Dow Jones Board Takes Over News Corp. Talks; MySpace Founder Makes an Offer
The Wall Street Journal reports that the Dow Jones board will take over negotiations on the company's future from the Bancrofts, the company's controlling family. The board says it will evaluate all strategic possibilities, including staying independent. The shift is expected to hasten a decision regarding Rupert Murdoch's $5 billion ($60/share) offer for the company, which some members of the family, along with many employees, have been resisting on concerns about how to safeguard the Journal's editorial integrity. The family is divided on the sale, and the rift threatened to prolong a decision indefinitely. In related news, MySpace founder Brad Greenspan has offered $60 per share for 25% of Dow Jones. His object is to allow those family members who want to sell to do so without turning over the whole company to Murdoch. Murdoch purchased MySpace parent Intermix Media in 2005, a sale Greenspan opposed. In addition, former Dow Jones executive and 5.2% shareholder James Ottaway Jr. expressed his preference for a sale to Pearson and GE, which have been exploring a possible joint bid. "If the Bancroft family has decided to sell or bring in partners, GE and Pearson would be much better owners and/or partners than News Corp.," Ottaway said in an email.
Sources: Wall Street Journal, Reuters, Bloomberg I, II, CNN.com
Commentary: As The Dow Jones Turns: Board Seizes Rupert Negotiations • Pearson and GE Considering Joint Bid for Dow Jones • Burkle and Yahoo Might Bid for Dow Jones - Fortune
Stocks/ETFs to watch: Dow Jones & Company, Inc. (DJ), News Corp. (NASDAQ:NWS), Pearson PLC [ADR] (NYSE:PSO), General Electric (NYSE:GE). ETFs: PowerShares Dynamic Media Portfolio ETF (NYSEARCA:PBS)
Conference call transcripts: Dow Jones Q1 2007, News Corporation F3Q07
CEO Stringer Declares Sony is Shifting to 'Profitable Growth'
"We will shift Sony from recovery to profitable growth," said Sony chief Howard Stringer at the company's annual shareholder meeting. Shareholders were skeptical, however, pressing Stringer for a clear strategy for PS3 profitability and beating Apple's iPod. Stringer said Sony has spent two years rebuilding software development strategies and vowed "not to make the same mistake again," referring to the iPod's dominance over its Walkman. As for the PlayStation 3, Stringer emphasized turning profitable via software sales and said a comeback is already underway. Sony expects 380 new PS3 games by March 2008, to add to the 100-plus on the market now. Shares struggled in Thursday trading, losing 1.5% to ¥6,520 ($52.73 ADR equiv. at ¥123.65/$1), while Nintendo reached a new all-time intra-day high, but closed lower by 0.5% to ¥44,300 ($44.78). Reuters reports Nintendo surpassed consumer electronics giant Matsushita in market cap (¥6.276t [$50.8b] vs. ¥6.157t) and is quickly closing in on Sony (¥6.539t [$52.9b]). Both companies have sales more than eight times Nintendo's.
Sources: Associated Press, Reuters I, II, XFN-Asia newswire
Commentary: The Day Sony's Music Business Died • Blockbuster Chooses Sony's Blu-ray Over Microsoft's HD DVD • Sony’s Online Games Division Ready to Break Out of the Shadows • Nintendo Closes at New All-Time High on Mizuho Target Boost, Weak Yen
Stocks/ETFs to watch: Sony (NYSE:SNE), Nintendo (OTCPK:NTDOY). Competitors: Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Activision (NASDAQ:ATVI), Electronic Arts (ERTS), Konami (NYSE:KNM), Take Two (NASDAQ:TTWO), THQ (THQI). ETFs: BLDRS Asia 50 ADR Index (NASDAQ:ADRA), iShares S&P/TOPIX 150 Index (NYSEARCA:ITF), iShares MSCI Japan Index (NYSEARCA:EWJ)
Conference call transcripts: Sony F4Q06
Apple Announces iPhone, TV Access to YouTube
With a little over a week until its much anticipated release, Apple announced Wednesday that the iPhone will have the ability to wirelessly stream content from YouTube over WiFi or AT&T's EDGE network. Apple also said YouTube content will be made available on Apple TV via a free software update. On Tuesday Apple announced enhanced battery specs for the iPhone, which sent its shares up nearly 4%. Wednesday, however, shares fell 1.7% to $121.55, amid broad market weakness. Google, which owns YouTube, lost 0.8% to $509.97. In a press release, Apple said YouTube has begun encoding its videos in the advanced H.264 format for higher quality and longer battery life on mobile devices. The iPhone will be the first device to use the format, with more than 10,000 videos expected to be ready by its scheduled June 29 release and their full catalog accessible by autumn. Prior to YouTube's new mobile format, Verizon Wireless had an exclusive deal to offer select YouTube videos on its phones.
Sources: Press release, Reuters, TheStreet.com
Commentary: History Calls Apple Inexpensive • Will Google Merge With Apple? • Is Google Monetizing YouTube?
Stocks/ETFs to watch: Apple Inc. (AAPL), Google Inc. (NASDAQ:GOOG), AT&T Inc. (NYSE:T). Competitors: Verizon Communications (NYSE:VZ), Vodafone Group Plc (NASDAQ:VOD), Motorola Inc. (MOT), Research In Motion Limited (RIMM), Palm, Inc. (PALM), Microsoft Corp. (MSFT). ETFs: PowerShares QQQ (QQQQ), Technology Select Sector SPDR (NYSEARCA:XLK), Internet Architecture HOLDRs (NYSE:IAH), First Trust Dow Jones Internet Index (NYSEARCA:FDN)
Conference call transcripts: Apple F2Q07, Google Q1 2007
Yahoo Snaps Up Collegiate Athletics Site Rivals.com For Undisclosed Sum
On his second day in office, Yahoo's new CEO Jerry Yang inked a deal to buy collegiate athletics site Rivals.com for an undisclosed sum. AP writes that the fact the terms aren't being disclosed is "an indication that the sales price is too small to dent Yahoo's finances." The deal puts Yahoo into direct competition with News Corp.-owned rival college sports website, Scout.com. Last September, Rivals.com pulled in site traffic of 2.57 million visitors, versus 2.29 million for Scout.com. News Corp. recently offered to swap social networking site MySpace in exchange for a 25% stake in Yahoo. Yahoo's latest acquisition should help Yahoo Sports cut into the approximately two million-a-month visitor traffic lead over it held by Disney-owned mega sports site ESPN.com.
Sources: Press Release, AP, Reuters, MarketWatch
Commentary: Google Dominates as Users Move to Search for Navigation -- Hitwise • MySpace for 30% of Yahoo Seems Like a Bad Deal • Yahoo Shakeout: CEO Semel Out, Co-Founder Yang In
Stocks/ETFs to watch: Yahoo! (NASDAQ:YHOO). Competitors: News Corp. (NWS), Disney (NYSE:DIS), Google (GOOG). ETFs: Internet HOLDRs (NYSE:HHH), First Trust Dow Jones Internet Index (FDN)
Conference call transcripts: Yahoo! Q1 2007
Related: Rivals.com • Yahoo! Sports
TRANSPORT AND AEROSPACE
Boeing, Airbus Duel Continues at Paris Air Show
Airbus continued to record big orders for its aircraft on day-three at the Paris Air Show. Boeing was relatively quiet, aside from a three-plane NATO deal and an order from Air France-KLM previously booked as an "unidentified customer." Meanwhile, rhetoric intensified over a forthcoming U.S. Air Force tanker contract decision, given its size of up to $40 billion and the possibility of winning orders from U.S. allies. The Wall Street Journal reports there are indications the Air Force might not be inclined to pick a clear winner. Boeing is the favorite based on experience, but it has recently encountered development delays, and was involved in an earlier corruption scandal. Airbus, which has partnered with Northrop Grumman, is new to tankers. Air Force Secretary Michael Wynne said there is no budget to split the initial purchase between the rivals, but he wants to keep that option open. An analyst at a U.S. aerospace consultancy called Airbus' latest A350 XWB orders "peripheral," saying, "These are not the blue-chip carriers they need to endorse it."
Sources: Dow Jones-AP, Reuters, Wall Street Journal I, II
Commentary: ILFC Places Big Order with Boeing, Favors 787 Over A350 • Airbus Flies High at Paris Air Show; Delta, Boeing Negotiate $20B Order • Boeing Announces 737/777 Orders, Aerospace MOU with Abu Dhabi
Stocks/ETFs to watch: Boeing (NYSE:BA), EADS (Paris: 005730), Northrop Grumman Corp. (NYSE:NOC), Lockheed Martin Corp. (NYSE:LMT), General Electric Co. (GE). ETFs: iShares DJ US Aerospace & Defense (NYSEARCA:ITA), PowerShares Aerospace & Defense (NYSEARCA:PPA)
Conference call transcripts: Boeing Q1 2007, General Electric Q1 2007
Related: Paris Air Show Notebook [WSJ]
Western Union Drops After Verizon Announces Wireless Payments and Transfers
Western Union shares fell 5.5% Wednesday after Verizon Wireless announced subscribers would soon be able to transfer funds and pay for purchases using their cell phones. Verizon said it was partnering with Obopay Inc.; purchases and transfers will be charged against a prepaid Obopay Mastercard. Users will also be able to check account balances, view transaction histories, and collect money from other mobile users. Western Union spokeswoman Sherry Johnson called the new technology "interesting" and said the company was looking at implementing its own version of mobile money transfers. UBS analyst Adam Frisch said in a research note that the move may signal increased competition in the future: "If this announcement makes other carriers announce similar deals, then it could be a very challenging time for traditional" companies such as Western Union. The Wall Street Journal reports that investment firm Morgenthaler Ventures is expected to announce Thursday it will back the U.S. subsidiary of Korean Danal Co., which lets users pay for shopping with their cell phones. Research firm Celent LLC says global mobile commerce will hit $55 billion in 2008, up from $24B in 2006. Separately, Wal-Mart announced Tuesday it will open financial-service centers in 1,000 stores by the end of 2008. Wal-Mart charges about 50% less for services like check-cashing -- likely bad news for Western Union and competitors like Moneygram International and First Data.
Sources: Verizon press release, Denver Post, BusinessWeek, Wall Street Journal
Commentary: Western Union Is Ready To Roll • Western Union: Like Wiring Money Into Your Portfolio • Western Union Wired for Growth -- Barron's
Stocks/ETFs to watch: The Western Union Co. (NYSE:WU), Verizon Communications Inc. (VZ), Moneygram International Inc. (NASDAQ:MGI), First Data Corp. (FDC), Wal-Mart Stores Inc. (NYSE:WMT)
Related: Obopay website
J.P. Morgan Holds Off on Bear Fund Asset Auction
J.P. Morgan, a creditor of two collapsing Bear Stearns hedge funds, canceled its $400 million auction of seized collateral minutes before it started on Wednesday afternoon. The collateral consists primarily of mortgage-backed securities. Morgan reached an agreement with Bear by which it will unwind its positions, meaning it will sell the assets back to Bear for an undisclosed amount of cash. The 'fire sale' atmosphere sent prices downward for similar securities and took the LCDX, a month-old derivatives index tied to junk-rated corporate loans, to its eighth-straight decline and a new low of 99.05. The ABX derivatives index fell to a record low of 59.25. Many of the Bear funds' assets are collateralized debt obligations, or CDOs, complex securities that pool mortgage-backed bonds with other debt instruments, that were backed by subprime mortgages. Because CDOs trade infrequently, they are difficult to price, and values are assigned to them. If they flood the market, however, they must be revalued. Widespread repricing could cause a domino effect of fund liquidations. "People are nervous," said investment manager Jeffrey Gundlach. "Do you want to be the first one out and perhaps cause the lows to be hit in the market, or do you want to wait and see how this all plays out?"
Sources: Wall Street Journal, Reuters, CNBC, New York Post, Financial Times, New York Post
Commentary: Bear Stearns Blowout: Who Will Buy These Assets? • Two Bear Stearns Hedge Funds on Brink of Closure • Bear Stearns Hedge Fund Facing Mortgage Losses -- WSJ
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)
Nuveen Investments to Be Acquired for $5.75 Billion
Shares of Nuveen Investments gained $8.98 to close at $63.14 Wednesday on news it has agreed to be acquired by Madison Dearborn Partners LLC for $5.75 billion. Madison Dearborn will pay $65 per share in cash for Nuveen, a 20% premium to Tuesday's close. The purchase is the biggest-ever asset management LBO. "What really attracts private-equity firms is that asset management firms throw out so much cash," said Ben Phillips, MD of Putnam Lovell NBF Securities. "Nuveen has very high asset margins." The company also owns the ETF Connect website. Nuveen traded at 22x earnings prior to the buyout, ahead of Goldman's 11x but behind the 30x of the S&P Midcap Asset Management & Custody Banks Index. Investment manager James Ellman believes Madison Dearborn is getting a bargain: "[T]he deal could have easily been worth 40% more." Nuveen is selling at 16x trailing Ebitda, leading financial blogger Rick Konrad to note that asset management companies Legg Mason (11x) and Federated (11.3x) look cheap by comparison.
Sources: Bloomberg, MoneyCentral, MarketWatch, Seeking Alpha
Commentary: Nuveen To Be Taken Private: CEF Streamlining To Follow? • Nuveen Acquisition: Will An ETF Provider Jump In? • Nuveen, Top-Ticking the Market [WSJ MarketBeat]
Stocks/ETFs to watch: Nuveen Investments, Inc. (JNC), Legg Mason (NYSE:LM), Federated (NYSE:FII). Competitors: BlackRock, Inc. (NYSE:BLK). ETFs: Financial Select Sector SPDR ETF (NYSEARCA:XLF), PowerShares Financial Preferred Portfolio (NYSEARCA:PGF), iShares Dow Jones US Financial ETF (NYSEARCA:IYF)
Related: ETF Connect
MetLife Forecasts Disappointing 2007 Operating EPS
Shares of U.S. life insurance company MetLife were off 2.2% to $64.98 Wednesday after the company provided 2007 earnings guidance below expectations. The company is projecting full-year operating earnings (which exclude investment gains and losses) in the $5.05-5.30 range. Last year, the company posted operating earnings of $5.21. Analysts had been expecting $5.46. MetLife also forecast 2007 return on equity of 12.1-12.7%, shy of prior analyst expectations of 12.75%. In an SEC filing ahead of an investor presentation (see link to slide show below), the company said it reduced its exposure to the residential mortgage-backed securities market by 25% between late 2005 and Q1 2007, and classified its exposure to subprime lenders as "minimal." The company holds $2.6 billion worth of higher quality collateral. According to CEO C. Robert Henrikson, MetLife will likely benefit from changes in accounting rules and pension legislation. At the presentation, CFO William J. Wheeler said MetLife might be interested in making acquisitions. "We are in a lot of different businesses domestically and we like almost every business we are in, so there are a lot of potential targets," he said. Dow Jones mentions Unum Group as a potential target.
Sources: Reuters, Forbes, Dow Jones
Commentary: 1Q07 Insurance Earnings: What's Working, What's Not • MetLife Beats Street on Operating EPS • Big Pay Day for MetLife: NYC Property Sells for $5.4 Billion
Stocks/ETFs to watch: MetLife, Inc. (NYSE:MET), Unum Group (NYSE:UNM) Competitors: Allianz SE (AZ), American International Group, Inc. (NYSE:AIG), Prudential Financial Inc. (NYSE:PRU). ETFs: KBW Insurance ETF (NYSEARCA:KIE), iShares Dow Jones US Insurance (NYSEARCA:IAK), Rydex S&P Equal Weight Financials (NYSEARCA:RYF)
Related: MetLife SEC filing (slide show)
Coley Pharma Falls 60% On Pfizer Cancellation of Lung Cancer Trials
Pfizer announced Wednesday it was discontinuing all trials of experimental lung cancer drug PF-3512676 after an independent data safety monitoring committee determined chemotherapy was equally effective with or without use of the drug. The drug had been licensed from small cap biopharma firm Coley Pharmaceutical Group. Four trials were canceled in all, including two late-stage and two mid-stage. Coley Pharma shares fell nearly 60% on the news; Pfizer shares fell 1.9% amid widespread market losses Wednesday. In another blow to Pfizer, the FDA delayed the approval of its HIV drug maraviroc, believed capable of bringing in $500 million a year in sales. It was widely believed the FDA would approve the drug this week. The agency instead presented Pfizer with an 'approvable letter,' which means the FDA believes a product is worthy of approval, but still needs additional information.
Sources: Press release, Reuters, AP, Wall Street Journal, CNBC.com
Commentary: Monogram’s Drug Resistance Tests Used By Pfizer • Pfizer's Maraviroc Suppresses AIDS Virus in Clinical Trial • Pfizer's Axitinib Shows Positive Results Against Pancreatic Cancer in Phase II Trial
Stocks/ETFs to watch: Pfizer (NYSE:PFE), Coley Pharmaceutical Group (COLY). Competitors: Amgen (NASDAQ:AMGN), Bristol Myers Squibb (NYSE:BMY), Glaxosmithkline (NYSE:GSK), Eli Lilly (NYSE:LLY), Teva (NYSE:TEVA), Merck (NYSE:MRK), Schering-Plough (SGP), Sanofi-Aventis (NYSE:SNY), AstraZeneca (NYSE:AZN). ETFs: iShares Dow Jones US Pharmaceutical Indx (NYSEARCA:IHE), Pharmaceutical HOLDRS (NYSEARCA:PPH), Vanguard Health Care ETF (NYSEARCA:VHT)
Sanofi-Aventis Faced with Possible Stake Sales
Shares of pharmaceutical company sanofi-aventis hit a two-year low Wednesday, in part on concerns two of its biggest shareholders will sell their stakes now that sanofi has won its patent-protection lawsuit regarding its blockbuster Plavix. Merrill Lynch said in a note that a "further cap on the share price is likely to be the increased likelihood that major shareholders Total and L'Oreal ... now divest their stakes." Christophe de Margerie, CEO of the Total oil company, said Wednesday his company has "a mission to sell" its 13.12% stake in sanofi now that the Plavix case is resolved and will do so "in the near term." Cosmetics manufacturer L'Oreal, however, which holds 10.6% of sanofi, said its stake is "not strategic, it's historical...A share sale is not imminent." Sanofi shares reacted positively to Tuesday's news of the patent win, but retreated on speculation the company might buy marketing partner Bristol-Myers Squibb and concerns over the share sales. Separately, after an FDA panel recently voted against recommending approval for sanofi's obesity drug Acomplia on concerns over psychological side effects, Wednesday a German court concurred with Germany's Joint Committee (a group of doctors and insurers who provide drug recommendations) that Acomplia should be labeled a "lifestyle" drug, which would render it ineligible for reimbursement.
Sources: Reuters I, II, III
Commentary: Plavix Patent Upheld; Bristol-Myers Shares Rise on Renewed Buyout Chatter • FDA Panel: Sanofi-Aventis Has Not Shown Acomplia to Be Safe • Sanofi Can Blame Itself for FDA Rejection of Acomplia Weight Drug
Stocks/ETFs to watch: sanofi-aventis (SNY), Total S.A. [ADR] (NYSE:TOT), Bristol-Myers Squibb (BMY). Competitors: Eli Lilly & Co. (LLY), Merck & Co. Inc. (MRK), Pfizer Inc. (PFE). ETFs: Pharmaceutical HOLDRs (PPH), iShares Dow Jones US Pharmaceuticals (IHE)
Have Wall Street Breakfast emailed to you every morning before the market opens.