Fed Grants $30 Billion Emergency Credit Line to Barclays, RBS - Telegraph
The U.S. Federal Reserve has granted requests from Barclays Bank and the Royal Bank of Scotland and provided them with a total of up to $30 billion (£15 billion) in emergency funds to assist American clients caught in the credit crunch, the Telegraph reported over the weekend. The Fed said it will grant the funds for clients "in need of short-term liquidity," particularly those holding mortgage-backed securities. Barclays will be able to borrow up to $20 billion and RBS up to $10 billion, for which they would put up collateral. "This secures another potential source of funding should our U.S. clients seek it," said a spokesman for Barclays Capital. Both Barclays and RBS have been outspoken about the Bank of England's reluctance to provide emergency funding during the credit crisis. Bob Diamond, CEO of Barclays Capital, said in an interview last month that it is "down to central banks" to provide liquidity. Shortly thereafter, the Bank of England intervened to keep Northern Rock afloat. Across the Atlantic, the U.S. Treasury prodded a trio of Wall Street banks to set up a $75 billion superfund -- MLEC -- intended to bail out structured investment vehicles [SIVs] (full story). Its object is to prevent SIVs, which are struggling to refinance short-term commercial paper loans, from being forced to liquidate quality assets -- a scenario that could result in what the Telegraph calls a "fresh bout of contagion in global markets."
Commentary: The Northern Rock Bailout: Sign of a Much Bigger Problem? • Global Rescue Fund Seeks Participants - WSJ • The Superfund's Merits: Sorry Hank, I'm Just Not Buying It
Stocks to watch: BCS, RBSPY. ETFs: PID
SanDisk Unveils TakeTV and Fanfare
Memory chip manufacturer SanDisk Corp. has unveiled the Sansa TakeTV, a flash memory drive that allows video downloaded from the Internet to be viewed on TV. Unlike more cumbersome alternatives like direct hookups, or digital media adapters like Apple TV or Xbox 360, the TakeTV is simple and small: the user drags and drops videos from a PC to the drive, clicks the drive into a cradle connected to a TV, and watches. "Today, people are downloading content to the PC and when it comes to transferring it to the TV, they're cursing," said Daniel Schreiber, SVP at SanDisk. David Poltrack, president of CBS Vision: "There are other ways to do this with more sophisticated products, but because of cost and complexity they're not as attractive. This is going to be selling at Wal-Mart." A 4-gigabyte version of the TakeTV will sell for $99 and an 8-gigabyte for $149. SanDisk is also bringing out a beta version of Fanfare, an Internet video service that will compete with Apple's iTunes. Fanfare's media partners include CBS, international movie download service Jaman.com and Showtime. "The video market right now is just embryonic," said SanDisk CEO Eli Harari. "Media companies have spent a great deal of money creating their content and they don't want anyone to tell them how to sell it. And we agree with them."
Commentary: SanDisk Beats, But Falls on Pricing Warning • 4 Reasons For Sandisk's Recent Downgrades • What's SanDisk Corporation Waiting For?
Stocks to watch: SNDK, CBS. Competitors: AAPL, MSFT, CSCO, NTGR, AMZN, NFLX. ETFs: QTEC, USD, RYT
Earnings call transcript: SanDisk Q3 2007
AU Optronics Beats Estimates in Record Q3
Taiwan's AU Optronics reported a new record for quarterly net income of NT$22.57 billion ($693M) or NT$2.89/share ($0.88/ADR), nearly a 36-fold increase y/y and exceeding analyst estimates ranging from NT$17B to NT$22B. Revenues climbed 30% q/q to NT$137.96B. Gross margins more than doubled to 23% sequentially and nearly tripled over last year. AU Optronics said average display prices increased 13% to $173 during Q3. Analysts say a significant drop in capex for new capacity is resulting in a tight supply situation for LCDs. Combined with an expected increase in demand ahead of the 2008 Beijing Olympics, it creates a positive environment for the display industry. AU Optronics CEO H.B. Chen said the company expects similar net income for Q4, with sales possibly rising a single-digit percentage over Q3 (full earnings call transcript later today). Analysts had been forecasting Q4 net income of NT$14.2B, according to Bloomberg. Ordinary shares of AU Optronics rose 0.3% to NT$69.60 ahead of its earning release. AU Optronics' ADRs lost 3% to $20.40 on Friday.
Commentary: LCD Maker AU Optronics Boosted By Strong Sales • AU Optronics Forecasts Profitability in Q2 on Rising LCD Panel Prices • The Skinny on Flat Panels: Reduced Capacity Could Mean a Strong '08
Stocks to watch: AUO. Competitors: LPL, BRLC, SNE, MC, PHG, OTCPK:SHCAY, Samsung (see EWY). ETFs: EWT
FTC Won't Probe Intel -- NY Times
Intel Corp., the world's largest semiconductor maker, will not be subjected to an antitrust investigation by the Federal Trade Commission. Citing government officials and lawyers involved with the proceeding, The New York Times reported Monday that the FTC, which has been conducting an informal review of complaints from rival Advanced Micro Devices for over a year, has rejected requests to open a formal probe of the chip giant that would give the agency authority to issue subpoenas and compel testimony. The competition battle between AMD and Intel is one of the largest antitrust issues facing regulators, according to the Times. Authorities in Korea and the European Commission recently have accused Intel, which controls 80%-90% of the microchip market, of antitrust violations involving the offer of large discounts to purchasers for not using AMD products, similar to accusations lodged two years ago by Japan, the Times said. A trial regarding an AMD lawsuit filed against Intel is scheduled to begin in Spring 2009.
Commentary: Strong Earnings Give Intel an Edge Over AMD • AMD Carves Out Some Territory In Core Wars
Stocks to watch: INTC. Competitors: AMD, TXN. ETFs: SMH, IGW, PSI
Earnings call transcript: Intel Q3 2007 Earnings Call
Check Point Tops Estimates on "Pure Focus on Security"
Israel-based Check Point Software Technologies saw its profits grow 8% in its latest quarter, topping consensus estimates on an adjusted basis. Check Point, which is the world's second-largest network-security company, reported net income of $76.7 million ($0.34/share), versus $0.31 a year earlier. Revenue climbed 29% to $184 million. Two acquisitions took $0.07 a share off of net, meaning the company earned $0.41 on an adjusted basis. Consensus analyst estimates were for adjusted EPS of $0.38 on sales of $179 million. CEO Gil Shwed credited the "overall success of the quarter is a result of our pure focus on security and Unified Security Architecture. This is demonstrated by the growth of our new data security business and core network security business, which delivered the largest quarterly revenue contribution in our history" (full earnings call transcript later today). The company's shares are up 18.5% YTD.
Commentary: Checkpoint Software Technologies is Back on Track • Eight Security Software Stocks to Help Secure Your Portfolio
Stocks to watch: CHKP. Competitors: CHKP, CHKP, MFE, SYMC, CSCO, JNPR. ETFs: SWH
Earnings call transcript: Check Point Software Technologies Q2 2007
MGM Mirage Buyer Says Shares Overpriced - Bloomberg
Having risen to a record $99.75 earlier this month and now standing at $91.75, Dubai World says it has stopped buying shares of casino giant MGM Mirage because they are overvalued. Sultan bin Sulayem, chairman of the state-owned investment group, which in August agreed to buy as many as 28.4M shares in the company and half of its CityCenter hotel and casino project in Las Vegas, told Bloomberg "We can always buy in the market to achieve the 9% to 9.5% of MGM that we want." He declined to say what price Dubai World is willing to pay for the shares, saying "We will look at it if the market gets better." On Friday, MGM said Dubai held a 4.8% stake after purchasing 14.2M shares at $84 each from the company. That's the same price at which Dubai was to have bought the remaining 14.2M shares through a public tender, but shares spiked after an analyst speculated last month that Dubai might raise its offer.
Commentary: Dubai World to Invest $5B in MGM Mirage and Resort Project • MGM Mirage: The Most Attractive Gambling Stock
Stocks to watch: MGM. Competitors: WYNN, LVS, HET, BYD, PENN ETFs: PEJ
Earnings call transcript: MGM Mirage Q2 2007
AT&T, Napster Announce Mobile Download Service
Beginning in mid-November, Napster's music catalog of more than five million tracks will be available for download for AT&T wireless subscribers. The downloads will cost $1.99/song or $7.49 for five songs per month. AT&T has not said which devices will be able to use the Napster service, but it is clear the iPhone will not. Verizon also charges $1.99/song, but Sprint only charges $0.99 and iTunes track downloads via Wi-Fi on the iPhone also costs $0.99. AT&T and Napster entered a deal this March providing one-year of free access to Napster's mobile download service for wireless subscribers using specific calling plans and other AT&T services. The forthcoming deal will allow subscribers to download tracks directly to their phone and receive an automatic email link to download the same track free of charge to their PC. AT&T Consumer Data Services chief Mark Collins said mobile downloads will take 15 to 30 seconds depending on signal strength. AT&T also announced two new services, MobiVJ, a music video streaming channel service and VIP Access, which provides artist biographies and discographies. Shares of AT&T lost 1% to $41.37 on Friday, while Napster fell 1.6% to $3.16.
Commentary: AT&T Signs Napster Mobile Deal • Napster Relaunches with Web-Based Platform • AT&T Makes Calling Plan Policies More “Customer Friendly”
Stocks to watch: T, NAPS, AAPL, VZ, S
TRANSPORT AND AEROSPACE
GM Overtakes Toyota as Top Global Carmaker in 2007
General Motors has again taken the upper hand in the battle for top global automaker by sales. GM CEO Rick Wagoner is adamant to keep his company's 76-year reign at the top of the global carmaker hierarchy intact. Through the first three quarters of the year, GM is holding a tiny 10,000 sales lead over Toyota, which was up 39,000 unit sales after the first half (full summary). But strong double-digit growth by GM overseas offset continuing weakness in North America, while Toyota's U.S. sales dropped for three consecutive months in Q3, the first time that has happened since 1995. A weaker dollar has helped contribute to GM's overseas sales growth, as its line of vehicles becomes more affordable in foreign currency terms. Looking to Q4, Toyota hopes to be able to surpass GM on the back of a more fuel-efficient fleet of cars, in light of oil topping $90 a barrel. Toyota captured five of the EPA's top 10 fuel-economy ratings for 2008 cars and trucks including the top spot with its Prius hybrid. GM shares are up 22.4% YTD, while Toyota's ADR shares are down nearly 21%. Toyota fell another 2.1% to a new 52-week low in Tokyo trading Monday.
Commentary: Toyota Loses Top Reliability Ranking • U.S. Sept. Auto Sales Down, But Better Than Expected • Toyota's September Sales May Disappoint
Stocks to watch: GM, TM. Competitors: F, HMC, DAI, OTCPK:NSANY.
Earnings call transcript: General Motors Q2 2007 • Toyota Motor F1Q08
Bear Stearns, Citic to Take $1B Stakes in Each Other - WSJ
Bear Stearns and Chinese investment bank Citic Securities are close to a deal that will see each bank taking a $1 billion stake in the other, the Wall Street Journal reported Monday. Sources said a finalized deal could be announced as early as today, but warned it could still fall through. Citic's $1 billion will get it a 6% equity stake in Bear; it also retains rights to take another 3.9% stake through public markets, giving it a maximum 9.9% holding. Bear will get a 2% stake in Citic for its $1B, with options to buy another 5% over the next five years. The deal, the Journal says, will be a welcome bright spot in what has otherwise been an overcast year for Bear after two of its hedge funds collapsed (full story). For Citic, it marks the increasing desire and ability of Chinese financial companies to participate in overseas markets. The deal, if true, comes despite Citic's Friday denial of any talks, and a promise made to Chinese regulators not to take a stake in the company for the next three months (full story). Year to date, Bear shares are down 28%, while Citic shares have more than tripled amid a booming Chinese stock market.
Commentary: Citic Not Considering Bear Stearns Stake • China's Citic Eyes Stake in Bear Stearns • Investment Banks: Not Dead Yet
Stocks to watch: BSC
Pearson Boosts Education Unit Guidance; Forecasts Record Year
Pearson plc, publisher of the Financial Times, raised its 2007 sales guidance for its education business during an upbeat trading update Monday. "We still have a lot of trading ahead of us, but every part of the company is doing well," said CEO Dame Marjorie Scardino. "This increases our confidence that 2007 will be another year of record profits for Pearson." All the company's businesses are in line with or ahead of projections. Operating profit is up 17% for the first three quarters; sales are up 4%. Including acquisitions and currency movements, sales were up 9% and operating profit 20%. Pearson upped its growth forecast for the professional education unit to 8-10% from 5-7%. The unit's 12% growth so far in 2007 has been driven primarily by demand for GMAT, driving theory and nursing examination materials. The school business unit is expected to grow "around the top end" of a previously forecast 4-6% range on market share gains in U.S. school publishing. The higher education business is on track to hit the top end of a 3-5% growth range for the year, and ad revenues for FT Publishing are up to 9% from 7% mid-year. Penguin, the company's consumer book division, got a boost from the publication of Alan Greenspan's memoir The Age of Turbulence. "With a yield of over 4% we regard Pearson as attractive in an uncertain market environment," wrote Numis Securities in a note. Pearson shares gained 1.5% to 776.5 pence in London trading Monday.
Commentary: FT.com Still Doesn't Get It • 10 College Stocks to Study
Stocks to watch: PSO. Competitors: NWS
Earnings call transcript: Pearson Q2 2007
China Mobile Beats Q3 Estimates on Strong Rural Growth
The world's number-one wireless-telephone carrier, China Mobile, posted Monday a 30% gain in profits and added a record number of subscribers after it cut prices and focused on untapped rural areas. Net income rose to 21.97.9 billion yuan ($2.93 billion) from 15.97 billion yuan a year ago; sales were up 22% to 258.5 billion yuan. Analysts polled by Reuters had been expecting net profit of 21.09 billion yuan. China Mobile added a net average of 5.4 million customers/month from January to September, and now serves 350 million users (more than the population of the United States). But the company said average revenue per user [ARPU] will likely fall as the company continues to sign up more rural customers who tend to opt for low-end packages. The battle between China's two biggest carriers, China Mobile and China Unicom, has increasingly shifted to rural areas as subscriber growth in big cities slows. "Benefiting from the rapid growth of the economy of China, enormous demand in the telecommunications market and rationalized competition environment, the Group maintained a rapid and healthy business development in the first three quarters of 2007. The Group made great efforts to extend the rural market," the company said in a press release. Shares of China Mobile are up almost 52% in Q3 alone, ahead of Unicom's 20% and a 25% gain in the Hang Seng. China Mobile closed down 3.9% Monday to HK$142.20 before the numbers were released, slightly worse than the Hang Seng's 3.7% percent drop.
Commentary: Is the Chinese Stock Market Party Over? • The Secret to Choosing Chinese Stocks
Stocks to watch: CHL. Competitors: CHU, CHA, CN. ETFs: FNI, PGJ, EEB, ADRE
ACTIONABLE BARRON'S CALLS
Barron's articles likely to move stocks today, culled from our Annotated Barron's Summaries
• Barron's says Juniper (NYSE:JNPR), whose stock is up 95% YTD, may be ripe for a sell. At a current $36, shares trade at 33x 2008e earnings, vs. 20x for major rival Cisco and 21x for other similar companies. Morgan Stanley analyst Scott Coleman says the Street's "universally bullish" expectations could be setting investors up for a disappointment when the company reports earnings Tuesday. (Full story)
• Despite increased competition that has taken a toll on radiology machine maker Varian's (NYSE:VAR) earnings, Barron's says the company has held on to just about all of its 50%+ market share. Orders have been delayed, but not cancelled in a healthcare sector slowdown, and will soon be made up. At $41.17, down from a 52-week high of $56, one analyst calls the stock "seriously undervalued," and says it could jump 25% back to that high over the next year. (Full story)
• Barron's says bears could be overlooking Sears Holdings' (NASDAQ:SHLD) value: Instead of spending on advertising and remodeling, CEO Eddie Lampert added higher-margin merchandise, used capital to expand Sears's highly-profitable home improvement businesses and updated in-store technology and distribution systems. If the firm can align its margins with competitors, shares ($134) could go to $190. (Full story)
• Despite internet companies such as Google and Amazon.com being valued at record prices, Monster Worldwide (NASDAQ:MNST) has fallen 24% this year to $35 over fears of a U.S. economic slowdown. But one analyst says revenue loss forecasts of -20% are overdone, and notes Monster isn't getting credit for a shift in help-wanted advertising revenue to the internet and the strength of its international franchise. Bulls say shares could surpass $50 over the next year, and go even higher should takeover talks reignite. (Full story)
• Barron's says the world's largest insurance broker Marsh & McLennan (NYSE:MMC) is worth a look. If the company can get margins up to the high-teens to 20% rate enjoyed by peers, from 7% in Q2, one analyst believes shares could be worth $40. "There are more ways to win than lose at this time," he says. (Full story)
THIS WEEK'S IPOS
• This Week's Healthcare IPOs: Power Medical Instruments, BioHeart, Merrion Pharmaceuticals
• Three Retail IPOs: Ulta Salon Cosmetics & Fragrance, Fuqi International, FGX Holdings Interational
• Three Financial IPOs: Longtop Financial Technologies, Pzena Investment Management, Cypress Sharpridge Investments
• Software IPO: SoundBite Communications
MUST-READS ON SEEKING ALPHA TODAY
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