Wall Street Breakfast: Must-Know News

by: SA Eli Hoffmann
SA Eli Hoffmann
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.
  • Asian markets tumble. The Nikkei fell 4.49% to its lowest since Jan. 23, the Hang Seng was off 3.07%, and the U.S. dollar fell to 102.72 yen -- its lowest since January 2005. Investors continue to fret a potential U.S. recession, and are gearing up for yet another Fed rate cut.
  • E*Trade moves to placate antsy investors. E*Trade (NASDAQ:ETFC) hired its chairman Donald Layton, former J.P. Morgan (NYSE:JPM) VP, as its new CEO, a move it hopes will bolster investor confidence in the troubled broker. E*Trade lost big on bets on mortgage-backed securities, and it still holds another $12B in home-equity loans. Sources say E*Trade and 20% shareholder Citadel are looking for a buyer for the portfolio, which would make a sale of the company more palatable.
  • UTC bids $2.6B for Diebold. United Technologies (NYSE:UTX) made an unsolicited $2.63B cash bid for developer Diebold (NYSE:DBD). The $40/share offer is well below Diebold's 52-week high of $54.50, but a 66% premium to its Friday close of $24.12/share, UTC says the bid is "compelling." Besides ATM machines, Diebold develops security systems and computer hardware that would help UTC's fledgling fire-and-security business grow revenue from a current $5.8B to $10B+. The move is the latest in a string of unsolicited bids as buyers look to capitalize on deflated share prices.
  • Microsoft increases online software offerings. Microsoft (NASDAQ:MSFT) will announce plans to offer online software services that will handle email, calendars, contacts and video conferencing for small-to-medium-size companies for a per-user fee. MSFT will start testing its offerings today for free with select businesses, after which it will begin charging fees. How much? Only time will tell.
  • Fed: Turning on a dime. Fed officials do not see stagflation (stagnant growth coupled with inflation) as a serious problem; what they're more worried about is how soon after they stop cutting interest rates they should start raising them again. Critics say the Fed took too long to change its course after the 2001-2003 dive in interest rates, which created the all-too-familiar housing bubble.
  • HSBC beats estimates, says 2008 uncertain. HSBC (HBC) reported a 21% rise in net income for 2007 to $19.1B, better than the $18.38B analysts expected. HSBC wrote down $2.1B on losses on assorted debt-based assets, and set aside $11.7B (up 79% from a year ago) against loan impairments and risk provisions. The bank said 2008 remains cloudy due primarily to U.S. economic weakness, but said it remains better-positioned than many of its rivals. Shares gained 0.85% in London.
  • Commercial real estate: Next shoe to drop? The impending fall of commercial real estate will take a heavy toll on firms with exposure to commercial property loans and mortgage-backed securities, such as Bear Stearns (NYSE:BSC), Citigroup (NYSE:C), JPMorgan (JPM), Lehman Brothers (LEH), Merrill Lynch (MER) and Morgan Stanley (NYSE:MS). Goldman Sachs analyst William Tanona thinks the above firms will write down $7.2B in Q1, and projects commercial real estate values will slide 21-26% over the next two years.
  • Barclays buys Russia bank for $745M. Barclays (NYSE:BCS) said it is buying Russia's Expobank for $745M as it moves to expand into emerging markets. Many see Russia as the fastest-expanding banking market among the BRIC foursome, with annual lending growth of 45%. Barclays says it expects a return on the investment by 2011.
  • Intel goes Atomic. Intel (NASDAQ:INTC) is launching one of its trademark "branding campaigns" to market two new microchips. Now co-named Atom, the Silverthorne is targeted at MIDs (pocket-sized internet-enabled devices), while the Diamondville is for low-end laptops. Intel's branding moves are closely watched, because the company uses its brands together with lucrative marketing incentives to dominate the market.
  • Revenue up 4% at Pearson. Pearson (NYSE:PSO) saw 2007 net earnings down 36% from a year ago to £284M; last-years earnings were boosted by unusually low taxes. Revenue was up 4% to £4.16B. Pearson sees low-single-digit revenue growth in 2008. It noted advertising revenue at its FT Publishing unit has been strong thus far, but said the outlook of the ad market was hard to predict. 60% of FT Publishing revenue now comes from digital sales, vs. 20% in 2000. Shares fell 2.3% in London amid a weak broader market.
  • Northrop flies on big contract win. Shares of Northrop Grumman (NYSE:NOC) surged 7% in Frankfurt after it and partner EADS won a $35B+ Pentagon contract for 179 air tankers, beating out favorite Boeing (NYSE:BA). Boeing shares were down 5%. Boeing can still appeal the decision.
  • Chip sales top targets. January global chip sales gained 0.03% Y/Y, beating expectations. Excluding highly-competitive memory chips, semi sales were up 8.1% Y/Y. PC and mobile handset shipments were in-line with expectations, which forecast 12% and 12--15% sales growth in 2008 respectively. "The U.S. economy has entered a period of slower growth that may impact consumer purchases of electronic products," SIA president George Scalise said. "However the emergence and growth of large consumer markets outside the U.S. has created new opportunities for chipmakers."

Today's Markets

  • Asian markets dropped sharply Monday, with the exception of Shanghai. Nikkei -4.49%. Hang Seng -3.07%. BSE Sensex -5.12%. Shanghai +2.06%.
  • In Europe, markets were also considerably lower at midday. FTSE -1.74%. CAC -1.71%. DAX -1.81%.
  • U.S. futures were down somewhat from Friday's close at 6:22. Dow -0.85%. S&P -0.6%. Nasdaq -0.67%.

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