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Cramer Goes To War (LMT, ATK, RTN)

On tonight's MAD MONEY on CNBC, Jim Cramer said that he thinks defense and aerospace is becoming the seventh bull market.  He thinks that the recent huge contract to Saudi Arabia for military orders will be a big win.  Saudi Arabia gets $20 Billion in defense and over $30 Billion is being granted to Israel in US defense grants.  Cramer also thinks Democrats would spend a lot on defense to look strong and we spend more than anyone else by far for defense.  Cramer gave Lockheed Martin (NYSE:LMT) last week.  He's got two more great US defense contractor plays for the sector:

The first play is Alliant Tech (NYSE:ATK) as the largest bullet manufacturer and is in big into projectiles of all sorts.  He thinks it is cheap at 1.3-times growth and he thinks numbers could come up with an upside surprise because of its share buyback plan.  This reports Thursday, so Cramer noted to only put on a half position so you don't have the earnings exposure as bad.  Alliant was my number one defense stock for the BAIT SHOP in takeover candidates (see post here), although I haven't updated that position in a while.

Cramer's favorite defense play is Raytheon (NYSE:RTN) because it is the most leveraged name to defense spending, and because it is the cheapest according to his growth rate over P/E analysis.  He isn't looking for a buyout or anything, but it won two big contracts in June that will help with visibility.  It also raised fiscal guidance and has a great balance sheet with debt retirement and share buybacks.

Jon C. Ogg
July 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Analysts Close To Assigning Blackstone Ratings (BX)

If you have followed the Blackstone Group L.P. (NYSE:BX) units on a post-IPO basis, then you will know it is almost impossible to cover without noting how the listed unit has traded lower and lower.  But let's get past the past the potential taxation changes that may be imposed and the obvious credit crunch that all private equity firms are facing.  The 'underwriter's quiet period' is basically up, so brokerage firms that participated in the underwriting of the IPO can begin initiating coverage of the units with their equivalents of "Buy, Sell, or Hold."

Underwriters have not been able to let their analysts at the brokerage firms initiate coverage because of those quiet period dates creating a coverage blackout.  A contact at Banc of America has said the quiet period ends today for research analysts and a call into John Ford at Blackstone yielded the same answer.  Unfortunately, telephone calls into syndicate desks at other underwriters gave mixed results and it wouldn't be surprising if some of the reports with coverage initiation from brokerage firm analysts don't make it out until next week.

It will be interesting to see is just how the "initiations of coverage" will come out from the slew of analysts that were in the syndicate.  Bear Wagner, a Bear Stearns Cos. specialist operation, is the listed NYSE specialist.  Morgan Stanley and Citigroup were the lead underwriters; and the list of co-managers was huge: Merrill Lynch, Lehman, Credit Suisse, ABN AMRO, Deutsche Bank, J.P.Morgan, Lazard, Banc of America, Bear Stearns, UBS, Goldman Sachs, Wells Fargo, Nikko Citigroup, and SEB Enskilda.  This doesn't mean that all of the underwriters will start coverage on the same day and it doesn't mean they will all line up with Buy or Hold ratings.  If post-IPO trading history is static then there could be many mixed analyst calls, but frankly making ANY prediction or assumption on something unique as a private equity analyst rating is something that hasn't really had many comparisons. 

When these analyst reports and ratings start coming out, you can probably bet that Blackstone will again command much of the media time.  Interestingly enough, this may be what has acted as a floor over the last few days.  Shares hit their lows back on last Thursday and have managed to stay above those lows during the weak markets since then.  Stay tuned Wednesday, because this could easily be one of the focal stocks that gets much of the media attention again.  Blackstone itself is also in its own current quiet period ahead of its upcoming earnings report.

Jon C. Ogg
July 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

SiRF Technology Goes Its Own Way (SIRF, NVT)

SiRF Technology Holdings Inc. (NASDAQ:SIRF), a Global Positioning Systems chip maker, isn't following quite the same lead of NAVTEQ (NYSE:NVT) in after-hours trading.  It is possible that the street read the GAAP EPS headline number rather than the non-GAAP, although the revenues look a tad light.

The company posted $0.23 non-GAAP EPS on revenues of $70.6 million, and gross margins of 54.6%.  Unfortunately, Wall Street was looking for $0.23 EPS on $71.5 million in revenues.  The share calculation was up to 56.5 million shares from the prior 56 million shares from Q2 2006.

Total cash, cash equivalents and short-term investments were $211.0 million at June 30, 2007, compared with $170.2 million at December 31, 2006. Long-term investments were $2.0 million at June 30, 2007, compared with $26.4 million at December 31, 2006.  Shares are down about 7% in after-hours trading, and unfortunately that will put shares within 10% of its 52-week lows.  We'll have to see how this trades tomorrow morning when it is more liquid before passing any final judgement.

Jon C. Ogg
July 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

MySpace And Facebook: No Traffic In Asia

comScore came out with a little study on the geographic spread of the users of social networking sites. Perhaps the most striking point is that the two largest properties, MySpace (NWS) and Facebook, have relatively few visitors in Asia.

MySpace had over 114 million unique visitors in June, up 72% over the course of a year.

Facebook had over 52 million uniques up a fairly astonishing 270%.

But, to Asia. Only 8% of MySpace's viisitors and 7% of Facebook's users are from Asia. Given the importance of the region, those number are very light

Smaller social network Friendster has 88% of its visitors in Asia. Maybe Baidu will buy them.

Douglas A. McIntyre

NAVTEQ Guides Itself Up Wall Street

Earnings per share were $0.41 diluted, compared to $0.25 in the second quarter of 2006; Revenue in the quarter rose 49% over the second quarter of 2006 to $202.3 million.  First Call estimates were only $0.27 EPS & $180.25M revenues.

Judson Green, President & CEO: "Our exceptional second quarter results and strong first half performance give us great momentum as we enter the second half of the year.... We are particularly excited by the surging growth we have seen in maps for portable devices and the relative stability of our automotive business despite unfavorable car sales trends in our core geographies."

Revenue from NAVTEQ's Europe, Middle East & Africa (EMEA) operations totaled $117.6 million in the quarter.  The company is RASING GUIDANCE:  For the fiscal year 2007, NAVTEQ expects revenue of $780 million to $795 million and earnings per diluted share of $1.45 to $1.50 (FIRST CALL ESTIMATES ARE Fiscal 2007 $1.33 EPS & $747.8M revenues). These ranges assume an effective worldwide tax rate of approximately 29%, an average U.S. dollar/euro exchange rate of $1.35, and average diluted shares outstanding of approximately 99.6 million on a full year basis.

This is higher guidance for the year, although if you do the math it looks like most of the gains are coming from this quarter just reported.  Traders are giving this the thumbs up vote with a gain of more than 6% in after-hours trading.

Jon C. Ogg
July 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Whole Foods Posts Whole Earnings (WFMI, OATS)

Whole Foods Market, Inc. (Nasdaq:WFMI) has posted $0.35 EPS diluted on sales of $1.51 billion.  The organic food grocer saw 14% ending square footage growth and a 7.0% increase in comparable store sales on top of a 9.9% increase in the prior year. The negative impact on comparable store sales growth of Easter shifting from the third quarter last year to the second quarter this year was approximately 76 basis points in the quarter. Identical store sales (excluding four relocated stores and two major expansions) increased 5.8%.

The short version is that consensus estimates are $0.33 EPS on $1.54 Billion in revenues.  The company also said it spent $100 million in share buybacks and still has another $100 million that can be spent for repurchases.  The Company also expanded its existing $100 million revolving credit line to $200 million during the quarter.  Whole Foods plans 18 to 20 new store completions this year.

For fiscal year 2007, on a 52-week to 52-week basis, the Company expects total sales growth of 13% to 17% and comparable store sales growth of 6% to 8%.  For fiscal year 2007, the Company expects operating income before pre- opening and relocation costs as a percentage of sales to be in line with its 5.9% results year to date.  Longer term, the Company's goal is to reach $12 billion in sales in fiscal year 2010.

Shares are now trading up 9% in after-hours trading, and you can bet there is some short covering.  The Mackey blogging issues mostly came up after the cut-off date here on these results, although that is still being deemed more of a stock and corporate issue rather than a brand issue.  The company has said it  expects to receive a court ruling by the middle of August regarding its proposed buyout of Wild Oats (NASDAQ:OATS).  John Mackey is also the one giving the quotes in the press release, so it doesn't look like he's planning on going away any time soon.  So far this report is being very well received despite the ongoing issues over the last month. 

Jon C. Ogg
July 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Chipotle Mexican Grill (CMG) Will Host A Party All Night

Chipotle Mexican Grill (CMG) quarterly revenue increased 33.9% to $274.3 million on comparable restaurant sales increased 11.6%. Net income rose 85.1% to $20.0 million and diluted earnings per share increased 81.8% to $0.60.

The analysts that follow the stock were looking for EPS of $0.45 on revenues of $262.9 million

For the full year 2007, management is updating its expectations for comparable restaurant sales by increasing the forecast to the high single to low double digit range.

Management also continues to expect the following for 2007:

• 110 - 120 new restaurant openings
• Non-cash stock compensation expense of approximately $8.0 to $8.5 million which includes 10 months of expense for the 2007 grants
• An effective tax rate of approximately 38.0%
• Diluted weighted average common shares outstanding of approximately 33.25 million

Investors began the party early. CMG shares traded up 7.5% after hours to $95, well above the 52-week high.

Douglas A. McIntyre

NYSE Euronext: The Stock Everyone Loves to Hate

Posted by Thomas Catino

Ant&Sons

NYSE Euronext Inc. (NYX) is the stock everyone loves to hate. With major market indices recently hitting 52-week highs, NYSE Euronext shares are instead well off their highest level in the past year - $112.00. Market share has declined to 64%...continued

CV Therapeutics Earnings Overshadows Takeover Spec

Posted by Thomas Catino

Ant&Sons

Shares of CV Therapeutics Inc. (CVTX) are slumping, down $.60, or 5.52%, to $10.26 on moderate volume. It's been a volatile ride for the stock that is continuing this morning after the company posted...continued

American Home Mortgage Reopens For Trading, Under $2.00 (AHM)

American Home Mortgage (NYSE:AHM) has finally repoened after being closed for a day and a half.  Indications were going around the street have been noted as lows as an implied $1.00 to $2.50, but shares are under $2.00... Shares were halted all of Monday, but it had traded down 45% in pre-market activity yesterday morning after the news release.

Yesterday the shares were halted because it said that margin calls were going to prevent it from being able to pay a dividend.  Today the news is that the secondary mortgage market disruption and credit risk concerns are preventing it from being able to borrow.

The Company said it has received and paid very significant margin calls in the last three weeks and has substantial unpaid margin calls pending.  American Home saidf it is now unable to borrow on its credit facilities and was unable to fund its lending obligations yesterday of approximately $300 million. It does not anticipate funding approximately $450 to $500 million today.  It also retained Milestone Advisors and Lazard to assist in evaluating its strategic options and advising with respect to the sourcing of additional liquidity including the orderly liquidation of its assets.

Yesterday we even noted how this may bury the company, but you never know who may step up to the plate.  It wouldn't be too much of a shock if the company gets an NYSE delisting notice soon.  Subprime woes continue, and then some.

Jon C. Ogg
July 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Cramer Calls Under Armour & Crocs (UA, CROX, NKE)

On today's TheStreet.com video, Jim Cramer again pushed Under Armour (NYSE:UA).  The stock is up big after earnings from this morning.  He noted how he was critical at its last earnings report, but this quarter they overdelivered big on an under-promise.  It is one to own for back to school and for Christmas and isn't one you can really worry about the actual stock price.  Cramer even noted, "Under Armour is the next Nike (NYSE:NKE)!". He thinke their clothing is now a required outfit for sport teams.  Under Armour shares are putting in new all-time highs up over 15% on the day.  For unbridled growth Cramer said you can go listen to the Crocs (NASDAQ:CROX) call.  It too is putting in another 52-week high today with its shares up over the $60.00 handle.  That's up 300% over the last year.  When you look at the last earnings report, it's just too hard to not give the company credit.

Jon C. Ogg
July 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Is Online News Faltering? (CBS)(NWS)(NYT)(WPO)(TWX)(DJ)

A look at traffic patterns for online news sites indicates that there is a decline in consumers using the internet as a source of mainstream news.

Using information from website tracking service Alexa, most of the large news websites have six month declines. CNN.com has a six month downward trend. It three month average ranking among all websites on the internet is 76. But, over the last week, that has dropped to 85, which is part of a steady decline which was only interrupted in mid-April.

MSNBC is also down over the last six months. Its three month traffic average puts it 10,508 among all sites, but for the most recent week its average is 16,958.

FoxNews.com has been moving down over the same period, but its three month average is 599 and its one week average is 551, a slight improvement.

Among newspaper websites, the trend is also down. Washingtonpost.com's Alexa ranking is down over the last six months, but has been stable more recently. Its three month average ranking among all websites is 616, down 123 spots. But, the last week the ranking was 604.

NYTimes.com has a three month rank of 185, down 41 spots. And, its rank for the last week is 229.

WSJ.com is at 1,043 as a three month average. That is down 85 spots. Its number for the last week is 1,110.

CBSnews.com sits at 2,462, off 421 spots. This week its place was 3,166.

Some of this is clearly due to the time of year. News consumption is likely to be lower in the summer. But, many of these sites also posted declines from February to May.

If the decline is indeed a move away from using large news company websites for information, where have the people gone? Probably not back to print newspapers and the TV set. It may simply be that the appetite for news is dropping overall.

The trend would be particularly troubling for newspaper companies. They are banking that revenue from the internet can help offset declines in print advertising. They need web audiences for their sites to grow, and grow quickly.

Douglas A. McIntyre

Global Positioning Earnings Onslaught (GRMN, NVT, SIRF, TRMB)

It is rare that one sub-sector has all of the key components reporting earnings within the same 24 hour period, but that is the case with the "GPS" or global positioning stocks.  Tonight we have earnings from Timble (TRMB), NAVTEQ (NVT) and SiRF Tech (SIRF).  Tomorrow morning is Garmin (GRMN).  If you are in outside sales, the military, shipping, or do lots of driving then you know the addiction to these.  Particularly since a research analyst just yesterday and Jim Cramer recently called NAVTEQ (NVT) a buyout candidate.  These reports are all after reports that TomTom agreed to Buyout NAVTEQ's rival TeleAtlas for some $2.6 Billion. Keep in mind that these have experienced significant gains and are all considered hi-beta names.  Here are the earnings previews with some brief notes:

NAVTEQ (NYSE:NVT) reports after today's close: $0.27 EPS & $180.25M revenues; next quarter $0.26 EPS & $181.4M revenues; Fiscal 2007 $1.33 EPS & $747.8M revenues.  Shares within 10% of recent yearly highs and up over 100% from year lows.  40+ P/E ratio, recently noted as takeover candidate.

Trimble Navigation (NASDAQ:TRMB) reports after today's close: $0.30 EPS & $311.7M revenues; next quarter $0.26 EPS & $293.4M revenues; Fiscal 20067 $1.12 EPS & $1.19 Billion revenues.  TRMB within 6% of 52-week highs and up over 60% from lows.  Almost $4 Billion market cap and 36+ P/E ratio.

SiRF Tech (NASDAQ:SIRF) reports after today's close: $0.23 EPS & $71.5M revenues; next quarter $0.28 EPS & $81.4M revenues; Fiscal 2007 $1.06 EPS & $315.5M revenues.  Just recently in new collaboration with Intel pre-market; stock well off of highs because of prior guidance; still massive P/E ratio because of items, but has only a 22.6 forward P/E ratio if it hits estimates.

Garmin Ltd. (NASDAQ:GRMN) reports Wednesday morning before the open: $0.73 EPS & $645.7M revenues; next quarter $0.67 EPS & $601M revenues; Fiscal 2007 $2.90 EPS & $2.62 Billion revenues. Stock already above most analyst targets because of outperformance; shares within 1% of all-time highs (52-week) with an $18.7 Billion market cap; Forward P/E close to 30.

Jon C. Ogg
July 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Chipotle Ready To Serve Earnings (CMG)

Chipotle Mexican Grill (NYSE:CMG) posts earnings after the close today.  The analysts that follow the stock are looking for EPS of $0.45 on revenues of $262.9 million according to First Call.  The estimates for Q3 are $0.46 EPS and $272.4 million.  As a reminder, Chipotle has a history of exceeding earnings estimates and based on its strong performance you can imagine that Wall Street is going to demand another "beat expectations and raise guidance" today.

The stock performance has been amazing.  Shares are within 6% of all-time highs since coming public and are up about 75% over the last year.  Analysts are now mixed on the stock as most Wall Street price targets have been met or exceeded.  On a static basis, options traders are braced for a move of up to $4.60 or so in either direction based on mid-morning prices today. 

A wildcard is of course wholesale food prices, and the spike in avocado and corn prices are no secret.  It has a secured meat supply arrangement (or has in the past) so you'll know where to look today.  It has been a while since Cramer backed the stock, but he definitely increased the cult following in the stock.  The other wildcard is the large short interest since the 4.34 million shares in June that rose a tad to 4.36 million in July.  That is close to 15% of its float and represents more than 10 days average trading volume.  With shares this close to a high and the stock being so leveraged, the shorts could get squeezed hard if this one posts another significant 'beat and raise' for the quarter and its outlook.  We'll know in about 5 hours.

Jon C. Ogg
July 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Downgrade Makes RadioShack Sound Like AbacusShack (RSH)

RadioShack Corp. (NYSE:RSH) is down again pre-market, this time on an analyst downgrade.  Citigroup has slashed its rating from what was already a cautious "Hold" down to the ugly "SELL" rating.  Part of the problem: those darn cell phone sales are slow and pressuring the company's business.  The outlet is losing market share as well.  Unfortunately, having only a couple or few choices in cell phone providers in each market and with all of them selling direct it seems customers are more interested in signing up directly with a provider store that has all of their phone choices on the spot.

The prior target from Citigroup had been $32.00, but the new target is now $20.00 after this sell rating.  We noted yesterday how RadioShack is still shrinking.  RadioShack has already given back half of its post-implosion gains from last year to this year.  It seems as though the easy money that was to be made off of Julian Day stepping into the company has been made.  Now the company has to really show what it is worth to continue driving gains rather than riding off its first turnaround efforts.

Julian Day is a stallion, that isn't in question.  But the easy money off of him has come and gone.  Shares are down close to $10.00 from the highs just in the last month, and it's hard to tie a 30% drop merely to the weak market of last week.  Shares are gapping down over 2% to just under $25.00 in pre-market trading.

Jon C. Ogg
July 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Whole Foods Ready For Earnings As FTC Hearing Begins (WFMI, OATS)

Whole Foods Market, Inc. (NASDAQ:WFMI) and Wild Oats Markets, Inc. (NASDAQ:OATS) today are in a preliminary injunction hearing to begin today that will end tomorrow to decide whether to approve the U.S. Federal Trade Commission's application for an injunction to block the proposed merger between the two companies. Whole Foods Market and Wild Oats Markets have consented to a temporary restraining order pending the hearing.  On last look Whole Foods received 58% of Wild Oats shares in tender at the $18.50 per share buyout.  The FTC complaint and attempt to block the merger was filed on June 7, 2007.  Both Whole Foods and Wild Oats are challenging the FTC's opposition to the merger.

Also, today after the close will be the earnings report for Whole Foods.  Here is our full preview from yesterday.  The short version is that consensus estimates are $0.33 EPS on $1.54 Billion in revenues.  We also had another article yesterday noting how Wild Oats may need to restructure its entire cost structure if the company is not acquired.

Jon C. Ogg
July 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Pre-Market Stock News (July 31, 2007)

(ADP) Automatic Data Processing $0.35 EPS vs. $0.36 est.
(AEP) American Electric Power $0.64 EPS vs $0.58 est.
(APC) Anadarko Petroleum $1.08 EPS vs $0.80 est.
(BEAV) BE Aerospace $0.39 EPS vs $0.37 est.; raised guidance.
(CAM) Cameron $1.02 EPS vs $0.95 est.
(CBS) CBS $0.54 EPS vs $0.51e; light revenues.
(CCJ) Cameco trading up 3% on "Clarification"of forward sales commitments and guidance clarification.
(COH) Coach $0.42 EPS vs $0.41 est.
(CVH) Coventry Health $0.96 EPS vs $0.95 est.
(DD) DuPont accelerating a $5 Billion share buyback plan.
(ETR) Entergy $1.32 EPS vs $1.31 est.
(GAS) NICOR $0.40 EPS vs. $0.38 est.
(GM) GM $2.48 EPS vs $1.13 estimate.
(GSK) GlaxoSmithKline panel recommends 22 to 1 to keep Avandiaa available to patients in U.S.
(HC) Hanover Compressor $0.23 EPS vs $0.18 est.
(HR) HEalthcare Realty $0.40 EPS vs $0.41 est.
(IACI) IAC/Interactive $0.31 EPS vs. $0.33 est.; weakness partly from ticket miss at Ticketmaster.
(IMB) Indymac $0.60 EPS vs $0.56 est.
(JNJ) J&J announced restructuring; will have layoffs; reaffirmed 2007 guidance.
(LCAV) LCA Vision $0.36 EPS vs $0.46 est.
(MAS) MASCO $0.50 EPS vs $0.49 est.
(MEDX) Medarex said Valortim may enhance ability to block anthrax spores from dewveloping into bacteria.
(MS) Morgan Stanley will IPO its MSCI analytics and index unit.
(NMX) NYMEX $0.60 EPS vs $0.58 est.
(NNI) Nelnet $0.44 EPS vs $0.49 est.
(OLED) Cambridge Display Tech being acquired for $12.00 per share by Sumitomo Chemical.
(PER) Perot Systems $0.18 EPS vs. $0.19 est.
(PMI) PMI Group $0.95 EPS vs $1.15 est.
(RJET) Republic Airways $0.46 EPS vs $0.50 est.
(SAH) Sonic Auto$0.65 EPS vs $0.64 est.
(SMG) Scotts-Miracle Gro $1.98 EPS vs $1.99 est.
(SINT) SI International $0.38 EPS vs $0.38 est.
(SIRI) SIRIUS -$0.09 EPS vs -$0.10 est.; R$226.4M vs. $228M est.; raised FY2007 revenue guidance; spent $108 per new subscriber; added 561K subscribers to end with over 7 million.
(SUNW) Sun Microsystems traded up 10% after $0.09 EPS vs $0.05 estimate.
(TKR) Timken $0.73 EPS vs $0.72 est.
(TOPP) Topps special meeting over offers has been delayed to August 30.
(TSYS) TeleComm Systems awarded $3.5M Army contract.
(UA) Under Armour $0.11 EPS vs $0.03 est.; raised guidance.
(WEC) Wisconsin Energy $0.49 EPS vs $0.37 est.
(WMI) Waste Management $0.56 EPS vs. $0.52 est.

Jon C. Ogg
July 31, 2007

Pre-Market Analyst Calls (July 31, 2007)

ABM raised to Overweight at Lehman.
ARP cut to Neutral at Sun Trust Robinson Humphrey.
BLDR cut to Mkt Perform at Pip[er Jaffray.
CCJ raised to Outperform at CIBC.
CE raised to Buy at Citigroup.
DHT cut to Neutral at JPMorgan.
ETP cut to Reduce at UBS.
EXC raised to Buy at UBS.
FELE cut to Underperform at Baird.
FPL raised to Outperform at Wachovia.
GCI raised to Outperform at BEar Stearns.
GYMB raised to Outperform at FBR.
IVAC cut to Mkt Perform at Piper Jaffray.
IVGN cut to Peer Perform at BEar Stearns.
KNOL raised to Buy at Jefferies.
MRT raised to Outperform at RBC.
MTG cut to Peer Perform at Bear Stearns.
NVTL cut to Underweight at JPMorgan.
OPTM cut to Hold at Jefferies.
PSO raised to Equal Weight at Lehman.
RSH cut to Sell at Citigroup.
SFL raised to Overweight at JPMorgan.
UL cut to Underperform at Credit Suisse.
VSEA raised to Neutral at Credit Suisse.
VZ raised to Buy at UBS.
WRES started as outperform at RBC.

Jon C. Ogg
July 31, 2007

IAC Interactive (IACI): Bad News All Around

IACI (IACI) released second quarter 2007 results , reporting $1.5 billion in revenue, a 6% rate of growth over the prior year, and $136 million in Operating Income Before Amortization, compared to $165 million in the year ago period. Adjusted EPS was $0.31, compared to $0.32 in the year ago period.

Operating income fell 33% to $54.4 million.

On a segment basis, revenue at the big retailing operation, which includes HSN, was up only 1% to $701.4 million. Operating income for the division fell 31% to $34.5 million.

Revenue in the transaction segment, which includes TicketMaster, was up 2% to $441.9 million. Operating income fell 36% to $48.5.

The media and advertising segment, which includes Ask.com, had revenue growth of 33% to $174 million. But, the segment had a loss of $10.7 million.

It looks like the small conglomerate is not doing very well.

Douglas A. McIntyre

CBS (CBS): No Good News

CBS (CBS) revenues of $3.4 billion for the second quarter of 2007 decreased 3% from $3.5 billion for the same quarter last year. Operating income before depreciation and amortization ("OIBDA") of $859.4 million and operating income of $749.9 million for the second quarter of 2007 remained flat with $858.9 million and $750.3 million, respectively, for the same prior-year period.

On an adjusted basis, excluding tax benefits from income tax settlements in both years and the pre- tax gain and related tax effect of station divestitures, net earnings from continuing operations increased 9% to $393.1 million for the second quarter of 2007 from $360.8 million.

Radio operating income fell 18% to $179 million.

Nothing to write home about.

Douglas A. McIntyre

GM (GM): The General Fights Back

GM (GM) announced net income of $891 million, or $1.56 per diluted share, for the second quarter of 2007, an improvement of $4.3 billion compared with a reported net loss of $3.4 billion, or $5.98 per diluted share, in the year-ago quarter.

The results beat the hell out of expectations.

GM's global automotive net income from continuing operations totaled $764 million on an adjusted basis in the second quarter of 2007 (reported net income from continuing operations of $618 million), compared to an adjusted net income of $367 million (reported net loss from continuing operations of $3.48 billion) in the second quarter 2006

GM Europe (GME) posted adjusted net income of $236 million for the quarter (reported net income of $217 million), compared to $143 million in the second quarter of 2006 (reported net loss of $39 million).

GM Asia Pacific (GMAP) recorded adjusted net income of $237 million in the second quarter (reported net income of $227 million), which marks a second- quarter net income record for the region, and compares with $164 million in the same quarter a year ago (reported net income of $376 million, which included $212 million from the sale of GM's equity interest in Isuzu).

GM Latin America, Africa and Middle East posted its best quarterly net income in a decade with adjusted earnings of $213 million (reported net income also $213 million), compared to $155 million in the same quarter last year (reported net income of $139 million).

Douglas A. McIntyre

Sirius (SIRI): Getting Subscribers Is Getting Harder

Sirius (SIRI) reported second quarter results, including a 51% increase in revenue from the year ago quarter to $226.4 million, and strong subscriber growth of 561,493 new subscribers during the quarter driving ending subscribers to over 7.1 million.

The company's net loss improved by 44% to ($134.1) million, or ($0.09) per share, for the second quarter of 2007, from ($237.8) million, or ($0.17) per share, for the second quarter of 2006.

    SIRIUS issued the following guidance for the full year 2007:

    -- Total revenue approaching $1 billion
    -- More than 8 million subscribers at year-end
    -- Average monthly subscriber churn of approximately 2.2% - 2.4%
    -- SAC per gross subscriber approaching $100

However, monthly subscription revenue dropped to $10.24 to $10.62 year-over-year, a sign of discounting and churn rose from 1.8% to 2.1%

Douglas A. McIntyre

Lehman (LEH), Merrill (MER), Goldman (GS) And Bear (BSC) Get Junk Status

According to Bloomberg, the debt implied in the credit ratings of Merrill Lynch (MER), Goldman Sachs (GS), Lehman (LEH), and Bear Stearns (BSC) is akin to "junk" status. "Prices of credit-default swaps based on the debt imply that their credit ratings are below investment grade, data compiled by Moody's Investors Service show," writes Bloomberg.

With banks backing $300 billion in debt for buy-outs, concerns about credit quality is keeping investors away from the debt of major investment banks.

"Investors demand an extra 1.25 percentage points in yield to own the bonds of brokers instead of Treasuries, up from a low of 0.64 percentage point on Jan. 29," Bloomberg adds. 

Perhaps it was just a matter of time before the buy-out boom turned down, but the stunning speed with which deals have slowed and may be falling apart shows just how far the trend had become over-extended. It would not be surprising if write-offs at major banks end up destroying the earnings brought in by the boom,

And, the status of the banks adds to the concerns about the greater economy. Lump it with high oil and mortgage defaults.

Douglas A. McIntyre

Alcatel-Lucent (ALU): The Price of Failure

Shares of Alcatel-Lucent (ALU) are down over 8% in European trading, as they should be. After the much heralded merger, the integration of the two companies has been a disgrace.

Revenue in the second quarter fell from 4.491 billion euros last year to 4.326 billion. The company swung to a loss of 336 million euros. Gross profit fell sharply.

ALU is a company where the merger and the benefits of the transaction to put the two telecom gear companies never seems to end. The deal promised big savings and improved revenue from a larger global marketing force.

The CEO, Patricia Russo, has achieved none of the above. But, she does get to stay in Paris a lot.

Douglas A. McIntyre

Europe Markets 7/31/2007 Big Rally

Markets in Europe were up sharply at 6 AM New York time.

The FTSE rose 1.6% to 6,306. Barclays (BCS) was up 2.1% to 695. BHP Billiton (BHP) was up 2.6% to 1439. GlaxoSmithKline (GSK) was up 3% to 1251.

The DAXX rose 1.5% to 7,568. DaimlerChrysler (DCX) was up 2.6% to 66.23. DeutscheBank (DB) was up 3.9% to 100.8.

The CAC 40 was up 1.3% to 5,718. Alcatel-Lucent (ALU) was down 8.1% to 8.81. France Telecom (FTE) was up 1.2% to 19.66. Axa (AXA) was up 2.6% to 28.93.

Data from Reuters

Douglas A. McIntyre

Sun's (SUNW) Poor Quarter

Sun Microsystems (SUNW) will be up today. Up big. After hours, the stock move as much as 11% on the plus side. That took them to $5.40, still well below their 52-week high.

Over the last six months, Sun's shares are down over 25%.

Perhaps the reason the stock is not up more is that Sun's revenue is not growing. At all. Revenue for the quarter was $3.835 billion. In the same quarter a year ago, the number was $3.828 billion. Net income was $329 million, reversing a loss a year ago of $301 million.

But, cutting costs can be done once or twice, and then it is done.

The market may not be bidding up Sun's shares more because its still faces very hard competition in the server markets from Hewlett-Packard (HPQ), Dell (DELL), and IBM (IBM). Each is larger and has more resources.

Perhaps worse than that, the entire industry is facing virtualization software from companies including IPO candidate VMWare. Barron's quotes one analyst as saying: "We expect the server installed base to barely grow beyond 2008." The new software should be particularly hard on Unix servers which are about a third of Sun's revenue.

When it looked like Sun was coming out of the woods in mid 2006, the stock ran from $4.20 to $6.69 in February of this year. Since then, it has given most of that back.

Sun may rally, but it won't last.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Media Digest 7/31/2007 Reuters, WSJ, NYTimes, FT, Barron's

According to Reuters, a groups lead by an internet entrepreneur is still pressing it case to buy Dow Jones (DJ).

Reuters writes that Alcatel-Lucent''s (ALU) loss for Q2 was greater than expected.

Reuters reports that GSK's (GSK) diabetes drug Avandia should stay on the market according to the FDA but containers should carry a warner about heart risks.

The Wall Street Journal writes that News Corp (NWS) and Dow Jones (DJ) seem to be getting closer to a deal to sell the publisher of the WSJ.

The WSJ reports that raider Nelson Pettz is willing to pay $37 to $41 for Wendy's (WEN).

The WSJ writes that GM (GM) is offering 9% financing on pick-up trucks.

The Wall Street Journal writes that Sun (SUNW) posted a profit for the last quarter.

The New York Times writes that Liz Claiborne (LIZ) is working on a plan to make it less dependent on department store sales.

The New York Times writes that four independent record labels will sell music direct over the internet to AT&T (T) wireless phones.

The FT writes that Verizon (VZ) has bought Rural Cellular for $2.67 billion.

Barron's writes that Dell (DELL) and Sun (SUNW) could suffer as virtualiztion cuts server sales.

Douglas A. McIntyre

Asia Markets 7/31/2007

Markets in Asia were mixed

The Nikkei fell .2% to 17,249. NTT (NTT) was down 1.3% to 518000. Toyota (TM) was down 1% to 7,200.

The Hang Seng rose 1.5% to 23,090. China Petroleum (SNP) .9% to 8.28

The Shanghai Composite was up .7% to 4,471.

Douglas A. McIntyre

Cameco: Playing Pinocchio or Pangloss (CCJ)

Cameco Corp. (NYSE:CCJ) did something interesting, and it's a move that most companies do when they aren't happy about a reaction to a news release.  This morning the company issued earnings at $0.55 EPS, well above consensus estimates.  But the Uranium producer's guidance was deemed under plan for 2007.  The problem with this is that the company apparently did not believe that its guidance was going to be received in this manner. Then tonight came the 'clarification press release.'

If the company thought it was going to have a positive reception to the news, then it wouldn't have made a clarification press release tonight. 

.....While future sales levels were reduced in our assumptions about forecast realized prices, this is not expected to significantly impact our profitability..... During the call, the company provided some background information regarding the updated sales volume assumption for the 2007 to 2017 period. The sales volume assumption in the 2007 first quarter report was 35 million pounds per year for 2008 to 2017. In our 2007 second quarter report, the sales volume assumption was reduced to 30 million pounds per year to eliminate the influence of near-term spot market purchases and subsequent resale.......

You can read the press release here on the next page break for the full data.  The problem with 'clarifications' such as this is that it is often symptomatic of 'corporate communications.'  I fear that this may be taking hold as a culture in Cameco and this is the major Uranium stock play.  I have listended in on the conference calls regarding the Cigar Lake flooding SNAFU, and it just seems from an outsider's point of view that the company either isn't doing enough of the right things or that the company has lost control of being able to communicate its message.  The call-in questions and 'criticisms' seem to be escalating in tone from the sound of it, and a falling stock price won't curb that. 

Selling product into the future at fixed and locked-in prices is quite normal.  Making production guestimates is quite normal.  Even making commodity market price assumptions is somewhat normal.  But sometimes it goes wrong.  This stock is closer to its yearly low, but the truth is that this would still easily be considered in the middle part of its 52-week trading range.  The problem regardless of the last year is that the company has seen shares slide from $55 (U.S.) down to the $40 area most recently over the last 45 days. 

Clarification press releases are needed sometimes, but it makes you feel sometimes like the company is trying to do what kids do in games.  "DO OVER!"  This company is the largest play on the Uranium market, and with thousands of shareholders and a hot market for its key commodity it would be in the company's (and its shareholders') best interest to communicate better or be in a bit better control than it has been.

The excitement has left this one too because of delays from its flooding of its Uranium project at Cigar Lake: In early July, Cameco announced that the startup of Cigar Lake production could be delayed from 2010 to 2011.  Shares were indicated higher and the 'clarification' may help shares on Tuesday.  It is just not that frequent that a company worth more than $10 Billion has to make clarifications.

Please see the NOTES REFERENCED ON PAGE 2 at the bottom here showing the descriptions of all of its giuidance remarks from the press release.

Jon C. Ogg
July 30, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Just In Case.... Cramer Outlines the Doom & Gloom Scenario

On tonight's MAD MONEY on CNBC, Jim Cramer said he is going at least address the doomsday scenario in the financial markets even though he doesn't think it is reality.  This would be the extreme bearish scenario just in case the worst thing happens.  Just in case.... The 3 groups in trouble are homebuilders, banks and mortgage brokers, and brokerage firm stocks. 

Homebuilders are a total mess, and the only one he thinks isn't a disaster is MDC (NYSE:MDC). South Forida, Phoenix, California are all in trouble and way overbuilt and he thinks some homebuilders could go under in theory.  Out of the lenders Countrywide (NYSE:CFC) is the only honest one about exposure and how bad some of it is.  The worst case is that 50% of home buyers could walk away, although Cramer doesn't think that will occur.  The brokers could lose all the private equity business and lose all the mortgage and derivative lending.  They could even see estimates fall 50% and they could see numerous headcount reduction.  Bear Stearns (NYSE:BSC) is in these the deepest, but all the brokers are in the same boat.

Later on MAD MONEY, Cramer did note that if the FED does end up cutting rates, then you could actually see these stocks soar.  He even noted that emergency rate cuts could add 50% to some of these names.  Now before you go panic, keep in mind that this isn't what was being predicted.  But this is what the absolute worst case scenario believers are thinking.  Cramer doesn't think this is going to happen. 

I don't believe this will happen either, for whatever that is worth.  I recall seeing these debt implosions left and right affecting private and public pension funds back in the mid 1990's, and it blew up many firms and many jobs were lost as a result.  These "toxic waste" products cause a lot of pain, but if they crater the economy and implode many of the large diversified brokers and investment houses then the world has changed.  In fact, that means the tail will have wagged the dog.  These deep implosions always overreact and in the end will create some great opportunities for those with the fortitude and foresight on being the right timers to buy.

Jon C. Ogg
July 30, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Sun Microsystems Must Love Cheap Component Prices (SUNW)

Sun Microsystems (NASDAQ:SUNW) posted earnings of $0.09 EPS GAAP and $3.835 Billion in revenues.  Estimates were $0.05 EPS and $3.84 Billion revenues, but the GAAP EPS also had soem charges in it.  We have no formal guidance so they are holding off until the conference call.  It even generated $564 million cash in the quarter and total gross margin as a percent of revenues for the fourth quarter was 47.2%.

What the company had going for it in general was cheaper component prices and a somewhat strengthening demand from corporate America for technology spending, but we'll have to see if those are the reasons for the beat on EPS estimates.  Unfortunately, Sun Micro Systems has seen its shares roll over fairly hard since recent highs from earlier in the year.  Shares are way off the private equity investment highs from earlier this year and shares sold off 10% in recent days in a weak market.

In normal trading, Sun closed down 0.6% at $4.89.  Shares are actually up 9% at $5.31 in reaction in the after-hours trading session.  The chart on this one despite the after-hours pop is going to be hard to call with what looks a bit directionless no-man's land patterns.

Jon C. Ogg
July 30, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Unionizing Toyota (TM)

The UAW negotiations with GM (GM), Ford (F), and Chrysler (DCX) has awakened a sleeping dog. Why isn't Toyota unionized in the US?

The media is filled with data on how much pension and health benefits add to the price of a car made by a US manufacturer. That delta is now about $25 an hour compared to the Japanese according to Forbes.

The argument that Detroit has not made cars as attractive as Toyota or Honda is irrefutbable. The US car companies have shot themselves.

But, it is also true that the cost advantage has helped swell Toyota's treasury. In other words, as Reuters points out "union supporters argue that the Japanese automaker rode to a $14 billion profit last year on the backs of its nonunion workers."

There is a certain equity in this argument. Labor costs have helped cripple Detroit. That has helped cripple the unions as they have lost membership.

Toyota & Co. has benefitted from having no unions, but that has done nothing for UAW members.

The union may insist that changes. Especially if it has to give up more in this round of talks with the Big Three.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Cramer Endorses Honeywell (HON, BA)

On today's STOP TRADING segment on CNBC, Jim Cramer was at least happier today than last week since the market stabilized.  Cramer said he'd buy Honeywell (NYSE:HON) as one that belongs in the same league as Boeing (NYSE:BA).  He likes that they blew out numbers and are buying more stock than anyone else.  Cramer said he would prefer to see more dividend hikes as long-term signals of conviction.

Honeywell is one that is within 4% of its 52-week highs and does trade at premium multiples to other DJIA components.  On top of its ability or desire to repurchase shares, it still also has many opportunities to prune down its portfolio and focus on core operations.  We'll leave that up to the company as to what their strategy is for now at least, particularly as the conglomerate has so many areas it operates in. 

Jon C. Ogg
July 30, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Weighing Earnings & FTC Review At Whole Foods (WFMI, OATS, KR, SWY)

Whole Foods Market Inc. (NASDAQ:NASDAQ) has much more than just earnings to deal with this week.  The company is expected to report earnings and revenues on Tuesday at $0.33 EPS and $1.54 Billion, according to First Call.  The company is also meeting the FTC over the challenge of its acquisition of Wild Oats (NASDAQ:OATS).  That two day hearing starts tomorrow and we'll likely have the earnings before we have a clear decision that further blocks or unblocks the $18.50 per share buyout of Wild Oats.

There is another key issue.  We haven't really heard a peep out of the company in roughly two weeks, and we have ourselves called for at least a partial or temporary resignation or withdrawal of Chairman & CEO John Mackey.  The issue is that he doesn't really need to leave entirely.  He can maintain his Chairman position as the company's founder, but this will signal he is at least willing to let the company have a more removed face to deal with regulators over the deal and to deal with the SEC inquiries over the "RAHODEB" message board posts.  After all, he even went on a massive rant and tirade on the Whole Foods Blogs.  What Mackey did was foolish and dumb, but the truth is that the business cycle has changed (thanks to many of his efforts) and the company may need a less-eccentric leader to help it fend off competition from lower-price competitors that sell the same products.

Whole Foods on a results basis is in somewhat of a Catch-22.  Very few are expecting great upside or great guidance.  After all, Kroger (NYSE:KR) and Safeway (NYSE:SWY) are able to offer many of the same exact goods now and for prices at much lower levels.  Don't take this too much against the company, because the truth is that the company will continue to be profitable and it has already established itself as THE premium brand for healthy and organic foods out of any nationwide chain grocer. 

Regardless of what traditional grocery stores do, its status will remain as the leader and the premium brand.  It boils down to what premium Wall Street is willing to accept, and right now Whole Foods still has roughly a 50% premium to the earnings multiples of Kroger and Safeway.  That may act as a ceiling while either the "E catches up to the P" or while the street determines a fair 'multiple premium' for the stock. 

Lastly, the short selling has increased from 19.1+ million in June up to more than 24.4 million shares in July.  That can't be a surprise considering the latest shenanigans out of Mackey.  But that could also create a major wave of short covering if the company can convey that things are going to be better than OK.  Wild Oats still trades at more than a $3.00 discount to its $18.50 per share buyout price, and Whole Foods is only about 3% above its most recent 52-week lows.

Jon C. Ogg
July 30, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Overstock.Com Earnings Preview (OSTK)

Overstock.com (NASDAQ:OSTK) will report earnings before the market open on Tuesday, and fortunately its 'bound to be entertaining' conference call is late morning at 11:00 AM EST.  This one is thinly followed and has a wide range of estimates, but it looks like First Call has guestimated earnings at a loss of -$0.62 EPS on revenues of $145 million.  The company has missed estimates for each of the last 3 quarters, and is not in the spotlight as much since its Chairman & CEO Patrick Byrne has stayed more out of the spotlight lately and stopped referring to conspiracies to topple his company by Sith Lords.

On a static basis, it appears that options traders are braced for a move of $1.25 to $1.30 in either direction.  Its most recent chart is actually back under levels that would mark an up-trend in the stock, although it goes without saying that has a mind of its own and can see wild moves on news.  The stock also carries over 5.4 million shares in its June short interest.  That represents more than 40% of the float, and Mr. Byrne's attack on short sellers is quite a unique case.

The company is expected to post losses for 2007 and 2008.  That means it has to operate cautiously so it doesn'rt get its own piece of the O.  We aren't going to spend too much guess time from here, but it may be worth pointing out that there are still many skeptics that believe its $400+ million market cap is too high and have their bets placed accordingly.  That's for you to decide. 

Overstock's 52-week trading range is $13.40 to $21.72.

Jon C. Ogg
July 30, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Buffalo Wild Wings Earnings Preview (BWLD)

Buffalo Wild Wings reports earnings after the close on Tuesday, with a conference call to follow.  First Call puts expectations at $0.22 EPS on revenues of just under $78 million.  Wall Street has gotten used to the company exceeding estimates for each of the last 3 quarters.

Buffalo Wild Wings has seen nearly a 20% pullback in its stock.  The stock was already well off of recent highs on its own, and the market slide last week exacerbated the drop.  This one is a bit harder to call on a fundamental basis because shares are still very close to average price targets from Wall Street analysts.  Its stock chart is also well outside of its uptrend, and much additional weakness on the chart here would signal that the company may change its name to Bearish Wild Wings.

If the company hits its $1.15 fiscal 2007 consensus earnings estimate, it trades at 34-times 2007 earnings; if it meets the $1.40 estimate for 2008, it trades at almost 28-times 2008 estimates.  The big wild card for the company has been its ability to keep material costs down (yep, chicken wings).  Of course that isn't the only component at all since it sells burgers, ribs, salads, sandwiches, wraps and much more.  But food prices have been a challenge for all restaurant chains of late, so we'll have to see how they have fared compared to elswhere in the restaurant chain sector.  Regardless of the current and forward P/E ratios sounding high, this one has 450+ locations in 37 states so it still has some room to grow and still have many franchise locations available.

This also carried a short interest of 3.7 million shares in July, but that is under the 4 million shares in June.  Many of these high-beta food chains tend to carry a higher short interest as many investors keep bets on for a shortfall that will take them back to normal market multiples. This is also one to watch as Jim Cramer developed a larger following in the stock before cooling to the sector recently, and here is the recent TheStreet.com article pointing to the company.

Jon C. Ogg
July 30, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Can Sirius Draw Attention To Results Rather Than Only The XM Merger? (SIRI, XMSR)

Shares of SIRIUS Satellite Radio (NASDAQ:SIRI) are trading up roughly 2% a day ahead of earnings, and this is likely due to a somewhat stabile market after last week's market slide.  The satellite radio provider is expected to post a loss with -$0.10 EPS and $228.3 million in revenues, according to First Call.

Its hopeful XM Satellite Radio (NASDAQ:XMSR) merger partner posted a gain of 338,000 net subscribers in Q2 with its earnings last week, and its cost per new subscriber increased to $121 per new subscriber (up from $112 a year ago).  Unfortunately we all know what happened last week in the stock market, and XM saw shares fall almost 8% on those earnings.  Sirius shares reached over $3.20 again over the last 10 days, but the market slide took its stock back under $3.00.

Unfortunately for the stocks, both of these are in serious limbo until a merger outcome is somewhat known or at least closer to a yes/no verdict.  We already know that Hugh Panero is leaving XM either way on August 10.  We also got to see the proposed new pricing plans on a post merger basis just last week.  And we also know that Sirius is bumping its Chrysler installs from being in 40% of 2007 models to 70% of 2008 models.

Forbes put Sirius' subscriber adds higher at 295,000 for Sirius this last quarter.  This one really boils down to the merger, and unfortunately that is still no closer to being known with or without an earnings report.  Mel Karmazin has already secured some financing packages that would be needed if this merger can't close, but unfortunately this one still acts like it wants to be in limbo by analyst reads and by the chart until an outcome is closer or more finite either way.

One of the few metrics that could be a focus outside of the merger is the cash flow from operations.  During Q4 last year the company did post positive cash flow, but its Q1 2007 was again negative $133.9 million in cash flow.  With the new financing secured and the $360+ million in liquidity as of last quarter, we can at least expect to see more projections later in the week of "time to zero cash in various scenarios" from analysts. 

If Karmazin & Co. can turn on his charm and draw attention to the actual results and on its own internal expectations, it might at least be able to keep the focus from Wall Street being only being pointed to the merger.  Unfortunately for both companies, most eyes are also going to be focused on the big board screens to make sure the market isn't in freefall mode.  The satellite radio provider hosts a conference call at 8:00 AM EST Tuesday.

Jon C. Ogg
July 30, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

GSK (GSK): Repeat After Me: Avandia Is OK

GlaxoSmithKline (GSK) wants everyone, including the FDA, to know that its diabetes drug Avadia is "safe and effective when used appropriately."

Almost everyone else thinks that the drug increases risk of heart problems.

A  Food and Drug Administration safety scientist  today said that "GlaxoSmithKline Plc's diabetes pill Avandia should be removed from the market because of heart risks," according to Bloomberg.

On May 27, a prominent researcher wrote in The New England Journal of Medicine that the drug increased the risk of heart attack.

GSK wants to believe that the drug is OK, because if it is pulled from the US market its shareholders get hammered. Its stock is near 52-week lows, and it appears that it is going to get worse.

Douglas A. McIntyre

EXCO Resources Juices Shares With MLP Announcement

EXCO Resources (NYSE:XCO) plans to file a registration statement this quarter for an IPO for essentially all of its market capitalization to from a master limited partnership (MLP). According to the company's press release, the IPO will issue $1.5 billion worth of common units; its market cap is currently about $1.9 billion. The offering is expected to close in the first quarter of 2008.

XCO says the IPO gives it "the opportunity to enhance valuation of a substantial portion of its mature producing properties" by creating an MLP that will go after additional mature properties, whether owned by XCO or a third party. The funds raised from the IPO will be used "to retire debt associated with the contributed assets" and for working capital.  In other words, a payoff to current officers and shareholders.

XCO already issued two flavors of preferred stock worth about $2B in private placements at the end of the first quarter. Once XCO completes the IPO of its MLP, virtually all the value will have been sucked out of the parent and the resulting MLP will be laden with debt.

There has been an identical trend elsewhere and there will almost certainly be more of these IPOs from small E&P companies like XCO, and all will have about the same terms. The value to investors in the MLP lies in the tax status and the rate of return projected by the company. The latter will be all-important in these deals.  So far, shareholders are eating this up as "XCO" shares are up over 1% to $17.95, less than $2.00 under the $19.70 all-time high since its IPO in early 2006.

Paul Ausick
July 30, 2007

Value-Clicked; After A Warning Is There Any More Value? (VCLK, GOOG, MSFT, WPPGY)

ValueClick Inc. (NASDAQ:VCLK) is probably hoping that Main Street can find more value in the stock with its shares down 20% pre-market.  On Friday evening, the company expedited its earnings release date to this morning on a short notice that gave very little or no time to most holders to decide what if they wanted to hold shares into earnings.  That acts as a trap for holders who were probably already worried after the major market slide, and this eliminated the ability for shareholders to get out ahead of the news.

The current quarter was put at a new $0.19 to $0.20 pro forma EPS on revenues of $155 to $165 million.  Its new 2007 fiscal guidance is now $0.74 to $0.76 EPS on revenues of $645 to $660 million, lower than prior guidance of $0.79 to $0.81 EPS on revenues of $655 to $665 million.  All in all this isn't exactly a horrible earnings warning, but it shows a possible crack and could magnify fears that DoubleClicks's buyout by Google (NASDAQ:GOOG), the 24/7 Real Media buyout by WPP Group (NASDAQ:WPPGY), and the buyout of aQuantive by Microsoft (NASDAQ:AQNT) could all be too much competition for the last of the large independent banner, click, and image online advertiser.

With shares down just over 20% pre-market to $20.50, shares are now closer to the low-end of the $13.65 to $36.70 trading range over the last 52-weeks.  This will adjust its market cap down closer to $2.1 Billion if shares open trading here at the 20% haircut levels.  ValueClick is going to have some upset shareholders on its hands this morning.  It increased its share buyback program from $66 million remaining up to $100 million, but unless it rolls back the clock to Friday's closing price this is going to fall on deaf ears.

Based on how far shares are off now from highs, it would sure seem that the larger acquisitions that were seen in the online ad sector have now all been completed.  Even if that isn't the case, there are still a lot of holders that are 'long and wrong' that were hoping this one would be acquired too.  Until those holders get flushed out and a new shareholder base is established with a lower entry price, the chances of even a 'hoped for' or hypothetical deal coming close to current prices would likely face far more shareholder resistance than support.

Jon C. Ogg
July 30, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.