- It's about Time. Time Warner (NYSE:TWX) is spinning off its 84% stake in Time Warner Cable (TWC). TWC will pay a one-time cash dividend of $10.9B, of which TWX will receive $9.25B, which it says it will distribute to shareholders. "We're bullish on Time Warner Cable's prospects, but its strategic goals and capital needs are increasingly different from those of our other businesses," TWX CEO Jeffrey Bewkes said. He's been under pressure to exit the cable business in order to focus on fixing the ailing AOL.
- Take that, Google. A Yahoo-less Microsoft (NASDAQ:MSFT) has a new search-ad trick up its sleeve: cash rebates for products found through Microsoft's live.com. "Live Search cashback" will get you percentage-based rebates deposited directly to your bank account, PayPal (NASDAQ:EBAY) account, or by check. Participating vendors include Canon (NYSE:CAJ), Barnes & Noble (NYSE:BKS), Circuit City (NYSE:CC) and Home Depot (NYSE:HD).
- Icahn group grows. T. Boone Pickens jumped aboard Carl Icahn's movement to topple Yahoo's (NASDAQ:YHOO) board in a July 3 vote, buying 10M shares (about 0.75%). Icahn owns or has the option to buy a 4.9% stake in Yahoo. Other teammates include Paulson & Co. (about 3.7%) and Daniel Loeb's Third Point (less than 10M shares). An inside source says the attempt will likely fail due to shareholder support for the current leadership, not to mention co-founders Yang and Filo's 10% stake and Capital World Investors' 10% stake -- and the fact that Microsoft has yet to say it's willing to come back to the table with a new comprehensive offer.
- Like two bookends. Barnes & Noble (BKS) is mulling a bid for rival Borders Group (BGP). The pair are number one and two U.S. booksellers with 20-22% and 10-12% market share respectively, so any deal would raise antitrust concerns. Amazon.com (NASDAQ:AMZN) is thought to have about 15% of the market. Borders surprised Wall Street by putting itself up for sale in March amid liquidity issues aggrivated by declining sales, a credit market freeze, and its failure to sell some assets. Its current market cap is $384M, but a buyer will also have to assume almost $550M in debt.
- HP satisfies, but doesn't overwhelm. Hewlett-Packard's (NYSE:HPQ) FQ2 earnings jumped 16% from a year ago, narrowly exceeding consensus estimates (earnings numbers below). Notebook sales were up 31%, but PC sales were flat. Its PC unit kicked in $544M of HP's $2.2B in profits. Imaging and printing earnings were flat at $1.2B. Services profits were $508M, and software earnings were $93M, up from just $7M a year ago. HP said its recent deal to buy Electronic Data Systems (NASDAQ:EDS) will boost its market share in enterprise services, and CEO Mark Hurd promised the deal would help HP reduce costs and produce value for shareholders. Shares are flat in early pre-market trading.
- Corporate Express does deal behind Staples' back. Corporate Express, itself a takeover target of Staples (NASDAQ:SPLS), agreed to buy its French rival Lyreco for €1.73B ($2.71B). CE insisted the acquisition was unrelated to Staples' courtship (which it has shunned), although it's clear that CE's post-Staples-offer elevated share price helped enable the move. CE shares fell as much as 8.8% in Amsterdam. Staples took its €2.8B offer directly to shareholders on Monday; it's unclear where things go from here.
- Wall Street's latest woe: Hedging. I-banks that hedged risky holdings by shorting indexes that track real-estate assets and leveraged debt are taking a beating as the indexes post hefty gains, while the assets they were hedging have failed to post like up-moves. Lehman (LEH) appears to be the worst hit, with expected hedging losses of $1.5-2B. Morgan Stanley (NYSE:MS) is thought to have lost less than half of that, and Goldman Sachs (NYSE:GS) and Merrill Lynch (MER) even less.
- Did computer bug trip up Moody's? Moody's (NYSE:MCO) said it will conduct a thorough investigation after a Financial Times investigation alleged the company erroneously awarded AAA ratings to billions of dollars in debt derivatives due to a computer glitch. FT says internal Moody's documents reveal senior staff knew in early 2007 that AAA-rated CPDOs (constant proportion debt obligations -- which use borrowed money to speculate on an improvement in credit quality) should have been ranked as many as four levels lower.
- Penn deal teetering. The $6.1B private-equity buyout of Penn National Gaming (NASDAQ:PENN) is under pressure, and the deal's terms may need to be revised to push it through. Buyers, including Fortress Investment Group (NYSE:FIG), are looking at ways to reduce the purchase price, while the lenders, led by Wachovia (NASDAQ:WB) and Deutsche Bank (NYSE:DB), are balking at the deal's terms. Renegotiations could delay or even kill the deal. Penn's shares, at $43 vs. a deal price of $67, reflect market skepticism.
- Journal changing with the Times. News Corp. (NASDAQ:NWS) made WSJ's publisher Robert Thomson its new managing editor, replacing Marcus Brauchli. Previously editor of News Corp.'s Times of London, one can assume that this Murdoch insider will speed the pace of change at the Journal and Dow Jones. Besides strong journalistic credentials, Thomson is also prone to use words like "perspicacious" and "incunabulum."
Earnings: Tuesday After Close
- Analog Devices (NYSE:ADI): FQ2 EPS of $0.44 beats consensus of $0.41. Revenue of $649M vs. consensus of $627M. Sees Q3 EPS of $0.43-0.45, better than consensus of $0.43, and revenue of $650-665M vs. consensus of $639M. Boosts dividend by 11% to $0.20/share. Shares: flat.
- Dycom (NYSE:DY): FQ3 EPS of $0.19 beats consensus of $0.12. Revenue of $293M vs. consensus of $291M. Sees Q4 EPS of $0.18-0.23, better than consensus of $0.19. Shares: +7.5%.
- FTD Group (FTD-OLD): Sees full-year EPS of $1.31, short of consensus of $1.36. 12% growth in Mother's Day orders. Shares: -1%.
- Health Net (NYSE:HNT): Sees full-year EPS of $3.45-3.55, better than consensus of $3.44, and revenue of $15-16B vs. consensus of $15.34B. Shares: +0.55%.
- Hewlett-Packard (HPQ): FQ2 EPS of $0.87 beats consensus of $0.85. Revenue of $28.3B vs. consensus of $28.11B. Sees Q3 EPS of $0.82-0.83 vs. consensus of $0.82. Sees full-year EPS of $3.54-3.58, better than consensus of $3.54. Shares: +0.1%.
- Intuit (NASDAQ:INTU): FQ3 EPS of $1.39 beats consensus of $1.33. Revenue of $1.31B in-line. Sees full-year EPS of $1.61-1.63, better than consensus of $1.59. Announces $600M stock repurchase plan over the next three years. Shares: +6.25%.
- Phillips-Van Heusen (NYSE:PVH): Q1 EPS of $0.90 beats consensus of $0.87. Revenue of $626M vs. consensus of $621M. Sees Q2 EPS of $0.63-0.66, short of consensus of $0.66. Sees full-year EPS of $3.21-$3.41, short of consensus of $3.35. Shares: -0.35%.
- Red Robin Gourmet (NASDAQ:RRGB): Q1 EPS of $0.43 misses consensus of $0.50. Revenue of $256M in-line. Sees full-year EPS of $2.04-2.23 vs. consensus of $2.15, and revenue of $905-918M vs. consensus of $892M. Shares: -6.9%
Earnings: Wednesday Before Open
- BJ's Wholesale (NYSE:BJ): Q1 EPS of $0.29 just beats consensus of $0.28. Revenue of $2.31B vs. consensus of $2.27B. Sees 2008 EPS of $2.04-$2.14, better than previous guidance of $1.98-2.08 and consensus of $2.06. Q1 comps gained 9.6%.
- Brown Shoe Company (BWS): Q1 EPS of $0.17 beats consensus of $0.07. Revenue of $554.5M vs. consensus $573M. Sees Q2 EPS of $0.19-0.24, better than consensus of $0.20, and revenue of $585-600M vs. consensus of $599M. Sees full-year EPS of $1.41-1.64, better than consensus of $1.50, and revenue of $2.43-2.48B vs. consensus of $2.49B.
- Charming Shoppes (NASDAQ:CHRS): Q1 EPS of $0.01 beats consensus of -$0.06. Revenue of $641M vs. consensus of $725M. Sees Q2 EPS of $0.01-$0.03, short of consensus of $0.04, and revenue of $625-640M vs. consensus of $736M.
- Solarfun Power (SOLF): Q1 EPS of $0.32 beats consensus of $0.16. Revenue of $171M vs. consensus of $136M. Raises full-year guidance to 160-180MW shipments from 160MW.
- Talbots (NYSE:TLB): Q1 EPS of $0.21 beats consensus of $0.12. Revenue of $542M vs. consensus of $554. Sees 2008 EPS of $0.48-0.52, better than consensus of $0.34. Says Q1 comps declined 9.8%.
- Tween Brands (TWB): Q1 EPS of $0.21 beats consensus of $0.16. Revenue of $252M vs. consensus of $242M. Sees Q2 EPS of $0.00-$0.04, better than consensus of -$0.02, and net sales gains in the mid teens.
- Asian markets were decidedly undecided Wednesday. Nikkei -1.65% to 13,926. Hang Seng +1.16% to 25,460. Shanghai +2.93% to 3,544. BSE Sensex +0.09% to 17,426.
- In Europe, markets are showing strength at midday. FTSE +0.92% to 6,249. CAC +0.46% to 5,078. DAX +0.31% to 7,141.
- U.S. futures are down at 7:30 AM. Dow -0.23% to 12,820. S&P -0.3% to 1,413.25. Nasdaq -0.24% to 2,002.50.
- Gold +0.63% to $926. Oil +0.88% to $130.09.
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