Under The Radar News - Wednesday

by: SA Eli Hoffmann

Bove vs. Whitney. Punk/Ziegel analyst Richard Bove, who called the top in brokers in 2007, recommends buying financials aggressively. Oppenheimer's Meredith Whitney, who called the Citigroup (NYSE:C) fiasco perfectly, says there's no end in sight. The average bank, which was worth $100 last year, and now trades for about $65, is going to $32.50, she says. Bold calls - only time will tell who's right.

Where are delinquencies worst? The New York Fed's Dynamic Maps of Nonprime Mortgage Conditions in the United States.

Google + Skype? Sources say Google (NASDAQ:GOOG) and EBay's (NASDAQ:EBAY) Skype are in talks, and a Google partnership with or even acquisition of Skype may be imminent. EBay is looking to unload the $3.1B Skype, while Google is looking for a foot-in-the-door in the voice space.

Beware false dawn. Many seem to think the recent mutli-day rally, sparked by "last-and-final" asset writedowns, is a signal the crunch is over. Maybe, but keep in mind investors have been duped more than once since things began to unravel last summer. On Oct. 1, Citigroup (C) gained 2.2% after announcing a $5.9B writedown. A few days later, Merrill Lynch (MER) wrote down $5.5B, and its shares rallied 2.5%. On Nov. 8, Morgan Stanley (NYSE:MS) jumped 4.9% after announcing a $3.7B loss. All of these were premature; the banks were ultimately forced to take additional writedowns, and shares fell further.

Who could buy UBS? Yesterday's jump in UBS (NYSE:UBS) was partially due to takeover speculation. UBS's losses suggest there may still be more to come (will U.S. banks that dealt heavily in CDOs will be hit with larger-than-expected Q1 writedowns?), and the $15B rights issue won't happen until late May, which leaves UBS vulnerable. Suitors may covet its private-banking business, but few banks are big enough to consider such an acquisition; UBS's market value is about $68B. Bank of America (NYSE:BAC) and JP Morgan (NYSE:JPM) are busy integrating other deals (CFC) (NYSE:BSC). A source says Spain's Banco Santander SA (SBP), which has weathered the financial crisis well, might engineer a breakup or purchase. Meanwhile Swiss finance minister Hans-Rudolf Merz says a takeover is unlikely, adding the state would not give aid for the bank, which is not at risk of bankruptcy.

Fed: Law breaker? When the Fed took control of Bear Stearns' $30B portfolio of "less liquid assets," it told the public it was "taking control" of the portfolio, not purchasing it. The Fed assumed the portfolio's risk and stands to gain if it appreciates in value, causing some to call its denial of ownership purely semantic. "They get the residual -- that almost always defines ownership," one expert said. If so, the Fed may be in violation of its charter, which allows it to buy U.S. Treasury and agency securities, foreign government securities, bankers acceptances, bills of exchange, certain municipal debt, foreign currency and gold -- but not CDOs, private mortgage-backed securities and other derivatives.

Microsoft bags approval of standards board.Microsoft's Office Open XML received an international standards designation, potentially ending a drawn out battle with rivals Sun's (JAVA) and IBM's (NYSE:IBM) Open Document Format. Office Open XML, Microsoft's open-document format for interchangeable web documents, received nearly 75% of core group members approval. The approval, granted by International Organization for Standardization, is almost certain to influence software spending by governments and large companies.

LCD TV panel pricing to remain deflated. An oversupply of TV LCD panels, coupled with demands by top LCD TV vendors for lower prices, will hinder planned April price increases. Bad news for AU Optronics (NYSE:AUO).

CBS firings less than counterparts. CBS (NYSE:CBS) is firing news department staff at several local stations, though it says the layoffs are not a sign of corporate troubles. "It looks big and ugly, but it"s not something that was ordered from on high," an executive said. CBS's Early Show will lose five employees. Rivals NBC (NYSE:GE) and ABC (NYSE:DIS) have announced even more significant layoffs.

IStar deal fails to shine. IStar Financial (SFI) CEO Jay Sugarman on his purchase of Fremont's (FMT) commercial real estate lending business, which he concedes may have been a bit premature: "Being a contrarian sometimes means being early. We'll end up making a positive return on the deal." IStar still has a $1.3B bridge loan on the purchase that comes due June 30, and exposure to Fremont's $6.3B commercial real-estate loan portfolio, much of which is tied to condominiums. And the first $4.2B it collects goes to Fremont.

Gas rush in Pennsylvania. Ever since Range Resources (NYSE:RRC) disclosed a 3 million cubic-foot-per-day natural gas well in Pennsylvania's Marcellus Shale, NG producers including EOG Resources (NYSE:EOG), Chesapeake Energy (NYSE:CHK) and Anadarko Petroleum (NYSE:APC) have been swarming to the spot. Analysts say the Street may still be underestimating the earnings power of the new wells. "Even though these stocks have done well, to say the market has fully captured the potential is laughable," says Subash Chandra of Jefferies.