Wall Street Breakfast

by: SA Editors
SA Editors
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Homebuilder Centex Swings to Q4 Loss

U.S. homebuilder Centex Corp. reported a wider-than-expected fiscal Q4 loss Monday as the housing downturn continues to hit revenue. The company posted a loss from continuing operations of $22.3 million (-$0.18/share) versus its earlier forecast of break-even. Analysts were expecting a loss of -$0.03. Last year the company earned $369 million ($2.86) in Q4. The results reflect land impairment charges of $202 million, or $1.01 a share. They do not, however, reflect earnings from discontinued operations of $221.1 million related to the company's construction services business, sold off in March, and some home equity operations. Including those profits, the company posted net income of $198.9 million ($1.60/share), down from $391.8 million ($3.04) a year earlier. Revenue dropped 11% in the quarter to $3.67 billion against analyst expectations of $3.34 billion, while closings fell 14% in what the company calls "one of the most difficult markets in 25 years." Shares dropped 2.7% yesterday and were down another 1% in AH trading to $44.77.
Sources: Press release, MarketWatch, TheStreet.com, Reuters
Commentary: Contrarian Investors Seek Value in HousingTen Stock Picks From Barbara Marcin of Gamco InvestorsIs It Time to Buy the Homebuilders? 13 Stocks to Consider
Stocks/ETFs to watch: Centex Corp. (CTX). Competitors: Pulte Homes Inc. (NYSE:PHM), DR Horton Inc. (NYSE:DHI), Lennar Corp. (NYSE:LEN). ETFs: iShares Dow Jones US Home Construction (NYSEARCA:ITB)


Supreme Court Sides with Innovators Over Patent Holders

The U.S. Supreme Court has sided with technology companies in two rulings that limit the rights of those owning or seeking patents. In one ruling, the Court voted 7-1 that Microsoft does not owe damages to AT&T for copies of the Windows OS installed on computers abroad. AT&T claimed that Microsoft had infringed a company patent on digital voice transmissions. In the other ruling, the Court unanimously agreed to toughen the requirement that patent seekers show their products to be genuinely innovative and not merely "obvious." In the Microsoft case, the Court overturned the Federal Appeals Court's support for AT&T's claim that U.S. patent rights extend beyond American borders. "If AT&T desires to prevent copying in foreign countries, its remedy today lies in obtaining and enforcing foreign patents," Justice Ruth Bader Ginsburg wrote. Microsoft will use the ruling to ask the courts to cut the damages it owes from two other patent cases, including a record $1.52 billion verdict in a case won by Alcatel-Lucent. "It's a great ruling that will reduce substantially our exposure and potential exposure in these patent cases," said Andy Culbert, Microsoft's chief patent counsel. "We have 45 pending cases, and I would say this case affects at least 43 of them."
Sources: U.S. Supreme Court's decision on Microsoft v. AT&T [pdf], Wall Street Journal, Red Herring, Bloomberg, TMCnet
Commentary: Microsoft Gets Boost in Alcatel Patent BattleAlcatel-Lucent Wins $1.52 Billion Patent Judgment Against MicrosoftKeeping Software Free - One Man's Battle Against Software Patents
Stocks/ETFs to watch: Microsoft Corp. (NASDAQ:MSFT), AT&T Inc. (NYSE:T). Competitors: Google Inc. (NASDAQ:GOOG), International Business Machines Corp. (NYSE:IBM), Sprint Nextel Corp. (NYSE:S), Verizon Communications Inc. (NYSE:VZ). ETFs: iShares Goldman Sachs Technology (NYSEARCA:IGM), iShares Goldman Sachs Software (NYSEARCA:IGV), First Trust Morningstar Div Leaders Idx (NYSEARCA:FDL), WisdomTree High-Yielding Equity (NYSEARCA:DHS)
Conference call transcripts: Microsoft F3Q07 (Qtr End 3/31/07), AT&T Q1 2007

Icahn to Publish Open Letter to Motorola Shareholders in Quest for Board Seat -- WSJ

Activist investor Carl Icahn is publishing an open letter to Motorola shareholders as a full-page newspaper advertisement on Tuesday, according to the Wall Street Journal. The letter calls the company "troubled" and gets personal for the first time about CEO Ed Zander, whose comments Icahn calls "something straight out of Alice in Wonderland." This is the first time Icahn has launched a direct attack on Zander since he started accumulating Motorola shares in January. Shareholders will vote on Icahn's directorship at the annual meeting on May 7. Icahn's letter dismissively cites a reference to Zander saying, "I love my job. I hate my customers," and claims the company has suffered "a critical failure in oversight and leadership." At the end of January, Icahn demanded the company use its cash to buy back stock, but after Motorola accelerated its buyback program, Icahn shifted his attention to "operational problems." Motorola's board opposes Icahn's election, calling him insufficiently knowledgeable about the company's business.
Sources: Wall Street Journal, Reuters, MarketWatch
Commentary: Proxy Firms Divided on Icahn Board Seat at MotorolaIcahn Pushes for Motorola Board Seat; Urges Postponement of BuybackShareholder Activism At Motorola: The Power Of Free Markets
Stocks/ETFs to watch: Motorola, Inc. (MOT). Competitors: LM Ericsson Telephone Co. (NASDAQ:ERIC), Nokia Corp. (NYSE:NOK). ETFs: Broadband HOLDRs (NYSE:BDH), Wireless HOLDRs (NYSEARCA:WMH), PowerShares FTSE RAFI Telecom & Tech (PRFQ)
Conference call transcripts: Q1 2007


Google Gets Personal with 'iGoogle'

Google's personalized home page now goes by a new name: "iGoogle". It was the company's fastest growing product in 2006, according to Marissa Mayer, Google's VP of search products and user experience, but still trails far behind Yahoo's MyYahoo, which has 50 million monthly unique visitors to iGoogle's 7 million monthly uniques. iGoogle Specifically, Google is pushing its Gadget Maker, in which users either can create their own content widgets (without having to know HTML), or customize their Google home page using some 25,000 existing gadgets. In addition, iGoogle is going global, reportedly reaching 26 languages across at least 40 countries. iGoogle currently does not have ads like those found on Google's search results pages. Mayer of Google mentioned the company's desire to make web searching easier and more personalized in the future - Google placed a “personalized home” link on their main home page, which is expected to drive significant numbers of new users to the site. The "ig" in the web address for iGoogle (http://www.google.com/ig) now makes sense after nearly two years, to the "tens of millions" of users whom Google says have already created personal pages.
Sources: Associated Press, CNET News.com, TechCrunch
Commentary: Google Still Ahead in Search Share, but MSN Makes Small GainGoogle’s News Search Gets Even SmarterInteractive Q&A: Katie Jacobs Stanton, Product Manager of Google Finance
Stocks/ETFs to watch: Google, Inc. (GOOG). Competitors: Microsoft Corp. (MSFT), Yahoo! Inc. (NASDAQ:YHOO), IAC/InterActiveCorp (IACI), Time Warner Inc. (NYSE:TWX). ETFs: First Trust Dow Jones Internet Index (NYSEARCA:FDN), Internet HOLDRs (NYSE:HHH), First Trust IPOX-100 Index (NYSEARCA:FPX)
Conference call transcripts: Google Q1'07, Yahoo! Q1'07, Microsoft F3Q07
Related: iGoogle, iGoogle Help

Yahoo and Comcast Ink Multi-year Display and Video Advertising Deal

Comcast Interactive Media, a division of cable provider Comcast, has signed a multi-year partnership with Yahoo in which Yahoo will oversee advertising services on Comcast.net. Yahoo's advertising organization will serve as the primary sales channel for Comcast.net display and video advertising. Financial terms weren't disclosed. The agreement compliments Yahoo’s recently forged partnerships with eBay, Viacom and a consortium of newspapers, as Yahoo looks to strengthen its position in display advertising. Yahoo also announced Monday it agreed to buy advertising exchange Right Media for $680 million; Google recently announced it would buyout DoubleClick, a provider of advertising services that also has an advertising exchange, for $3.1 billion. In the near future, the companies will collaborate to create and market new sponsorships and custom advertising packages, supported by Yahoo's platform. Comcast.net will unveil a new site design later this year, integrating Yahoo's ad services as a central facet of the site. Comcast's other properties were not included in the deal. According to a joint press release issued by the companies, Comcast.net boasts more than 2.5 billion page views, 80 million videos views and 15 million unique visitors a month.
Sources: Press release, Reuters, TheStreet.com, MarketWatch, Red Herring, Searchengineland.com
Commentary: Yahoo: The Overvalued, But Core, Internet HoldingThe Future Of Image Search Is In Social SearchMarket Mispricing Comcast, Charter Communications
Stocks/ETFs to watch: Yahoo (YHOO), Comcast (NASDAQ:CMCSA)Competitors: Google (GOOG), Time Warner Cable (TWC).ETFs: Internet HOLDRS (HHH), First Tr DJ Internet Index Fd (FDN), Consumer Discretionary SPDR (NYSEARCA:XLY)
Related: Comcast.net

Google Expresses Confidence It Will Win Viacom Youtube Suit

Google hit back at Viacom and its $1 billion dollar lawsuit against video sharing site Youtube.com Monday, saying "We feel pretty confident about the case and are ready to take it to court." Managing counsel for litigation at Google, Michael Kwun added, “We are not going to let this lawsuit distract us.” Viacom alleges Google has knowingly infringed on its copyrighted material with Youtube. Google filed a response to Viacom's suit Monday in Federal District Court in Manhattan in which it outlined the likely course of its defense: the so called 'safe harbor' provisions of the Digital Millennium Copyright Act, enacted in 1998, which ruled a sites’ owners are not liable for copyrighted material uploaded by others as long as they promptly remove the material when asked to do so by the copyright owner. Viacom responded that Google's filing "ignores the most important fact of the suit, which is that YouTube does not qualify for safe harbor protection under the D.M.C.A. It is obvious that YouTube has knowledge of infringing material on their site, and they are profiting from it.” The first case management conference is scheduled for July 27; Google has requested a jury trial.
Sources: Wall Street Journal, New York Times, L.A. Times, Business Week
Commentary: Viacom Needs to Team Up With Google, Rather Than Sue ItYouTube: Not the Killer Online Video App You Thought It WasGoogle Gets Personal with 'iGoogle'
Stocks/ETFs to watch: Google (GOOG), Viacom (NYSE:VIA). Competitors: Yahoo (YHOO), Time Warner (TWX). ETFs: PowerShares Dynamic Media Portfol. (NYSEARCA:PBS), Consumer Discretionary SPDR (XLY), First Tr DJ Internet Index Fd (FDN)
Conference call transcripts: Google Q1 2007 Earnings Call Transcript
Related: Youtube.com


Daily Newspaper Circulation Drops 2.1%

Weekly circulation at U.S. dailies has dropped 2.1% over the past six months, according to the Audit Bureau of Circulations. Sunday papers saw a 3.1% drop in circulation over the same period. The figures reflect 745 of the country's 1,400 or so daily newspapers. The New York Post bucked the trend with a 7.6% rise, followed by the New York Daily News with a 1.4% gain. The Dallas Morning News saw a 14.3% decline, due in part to a circulation cutback to within about 100 miles of Dallas. Newsday saw a 6.9% decline. Newspaper circulation has been dropping steadily as news consumers have turned increasingly to other media, particularly round-the-clock cable TV news and the Internet. Still, the 2.1% decline is less severe than the 2.8% drop in the six months that preceded it or the 2.5% decline in the year-ago period. Though consumers appear to be losing interest in physical newspapers, they are visiting newspaper websites more often: Nielsen/NetRatings data indicate a 5.3% increase in site visits in Q1 2007.
Sources: Wall Street Journal, New York Times, MoneyCentral
Commentary: Why Print Journalism Will Never Really DiePrint Media: Less Predictable Revenue Doesn't Mean It's OverFewer Newspapers With Lower Circulation Is the Way of the Future
Stocks/ETFs to watch: The New York Times Company (NYSE:NYT), Washington Post Co. (WPO), Dow Jones & Company Inc. (DJ), Gannett Co. Inc. (NYSE:GCI), The McClatchy Company (NYSE:MNI), The Tribune Co. (TRB), Belo Corp. (NYSE:BLC)
Conference call transcripts: The McClatchy Company Q1 2007, The New York Times Q1 2007, Dow Jones Q1 2007, Gannett Q1 2007


Circuit City Cuts Guidance on Weak TV Sales, Shares Tumble

Circuit City announced it restated earnings for the past two quarters and revised its guidance for fiscal 2008. The restatement of earnings took a backseat to news of "substantially below-plan sales" of large flat panel and projection TVs in April, resulting in a larger forecast loss from continuing operations before taxes of $80 million - $90m for Q1'08 (ending in May). Circuit-City-CC-chart-04-30-07 It withdrew its previous guidance of an H1 loss of $40m - $50m with a "strong recovery in the second half." Circuit City said if business trends improve and restructuring efforts are effective, then it expects FY'08 earnings from continuing operations (before taxes) as a percentage of sales at the low end of its prior forecast of 1.4% to 1.8%. Analysts cited in coverage by Reuters report Circuit City's problems are company-specific. Shares of Circuit City lost 2.7% to $17.45 in normal trading and dropped 8% to $16.05 in the after-hours on volume of almost 1.07 million.
Sources: Press release, Reuters
Commentary: Circuit City Short Circuits On Weak Flat TV SalesKey Takeaways From Best Buy, Circuit City Earnings: Vista's Selling Well, TVs Are CheapCircuit City Calls Its FQ4 Earnings 'Disappointing'
Stocks/ETFs to watch: Circuit City Stores Inc. (NYSE:CC). Competitors: Best Buy Co. Inc. (NYSE:BBY), RadioShack Corp. (NYSE:RSH), GameStop Corp. (NYSE:GME), Wal-Mart Stores Inc. (NYSE:WMT). ETFs: Consumer Discretionary SPDR (XLY), PowerShares Dynamic Consumer Discretionary (NASDAQ:PEZ), Vanguard Consumer Discretionary VIPERs (NYSEARCA:VCR)
Conference call transcripts: Circuit City F4Q07 (Qtr End 2/28/07), Best Buy F4Q07 (Qtr End 3/3/07)


Government Opens 48 Million Acres to Offshore Exploration

The Department of the Interior announced Monday a five-year plan to open 48 million acres of offshore land to seismic oil exploration. If reserves are found, two federal moratoria would have to be lifted before drilling could begin. Secretary of the Interior Dirk Kempthorne said yesterday the new areas, including waters in Alaska and the Gulf of Mexico (both pictured below), could produce up to 10 billion barrels of oil and 45 trillion cubic feet of natural gas over 40 years. Unless blocked by Congress, the program will begin leasing its 21 sites July 1. Paul N. Cicio, president of the Industrial Energy Consumers of America, called the plan "a good step" but added that more offshore production is needed as domestic natural gas supply is down 5.8% since 2001. The move garnered praise from the energy industry, though some said the move would barely tap vast undiscovered resources: Chevron Corp. called it a "positive move... even though the new areas are very small." New York Times says Royal Dutch Shell has been particularly eager to explore and develop the Alaska areas, and has hired a number of former government officials to help build popular support. Critics such as Maurice Hinchey (D-NY) called the plan "shortsighted," fearing it could wreak environmental havoc.
Sources: Department of Interior press release, Wall Street Journal, AP, New York Times
Commentary: Fiscal Irresponsibility in Washington: Using More Cents Than SenseU.S. to Raise Royalties on Gulf Oil and Gas LeasesFuel For Thought: Which Integrated Oil Company Should You Own?
Stocks/ETFs to watch: Royal Dutch Shell (NYSE:RDS.A), ExxonMobil Corp. (NYSE:XOM), ConocoPhillips (NYSE:COP), Chevron Corp. (NYSE:CVX). ETFs: SPDR Oil & Gas Exploration & Production ETF (NYSEARCA:XOP), iShares Dow Jones U.S. Oil & Gas Exploration/Production (NYSEARCA:IEO)


Deutsche Boerse to Acquire International Securities Exchange for $2.8 Billion

Deutsche Boerse, operator of the Frankfurt stock exchange, agreed Monday to purchase the International Securities Exchange [ISE] for $2.8 billion to create the world's biggest global derivatives marketplace. ISE shares leaped 46% to close at $66.69. The deal values the ISE at $67.50/share, a premium of almost 50% to the shares' Friday close of $45.72. Some analysts believe the rapid growth of options volume could entice other parties to bid for the ISE, including the Chicago Merc and NYSE Euronext. According to analyst Richard Herr, "NYSE has talked about wanting to be bigger in U.S. derivatives and ISE is certainly one of the more attractive properties...NYSE also has the currency to outbid the Deutsche Boerse group." Deutsche Boerse attempted last year to buy Euronext, which merged with the NYSE instead. Deutsche Boerse and the ISE claim the transaction will create $50 million in synergies and immediately contribute to Deutsche Boerse's EPS. Together, they will have a market cap of $20 billion. In related news, The Philadelphia Stock Exchange, the third-largest U.S. options market, has been approached by the NASDAQ and other suitors. "We are talking and have talked to a whole bunch of folks, and we are seriously looking at all our options,'' said Sandy Frucher, chairman of the exchange.
Sources: Wall Street Journal, Bloomberg, Reuters, MarketWatch
Commentary: ISE Exchange May Get $2.6 Billion Bid from Deutsche Boerse -- WSJInternational Securities Exchange Flies Under the M&A RadarA Look At Stock Exchange Stocks
Stocks/ETFs to watch: International Securities Exchange Holdings (ISE). Competitors: CBOT Holdings, Inc. (BOT), Chicago Mercantile Exchange Holdings (NASDAQ:CME), Nasdaq Stock Market Inc. (NASDAQ:NDAQ), NYSE Euronext (NYSE:NYX), IntercontinentalExchange Inc. (NYSE:ICE). ETFs: PowerShares Dynamic Mid Cap Growth (PWJ), iShares Dow Jones US Broker-Dealers (NYSEARCA:IAI), PowerShares Dynamic Aggressive Growth (NYSE:PGZ), KBW Capital Markets ETF (NYSEARCA:KCE)


MedImmune's Beat Quarter Sends Shares Higher

MedImmune Inc. reported that its 1Q07 profit more than tripled on increased sales of its respiratory drug Synagis.medi MedImmune posted a net profit of $160 million ($0.66/share), compared with EPS of just $0.18 a year ago. Sales were $574.8 million, up from $498 million last year. Analysts polled by Thomson Financial were looking for EPS of $0.57 on revenue of $553.5 million; Reuters consensus estimates projected EPS of $0.56. Worldwide sales of Synagis (palivizumab) grew 9% to $507 million, up from $463 million last year. MedImmune agreed last month to be bought by AstraZeneca for more than $15 billion. Shares climbed $0.82 (1.45%) to $57.50 after hours. MedImmune canceled its planned conference call because of the takeover plans.
Sources: Press Release, AP, MarketWatch, Reuters,
Commentary: AstraZeneca to Buy MedImmune for $15.6 BillionAstraZeneca's MedImmune Acquisition Should Receive Regulatory ApprovalValuing Sepracor Through Astra-Zeneca's MedImmune Goggles
Stocks/ETFs to watch: MedImmune, Inc. (MEDI), AstraZeneca (NYSE:AZN). Competitors: Amgen (NASDAQ:AMGN), Genentech, Inc. (Private:DNA). ETFs: iShares Dow Jones US Pharmaceutical Indx (NYSEARCA:IHE), Pharmaceutical HOLDRS (NYSEARCA:PPH), Vanguard Health Care ETF (NYSEARCA:VHT)
Conference call transcripts: MedImmune Q4 2006 Earnings Call Transcript
Related: MedImmune Investor Relations


U.S. Market: Has the Market Topped Out?
Housing: Housing Bubble and Real Estate Market Tracker
Long Idea: ValueClick: An Online Advertising Value Bet
Short Idea: Auto Storm Brewing: The Short Case for the Weakest Players
Internet: The Future Of Image Search Is In Social Search
Telecom: Sprint/Nextel: The Next Data Wireless Kings?
Networking: Nortel Shares Fall On Goldman Downgrade
Hardware: Rackable: New CEO Will Be Busy in Server/Storage Space
Chips: Is QLogic Corporation Looking For A Run?
Software: Cognos Incorporated: Vendor Rationalization Could Spark Buyout
Consumer Electronics: Why Buy a Bad Apple? Options Pricing is a Real Issue
Media: Jobs on Subscription Music: 'Customers Don't Seem Interested'
Healthcare: Haemonetics Corporation: Market Leader in Blood Recycling
Biotech: Waters Continues Its Growth
Retail: Stocks For Your Mom
Transport: AutoNation Shows Marked Improvement In Profit Per Employee
Gold: Forget Gold - What About Cobalt? Indium?
Energy: Five Mega Cap Picks for May: Oil is the Name of the Game
Financial: D.E. Shaw, Convergence and the Future of Institutional Mangement
Asia: Japan: Best and Worst Performing ADRs Last Week and YTD
ETFs: First Israel Fund Jumps 10% - Discount To NAV Closing
Hedge Funds: U.S. Official: Government Not the Hedge Fund Police
Small-Caps: Five Small Cap Picks for May
IPO Analysis: Is An Alternative Energy Bubble On the Horizon?
Sound Money Tips: Get Unbiased Online Fitness Help
Jim Cramer: Latest stock picks
Earnings Call Transcripts: Verizon Q1 2007FPL Group Q1 2007Kellogg Q1 2007FTD Group F3Q07Cameco Q1 2007Hilton Hotels Q1 2007Atheros Communications Q1 2007Intevac Q1 2007Vertex Pharmaceuticals Q1 2007

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