Wall Street Breakfast: Must-Know News

by: SA Eli Hoffmann
SA Eli Hoffmann
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.
  • Greenspan: No economic growth; oil boom 'forever'. "As of right now, U.S. economic growth is at zero," former Fed chairman Alan Greenspan said Monday. "Recovery might take longer to emerge than it usually does." Soaring oil prices, he said, will "go on forever." Greenspan also told Gulf nations their inflation would fall "significantly" if they would cease pegging their currencies to the U.S. dollar. Most Gulf leaders continue to insist on a dollar peg to boost capital flows.
  • NABE: Possible stagflation in 2008. First-half growth will slow to a crawl (3/4%), the National Association for Business Economic [NABE] says, but 55% of the economists it surveys say we will sidestep full-fledged recession. The other 45% believe a recession will be short-lived and shallow. An optimistic 60% expect credit market liquidity to return to normal by the end of 2008. House prices will decline 4% in 2008, and gain a scant 0.1% in 2009. The Fed benchmark interest rate will be at 2.5% by year end; inflation will also be 2.5%.
  • EA goes public with $2B courtship of Take-Two. Electronic Arts (ERTS) made a $26/share, $2B hostile bid for fellow game developer Take-Two Interactive Software (NASDAQ:TTWO) Sunday -- a 50% premium to Friday's $17.36 close. It appears the bid may be timed to precede the release of Take-Two's blockbuster Grand Theft Auto IV, slated for late April, which is widely expected to be 2008's best-seller, and could make its shares more expensive. The public bid follows two private offers of $25 and $26 a share on Feb. 15 and 19; Take-Two responded by saying the price "provides insufficient value to our shareholders and comes at absolutely the wrong time given the crucial initiatives under way at the company."
  • Ambac rescue at hand. Sources say Ambac Financial Group (ABK) is drawing nearer to sealing a $3B capital injection that will allow it to restructure, and save its critical AAA rating. The plan involves a $2.5B stock issue to existing shareholders at a discount, backed by bankers including Citigroup (NYSE:C), UBS AG (NYSE:UBS), Wachovia (NASDAQ:WB) and Royal Bank of Scotland (NYSE:RBS), who would commit to buying any shares unsold. Ambac will also sell $500M of debt. Banks are exposed to companies like Ambac and MBIA (NYSE:MBI) who insure some of their riskier portfolio assets, such as CDOs. A sharp downgrade to the insurers could trigger a fire-sale of such assets. Markets soared into positive territory during Friday's final minutes when news of the potential rescue broke.
  • Lowe's outlook comes up short. Lowe's Companies (NYSE:LOW) reported Q4 EPS of $0.28, beating consensus estimates of $0.25. Revenue of $10.4B fell short of estimates of $10.63B. Looking ahead, the home-improvement retailer sees Q1 EPS of $0.38-0.42 and 2008 EPS of $1.50-1.58, short of estimates for $0.41 and $1.76 respectively. "Fourth quarter and fiscal year 2007 sales fell short of our plan as we faced an unprecedented decline in housing turnover, falling home prices in many areas and turbulent mortgage markets that impacted both sentiment related to home improvement purchases as well as consumers' access to capital," CEO Robert Niblock said. Shares are down 4.6% in early trading.
  • Visa's blockbuster IPO. Visa (proposed ticker: V) disclosed the proposed terms of its much-awaited IPO. Visa plans to sell as much as $17 billion in stock -- 406 million shares for $37-42 -- making it the biggest IPO in U.S. history. $3B will go into an escrow account to pay legal settlements; $10.3B will be used to redeem stock held by its member banks; the rest will be held in cash. Visa processed 44 billion transactions in 2006, vs. 23.4 billion for MasterCard (NYSE:MA).
  • Genentech soars after Avastin gets FDA clearance. Shares of Genentech (DNA) surged 10% in Frankfurt Monday after its cancer drug Avastin received surprise FDA approval for treatment of metastatic breast cancer in conjunction with paclitaxel chemotherapy. "We believed there was only a 40% chance of FDA approval... Genentech now regains the key Avastin growth driver for 2008," said analyst Michael King. The flipside: If "six deaths attributed to the drug" prove significant, there is the risk of product liability.
  • Adobe bets on AIR. On Monday Adobe (NASDAQ:ADBE) will launch Adobe AIR, an OS-independent platform which will enable companies to offer downloadable desktop-based versions of their websites, reducing load times and allowing browser-free interaction. Companies who have already developed AIR-based sites include eBay (NASDAQ:EBAY), Nasdaq Stock Market (NASDAQ:NDAQ), AOL (NYSE:TWX) and salesforce.com (NYSE:CRM). Microsoft's (NASDAQ:MSFT) Silverlight and Sun's (JAVA) JavaFX both compete with Adobe's Flash Player, not AIR, the company says.
  • Clear Channel settles dispute with TV station buyer; Wachovia still unhappy. Clear Channel Communications (CCU-OLD) has settled a dispute with Providence Equity Parnters over the latter's scheduled purchase of its TV stations. Under the proposed terms, Providence will pay a reduced $1.1B for the stations, down from $1.2B. However, while two of the three banks backing the deal -- UBS AG (UBS) and Goldman Sachs Group (NYSE:GS) -- continue to support it, Wachovia (WB) still wants out, and says it will not participate in a meeting today to close the deal, a move that could expose it to a $45M breakup fee if the acquisition falls through.
  • Motorola expands China business with cable offerings. Motorola said Monday it has acquired the assets of two Chinese digital cable set-top firms, in a effort to expand its product range in China. "130 million Chinese households currently subscribe to cable, and as customers make the transition from traditional analog solutions to digital cable, digital cable subscriptions in China are expected to grow from 10 million in 2006 to over 165 million by 2016," MOT said in a statement. Financial details were not disclosed.
  • CME may sweeten Nymex offer. CME Group (NASDAQ:CME) may boost its offer to acquire Nymex (NMX) in a move to create the world's biggest exchange. The original bid was valued at about $11.3B, but has since fallen to about $10B due to a fall in its share price; the boost being considered would bring the bid back in line with its original level. A 30-day exclusive negotiating period between the sides ends Tuesday. If the deal succeeds, the biggest losers are large investment banks, who are already struggling to challenge the CME's stronghold on futures trading.
  • Angry shareholders stick it to Yahoo. Yahoo (YHOO) is facing a barrage of lawsuits from shareholders who say the company is breaching its fiduciary duty by trying to repel a $46B deal with Microsoft (MSFT).

Today's Markets

  • In Asia, markets were very varied. Nikkei +3.07%. Shanghai -4.07%. Hang Seng -0.15%. BSE Sensex +1.74%.
  • European markets are sharply higher at midday following Friday's last-minute surge in the U.S. FTSE +1.63%. CAC +1.7%. DAX +1.19%.
  • U.S. futures are up slightly at 7:10. S&P +0.24%. Dow +0.19%. Nasdaq +0.06%.

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