Dell Joins Microsoft in Attempt To Sell Novell's Suse Linux
Dell has agreed to buy Suse Linux enterprise server certificates from Microsoft, adding a hardware player to the deal Windows OS maker Microsoft and Suse Linux support provider Novell signed in November. The deal was essentially an arrangement between Microsoft and Novell that allows customer to combine the proprietary ('closed source') Windows operating system with the open source Linux system, for which Novell provides user support. Dell will set up a services and marketing program aimed at convincing companies which use open-source platforms to switch to Novell's Suse Linux offering. VP and general manager of global strategic alliances at Novell, Susan Heystee, believes "Dell's embrace of the Novell-Microsoft agreement reflects a growing market reality."
Sources: AP, Boston Globe, Reuters
Commentary: Microsoft's Steve Ballmer on the Dangers of Open Source Software • Seven Hits (and Misses) From Novell's BrainShare Event • In Recognition of New "Mixed" Software Environment, Microsoft To Work With Novell's Linux
Stocks/ETFs to watch: Novell, Inc. (NOVL), Microsoft (MSFT), Dell (DELL). Competitors: Red Hat (RHT), Hewlett-Packard (HPQ). ETFs: iShares Goldman Sachs Software Index (IGV), PowerShares Dynamic Software (PSJ)
Conference call transcripts: Novell F1Q07 (Qtr End 01/31/07) Earnings Call Transcript
Related: Suse Linux Online
Microsoft/Yahoo: Talks Not Current, Deal Would Face Obstacles -- WSJ
In response to Friday's New York Post article that Microsoft and Yahoo! were seriously considering a merger, the Wall Street Journal reported Sunday that while the companies did discuss a possible merger or other matchup "that would pair their respective strengths" a year ago, the discussions are not currently active. The companies, it says, may yet pursue "some other form of cooperation." People familiar with the situation say Microsoft's online unit is headed for a 'shake-up' after it has failed to gain search market share against rival Google. They say CEO Steve Ballmer's frustration with the unit is "palpable." One possibility, the Journal says, is a Microsoft/Yahoo team where Microsoft runs the technical end of things while Yahoo! staff oversees the consumer-oriented/content side. Microsoft, it says, could possibly spin its online unit into Yahoo in return for a Yahoo stake. But with Yahoo's recent signs of increasing momentum, it is likely top staff would resist any substantial form of combination.
Sources: Wall Street Journal
Commentary: Microsoft, Yahoo: It Will Take More Than a Merger to Compete With Google • Microsoft-Yahoo! Merger Wouldn't Vanquish Google • No Way Is Microsoft Going to Buy Yahoo For $50B • Microsoft/Yahoo: The Numbers Just Don't Add Up • Microsoft/Yahoo: Merger Out, Alliance In?
Stocks/ETFs to watch: Microsoft Corp. (MSFT), Yahoo! Inc. (YHOO), Google Inc. (GOOG). ETFs: Internet HOLDRs (HHH), First Trust Dow Jones Internet Index (FDN)
Major Dow Jones Shareholders Oppose News Corp. Bid
Two former Dow Jones executives, both of whom retain large holdings of company stock, have stated they oppose the $5 billion offer from Rupert Murdoch's News Corp. to take the company over. In a tartly phrased statement, James H. Ottaway Jr. said Murdoch's overriding concern for business and political interests would endanger the "unique news quality" of Dow Jones's publications, particularly the Wall Street Journal. Murdoch's New York Post, Ottaway wrote, "regularly runs biased news stories and headlines supporting [Murdoch's] friends, political candidates and public policies, and attacks people he personally opposes." A News Corp. spokesman dismissed Ottaway's charges as "based on tired misconceptions and clichés." Former chairman and CEO of Dow Jones Peter Kann also weighed in against the News Corp. bid. The controlling Bancroft family, the Ottaways and the Kanns together hold 57% of voting power. Many independent directors on the board are said to support the bid, not out of enthusiasm for Murdoch but because "it is hard to say no to that kind of a premium if you're a director," according to a person who has attended meetings. Murdoch's $60/share offer represents a 65% markup to the shares' close last Monday. In related news, Warren Buffett said at the annual meeting of Berkshire Hathaway yesterday that he believes the News Corp. offer might attract other bidders who want access to the "B value," or prestige, associated with the Wall Street Journal. "Rupert would even acknowledge that some part of his interest in the Wall Street Journal goes beyond economics," said Buffett.
Sources: Wall Street Journal, Reuters (I, II), MarketWatch (I, II), Bloomberg
Commentary: Dow Jones Takes No Action on News Corp. Bid; Murdoch Considers Next Tack • Michael Price on Murdoch, Dow Jones and the Washington Post • Dow Jones' Bancrofts Can't Have Their Cake and Eat It Too • Bancroft Family Will Vote Against News Corp. Bid
Stocks/ETFs to watch: Dow Jones & Company Inc. (DJ), News Corp. (NWS). Competitors: Gannett Co. Inc. (GCI), McClatchy Company (MNI), The New York Times Co. (NYT), Washington Post Co. (WPO), Lee Enterprises Inc. (LEE), Reuters Group plc (RTRSY), Pearson plc (PSO)
Conference call transcripts: Dow Jones Q1 2007
Thomson/Reuters Merger Would Face Shareholder Obstacle
Thomson Financial is in talks with Reuters regarding a takeover, valued at more than $15 billion and possibly topping $16b. Rumors of a deal, later acknowledged by Reuters as a "preliminary approach from a third party", hit newswires on Friday and sent Reuters shares soaring to a multi-year high. One potential obstacle for Thomson is Reuters' so-called "Founders Share", the right held by private Reuters Founders Share Co. to prevent any takeover. Thomson and Reuters would be a complementary fit, as Thomson is strong in U.S. data products, while Reuters is best known for its Europe and Asia region data. Data from Inside Market Data Reference shows Bloomberg controlled 33% of the global financial data and news market in 2006, followed by Reuters at 23% and Thomson at 11%. Some data clients are voicing concerns about a duopoly in the market data industry. ADRs of Reuters gained 27% to $74.76 on Friday, trading as high as $81.03 intra-day, reaching their highest levels since '01. Shares of Thomson fell 0.6% to $43.45.
Sources: FT.com, MarketWatch, The Wall Street Journal
Commentary: Reuters Merger Speculation: Thomson, News Corp Possible Suitors • Reuters Buyout By Thompson Underscores Changes in Media Landscape • Reuters Shares Fly on Takeout Approach
Stocks/ETFs to watch: Reuters Group plc (RTRSY), Thomson Corp. (TOC). Competitors: FactSet Research Systems (FDS), Dow Jones & Company Inc. (DJ), The New York Times Co. (NYT), News Corp. (NWS)
Darden Restaurants to Shut Down or Sell Smokey Bones Locations
Darden Restaurants, operator of several eateries including Red Lobster and Olive Garden, announced Saturday that it will close 56 of its Smokey Bones Barbeque & Grill locations and put the remaining 73 up for sale. The company will accordingly incur a pretax charge of about $260 million in Q4. Darden is forecasting EPS from continuing operations of $2.48-2.52 in fiscal 2007, up from prior guidance of $2.38-2.42 and ahead of analyst expectations of $2.40. Due to the Smokey Bones actions, however, the company is forecasting a 2007 loss per share from discontinued operations of $1.16-1.21. Darden spokesman Joe Chabus said the closures and sales are expected to improve company profitability and position Darden for growth. The closings will occur in 22 states, mostly in the southwestern and north-central U.S. Darden Chairman and CEO Clarence Otis: "This action in no way reflects adversely on the hard work of people associated with Smokey Bones and we will take care of every employee affected by this action...The remaining Smokey Bones restaurants are a viable business but one that is not consistent with Darden's vision for a national restaurant concept."
Sources: MarketWatch, Reuters
Commentary: CEOs Discuss Steaks, Burgers, Lobsters and Nutrition Bars • Darden Execs Comment on Smokey Bones' Troubles
Stocks/ETFs to watch: Darden Restaurants, Inc. (DRI). Competitors: Applebee's International Inc. (APPB), Brinker International Inc. (EAT), OSI Restaurant Partners, Inc. (OSI)
Conference call transcripts: F3Q07 (Qtr End 2/25/07)
TRANSPORT AND AEROSPACE
BAE Systems Close To Buying Armor Holdings - WSJ
Armor Holdings, which produces a diverse array of defense products, including the special armored lining for the humvee that has become ubiquitous in U.S. military operations in Iraq, has been approached for buyout by British defense contractor BAE Systems. With the U.S. military looking to replace thousands of humvees in the coming years and BAE eying an increased role in the lucrative U.S. defense industry, BAE has offered Armor Holdings' shareholders $88 a share, or a roughly 7% premium to the company's closing price Friday of $82.15. As of Sunday night, sources told the Wall Street Journal that while the deal was in 'final preparations' mode, it could still fall apart. Friday, shares of Armor Holdings climbed $4.46, or 5.74%, on a Prudential Equity analysts upping his price target from $72 to $80, on expectations Armor holdings would win a contracts to build Mine Resistant Ambush Protected vehicles for the military for an estimated cost of $8.4 billion. Armor's total revenue in FY2006 was just under $2.4 billion. Though a relatively small player in the U.S. defense industry, Armor's stock performance underscores the explosive growth the industry has experienced since the U.S. invaded Iraq in 2003. From a share price of under $10 in 2003, it's shares have increased to upwards of $80 in a period of four years.
Sources: Wall Street Journal, AP, Reuters, MarketWatch
Commentary: Armor Holdings Right Back Where it Began • Ceradyne's Armor Outshines the Rest • Cramer's Take on AH
Stocks/ETFs to watch: BAE Systems PLC (OTCPK:BAESY), Armor Holdings (AH). Competitors: Force Protection (FRPT), Lockheed Martin (LMT), General Dynamics (GD). ETFs: PowerShares Aerospace & Defense (PPA), iShares Dow Jones US Aerospace & Defense (ITA), iShares Morningstar Small Core Index (JKJ)
Related: Humvee Fact Page
Goldman Offers Macquarie a Deal it Can't Refuse for S. Korean Asset Manager
Goldman Sachs Asset Management [GSAM] has agreed to acquire 100% of Macquarie-IMM Investment Management, a South Korean asset management firm 65% owned by Macquarie, with around 10 trillion won ($10.8b) in assets under management. Financial terms were not disclosed, but Reuters estimates the transaction to be valued at 120b ($129m) - 180b won ($194m), based on deals by other investment banks in South Korea in 2006. A Macquarie spokesman commented: "We were approached by Goldman ... The offer was quite attractive ... so we decided to accept the offer." Macquarie is the largest foreign i-bank in S. Korea and has another asset management unit run as a JV, the largest foreign asset management operation in the country. The head of GSAM Int'l called the acquisition a "significant milestone" in Korea, "a growing financial hub with significant market potential." Shares of Goldman Sachs gained 2.6% to $227.34 on Friday, setting a new all-time high. Macquarie's ADRs trading on the pink sheets gained 1% to $75.50, also a new all-time high.
Commentary: KKR and Goldman Capital Take Out Harman International Industries For $8 Billion • Blackstone Files For $4 Billion IPO, Reveals Untold Secrets • Goldman Sachs: More Transparency Would Boost Share Value
Stocks/ETFs to watch: Goldman Sachs (GS), Macquarie Bank Limited (OTCPK:MQBKY). Competitors: JP Morgan (JPM), Lehman Brothers (LEH), Merrill Lynch (MER), Morgan Stanley (MS). ETFs: iShares Dow Jones US Broker-Dealers (IAI), KBW Capital Markets ETF (KCE), Financial Select Sector SPDR (XLF)
Conference call transcripts: Goldman Sachs F1Q07 (Qtr End 2/23/07)
ABN Amro Opposes RBS-Led Rival Bid for LaSalle
ABN Amro's management and supervisory boards announced Monday they are rejecting a $24.5 billion bid for its U.S. unit LaSalle Bank by a consortium of three banks led by Royal Bank of Scotland. The boards stated the bid by the group is "not superior" to a previously accepted $21 billion bid by Bank of America [BoA] because of "uncertainty and execution risk" -- particularly with regard to as-yet incomplete fundraising by Fortis and Santander, the other two banks in the group. The boards also looked with disfavor on the consortium's insistence on accepting no liability for a pending BoA lawsuit against ABN for breach of contract, a demand it was said to concede late in the negotiations. (On Friday, BoA sued ABN in U.S. federal court for unspecified damages relating to the Dutch bank's retreat from the LaSalle transaction.) Nevertheless, in keeping with instructions by the Dutch commercial court following a suit last week by irate investors, ABN will put this and all other offers for LaSalle to a shareholder vote at an as-yet unscheduled Extraordinary General Meeting. The RBS-led bid for LaSalle is contingent on acceptance by ABN of the consortium's $98.5 billion bid for the whole of ABN, which tops the $88 billion offer from Barclays that ABN has already accepted.
Sources: MarketWatch, Wall Street Journal, Reuters
Commentary: Judge Orders Freeze of ABN Sale of LaSalle to BoA • ABN Shareholders Determined to Thwart LaSalle Sale to BoA; RBS-Led Consortium Reiterates Rival Bid • Memo to Barclays: ABN Amro's US Banks Are a Mixed Bag
Stocks/ETFs to watch: ABN Amro Holding N.V. (ABN), Barclays PLC (BCS), Royal Bank of Scotland Group plc [ADR] (RBSPY), Fortis NV [ADR] (FORSY), Bank of America Corp. (BAC). Competitors: HSBC Holdings plc ADR (HBC), Deutsche Bank AG (DB), UBS AG (UBS). ETFs: First Trust Morningstar Div Leaders Idx (FDL), PowerShares Intl Dividend Achievers (PID), iShares MSCI Netherlands Index (EWN)
ACTIONABLE BARRON'S CALLS
Barron's articles likely to move stocks today, culled from our Annotated Barron's Summaries
- Investors and drug companies are looking for promising stem-cell opportunities to ride what promises to be a new wave of treatments. Barron's likes StemCells (STEM) [which got the first FDA test approval for human neural stem cell research for its Phase 1 Batten trial], Osiris Therapeutics (OSIR) [promising bone-regeneration, heart-disease, and Chron's treatments], Geron Corp. (GERN) [may be first to get FDA approval for tests using human embryonic stem cells], ThermoGenesis (KOOL) [makes stem cell extraction/storage devices that General Electric (GE) bought the rights to], and Cytori Therapeutics (CYTX) [makes a machine that extracts stem cells from fat].
- McDermott International (MDR) is an inexpensive play on energy, oil/gas exploration, and coal: Likely project wins in Mexico make earnings beats likely, and its OxyFuel carbon-dioxide separation technology should benefit from the rush to reduce CO2 emissions at power plants. Analysts say earnings will grow 20% a year for the next 3-5 years.
- Barron's takes web commerce facilitator iMergent Inc. (IIG) to task over issues such as lack of fair disclosure [in issuing 'secret' earnings forecast revisions to choice investors], litigation underway or pending in many states, and collusion with an analyst. Shorts were 60% of the 12.4 million share float as of March 15, and have since suffered $50 million in paper losses. Investor Mark Cuban [who was but is no longer short] says "it's not a question of if it collapses, but when," though he's no longer short the stock. iMergent reports Monday.
- International Fight League (OTC:IFLI) went public in November and trades at about $3 -- down from an IPO value of $8.50. The IFL lost $9.6 million in 2006 on $2.4 million revenues. It warns it may not have enough insurance if a fighter is severely wounded or killed. And it's ultra-violent brand of martial arts is illegal in 33 states, which makes it hard to build a fan base. The stock is unlikely to rise any time soon.
- Intel (INTC) says that over the next year it will be shifting chip production to transistors with features as small as 45 nanometers, meaning it will continue to beat AMD (AMD) with either cheaper or more feature-packed chips. It says it can re-use 90% of its last-generation capital equipment for the newer chips, which doesn't bode well for chip equipment makers Applied Materials Inc. (AMAT), Novellus Systems Inc. (NVLS) and KLA-Tencor Corp. (KLAC). And its Silverthorne ARM chip, due within the year, will be software-compatible with all Intel chips, but require just a quarter of the space and power -- bad news for competitors ARM Holdings (ARMHY), Qualcomm (QCOM) and Texas Instruments (TXN).
- Activist investor Carl Icahn promises to push for at least one seat on Motorola's (MOT) board at its shareholder meeting Monday. Charter Equity Research analyst Ed Snyder says the company's lack of a new platform to follow RAZR's success means Icahn-centric ploys such as cost-cutting and changing suppliers won't suffice. Snyder claims at least two major shareholders say Icahn is the source of a rumor Ericsson (ERIC) has made an unsolicited offer to acquire Motorola for $23/share. Snyder: "Icahn may not have any better idea on how to fix the phone platform than [CEO Ed] Zander does."
- Hedge fund investor and media guru Buzz Zaino likes movie theater stocks. Box-office receipts are up 7.2% YTD and new releases promise even healthier ticket sales, jacking up profits from popcorn, condiments, and other extras. Companies he likes: Cinemark Holdings (CNK), Regal Entertainment Group (RGC), and Carmike Cinemas (CKEC). He also says newspaper stock sentiment is overly bearish, and that the coming election year should drive increased readership. He likes: Journal Register Company (JRC) and McClatchy Company (MNI).
- Despite a 16% jump in Q1 EPS and raising its 2007 guidance from $5.53 to $5.54/share, WellPoint (WLP) shares have traded relatively flat. Bulls say shares could rise 20% on 8% projected revenue growth, massive cash flows which could lead to acquisitions/share buybacks, and a CEO [Angela Braly] who stands to gain from a government healthcare overhaul.
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