24/7 Wall St.

What A Huge Quarter Would Look Like For Apple (AAPL): $7 Billion

Apple (AAPL) probably already knows what its September quarter looks like, but, it could be more successful that many on Wall St. can imagine.

Mac sales are being put as high as 2.17 million by Citigroup in a research piece picked up by Barron's. In the June quarter, they were 1.764 million units yielding $2.533 billion. At the higher unit volume Mac revenue would be about $3.12 billion. TheStreet has given a unit estimate of 2.35 million Macs. That would move Mac revenue up to $3.38 billion.

Research firm Hambrecht puts iPod sales at 12 million for the September period. In the last quarter, iPod revenue-per-unit was $160. That would bring iPod revenue to $1.92 billion. iTune sales in the June quarter were $608 million. Peripherals and software were just high of $700 million.

iPhone yield per unit is now $400  UBS is putting iPhone sales for the just-closed quarter at 950,000. That would add another $380 million.

That brings revenue to $7 billion. Revenue for the June quarter was $5.4 billion. In the September quarter of 2006, revenue was $4.837 billion.

Could $7 billion happen? If the company reaches the high end of all analyst estimates, yes.

Douglas A. McIntyre

Is Yahoo! (YHOO) Better Off As Two Companies?

Yahoo!'s (YHOO) international operations are OK, especially if you compare them to the domestic part of the company.

In the last quarter, Yahoo! US grew only 5% to $1.11 billion. International operation grew 15% to $579 million. There is level of currency risk/reward in the overseas businesses. And, the company has at least two very valuable assets. One is its 34% ownership in Yahoo! Japan which was valued at just under $7 billion as of June 30.. Softbank is the other large owner. In the second quarter, revenue at the Japanese company rose 20% to $482 million.

Yahoo! also has a 44% interest in Chinese online company Alibaba. The e-commerce operation plans to go public and raise $1 billion in the current quarter. Yahoo!'s piece of the company is certain worth in the billions of dollars.

It is fair to assume that with Yahoo! trading at 5.3 times sales, an new independent international company would trade closer to 7x to 8x. That is about $18 million. Add in Yahoo!'s ownership in the Chinese and Japanese companies and the market value of Yahoo! International would  probably be closer to $25 billion to $30 billion. The entire YHOO market cap is $36 billion now.

This leaves Yahoo! US with a value of $6 billion to $8 billion. That is for the part of the company that has a $4,5 billion run rate. It is only a 2x revenue valuation. Too low? CNET (CNET), a technology information portal trades for 2.8x. ValueClick (VCLK), an online advertising operation trades a 3.7x, which has been pushed up sharply by M&A rumors.

And, Yahoo! US is no longer growing.

This would leave Yahoo! US to cut costs and try to improve its display ad rates through new methods like behavioral targeting. Based on the company's 10-Q, Yahoo! US had operating costs of $756 million before depreciation and amortization and stock-based costs. Could these costs be cut? If the new company was only operating in the US, it would seem likely.

Not unlike the upcoming plan to split Altria (MO) into two pieces, Yahoo! shareholders would get to have two bets to make and not one. The first company would be the faster growing overseas operation with valuable assets in Japan and China.

The second company would have a much lower growth rate. But, its cost cutting potential and the chance that it can do a better job of getting improved rates for its inventory might give the company a chance to improve a dismal performance. And, that could give the US shares some real upside.

Douglas A. McIntyre

UBS Expects Mega-Loss For Q3

The Wall Street Journal is reporting the UBS will write off the value of a number of instruments held in its fixed income division. Some of these are securities tied to mortgages.

The Journal writes that UBS should have a "third-quarter loss of swiss francs 600 million to swiss francs 700 million based on a writedown of swiss francs 3 billion to swiss francs 4 billion for fixed income assets."

It will be interesting to see if any US banks are forced to make similar announcements over the next several days

Douglas A. McIntyre

Telecom Stocks Hit Highs Across The Globe

Telecom was supposed to be a business that time had passed by. VoIP, cable, and wireless internet technology like city-wide WiFi was going to bury the phone companies.

But, last week AT&T (T), Verizon (VZ), China Telecom (CHA), China Mobile (CHL), Vodafone (VOD), Deutsch Telekcom (DT), and France Telecom (FTE) all high 52-week highs.

It turns out that talking on a phone may still drive a lot of revenue. For several years, the assumption was that VoIP would take away tens of millions of subscribers. But, the revenue for Skype still appears to be modest and cable companies are taking customers, but telecom companies are replacing those with wireless subscribers. Cable can't offer that. While landline customers may be falling, cellular business is moving up sharply.

It also appears that using phone lines for broadband may be a better business than Wall St. realized. DSL still has as many customers as cable broadband in many countries, and there is belief that fiber connections to the home will win more subscribers. That may explain why Comcast (CMCSA) is at a 52-week low.

The telecommunications business was supposed to be in trouble, but, that's why they call a guess a forecast.

Douglas A. McIntyre

Online Retailers Hit 52-Week Highs As Same-Store Sales Collapse

Online retailer Amazon (AMZN) hit a 52-week high last week. So did Priceline (PCLN), Expedia (EXPE), and eBay (EBAY). Even Overstock (OSTK) made the list.

On the 52-week low side of the ledger, Wall St. found Sear Holdings (SHLD), Circuit City (CC), Staples (SPLS), and Borders (BGP). Same store sales for last month were disappointing for most retailers.

The rotation toward buying online seems to have come to pass. And, if bricks-and-mortar retailers want to know where their business went, they can blame it on a slow economy and high gas prices. Or, they can admit that a huge amount of their business is going online.

Part of the trend is driven by convenience, but another important aspect is that shoppers can get reviews and ratings of products online before they buy. According to a recent study by iCrossing, "About 49 percent of those surveyed said they look for customer product reviews and evaluations, up from 40 percent two years ago." It's much harder to get a review in a store.

Forrester Research expects US online sales to hit $157 billion this year. The figures should rise to $272 billion by 2001, which would make it a little under 10% of total retail sales.

Although a number of large retailers like Wal-Mart (WMT) have large and well-trafficked sites, the movement online is going to continue to do significant damage to store traffic.

That means the companies like Home Depot (HD), Best Buy (BBY), and CostCo (COST) better start pushing the opportunity to buy at their websites harder and start looking at closing under-performing stores. And, that is likely the path which the most intelligent retailers will take over the next two or three years. Measuring store sales and attrition by location may well allow some of these companies to prune their number of locations. But, they have to get those customers to stay with them online.

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

Q3 Biggest Stock Winners: Apple (AAPL), Amazon (AMZN), Nvidia (NVDA)

Big tech continued to do extraordinarily well in the third quarters. Stocks that would seem to have outrun their earnings continued to climb.

Among the members of the S&P 500, Apple (AAPL) rose 27% to $153.47, very near its multi-year high. The market still believes that Mac sales will be strong into the holiday season and that new versions of the iPod will continue to expand that franchise.

Amazon (AMZN) kept moving North. Its shares rose 37% and now are up 137% for the year. The company has launched its own music download service and the video Unbox product. But, it share price increase may have more to do with the market's belief that AMZN will keep its marketing and technology costs down.

Nvidia (NVDA), the graphics chip maker, is benefiting from the surge in laptop sales Improved graphics performance is critical to most PC with the rising of computer based video games and increased online video consumption.

Among members of the Dow, tech stocks also did extraordinarily well. HP (HPQ) rose 13%. Its lead in PC sales helped its share price. IBM (IBM) rose 12% for the quarter. Its software services business continued to grow and cost cutting  activity at the firm appears to reap endless benefits.

Douglas A. McIntyre

GM's (GM) Stock Off During Q3

If most investors were asked what happened to GM's (GM) stock price during the third quarter, they would probably say it went up.

Wrong. The shares were actually off slightly. As UAW negotiations moved through the summer and US car sales were weak, Wall Street cut the value of the shares into late August and early September. A positive end to the talks was not enough to get it back to even.

And, then there was the question of how bad sales will be this fall.

Douglas A. McIntyre

Biggest Losers In The Third Quarter Lead By Countrywide (CFC) And Circuit City (CC)

No one would be surprised to see mortgage lender Countrywide (CFC) of the list of biggest losers for the third quarter The company's shares were down 48% to $19. The fall of Circuit City (CC) was more surprising. But, its shares dropped 48% to $7.91.

No one would have imagined that internet content delivery company Akamai (AKAM) would be on any list of falling stocks. But, in Q3 its shares were off 42% to $28.73 and are down from a 52-week high of almost $60. With the increase in video traffic on the web, Akamai would seem to have the perfect business, but pricing pressure from competitors seems to be eating it alive.

It never hurts to have a home builder on the list, given all of the bad news in that sector. Pulte Homes (PHM) dropped to $13.61.

The largest losers on in the Dow 30 were Home Depot (HD), down 17% and Wal-Mart (WMT), down 9%.

Douglas A. McIntyre

The Business Day In Global Warming (YGE, PCL, FSLR, SPWR, FTEK, NPWS, UEC, CEG, CVX)

Yingli Green Energy Holding Company Limited (NYSE: YGE) amended the joint venture contract with Baoding Tianwei Baobian Electric Co., Ltd. under which Yingli Green Energy will contribute additional capital of US$236.6 million to its principal operating subsidiary in China, Baoding Tianwei Yingli New Energy Resources Co., Ltd.

Plum Creek (NYSE:PCL) was noted positively on ethanol help on "Inside Wall Street" in Business Week.

First Solar (NASDAQ:FSLR) opened a new solar plant in Malaysia; First Solar was one of the WINDOW DRESSING stocks this week (see Friday notes on this) with more than 25% stock price gains.

SunPower (NASDAQ:SPWR) is partnering with Macy's to install solar power in stores in California.

Fuel Tech (NASDAQ:FTEK) was awarded air pollution control orders totaling $4.8 Million.  This is the "cleaning up coal plants" player.

CGM's Ken Heeber talked up Oil Services On CNBC (SLB, BHI), although we haven't gotten his read on alternatibve energy.  This sounded much like T. Boone Pickens bullish call recently that we've addressed.

The 52-Week Low Club

Hartmarx  (HMX) Maker of casual and golf apparel cuts guidance. Shares fall to $4.90 from 52-week high $8.69.

Standard Pacific (SPF) Home builder. Drops to $5.45 from 52-week high of $30.52.

La-Z-Boy (LZB) Tough economy means people don't have time to sit down. Down to $7.30 from 52-week high of $15.60.

Bigband (BBND) Broadband infrastructure provider misses all targets. Down to $5.89 from post-IPO high of $21.63.

Douglas A. McIntyre

Q3 Window Dressing Stocks (CSCO, GOOG, AAPL, RIMM, CROX, XOM, SLB, HAL, NOV, FSLR, BIDU, VMW, AMZN)

As quarters come to an end, with today being the quarter end, we usually like to review the top hi-flyers, usually in tech or energy of late, but we like to look for stocks that have performed the best during a quarter that fund managers and pension managers like to have on their books.  That is the famed Window Dressing trading. Below is a list of some of the top names that portfolio managers would want to show as being on their books at the end of a quarter (prices are last hour, not closing prices)

                                                June 29     September 30 (last hour)
Cisco Systems (CSCO)        $27.85        $33.02
Apple (AAPL)                           $122.04        $153.06
Research in Motion (RIMM)   $66.66        $98.07
Amazon.com (AMZN)              $68.41        $93.17
VMware (VMW)            n/a IPO $29...         $83.15
Baidu.com (BIDU)                 $167.98       $290.10
First Solar (FSLR)                   $89.29        $115.85
Crox (CROX)                            $43.00         $67.48
Google (GOOG)                     $522.70        $566.00
Exxon Mobil (XOM)                  $83.55          $92.24
Schlumberger (SLB)              $84.74          $105.00
Halliburton (HAL)                    $34.41          $38.45
Nat'l Oilwell Varco (NOV)      $104.24        $144.31

If you thought the market malaise of mortgages and brokerage blow-ups was a wreck, these guys sure didn't know it.  What tends to happen is that many of the "index" type traders that play rebalances and play January effect tend to lighten up on the hi-flyers at the end of the quarter or immediately after it, although these have to all be looked at on a case by case basis and there are many will refute this theory.  I lean toward the refuting crowd on this as an 'every single quarter' basis, but when you look at the monster performance of these you can understand why some would try to sell the names.

Also, as a reminder many of the funds have OCTOBER Year-End, so this may make this quarter end a bit different.  The underlying trends are also quite favorable, although that is enough on the caveat front.   

Jon C. Ogg
September 28, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

Industry Insider on YHOO Q2: Big Negative Surprise

From Silicon Alley Insider

Take this for what it's worth, but a well-placed insider at a major online media company puts the Q3 advertising revenue growth of competitors AOL (TWX) and Yahoo (YHOO) as follows. 

AOL:        +14%
Yahoo:    Flat   

Ordinarily we would pay little attention to this sort of info, but having just heard from one of our regular AOL sources that AOL would be at about 15% for the quarter, we are taking the Yahoo observation more seriously.  continued here...

Ford (F) Seen As Having Big September Sales Drop

Auto research firm Edmunds and other analysts say Ford's (F) sales will drop as much as 18% in September. As one analyst quoted at MarketWatch said "New cars and trucks from other automakers, like GM's line of big trucks and SUVs, are drawing buyers away from Ford."

GM (GM) and Toyota (TM) are expected to single digit sales drops due to a tough economy and high gas prices. Chrysler's sales are expected to fall about 10%.

Ford's problems are a by-product of the slow pace at which former CEO Bill Ford changed out the company's product mix from pick-ups and SUVs to smaller, fuel-efficient vehicles.

Now, the chickens come home to roost.

Douglas A. McIntyre

Pfizer (PFE) Not Up On Viagra

A Canadian court ruled that Apotex could not market a generic version of Viagra, Pfizer's (PFE) massively successful ED drug. Oddly, Pfizer's shares were down 1.2% to $24.35.

The Big Pharma company has watched its stock slide almost 15% as generic drugs continue to lay siege to sales of some of its most important drugs.

Douglas A. McIntyre

Why Is NetBank Still Open? (NTBK)

If you have followed the saga of NetBank (PinkSheets:NTBK), this has been a long slow death.  We've been reviewing this on and off for some time and never with anything positive, at least not in years.  This looked like a classic situation of a financial company masquerading as a dot.bomb turning into a flameout.

On July 26, 2007, back when we were just deemed as petty emerging bloggers, I wrote a piece about how this one was stinking up the room when shares were around $5.50.  I had actually been covering this one negatively at one of the predecessor operations prior to 24/7 Wall St. since 2003 or 2004 because of how the company was being run and how it looked like it had a tsunami headed straight at it.  They would have made a great asset and could have become part of a much larger company at one point, but that was way back when and is now ancient history.  The yield boost they were offering on CD's compared to traditional banks was eating their financials inside out.

In late January 2007 I also looked at this on a review because Citigroup was acquiring Egg as an online counterpart in the U.K.  Unfortunately NetBank was ugly on a relative value basis then and the fundamentals weren't getting better.  They were dying on the vine and divine intervention looked like its only hope.  Shares were around $3.80 then, and heading lower.

This one was hitting our 52-week lows screens all the time and we noted again in May how one analyst had even said the company was worth nothing.

The truth is very few traders stay short stocks once these get to such incredibly low stock prices, even after privately-held EverBank decided to cancel its vulture offer for the company's assets.  Even though this one is dying on the vine the risks of shorting down at $0.08 or even higher are just too big.  If anyone really does surface with anything whatsoever this one could pop exponentially from current levels.  It won't make that move on its own because this one would be on f'dcompany.com if it was still around. 

There is just really no value in the company.  The website NetBank.com is still up and you have to wonder who in their right mind would still be with them.  The home page shows pictures pictures of people smiling looking down at their PDA, but those are either short sellers or are competitors.

Now it seems the only bet will be if they can remain alive even on the dreaded pink sheets.  It is always possible that dead birds rise out of the ashes as a Phoenix, but the only time we've ever seen it is in drawing in mythology books.

Jon C. Ogg
September 28, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

AMEX Lists Uranium Energy Corp (UEC, URME)

Uranium Energy Corp (AMEX: UEC) has begun trading on the American Stock Exchange.  This was previously trading OTC under the "URME" ticker.  The company is a US-based junior resource company with the objective of becoming a near-term ISR uranium producer in the United States.  The company claims to control one of the largest historical uranium exploration and development databases in the US and has acquired advanced uranium properties throughout the southwestern US.

it also calims operational management is comprised of uranium mining and exploration professionals with experience in the uranium mining industry gives the company ongoing uranium mine-finding and uranium mine development expertise.  Here is the management team data from the site.

Just yesterday it gave its fifth update this year of its progress at its Goliad Project in South Texas:  Since acquiring the Goliad project, the Company has drilled over 360 holes and completed extensive sampling, mapping and reporting by experienced independent and internal technical staff in generating a number of studies for permitting applications.  The Company plans to develop an in-situ uranium recovery facility, following the completion of further resource definition and engineering studies, that must meet the stringent review and analysis of the Texas Commission on Environmental Quality (TCEQ) for air, water, and radiation emissions before permits and licenses are granted.  In-situ recovery is a mining process developed in South Texas over the past 30 years. The process is well understood and has been applied successfully at other South Texas mining projects.

Here is the full SEC site data that will give a much in depth example and backgrounder for the financials and operations.  We recently covered how the media was increasing coverage of nuclear energy and we focused much of the sector and gave some other links as well.
As Media Touts Nuclear Energy, Time To Review Nuclear & Uranium Stocks
Cameco: Playing Pinocchio or Pangloss
NYMEX Trading Uranium Futures
Uranium Stocks Went Bonkers on Rising Uranium Prices

Jon C. Ogg
September 28, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

INVESCO PowerShares Launched Five New Foreign ETF's (PDQ, PDN, PXH, PWD, PFP, IVZ)

There were five new ETF's that hit the American Stock Exchange, which now counts 342 listed ETF's at the exchange.

• PowerShares FTSE RAFI Asia Pacific ex-Japan Small-Mid Portfolio (Amex: PDQ) aims to track the price and yield performance of the FTSE RAFI Developed Asia Pacific ex Japan Mid Small Index which is comprised of Asia Pacific small and medium capitalization companies with the largest fundamental value, selected from the constituents of the FTSE Developed Asia Pacific ex Japan All Cap Index.
• PowerShares FTSE RAFI Developed Markets ex-U.S. Small-Mid Portfolio (Amex: PDN) aims to track the FTSE RAFI Developed ex US Mid Small 1500 Index which is comprised of small and medium capitalization companies with the largest fundamental value, selected from the constituents of FTSE Developed ex US All Cap Index.
• PowerShares FTSE RAFI Emerging Markets Portfolio (Amex: PXH) aims to track the FTSE RAFI Emerging Index which is comprised of the emerging market companies with the largest fundamental value, selected from the constituents of the FTSE Emerging Large/Mid Cap Index.
• PowerShares FTSE RAFI Europe Small-Mid Portfolio (Amex: PWD) aims to track the FTSE RAFI Developed Europe Mid Small Index which is comprised of the European small and medium capitalization companies with the largest fundamental value, selected from the constituents of the FTSE Developed Europe All Cap Index.
• PowerShares International Listed Private Equity Portfolio (Amex: PFP) aims to track the International Listed Private Equity IndexSM which is composed of a diversified mix of listed private equity companies selected based on the following criteria: valuation metrics, financial data, historical performance, market capitalization and the need for diversification within the portfolio.

Some of the esoteric ETF's tend to not see much trading volume, but these specific and focused ETF's that track recognizable baskets serve great purposes.  The PowerShares are part of INVESCO PLC (NYSE:IVZ), which listed $492 Billion under management as of August 31, 2007.

Jon C. Ogg
September 28, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

Duff & Phelps Gets A Welcome Mat From Wall Street (DUF)

Duff & Phelps Corporation (NYSE:DUF) priced its initial public offering of 8,300,000 shares of common stock at $16.00 per share, and Wall Street is greeting it with open arms.  This is a leading independent financial advisory and investment banking firm underwritten by Goldman Sachs and UBS as the lead underwriters and co-managers were Lehman Brothers, William Blair, Keefe Bruyette & Woods, and Fox-Pitt Kelton.  By having such a large underwriting syndicate this relatively small IPO should have ensured that it will have ample analyst covereage.

Shares opened at $17.00 and are now up at $18.75.  Interestingly enough, this should help give some good wind to some other pending IPO's:

• IPO FILING: RiskMetrics Group, Inc.
• IPO Filing: Turner Investments Inc.
• When will the mortgage vulture fund Chimera come public?

Jon C. Ogg
September 28, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

3Com Bailout Confirmed (COMS, NT, CSCO, JNPR)

3Com did confirm the reports of a $2.2 Billion buyout from Bain and Huawei this morning at $5.30 per share.  Why $5.30?  It wasn't based on the stellar valuation nor was the price on its great hope.  It gets it right above the 52-week high of $5.24 and makes most of the holders who bought shares in the last 3-years a profit if they still held.  Sure there are shareholders buried from prior years, but the "long and wrong" crowd won't be able to stop this from happening.

We've felt so sorry for this company when you look at its history that it is almost going to be a joy not having to cover 3Com anymore.  Management couldn't fix this on its own, so maybe the private equity and Chinese can.

This will be a more formidable competitor than it has been now that it is in more capable hands.  It won't be able to completely unseat the giants, but there is a slight impact.  Cisco Systems (NASDAQ:CSCO) is down 0.4% at $33.08 after briefly hittting new highs and Juniper Networks (NASDAQ:JNPR) is down marginally.  The industry dog Nortel Networks (NYSE:NT) is actually up almost 3% today, and you have to wonder if the Canadians hope a bailout is coming their way too.

• Recent earnings looked OK, but the stock didn't.
• We noted it being for sale previously.
• We also noted it seeing tertiary benefits from Sun's investment by KKR.
• This will give Huawei its joint venture stake back.

Jon C. Ogg
September 28, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

CGM's Ken Heeber Talks Oil Services (SLB, BHI, VIP, POT, OIH)

If you know market pundits, you know Ken Heebner of CGM Realty.  He made a fortune for investors on investing in real estate and he ditched that las year in favor of other plays. This morning he was on CNBC discussing his outlook, and he is one of the pundits to watch.

Two holdings he was discussing today that he is still holding are

• Potash Corp. of Saskatchewan, Inc. (POT) still holds it for strong potash sales;
• Vimpel-com (VIP) as a cell carrier in Russia.

But he was still very positive on energy and oil services because of decline in major oil fields in the world are in decline and demand from emerging world will keep prices higher.  The good news for property owners is that he doesn't believe in the theory that a US housing-led recession, even though economy may go sideways and flatten retail sales, will kill the global growth story because for the first time in recent history the U.S. isn't the driving force.  Oil services is a major sector in Heebner's portfolios now and he is still positive on Schlumberger (SLB) and Baker Hughes (BHI) today.  He didn't mention the OIL SERVICES HOLDRs (AMEX:OIH), although that is trading up nearly 1% more today in early trading. 

• If you read through a 2006 Wall Street Journal article from 2006 you'll think he was sitting in front of a crystal ball.  Based on his stellar stock performance, he may actually have one.
• Recently, Ken Heebner was positive on Fannie Mae and Freddie Mac
• Jim Cramer noted how Heebner was right on real estate

Jon C. Ogg
September 28, 2007

Memo To BigBand (BBND) Board: Fire The CEO

TO: Lloyd Carney, Dean Gilbert , Ken Goldman, Gal Israely, Bruce Sachs, Robert Sachs, Geoff Yang

RE: Amir Bassan-Eskenazi, BigBand CEO

As members of the BigBand (BBND) board of directors, it would seem appropriate that you find a new CEO. None of your investors would have expected, especially after looking at your S-1, that the BigBand business would fall apart in a matter of months.

BigBand's stock is now down from $21.63 to $6. The company was downgraded by several research firms. The board may have the opportunity to get things back on track, but the time is probably short. The chance of class action suits goes up each day.

Your stock chart is starting to look like Vonage's (VG).

Douglas A. McIntyre

SPAC IPO FILING: Sports Properties Acquisition Corp. (HMR, TAXI)

Sports Properties Acquisition Corp. filed to sell 20 million units at the traditional $10.00 per unit, and the company is granting an overallotment allowance of 3 million more shares.  Sports Properties is taking the proposed ticker "HMR" on the American Stock Exchange and so far lists only Banc of America Securities as the lead underwriter.

The company is a SPAC, a special purpose acquisition company, so it has no existing operations.   This was formed to acquire, through a merger, capital stock exchange, asset or stock acquisition, exchangeable share transaction, joint venture or other similar business combination, one or more domestic or international operating businesses.  It intends to focus efforts on companies that create, produce, deliver, distribute, market content, products and services pertaining to the sports, leisure or entertainment industries.

Here is tha management team:

• Tony Tavares, President and Chief Executive Officer, is the former CEO and President of SMG, a premier management company engaged in the private management of stadiums, arenas, theaters and convention facilities.
• Jack Kemp, Chairman, was the Republican Vice Presidential candidate in 1996k former AFL quarterback.
• Andrew Murstein, Vice Chairman and Secretary, has served as the President and a director of Medallion Financial Corp. (NASDAQ:TAXI), a publicly traded investment company, since its IPO in 1996.
• Richard Mack, Director, is a senior partner at Apollo Real Estate Advisors.
• Henry "Hank" Aaron, Director, the unjuiced homerun king of major League baseball.
• Mario Cuomo, Director, is a former three-term Governor of the State of New York.
• Randel Vataha, Advisor, is a former Stanford football player and NFL wide receiver.
• Robert Caporale, Advisor, is a former sports and entertainment law attorney who has represented a number of professional sports leagues and franchises.

A unit consists of 1 common share and 1 warrant with a $7.50 strike price per unit.  Maybe investors will get to own another public sports team since these have essentially all gone private.  Prior public sports teams were the Cleveland Indians and Boston Celtics, and the Green Bay Packers are one of the community owned and quasi-public companies (that you can't buy a share in easily).

Jon C. Ogg
September 28, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

AMD Gets A Downgrade

Research firm AmTech has downgraded shares of AMD (AMD) over concerns of late introduction of its new Barcelona chips and poor uptake. The report indicated that Q3 and next year will be rougher than Wall St. thought.

The news comes a day after Intel's (INTC) chairman claimed that his company was taking market share from AMD. The smaller firm's shares dropped about 3% as the day wore on.

Douglas A. McIntyre

Pre-Market Stock News (September 28, 2007)

(BBND) BigBand Networks traded down almost 30% on earnings and revenue warning.
(CBS) CBS has created CBS EyeLab, a site of short clips from its shows to attract web views who only want to spend a few minutes watching video.
(COMS) 3COM reportedly being sold to Bain Capital and Huawei; stock halted up 32%.
(CRA) Celera received $2M milestone payment from Merck.
(DELL) Dell will sell computers in Wal-Mart stores in Brazil and Mexico.
(DIS) Disney reportedly closed its cellular service.
(DUF) Duff & Phelps priced its IPO at $16.00.
(FCSX) FC Stone trades ex-split today.
(FMCN) Focus Media raised 2007 targets.
(GOOG) Google's free ad-based phine getting more media coverage; facing harder battle ovver DoubleClick acquisition.
(NOV) National Oilwell Varco trades ex-split Monday.
(PCL) Plum Creek noted positively on ethanol help on "Inside Wall Street" in Business Week.
(SEH) Spartech announced a 2M share buyback plan.
(SIRI) Sirius trading down over 1% on concerns over FCC comments.
(SPWR) SunPower partnering with Macy's to install solar power in stores in California.
(TWTC) Time Warner Telecom noted positively on "Inside Wall Street" in Business Week.
(UEIC) Universal Electronics noted positively by analysts on "Inside Wall Street" in Business Week.
(WCC) Wesco announced a $400M buyback plan.

Jon C. Ogg
September 28, 2007

3Com's Rescue Plan....A Sale (COMS)

3Com (NASDAQ:COMS) may be a long-standing disaster story on its own, but shares are up 30% pre-market.  The Wall Street Journal has reported that 3Com is about to be acquired by private equity firm Bain Capital and Cinese equipment maker Huawei for more than $2 Billion.  This will reach more than $5.00 per share if the reports are accurate, representing more than a 50% premium. 

Shares of COMS were halted at 8:06 AM EST up 32% at $4.88 in pre-market activity and had traded 1.44 million shares.  This is one of those stocks that we had featured as one that management couldn't fix.  Maybe private equity and the Chinese can.

• Recent earnings looked OK, but the stock didn't.
• We noted it being for sale previously.
• We also noted it seeing tertiary benefits from Sun's investment by KKR.
• This will give Huawei its joint venture stake back.

Jon C. Ogg
September 28, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

Will Ford (F) Kill UAW Deal?

The Detroit News is reporting that Ford (F) does not want the same deal that the UAW offered GM (GM). It wants a much better one. That might PO the union. As a matter of fact, it probably will.

The union could go along with a better deal with Ford, but GM might resent that. According to DetNews "executives at Ford Motor Co.already worry that it (GM's deal) may not cut costs deep enough for them."

"Of course, GM would scream bloody murder," said Sean McAlinden, chief economist for the Center for Automotive Research.

The labor deal with the car companies is not done yet, Not by a long shot.

Douglas A. McIntyre

Pre-Market Analyst Calls (September 28, 2007)

BIDZ started as Buy at Roth Capital.
BBND cut to Mkt Perform at Morgan Keegan.
CMG cut to Hold at Citigroup.
CNO raised to Outperform at FBR.
CRAI raised to Outperform at William Blair.
CFR raised to Outperform at KBW.
CNB cut to Underperform at KBW.
CPF cut to Underperform at KBW.
CSFL cut to Underperform at KBW.
FHN cut to Underperform at KBW.
FTEK started as Outperform at JMP Securities.
GBE started as Outperform at JMP Securities.
HAR raised to Outperform at Bear Stearns.
IPGP started as Outperform at Bear Stearns.
LNUX started as Buy at Merriman Curhan Ford.
LUM raised to Hold at Deutsche Bank.
MMM started as Buy at UBS.
MWE started as Outperform at Morgan Keegan.
NWA started as Neutral at UBS.
RSTI started as Outperform at Bear Stearns.
SE cut to Hold at Jefferies.
SNV raised to Outperform at KBW.
THO raised to Sector Perform at RBC.
WCC started as Outperrform at CIBC.
WYN started as Buy at Deutsche Bank.

Jon C. Ogg
September 28, 2007

Microsoft (MSFT) To Keep XP Shipping: Bad News For Vista?

Microsoft (MSFT) says it will continue to ship is old-world OS, XP, for another six months. It is the product which was to be replaced by Vista.

Does that mean that Vista is in trouble because customers still want the older OS?

Maybe. But, if the life of the XP product is extended again, there is reason to worry.

Douglas A. McIntyre

Bone Head Research Call Of The Day: Morgan Keegan On BigBand (BBND)

The folks at investment house Morgan Keegan were good enough to downgrade broadband infrastructure company BigBand (BBND), a recent IPO.

The bank dropped its rating from "outperform" to "market perform". The change was certainly very late, and its is surprising that the company was not posted as an outright sell.

BigBand's take on its Q3 performance was that it now expects to report revenue in the range of $35 to $39 million, which is below the company's previous guidance of $54 to $58 million. Nice work. The company also said that it will lose money. The stock fell almost 30% after hours and will probably trade around $6 or $7 today. That would be a 52-week low by a wide margin. The company traded as high as $21.63 right after it went public.

The Morgan Keegan clients may not take much comfort in the ratings change.

Douglas A. McIntyre

M&A Falls 43% In Q3

There was some hope that as mortgage problems and hedge fund headaches took down shares and earnings of investment banks like Lehman (LEH) and Morgan Stanley (MS) that global M&A fees would take up some of the slack. In its earnings announcement, Goldman Sachs (GS) said it liked its M&A pipeline going forward.

But, Goldman may be alone. A study by Dealogic picked up by the FT, shows M&A activity off 43% in the third quarter when compared with the immediately previous period. Most bankers believe that, if there is no recession, business could pick back up again.

The bankers should not hold their breath. Not only is the economy softening, but the private equity transactions that helped built M&A practices over the last two years have gone away. And, company-to-company mergers are unlikely to pick up the slack.

It's an M&A recession, and it may well be a long one.

Douglas A. McIntyre

CBS Goes YouTube

The management at CBS (CBS) have finally caught on that most people do not want to watch feature length video content on PCs. The screens are small and sound systems weak. Old people like their TVs better. Young people don't watch TV

What YouTube has proven is that clips which are a few minutes long are endlessly fascinating, especially to teens and twenty-somthings. This dawned on CBS when a video of short edited clips of its "CSI" show got over one million views at YouTube. The network had not made the video. Some pirating young kid did.

No matter whose fault it was, CBS decided to start CBS EyeLab, "a digital-production studio that will create and distribute short clips cut together from the network's most popular shows," according to The Wall Street Journal.

If this works well, what does it mean for the other networks? There is Hulu and NBC's direct download of entire shows. ABC is doing the same thing. Several movie studios have download deals going with the likes of Amazon (AMZN).

If the short clip plan works at CBS, it will be a sign that, once again, simple and inexpensive solutions often trump ones that are expensive and overdone. It's the law of the jungle.

Douglas A. McIntyre

$90 Oil By Christmas

Many Americans will be asking for a gallon of gas in their stockings this year. Oil hit $83 a barrel yesterday. Storms in the Gulf again.

And, storms in the Middle East, Nigeria, and Venezuela. Tight supply out of OPEC. And, China sucking up oil like a vacuum.

Oil bears want Wall St. to believe that prices are rising because hedge funds are putting money into oil futures and because the dollar is weak  But, oil is rising because the world is beginning to run out of the black gold. There is no reason for the Saudis or the oil companies to increase supply even if they could. It is not good for business.

The government of Dubai is going around picking up everything from a big piece of the Nasdaq (NDAQ) to commercial real estate.

With the price of oil likely to move to $90 as the winter sets in for the Northern Hemisphere, Dubai may end up owning a lot more assets in the free world.

Douglas A. McIntyre

Coke (KO) and Pepsi (PEP): Soft Drinks In A Soft Economy

Coca-Cola (KO) and Pepsi (PEP) keep making new highs. Yesterday, Coke hit $57.33, a few pennies from its 52-week peak. At $72.62, the same is true of Pepsi (PEP). So far this year, both companies have out-performed the market by wide margins.

Conventional wisdom is that the companies are now diversified. They have a large portion of their business overseas. But, the have real headwinds. Commodities prices are rising. Soft drinks are not the medical community's No.1 suggestion for a healthy diet.

No, the stocks are doing well for the same reason that McDonald's (MCD) is. People can always afford a can of Coke. Even when making the mortgage payments is tough.

As the economy contracts, Coke and Pepsi are signature businesses for the kind of operation that will not get hurt. What they sell is inexpensive, and almost everyone likes it.

Douglas A. McIntyre

Why A Global Market Collapse Will Begin In China

Most experts believe that, when a sharp drop in the global stock markets comes, and it will one day, the fall will begin in the US. It could be triggered by a slowing economy, falling corporate earnings, or trouble in the housing industry.

But, the S&P is up less than 15% this year, and there are not many stocks making 52-week highs. The market may be OK, but it appears to have at least a modest amount of risk built in.

Looking across the Pacific to China, the story is completely different. The Shanghai Composite made another new high overnight. It has more than doubled since the beginning of January.

Perhaps more impressive is the number of Chinese stocks hitting 52-week highs, even when they trade on US exchanges. Yesterday, China BAK Battery (CBAK) rose 20% in Nasdaq trading to make a new high. China Fire & Security (CFSG) made a new high on Nasdaq as well. So did China Fin Online (JRJC).

On the NYSE, nine of the 25 new highs reached yesterday where Chinese companies. These include huge operations China Telecom (CHA), China Unicom (CHU), China Mobile (CHL), PetroChina (PTR), China Petroleum (SNP), and China Life (LFC). These are not small, speculative stocks. Some of the shares in these large companies have almost tripled from their lows.

What is impressive is that the move up is not in one sector. It is spread across telecom, energy, finance, and industrial stocks.

China's GDP is growing at 10% or so. A significant run-up in markets there is too be expected. But, there is plentiful evidence that the share price of many companies is out-stripping near-term potential.

A fall in global markets begins in China.

Douglas A. McIntyre

Why is Yahoo! (YHOO) So Successful In Japan?

Unlike Yahoo! (YHOO) in the US, Yahoo! Japan shares are in the middle of their 52-week trading range. And, the Yahoo! sites lead all others in terms of total unique visitors, According to comScore, Yahoo! Japan had 41.1 million unique visitors during August. Google (GOOG) was second with 30.9 million.

In most large countries in Europe, Google leads Yahoo!. And in China, both are behind sites like Baidu (BIDU), but Google still does better than its rival.

Why is Yahoo! different in Japan? Perhaps the most important thing is that the company has several large shareholders including Softbank, a large multimedia company with interests in broadband, telecom, and wireless operations.

Yahoo! might like to buy-out Softbank, but having a relationship with a major infrastructure company in the country give the portal access to distribution, like wireless, that it might not have so easily in the US and Europe.

There have been many rumors about Yahoo! being sold. But, the company might be much smarter to look for a large distribution network company like Comcast (CMCSA) or AT&T (T) to be a holder.

It seems to work well in Japan.

Douglas A. McIntyre

Media Digest 9/28/2007 Reuters, WSJ, NYTimes, FT, Barrons

According to Reuters, Goldman Sachs (GS) offered $1.5 billion for reinsurance broker Benfield

Reuters writes that Alan Greenspan thinks the chance of a US recession is still below 50/50.

Reuters reports that the head of Freddie Mac says the chance of a US recession is close to 40% to 45%.

The Wall Street Journal writes that Google (GOOG) is facing a battle in the US Senate over is purchase of DoubeClick.

The Wall Street Journal reports that AT&T (T) is planning to buy companies overseas and offer telecom services worldwide.

WSJ writes that CBS (CBS) has created CBS EyeLab, a site of short clips from its shows to attract web views who only want to spend a few minutes watching video.

WSJ said comments by the head of the FCC cast some doubt on the Sirius (SIRI) merger with XM.

WSJ writes that Dell (DELL) will sell computers in Wal-Mart stores in Brazil and Mexico.

The New York Times writes that Disnye (DIS) has shut down its cellphone service.

FT writes that the global M&A market fell 42% in the third quarter.

FT also writes that Intel (INTC) says that a large number of jobs will go overseas if healthcare cost in the US keep rising.

Barron's writes that Big Band (BBND) cuts its forecasts driving the stock down more than 20%.

Bloomberg reports that oil moved up sharply to $83 a barrel.

CNN Money writes that the EPA found the Japanese cars are still more fuel efficient than those made by US companies.

Douglas A. McIntyre

Asia Markets 9/28/2007

Markets in Asia were mixed.

The Nikkei fell .3% to 16,786. Canon (CAJ) rose 2.6% to 6270. NTT (NTT) rose 1.7% to 537000. Toyota (TM) rose 1.3% to 6780.

The Hang Seng rose .6% to 27,224. China Life (LFC) rose 4.1% to 45. China Petrolaum (SNP) rose 3.1% to 9.75.

The Shanghai Composite rose 2.6% to 5,532.

Data from Retuers

Douglas A. McIntyre

Alcatel-Lucent (ALU) CEO Faces Firing Squad

The board of Alcatel-Lucent (ALU) has told CEO Pat Russo that she needs to come up with an "emergency restructuring plan" for the company, according to the FT. It's hard to say what took them so long. Shares in the telecommunications equipment company are down over 30% this year. The company seems to cut its earnings estimates every month.

Research firm Dresdner Kleinwort has just calling on Alcatel-Lucent to replace Ms Russo with Mike Quigley, former chief operating officer. It cut its rating on the company to "hold" and suggested that a new restructuring plan should plan for firing 30,000 people, not the 12,500 that management has set as a target.

While the FT says that the board has not told Ms. Russo that here job is on the line, investors should hope that she has already figured that out.

The time for her to leave has already passed.

Douglas A. McIntrye

Another Reason GM (GM) And Ford (F) Can't Sell Cars: Fuel Mileage

GM (GM) can cut all of the costs it wants to, and get a world class contract with the UAW. And, Ford (F) can follow suit. But, if they can't sell cars, over time it will not matter.

In the current world of high fuel costs and a sinking feeling about the economy, most drivers probably look at fuel-efficiency when they buy a car.

The Environmental Protection Agency came out with its new rankings for fuel use. No one should be surprised that Honda (HMC) and Toyota (TM) were at the top of the list. Across its model line Honda's averaged 22.9 mpg and Toyota 22.8.

Over at GM, the mpg average was 19.4 and at Ford 18.7. The head of Ford did run part of Boeing (BA) where the mpg for the airplanes is low, so it may take him some time to get around to the notion that cars have smaller engines than jets do.

Chrysler did poorly with an average mpg of 18.3.

The Japanese fleets which are about 20% more fuel-efficient than the Americans. That's too big a spread.

Douglas A. McIntyre

Earnings Slaughterhouse: BigBand Networks (BBND)

BigBand Networks Inc. (NASDAQ:BBND) has been a long and hard ride into Uglyville.  This company came public as a "Hot IPO" earlier this year and it was a hot potato.  But hot potatoes cool quickly, and they cool really fast when you break them apart and expose them.   The company has severely cut revenues forecasts of an original $54 to $58 million down to a new range of $35 to $39 million.  It's also going to have a loss.

You can read the company's excuses if you want, but it doesn't really matter.  The company has lost all forms of credibility and is going to be turned on by its underwriters for making them look so bad after a premium pricing.  Having great products doesn't cut it sometimes when you are competing against power-house companies because they offer full end-to-end solutions and can undercut you simply for the sake of doing it.

The analysts at the underwriters started this with positive ratings back in April.  Now they are covering a firm called "The One Man Band."  This looks absolutely shameful.

• BigBand was ugly and on lows even this summer...so this is even worse.
• So much for having a premium pricing on hype.
• Akamai (NASDAQ:AKAM) also hit recent lows today, and we've noted how it is mysteriously bad times for multimedia carriers and th tech around it.

Jon C. Ogg
September 27, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

Tire Inflation Coming? (TWI, GT, CTB)

Titan Tire Corporation, a subsidiary of Titan International, Inc. (NYSE: TWI), will implement a price increase on Titan and Goodyear branded farm and construction tires, effective November 1, 2007.  The increase of up to 5% will offset rising raw material and energy costs, but certain tire prices may rise more than 5% due to repositioning of the product.

Goodyear Tire (NYSE:GT) and Cooper Tire & Rubber Co. (NYSE:CTB) probably just got some more pricing power.  With oil at $80.00+ and rising commodity costs, they are going to need it.  Granted, this is in the larger industrial and agricultural tires rather than full scale consumer auto tires, but where there is smoke.....there's a tire.

Jon C. Ogg
September 27, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.

The Business Day In Global Warming (RZ, VE, NGG, COP, ADM, HIT, POWR, CMGI, GE, CVX)

This morning Goldman Sachs (NYSE:GS) cut estimates from 2007 to 2009 for corn-based ethanol producers for much of the same reasoning that we have been cautious on the sector.

Raser Technologies, Inc. (NYSE Arca: RZ) announced today that it has added to its geothermal rights in the Escalante Desert in southwestern Utah through a 10 year lease agreement with a private property owner for undisclosed financial terms.

National Grid (NYSE: NGG) has welcomed plans by the Massachusetts Department of Environmental Protection (DEP) to introduce auctions for CO2 allowances across the state that are being developed in support of the Regional Greenhouse Gas Initiative (RGGI) that was endorsed by Governor Patrick earlier this year.

Veolia Water, part of Veolia Enrinnment SA (NYSE:VE) Won a contract to Supply 3 Million inhabitants with drinking water in Tianjin, China.  From what we've read, they need it.

ConocoPhillips (NYSE:COP) and Archer Daniels Midland (NYSE:ADM) have announced a new alliance to develop next generation biofuels.  Expect more and more announcements of this sort from oil comnpanies.  You don't think any of them are going to say "No we're not interested because we only are interested in oil."  They might feel that way today, but at the end of the day oil companies are just energy companies.

The 52-Week Low Club

Expressjet Holdings (XJT) Airlines still hurt by rising oil and failing economy. Falls to $3.09 from 52-week high of $9.61.

Standard Pacific (SPF) Home builder. Down to $5.66 from 52-week high of $30.52.

Akamai Technologies (AKAM) Content delivery over the internet getting squeezed by price cutting. Down to $28.13 from 52-week high of $59.69.

Panacos Pharmaceuticals (PANC) Still falling due to CFO departure and analyst downgrade. Falls to $1.48 from 52-week high of $7.23.

Douglas A. McIntyre

Private Equity Firms Make Money Because They Are Smarter

A company bought and operated by private equity interests outperforms it publicly-traded counterparts. Not only are their profits better, but "an Ernst & Young survey of the biggest 100 private equity exits in both the US and Europe also found that private equity-owned companies benefited from a much bigger jump in valuation multiples than their listed equivalents," according to the FT.

In other words, private equity executives are much smarter than management at public companies. It would also appear to say that private equity interests have a great deal of skill buying companies which they can improve.

The 100 biggest private-equity owned companies sold in the US last year had annual enterprise value growth of 33 per cent against 11 per cent growth in the value of equivalent publicly listed companies, the survey also found.

What does that say? Unfortunately, it is an indictment of public company management more than praise for private equity, especially with a performance gulf that is so large. Granted, private equity firms pick what they buy, but the price is often a large premium when they take on a company that is already public. That leaves them fighting with a disadvantage when it comes to increasing value further.

What do private equity firms do with companies? The survey doesn't say. But, investors can guess. Private companies are likely to cut expenses more rapidly and hold them down longer. They are also more likely to raise prices. And, they are not burdened with the time and expense of being public.

If the survey is even close to accurate, benchmarking the private equity company practices would be a good use ot time at public company counterparts.

Douglas A. McIntyre

Google/DoubleClick Inside Story: FTC Will Approve, Microsoft Could Litigate

From Silicon Valley Insider

Since posting two installments this morning on Google/DoubleClick, we have done additional research.  Here's our current understanding of the situation.  (None of this has been officially confirmed by any of the companies involved or the FTC). Two key points:

1. The FTC has reportedly given Google/DoubleClick verbal assurances that the deal will be approved.
2. Even if the the deal is approved, we believe Microsoft/AT&T could still litigate.  This could severely delay or even prevent the transaction from taking place.   continued here....

Resurfacing EchoStar & AT&T Discussions? (DISH, T)

Today's rally in shares of EchoStar Communications (NASDAQ:DISH) can probably hold its thanks to TheStreet.com putting out an article and video noting that AT&T (NYSE:T) may be closer to acquiring the satellite TV provider.  You can watch the video with Scott Moritz on TheStreet.com that discusses this, and he noted that this has been on and off in the discussion tube for a year or so (and longer than that, see below...).  Mortitz noted there is a spread between AT&T wanting to pay $55 and EchoStar wanting $65, and Moritz noted it should ultimately reach a merger down the road.

If you read our own piece from the other day when EchoStar said it had filed to explore a split-up of itself after acquiring SlingBox.com, a television anywhere over the web company, you'll see how the follow-on interest has been there.  Just yesterday S&P put the satellite TV operator on credit watch over the lack of definitive information and an unknown structure.

This isn't the first time this "rumor" or discussion has been around.  Not even by a long shot.  American Technology Research noted this in the opening hours of 2006 and they were not even the first ones to note it then.  Shares are up nearly $20.00 from when this was out in early 2006.

Shares are up 8% today at $46.95 and this gets it within 10% of yearly highs.  Options are often a good judge of these "re-rumors" and even with the pop today the options are for OCTOBER are not signaling that high of a probability.  If you run the math you'd get an implied premium of somewhere in the $49.50 to $51.00 range.  That is higher than yesterday and even higher than Tuesday's open of $42.73, but still isn't a major premium compared to today.  This is not a member of our BAIT SHOP of takeover candidates, although it has been on and off a watch list before.

Jon C. Ogg
September 27, 2007

Jon Ogg can be reached at jonogg@