Wall Street Breakfast: Must-Know News

• Job cuts, $1.3B charge at American Air. American Airlines (AMR) is cutting almost 7,000 jobs (8% of its workforce) and will take a $70M charge to cover severance costs and a $1.2B non-cash charge to reduce the value of its parked aircraft. Analysts say similar charge-offs are likely at peer carriers. American will reduce its U.S. capacity by 12%.
• Nvidia warning sends shares diving. Nvidia (NVDA) lowered its Q2 revenue and margin outlook due to delays, end-market weakness and price competition. It now sees revenue of $875-900M vs. a $1.1B consensus. Nvidia will also take a $150-200M warranty charge arising from a material defect in certain notebook chips. Shares -21.9% to $14.08.
After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.
• Jockeying for position on the transatlantic runway. American Airlines (AMR), British Airways (BAIRY.PK) and Spain's Iberia are in late-stage talks to create a profit sharing pact, inside sources say. American's current deal with BA excludes overseas routes, which is where the two stand to gain the most. Adding Iberia to the mix gives the two a critical link to continental Europe and Latin America. Regulators have hassled BA and American in previous attempts at a pact; they are expected to argue that the Open Skies accord has changed the competitive landscape. Delta (DAL) and Northwest (NWA) received antitrust approval for a JV with Air France-KLM earlier this year. Continental (CAL) recently left the Delta team to join forces with United (UAUA) and Lufthansa.
• Same old same old. Sources say Yahoo (YHOO) and Time Warner (TWX) are once again talking about Time Warner folding AOL into Yahoo, and taking a minority stake in the combo. News Corp. (NWS) is also keeping an eye on what's doing. Microsoft has spoken to News Corp. in a deal which could see Microsoft buy Yahoo's search business, and News Corp. fold MySpace into what remains of Yahoo.
• Watching the watchers. A judge has ordered Google (GOOG) to turn over records of every video watched by YouTube users, including user names and IP addresses, to Viacom (VIA) - which is looking to prove the overwhelming popularity of copyrighted materials vs. user-created and increase Google's liability if it is found guilty of contributory infringement. Privacy advocates are already kicking up a fuss.
• Vodafone takes control of Ghana Telecom. Vodafone (VOD) is buying 70% of Ghana Telecom for $900M, as it continues to push into emerging markets. Ghana's government will retain the remaining 30%. The move was widely expected.
• Two birds... IBM (IBM) agreed to buy Platform Solutions Inc., a move that both eliminates Platform's outstanding litigation against IBM, and removes competitor for its lucrative mainframe business.
• This ain't over yet - Paulson. The current economic downturn has further to go, but U.S. growth should pick up by the end of 2008, U.S. Treasury Secretary Henry Paulson said Thursday in a BBC interview. Spiking oil prices, the credit crunch and a slumping housing market are all contributing factors. Paulson conceded the impact of the global credit crunch could have been minimized by better regulation of U.S. banks.
• Commercial rentals send mixed messages. The national vacancy rate for U.S. office space rose to 13% in Q2, from 12.8% in Q1. Rents rose 0.7% to $25.16/square foot.
• The bottom line. In an effort to reduce the risk counterparty failures pose to the $62T credit-default swap market, 13 major players will initiate a new process at the end of July that cancels out offsetting CDSs to arrive at actual risk exposure.
• Overdue debt inches up. Delinquent accounts for auto loans rose 2 BP to 1.92% in Q2; RV loans by 3 BP to 1.11%; boat loans by 18 BP to 1.75%; and personal loans by 7 BP to 2.55%.
• Deutsche Bank pays Fortis $1.1B for commercial lending business. Deutsche Bank (DB) said it is buying two commercial lending units that Fortis inherited from ABN Amro for $1.13B. At this point, it's probably safe to believe Deutsche that it doesn't need to raise capital.
• The ADP said private-sector jobs fell by 79,000 (vs. -20,000 consensus) in June. The service sector's 3,000 decline was its first since Nov. 2002. Assuming an average monthly addition of 20,000 government jobs, ADP's number suggests today's payroll number will be about -60,000 - 10-20K more than the Street consensus.
• Layoff announcements jumped 21% in the first half of 2008 vs. a year ago. June's announced layoffs of 81,755, 19,000 of which were financial firms, were 47% more than June 2007. Reasons for the layoffs: market conditions (37,363), cost-cutting (21,213), M&A (7,811), restructuring (3,896) and closures (3,414).
• May Factory Orders climbed 0.6%, better than the +0.5% consensus. At almost $450B, orders are at their highest level since at least 1992. Shipments also set new records.
• Crude inventories fell by 1.98M vs. +0.5M consensus. Gasoline +2.1M vs. +0.5M. Distillate +1.26M vs. +1.5M. Refinery utilization 89.2% vs 87.2%.

Today's Markets

• Asian markets were largely in the red Thursday: Nikkei -0.16% to 13,265. Hang Seng -2.13% to 21,243. BSE -4.18% to 13,094. Shanghai +1.95% to 2,704.
• Europe at midday: London -0.6%. Paris -0.65% Frankfurt -0.8%. Stockholm -2.15% after its central bank hiked rates 25 BP to 4.5%.
• U.S. futures: Dow -0.04%. S&P +0.04%. Nasdaq -0.37%.
• Oil breached $145 for the first time in overnight trading, boosted by concerns about Iran, yesterday's inventory data, and a possible ECB rate hike which could weaken the dollar. Futures +1.24% to $145.35. Gold -0.25% to $944.
• Thursday's economic calendar:
  7:45 ECB Announcement
  8:30 Payrolls and Jobless Claims
  9:00 RCB Cash Index
  10:00 ISM Non-Manufacturing
  10:30 EIA Natural Gas

Earnings: After Close

• WD-40 Company (WDFC): FQ3 EPS of $0.49 beats by $0.02. Revenue of $82.1M (+5.8%) in line. Sees full-year EPS of $1.78-1.85 vs. $1.86 consensus. Shares -5.7%. [PR]

Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.

Comments

[helsi:]

interesting remarks..coal? steel? potash? Helsi

2008 Jul 03 09:45 AM

[GeorgeR:]

Ding dong ... the witch is dead!

... or at least she is starting to melt!

Wow ... I would say this is very good news to the entire copyright industry. While potentially inconvenient to YouTube viewers, and understanding the importance of privacy protection in the complex world of the Internet these days, this decision by the judge in the Viacom v. Google/YouTube case may be the best thing that has happened to the copyright industries in this country, and to our overall economy, in practically a decade.

I have been following this case, and others like it, now for several years. I, for one, am sick and tired of the Google's of the world blaming their own customers for all of the infringing activity that occurs day in and day out over the Google sponsored networks. Who do you think gains the most financially from these obvious infringements - Google or the poor smuck in Louisville who does not have a clue what is right or wrong, let alone what is infringing and what is not?

In fact, if it is true that an individual typically adapts his or her production and viewing habits from what they see and are taught by the larger media, entertainment, Fortune 500, and technology companies in this country ("if this weren't legal, certainly mighty Google wouldn't encourage it as they do or run AdSense ads on the infringing sites, and Exxon/Mobile wouldn't be placing ads on the sites that are displaying the "shared" works, either").

It is an unfortunate reality today that many of the copyright defense lawyers, and their clients out to make the big bucks regardless of the rules, have made a mockery of the Digital Millennium Copyright Act (the DMCA), which was signed into law in 1998 by President Clinton. Like the music industry has learned in the school of hard knocks (aka "the real world"), it is virtually impossible today to hold the middlemen in these unlawful distribution channels and networks accountable. So, what do the copyright companies have to do to protect their valuable property? Go directly after the often innocent "end users" who are often sucked into this game, more often unknowingly than not. It is shameful.

Perhaps this New York court decision will help to turn those tides.

Google enables widespread copyright infringement activity like no other company on this planet. Google subsidizes entire networks of infringers through it Adwords and AdSense marketing and advertising programs. Google facilitates willful copyright infringement. Google enables widespread copyright infringement. Day in and day out. Google causes enormous damages to legitimate copyright holders every second of every single day. Google has been doing this for years. They earn a substantial portion of their overall revenue and profits by sponsoring illegal activities over the Internet. And their operations outside the U.S. are far more egregious than the infringement activity we see referenced in this Viacom case, which is largely within our borders.

I, for one, have had enough. Baseless, if not ludicrous excuses and piracy defense strategies, implemented by what used to be some of the finest copyright law firms in this country, - "fair use", "safe harbor", "no harm", "unclean hands", "de minimus damage", "copyright misuse", "DMCA safeguards", "willful blindness", "laches", and on and on - haven't we seen it all?

What do they all mean in Google's true vernacular? How about this. "We are big. We are powerful. We can do anything we damn well please. Quit complaining, copyright owners, or we'll cut you off from all the online revenues streams, as well". Better yet, "... if you don't conform, we'll simply run some of this stuff from our operations in Brazil, Russia, India, and China (those BRICS have plenty of money), and let them beam it all back here to the states."

Aren't you tired of watching Google hide behind the skirt-tails of their customers. "They were the ones who loaded the illegal videos onto our system, not us." Or , better yet, "how were we to know that Bart Simpson wasn't already in the 'Public Domain'?"

Is Google alone in this? Unfortunately, the answer is no. Microsoft, AOL, Yahoo, and others are moving as fast as they can to mimic and duplicate Google's cash cow system, whether the law is violated or not. Cash is the king. And copyrights from the creative industries are not the only victims. Haven't you seen lately, similar claims (and penalties) levied against these giant Internet companies for their advertising efforts to support, or even subsidize in many cases, the distribution of harmful pharmaceutical drugs and counterfeits over the Internet, sponsor illegal gambling and pornography web sites, and many others too numerous to mention. Billions and billions and billions of dollars every single month.

"What do you expect us to do, your honor. Try out every single drug our customers illegally deliver just because we provide the advertising revenues for them to survive?"

This activity not only helps to destroy our economy, it breaks down the moral fiber of our society. What makes you think this young generation that has grown up witnessing these wide scale unlawful activities delivered to them (usually "free of charge") via the Internet, will be able to draw a distinction between the virtual world and the physical world where STEALING in concerned as they get older and have to put food on a table full of their own babies and elderly parents? The jury is still out on that one.

I applaud the nerve, and the intelligence, of the judge up there in New York who presides over this case between Google and Viacom. Maybe your recent ruling will cause all of these Internet parasites to wake up and see the error of their ways before it is too late for all of us.

As a pleasant footnote to copyright holders. Do you think the judge would have allowed the complete user logs of YouTube to be released in this case if the outcome of this case was not leaning in Viacom's direction? I certainly do not. This may, indeed, be one of the most important weeks in the history of protecting the original works of copyright owners in this country ... one of the few absolute rights that was guaranteed to all of us in our Constitution over 200 years ago.

Congratulations New York. Congratulations copyright holders. It must feel good to know you have some judges up that way who have your best interests at heart in enforcing our critically important (and "endangered") copyright laws and maintaining the delicate balance between managing and policing unbridled growth (i.e. "growth at ANY cost") over the Internet and maintaining our vital and long standing ethical, moral, and legal business practices going forward, while looking out for your best interests.

... which old witch ... the wicked witch!

George P. Riddick, III
Chairman/CEO
Imageline, Inc.

[e-mail]...

2008 Jul 03 02:55 PM