Apple's Annual Developers' Conference Disappoints For Its Lack of Innovation
Apple shares fell 3.45% yesterday on general investor disappointment with what was perceived as a lack of innovation at Apple's annual software developers' conference [WWDC]. The major piece of news, that Apple was releasing a Microsoft Windows compatible version of its Safari web browser failed to impress, with blogger Paul Kedrosky joking that the "only interesting part came at 11:22 of the [Jobs' keynote]" when the "Head of Apple iPhone software had some trouble typing with the iPhone on-screen keyboard." Piper Jaffray analyst Gene Munster believes, "Overall it was a disappointment." Among other announcements, Apple will allow outsiders to create programs for its upcoming iPhone. In other news, game maker Electronic Arts announced it was releasing six titles for the Mac including members of its popular sports line John Madden Football and Tiger Woods Golf.
Sources: Wall Street Journal, The Street.com I, II, Reuters, MarketWatch, AP
Commentary: Job's WWDC Apple Leopard Keynote: Nothing to Say, Nothing Said • No Real News at Apple's WWDC • Takeaways From Jobs Keynote: 64-bit Leopard Is Big; Safari On Windows
Stocks/ETFs to watch: Apple Inc. (NASDAQ:AAPL), Electronic Arts (ERTS). Competitors: Microsoft Corp. (NASDAQ:MSFT). ETFs: Internet Architecture HOLDRs (NYSE:IAH), PowerShares QQQ (QQQQ), PowerShares Dynamic Hardware & Consumer Electronics (PHW)
Conference call transcripts: F2Q07
Related: Apple Developers Conference Homepage
Take Two Announces Restructuring Plan; Posts Q2 Loss
Videogame publisher Take-Two Interactive posted a Q2 earnings loss that beat expectations, but sales dropped from a year ago. This marked Take-Two's sixth consecutive quarterly loss. The company also announced a restructuring plan designed to reduce fixed overhead expenditures by $25 million by the end of fiscal 2008 and consolidate marketing, sales and operational functions. The company expects to take $15 million in charges connected to the restructuring through fiscal 2008. The fiscal Q2 net loss came in at $51.2 million (-$0.71/share) versus a loss of $50.4 million (-$0.71) a year ago. Excluding costs, Take-Two posted an EPS loss of -$0.41, ahead of consensus expectations of -$0.57. Revenue was down 22.5% to $205.4 million from $265.1 million last year. Analysts had forecast revenue of $204.5 million. This is Take-Two's first earnings report after a corporate shakeup that removed former CEO Paul Eibler and CFO Karl Winters and installed CEO Ben Feder and Chairman Strauss Zelnick. The company is reiterating its fiscal 2007 guidance of revenue of $1.2-1.25 billion and break-even results on a GAAP basis. Shares rose 1.5% following the report.
Sources: Reuters, TheStreet.com, MarketWatch, 24/7 Wall Street
Commentary: Take Two Crosses Its Fingers and Toes For Blockbuster Q4 • Take Two Announces Restructuring Plan • Take-Two Interactive: Buying Puts is Too Obvious
Stocks/ETFs to watch: Take-Two Interactive Software, Inc. (NASDAQ:TTWO). Competitors: Activision Inc. (NASDAQ:ATVI), Electronic Arts Inc. (ERTS). ETFs: iShares Goldman Sachs Software Index Fund (NYSEARCA:IGV), Software HOLDRS Trust ETF (NYSE:SWH), PowerShares Dynamic Software (NYSEARCA:PSJ)
Conference call transcripts: F2Q07
TI Narrows Guidance, Shares Fall 2% in After-hours Trading
Texas Instruments updated its Q2 business outlook saying it now expects EPS between $0.40 and $0.44, on sales of $3.36 billion to $3.51b, compared its prior forecast of $0.39 - $0.45 on sales of $3.32b - $3.6b. Analysts on average were expecting $0.42/share on revenues of $3.46b. The mid-range of TI's revised EPS guidance matches analysts' average estimate, but its sales guidance falls short by about $25m. Shares of TI fell 2% to $35.08 in after-hours trading on volume over 1.2 million, after losing 0.5% to $35.79 during normal trading. TI narrowed its forecast for semiconductor revenues to $3.20b - $3.34b, from $3.14b - $3.40b previously. TI said a retailer delay in stocking its calculators will negatively impact revenues by $20m - $30m -- it offered new guidance of $160m - $170m, compared to $180m - $200m previously. A spokesman said the U.S. ITC's partial ban of handsets with QUALCOMM chips could benefit the company if it stands, since carriers will be more reluctant to rely on QUALCOMM.
Sources: Press release, Bloomberg, MarketWatch
Commentary: Companies With The Most Analyst Attention & Affection • Semis With Highest, Lowest Production To Sales Ratio • ITC Slaps Partial Ban on QUALCOMM, Shares Rally on Plans to Appeal • TI's Shares Jump On Beat and Raise
Stocks/ETFs to watch: Texas Instruments Inc. (NASDAQ:TXN). Competitors: National Semiconductor Corp. (NYSE:NSM), Analog Devices Inc. (NASDAQ:ADI), Microchip Technology Inc. (NASDAQ:MCHP), QUALCOMM Inc. (NASDAQ:QCOM), STMicroelectronics NV (NYSE:STM). ETFs: Semiconductor HOLDRs (NYSEARCA:SMH), iShares Goldman Sachs Semiconductor (IGW), PowerShares Dynamic Semi. (NYSEARCA:PSI)
Conference call transcripts: Texas Instruments Q1 2007
Google and Sina to Take on Baidu
Google and SINA Corp., a leading Internet portal in China, announced a strategic partnership in the areas of online search (Google search on SINA.com), advertisement (AdSense and AdWords) and news. Financial details were not disclosed. Shares of Google lost 0.8% to $511.34 during normal trading Monday. SINA lost 1.8% to $38.43 and Baidu rose slightly (0.05%) to $137.10. A Hong Kong-based JP Morgan analyst commented, "The increased traffic and branding from the Sina-Google tie-up will make Google more localized and may help the two companies regain market share from Baidu." A Beijing-based web analytics firm estimates Baidu's search market share in China at the end of Q1 was 57% (-1% q/q), versus Google's 19% (+2% q/q). During Q1, Baidu surpassed SINA as China's leading online advertiser for the first time. Bloomberg reports Google's China chief said the firm is "looking for more partners" locally, but wouldn't elaborate. He said SINA and Google have already started the search service, are testing advertising and will likely start a news service "soon."
Sources: Press release, Bloomberg
Commentary: Sina Announces Deal With Google On Search, Ads, Content • A Closer Look at Google's Valuation • Citigroup: Google Trading At 40%-60% Discount On a PEG Basis • Search Ratings: Google Gains, MSN Slips, Yahoo Stays Same • Baidu: Beware Downside Risk
Stocks/ETFs to watch: Google Inc. (NASDAQ:GOOG), Sina Corp. (NASDAQ:SINA). Competitors: Baidu.com Inc. (NASDAQ:BIDU), Yahoo! Inc. (NASDAQ:YHOO), Microsoft Corp. (MSFT), IAC/InterActiveCorp (IACI). ETFs: iShares Goldman Sachs Technology (NYSEARCA:IGM), iShares Goldman Sachs Software (IGV), First Trust Dow Jones Internet Index (NYSEARCA:FDN), First Trust IPOX-100 Index (NYSEARCA:FPX)
Conference call transcripts: Google Q1 2007 , SINA Q1 2007, Baidu.com Q1 2007
DJ Roundup; Bancrofts to Issue Revised Safeguard Proposal to News Corp.
The Bancroft family, which holds a controlling interest in Dow Jones & Co., is proposing new ideas on how to protect the editorial integrity of the Wall Street Journal in the event of a takeover by Rupert Murdoch's News Corp. The proposals could be sent to Murdoch as early as Tuesday. Murdoch has bid $60 per share ($5 billion) for the company, but the Bancrofts and many employees are apprehensive about his editorial influence. Murdoch has proposed an editorial board like the one installed at the Times of London, which he bought two decades ago. In principle, that board protects the paper from owner interference; but in fact, Murdoch has involved himself in its editorial affairs. The Bancrofts want the DJ board to have more "teeth," including the power to hire and fire the managing editor. In related news, Dow Jones said the Journal's ad revenue fell 3.4% in May on declining technology, car and classified ads. Mutual fund company Fidelity Investments has cut its stake in Dow Jones from almost 4.7 million at the end of March to about 117,000 shares. GE, which held talks with Microsoft about possibly acquiring Dow Jones, is not interested in pursuing alternative partners now that those talks have broken down. TheStreet.com's Jim Cramer has weighed in in favor of a a takeover by "visionary" Murdoch.
Sources: Reuters, Wall Street Journal, Bloomberg (I, II), Financial Times, MarketWatch [video]
Commentary: Murdoch: Meeting with Bancrofts Was "Constructive" • There Goes Dow Jones: On Ratings, Revenues And Profits • Microsoft, GE Considered Dow Jones Bid -- WSJ
Stocks/ETFs to watch: Dow Jones & Company, Inc. (DJ), News Corp. (NASDAQ:NWS), General Electric Co. (NYSE:GE). ETFs: PowerShares Dynamic Media Portfolio ETF (NYSEARCA:PBS)
Conference call transcripts: Dow Jones Q1 2007, News Corporation F3Q07, General Electric Q1 2007
Got Milk, Got Problems: Dean Foods Guides Down
Dean Foods lowered its Q2 and FY 2007 guidance due to anticipated record high dairy prices and an oversupply of organic dairy products. Shares of Dean Foods are currently untraded in Tuesday's pre-market, after gaining 0.3% to $32.46 in normal trading Monday. Dean Foods now expects Q2 EPS of $0.30 - $0.31, compared to the $0.37 - $0.38 it expected previously. Analysts had estimated $0.37/share on average. Full year EPS is seen between $1.52 - $1.58 (vs. $1.72 - $1.78 previously), compared to analysts' $1.69/share average estimate. In a press release, Gregg Engles, Dean Foods Chairman and CEO said, "We are faced with an unusually broad set of challenges across the portfolio." Q3 is expected to be "particularly challenging." An update will be provided in August during the company's Q2 earnings conference call. In a positive note, Engles said he expects profits to accelerate in 2008, based on a multi-year cost-cutting and restructuring program, in addition to moderating short-term challenges.
Sources: Press release, MarketWatch
Commentary: Dean Foods: Milk This Oversell - Barron's • 4 Dairy Stocks To Watch • Dean Foods: Special Dividends Not a Good Signal
Stocks/ETFs to watch: Dean Foods Co. (NYSE:DF). Competitors: ConAgra Foods, Inc. (NYSE:CAG), Kraft Foods Inc. (KFT)
Goldman Buys 13% Stake in RadioShack
Goldman Sachs Asset Management has taken a 13% stake in RadioShack, according to a June 11 SEC filing. The move makes it RadioShack's #2 shareholder, behind Fidelity Management and Research, which owns 15% according to a March filing. RadioShack CEO Julian Day is in the midst of a company-wide overhaul, and shares are up 120% since he took the reins last July. But some analysts say the runup is overdone: "We believe that investors are anticipating much stronger earnings then what the general analyst community is looking for," -- BMO analyst Richard Weinhart. In April, Day acknowledged the company continues to face challenges: Q1 comparable sales dropped 9.2% y/y and total sales fell 14% to $992 million. Part of the drop is a result of the company's closure of 480 underperforming stores. Recently, there has been speculation the company might be the subject of a buyout/merger attempt by PC giant Dell, as it looks to bolster its retail foothold. Weinhart, however, dismisses the rumors, noting Dell's recent deal with Wal-Mart to sell computers at its stores. He says RadioShack's inflated valuation will likely deter other courtiers. He also notes that wireless revenues fell 28% in Q1, vs. 30% gains for competitors Circuit City Stores and Best Buy; wireless sales account for 30% of RadioShack's revenue. InsiderScore.com's Ben Silverman says the recent buying suggests Goldman Sachs has "a lot of long-term faith" in the company.
Sources: SEC filing, Financial Times, Barron's
Commentary: Which Partner Will Help Ease Dell Into Retail? • Buying Radio Shack Would Kill Dell • RadioShack Still Faces Plenty of Challenges
Stocks/ETFs to watch: RadioShack Corp. (NYSE:RSH), Goldman Sachs Group Inc. (NYSE:GS), Dell Inc. (NASDAQ:DELL), Circuit City Stores Inc. (NYSE:CC), Best Buy Co. Inc. (NYSE:BBY). ETFs: Retail HOLDRS ETF (NYSEARCA:RTH), SPDR S&P Retail (NYSEARCA:XRT), PowerShares Dynamic Retail (NYSEARCA:PMR)
Supreme Court Rules Against Philip Morris
In a defeat for the Altria Group's Philip Morris unit, the U.S. Supreme Court ruled Monday that a class action suit brought against the company in Arkansas state court cannot be moved to federal court. State court is viewed as a more hostile venue than federal court for tobacco companies. The suit alleges that Philip Morris used unfair and deceptive marketing practices in its advertising and packaging of "light" cigarettes. The Court decided that federal regulation of the products does not imply that cases concerning them should be heard at the federal level. The decision will affect suits against both Philip Morris and R.J. Reynolds Tobacco, a unit of Reynolds American. The ruling was widely anticipated by analysts and investors. "It doesn't change our stance about the incredible improvement in the legal environment for the U.S. tobacco companies," said portfolio manager Charles Norton. Edward Sweda, senior attorney for the Tobacco Products Liability Project, views the decision differently: it will "benefit plaintiffs and their attorneys in other 'light' cigarette litigation since Philip Morris' attempt to evade state law simply by virtue of the fact that it is regulated has failed."
Sources: Reuters, New York Times, MarketWatch, Bloomberg, Wall Street Journal
Commentary: Supreme Court Slaps Down Philip Morris [Perfectlyclueless] • Altria Shrugs Off Court Ruling [24/7 Wall St.]• Compliance with FTC Process Did Not Warrant Removal of State Suit: U.S. Supreme Court [Traderegulation] • Tobacco Litigation: Will Tobacco Companies Get A Refund From The States?
Stocks/ETFs to watch: Altria Group Inc. (NYSE:MO), Reynolds American Inc. (NYSE:RAI). ETFs: Vanguard Consumer Staples ETF (NYSEARCA:VDC), PowerShares FTSE RAFI Consumer Goods (PRFG), Consumer Staples Select Sector SPDR (NYSEARCA:XLP)
Related: Syllabus of the decision of the U.S. Supreme Court regarding Watson et al. v. Philip Morris Cos. Inc.
TRANSPORT AND AEROSPACE
Toyota Surpassed GM in 2006 -- Automotive News
The Automotive News, which publishes a widely-used annual ranking of global automakers, said Toyota outsold GM in 2006 after stripping out commercial vehicles built by a GM affiliate in China. Toyota had 8,808,000 units to GM's 8,679,860. The News attributed Wuling-brand vehicles, including its seven-seat microvan, to GM-partner SAIC Motor, which owns 51% of the China venture. GM, which had held the #1 spot for 76 years, counted Wuling vehicles in its tally. In Q1 2007, even by GM's tally, Toyota pulled ahead by 90,000 vehicles, and is likely to take the uncontested lead of global carmakers in 2007 with 9.34M vehicles forecast vs. GM's 9.2M.
Sources: Reuters, Automotive News
Commentary: Difficult Times For the Retail Auto Market • Toyota Threatens GM's Reign as Biggest Automaker • Toyota Still Hasn't Crossed the Finish Line
Stocks/ETFs to watch: General Motors Corp. (NYSE:GM), Toyota Motor Corp. (NYSE:TM). Competitors: Ford Motor Co. (NYSE:F), DaimlerChrysler (DCX), Honda Motor Co. (NYSE:HMC)
Conference call transcript: General Motors Q1 2007
Citigroup Clinches Key Stake in Nikko Cordial
According to a filing with Japan's finance ministry, Citigroup raised its stake in Japanese brokerage Nikko Cordial Group from 61% to a critical 68% this month. In April, Citigroup bought 61% of its voting stock for $7.7B, and ultimately plans to convert Japan's #3 brokerage into a fully-owned subsidiary. The current purchase takes Citigroup's stake above a key threshold -- 2/3 -- giving it protection against veto moves by minority holders. It can now merge or sell units without the consent of other shareholders. The move gives the U.S. bank more power to push through changes at the ailing brokerage and move forward with its plans to bolster its foothold in the world's second biggest economy. Citigroup bought 37 million shares for ¥1,700 per share in a private placement, and 32 million shares on the market between June 5-6 for less than ¥1,700 per share, a spokeswoman said. Several large shareholders still refuse to sell. Citigroup shares are down 4% YTD, and up 7.4% over the past year.
Sources: Reuters, Bloomberg, Dow Jones Newswire
Commentary: Nikko Cordial : Citigroup May Fail to Gain Full Control Of Company • Citigroup Plays Japanese Poker • Why I'm Holding Onto Nikko Cordial
Stocks/ETFs to watch: Citigroup Inc. (NYSE:C), Nikko Cordial Group ADR (OTC:NIKOY). Competitors: Mitsubishi UFJ Financial Group (NYSE:MTU), Nomura Holdings (NYSE:NMR), Daiwa Securities Group (OTC:DSECY). ETFs: iShares S&P Global Financial Index Fund (NYSEARCA:IXG), iShares Dow Jones US Financial Services (NYSEARCA:IYG), Financial Select Sector SPDR (NYSEARCA:XLF)
Conference call transcript: Citigroup Q1 2007
CME One-Ups ICE In CBOT Bidding By Gaining Regulatory Approval
Clearing perhaps the biggest hurdle in its attempt to win a bidding war for the Chicago Board of Trade [CBOT], the Chicago Mercantile Exchange [CME] was given clearance by the Justice Department [DoJ] to proceed with its acquisition attempt. The DoJ believes CME and CBOT's products "seldom compete head to head" and that the merger would not impede innovation in the areas of exchange-traded futures and options on U.S. interest rates, equity indexes and foreign currencies. The approval should give CME another leg up on IntercontinentalExchange's [ICE] higher bid. CBOT's board already prefers CME's offer to ICE's due to the belief it would be a smoother transition. The regulatory approval only seems to confirm that. According to Craig Pirrong, Director of energy markets for the University's Global Energy Management Institute, "This was realistically the main obstacle. The ICE deal will melt away." On May 11, CME raised its bid to 0.35 of its own shares for each CBOT share for a total offer of $10.3 billion at current market prices. Shares of all three companies reacted positively to the news yesterday, gaining a minimum of 1.3%, with ICE shares jumping nearly 2.5% as shareholders seemed to breathe a sigh of relief that the company's offer would not go through as planned.
Sources: Press Release, Bloomberg, Wall Street Journal, The Street.com, MarketWatch, Reuters
Commentary: CME Sweetens Offer for CBOT; ICE Considers Its Position • Who Will Acquire CBOT Holdings? • Chicago Merc-ICE Bidding War Over CBOT Gets Nasty
Stocks/ETFs to watch: CBOT Holdings, Inc. (BOT), Chicago Mercantile Exchange Holdings Inc. (NASDAQ:CME), IntercontinentalExchange, Inc. (NYSE:ICE). Competitors: NYSE Euronext (NYSE:NYX), NYMEX Holdings Inc. (NMX), International Securities Exchange Inc. (ISE)
D.E. Shaw to Buy James River Group for $575 Million
Hedge fund D.E. Shaw & Co. will buy property and casualty insurer James River Group Inc. for approximately $575 million in cash. The insurer's shares dropped 3.6% to $33.90 after Monday's announcement on concerns that the sale price is too low. James River shareholders will receive $34.50 per share, a 1.9% discount to Friday's close of $35.18. D.E. Shaw will incorporate James River into a holding company with a new, Bermuda-based reinsurance unit. "Since Shaw is a significant owner of insurance stocks, they could see this as one of those little diamonds in the rough," said money-management consultant Geoffrey Bobroff. In its press release, D. E. Shaw group said: "We believe their careful approach to underwriting and their diligent expense control provide the company with a powerful competitive advantage." James River has until August 5 to solicit higher bids. If a higher offer is accepted, D.E. Shaw will collect a termination fee of $7.2 million. James River is next in a series of financial services companies to go private; others include transaction processors First Data and Alliance Data and student lender Sallie Mae. Two weeks ago, hedge fund manager David Einhorn raised nearly $195 million by launching an IPO of reinsurer Greenlight Capital Re Ltd.
Sources: Press release, Reuters, Bloomberg, Forbes
Commentary: 1Q07 Insurance Earnings: What's Working, What's Not (Part IV) • Hedge Fund DE Shaw Does It The Right Way • D.E. Shaw, Convergence and the Future of Institutional Asset Management • This Week's IPOs: Clean Energy Fuels, Greenlight Capital Re, Helicos Biosciences, RSC Holdings
Stocks/ETFs to watch: James River Group, Inc. (NASDAQ:JRVR). Competitors: Argonaut Group, Inc. (NASDAQ:AGII), Markel Corp. (NYSE:MKL), RLI Corp. (NYSE:RLI). ETFs: streetTRACKS KBW Insurance (NYSEARCA:KIE), PowerShares Dynamic Insurance Portfolio ETF (NYSEARCA:PIC), iShares Dow Jones U.S. Insurance (NYSEARCA:IAK)
FDA: Sanofi's Acomplia Has Suicide Risk
The FDA said Monday that Acomplia, an experimental obesity medication manufactured by Sanofi-Aventis, might contain a serious risk of prompting suicidal thoughts. The agency said the drug does appear to help patients lose weight and lower their cholesterol and blood sugar levels. However, patients on the drug exhibit a relatively high incidence of depression, insomnia and suicidal anxiety (26% of patients on the drug vs. 14% of patients on placebo). Sanofi applied for FDA approval for Acomplia in April 2005. In February 2006, the FDA said it needed more information on the drug's psychiatric side effects. Sanofi provided that information in October 2006. An FDA advisory panel will meet Wednesday to discuss Acomplia's market application, and a final FDA decision is expected July 27. "The market is expecting the drug will get approved for obesity, but in light of these comments it could be a quite a close call,'' said Helvia Ltd. research analyst Andrew Fellows.
Sources: FDA briefing (.pdf), Reuters, Wall Street Journal, Business Week, Bloomberg, MarketWatch
Commentary: Biotech Day In Review: Another Setback for Acomplia from Sanofi-Aventis • Sanofi-Aventis Earnings Drop 5%, Suffers Two FDA Setbacks • Sanofi-Aventis Diet Drug Acomplia May Have Use in Diabetes Treatment
Stocks/ETFs to watch: Sanofi-Aventis (NYSE:SNY). Competitors: Eli Lilly & Co. (NYSE:LLY), Merck & Co. Inc. (NYSE:MRK), Pfizer Inc. (NYSE:PFE). ETFs: Pharmaceutical HOLDRs (NYSEARCA:PPH), iShares Dow Jones US Pharmaceuticals (NYSEARCA:IHE)
Related: WSJ's health blogger Jacob Goldstein discusses FDA's concerns about Acomplia [video]
MACRO AND HOUSING
Lehman CEO Says Economy Won't be Derailed by Subprime Crisis
Lehman Brothers CEO Jack Malvey said Monday that falling house prices will prolong the current housing slump, but that it was not enough for now to harm the domestic or global economy. Malvey expects the subprime loan crisis to deepen and foreclosures to accelerate as adjustable rate mortgages reset and lending standards tighten, but that the current "benevolent cycle" in the overall economy should last until 2009-2012. Until then, Malvey sees housing prices falling to 'early boom' 2005 levels. Fears of a subprime fallout affecting the general economy led to mistaken expectations of a rate cut. It may come in 2008, Malvey says, but the current 5.25% rate will hold steady until then. Trader bets on immediate rate cuts have subsided. Globally, Malvey expects the European Central Bank to tighten credit "two or three more times." The Bank of England too, could raise rates another "50 basis points." Malvey suggested tighter Fed language might help reduce volatility on domestic interest rate expectations.
Commentary: Why Last Week's Interest Rate Based Selloff Was Overblown• Housing Prosperity Just Around Corner? I Don't Think So • Housing Bubble and Real Estate Market Tracker
Stocks/ETFs to watch: S&P 500 Index (NYSEARCA:SPY), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Lehman Aggregate Bond (NYSEARCA:AGG)
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