Bed Bath & Beyond Warns of Weak Profits, Same-Store Sales
Bed Bath & Beyond Inc. warned late Monday its Q1 2007 profits would be $0.36-0.38, missing analyst estimates of $0.40. It also guided same-store down to 1.6%, from a prior 3-5%. It will report full Q1 results on June 27. It said sales in the retail sector, particularly of home-related merchandise, have been challenging. Lowe's, second to Bed Bath & Beyond in U.S. home-improvement sales, lowered its 2007 earnings forecast in May and said its Q1 profits fell 12%. Jefferies' Timothy Allen: "We're to the point where the drag on housing activity is definitely going to have an impact." He added: "They're great operators, and they're doing everything within their control," including using 20%-off coupons to lure customers. Other analysts, however, expressed concern, noting the company rarely misses targets, and almost never issues warnings. CEO Steven Temares: "While we did not achieve all of our financial goals during our initial fiscal quarter of 2007, we remain optimistic that this year will be our best ever." Shares have traded in the $35-40 range for most of the past four years; they dropped 2.8% after-hours to $39.35 on the warning.
Sources: Press release, Bloomberg, Reuters, 24/7 Wall Street
Commentary: Bed Bath & Beyond Warns on June Quarter; Buyable For a Bounce? • Bed Bath & Beyond's Q1 Miss: Warning of Bigger Retail Problems? • Irrational Market Reactions: Jos. A Bank Clothiers, Bed Bath & Beyond
Stocks/ETFs to watch: Bed Bath & Beyond Inc. (NASDAQ:BBBY), Lowe's Companies Inc. (NYSE:LOW). Competitors: Target Corp. (NYSE:TGT), Wal-Mart Stores Inc. (NYSE:WMT), The Home Depot Inc. (NYSE:HD). ETFs: Retail HOLDRS ETF (NYSEARCA:RTH), PowerShares Consumer Services ETF (PRFS), Consumer Discretionary SPDR ETF (NYSEARCA:XLY)
Conference call transcript: Bed Bath & Beyond F4Q06
MACRO AND HOUSING
GE Buys Stake in Dundee REIT; Launches Nuclear Construction Alliance With Hitachi
General Electric had a busy day Monday, with two major announcements and speculation that a third was close at hand. GE shares rose nearly 1% as a result of the flurry of activity. GE's real estate division announced the purchase of an 18% stake in Canada's Dundee Real Estate Investment Trust, in a tender offer valuing the shares at 19% above Friday's closing price. Ge will also purchase 180 Dundee commercial and industrial properties in Ontario, Quebec and Newfoundland for a total price of approximately $2.3 billion (C$2.4 billion). Dundee shares rose 16% in Toronto Monday, for their biggest gain in more than four years. Dundee's remaining holdings will be almost exclusively in Western Canada. In other news, GE and Japan's Hitachi Ltd. began a joint nuclear plant construction alliance under the name GE-Hitachi Nuclear Energy (in Japan, the company will go the Hitachi name exclusively). Outside of Japan, the venture is 60% GE-owned, while in Japan, Hitachi will maintain an 80% stake. Meanwhile, GE Benelux head John Vassallo said GE is keeping its eye on takeover targets in Belgium in the property and financial services sector as well as in the port of Antwerp, one of Europe's largest.
Sources: Press Release, Bloomberg (i) (ii), Reuters
Commentary: Margin Growth Should Drive GE for Years to Come - Barron's • General Electric's Ecomagination: A Panacea? • Cramer's Take on GE
Stocks/ETFs to watch: General Electric (NYSE:GE), Hitachi (HIT). Competitors: Toshiba (OTCPK:TOSBF). ETFs: DJ Wilshire REIT (NYSEARCA:RWR), Vanguard REIT ETF (NYSEARCA:VNQ)
Intel, Asustek Announce Low-Cost Laptops, One Model Under $200
At the Computex computer trade show in Taiwan, Intel unveiled its new 3 Series Chipset family and announced plans to work with Taiwan's Asustek Computer Inc., the world's largest manufacturer of motherboards, to develop low-cost education focused mobile PCs, including one priced below $200. Intel also said it expects to release a Core 2 Extreme mobile processor in Q3 this year. CNET reports the 3 Series Chipsets are necessary to accommodate Intel's 45nm Penryn family of processors set to launch in the second half. Intel/Asustek's low-cost ($199 - $299) laptops are scheduled to ship in July or August, with an initial sales target of 200,000 this year. They will run either Linux or Microsoft Windows, according an Intel executive. The One Laptop Per Child Foundation [OLPC], a U.S.-based non-profit, has a model that reportedly costs $180. OLPC has previously said it plans to ship millions of units from this autumn.
Sources: Press release, Reuters, CNET
Commentary: Intel vs. Negroponte: Time For AMD’s Take • Microsoft’s One Laptop Per Child Project: Unintended Consequences • Intel's New Fashion-Forward Laptop?
Stocks/ETFs to watch: Intel Corp. (NASDAQ:INTC), Advanced Micro Devices Inc. (NASDAQ:AMD), Microsoft Corp. (NASDAQ:MSFT), Dell Inc. (NASDAQ:DELL), Hewlett-Packard Co. (NYSE:HPQ), Lenovo Group Ltd. (OTCPK:LNVGY). ETFs: HOLDRS Semiconductors (NYSEARCA:SMH), iShares Goldman Sachs Semiconductor Index Fund (IGW), PowerShares Dynamic Semiconductor (NYSEARCA:PSI)
Conference call transcripts: Intel Q1 2007, Advanced Micro Devices Q1 2007
Avaya Agrees to $8.2B Bid from Silver Lake, TPG
Avaya said late Monday it has entered a merger agreement with private-equity firms Silver Lake and TPG Capital for $8.2 billion, or $17.50/share, which represents a 28% premium from last week when The Wall Street Journal reported news of deal talks. The offer is 4.7% more than Avaya's $16.72 Monday close. A Piper Jaffray analyst commented, "Private equity will probably make it a stronger organization. From a shareholder perspective, it's definitely a good move." In a press release, it is mentioned Avaya has 50 days to solicit proposals from third parties and may respond to unsolicited proposals. Avaya has previously been in talks with both Cisco and Nortel. Private-equity is said to be attracted to telecom equipment makers because of their steady cash flow and low debt levels. Avaya has $829m of cash and carries zero debt.
Sources: Press release, Bloomberg, The Wall Street Journal
Commentary: Nortel's Possible Purchase of Avaya: Pros and Cons • Avaya Sale to TPG/Silver Lake May Be Imminent -- WSJ and NYT • Avaya: Report Company Close To $9B-Plus Sale
Stocks/ETFs to watch: Avaya Inc. (NYSE:AV), Nortel Networks Corp. (NT), Cisco Systems Inc. (NASDAQ:CSCO). Competitors: Alcatel-Lucent (ALU), Plantronics Inc. (NYSE:PLT). ETFs: iShares Goldman Sachs Network Index Fund (NYSEARCA:IGN), PowerShares Dynamic Networking (NYSEARCA:PXQ)
Conference call transcripts: Avaya F2Q07
Openwave Board Nixes Harbinger Bid; Shares Sink After Hours
Shares of communications software manufacturer Openwave Systems Inc. plummeted 14% to $8.92 in AH trading Monday after the company announced it has rejected a bid from shareholder Harbinger Capital Partners and has not found any other suitors. Harbinger, which holds a 13% stake in the company, offered to buy 49% of the company for $8.30 per share in cash (approximately $335 million). In rejecting Harbinger's unsolicited partial tender offer, Openwave's board categorized the bid as "inherently coercive" and "inadequate." Openwave, which hired Merrill Lynch in March to help it explore strategic alternatives, said no other parties have submitted binding proposals. Openwave will now "focus its energies on implementation of the company's stand-alone plan," which is designed to generate savings of $50 million through a 20% staff reduction. The company will post a $20 million restructuring charge in Q4 connected to the workforce cutback. Openwave also announced it will pay a special dividend of $1.20 per share in order to return $100 million to shareholders.
Sources: MarketWatch, Reuters, TheStreet.com, Forbes
Commentary: Sybase, Oracle, Et Al Eyeing Openwave - Barron's • OpenWave: Shares Sag Despite “For Sale” Sign • Openwave: Activist Investors May Release Hidden Value - Barron's
Stocks/ETFs to watch: Openwave Systems Inc. (OPWV). Competitors: Comverse Technology Inc. (NASDAQ:CMVT), Microsoft Corp. (MSFT), Nokia Corp. (NYSE:NOK). ETFs: Internet Infrastructure HOLDRs (NYSE:IIH)
Conference call transcripts: Openwave Systems F3Q07
Bezos: Amazon.com Will Boost China Investment -- WSJ
Online retailer Amazon.com will boost investment in its China unit, according to an interview with CEO Jeff Bezos published in the Tuesday Wall Street Journal. China is the world's largest Internet market behind the U.S. Amazon purchased Chinese Internet company Joyo.com for $75 million in 2004, renaming it Joyo Amazon. Joyo is the company's fastest growing business, but its 12% Q1 share lags market leader Dangdang.com's 18%. "With something growing this fast and doing this well, as far as investment goes, we would like to double down," said Bezos. To lure customers, Amazon plans to offer free shipping on all orders and provide customer-specific purchase recommendations, a feature already available in other markets. Analysts speculate that Chinese e-commerce sales could more than triple to 18.83 billion yuan ($2.5 billion) in 2010 from 5 billion yuan in 2006. Amazon.com shares gained 2.7% to $70.42.
Sources: Wall Street Journal, Bloomberg, MarketWatch
Commentary: Amazon: A Case of Irrational Exuberance At Current Valuations • Amazon: Back in the Limelight and Ready to Roll • Why Amazon Will Never Really Be Profitable
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), Rydex S&P 500 Pure Growth (NYSEARCA:RPG)
Conference call transcripts: Q1 2007
Murdoch: Meeting with Bancrofts Was "Constructive"
Rupert Murdoch met for more than four hours Monday with members of the Bancroft family to discuss his proposal to buy Dow Jones for $60 per share. "We had a very long, constructive meeting, and we've both gone away to consider both sides," Murdoch said after the meeting. The Bancroft family controls 64% of the voting power at Dow Jones. Murdoch's offer represents a 65% premium to the share price the day before the bid was made public. The family resisted the offer until last week, when they agreed to consider it following the announcement that rivals Thomson and Reuters will merge in a $17.2 billion transaction. The meeting was set up by Murdoch to give him an opportunity to allay the family's fears that a sale to his News Corporation would undermine the editorial integrity of Dow Jones's properties, particularly the Wall Street Journal. The family proposed establishing a board of independent overseers that would hire and fire editors, an idea Murdoch said he cannot accept. Murdoch instead suggested establishing a governing body similar to the one set up at The Times of London when he purchased it. The Independent Association of Publishers' Employees, a union that represents more than 2,000 Dow Jones workers, has hired advisors to help it identify alternative bidders to challenge Murdoch.
Sources: Wall Street Journal, Bloomberg, Reuters, MoneyCentral, Barrons, New York Times (I, II)
Commentary: Murdoch to Meet Bancrofts Monday • The Bancrofts Soften On Selling Dow Jones: Journalistic Integrity Claims Are A Red Herring • Dow Jones' Bancroft Family Backtracks -- Says It Will Meet With News Corp.
Stocks/ETFs to watch: News Corp. (NASDAQ:NWS), Dow Jones & Company, Inc. (DJ). ETFs: PowerShares Dynamic Media Portfolio ETF (NYSEARCA:PBS)
Conference call transcripts: Dow Jones Q1 2007, News Corporation F3Q07
Warner Bros. Reports Successful Simultaneous VOD, DVD Releases
At an investor conference Monday, Time Warner's Warner Bros. Home Entertainment Group said it is considering broader simultaneous releases of VOD and DVD movies based on successful trials with Comcast. The results of six-month trials in two markets show demand for VOD jumped 50%, while DVD sales rose 10%, and there was only a "marginal impact" on rentals. Warner Bros. president Kevin Tsujihara said studios take home 60% to 70% of revenues from sales of video on demand titles, but get only 15% to 20% for rentals. Coverage of the conference by The Hollywood Reporter said a Blockbuster spokesman reiterated his stance that studios will be cautious about cannibalizing rental and retail channels, which represent their largest revenue stream at around 70%. Tsujihara of Warner Bros. said he sees the move to VOD as "incremental", but recognizes the potential for improving profit margins over the next 12 to 24 months.
Sources: The Hollywood Reporter, Barron's Tech Trader Daily
Commentary: Time Warner Cable Conquers Fear of Video-On-Demand • Bad News For Blockbuster Shareholders • Blockbuster May Buy Movielink -- WSJ
Stocks/ETFs to watch: Time Warner Inc. (NYSE:TWX), Time Warner Cable, Inc. (TWC), Netflix, Inc. (NASDAQ:NFLX), Blockbuster Inc. (BBI), Movie Gallery Inc. (MOVI), Lions Gate Entertainment Corp. (NYSE:LGF), Comcast Corp. (NASDAQ:CMCSA). Conference call transcripts: Blockbuster Q1 2007, Netflix Q1 2007, Comcast Q1 2007, Time Warner Q1 2007
NYSE, Others Named in $4B Trading Lawsuit
A lawsuit filed Friday by Sea Carriers LLC seeks $4 billion in damages from the New York Stock Exchange's parent NYSE Euronext, as well as Goldman Sachs, Bank of America, Bear Stearns, LaBranche & Co. and Van Der Moolen -- which own "specialist" floor-trading businesses. Sea Carriers, according to the lawsuit, traded 4.5 billion shares of NYSE stocks though the SuperDOT system from 1998-2002. Sea Carriers alleges the defendants misrepresented the market for execution services and costs of execution of trades on the NYSE, manipulated trading, and fixed the costs of execution services at anti-competitive levels: "Empirical evidence demonstrates that those who traded through the SuperDOT system got consistently worse executions than those who traded through floor brokers... As a result of defendants' misconduct, the costs of purchasing and selling (securities) by public investors were artificially manipulated and distorted," the complaint said. In 2003, Sea Carriers tried unsuccessfully to join a Calpers (California Public Employees' Retirement System) lawsuit against the NYSE as a lead plaintiff; the lawsuit was ultimately dismissed by the court and is currently in appeal. None of the defendants commented on the merits of the lawsuit.
Sources: Dow Jones Newswire, Reuters, CNBC
Commentary: Treading Carefully In Exchange Stocks • Specialist Exodus Poses Problem for New ETFs -- WSJ • NYSE: Gains Are Far From Automatic -- Barron's
Stocks/ETFs to watch: NYSE Euronext (NYSE:NYX), Goldman Sachs Group Inc. (NYSE:GS), Bank of America Corp. (NYSE:BAC), Bear Stearns Companies Inc. (NYSE:BSC), LaBranche & Co. Inc. (NYSE:LAB), Van Der Moolen Holding NV (VDM)
ICE Buys Leading LNG/Chemicals Trading Platform ChemConnect
IntercontinentalExchange, Inc. [ICE] continued its push to expand its share of U.S. OTC e-trading Monday, announcing it will acquire ChemConnect Inc.'s commodity trading business for an undisclosed sum of cash. The announcement sent ICE shares to a closing price of $149.67, a gain of $6.70, or 4.69%. ChemConnect's commodity trading business includes the liquid natural gas [LNG] market as well as chemical commodities like ethylene, propylene and benzene. As part of the arrangement, which is expected to close in July, ChemConnect will shift its electronic trading platform over to ICE's. ICE President and CEO Charles Vice said he believes "the acquisition of the leading electronic physical NGL and chemicals trading platform [ChemConnect] is an excellent fit with our leadership in the U.S. physical gas and power markets." ICE is currently in the midst of a bidding war with the Chicago Mercantile Exchange over the right to acquire the Chicago Board of Trade.
Sources: Press Release, MarketWatch, Reuters, AP
Commentary: ICE Pact With Chicago Options Exchange May Assist In Its CBOT Bid • CBOT Taking ICE Offer Seriously: Money Talks • Cramer's Take on ICE
Stocks/ETFs to watch: IntercontinentalExchange, Inc. (NYSE:ICE). Competitors: CBOT Holdings, Inc. (BOT), Chicago Mercantile Exchange Holdings Inc. (NASDAQ:CME), NYMEX Holdings Inc. (NMX), International Securities Exchange Inc. (ISE)
Pfizer's Axitinib Shows Positive Results Against Pancreatic Cancer in Phase II Trial
Pfizer reported Monday that a Phase II clinical trial has shown its tumor treatment candidate axitinib lengthened the lives of patients with advanced pancreatic cancer from 5.6 months to 6.9 months when taken in combination with chemotherapy drug Gemcitabine. The study involved 103 patients. These results warrant a Phase III trial for the drug, according to Jean-Philippe Spano, the study's lead investigator. Pfizer said other mid-stage studies on axitinib have shown positive results against breast cancer and renal cell carcinoma and significant anti-tumor activity in patients with advanced thyroid cancer. Axitinib is a VEGF inhibitor, a class of drug that starves tumors of nutrients (anti-angiogenesis). Genentech's blockbuster cancer drug Avastin was the first VEGF inhibitor. Charles Baum, Pfizer's head of oncology development: "The overall profile of axitinib looks good because it is clearly showing activity against a number of tumors."
Sources: Press release, Forbes, Reuters
Commentary: Investing in Cancer Treatment: Six Stock Ideas • Stocks That Yield - Barron's • Barron's: Value Investor Cliff Hoover's Quality Picks
Stocks/ETFs to watch: Pfizer Inc. (NYSE:PFE). Competitors: Roche Holding Ltd. [ADR] (OTCQX:RHHBY), Genentech, Inc. (Private:DNA), Merck & Co. Inc. (NYSE:MRK). ETFs: Pharmaceutical HOLDRs (NYSEARCA:PPH), PowerShares FTSE RAFI Health Care (PRFH), iShares Dow Jones US Healthcare (NYSEARCA:IYH)
Nigeria Sues Pfizer for $6.95 Billion
Nigeria filed suit against pharmaceuticals company Pfizer on Monday on allegations that a drug experiment caused deaths and disabilities among children during a meningitis epidemic ten years ago. The Nigerian government is seeking $6.95 billion in damages. The case, filed in Abaja, is separate from a $2 billion suit filed against the company by the Kano state government stemming from the same experiment. During the epidemic, one hundred children were given experimental antibiotic Trovan; the second hundred received approved antibiotic ceftriaxone in what the families' lawyers say was an insufficient dose. The treatment is alleged to have resulted in the deaths of up to 11 children and brain damage and disabilities among many others. Pfizer claims none of the deaths were the result either of Trovan or inadequate treatment. In 2001, a Manhattan federal court dismissed a case brought by disabled Nigerians who participated in the study on the grounds that the case should be heard in Nigeria.
Sources: Press release, Reuters (I, II), MoneyCentral, Forbes, Genetic Engineering & Biotechnology News
Commentary: Projected Dividend Growth, Shrinkage Rates of High Yielding S&P 500 Stocks • Stocks That Yield - Barron's • The Top Dividend Paying ETFs and Stocks
Stocks/ETFs to watch: Pfizer Inc. (PFE). Competitors: Novartis AG (NYSE:NVS), Merck & Co. Inc. (MRK), Bayer AG (BAY). ETFs: Pharmaceutical HOLDRs (PPH), PowerShares FTSE RAFI Health Care (PRFH), iShares Dow Jones US Healthcare (IYH)
Amgen to Buy Ilypsa for $420 Million
Amgen announced Monday it has agreed to buy private biotech company Ilypsa Inc. for $420 million in cash. Ilypsa does not yet have any drugs on the market. Its leading experimental drug, ILY101, is designed to treat high phosphate levels (hyperphosphatemia) in patients on hemodialysis for chronic kidney disease. Because the body does not absorb ILY101, the drug could potentially be used in smaller doses and with better tolerance than other drugs in the same class. The transaction, which has been approved by both company boards and by Ilypsa's shareholders, is expected to close in Q3. The FDA recently instructed Amgen to add new warnings to the labels of its anti-anemia medications, Aranesp and Epogen, and conduct additional safety studies. The drugs collectively brought in about half the company's revenue last year. An FDA panel will meet in the autumn to evaluate their use by kidney patients.
Sources: MarketWatch, Reuters, Forbes
Commentary: Amgen: Still A Bargain Despite New Warning Labels • FDA Panel Recommends Stronger Warning Labels, More Testing for Anemia Drugs • Cancer Stocks on the Go: Winners and Losers
Stocks/ETFs to watch: Amgen, Inc. (NASDAQ:AMGN). Competitors: Baxter International Inc. (NYSE:BAX), Johnson & Johnson (NYSE:JNJ), Novartis AG (NVS). ETFs: Biotech HOLDRs (NYSEARCA:BBH), Health Care Select Sector SPDR (NYSEARCA:XLV), PowerShares Dynamic Pharmaceuticals (NYSEARCA:PJP)
Conference call transcripts: Amgen Q1 2007
Have Wall Street Breakfast emailed to you every morning before the market opens.