24/7 Wall St.

Motorola (MOT) Looks For The Exit Door

Motorola's (NYSE: MOT) shares were halted. Then the company announced what many on Wall St. had expected. Its board will look at whether not the company should exit the cell phone business. The firm's share of global handset sales has dropped from about 22% to 12% in two years. Rivals Nokia (NYSE: NOK), Samsung, and Sony Ericsson have systematically stripped MOT of its customers.

Samsung and Sony Ericsson would be likely buyers.

Earlier in the month, 24/7 Wall St. noted that Motorola might not make it through the year intact. Now it looks like that prediction may come true soon.

In its announcement, the company said it is exploring the structural and strategic realignment of its businesses to better equip its Mobile Devices business to recapture global market leadership and to enhance shareholder value. The company's alternatives may include the separation of Mobile Devices from its other businesses in order to permit each business to grow and better serve its customers.

In other words, the board and management admitted defeat.

Douglas A. McIntyre

Some of the other companies we have noted, with full explanations in the link, are Sears Holdings (NASDAQ: SHLD), Citigroup, (NYSE: C), Yahoo! (NASDAQ: YHOO), Advanced Micro Devices (NYSE: AMD), Ford (NYSE: F), Sprint Nextel (NYSE: S), and Qwest Communications (NYSE: Q).

Google Follows Internet Post-Earnings Sell-Off (GOOG)

Goole Inc. (NASDAQ: GOOG) has posted its earnings and the results came in at $4.43 non-GAAP EPS on revenues of $3.39 Billion on an ex-TAC basis, and these are not going to greatly received since Wall Street demand more from Google.  First Call had estimates at $4.45 EPS on ex-TAC revenues of $3.45 Billion. 

Google doesn't offer guidance, but Wall Street is expecting roughly a 30% EPS gain in 2008 to $20.78 EPS and roughly a 40% revenue gain to $16.59 Billion.Its revenues before backing out traffic acquisition costs was $4.83 Billion.  Here were some key metrics:

• Google-owned sites generated revenues of $3.12 billion, or 65% of total revenues, in the fourth quarter of 2007.
• Google's partner sites generated revenues, through AdSense programs, of $1.64 billion, or 34% of total revenues.
• Revenues from outside of the United States totaled $2.32 billion, representing 48% of total revenues in the fourth quarter of 2007.
• Google's PAID CLICKS rose 30% year over year and rose 9% sequentially.
• As of December 31, 2007, cash, cash equivalents, and marketable securities were $14.2 billion.
• Google employed 16,805 full-time global employees as of December 31, 2007, up from 15,916 full-time employees as of September 30, 2007.  That represents a 5.5% headcount growth.

Google had 3.88 million shares listed in the short interest as of last look in Mid-January, down from 4.07 million at the end of December.  Google shares closed up almost 2% at $560.00 on more than 10 million shares, although this fell $10 at the end of the day from a $570.19 high as traders may have gotten cold feet. In after-hours trading, Google shares are getting whacked by 8% down to $516+ on active volume (for a $500+ stock).

Jon C. Ogg
January 31, 2008 

The 52-Week Low Club (CDNS)(ARAY)(RNOW)(CRUS)(HSTX)

Cadence Design Systems (CDNS) posts bad numbers and gets downgrades. Falls to $9.90 from 52-week high of $24.90.

Accuray (ARAY) The radiosurgery device maker reported disappointing fiscal second-quarter results. Trades off to $9.26 from 52-week high of $31.90.

Rightnow Technologies (RNOW) Poor financial outlook. Drops to $9.70 from 52-week high $23.38.

Cirrus Logic (CRUS) Market unhappy with profits. Falls to $4 from 52-week high of $9.44.

Harris Stratex Networks (HSTX) Weak results hit stock. Falls to $10.11 from 52-week high of $21.25.

Douglas A. McIntyre

Garmin nuvifone 'May' Threaten Apple iPhone (GRMN, AAPL)

Garmin Ltd. (NASDAQ: GRMN) has unveiled a new device today and this looks like many consumers will interpret it as a shot right across the bow of Apple Inc. (NASDAQ: AAPL).  These are actually different markets on the surface, but analysts and consumers may draw more lines into converging markets after the first or second generation of the phones.  You could make an anology that Apple was converging mobile computing and communications and iTunes into the iPhone, and Garmin is converging mobile computing and communications with GPS & PND. 

Garmin is launching the nuvifone(TM) to combine a phone with a personal navigation device.  This has many of the same features as the Apple iPhone with some differences and some relative pros and cons.  The con is fairly easy to see and that is that it doesn't look quite as cool on the surface, and this is not really looking like the next iTunes replacement hub.  But the pros may greatly outweigh this.  For starters, this is going to have much the same look as the personal navigation devices from Garmin today, plus it will have a mobile web browser in an all touchscreen platform on a 3.5-inch screen (same size as iPhone). 

You can see the entire media pictures here outside of this one picture here with the web browser open to get a snapshot of what you are really looking at, and when you click on the images on the Garmin nuvifone site you will see their images are much more clear.

When the nuvifone is docked onto the vehicle mount, it automatically turns on the GPS, activates the navigation menu, and enables hands-free calling so that the user never misses a beat in the conversation and is able to begin routing to their destination with ease.  This also comes preloaded with maps of North America, or Europe (or both), and you can still have that talking voice prompted direction guide.

This will also harness Google local search capability with 3.5G and will combine a personal messaging function for email, text, and instant messaging. 

For those who can't find their own (you know what), it even has a "Where am I?" feature to display the exact latitude and longitude coordinates, the nearest address and intersection, and the closest hospitals, police stations and gas stations.  And if the enemy is over-running your defense lines you can call in the broken arrow air strike right on top of your position.

Besides navigation, the nuvifone includes access to Garmin Online(TM) for constant updated information in real-time traffic, fuel prices, stock prices, sport scores, news reports, local events and weather forecasts.

Many Homebuilders Up 100% From Lows (MTH, PHM, LEN, WCI, SPF, HOV, XHB)

Everyone knew homebuilders would turn one day and when they turned it would be fast and in a flurry of buying volume.  Much of this may attributed to short covering, but much is because the good old Fed and another 125 basis points in rate cuts within a 10-day period.  You know you can't pay attention to the headlines on home sales or even the earnings out of these, because that is dismal.  But traders are taking aim here.  In fact some of these are up 100% off of lows already.

• Meritage Homes (NYSE: MTH) up 12% at $15.26, up over 100% from lows; 52-week range $7.04 to $46.65.
• Pulte Homes (NYSE: PHM) up 14% at $15.52, up over 80% from lows; 52-week range $8.20 to $35.56.
• Lennar (NYSE: LEN) up 8% at $19.70, up over 60% from lows; 52-week range $11.98 to $56.54.
• WCI Communities (NYSE: WCI) up 14.5% at $5.98, up over 200% from lows; 52-week range $1.35 to $24.20.
• Standard Pacific Corp. (NYSE: SPF) up 22% at $3.78, up over 100% from lows; 52-week range $1.47 to $30.52
• Hovnanian Enterprises Inc. (NYSE: HOV) up 10% at $9.68, up over 100% from lows; 52-week range $4.25 to $37.58.

We even ran the key ETF for the sector.  The SPDR S&P Homebuilders (AMEX: XHB) is up over 8% today to $22.10.  But even this is up almost 50% from the recent lows; 52-week trading range $15.22 to $40.03.  That low was just on January 9, 2008.

There are many other names that were equally charged.  But these were the ones that fir the screen today.

Jon C. Ogg
January 31, 2008 

Sprint (S) To Write-Off Most Of NexTel Value

As it to confirm what a disaster its acquisition of NexTel has been, Sprint (S) will write-off as much as $31 billion in goodwill related to the deal.

According to Reuters Sprint "might have to write off all of the $30.7 billion goodwill value from its purchase of Nextel Communications and smaller deals as it struggles with customer losses."

At this point, with its stock down from a 52-week high of $23.42 to $10,50, the entire market cap of the company is only $30 billion.

Douglas A. McIntyre

Brinks: The Sweet Spot In A Rough Patch (BCO)

Shares of Brinks Co. (NYSE: BCO) are up significantly after today earnings report.  We have been behind Brinks for several months now, and it is still an active stock on our Special Situation subscriber letter.  This has approached our own $70 price target before the market malaise took it lower.  It actually never even did hit our downside panic levels, but we have a hedged scenario anyhow.

This morning Brinks managed to beat earnings quite handily.  Brinks posted earnings at $1.16 EPS, well above the $0.74 estimate from First Call; revenues were up more than 18% to $882.8 million, yet First Call only had estimates at $819.5 million.

Furthermore the company put 2008 goals for organic growth of high-single digits for revenues with operating profit margins at or above 8%.  Not only that, but Brinks is looking further out to 2010 with a goal of sustaining that rate of revenue growth and boosting its operating margins to 10%.

Our Special Situation thrust here was only partially based upon improving results, although we did expect a turn there again.  We have been tracking increased activist investor activity and after we reviewed the books, the business stance, its minor units that could be parceled out, and other factors, we determined that this stock could reach roughly $70.00.  Our entry area was in the mid-$50's in September 2007, and we didn't want to note the profits by taking them too soon in the mid-$60's by early November.

As always, we laid out an options trade that allowed for hedging the transaction to minimize risk.  This is crucial for many turnarounds and for many businesses that have special situations they are working through.  In short, it's important to have protection when management may intentionally or inadvertently take actions that result in negative shareholder value.

Jon C. Ogg
January 31, 2008

Hedge Fund Holder Says Countrywide Selling Too Cheap (CFC, BAC)

A hedge fund is claiming that Countrywide Financial (NYSE: CFC) is selling itself too cheaply to Bank of America (NYSE: BAC).  SRM GLOBAL FUND GENERAL PARTNER LIMITED has filed a Schedule 13D.  SRM now owns and has a shared voting power of just over 30 million shares, or 5.19% of the common stock.  We would at least note that the "as of date" is January 24, 2008, even though the filing posted on Edgar at 8:33 this morning.

Here are excerpts from the comments from SRM: "...the Reporting Persons are of the view that the Merger Agreement does not provide sufficient value to holders of the Issuer’s Common Stock. The Reporting Persons may initiate discussions with the Issuer and may communicate with the Issuer’s executive management and board of directors, with other holders of the Issuer’s Common Stock, and with B of A from time to time regarding the proposed terms of the Merger Agreement. Depending on various factors.... the Reporting Persons may in the future take such actions with respect to their investment in the Issuer......."

In short, SRM is saying that Countrywide is selling itself too cheaply, and SRM is trying to demand a higher price or will try to influence a vote against the approval of this merger.  SRM probably has a long road in front of them here on this effort as Countrywide was going to be an "at risk" company without this buyout. 

Jon C. Ogg
January 31, 2008

Under Armour: GARP or Value Trap? (UA)

Under Armour, Inc. (NYSE: UA) posted its earnings this morning, and some might be breathing a sigh of relief that the stock is only down marginally.  The sporting apparel maker posted Q4-2007 EPS of $0.34 per share on a 29% rise in revenues to $174.8 million.  First Call had estimates pegged at $0.32 EPS on revenues of $173.5 million.

We had already been warned that the company was going to see a ramping up of its ad spending for the first half, and Wall Street understood that this meant a lower bottom line.  Under Armour's guidance for fiscal 2008 is light as it sees revenues of $765 to $775 million.  First Call has estimates at $787.87.  The company is maintaining the stance that its diluted earnings per share will be in a range of $0.03 to $0.05 for the first half of 2008.

Shares had actually indicated slightly higher in pre-market trading, but now shares are down almost 3% at $36.50.  Its 52-week trading range is $25.39 to $73.40, although this only spent two or three days over the last two weeks down under $30.00.

What is interesting is how this has fallen so far from grace after a monumental 2006 rise.  If the company would just meet prior 2008 targets, it would now have a forward P/E ratio of just under 30.  The problem is that it isn't growing as fast as before and it is no secret that all high growth companies either reach the end of the exponential growth or at least mature. 

If you are a growth investor, the GARP (growth at reasonable price) is there.  But the best growth is behind it and all the momentum is a mere memory.  Based on its multiples, its recent performance, its current earnings performance, and more, this also looks more like a value trap than it does a value stock.  The good news on the flip-side of the coin is that it at least looks like most of the worst has been seen.  We'd also note that if the company loses too much value it would make an attractive brand target for another apparel conglomerate that wants another solid core brand under its roof.

Jon C. Ogg
January 31, 2008

The New York Times (NYT) Misses Every Number

In the fourth quarter, The New York Times (NYT) missed Wall St. estimates for EPS and revenue. EPS came in at $.44 compared to $.48. Revenue was $867 compared to estimates at $882.

The additional week in 2006 had a significant effect on the comparisons of Internet revenues. In the fourth quarter, our Internet revenues grew 12.0 percent to $95.2 million from $85.0 million in the fourth quarter of 2006. For the full-year 2007, Internet revenues rose 20.2 percent to $330.2 million from $274.7 million in 2006. We estimate that the additional week contributed $4.0 million in the fourth quarter and full year of 2006. Excluding the additional week, Internet revenues grew 17.6 percent in the fourth quarter and 22.0 percent for the full year.

In December, things got worse. For the last month of the year total revenues from continuing operations decreased 22.4% compared with December 2006, when our fiscal calendar included an additional week; excluding the estimated impact of the additional week in 2006, they decreased 8.2%. Advertising revenues decreased 25.2%; excluding the additional week, they decreased 12.0%. Circulation revenues decreased 17.8%; excluding the additional week, they increased 0.6%.

The stock is off almost 4% in the pre-market.

Douglas A. McIntyre

ETF LAUNCH: China Small Cap From Claymore/AlphaShares (HAO)

The American Stock Exchange launched trading yesterday in a new exchange traded fund that tracks small cap stocks in China.  It launched the Claymore/AlphaShares China Small Cap Index ETF (Amex: HAO) by Claymore Securities, Inc.

This ETF (HAO) aims to track the performance of the AlphaShares China Small Cap Index, which was designed to track the performance of publicly-traded small cap stocks in mainland China.

According to the launch site, this ETF launched with only 200,000 shares outstanding and it traded 2,800 shares yesterday.  It was also listed as having a 5.32% Bid/Ask premium and has 120 securities in the AlphaShares China Small Cap Index (ACNSC).

Ford (F): More Incentives, Bad News

One of the things Ford (F) CEO Alan Mulally wanted to do at the car company was cut the use of incentives. They can cost auto firms as much as $5,000 per vehicle. Average incentive per car runs about $2,400 for US car-makers.

Things have not worked out as Ford's US sales keep falling and the domestic car market gets tough due to a bad economy and rising full prices.

According to The Detroit News "Ford will sharply increase incentive spending this year to counter aggressive pricing by competitors and ensure that demand for older vehicles like the Ford F-150 and Mercury Milan remains strong."

Mulally's idea was nice while it lasted.

Douglas A. McIntyre

Analysts Defend Alliance Data Systems After Earnings (ADS)

Alliance Data Systems Corp. (NYSE: ADS) is seeing shares surge in pre-market trading this morning.  Alliance is suing Blackstone Group (NYSE: BX) over the likely merger failure.  Alliance also posted its earnings yesterday after the close.

The company posted a 14% drop in earnings after losses from a business unit sale and from its failed buyout.  It made $0.42 EPS, down from $0.48 EPS the year before on a net basis, but it posted $0.93 cash earnings versus a $0.93 estimates.  Revenues were up about 15% to $602.7 million, while estimates were looking for almost $601 million.

Alliance also maintained its stance that it could clearly generate double-digit organic growth in both operating and adjusted EBITDA.  The company noted a "combined impact of double-digit organic growth, reductions in capital expenditures and the implementation of additional free cash flow initiatives" will all result in a significant increase in cash flow during 2008. 

Analysts are defending the stock this morning.  There are upgrades from both Bear Stearns and JMP Securities raising ratings to "Outperform" and SunTrust Robinson Humphrey is raising its rating to a Buy from Neutral.  Shares closed at $42.70 yesterday and shares are up over 8% pre-market at $46.40 in early trading.  This was cut in half after the failed Blackstone buyout and the 52-week trading range is $39.54 to $80.79.

Jon C. Ogg
January 31, 2008

Goldman Sachs Conviction Buy List Changes In Gold Sector (ABX, FCX)

Goldman Sachs is making a key change in the gold sector this morning.  The investment banking giant is adding Freeport-McMoRan Copper & Gold (NYSE: FCX) to the Americas Conviction Buy List.  This stock is replacing Barrick Gold (NYSE: ABX) on the Americas Conviction Buy List.

FCX is noted as being down over 15% year to date and being inexpensive based on a 49% upside from current prices to Goldman's 12-month $129.00 price target.  Its leverage in copper is perhaps one of the more favorable issues according to the note, and Goldman notes that it believes copper consumption will be least affected of the base metals in a Western economic slowdown.

Barrick's removal from the Americas Conviction Buy List comes on the heels of strong performance, which is actually up 29% since being added to the list on November 27, 2007.  Barrick is also up some 90% since April 2006 when it was first given a Buy rating.  Goldman Sachs is still maintaining its official Buy rating on Barrick along with a $66 price target.  The firm believes this was the beneficiary of higher gold prices over $900/ounce as the stock outperformed mining and metals peers.  It also believes this is a top gold investment vehicle.

This call looks more like a relative value call based upon performance and value, and it could even be an implied pairs trade in the sector to some.

Jon C. Ogg
January 31, 2008

Top 10 Pre-Market Analyst Calls (ADBE, ADS, JRJC, GILD, HES, JWN, MNST, NEU, RL, YUM)

These are not all of the pre-market research calls during a busy earnings morning, but these are the top calls that 247WallSt.com is looking at:

• Adobe Systems (NASDAQ: ADBE) downgraded to Underperform from Buy at Jefferies.
• Alliance Data Systems (NYSE: ADS) upgraded to Outperform at Bear Stearns and upgraded to Outperform at JMP Securities.
• China Finance Online (NASDAQ: JRJC) started as Buy at Jefferies.
• Gilead Sciences (NASDAQ: GILD) raised to Outperform at Wachovia.
• Hess (HES) raised to Overweight at JPMorgan.
• J.W. Nordstrom (NYSE: JWN) raised to Outperform at Bear Stearns.
• Monster Worldwide (NASDAQ: MNST) downgraded to Hold from Buy at Deutsche Bank.
• NeuMarket (NYSE: NEU) started as Outperform at Oppenheimer.
• Polo Ralph Lauren (NYSE: RL) downgraded to Neutral from Buy at Banc of America.
• YUM! Brands (NYSE: YUM) downgraded to Hold from Buy at Deutsche Bank.

Jon C. Ogg
January 31, 2008

Amazon.com Sees Greatness In Audible (AMZN, ADBL)

Audible Inc. (NASDAQ: ADBL) is finally being acquired.  Amazon.com (NASDAQ: AMZN) will pay some $11.50 per share of Audible in an all-cash buyout.  Including Audible's cash on hand, this transaction is valued at roughly $300 million. 

If any company needed to be acquired in the digital media for books, magazines, newspapers, radio, TV, and other content distribution, it was Audible.  The company has its Audible.com service in the U.S. that has been around since the late-1990's for subscriptions, and the service also offers sites specifically for the U.K., France, and Germany.

When you consider that Amazon.com is taking on Apple (NASDAQ: AAPL) over iTunes and is launching its Kindle eBook reader, we wouldn't expect this to be the only small media company that Amazon.com (or others) look at, although not all the buyouts in the sector will be of public companies.

Jon C. Ogg
January 31, 2008

P&G (PG) To Spin-Off Coffee Operations

P&G (PG) announced plans to separate its coffee business and create an independent company named The Folgers Coffee Company. The coffee business had sales of approximately $1.6 billion and operating income of about $350 million in fiscal 2007.

The company also said revenue for the last quarter increased nine percent to $21.6 billion behind five percent volume growth and a five point favorable foreign exchange impact. Diluted net earnings per share increased 17 percent to $0.98. Net earnings increased 14 percent to $3.3 billion behind higher sales growth, increased operating profit and a lower tax rate.

For the current period P&G expects earnings per share to be in the range of $3.46 to $3.50, up 14 to 15 percent versus the prior year. This is an improvement versus the company's prior guidance range of $3.46 to $3.49 due to the strong results in the October-December quarter.

Douglas A. McIntyre

Asia Markets 1/31/2008 (SNE)(TM)(LFC)(PTR)

Markets in Asia were mixed at 3.10 AM New York time.

The Nikkei was up 1.9% to 23.329. Sony (SNE) was up 3.6% to 5,220. Toyota (TM) was up 5.4% to 5,820.

The Hang Seng was trading off 1.2% to 23,375. China Life (LFC) was down 4.5% to 27.7. PetroChina (PTR) was off 1.9% to 10.6.

The Shanghai Composite fell .8% to 4,383.

Data from Reuters

Douglas A. McIntyre

Eli Lilly (LLY): The Drug Companies Never Learn

At least once a year, and probably more often, a big drug company makes a settlement or faces suits over not disclosing the bad effects of one or more of its products.

Lilly's anti-psychotic drug Zyprexa can cause severe weight gain which can lead to diabetes. Investigators clearly think that someone at Lilly knew this. As The Wall Street Journal points out "the prospect of an indictment is daunting for a drug maker in light of the government's huge role in health care, since a criminal finding could compromise a company's access to government business."

Lilly may pay as much as $1 billion to settle with the feds and state governments. Then all of its Zyprexa problems will go away like bad dreams.

The settlement hardly gets to the heart of the matter which is that drug companies appear to be routinely prepared to be overly aggressive in marketing their products. Lawsuits are part of the cost of doing business. Lilly made over $1 billion last quarter. The charge for settling this matter will probably be spread over more than one year.

The drug company culture is deeply flawed and undermined by an acceptance of deception. Prosecutors and the FDA know that. But, they seem not to be willing to do much about it.

Douglas A. McIntyre

Starbucks (SBUX) Will Have To Close A Lot More Than 100 Stores

No one on Wall St. liked the Starbucks (SBUX) quarterly results and the shares moved down after they were announced. They still sit close to a 52-week low. The company reported revenues of $2.8 billion, a 17 percent increase from fiscal Q1 of 2007. Earnings per share were $0.28, compared to $0.26 per share in the period a year ago. Comparable store sales growth of one percent worldwide.

The company's solution to these problems seems to have three pieces. First, Starbucks will sell a $1 cup of coffee. It may bring in foot traffic, but probably won't be profitable. Second, the company will eliminate selling sandwiches.

Finally, Starbucks will close 100 stories in the US. That is out of a total of 11,168 in the US at of the end of 2007, which is up from 9,401 at the end of 2006. In the US, same-store sales fell 1% in the last quarter.

Howard Schultz is back as Starbucks CEO and there is already something wrong with his math. Shareholders are bleeding and the company is planning to close 100 under-performing stores out of a universe of over 11,000.

If Starbucks is going to get back in the good graces of investors, it is going to have to look at a program significantly more radical than the one it proposes. It is plain to almost everyone except the company that with shrinking same-store sales a .1% reduction in locations is not even close to adequate.

But, Schultz has already fired his CEO, and he is unlikely to do the same thing to himself.

Douglas A. McIntyre

Sony Earnings: Playstation Resurrection

For years the Playstation franchise carried Sony's (SNE) earnings. The PS2 was one of the great selling consumer electronics products of all time.

Sony stumbled with the launch of the PS3. Microsoft's (MSFT) Xbox had taken too many customers and the Nintendo Wii was becoming the world's top game console. Sony's CEO had to step down, and Howard Stringer was brought in from the US to run the company.

Sony's game division has finally gone into the black.

Net income at Sony moved up 25% to $1.9 billion for the quarter ending December 31. Revenue rose almost 10%.

TV sales were the big winner for Sony during the quarter. Financially, the game unit which includes PS3 was a footnote. But, it is no longer a drag on earnings.

If there is any virtue to patience in business, it has found some very modest reward at Sony.

Douglas A. McIntyre

S&P Sees CDO And Subprime Losses As High As $265 Billion

Losses from securities linked to subprime mortgages may exceed $265 billion as regional U.S. banks, credit unions and overseas financial institutions write down the value of their holdings, according to Standard & Poor's writes Bloomberg.

The first and second quarters could be worse than most on Wall St. imagine.

Douglas A. McIntyre

Amazon (AMZN): Nothing Will Satisfy A Bear Market

Wall St. has gone through the looking glass into Wonderland with Alice. The world is upside down now. Awful results at firms like E*Trade (ETFC) and Countrywide (CFC) can make shares rally. Outstanding results at a place like Amazon (AMZN) can cause a sell-off. It happened earlier in the month to Intel (INTC).

Amazon has to be the envy of the retail world, both online and brick-and-mortar. Fourth-quarter net income rose to $207 million, or 48 cents a share, from $98 million, or 23 cents a share, in the fourth quarter last year. Sales climbed to $5.67 billion, from $3.99 billion. That was all during a bad patch for holiday sales, one worse than any since 2001. Gross margins at Amazon dropped a touch, but just a touch.

Amazon also gave a robust outlook for 2008 and its shares dropped 11% to $65.

None of that makes any sense. The last time Amazon reported earnings, the stock reacted by moving above $100. The current earnings were better in almost every way, and the stock trades down by a third from where its was in late October.

A market is only as good as its reaction to the best earnings it sees. In a bull market, very good earnings get outstanding stock market results. Even mediocre earnings can be countenanced.

In a bear market, there is no such thing as good news.

Douglas A. McIntyre

MBIA (MBI) Takes A Torpedo In The Boiler Room

Wall St. thought things would be bad when MBIA (MBI) reported earnings, but they were worse. The largest bond insurer posted a loss of $2.3 billion, or $18.61 a share, compared with profit of $181 million, or $1.32 a are in the same quarter the prior year. No wonder the company made its announcement at midnight.

MBIA it took a $3.4 billion charge after writing down the value of residential and commercial mortgages as well as complex financial instruments that it guarantees.

The numbers from the financial firm are certainly an indication that write-offs for mortgage-related securities at all large banks and investment houses could get worse, and it probably also makes a bail-out of MBIA and Ambac (ABK) harder. Any institution putting money into the firms will have to wonder if it is enough or whether further losses will make an initial bail-out inadequate.

The simple argument is that banks should put up the money to keep MBIA in business. If the insurer fails, that value of many of the muni bonds it insures will drop, leading to more write-offs at banks which hold these securities. The banks may not have the capital, but their arms will be twisted by regulators using their self-interest as an excuse.

If the bond insurers are the keystone keeping the financial system from crumbling, then the states and federal governments should find another way to back these pools of debt. It will save local and state treasuries billions of dollars and save tax-payers from having to make up the borrowing costs of municipalities.

No matter how much the government wants big banks to step up for MBIA, they don't have the money.

Douglas A. McIntyre

Media Digest 1/31/2008 Reuters, WSJ, NYTimes, FT, Barron's

According to Reuters, Amazon's (AMZN) financial results show that its profit margins were squeezed in the last quarter.

Reuters writes that Starbucks (SBUX) will close 100 stores and say 2008 could bring a recession.

Reuters reports that bond insurance companies came under pressure with a Fitch downgrade of FGIC.

Reuters reports that NY State may use the powerful Martin Act securities fraud law to go after Wall St. firms which packaged mortgage-based products.

The Wall Steet Journal reports that MBIA (MBI) reported $3.5 billion in write-downs in its portfolio driving a $2.3 billion loss for Q4

The New York Times writes that Lilly is considering a $1 billion fine to settle claims against the company’s marketing of an antipsychotic drug.

The New York Times writes that William A. Ackman, a prominent money manager, said a failure of bond insurers could cause massive losses at big banks.

The New York Times writes that Altria (MO) will spin-off its international operation.

The Wall Street Journal writes that JC Penney will merge the buying operations of its stores and online services and cut jobs.

The FT writes that the head of Merrill Lynch (MER) see bail-outs of bond insurers coming company-by-company and not through an industry-wide bail-out.

The FT writes that inexpensive laptops from Asia could squeeze margins at big US PC makers including Dell (DELL), Apple (AAPL), and Hewlett-Packard (HPQ).

Bloomberg writes that Sony (SNE) turned in an increase in net income of 25% as its PS3 unit made a profit.

Douglas A. McIntyre

Can Google Break The Internet Earnings Drop? (GOOG, YHOO, AMZN, EBAY)

After the close of trading on Thursday, the beloved Google (NASDAQ: GOOG) will report earnings for Q4-2007.  This is the last of the internet giants to report earnings.  Interestingly enough, all of other pure-play web giants that reported earnings have been battered right after the report.  It seems that even the Internet is now economically sensitive at a time when investors are trying to find equilibrium on growth versus value in a slowing economy.

Yahoo! (NASDAQ: YHOO) fell 8% on Wednesday after the Tuesday earnings report.  Even though shareholders here are more patient than any other shareholders, 2008 is only 'yet another year of a turnaround.'  Yahoo! is actually more expensive on its multiples ahead than Google because it is still the largest web property outside of search, it has the longest portal history of the Internet pure-plays, and there is a would-be takeover premium in the stock.  If Yahoo! management dug in and said they will fight any partnerships or takeovers, and if it just bullied Wall Street on a "we're sticking to the #2 strategy" then we could even argue it is still 25% too high.

Frankly, comparing Amazon.com (NASDAQ: AMZN) and eBay (NASDAQ: EBAY) to Google is just not a real comparison.  At least that is our take.  But web-watchers look at all these for the inner workings of the web, monitoring traffic, sales, earnings, commentary, new developments and so on.  And the metrics of those properties are being used to judge elsewhere, particularly as eBay was said to be toning down ad spending with Google.

Intuitive Surgical Braces For Earnings (ISRG)

Intuitive Surgical Inc. (NASDAQ: ISRG) is set to report earnings after the close on Thursday.  Shares closed at $235.00 Wednesday, down from a 52-week high of $359.59 and down from a December 31 close of $323.00.

First Call has estimates at $1.04 EPS on $175.9 million in revenues.  As far as Q1-2008, estimates are $0.98 EPS on $172.6 million revenues. Its fiscal-2008 estimates are $4.70 EPS on $811.1 million in revenues, representing an estimated 34% earnings per share growth and 38% revenue growth for 2008.

While everyone will be focused on Google earnings, this is at a critical juncture as a stock.  Intuitive Surgical makes the da Vinci surgical system for urologic, cardiothoracic, gynecologic, and general surgeries.  The problem is that the stock is up  almost twenty-fold over the last five-years and we just saw another quasi-robotic medical products competitor get crushed last night. 

The short interest for mid-January fell slightly to 1.915 million shares.  If options are any accurate guide, this stock could easily see a move of $22 or more in either direction after earnings.  Analysts still have an average price target north of $320 on Intuitive Surgical.  The company closed out Wednesday with a 50 forward P/E ratio, so Wall Street is going to keep demands high for the company in an environment where investors want more safety.

Jon C. Ogg
January 30, 2008

Accuray, Neither Recession Proof Nor Credit Proof (ARAY)

Accuray Inc. (NASDAQ: ARAY) is being punished in after-hours trading.  The company posted earnings at $0.04 EPS on revenues of $52 million.  The problem is that First Call was at $0.09 EPS on $58.2 million. The company also gave 2008 revenue guidance of $210 to $230 million, down from a prior guidance of $250 to $270 million and down from consensus estimates of almost $265 million.  This represents 50% to 64% revenue growth projected over 2007, but it isn't enough.

Accuray was in a position that you would think is recession-proof and full of growth ahead.  Its own CyberKnife Robotic Radiosurgery System treats tumors anywhere in the body non-invasively with continual image guidance technology and computer controlled robotic mobility.  As it monitors movement real-time, it delivers targeted high-dose radiation to minimize damage to surrounding healthy tissue.  It also eliminates the need for invasive head or body stabilization frames.  Shouldn't that be recession proof????

You have to see the comments here and determine if you believe the CEO, Euan S. Thomson, Ph.D.:  "Accuray continues to experience record-setting growth.... This sustained growth is a testament to the impact that the CyberKnife System is having on meeting the demands for extracranial radiosurgery, particularly prostate and lung cancer.... While this was a positive quarter with respect to revenue and backlog growth, we believe that broader credit market issues are having a short-term impact on some of our U.S. customers' purchase and installation timelines, as obtaining financing has become more difficult...."

Shares closed down 1% today at $14.98 and the 52-week trading range was $12.50 to $31.09.  But after-hours is ugly and a new 52-week low down almost 30% to under $11.00. 
You might wonder if Accuray's salesforce has trouble pitching gold for the price of silver.  Something just doesn't seem right here.

Jon C. Ogg
January 30, 2008 

Starbucks Earnings, Ammo For Bulls & Bears Alike (SBUX)

Starbucks (NASDAQ: SBUX) is seeing shares trade slightly lower in after-hours trading after earnings.  The coffee inflating retailer posted earnings of $0.28 EPS on revenues of $2.8 Billion, yet First Call estimates were $0.27 EPS on $2.77 Billion revenues.  Its margins contracted 160 basis points, a 1.6% total drop, down to 12.0%; and same store sales growth was 1% for the quarter.

As far as its slowing growth plans, it slowed the pace of U.S. store growth to 1,175 stores for this fiscal year, down from a revised target of 1,600 stores; while it increased International store openings to 975 stores.  The problem with today's numbers is that Howard Schultz noted that the full details of the PLAN AHEAD will not be released until MARCH 19:  “We will unveil additional details of our transformation plan, including bold innovations that will reassert our coffee leadership, redefine the in-store experience and introduce core brand-building initiatives, on March 19, 2008, at the company’s Annual Meeting of Shareholders. Given all the work underway, we view 2008 as a year of refocus and renewal for Starbucks.”

Starbucks targets low double-digit EPS expansion this year.  Schultz also maintains that this $1 coffee initiative offering is just a test and it will be listening to customer feedback. 

During the first quarter, the company repurchased a total of 12.2 million shares at an average cost of $295 million, and had 1.3 million shares remaining available for repurchase under the authorization in place. Starbucks' Board of Directors authorized the repurchase of up to 5 million additional shares of the company’s common stock just last night.

Shares closed down 3.7% at $19.22 in regular trading today, and shares are down about 2% at $18.83 in after-hours trading.  The 52-week trading range is $17.66 to $35.42. 

There is nothing special in this earnings release.  The bulls will say the worst is over, and it probably is.  The bears will say the best days are obviously long gone in a more challenging environment, which is also true.  Personally, this sort of feels like being Imelda Marcos opening a birthday present, only to find the present is a new pair of shoes.

Jon C. Ogg
January 30, 2008 

52-Week Low Club (AMLN, CYMI, NTCH, KEYN, MMA, NATI, STE, WTW)

There was a much larger list of companies which hit 52-week lows, but these were some of the larger percentage changes that we looked at:

• Amylin Pharmaceuticals Inc. (AMLN) closed at $29.34 versus a prior 52-week low of $29.73 (high $53.25). Poor future outlook and inflated costs.... stock starting to look like the "Amylin-ville Horror."
• Cymer Inc. (CYMI) down 20% to $27.00, prior 52-week range was $31.25 to $45.16. Cymer was downgraded after missing earnings yesterday.
• Hutchinson Technology Inc. (NASDAQ: HTCH) fell 33% to $16.18; prior 52-week range was $17.69 to $27.85. Low sales projections and downgrades from Caris and Brean Murray.
• Keynote Systems Inc. (KEYN) tanked 28% to $9.20 versus prior 52-week trading range of $10.35 to $17.35. A Bad note of losses and downgrades.
• Municipal Mortgage & Equity LLC (NYSE: MMA) down 22% to $7.13, versus prior 52-week range of $9.05 to $32.20.  Woes continue, stock heading to pink sheets/OTC.
• National Instruments Corp. (NASDAQ: NATI) fell almost 10% to $26.23, but intraday lows were $24.88; 52-week trading range $25.80 to $36.06.  Citi downgraded after Q1 earnings outlook looked short.
• Steris Corp. (NYSE: STE) fell 14% to $23.48; prior 52-week range $24.65 to $31.71. It is involved in the development, manufacture, and marketing of infection prevention, contamination control, microbial reduction, and surgical and critical care support products and services.  For a nearly-recession proof business, you wonder why its outlook wasn't in-line.
• Weight Watchers (NYSE: WTW) fell 2.2% today to $41.94, although its intraday low was $41.49; prior 52-week trading range was $41.52 to $58.24.  No real news today, maybe losing weight equals losing share prices?  We doubt it.  This may be economically sensitive even if this is one of the few ongoing methods of weight loss that will actually work.

Jon C. Ogg
January 30, 2008

Amazon.com Delivers, But Valuations Catching Up (AMZN)

Amazon.com (NASDAQ: AMZN) posted earnings with net income at $0.48 EPS on net sales of $5.67 Billion.  First Call had estimates pegged at $0.48 EPS and $5.37 billion in revenues.  Interestingly enough, Amazon noted a $200 million currency benefit.

Bezos & Co. also offered guidance for next quarter of $155 to $200 million in operating income, up 7% to 38%; $3.95 billion and $4.15 billion in revenues, a gain of 31% to 38% year over year.  Next quarter's estimates are $0.35 EPS and $3.92 billion in revenues.

For 2008, Bezos offered up guidance of $785 to $985 million in operating income and $18.75 to $19.75 Billion in revenues; while the estimates for 2008 are $1.63 EPS and $18.25 billion in revenues.

Its shipping revenues also grew some 38% to $265 million.  Outbound shipping costs totaled $449 million, up 42% from $317 million in Q4-2006. Net shipping cost was $184 million, or 3.2% of net sales.

Amazon.com also ended the year out with over $3 Billion in net cash and equivalents

Amazon.com shares closed up 0.35% at $74.21 in regular trading, and shares are down some 4% at $71.25 in after-hours trading.

Jon C. Ogg
January 30, 2008

SCO's Last Annual Report Ever? (SCOX, SCOXQ)

SCO Group, Inc. (Pink Sheet-SCOXQ), formerly "SCOX," has filed its annual report.  After you have seen the history of this company through the years, it is almost impossible not to wonder if this is likely the end of the road for the company.  Very few companies this small are involved in this much litigation.  The stock was booted from trading on the NASDAQ at the end of December and it is now traded on the Pink Sheets.  It is under bankruptcy protection.  Its revenues appear to be racing faster and faster to zero.  Its balance sheet is in the same boat.

It turned out that having a business model of suing everyone under the sun wasn't a good one.  Go figure.  All of these are excepts from the 10-K, and we have focused on the more pressing issues with comments from the company:

FOMC 50/50 Delivery

The FOMC made its rate cut today and delivered on 0.50% on both the FED FUNDS and on the discount rate, so now Fed Funds will be targeted at 3.00%.  Wall Street economists had been expecting a 0.50% rate cut down to 3.00%, so this was right in line with what the markets were hoping for.

Some brief comments were as follows:

• financial markets remain under considerable stress;
• credit has tightened further for some businesses and households;
• recent information indicates a deepening of the housing contraction as well as some softening in labor markets;
• expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation...

You can see the full statement here.

At 2:10 PM EST, about 5 minutes before the scheduled FOMC time, these were the market levels:
DJIA               12,447.46  (-32.84; -0.26%)
S&P500        1,358.17   (-4.13; -0.30%)
NASDAQ       2,348.33   (-9.73; -0.41%)
10YR-Bond   3.697%     (+0.0390)

The markets have rallied after this announcement, mostly as the tone of this announcement does not eliminate further cuts in the future.

Jon C. Ogg
January 30, 2008 

Starbucks Plan Acceptance Likely Outweighs Its Earnings (SBUX)

Starbucks Corp. (NASDAQ: SBUX) is set to report earnings today after the close of trading. First Call has estimates pegged at $0.27 EPS and $2.77 billion in revenues. Next quarter's estimates are $0.22 EPS and $2.65 billion in revenues; if the company offers these targets, next year's estimates for 2009 are $1.21 EPS and $12.66 billion in revenues.  As of last look analysts have a price target average of $27.92.  We recently came up with our own analysis for a fair value range, although our targets are much more conservative than those of Wall Street on Starbucks with a low-target calculation of $18 and $26 as a high-end target..

As of late morning after shares slid from being positive, it appears that options traders are looking for a move of up to $0.95 to $1.05 in either direction.  The only good news about the chart is that at least this one stabilized after hitting $18-ish levels before Schultz announced he would resume the helm.  Shares have traded in a $17.66 to $45.42 trading range over the last 52-weeks.

As estimates have been coming down, there are not near as many positives going in and it would be hard to imagine Wall Street demanding a solid quarter with bang up numbers.  Schultz has already made some announcements on what he will do to bring the growth under control and to keep the wheels on the car, but you can imagine investors will be weighing the strategy more than a past number.  Testing $1 coffee may be going the wrong way as it is "so early 1990's.

Jon C. Ogg
January 30, 2008

VMWare (VMW) Could Fall 50% Further

VWWare (VMW) lost about a third of its value on a disappointing quarterly report. The stock is now down to $56, near a 52-week low and off a period high of better than $125.

The pricing of the company's IPO last year was $29, and that is probably closer to the real value of the company. That would move the firm's market cap from its current $22 billion to just over $13 billion.

Fourth quarter revenue at VMW was $412 million, up 80% over the same period a year ago. GAAP operating income was $76 million, a 19% operating margin. At this point VMWare trades about 14x its revenue run rate.

In the last quarter, Microsoft had revenue of $16.37 billion. Operating income was $6.48 billion. That is an operating margin of almost 40%. In its core software businesses, Microsoft has operating margins higher than 60%.

Wall St. would argue that Microsoft is not growing as fast as VMWare. That is true, but VMWare is facing competition in it virtualization software business. It is the lead, which should command some premium.But, Microsoft actually has only modest competition in its operating software operations. Their business in that arena is also probably less likely to be hurt by recession or a major competitive threat.

Microsoft's multiple of revenue is about a little over 5x. Should the difference in revenue multiples be so great between the two firms. Almost certainly not. Could VMW's growth rate give it a 7x or 8x figure? Probably. That gives the stock a value of about $30.

Douglas A. McIntyre

Can Amazon.com Live Up To Growth Targets? (AMZN)

Amazon.com (NASDAQ: AMZN) is set to report earnings after the close today.  First Call has estimates pegged at $0.48 EPS and $5.37 billion in revenues. Next quarter's estimates are $0.35 EPS and $3.92 billion in revenues; the estimates for 2008 are $1.63 EPS and $18.25 billion in revenues.

Analysts have fairly aggressive price targets on Amazon with an average north of $98.00.  We'd note that shares have traded as low as $36.63 and as high as $101.09 over the last year.  Up until the last pullback this has spent most of the last four months in an $80 to $100 trading band, although we'd caution that $95 or so was the top of that band on all but one day.  Shares have also been hanging out for the last week or more under the 200-day moving average, which was $78.72 on last look.

Options are almost impossible to use for a predicting tool today with a high VIX, high event risk, and high volatility.  If you want a guess at options as a prediction, options traders appear to be braced for a move of more than $7.25 in either direction.  The short interest is also a must-see ahead of earnings, and as of mid-January the short interest was 31.4+ million shares (up 1.5% from December-end).

We do not know if Bezos & Co. will go out on a limb and offer any targets for 2008.  But we are fairly certain that 2007 will be an important benchmarking for analysts as they try to come up with 2008 targets.  Even with the recent sell-off we've seen, it doesn't look like the analysts are going to line up in defense of Amazon.com if it makes any comments that are overly cautious ahead. 

If the company meets the 2007 target, its trailing P/E ratio will be 66.  With a target of $1.63 expecting almost 45%  earnings growth, this forward P/E ratio is still 45.3 for 2008 targets.  Sometimes valuations do matter, particularly when you are teetering on a recession or a bear market.

Jon C. Ogg
January 30, 2008 

SPAC IPO Filing: Open Acquisition Corp. (OXE, VGR)

Open Acquisition Corp. is a SPAC, a special purpose acquisition company, that has filed to come public via an IPO.  With $125 million proceeds targeted at $10.00 per unit, each unit will consist of one share of stock and one warrant with a $7.50 strike price.  The total proposed maximum aggregate amount in securities is listed as $264,687,600.00.  Deutsche Bank is listed as the lead underwriter.  Once the securities begin separate trading, the common stock and warrants will be traded under the symbols “OXE” and “OXE.W” on the American Stock Exchange.

The filing does not specify a particular business focus, however, it is organized with the purpose to own no less than a controlling share in a “merger, capital stock exchange, stock or asset acquisition, or other similar business combination.”  Furthermore, it does specify which businesses that it will NOT engage in: real estate brokerage, insurance brokerage and employee benefits, retail investment advisory and asset management services, quick service restaurants, nor in tobacco.

In identifying a target, the management will evaluate aspects such as the following: earnings and growth potential; experience and skill of management and availability of additional personnel; capital requirements; competitive position; financial condition and results of operation; stage of development of the products, processes or services; breadth of services offered; degree of current or potential market acceptance of the products, processes or services; regulatory environment of the industry; and costs associated with effecting the business combination.

Open Acquisition Corp. chairman is Howard M. Lorber and President/CEO is Michael S. Liebowitz. Lorber is the current President and CEO of Vector Group (NYSE: VGR), a holding company focused on tobacco and real estate businesses. He is also the chairman and CEO of fast food chain Nathan’s Famous, Inc. Liebowitz is the former president and CEO of Harbor Group, Ltd., a property and casualty brokerage firm. He is the current president and CEO of Insreview, Inc, an insurance consultant for investment banks, capital market and mezzanine lenders, and real estate opportunity funds.

Rachel Lopez
January 30, 2008

American Water Works IPO Closer To Market (AWK)

American Water Works Company submitted an amended IPO filing after yesterday's market closed, and this is one we at 247WallSt.com have been looking forward to.  The filing still shows a planned IPO for a sale of up to $1.5 Billion in securities.  While most filing numbers are merely for filing purposes, this is going to be one of the larger IPO's of 2008. 

The underwriting group is still listed as Goldman Sachs, Citigroup, and Merrill Lynch.  We won't be shocked if that number of underwriters grows as far as co-managers are concerned.  American Water Works Company still has the stock ticker “AWK” on the NYSE as its pre-designated ticker.

American Water Works generated $2.1 billion in total operating revenue in 2006, and pro forma for the nine months ended September 30, 2007 is $1.66 billion in operating revenues.  This is one IPO we have been waiting for as RWE AG in Germany is essentially selling this one back to the U.S. public after acquiring it.

Jon C. Ogg
January 30, 2008

E*TRADE Insiders Buying Spree (ETFC)

There are some SEC filings out of online brokerage firm E*TRADE Financial Corp. (NASDAQ: ETFC) that shows quite a bit of insider transactions that took place on January 29.  These were all insider acquisitions and this was after earnings.  Below are the purchases seen from management with the shares purchased and the listed prices:

• Hayter, director 4,917 at $4.06
• Layton, director  245,800 at $4.06
• Fisher, director 31,806 at $4.06
• Randall, director 29,500 at $4.06
• Parks, director  24,586 at $4.06
• Raffaeli, director 12,293 at $4.06
• Lilien, acting CEO 7,376 at $4.06
• Weaver, director 68,843 at $4.06
• Brewster, director 24,586 at $4.06
• Willard, director 11,942 at $3.98 and 13,058 at $3.99

We looked over its recent earnings and noted how the company is not at all signaling its demise.  These insider share purchases may only fuel that more.  We just noted this one in our "10 Stocks Under $10" weekly subscriber letter on Sunday and we really wonder if Mr. Moglia or Mr. Schwab have an interest in buying this company.

Jon C. Ogg
January 30, 2008

China's Huge Bear Market (PTR)(LFC)

China's Hang Seng Index is off almost 25% over the last three months. The S&P 500 is barely off 10% over the same period.

A look at some of the components of the Hang Seng looks even worse. During the last 90 days, shares in PetroChina (PTR) are off 40%. Shares in China Life (LFC) are down 40%.

Bank of China is off well over 30%.

All of this is likely to make the middle class in the country feel a little less well off. A great deal of the net worth of the well-off Chinese is in stocks and land.

Under the circumstances, the Chinese consumer may start to buy less. Couple that with falling exports due to slowing economies in the West and it points to a recession.

Douglas A. McIntyre

Q4 GDP Already Near Recession Levels

Today we got our first look at Q4 2007 GDP, and this is the preliminary data that will see two revisions ahead.  Q4 GDP just came in at +0.6%.  Most estimates we saw were still north of 1% GDP growth with a 1.2% to 1.4% range.  The number was a bit better if you back out autos at +1.6% but not enough to make anyone cheer.

Also broken out of the GDP number was PCE Price Index came in at +3.9%, and the price deflator gave this a level of +2.5%.

While this is still positive above the 0.0 mark, it is under plan and was not anywhere strong enough to dash hopes for an aggressive Federal Reserve rate cut today.  We have been noting that the US economy is for all practical purposes already in a recession, and this +0.6% reading just makes this look like that is even more the case when you consider how many parts of the country are in more than a pinch.

Jon C. Ogg
January 30, 2008

Schering-Plough Relief on Partner Earnings (SGP)

Schering-Plough Corp. (NYSE: SGP) is probably breathing a sigh of relief this morning after Merck's earnings as it is partners with the drug giant on Vytorin and Zetia for cholesterol treatments.

The combined Vytorin & Zetia franchise was noted as having some $5.2 Billion in 2007 annual sales, with some $1.5 Billion being reported in the fourth quarter alone.

Merck did disclose some 50 lawsuits over these sales and noted that it is complying and cooperating with investigations.  But the good news is that the company's guidance wasn't sharply changed.

Schering-Plough has a large portion of its profits that come directly as a result of its Merck partnership.  It is still too early to get a solid read on Schering-Plough shares and obviously the situation can change based on Merck comments in their earnings conference call. 

So far shares are indicated up marginally for Schering-Plough at $19.20 after a $19.11 close yesterday.  Its 52-week trading range is $17.45 to $33.81, and shares were north of $26.00 at the start of 2008.

Jon C. Ogg
January 30, 2008

Boeing Backlog More Impressive Than Guidance (BA)

Boeing Co. (NYSE: BA) posted earnings of $1.36 EPS on $17.5 Billion in revenues for its fourth quarter.  Estimates from First Call were $1.32 EPS and $17.33 Billion in revenues.  Boeing is also making "raised guidance projections" for 2008 with EPS in a range of $5.70 to $5.85, while First Call estimates were $5.95 on last look.  The aerospace and defense giant noted that its raised guidance came from productivity gains being realized ahead of earlier plans.

As far as the 787 Dreamliner, it doesn't look like any real changes are any different than from earlier this month.  It now expects the first flight to occur around the end of the second quarter of 2008 and the first delivery in early 2009. The Dreamliner program won a record 369 orders in 2007 for the 787, bringing total firm orders since launch to 857 airplanes from some 56 customers.

This backlog makes IBM's $100+ Billion look like chopped liver.  Boeing's stated backlog is $327 Billion, or roughly 5-years worth of 2007 revenues.  Boeing spent $890 million for some 9.4 million shares in the fourth quarter as part of its expanded share buyback plan.

As this guidance for 2008 is under plan, Boeing shares are initially indicated down 1.4% at $79.79 in pre-market trading.  The 52-week trading range is $74.12 to $107.83.

Jon C. Ogg
January 30, 2008

Merck's Guidance A Relief (MRK)

Merck & Co. (NYSE: MRK) has just posted earnings that may be a relief to many who were worried about recent Vytorin woes affecting 2008 numbers.  The company posted EPS of $0.80 for Q4 and consensus estimates out of First Call were $0.74.  Merck is also guiding its fiscal 2008 of $3.28 to $3.38 EPS, and estimates are $3.36, yet after items it sees a revised 2008 EPS range of $3.80 to $4.00.

Merck shares closed at $48.00 yesterday, down from recent 52-week highs north of $60 earlier in January before the Vytorin woes came out.  Its shares are indicated up 1% pre-market. 

As estimates had been coming down in recent days, this guidance for 2008 may be a relief to many that worried the latest issues would sharply bring down earnings projections.

Jon C. Ogg
January 30, 2008

Top 10 Pre-Market Analyst Calls (CSIQ, COLM, DTE, ERTS, KMP, MER, MU, NKE, ZQK, YHOO)

These are not the only research calls we are looking at in pre-market trading, although these are the initial calls that grabbed our attention early on:

<