuters Invests in Pluck, Commits To Blogs • Reuters, CME Team Up To Open Spot Currency Exchange
Stocks/ETFs to watch: Reuters Group PLC (RTRSY). Competitors: Dow Jones & Company Inc. (DJ), THOMSON CORP (TOC), Track Data Corp. (OTCPK:TRAC), Interactive Data Corp. (IDC), Morningstar Inc. (NASDAQ:MORN)
Coca-Cola in Talks to Acquire Stake in Glaceau
Coca-Cola Co. is in serious negotiations to acquire part or all of Vitaminwater manufacturer Glaceau. A deal is not thought to be imminent, although Coke might choose to announce a transaction at or just before its North American bottlers' meeting in Atlanta in May. According to the Wall Street Journal, New York-based Glaceau could be worth more than $2 billion. Thirty percent of Glaceau is owned by the Indian conglomerate Tata Group, which purchased its stake last summer for $677 million. An acquisition of Glaceau could help Coke reverse sales declines and build up its nonsoda offerings. The purchase of a stake would follow Coke's acquisition in February of Fuze Beverage LLC, a manufacturer of energy, tea and vitamin drinks. Coke has also held discussions with Arizona Beverage Co. about a possible acquisition of Arizona Teas. Enhanced water is rapidly growing in popularity: in 2006, Glaceau's volume more than doubled. The enhanced water segment is forecast to account for 22% of North American beverage revenue over the next five years.
Sources: Wall Street Journal, MarketWatch, Reuters
Commentary: Coke, Pepsi Losing Market Share • Questioning Sell-Side Consensus On Coca-Cola • Outlooks for Select S&P Dividend Aristocrats
Stocks/ETFs to watch: The CocaCola Company (NYSE:KO). Competitors: Cadbury Schweppes plc (NYSE:CSG), Pepsico, Inc. (NYSE:PEP). ETFs: Vanguard Consumer Staples ETF (NYSEARCA:VDC), Consumer Staples Select Sector SPDR (NYSEARCA:XLP), PowerShares FTSE RAFI Consumer Goods (PRFG)
Conference call transcripts: Q1 2007
ABN Amro Takeover: Rival Trio Tops Barclays with $98.5 Billion Bid
ABN Amro's shares rose up to 6.3% on news that the consortium battling Barclays for the Dutch bank -- Royal Bank of Scotland [RBS], Banco Santander Central Hispano and Fortis NV -- has submitted an offer for ABN of $98.5 billion (€72.2 billion, or €39 per share), besting the $91 billion offer from Barclays agreed to on April 23 by ABN's management. The consortium's bid consists of 70% cash and 30% RBS shares, giving it an appeal to shareholders over Barclays' all-share offer. The bid is contingent on the granting by ABN of due diligence and the assurance that LaSalle Bank, which ABN has announced it is selling to Bank of America, will instead stay within the ABN group. The terms of the LaSalle sale permit a rival bidder to offer a higher price within 14 days. Bank of America will have the right to match any new bid, and if it chooses not to, ABN will pay it a breakup fee of $200 million. Activist investor TCI Fund Management is demanding that the ABN board "recommend the Royal Bank consortium offer...and terminate the LaSalle Bank sale" at its annual board meeting tomorrow. The consortium intends to break up ABN, a prospect favored by TCI and one ABN CEO Rijkman Groenink is trying to avoid.
Sources: Bloomberg, Reuters (I, II), Forbes
Commentary: ABN-Barclays Merger: Rival Bidders and Investors Query LaSalle Sale • ABN Amro Agrees to Sell Itself to Barclays for $91 Billion • Trio of European Banks Eyes ABN Amro
Stocks/ETFs to watch: ABN Amro Holding N.V. (ABN), Barclays PLC (NYSE:BCS), Royal Bank of Scotland Group plc [ADR] (RBSPY), Fortis NV [ADR] (FORSY), Bank of America Corp. (NYSE:BAC). Competitors: HSBC Holdings plc ADR (HBC), Deutsche Bank AG (NYSE:DB), UBS AG (NYSE:UBS). ETFs: First Trust Morningstar Div Leaders Idx (NYSEARCA:FDL), PowerShares Intl Dividend Achievers (NYSEARCA:PID), iShares MSCI Netherlands Index (NYSEARCA:EWN)
Western Union Posts 12% Drop in Q1 Earnings; Cuts Revenue Forecast
Shares of payment transfer company Western Union fell 4.5% in AH trading to $21.90 yesterday after the company posted a drop in Q1 profit on overhead and interest expenses from its spin-off from First Data Corporation. Q1 net income fell to $193.2 million ($0.25/share) from $219.8 million ($0.29/share) a year earlier. The EPS result met analyst expectations. Revenue was up 8% from a year ago to $1.13 billion. The quarterly results reflect $15 million of expenses to add staff and replace services that had been provided by First Data. International transactions rose 21%, with India showing growth of at least 90% in each of the past six quarters, according to CEO Christina Gold. The company is forecasting full-year EPS earnings of $1.07-1.11 and has lowered its 2007 revenue growth forecast to 10-11% from 11-13%.
Sources: MoneyCentral,Reuters, Forbes, Bloomberg, MarketWatch
Commentary: Oakmark Funds' Bill Nygren: Buys, Sells, Portfolio • First Data Corp. Insecure Following Western Union Spinoff • The Long Case for Western Union: Like Wiring Money Into Your Portfolio
Stocks/ETFs to watch: The Western Union Co. (NYSE:WU), First Data Corp. (FDC). Competitors: Checkfree Corp. (CKFR), Moneygram International Inc. (NASDAQ:MGI). ETFs: First Trust IPOX-100 Index (NYSEARCA:FPX)
Wal-Mart Expands In-Store Medical Clinic Program
Wal-Mart Stores Inc. said on Tuesday it will expand its 2005 program of leasing space to local hospitals and other organizations to open 400 in-store, independent health clinics by 2010, with possibly 2,000 by 2015. The clinics will offer standard-priced, basic services like flu shots and cholesterol screening as they do in the 76 clinics currently operating in 12 states. CEO Lee Scott says the move will boost sales and draw customers into the stores, and also help solve America's healthcare crisis. While detractors color this an attempt to burnish Wal-Mart's image from low health coverage and low wage scandals, Wal-Mart counters that it is part of the "Better Health Care Together" coalition and says its $4 prescription program has saved customers $290 million on drugs since the program started last year. It now accounts for 35% of all Wal-Mart prescriptions, and 30% of those customers are uninsured. Target and Walgreens matched the prescription program, and CVS opened MinuteClinic's, continuing the general 'retailization-of-medicine' trend. Wal-Mart shares fell 0.5% to $48.69 yesterday.
Sources: Press release, MarketWatch, Reuters, Bloomberg, UPI, Motley Fool, 24/7 WallSt.
Commentary: Berkshire Hathaway: Notable 13F Changes • New York to Wal-Mart: Drop Dead • The Forbes Global 2000: The World's Most Important Companies
Stocks/ETFs to watch: Wal-Mart (NYSE:WMT), Walgreen Co. (WAG), Target Corp. (NYSE:TGT), CVS Caremark Corp. (NYSE:CVS)
Conference call transcripts: Wal-Mart F4Q07 Earnings Call Transcript
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