Wall Street Breakfast

by: SA Editors
SA Editors
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Mobile Players Take On Apple iPhone With Flat-Rate Mobile Music Service

Major mobile phone players in Europe and Asia are pooling their resources to launch a low-cost, flat-rate music service called MusicStation, in a direct challenge to Apple's upcoming iPhone. The Financial Times reports that the service, which launches today, is being backed by Nokia, Sony Ericsson, Motorola, Samsung, 30 mobile phone operators, and all four major music labels -- Universal, Sony, EMI and Warner. Apple's U.S. iPhone launch is scheduled for June 29. The iPhone includes a built-in iPod, which will access Apple's online music store, iTunes. The MusicStation launch is timed to pre-empt the iPhone launch in Asia and Europe: "We were keen to jump through the finish line first. All European and Asian consumers will have access to MusicStation well before iPhone's arrival in those regions," said Rob Lewis, CEO of Omnifone, the company behind MusicStation. Mobile phone makers are pre-loading phones with MusicStation software; it's estimated 100 million pre-loaded phones (pictured) will MusicStation 14 06 2007ship over the next year, compared to Apple's stated goal of 10 million. Many of the phones will be mid-price-range, in contrast to iPhone's $499 price tag. Users will be charged a flat fee of €2.99/week for unlimited access to MusicStation's one-million-plus collection of songs. Singles on sites like iTunes are typically sold for about €1.50, and the industry estimates the average user buys six singles a year. According to the company's press release, the first MusicStation handsets arrived in Swedish stores today. Extensive rollouts in Europe, Asia-Pacific and Africa are imminent, but will only be announced on the day handsets arrive in retail outlets.
Sources: Press release, Financial Times
Commentary: The Street Gets Pre-Release Jitters On Apple's iPhoneNokia's N95: The iPhone's European CompetitorVerizon May Counter iPhone With LG Prada
Stocks/ETFs to watch: Nokia Corp. (NYSE:NOK), Sony Corp. (NYSE:SNE), Telefonaktiebolaget LM Ericsson ADR (NASDAQ:ERIC), Motorola Inc. (MOT), Apple Computer Inc. (NASDAQ:AAPL)
Related: MusicStation website

Sprint Nextel Buys Out Affiliate for $312.5 Million, Sidesteps Lawsuit

Number-three U.S. wireless provider Sprint Nextel announced Wednesday it is buying affiliate Northern PCS LLC for $312.5 million, thereby resolving a contract dispute. S 14 June 2007Sprint will pay $307.2 million and assume $5.3 million in debt. The deal is expected to close in Q3. Northern PCS, which serves over 236,000 Sprint subscribers in Minnesota, North Dakota, Wisconsin and Iowa, had sued Sprint for breach of contract, alleging that Sprint's $35 billion merger with Nextel in 2005 violated an agreement between the companies on territorial exclusivity. Sprint has been faced with similar accusations from other regional telcos that sell Sprint-Nextel wireless service. To resolve this problem, which has hampered the integration of Nextel's operations following the merger, Sprint has made a flurry of affiliate acquisitions. Last summer, for example, the company bought UbiquiTel Inc. for $1 billion. Sprint has three remaining affiliates: iPCS Inc., Shenandoah Telecommunications and Swiftel Communications. Sprint's shares closed up 2.6% at $22.16.
Sources: Press release, CNN.com, Forbes, Reuters, TheStreet.com, Wall Street Journal
Commentary: Sprint: Slower Than Expected Return To Growth ExpectedSprint/Nextel: The Next Data Wireless Kings?Bill Nygren on the Long Case for Sprint-Nextel
Stocks/ETFs to watch: Sprint Nextel Corp. (NYSE:S). Competitors: Verizon (NYSE:VZ), AT&T (NYSE:T), Qwest Communications (NYSE:Q). ETFs: Wireless HOLDRs (NYSEARCA:WMH), Telecom HOLDRs (NYSEARCA:TTH), Vanguard Telecom Services ETF (NYSEARCA:VOX)
Conference call transcripts: Q1 2007


EBay Drops Out of Google's AdWords

EBay has pulled its ads from Google's AdWords network in what it called its "constant experimentation to see what works best." But people familiar with the situation say the removal was at least in part retaliation for Google's "Freedom Party" scheduled for Thursday night that conflicts with eBay's Live conference, the Wall Street Journal reports. The "freedom" theme, the Journal says, is in reference to Google's effort to have eBay indicate on its auction pages whether the seller accepts Google's Checkout online payment, which directly competes with eBay's Paypal. On Wednesday, Google cancelled the event, saying: "After speaking with officials at eBay, we at Google agreed that it was better for us not to feature this event during the eBay Live conference." An eBay representative described the ad pull as non-permanent. The eBay 14 06 2007 Chart Google 14 06 2007 ChartJournal says it is unclear if and when the eBay ads might return in light of Google's backing down. NetRatings estimates eBay was the #1 AdWords advertiser in Q1 2007. EBay has said it is exploring other options to drive traffic to its site, and has a deal to place ads with Yahoo on its U.S. sites.
Sources: Wall Street Journal
Commentary: Can Online Publishers Take Back Control From Ad Networks?eBay : Coming Up Short in a Bull MarketGoogle Checkout May Be a Dud
Stocks/ETFs to watch: Google Inc. (NASDAQ:GOOG), eBay Inc. (NASDAQ:EBAY), Yahoo! Inc. (NASDAQ:YHOO)
Conference call transcripts: Google Q1 2007, eBay Q1 2007


Liberty Media/EchoStar May Make Surprise Bid for Satellite Service Provider -- WSJ

Liberty Media and EchoStar Communications will make a surprise joint bid in the auction of satellite provider Intelsat, which ends today, the Wall Street Journal reports. People familiar with the matter say Intelsat is expected to draw bids between $4.5 and $5.5 billion. Liberty and EchoStar each run satellite-to-home TV broadcast systems that compete. But the sources say the companies are now looking to cut costs by cooperating, and Intelsat ownership would provide substantial savings for both companies. Intelsat is the industry leader in providing satellite services, and its main customers are cable broadcasters, who compete with companies like Liberty and EchoStar -- which will likely raise regulatory flags. The sources say that since Intelsat's and Liberty/EchoStar's segments are different (satellite broadcast vs. satellite services), Intelsat's owners believe the bid would gain regulatory approval. Liberty is slated to take over satellite-broadcaster DirecTV in the coming Liberty Media 14 06 2007 Chart EchoStar 14 06 2007 Chartmonths, and the joint venture could pave the path for EchoStar/DirecTV cooperation or even a merger -- a proposal strongly opposed by consumer groups. All interested parties declined to comment.
Sources: Wall Street Journal
Commentary: DirecTV, EchoStar Enjoy Free Cash Flow GrowthConsumer Spending Uptick Points to Satellite TVTiVo vs Echostar: The Court Wants an Explanation
Stocks/ETFs to watch: Liberty Media Capital (LCAPA), EchoStar Communications Corp. (NASDAQ:DISH), DirecTV Group Inc. (DTV). Competitors: Time Warner Inc. (NYSE:TWX), Comcast Corp. (NASDAQ:CMCSA), Cablevision Systems Corp. (NYSE:CVC), CBS Corp. (NYSE:CBS)
Conference call transcripts: EchoStar Communications Q4 2006, DIRECTV Q1 2007


Marriott and Schrager to Develop Boutique Hotel Chain

Hotel group Marriott International is expected to announce Thursday that it is developing a boutique hotel chain with hotelier Ian Schrager, according to the Wall Street Journal. Financial terms were not disclosed. MAR 14 June 2007Schrager will design, market and brand the hotels and Marriott will operate them. The partnership is viewed by some as curious, since Marriott's conservative image -- typified by its flagship Ritz-Carlton -- differs from the "style-driven" approach Schrager has taken in his properties. The hotels will be owned by third parties who will pay fees to both Marriott and Schrager. Marriott plans to sign five hotel deals by the end of 2007 with an ultimate goal of 100 hotels under development around the world over the next decade. In the 1970s and 1980s, Schrager and then-business partner Steve Rubell ran New York nightclub Studio 54. He eventually served time for tax evasion. On his release, he opened stylish, upscale boutique hotels in New York, Miami and Los Angeles. "We just knew it was time for us to get into that space and we wanted to do it with somebody who really knows how it works," said Marriott Chairman and CEO J.W. "Bill" Marriott Jr.
Sources: Wall Street Journal, Reuters
Commentary: Eight Hotel Stocks To Watch This SummerCramer's Take on MAR
Stocks/ETFs to watch: Marriott International, Inc. (NASDAQ:MAR). Competitors: Starwood Hotels & Resorts Worldwide, Inc. (NYSE:HOT), Hilton Hotels Corp. (NYSE:HLT), Intercontinental Hotels Group plc (NYSE:IHG). ETFs: Consumer Discretionary SPDR ETF (NYSEARCA:XLY), PowerShares Dynamic Consumer Discretionary (NYSEARCA:PEZ), Vanguard Consumer Discretionary VIPERs (NYSEARCA:VCR)


Upcoming UAW Negotiations 'Do or Die' For Detroit's Big Three

Industry experts are going as far as to call next month's talks between the Big Three U.S. automakers and the United Auto Workers Union [UAW] 'do or die' for the U.S. auto industry. With the three bleeding large amounts of red ink (Ford has mortgaged many of its assets in hopes it can become profitable), and the U.S. auto industry in the midst of its worst crisis in decades, it will need to win massive concessions from UAW President Ron Gettelfinger, with auto workers agreeing to a $25-$30/hour cut in compensation and benefits. In addition, the Big Three will attempt to pass on to the union (through the establishment of a union-run healthcare fund) more than $110 billion in long term healthcare liabilities currently being saddled by the automakers. Gettelfinger suggested in March that the Union already agreed to sufficient healthcare cuts in 2005, saving the auto companies billions, and that further concession were unfair and unlikely to be agreed to by the UAW's rank and file. GM compensates its workers $73 an hour in salary and benefits versus the just $48 an hour Toyota lays out for its employees. If the Big Three can't get the UAW to agree to cut costs on pare with Japan's Big Three, it is unclear how much longer they can avoid bankruptcy.
Sources: Wall Street Journal, AP, Reuters I II,
Commentary: Big 3 May Propose UAW-Run Health Fund In Talks Next MonthAre Domestic Auto Manufacturers Losing Consumer Interest?Note to US Auto Manufacturers - Adapt or Die
Stocks/ETFs to watch: General Motors (NYSE:GM), Ford (NYSE:F), Chrysler (DCX). Competitors: Toyota (NYSE:TM), Honda (NYSE:HMC), Nissan (OTCPK:NSANY)
Conference call transcripts: General Motors Q1 2007 Earnings Call TranscriptFord Motor Q1 2007 Earnings Call TranscriptDaimlerChrysler Q1 2007 Earnings Call Transcript


Bear Stearns Hedge Fund Facing Mortgage Losses -- WSJ

In what some observers are calling an ominous sign for the mortgage-backed bond market, a hedge fund run by investment bank Bear Stearns is racing to sell large quantities of those securities, according to the Wall Street Journal. BSC 14 June 2007Many of the bonds in question are backed by subprime mortgages. The bank's High-Grade Structured Credit Strategies Enhanced Leverage Fund, together with a sister fund, is facing serious losses and probable margin calls. The fund is trying to raise cash by selling approximately $4 billion in mortgage-backed bonds, valued individually between $1 million and almost $110 million. If the sale fails, the fund might be shut down. The amount to be sold represents a small portion of the $7 trillion residential mortgage-backed bond market, but it is a great deal to be sold at one time. Bids for the bonds are due at 10:00 a.m. Thursday, the same day Bear Stearns will post quarterly results. Analysts are forecasting a 6% drop in fiscal Q2 earnings from a year ago, in part because of the bank's exposure to mortgage-backed bonds. Last month, Swiss bank UBS AG shut down internal hedge fund Dillon Read Capital Management after bad mortgage trades led to a $124 million loss.
Sources: Wall Street Journal, Reuters
Commentary: I-Banks At Risk From Hedge Fund Over-Exposure?Bear Stearns' Profits Rise 8% Despite Housing SlowdownBear Stearns Criticized For Helping Delinquent Subprime Borrowers
Stocks/ETFs to watch: Bear Stearns Companies Inc. (NYSE:BSC). Competitors: Goldman Sachs Group Inc. (NYSE:GS), Lehman Brothers Holdings Inc. (LEH), Merrill Lynch & Co. Inc. (MER). ETFs: iShares Dow Jones US Broker-Dealers (NYSEARCA:IAI), KBW Capital Markets ETF (NYSEARCA:KCE)


FDA Panel: Sanofi-Aventis Has Not Shown Acomplia to Be Safe

An FDA advisory panel said unanimously on Wednesday that pharmaceutical company sanofi-aventis has failed to demonstrate the safety of its experimental obesity medication Acomplia (rimonabant). As the FDA generally follows the recommendations of its panels, it is now believed unlikely to approve the drug before studies of rimonabant are completed in 2010. SNY 14 June 2007Studies showed patients on Acomplia to have twice the likelihood of psychiatric side effects, including depression, insomnia, and suicidal anxiety, than patients on placebo. The drug is already approved for use in Europe, but its reception has been tepid. The panel's decision is a blow to sanofi, which had been counting on U.S. sales to account for most of Acomplia's revenue. In February, the FDA rejected Acomplia as a smoking-cessation treatment. The agency said Acomplia did help patients lose an average of 15 pounds, but the benefit of such weight loss in reducing cardiovascular and other health problems remains unproven, and the risks might outweigh the benefits in any case. The FDA is expected to make a final decision on Acomplia on July 27. Sanofi shares fell 3% to $43.07 on the news and another 2.4% to $42.05 after hours.
Sources: Press release (.pdf), Forbes, MarketWatch, Wall Street Journal, Bloomberg, TheStreet.com
Commentary: FDA: Sanofi's Acomplia Has Suicide RiskThe Bad News is Out on Sanofi-Aventis' Weight Loss DrugBiotech Day In Review: Another Setback for Acomplia from Sanofi-Aventis
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)


Fed's Beige Book: Economy Growing at Moderate Pace

In the Fed's Beige Book on regional economic activity, released Wednesday, economic growth was shown to have picked up in the period from mid-April through the end of May. Stocks rallied on the report, with the DJIA adding over 180 points for its best one-day gain of the year. Bond yields retreated from 5-year highs on easing concerns about inflation. Seven of 12 federal districts reported modest or moderate growth with the remainder posting growth that was moderately strong. Overall wage pressures did not grow in the period. Energy products reflected "significant" price increases, but overall price pressures did not get worse. Residential real estate and construction continued to be weak, but the commercial real estate sector is gaining strength. Housing markets were weak almost across the board and no district reported growth in new home construction. Consumer spending, which constitutes two-thirds of the nation's output, and retail sales were both stronger during the period. Inflation numbers will be released Friday, the day June options expire.
Sources: Beige Book report, MarketWatch I, II, Reuters
Commentary: David Fry's Market Outlook for ThursdayWhy Bond Yields Are A Sextuple ThreatIs the Bond Market Sending Us Another Clue About Liquidity?
Stocks/ETFs to watch: ETFs: S&P 500 Index (NYSEARCA:SPY), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Lehman Aggregate Bond (NYSEARCA:AGG), iShares Lehman TIPS Bond Fund (NYSEARCA:TIP)


U.S. Market: The Genius of Bill Gross
Housing: Are Long Term Interest Rates Breaking Out?
Long Idea: Finding the 'Mythical' 100-Bagger
Short Idea: Amazon.com: Why Now Might Be the Time to Short
Internet: eBay Shares Reasonably Priced - But Without Margin of Safety
Telecom: XO Holdings: The Most Undervalued Telecom Stock?
Networking: IBM's Winning Networking Strategy
Hardware: Syntax-Brillian: The Future Looks Crystal Clear
Chips: Semiconductors: Breakout of FTTH Silicon Market Share
Software: Trouble in Paradise: Security Experts Find Multiple Bugs in Apple's Safari
Gadgets: IPhoned: When the Hype Wears Off, There Are Real World Issues
Media: Dow Jones' Bancrofts 'Refine' Proposal to Murdoch: Are They Just Stalling?
Healthcare: Visicu, Inc.: Just Own the Stock and Wait
Biotech: Genotyping Opportunity Knocks For Glaxosmithkline's Avandia
Retail: Hasbro: Ahead of the Game Through Licensing and Co-Branding
Transport: Toyota: A Lesson in Fast Market Response
Gold: Interest Rates Rising, Gold Declining: What Am I Missing?
Energy: sxr Uranium One: The Newest Uranium Major
Financial: Overlay: The Wild Card Of the Hedging Lexicon
Asia: Scotia Capital: Japan's Monetary Policy Key For Global Equity Performance
ETFs: A World Market Cap Approach to Allocation
Small-Caps: Nova Biosource Fuels: Long-term Prospects Outweigh Short-term Volatility
IPO Analysis: Recent IPO Cavium Networks: Great Technology, High Price Tag
Sound Money Tips: Protect Yourself from Illegal Hiring Practices
Jim Cramer: Latest stock picks
Earnings Transcripts: Chindex F4Q07
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