Under The Radar News - Wednesday

by: SA Eli Hoffmann

Pharma wants public to swallow its lack of innovation. Pfizer (NYSE:PFE) and GlaxoSmithKline (NYSE:GSK) raised U.S. wholesale prices 9% on their 10 top sellers in 2007, pretty steep when you consider the broader CPI only grew 4.2%. If not for pricey drugs, sales would have fallen more than 10% as pharma companies fail to discover new drugs to take the torch from last generation's blockbusters. Only 19 new drugs got the FDA's stamp in 2007, the weakest showing in 24 years.

One decade down - more to come? Investors could have done no worse than to keep their money in non-growing equities over the past nine years. Factoring in inflation, the S&P 500 made just 1.3% per year over the past decade, during which Treasurys gained 4.7% and commodities did double that. Yale economist Robert Shiller, who predicted the dot-com bust, says recent volatility doesn't bode well for the future. "The housing crisis that we are going through is going to put a damper on the economy that is longer than a recession. I don't see the stock troubles ending as quickly as many people are imagining."

Credit losses to quintuple. Global credit crunch losses will hit $1.2 trillion, Goldman Sachs analysts say. U.S. banks, brokers and hedge funds will shoulder about $460B of that. Sound scary? It is. U.S. leveraged institutions have written off only $120B since the liquidity crisis began last summer. "There is light at the end of the tunnel, but it is still rather dim."

WiMax deal ain't simple. A deal that would see cable companies including Comcast (NASDAQ:CMCSA) and Time Warner Cable (TWC) joining Sprint (NYSE:S) and Clearwire's (CLWR) WiMax start-up is likely to be complex and time-consuming, bankers say. They think it could take up to 24 months to seal a deal, which may also include Intel (NASDAQ:INTC) and Google (NASDAQ:GOOG). Several structures are being looked at, including a full sale of the WiMax assets.

Game theory. Number crunchers are finding complex graphics chips from Nvidia (NASDAQ:NVDA) are better at handling big math chores than CPUs from Intel (INTC) and Advanced Micro Devices (NASDAQ:AMD). Hence, Nvidia's plans to give "supercomputing ability to anyone who can afford a PC." It says one GPU (graphics processing unit) can do number chores up to 200x faster than an x86 CPU, and notes its "addressable market" is $6B. Nvidia hopes CUDA, its breakthrough development language, will make GPU programming mainstream.

Money managers very bullish. 42% of money managers say U.S. stocks are undervalued, 8% more than thought so three months ago and the highest level in four years. 66% think we'll still see positive returns in 2008; 26% think gains will exceed 10%. Large-cap growth tops their list; they also like oil and energy companies.

Investment bankers struggling in China too. Investment banking fees fell a worrisome 5.4% in China to $2.1B. M&A fees were up 3.6%, but fees from debt capital and equity capital markets fell 52% and 16% respectively. UBS (NYSE:UBS) took #1 spot in the region, followed by Citigroup (NYSE:C). Isn't China supposed to be on fire?

Bad news for banker? Merrill Lynch (MER) has plans to layoff 10-15% of its investment banking unit due to a major writedown. Sources say the writedown could hit $8B.

Entertaining proposition. MGM Mirage (NYSE:MGM), Abu Dhabi real estate developer Sorouh, and Jordan's Rubicon will spend up to $1B to create an "entertainment destination" in Abu Dhabi. MGM may also set up an animation studio there, as well as TV and film production facilities.

Another 10 million iPhones? Gartner analyst Ken Dulaney notes speculation Apple (NASDAQ:AAPL) has ordered 10 million 3G network iPhones. A 3G iPhone may use Organic Light Emitting Diode [OLED] display, which would yield better battery life and a thinner phone. Dulaney thinks the rush to 3G may be due to a less-than-stellar showing of the 2.7G/EDGE network phone in Europe.

Apple snags four patents. Apple was granted four patents yesterday: 1) iPod scroll wheel. 2) iMac support arm. 3) Split screen editing. 4) Speech recognition. Mind you, none of them sound too new anymore.

Off again... on again. A source says Fifth Third Bancorp's (NASDAQ:FITB) acquisition of First Horizon National (NYSE:FHN) is on again, and will be announced this week. The deal was said to have fallen apart in February over price.

Due diligence at Dillard's. Activist shareholder Barington Capital wants to know what perks executives at Dillard's (NYSE:DDS) are receiving. Apparently, the firm owns five jets to Macy's (NYSE:M) three, even though the latter dwarfs it. Barington also wants details of Dillard's dealings with construction company CDI Contractors, which it half owns, and whose CFO, John Glasgow, has been missing for two months.

Banking on bankers. Options guru Bernie Schaeffer of Schaeffer's Investment Research went long Merrill Lynch (MER) and Lehman Brothers (LEH) in his Master Trading portfolio.