Novellus Posts Slowest Growth in a Year
Chip manufacturer Novellus reported 8.7% growth in Q2 net income, its smallest gain in four quarters, as the industry absorbed excess capacity amid an order slowdown. Profit came in at $57.3 million ($0.45/share) versus $52.7 million ($0.42) in the year-ago quarter, slightly ahead of analyst expectations of $0.43. Revenue was flat at $416.3 million, ahead of Street forecasts of $412.6 million. Q2 bookings dropped 19% to $332.2 million from Q1, and CEO Richard Hill forecasts a similar figure in Q3, "plus or minus 5%." Shipments came in at $436.4 million, up over 12% from Q1. "Bookings and shipments have come in at the low end of our guidance as some absorption of excess capacity is taking place," said Hill. He added that he expects the chip-equipment industry's "pause" in orders to continue for another one or two quarters. The company said last month it is taking steps to manage the decline in demand, including shutdowns and executive pay cuts. Novellus shares gained 1.8% to $29.69 in regular trading Monday and added another 1% to $30.00 after hours.
Sources: Press release, Novellus Q2 2007 Earnings Call Transcript, Bloomberg, TheStreet.com, Reuters
Commentary: Bearish on Semi Equipment Stocks With High Exposure to DRAM Capex • Novellus Lowers Order Guidance As Expected • Semi Equipment Order Downturn Unlikely To Be Just One Month
Stocks/ETFs to watch: Novellus Systems, Inc. (NASDAQ:NVLS). Competitors: Applied Materials Inc. (NASDAQ:AMAT), Semitool Inc. (SMTL), ASM International (NASDAQ:ASMI). ETFs: HOLDRS Semiconductors (NYSEARCA:SMH), iShares Goldman Sachs Semiconductor Index Fund (IGW), PowerShares Dynamic Semiconductor (NYSEARCA:PSI)
Vodafone Denies It's Considering a $160B Bid for Verizon
Mobile phone carrier Vodafone Group is considering a mammoth $160 billion takeover bid for Verizon Communications, its partner in Verizon Wireless, the Financial Times reports on its Alphaville website. UK-based Vodafone in a brief statement Monday denied the report, saying it has no such plans. The plan, according to the FT, would be to spin-off Verizon's fixed-line holdings to private-equity groups in order to focus only on wireless. The FT said Vodafone has not yet approached Verizon, and that there's no certainty it will. A combined Vodafone/Verizon would carry an market cap of about $300 billion, bigger than the world's current number-one telecom carrier AT&T. Shares in Verizon spiked briefly to $47 (+12.5%) on the rumor, but have since retreated to $42, up 0.9%. Vodafone ADRs are off 0.6% to $33.33 in the pre-market.
Sources: FT Alphaville, Reuters
Commentary: Verizon: More Upside Ahead In Wireless • Is Verizon Coming Closer to Owning Verizon Wireless? • Vodafone Activists Should Show More Patience - Barron's
Stocks/ETFs to watch: Verizon Communications Inc. (NYSE:VZ), Vodafone Group plc (NASDAQ:VOD). Competitors: AT&T Inc. (NYSE:T). ETFs: PowerShares Dynamic Telecom & Wireless ETF (PTE), HOLDRS Wireless (NYSEARCA:WMH)
Conference call transcripts: Verizon Q1 2007, Vodafone Group FY 2006
Answers.com to Buy Dictionary.com; Lowers Revenue Guidance
Answers Corp., operator of Answers.com, announced it will purchase privately held Lexico Publishing Group, LLC, owner of Dictionary.com, Thesaurus.com and Reference.com, for $100 million in cash. Its shares were reportedly halted in extended trading after dropping more than 14%. Lexico had revenues of $7m, EBITDA of $2.9m and net income of $2.8m last year. The acquisition is expected to be accretive to 2008 EBITDA. Lexico's web properties, which generate around three times the number of total page views of Answers.com, will remain standalone brands. "Lexico's suite of popular brands, steady direct traffic and loyal users are valuable assets that we believe will reduce our products' reliance on search engine-driven traffic," commented Robert S. Rosenschein, CEO of Answers. In a press release for the acquisition, Answers also downward revised its Q2 (ended June 30) revenue forecast to $2.75-$2.8m, from $2.8-$3.2m previously, citing "more pronounced seasonality" and "slower than anticipated ramp of its direct ad sales effort." Answers lost 0.85% to $12.90 during normal trading.
Sources: Press release, Associated Press, TheStreet.com
Commentary: Why Answers.com Is Not Completely Crazy • Answers Corporation Buys Dictionary.com For the Domain Name • Answers Corp. Buys Dictionary.com For $100m Cash, Then Issues Revenue Warning • Why CNET, TheStreet.com, WebMD, PlanetOut, The Knot and Answers.com Won't Be Acquired
Stocks/ETFs to watch: Answers Corp. (NASDAQ:ANSW). Competitors: Google Inc. (NASDAQ:GOOG), IAC/InterActiveCorp (NASDAQ:IACI), Microsoft Corp. (NASDAQ:MSFT), Yahoo! Inc. (NASDAQ:YHOO)
News Corp. and Dow Jones Reach Tentative Deal -- WSJ
The Wall Street Journal reports that Rupert Murdoch has reached an agreement in principle to buy Dow Jones at his original bid of $5 billion, a 67% premium to the shares' level before the offer was announced in April. The agreement will go to the Dow Jones board Tuesday for approval. The two sides conducted a round of negotiations Monday at which Murdoch declined to sweeten his offer. Michael B. Elefante, lead trustee of the controlling Bancroft family, will present the deal to them on Thursday. The Bancrofts, who hold 64% of the company's voting shares but are not obliged to vote together, will be given a few days to deliberate. Dow Jones CEO Richard F. Zannino considers the decision of the family, which is sharply divided on the matter, too close to call. Dow Jones director Christopher Bancroft, who controls about 15% of the company's shareholder votes, has been approaching hedge funds and other investors in a bid to accumulate enough super-voting shares to stop the sale. Director Leslie Hill, another family member whose mother controls about 15% of the votes, also opposes the sale and has urged the company to pursue alternative bidders. In related news, Dow Jones announced Tuesday it has increased the universe of company profiles for the Russian and German markets in its Factiva databases to a respective 110,000 and 200,000.
Sources: Wall Street Journal, Financial Times, Chron.com, Dow Jones press release on Factiva
Commentary: Christopher Bancroft Lobbying to Nix Murdoch Deal • Dow Jones' Bancrofts: Time to Get Off The Pot • Murdoch: Dow Jones Bid Stays at $60 per Share
Stocks/ETFs to watch: Dow Jones & Company Inc. (DJ), News Corp. (NASDAQ:NWS). Competitors: Reuters Group PLC [ADR] (RTRSY). ETFs: PowerShares Dynamic Media Portfolio ETF (NYSEARCA:PBS)
Earnings call transcripts: Dow Jones Q1 2007, News Corporation F3Q07
Christopher Bancroft Lobbying to Nix Murdoch Deal
Christopher Bancroft, a member of the family that holds a controlling stake in Dow Jones, is canvassing hedge funds and private equity firms in an eleventh-hour attempt to thwart Rupert Murdoch's $5 billion takeover of the company. The family and the Dow Jones union have responded with apprehension to the prospect of a Murdoch stewardship of the Wall Street Journal, but no viable rival bid has emerged. According to the Journal, Bancroft's object is to buy up super-voting shares, which give the holder ten votes per share rather than one. His campaign is unlikely to target common shares, which could be a serious disappointment to their holders -- many of whom have been anticipating a buyout at $60 per share or higher. The Journal says Bancroft probably does not have time to gather the shares he needs, since Dow Jones and News Corp. are concluding due diligence. He could still get his way, however, if the Bancrofts insist on a sweetener to make the transaction more palatable. Murdoch has indicated he will not raise his bid, creating two possible scenarios: Bancroft naysayers like Christopher and his cousin Leslie Hill could obstruct acceptance of the offer as it stands, or Murdoch could take it off the table.
Sources: Wall Street Journal
Commentary: Dow Jones' Bancrofts: Time to Get Off The Pot • Murdoch Frustrated Over Dow Jones Talks • Burkle and Greenspan Present Alternatives to Murdoch Bid for Dow Jones
Stocks/ETFs to watch: Dow Jones & Company Inc. (DJ), News Corp. (NWS). Competitors: Reuters Group PLC [ADR] (RTRSY). ETFs: PowerShares Dynamic Media Portfolio ETF (PBS)
Earnings call transcripts: Dow Jones Q1 2007, News Corporation F3Q07
TRANSPORT AND AEROSPACE
GM Turns Diesel, Buying a 50% Stake In Italian Engine Maker VM Motori
General Motors will buy a 50% stake in Italian diesel engine maker VM Motori SpA from privately-held Penske Corp. (not to be confused with publicly traded Penske Auto Group) for an undisclosed sum. The transaction is expected to close later this year. With the purchase, GM hopes to gain a bigger presence in fast-growing light commercial vehicle markets in emerging economies. Commercial vehicle sales represent a third of all vehicle sales in the top ten emerging markets. GM and VM Motori have already been cooperating for some time now: the two companies are currently developing a 2.9-liter V6 engine for a European version of the Cadillac CTS sedan. GM already markets a 2.0-liter four-cylinder diesel engine made by VM in some of its Opel, Vauxhall and Chevrolet models sold in Europe. In the North American market, GM also plans to introduce more fuel-efficient diesel models, though more stringent U.S. emissions standards complicate things. GM VP Bob Lutz said last week the company is planning to offer diesel engines in Cadillac and Saturn vehicles as well as SUVs and trucks in the U.S., but warned not to think "that the diesel engine is the panacea and is going to make everybody get to a fleet of 36 miles per gallon and all you have to is convert everything to diesels and you're home free," adding that diesel engines designed to meet U.S. emissions standards will be at least $2,000 more expensive than regular gas engines.
Sources: Wall Street Journal, Reuters, Financial Times, MarketWatch
Commentary: GM, Ford Confuse Investors With The Turnaround Dance • Big Three Automakers Lose Ground to Japanese in June • June U.S. Light Vehicle Sales: Not A Bad Month For Auto Retailers
Stocks/ETFs to watch: General Motors (NYSE:GM). Competitors: Ford (NYSE:F), DaimlerChrysler (DCX), Toyota (NYSE:TM), Honda (NYSE:HMC)
Earnings call transcripts: General Motors Q1 2007
Related: VM Motori SpA
Lear Shareholders Reject Icahn's Revised Bid
A majority of Lear Corp. shareholders rejected Carl Icahn's American Real Estate Partners' [AREP] revised takeover bid of $2.9 billion, or $37.25/share, preferring that Lear continue as a stand-alone company. Lear said it solicited 41 other potential buyers but didn't receive a higher offer. "There is an optimism out there by the shareholders that the tough times are all behind us,'' said Lear CEO Robert Rossiter. "I hope they are right, believe me, but I really think there are some bumps in the road ahead.'' Lear's second largest shareholder, Pzena Investment Management (8.6% stake vs. Icahn's 16%) has said Lear is worth $55-60/share. AREP is entitled to receive $12.5m in cash and 335,570 shares as a breakup fee, and could receive as much as $85m if Lear is sold to another bidder within a year. Icahn called his offer a "full and fair price" and said he intends to hold his shares. Lear's shares have appreciated around 50% since October, when it was announced Icahn would take a $200 million stake in the company. Shares of Lear rose 1.6% to $37.50 on Monday, while AREP fell 5.7% to $97.70.
Sources: Press release, Bloomberg, MarketWatch, Reuters, Wall Street Journal
Commentary: Icahn Raises Lear Bid to $2.9B • ACP: The Icahn Premium is Overdone - Barron's
Stocks/ETFs to watch: Lear Corp. (NYSE:LEA), American Real Estate Partners LP (NYSE:ACP). Competitors: Johnson Controls (NYSE:JCI), Delphi Corp. (OTC:DPHIQ), Visteon Corporation (NYSE:VC)
Barclays to Sweeten Offer for ABN Amro -- FT
Barclays is planning to add cash to its all-stock offer for ABN Amro, according to the Financial Times. The move is a response to the increase by a rival consortium, led by the Royal Bank of Scotland, of the cash portion of its offer from 79% to 93%. That revision was made following the decision by the Dutch Supreme Court permitting ABN to proceed with the sale of LaSalle Bank, an asset RBS was hoping to acquire as part of the larger transaction. "We'd always prefer to get LaSalle but we didn't and it does not undermine the rationale for the rest of the transaction," said RBS CEO Sir Fred Goodwin. Several major Barclays shareholders question the wisdom of Barclays' acquisition of ABN. "Our view is that graceful withdrawal is the best option for Barclays management as to match or better the offer would be value destructive," said Robert Talbut, CIO of shareholder Royal London Asset Management. Some RBS investors, too, are wondering why RBS is still interested in ABN now that one of its primary assets is off the table. Barclays might use prearranged sales of ABN assets, like its Italian and Brazilian units, as a means of raising cash for a sweetener, although Barclays has said part of the point of buying ABN is to expand in those markets. If it does go that route, it might have a buyer in BNP Paribas, which wants to continue its expansion in Italy.
Sources: Wall Street Journal, Financial Times
Commentary: RBS Consortium Ups Cash Ante for ABN Amro • Atticus Capital: We Can Block Barclays' Bid for ABN • Barclays Might Sweeten Bid for ABN -- FT
Stocks/ETFs to watch: ABN Amro Holding N.V. (ABN), Barclays PLC (NYSE:BCS), Bank of America Corp. (NYSE:BAC), Royal Bank of Scotland Group plc [ADR] (RBSPY.PK), Fortis NV [ADR] (FORSY). Competitors: HSBC Holdings plc ADR (HBC), Deutsche Bank AG (NYSE:DB), UBS AG (NYSE:UBS). ETFs: iShares MSCI Netherlands Index (NYSEARCA:EWN), streetTRACKS KBW Bank (NYSEARCA:KBE), HOLDRS Regional Bank (NYSEARCA:RKH)
Novartis Beats, But Lowers Full Year Outlook
Despite an 18% rise in Q2 profits, Swiss drugmaker Novartis AG trimmed its sales outlook for F2007 to low-single-digit growth for its pharmaceuticals division and mid-single digit growth for continuing operations, due to a slowdown in revenue from prescription drugs. Shares were lower by 1.03% in pre-market action on the NYSE, as of 6:23 a.m. EST. In its latest quarter, net profit rose to $2.01 billion, on a 10% gain in revenue, to $10.12 billion. Analysts were expecting net profits of just $1.91 billion. Profits from generics rose 17%, while non-generic pharmaceuticals operating profits rose just 5%, a result of declining operating margins.
Sources: Press Release, Wall Street Journal, Reuters, Bloomberg, MarketWatch, Dow Jones Newswire [check back later today for NVS' latest conference call transcript]
Commentary: Novartis: A Dividend Payer With Foreign Currency Exposure • Novartis Beats Street with 11% Q1 Profit Jump • Cramer's Take on NVS
Stocks/ETFs to watch: Novartis AG (NYSE:NVS). Competitors: Roche Holding Ltd. [ADR] (OTCQX:RHHBY), Merck & Co. Inc. (NYSE:MRK), GlaxoSmithKline plc [ADR] (NYSE:GSK), Sanofi-Aventis [ADR] (NYSE:SNY). ETFs: Pharmaceutical HOLDRs (NYSEARCA:PPH), Market 2000 HOLDRs (NYSEARCA:MKH), Europe 2001 HOLDRs (NASDAQ:EKH)
J&J Lands FDA Approval for Breast Cancer Test
A Johnson & Johnson test manufactured by its Veridex unit has been approved by the FDA to determine whether a patient's breast cancer has metastasized into her lymph nodes. This is the first time a molecular-based lab test has been approved for this purpose. During clinical trials of 416 patients, the test -- the GeneSearch Breast Lymph Node [BLN] Assay-- correctly spotted almost 88% of women whose cancer had spread to the nodes and 94% of women whose cancer had not metastasized. "Results of this rapid test are available while patients are on the operating table, providing a way for some women to avoid a second operation," said Dr. Daniel Schultz, director of the FDA's Center for Devices and Radiological Health. Veridex calculates the number of women who can be spared a second procedure at up to 5,200 per year. The test does not show how big the tumors are or how many there are, which led some members of an FDA advisory panel in November to ask how it can help to determine the care a patient should receive. An estimated 180,000 American women are expected to be diagnosed with breast cancer this year and 41,000 are forecast to die of the disease.
Sources: Press release (FDA), Press release (Johnson & Johnson), Dow Jones, Reuters
Commentary: Johnson & Johnson: A Definite Buy at Current Price Levels • Johnson & Johnson to File for Approval for Five New Drugs in 2007 • Johnson's Cordis Unit Resolves Stent Issues With FDA
Stocks/ETFs to watch: Johnson & Johnson (NYSE:JNJ). Competitors: Merck & Co. Inc. (MRK), Novartis AG (NVS), Procter & Gamble Co. (NYSE:PG). ETFs: Health Care Select Sector SPDR (NYSEARCA:XLV), Pharmaceutical HOLDRs (PPH), PowerShares FTSE RAFI Health Care (PRFH), Vanguard Health Care ETF (NYSEARCA:VHT)
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