Wall Street Breakfast

by: SA Editors
SA Editors
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Ad Spending Growth Will Drop to Just 1.7% in 2007 -- report

Network/cable TV and magazine ad revenues will grow this year, while radio and newspapers will see declines in ad revenue this year, according to ad tracker TNS Media Intelligence. Newspaper ad spending on newspapers is seen falling 2.9% (-2.4% in 2006). Spot TV ads (bought on local TV stations) will fall 5.5%, network TV ad spending will grow 1.3%, and cable ads will jump 5.9%, it says. The fastest ad growth market is digital: internet display advertising is expected to grow 16% this year. TNS doesn't track search and rich media ads, which are seeing increased attention from advertisers. Overall, the industry monitor says ad spending will be the weakest since TNS ad chart2001 -- growing just 1.7% to $152.3 billion, a marked drop from its previous forecast of 2.6% growth. TNS's Jon Swallen: "Take two aspirin and wait for 2008."
Sources: TNS release, Wall Street Journal, New York Post
Commentary: First Quarter Online Ad Spending Up 16.7%Yahoo Gets Serious About Strengthening Its Display AdvertisingThe New Vertically Integrated Media And Advertising Companies
Stocks/ETFs to watch: Google Inc. (NASDAQ:GOOG), Yahoo! Inc. (YHOO), Microsoft Corp. (NASDAQ:MSFT), Catalina Marketing Corp. (POS), Omnicom Group Inc. (NYSE:OMC), Interpublic Group of Companies Inc. (NYSE:IPG), ValueClick Inc. (VCLK), Wausau-Mosinee Paper Corp. (NYSE:WPP), Time Warner Inc. (NYSE:TWX), CBS Corp. (NYSE:CBS), Walt Disney Company (NYSE:DIS), Dow Jones & Company Inc. (DJ), The New York Times Co. (NYSE:NYT)

Shakeup Coming at Journal Newsroom -- NYT

On Wednesday, The Wall Street Journal will announce a major shakeup in its newsroom, involving the promotion of some top editors and the replacement of others, according to the New York Times. DJ 13 June 2007The reshuffle is viewed by the Times as a bid by managing editor Marcus E. Brauchli, who took the position a month ago, to make his mark on the paper. Wednesday is also the day the Bancroft family, which holds a controlling interest in Dow Jones, is expected to submit a new proposal to Rupert Murdoch regarding the protection of the editorial independence of the Journal in the event of a takeover by Murdoch's News Corp. Murdoch has bid $60 per share, or $5 billion, for the company. Part of the family's goal is to prevent Murdoch from exercising any control over the appointment or dismissal of senior editors. The shakeup follows the retirement of Dow Jones's longtime Chairman and CEO Peter R. Kann, as well as that of Paul Steiger, The Journal’s managing editor.
Sources: New York Times, Reuters, The Age
Commentary: DJ Roundup; Bancrofts to Issue Revised Safeguard Proposal to News Corp.Dow Jones & Company: The Economics Don't Make SenseThere Goes Dow Jones: On Ratings, Revenues And Profits
Stocks/ETFs to watch: Dow Jones & Company, Inc. (DJ), News Corp. (NASDAQ:NWS). ETFs: PowerShares Dynamic Media Portfolio ETF (NYSEARCA:PBS)
Conference call transcripts: Dow Jones Q1 2007, News Corporation F3Q07

Blockbuster Undercuts Netflix with Online-Only Plan

Shares of Netflix closed down 8.4% at $20.08 Tuesday after rival Blockbuster announced an online-only rental subscription plan priced below the Netflix equivalent. Blockbuster's new program, called Blockbuster By Mail, will allow customers to rent three movies at a time for $16.99, $1.00 less than Netflix. Blockbuster's Total Access plan has been losing money since it was initiated November 1, and the new plan is intended to promote online subscriber growth. Many observers had been expecting Blockbuster to raise prices on Total Access, but it has not yet done so. "The battle for subscribers is coming at the price of the bottom line," said analyst Stacey Widlitz. Shane Evangelist, senior VP and GM of Blockbuster Online: "The online rental market is projected to increase 43% during 2007...NFLX 13 June 2007 BBI 13 June 2007"[W]e intend to capture our share of that growth, broaden our customer base and remain the fastest growing online rental service in the marketplace." Citigroup analyst Tiny Wible downgraded Netflix to sell and slashed his price target from $25 to $15 on news of the plan. "We expect that Netflix will eventually have to match the price cuts or lose significant share to Blockbuster," he said. Blockbuster shares closed down 3% at $3.95 but then gained it back after hours.
Sources: Wall Street Journal, Reuters, Forbes, Hollywood Reporter
Commentary: Netflix Stock Drops As Blockbuster Cuts Prices On Online-Only PlansBlockbuster Fires Back at Netflix's Price Hike AccusationBlockbuster Sells Off Game Station Unit to Focus on Movies
Stocks/ETFs to watch: Blockbuster Inc. (BBI), Netflix, Inc. (NASDAQ:NFLX). Competitors: Hastings Entertainment Inc. (NASDAQ:HAST), Movie Gallery Inc. (MOVI). ETFs: PowerShares Dynamic Leisure & Entertainment ETF (NYSEARCA:PEJ)
Conference call transcripts: Blockbuster Q1 2007, Netflix Q1 2007


eBay's 'Buy It Now' Patent Dispute Resurfaces

Virginia-based two-man operation MercExchange LLC has filed a motion for an injunction against eBay's "Buy It Now" feature on its auction website. MercExchange claims it owns the patent to "Buy It Now;" their dispute began in 2001. EBAY-chart-06-12-07 In 2003 MercExchange won a federal jury verdict; damages were lowered to $25m (from $35m) in an appeal. Judge Jerome Friedman said he "hasn't made any ruling yet," and "would like to see what eBay's position is." Friedman has yet to issue an order to stop eBay from using "Buy It Now." EBay's counsel says the patent should never have been issued, and the U.S. Patent and Trademark Office agrees in preliminary findings. The Virginian-Pilot reports MercExchange received more than $6m from a hedge fund group, but hasn't used the funds for any capital expenditures, which eBay says shows it has no commercial plans for the patent. However, MercExchange recently partnered with uBid.com, an eBay competitor -- proof it is using the patent, it says.
Sources: Associated Press, Bloomberg, The Virginian-Pilot
Commentary: eBay's "Click To Buy" Patent Fight Continues [24/7 Wall St.] • eBay: Coming Up Short in a Bull MarketeBay's Upcoming Acquisitions: Vertical Search Portals?
Stocks/ETFs to watch: eBay Inc. (NASDAQ:EBAY), uBid.com Holdings, Inc. (UBHI.OB). Competitors: Amazon.com Inc. (NASDAQ:AMZN), Google Inc. (GOOG), Yahoo! Inc. (YHOO). ETFs: Internet HOLDRs (NYSE:HHH), First Trust Dow Jones Internet Index (NYSEARCA:FDN), NASDAQ 100 Trust Shares ETF (QQQQ)
Conference call transcripts: eBay Q1 2007
Related: MercExchange v. eBay: Injunction Hearing [Patent Law Blog]

Yahoo Shareholders Approve Board of Directors, But By Narrow Margin

Yahoo shareholders voted in the company's board of directors at Tuesday's annual meeting, but expressed their discontent by giving the slate only 66% of the vote against last year's 97%. YHOO 13 June 2007Yahoo stock has fallen 10% over the past year while the Nasdaq index has gained 25%. The company has been increasingly left behind by rival Google, whose stock is up 30% over the past 12 months. Adding insult to injury, the board approved very generous compensation packages for senior executives last year, including CEO Terry Semel, who received $71.7 million -- more than any other CEO of an S&P 500 company. "I was extremely pleased with the results," said activist shareholder Eric Jackson. "My hope is this is going to break the logjam, and there are going to be some changes on the board and some positive changes that help the company." Jackson, who owns only 100 shares of Yahoo, has put together a group of shareholders who collectively hold 2 million shares. The group has used blogs, videos and wikis to promote a "Plan B" for Yahoo. At the meeting, Semel said he had not yet reviewed the plan, which Jackson submitted to the company in February.
Sources: Wall Street Journal, TheStreet.com, Mercury News
Commentary: Yahoo Shareholder Meeting: Tuesday of DiscontentEric Jackson Prepared to Shake Things Up at Yahoo's Shareholder MeetingYahoo Investors, Partners and Customers Getting Nervous
Stocks/ETFs to watch: Yahoo! Inc. (YHOO). Competitors: Google Inc. (GOOG). ETFs: Internet HOLDRs (HHH), First Trust Dow Jones Internet Index (FDN)
Conference call transcripts: Q1 2007


AU Optronics Forecasts Profitability in Q2 on Rising LCD Panel Prices

At its annual shareholder meeting Wednesday, Taiwan's AU Optronics, the world's third-largest LCD maker, said it expects to post a profit in the current quarter, citing a recovery in LCD panel prices that began in April. Analysts surveyed by Bloomberg estimate AU will earn NT$1.01 billion (approx. $30m) on average. AU-Optronics-AUO-chart-06-12-07 A Reuters poll showed an average estimate of NT$1.546b (~$46m). AU reported a net loss of NT$5.11b ($154.7m) in Q1 and had net income of NT$182m (~$5m) last Q2. AU is expected to earn NT$8.9b (~$269m) in Q3 and NT$13.7b (~$415m) in Q4, according to Reuters Estimates. AU's chairman said factories are running at full capacity and its president mentioned plans to double capacity at its newest LCD factory by Q3 next year. Rival Samsung also sees a sustained recovery in LCD panel prices. Ordinary shares of AU Optronics were up 0.2% in late afternoon trading in Taipei after gaining as much as 1.8% intra-day. Its ADRs were unchanged at $16.66 in normal trading Tuesday.
Sources: Bloomberg, Reuters
Commentary: The Skinny on Flat Panels: Reduced Capacity Could Mean a Strong '08Sony: Gearing Up To Sell Flat Screens, Wal-Mart StyleSony Launches Nine New LCD Flat-Panel TVs, Dell Exits Market
Stocks/ETFs to watch: AU Optronics Corp. (NYSE:AUO) (Taipei: 2409). Competitors: LG.Philips LCD CO., Ltd. (NYSE:LPL), Syntax-Brillian Corp. (BRLC), Philips Electronics NV (NYSE:PHG), Sharp Corp. (OTCPK:SHCAY), Matsushita Electric Ind. Co. Ltd (NYSE:MC), Sony Corp. (NYSE:SNE), Samsung [not traded in the U.S., but an 18% component of iShares MSCI S. Korea (NYSEARCA:EWY)]. ETFs: iShares MSCI Taiwan Index (NYSEARCA:EWT)
Conference call transcripts: AU Optronics Q1 2007

Finisar's Preliminary Q4 Report Misses Forecasts

Optical networking component manufacturer Finisar Corp. announced in a preliminary Q4 report Tuesday that quarterly revenue fell 5% from year-ago levels to $97.3 million. FNSR 13 June 2007Analysts had been expecting Q4 revenue of $99 million. For the full fiscal year, revenue came in at $419.2 million, 15% above the year-ago quarter but shy of analyst forecasts of $422 million. "Despite year-end problems with customer supply chain and excess inventory issues, I think we made tremendous progress on a number of fronts in the last fiscal year," said CEO Jerry Rawls. The company was unable to provide any earnings information because it is in the middle of an investigation into its accounting of stock options. Discrepancies in the dates of some options grants will obligate the company to restate some financials to reflect related charges. The amount of the charges has not been determined, but the company said they could affect results from 2000 through 2007.
Sources: Press release, TheStreet.com, MoneyCentral, Reuters
Commentary: 5 Misconceptions About the 10G Optical MarketOptical Vendors: Cornering The Commodity MarketFiber Optics Market: Benefiting from the Online Video Trend
Stocks/ETFs to watch: Finisar Corp. (NASDAQ:FNSR). Competitors: JDS Uniphase Corp. (JDSU), Stratos International Inc. (STLW), Opnext Inc. (NASDAQ:OPXT), Avanex Corp. (AVNX). ETFs: iShares Goldman Sachs Network Index Fund (NYSEARCA:IGN), PowerShares Dynamic Networking (NYSEARCA:PXQ)


Jones Apparel on the Verge of Selling Barneys -- NY Post

Jones Apparel is closing in on a deal to sell its Barneys New York luxury department store chain to the Dubai government for $950 million, according to a report in the New York Post. Unnamed sources say that after several months of talks, negotiations are now in their final stages, and a deal could be announced as soon as this or next week. Jones' CEO Peter Boneparth bought Barneys in 2004 for $400 million. He has been under pressure from shareholders to boost the company's share price in the face of weak sales in its discount apparel brands and Nine West shoe unit. Jones shares are down 13.6% YTD and 12.2% over the past year. The deal, the Post says, would be Jones Apparel 13 06 2007 Chartvindication for Boneparth. Barneys' 35-odd stores -- including flagships in NYC, Beverly Hills, Boston and Chicago -- sell designer apparel, shoes, accessories and home furnishings. The buyer, private equity firm Istithmar, is owned by the oil-rich Dubai government.
Sources: New York Post
Commentary: Jones Apparel Reportedly Considering Sale of BarneysJones Apparel: Room to Grow -- Barron'sMr. Market Spot On With Jones Apparel
Stocks/ETFs to watch: Jones Apparel Group Inc. (NYSE:JNY). Competitors: AnnTaylor Stores Corp. (NYSE:ANN), Brown Shoe Company Inc. (BWS), Liz Claiborne Inc. (LIZ). ETFs: Retail HOLDRS ETF (NYSEARCA:RTH)


ICE Offers CBOT 'Enhanced' Merger Proposal

IntercontinentalExchange Inc. [ICE] is refusing to say die in its bid for the Chicago Board of Trade [CBOT]. A day after the U.S. Department of Justice granted regulatory approval to the Chicago Mercantile Exchange's [CME] rival bid, which CBOT's board seems to prefer, ICE issued a press release adding several 'enhancements' to its current all-stock offer totalling $11.1 billion.bot cme ice The new proposal enables CBOT shareholders to now receive some cash instead of exclusively ICE shares for their stakes in CBOT; other improvements include a freeze on increases in trading fees for CBOT members at least until 2011, and the retention of at least five members of CBOT's choosing on the new company's board, through 2014. ICE claims its revised offer is now worth $211.55 per CBOT share, offering more than a 10% premium to CME's offer of $191.98 a share. CME responded to ICE's 'enhanced' proposal by saying it "does not address the fundamental strategic and operational flaws of its original proposal," adding a CME/CBOT deal offers greater long-term value to CBOT holders.
Sources: Press Release, Wall Street Journal, MarketWatch, Reuters
Commentary: CME One-Ups ICE In CBOT Bidding By Gaining Regulatory ApprovalCME Sweetens Offer for CBOT; ICE Considers Its PositionWho Will Acquire CBOT Holdings?
Stocks/ETFs to watch: CBOT Holdings, Inc. (BOT), Chicago Mercantile Exchange Holdings Inc. (NASDAQ:CME), IntercontinentalExchange, Inc. (NYSE:ICE). Competitors: NYSE Euronext (NYSE:NYX), NYMEX Holdings Inc. (NMX), International Securities Exchange Inc. (ISE)

Activist Shareholder Bill Ackman to Oppose Ceridian Buyout, Find Higher Bidder -- WSJ

Ceridian Corp.'s largest shareholder will today that he is opposed to Thomas H. Lee Partners and Fidelity National Financial Inc.'s $5.3 billion ($36/share) bid for the human-resources/transaction-outsourcing company, according to a Wall Street Journal report. A person familiar with the matter says activist Bill Ackman's Pershing Square Capital Management will also say it has hired bankers (Lazard Ltd. and law firm Sullivan & Cromwell) to solicit a better bid. In a letter to fellow shareholders, Ackman, who is already in a proxy contest with Ceridian's board, argues the bid undervalues the company: "It appears to us that the current deal is Ceridian 13 06 2007 Chartan ill-suited response to our proxy contest and is suboptimal for Ceridian stockholders." Ackman will suggest splitting up the company's human-resources and credit-card payment processing units, or applying significant new debt to bolster share prices. Shares are up over 50% since Ackman began amassing his stake in November 2006.
Sources: Wall Street Journal, Seeking Alpha
Commentary: Activist Investors: Pay Enough and Ye Shall Be HeardPershing Square Capital's William Ackman: Buys, Sells, Portfolio"Mr. Pressure" Wants Ceridian/Comdata Split -- Barron's
Stocks/ETFs to watch: Ceridian Corp. (NYSE:CEN), Fidelity National Financial Inc. (NYSE:FNF). Competitors: Paychex Inc. (NASDAQ:PAYX), Automatic Data Processing Inc. (NASDAQ:ADP), First Data Corp. (NYSE:FDC), Hewitt Associates Inc (HEW). ETFs: Vanguard Financials VIPERs (NYSEARCA:VFH), Financial Select Sector SPDR ETF (NYSEARCA:XLF)

Barclays Might Sweeten Bid for ABN -- FT

Barclays Bank has drafted a contingency plan to add a cash sweetener to its all-stock offer for Dutch banking giant ABN Amro, according to a report in the Financial Times. Barclays' offer of €65 billion was accepted by ABN, but a rival consortium led by the Royal Bank of Scotland has since bid €71.4 billion. The consortium's bid is on hold pending resolution of a dispute with Bank of America over ABN's U.S. asset LaSalle Bank, which the consortium wants, but BoA has already agreed to buy from ABN for $21 billion. When that dispute is resolved, Barclays will make a final decision about the sweetener. The Financial Times says Barclays is considering reducing the number of shares it was going to issue for ABN and replacing them with cash. Also, Barclays and ABN had planned to return €12 billion to shareholders through a buyback following the merger. Barclays could pay a portion of that cash directly to the shareholders by including it in the bid. ABN 13 June 2007 BCS 13 June 2007The prospect of a sweetener is expected to upset some major shareholders of Barclays, who are apprehensive about a costly bidding war. The cash element, however, is expected to appeal to those who favored the RBS offer in part because it contained a cash component.
Sources: Financial Times, Reuters
Commentary: Atticus Fund to Barclays: Drop Your Bid for ABN AmroRBS Consortium Formalizes Bid for ABNBarclays Approached by Suitors for ABN Amro's Banco Real
Stocks/ETFs to watch: ABN Amro Holding N.V. (ABN), Barclays PLC (NYSE:BCS), Royal Bank of Scotland Group plc [ADR] (RBSPY), Fortis NV [ADR] (FORSY), Bank of America Corp. (NYSE:BAC). ETFs: First Trust Morningstar Div Leaders Idx (NYSEARCA:FDL), PowerShares Intl Dividend Achievers (NASDAQ:PID), iShares MSCI Netherlands Index (NYSEARCA:EWN)


Boston Scientific Fails to Have Punitive Charges Dismissed

A federal court Tuesday ruled against Boston Scientific's attempts to have litigation over faulty defibrillators thrown out of court. It inherited the 1,660 lawsuits when it purchased Guidant in 2006. Boston Scientific has budgeted for at least $732 million in damages and legal costs. The current ruling concerns the recall of Guidant's 1861 defibrillators. In 2002 Guidant discovered a rare flaw that could it to malfunction, but didn't inform doctors and patients until 2005. Three patients died, although the plaintiffs involved in the current ruling didn't experience a malfunction. Boston Scientific argues Guidant didn't need to inform doctors due to the small failure rate (1/500), and says it told doctors the devices were imperfect, and that it told the FDA that the failure rate was up to 1/20. It also argues that patients Boston Sci 13 06 2007 Chartwhose devices weren't faulty shouldn't be allow sue for punitive damages. The court disagreed: "The law is not furthered by allowing a manufacturer to escape liability for a defective product simply because a plaintiff elected to remove a medical device." Boston Scientific says it is confident that juries will ultimately see things its way. Shares are down 6.6% YTD and 18.6% over the past year.
Sources: Wall Street Journal
Commentary: Boston Scientific Backs Neuromodulation Technology FirmBypassing Surgery - Will Stents Survive The Bad News?Jim Cramer's Take on BSX
Stocks/ETFs to watch: Boston Scientific Corp. (NYSE:BSX)


U.S. Market: To Stay Invested, Or Not
Housing: Housing Bubble and Real Estate Market Tracker
Long Idea: Money Managers Pick Amdocs as One of the Top 21 Stocks of the Year
Short Idea: Coach: Too Far, Too Fast?
Internet: Yahoo Shareholder Meeting: Tuesday of Discontent
Telecom: Cerberus Taking a Bipolar Approach to BCE
Networking: Level 3 Communications: Ready to Rule the CDN Market?
Hardware: HP, Apple: Bright Spots Amid Corporate Spending Slowdown
Chips: Micron LBO Seems Imminent
Software: Safari for Windows: Apple's Free Product Could Generate Billions
Gadgets: iPhone's Safari Browser: Another Back Door to the Windows Desktop
Media: Why is RealNetworks Offering Yet Another New Player?
Healthcare: Healthspring Warning Provides Shorting Opportunity: Big Picture Looks Bleak
Biotech: Botox Not Just For Wrinkles: Time to Reconsider Allergan
Retail: H&M: The Ikea of Retail Apparel Is a Hit With U.S. Consumers
Gold: Gold Bullion
Financial: JPMorgan Chase: Banking on Growth Under CEO Jamie Dimon
Asia: Japanese Property Market in Strong Secular Rebound
ETFs: Growth Outperforming Value Over Last Few Weeks
Hedge Funds: Hedge Fund D. E. Shaw Urges Investment Technology Group to Consider a Sale
Small-Caps: Kal Energy: Avoid This Stock At All Costs
Sound Money Tips: How to Find the Best Employee
Jim Cramer: Latest stock picks
Earnings Transcripts: Lehman Brothers F2Q07 (Qtr End 5/31/07) Earnings Call Transcript

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