Matthew Hammond - Credit Suisse

Olli-Pekka Kallasvuo, CEO However, as you know, the quarter was not all positives and we have more work to do. ASPs were down significantly sequentially. This, of course, reflected our big entry level volumes due to both continued industry growth in the entry level and not as strong sales gains in emerging markets. I think also it was a reflection of a lower proportion of sales in higher end products related in part to slower take up of WCDMA products industry wide. The decrease in gross margins was also significant which we'll address shortly.

Rick Simonson, CFO: Most significant potential negative drivers for device gross margins, aggressive pricing tactics by the competition as some players seek to gain a meaningful market share. We'll be as competitive as we need to be in all of these markets including emerging markets. And we need to have an ever more competitive product portfolio. Another important balancing factor for device gross margins is that we continue to see a shift in the market toward the higher growth emerging markets.

Boston Globe Doesn't Deliver For the Times [Wall Street Journal]

HEARD ON THE STREET: Investors to Wal-Mart: Slow Construction Pace [Wall Street Journal]

Total revenues for the third quarter of 2006 were $749 million, an increase of 52% from total revenues of $493 million in the third quarter of 2005. This growth was primarily driven by higher HIV product sales and higher royalty revenues from Roche’s second quarter Tamiflu sales. Revenue from Gilead’s product sales were $670 million, an increase of 43% from the third quarter of this year compared to the same period of last year, driven primarily by our strong HIV product sales. Product sales increased sequentially by 13% compared to the second quarter of this year. HIV product sales grew to $557 million for the third quarter of 2006, up 53% compared to $364 million in the third quarter of 2005 and up 17% sequentially from the second quarter of 2006.

Greg Cappelli - Credit Suisse

CFO Bob Rivet on The Numbers:

Moshe Katri - Cowen & Company

As we had forecast in our last conference call, sales and profits for the just completed September quarter were roughly similar to the previous quarter. However, the overall business environment was weaker than we expected and consequently our bookings decreased slightly. Consumer bookings grew, but not to the extent we expected as customers remain cautious going into the holiday demand period. Revenue for Q1 ended October 1 2006 was $292.1 million, essentially flat with the revenue of $292.9 million for the previous quarter, but was an increase of 14% over the first quarter of last fiscal year’s revenue of $256 million. Net income for Q1 was $112.4 million, or $0.37 diluted EPS, compared with $115.7 million, also $0.37 diluted EPS in the prior quarter. [...]

Banks See Profits, Rising Pressures [Wall Street Journal]

Ford Gets Cut Off by a Top Supplier As Detroit Squeezes Parts Makers [Wall Street Journal]

The most recent surveys of expectations conducted by the central bank show a growing consensus that inflation is likely to come in around 3% in December. This represents a marked decline from forecasts that at the beginning of last month were above 3.6%.

Summary: Microsoft is setting its sights on the 6-11 year old market this holiday season, and has built a team of corporate partners to help. Fox TV's new show Viva Piñata is at the core of this strategy; Microsoft aims to launch an Xbox 360 game based on the show this holiday season. Other partners include 4Kids Entertainment (the media company behind Pokemon and Yu-gi-oh), and Playmates Toys, which is developing the next generation of trading cards personified in $6.99-$14.99 interactive figurines. According to MSFT's VP of Franchise Development Ed Ventura, "The younger audience is certainly our future business because they turn into our hard-core gamers". Expect a gaming-advertising battle this season; analysts project video game manufacturers will spend $100M in game and console advertising in Q4. Microsoft is risking alienating its traditional thirty-something consumers in favor of a much younger audience.
Related links: Who Will Profit from Console Gaming Wars? • Gaming Wars Continued • Sony Playstation Mania • Microsoft's Viva Piñata Site
Potentially impacted stocks and ETFs: Partners: Microsoft (MSFT), 4Kids Entertainment (KDE), News Corporation (NWS). Competitors: Nintendo (NTDOY), Sony (SNE)

Seeking Alpha's Wall Street Breakfast summarizes today's key market- and stock-moving news. Receive it by email every weekday morning (free/no spam).

AHEAD OF THE TAPE: Calling Tech Bellwethers [Wall Street Journal]

Summary: Two leading semiconductor companies report today: Intel and Linear Technology. Intel, long considered a key indicator for both the tech industry and the general economy, is less likely to fulfill this role today given its battle with AMD. Linear Technology, a leading developer of analog chips, could be viewed as a replacement. According to Lehman Brothers semi analyst Romit Shah, Linear is likely to follow peers National Semiconductor and Maxim Integrated Products which warned last month about weakening demand for analog chips. Shah believes that Linear is a good indicator of the general state of the economy, as they are known for answering customer demand more quickly than their peers. A decline in sales, therefore, would more accurately reflect a real-time decline in market demand.
Related links: Latest Earnings Call Transcripts on Seeking Alpha • Semiconductors: Indicator for Tech and Broader Market • More Proof the Semis Are In Trouble
Potentially impacted stocks and ETFs: Intel (INTC), AMD (AMD), Linear Technology (LLTC), Maxim Integrated Products (MXIM), National Semiconductor (NSM). Semiconductor HOLDRs ETF (SMH).

Embattled CEO To Step Down At UnitedHealth and UnitedHealth's Next Challenge Is Uncertainty [Wall Street Journal]

Summary: UnitedHealth Chairman and CEO Dr. William McGuire holds options valued at $1.78B. Yesterday, after releasing the results of its options backdating probe, the company announced Dr. McGuire would be retiring as chairman role immediately, and that second-in-command Stephen Hemsley would replace him as CEO by December 1. Examiners concluded options grants had been backdated to the recipients' benefit: McGuire received twelve grants between 1994 and 2002; all were dated before sharp increases in the share price, and three were dated on the lowest price of the year. McGuire took over in 1991, and is credited with transforming UnitedHealth into a leading health-insurer valued at over $60B. UNH shares currently trade at close to 18X 2006 earnings, higher than competitors WellPoint and Aetna.
Investors are now presented with the choice of giving the stock "the Greenberg treatment or the Fiorina treatment": when AIG CEO Maurice Greenberg stepped down in 2005, the stock dropped 7% due to his centrality in the company; when Carly Fiorina was removed from Hewlett-Packard, share prices rose 7% due to relief in the change of management. Since the initial exposure of UNH's backdating probe in March, the stock has plummeted 23%. New CEO Hemsley also received significant grants, but was cleared by the probe.
Related links: UnitedHealth Group Press Release • WSJ Options Scandal Scorecard • UnitedHealth Under Fire • UnitedHealth Problems Continue • Findings of WilmerHale Probe
Potentially impacted stocks and ETFs: UnitedHealth Group Inc. (UNH) • Key competitors: WellPoint (WLP), Aetna (AET)

ASTHMATX (AZMA)

Business Overview (from prospectus):

Jobs Knew Apple Manipulated Some Option Grants (Wall Street Journal)

Intel Could Face EU Antitrust Case

Summary: After a five year probe of a variety of Intel's business practices, people familiar with the case say that the European Commission in Brussels has prepared a draft of charges against the company. The next step in the process is for the commission to present its case to an expert panel to screen the argument for holes, then European antitrust chief Neelie Kroes will examine the evidence and decide whether to charge Intel, probably before the end of the year. Intel would have up to two months to respond to Ms. Kroes' charges, and would be entitled to a hearing. Ms. Kroes could end up fining the company. Thomas McCoy, AMD's (AMD) VP of Legal Affairs noted that Intel typically uses "false rebates schemes and the threat of price increases" with computer manufacturers. Intel is up against antitrust authorities in South Korea as well, but in the U.S. has not faced an antitrust suit since the '90s,
Related links: Full WSJ article • Intel & AMD: Where the Chips Fall • Intel vs. AMD: What the Cuts Mean
Potentially impacted stocks and ETFs: AMD (AMD), Dell (DELL), Hewlett-Packard (HPQ)

Cold Water Club

Summary: Remember the good old days of 1972? On November 10th, the Dow closed at 995.26, breaking the six year plus record of 995.15 from February 1966. Then after peaking at 1051.7 in January 1973 it fell, and took a decade to recover. According to Bollinger Capital Market's John Bollinger, yesterday's peak looks all too familiar: "Great bull markets are born from periods of excessively low valuations. All the current cycle has allowed us to do is bring us to just above average valuations." Plagued by Watergate, inflation, oil woes and recession the 70s turned out to be no picnic; while these days may be better, as the article notes: "it hardly seems like a time for lots of bubbly."
Related links: Full WSJ article • First Time in a Decade the Dow's P/E is Higher Than the S&P 500's • New Stock Bubble Theory Picks Up Steam • Not All Markets are Hitting Highs
Potentially impacted ETFs: S&P 500 Spiders (SPY), Diamonds Trust (DIA), Nasdaq 100 (QQQQ), iShares Dow Jones Select Dividend (DVY)

Licenses Are the Biggest Hurdle To a Deal for Harrah's