Wall Street Breakfast: Must-Know News

• Airlines eye massive loss. Airlines are looking at $6.1B losses worldwide if oil prices remain at $135/barrel. IATA, the industry trade body, previously forecast a $4.5B profit, down from $5.6B in 2007. If Brent oil comes down to $107, airlines will still lose $2.3B. Global traffic growth is expected to be 3.9%.
• Intrepid's intrepid quarter. Recent IPO Intrepid Potash's (IPI) net quintupled to $33.1M on 75% sales growth to $84.4M. EPS were $0.27. Analysts expected EPS of $0.24 on revenue of $80.1M.
• China Telecom initiates telecom shuffle. China Telecom (CHA) is paying $15.9B to buy China Unicom's (CHU) wireless CDMA network, the first of many expected deals after the Chinese government unveiled its telecom industry restructuring plans last week. Update: China Unicom (CHU) is acquiring fixed-line firm China Netcom (CN) in a share-swap worth $56.3B.

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• Shell deal targets coal-seam gas. Shell (RDS.A) is spending $739M (£375M) to acquire a 30% stake in Arrow Energy's coal-seam gas projects, as big oil companies continue to diversify to new energy sources like coal bed methane to feed global demand.
• Harris off the block. Disappointed with incoming bids that lowballed its $75-80/share target, IT company Harris Corp. (HRS) said in a press release it will remain an independent company.
• Sources say supermarket giant Tesco (TSCDY.PK) is buying Royal Bank of Scotland's (RBS) stake in their personal finance JV for an estimated £1B. RBS is widely reported to be shopping its insurance arm; top courters are Zurich, Allstate (ALL), American International Group (AIG) and Travelers.
• Ryanair sets May benchmark, traffic +22%. Passenger traffic at Ryanair (RYAAY) rose 22% to 5.06M. Load factor was steady at 80%.
• British banks raided. Barclays (BCS) and Royal Bank of Scotland (RBS) were raided this morning by the Office of Fair Trading in connection with an investigation into loan price-fixing.
• Chip sales +5.9%. Sales of chips rose 5.9% to $21.2B in April. First-third 2008 sales are up 4.3%. Strong flash memory sales lead the way. The SIA said PC sales should rise 10% in 2008, and telephone handset sales 12%.
• Intel to re-enter mobile market - through back door. Intel (INTC) CEO Paul Otellini says he wants to re-enter the mobile phone market on the heels of its new low-power Atom chip. "If you accept that the value proposition of the high end of the mobile phone market is full internet access that happens to have voice, my view is that it’s easier to add voice to a small computer than vice-versa." Intel is backing Sprint (S) and Clearwire's (CLWR) $14.5B WiMAX 4G wireless data venture.
• Toyota likely to cut U.S. sales outlook. Toyota (TM) may scale back its U.S. sales forecast amid weak demand for pick-ups and large vehicles. S&P says U.S. demand for light trucks and cars may fall to the lowest since 1995.
• Hilton lures Starwood execs. Hilton (BX) hired two luxury gurus away from Starwood Hotels (HOT); both were key players in Starwood's highly successful W Hotels brand.
• GM set to post record lows. Despite a bullish article by Barron's over the weekend, WSJ says GM's market share could dip below 20% when automakers report May sales this Tuesday.
• CME's shaky Nymex bid. CME's (CME) bid for Nymex (NMX) was originally worth $11.3B. At a present $8.8B, it looks increasingly likely to be derailed by shareholder opposition.

Today's Markets

• Asia Monday: Nikkei +0.71% to 14,440. Hang Seng +1.22% to 24,831. Shanghai +0.75% to 3,459. BSE Sensex -2.15% to 16,063.
• Europe at midday: FTSE -0.98% to 5,993. CAC -1.44% to 4,942. DAX -1.06% to 7,021.
• U.S. futures: Dow -0.51% to 12,571. S&P -0.48% to 1,393.50. Nasdaq -0.37% to 2,027.50. Oil -1.08% to $125.93. Gold +0.27% to $889.

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Comments

[Mazel Tov]

Good point with the Airlines...I forsee some very difficult times for that industry in the next couple of years. I would expect ticket prices to surge and when that happens many people will not be able to afford to take a plane to their destination.

This is something that can hurt everyone. It is a downward spiral.

[RightinSanFrancisco]

If you were to study one industry in business school, it should be the airline industry - many competitors, aggressive consumer marketing, high interest by the financial press, high legacy costs, volatile factors beyond your control, regulation, etc.
As an investor, I cannot imagine a worse place to go than a major airline. Have been intrigued by the buzz around a start-up once. But never again.

[NextelAccessories]

China Telecom & Sprint?

[Geddy]

Even China thinks Sprextel sucks!