24/7 Wall St.

24/7 Wall St. Most Overpaid CEO Of The Day: JDS Uniphase (JDSU) CEO Kevin Kennedy

JDS Uniphase (JDSU) announced it business fell to pieces in the last quarter. On a non-GAAP basis, the company said it would have earned $15.5 million, or 7 cents per share. Revenue grew to $390.3 million from $350.7 million last year. Analysts were expecting earnings of 10 cents a share on revenue of $395.8 million, according to consensus estimates from Thomson Reuters, writes MarketWatch.

The market was upset and pushed the shares down 11% in the pre-market, falling to $10.50, about $1 from its 52-week low. Over the last two years, JDSU is down about 50%.

Top Pre-Market Analyst Upgrades (AAUK, ACI, BBT, CETV, FCL, JKHY, MEE, WCG)

These are some of the top upgrades or positive calls we are seeing from analysts this Thursday morning:

• Anglo American (AAUK) Raised to Strong Buy at S&P (late Weds. call).
• Arch Coal (ACI) Raised to Buy at UBS.
• BB&T Corp. (BBT) Raised to Buy at S&P.
• Central European Media (CETV) Raised to Buy at Citigroup.
• Foundation Coal (FCL) Raised to Buy at UBS.
• Jack Henry (JKHY) Cut to Hold at Needham; Cut to Neutral at D.A. Davidson.
• Massee Energy (MEE) Raised to Buy at UBS.
• WellCare Group (WCG) Started as Buy at B of A.

Jon C. Ogg
August 21, 2008

Top Pre-Market Analyst Downgrades (AER, AGP, LEH, NVO, CRM, SNPS)

These are some of the downgrades or cautious analyst calls we are seeing this Thursday morning:

• AerCap (AER) Cut to Hold at Citigroup.
• Amerigroup (AGP) Started as Neutral at B of A.
• Lehman (LEH) estimates cut at Citigroup.
• Novo Nordisk (NVO) Started as Neutral at UBS.
• Salesforce.com (CRM) Cut to Neutral at Piper Jaffray.
• Synopsys (SNPS) Cut to Sell at Citigroup.

Jon C. Ogg
August 21, 2008

Airline Roulette: Industry Leader Sees More Failures (AMR)(DAL)

The head of the International Air Transport Association thinks that the plight of the airline industry will get worse before its gets better. He believes that losses among carriers could hit over $6 billion this year.

Oil prices have not come down enough to make fuel "affordable" to the point of curbing losses. Passenger traffic is falling even in formerly strong markets like Asia.

Net Neutrality And The Myth Of Fairness (CMCSA)

The FCC did not like it when Comcast (CMCSA) started to shut off customers running video file-sharing services. Comcast said the programs use too much bandwidth. The agency said that people who pay for broadband should get it.

It is easy for the FCC to take its position. It does not have to pay billions of dollars to upgrade the infrastructure at Comcast or any of the other large cable companies.

Boeing (BA) And Its Unions Go To Hell Together

Boeing (BA) has delayed the launch of its Dreamliner three times. Supply chain trouble and manufacturing flaws have damaged the company's reputation with its customers and opened a door for more competition from Airbus. The set-backs have been so substantial that some Boeing customers want compensation for the late deliveries.

None of this has done any good for Boeing shareholders. Despite the fact that the company has a huge backlog of orders, its share price is $63, near a 52-week low and down from the period high of $107.15.

Microsoft (MSFT) Attacks Its Self-Loathing By Turning To Seinfeld

Jerry Seinfeld can be a vicious and cruel comedian. Microsoft (MSFT) has changed that by putting $10 million in his pocket.

The people from Redmond have finally acknowledged that a huge portion of the PC using population hates Windows, especially the new Vista version. It is complex and heavy with bugs. Very few people can figure out how to tap many of its features.

The troubles with Windows have opened a door for Apple (AAPL) to promote its Mac OS which is supposedly user-friendly and safe for both children and pets.

Citigroup (C) Downgrades Everyone But Itself (LEH)(MS)(GS)

The rule on Wall St. is that securities analysts don't rate their own firms. Now that brokerage research departments are no longer slaves to investment banking, the independence of analysts is supposed to be a given. They still do not put "sell" ratings on many stocks, even in a bear market. Perhaps they lack the courage of their convictions because a bad grade may deny them access to the companies they cover.

Citigroup downgraded Lehman (LEH), Morgan Stanley (MS), and Goldman Sachs (GS) saying future write-downs and slow investment banking would hit earnings.

Media Digest 8/21/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to Reuters, Nissan says it will start exporting cars from it China joint venture.

Reuters reports that Micorosft (MSFT) will enlist Seinfeld for its new ad campaign.

Reuters reports that the NY Attorney General will step up his auction-rate probe.

Reuters writes that Fannie Mae (FNM) and Freddie Mac (FRE) fell on concerns of a bail-out.

Asia Markets 8/21/2008 (LFC)(SNP)

Markets in Asia were mostly down.

The Nikkei fell .7% to 12,752. Canon fell 2% to 5260. Casio fell 3.7% to 1220.

The Hang Seng dropped 2.2% to 20,480. China Life (LFC) rose 4.3% to 27.70. China Petroleum (SNP) rose 4.4% to 7.68.

The Shanghai Composte fell 3.6% to 2,432

Data from Reuters.

Douglas A. McIntyre

The 52-Week Low Club 8/20/2008 (FNM)(FRE)(MNI)(CC)(NVTL)

Fannie Mae (FNM) Fear the mortgage firm will fail. Drops to $3.95 from 52-week high of $70.57.

Freddie Mac (FRE) Ditto. Sells down to $2.95 from 52-week high of $67.20.

McClatchy Newspapers (MNI) Newspaper firm turns in bad July ad revenue. Drops to $3.53 from 52-week high of $23.58.

Circuit City (CC) Market does not think retailer can find a buyer. Dips to $1.63 from 52-week high of $11.55.

Novatel Wireless (NVTL) Turns in a bad quarter. Collapses to $6.05 from 52-week high of $27.20.

Douglas A. McIntyre

Aladdin & Vector Capital, Another Questionable Deal (ALDN, CREL, CAPA)

Aladdin Knowledge Systems (NASDAQ: ALDN) has confirmed that it received a confidential and unsolicited proposal from private equity firm Vector Capital to acquire the company.  The company notes that Vector's proposal includes a potential alternative transaction with Vector's purchase of Aladdin's DRM business.... "potentially combined with a repurchase by Aladdin of the shares of Aladdin purchased by Vector Capital, and the sale by SafeNet, Inc., a Vector affiliate, of its authentication business to Aladdin."  What is very interesting is that while this would be a small deal, you can see below how this deal will come under question by many just as fast as it was announced.

Oil Services Better Insulated Than Most Energy Sub-Sectors (RIG, DVR, PDS, WFT, NOV, BJS, BHI, BAS, HAL, SLB, SII)

Oil Services are deemed by many market pundits as being more insulated than integrated oils, refiners, and other sub-sectors of the energy sector for oil and gas.  While these frequently move in-line with oil prices and with the sector, they are expected to have much more stable earnings than counterparts elsewhere in the sector.  Many of the oilfield services shares are down nearly 20% or more along with a major drop in oil prices. Transocean's shares are holding at less than 1% down from 52-week highs, probably on the strength of the company's bookings.

Transocean Inc. (NYSE: RIG) has given back nearly one-quarter of its value from its highs.  The worst performer among the larger players was CalDive (NYSE:DVR), down 43% from its 52-week high. Precision Drilling Trust (NYSE:PDS) is down about 30%, Weatherford (NYSE:WFT) is off about 27%, and National Oilwell Varco (NYSE:NOV) and BJ Services (NYSE:BJS) are down about 25%. A host of others are off around 20%: Baker Hughes (NYSE:BHI) at 22%; Basic Services (NYSE:BAS) at 21%; Halliburton (NYSE:HAL) at 20%; and Schlumberger (NYSE:SLB) and Smith International (NYSE:SII) are off about 19%.

24/7 Wall St. CEOs Who Should Work For $1 Society: Schwartz Of Sun (JAVA)

CEOs at troubled companies often set their salaries at $1 a year. Lee Iaccoca did it at Chrysler and Steve Jobs did the same at Apple (AAPL). The gesture allows the poor wretches who have been laid off and the impoverished shareholders believe that the commander-in-chief is willing to make a sacrifice

One CEO who should certainly step his pay down to a buck is Jonathan Schwartz, CEO of "dead man walking" hardware company Sun Microsystems (JAVA).

24/7 Wall St. Day Trading Alerts (NVTL)(STP)(JKHY)

VSInvestor.com posted several day-trading alerts.

Novatel (NVTL) dropped sharply on very heavy volume after posting poor results.

Suntech (STP) and several other solar stocks made big moves on STP results.

Jack Henry & Associates (JKHY) dropped hard on a disappointing earnings report.

Douglas A. McIntyre

Goldman Sachs (GS) Cuts All Bank Estimates But Its Own (JPM)(MER)(C)(MS)

It is not hard to blame Goldman Sachs (GS) for failing to cut its own earnings estimates for the next quarter and the full year. That kind of action by analysts is verboten. Rating yourself is not allowed.

Goldman did take a pollaxe to its peers, chopping Citigroup (C), Morgan Stanley (MS), JP Morgan Chase (JPM), and Merrill Lynch (MER).

VeriFone's Long Journey on the Rehab Trail (PAY)

We noticed a huge surge in activity over at Volume Spike this morning in shares of VeriFone Holdings Inc. (NYSE: PAY). You can thank the company finally giving a positive outlook and its cleaned-up accounting mess that has been a gorilla on its neck.  Verifone makes the point-of-sale terminals used to process credit and debit card transactions which you have likely seen at grocery stores or many other retail outlets.  As you read on, you might even determine that the worst is close to being finished.

Goldman Sachs Cans Department Stores (M, KSS, DDS)

Goldman Sachs is out with a negative call this morning that is a downgrade in the department stores section of the retail sector.  The firm believes that gains of some 30% while companies are still warning ahead or are still very cautious has been too much of a share run-up.  The drop in oil prices may also not be sustainable as Goldman Sachs reiterated its oil target of $149 per barrel.  It also blames a lack of sales being the big issue.  Macy's (NYSE: M) and Kohl's (NYSE: KSS) were both downgraded to Neutral from Buy.  Macy's shares are down about 2.3% at $19.85 and Kohl's is down about 1.8% at $47.95 in pre-market trading.  We have seen no indications nor any trades in Dillard's (NYSE: DDS).

JON C. OGG
August 20, 2008

Goldman Sachs (GS): Oil Headed Back Toward $150

Goldman Sachs (GS) says oil will be back at $149 at the end of the year.

The investment bank reiterated its year-end price forecast of $149 a barrel for U.S. crude oil, and said strong fundamentals were a more important factor than a strengthening dollar, according to Reuters.

Douglas A. McIntyre

24/7 Wall St. Most Overpaid CEO Of The Day: Novatel (NVTL) CEO Peter V. Leparulo

Novatel (NVTL) managed to post guidance that was below expectations. Expectations must have already been poor. The company's stock is off 60% over the last year, and should fall further today.

For the third quarter, Novatel expects a loss of $.03 to breakeven per share, on revenue of $80 million to $85 million. According to Reuters, "Analysts were expecting earnings of 18 cents a share, on revenue of $96.2 million, for the period."

Early-Bird Analyst Upgrades (DLTR, HTX, KLAC, ORLY, TSRA, AUY)

These are some of the early analyst upgrades or positive calls we are seeing this Wednesday in early pre-market hours:

• Dollar Tree (DLTR) Raised to Buy at S&P.
• Hutchinson Telecom (HTX) Raised to Buy at Citigroup.
• KLA-Tencor (KLAC) Raised to Overweight at HSBC.
• O'Reilly Automotive (ORLY) Raised to Overweight at JPMorgan.
• Tessera Technologies (TSRA) Raised to Outperform at FBR.
• Yamana Gold (AUY) Raised to Outperform at RBC.

JON C. OGG
August 20, 2008

Early-Bird Analyst Downgrades (AAP, ALNY, COMV, DISH, DPS, HAS, NATI, NVTL, STEL)

These are some of the early analyst downgrades or negative calls we are seeing this Wednesday in early pre-market hours:

• Advance Auto Parts (AAP) Cut to Neutral at JPMorgan.
• Alnylam Pharma (ALNY) Started as Underperform at Leerink Swann.
• Comverge (COMV) Cut to Neutral at Broadpoint Capital.
• DISH Network (DISH) Cut to Market Perform at Bernstein.
• Dr. Pepper Snapple (DPS) Cut to Neutral at UBS.
• Hasbro (HAS) Cut to Underperform at BMO Capital.
• National Instruments (NATI) Cut to Neutral at Credit Suisse.
• Novatel Wireless (NVTL) Cut to Sell at Piper Jaffray.
• StellarOne (STEL) Cut to Underperform at Baird.

JON C. OGG
August 20, 2008

Microsoft Expanding Linux Efforts With Novell (MSFT, NOVL)

Novell Inc. (NASDAQ: NOVL) got some decent news after Microsoft (NASDAQ: MSFT) expanded its Linux support relationship for interoperability.  If it seems that Microsoft is warming up to Linux and open source, it is at least evidence that the company realizes it has to expand its interoperability in today's world.  Novell will receive $100 million to provide additional resources, training, and support for companies and organizations using mixed-source IT operations.

GM (GM): More Incentives Mean More Job Cuts

GM (GM) has decided to do two things to stimulate sales. One is to offer aggressive incentives on its new cars. The other is to offer substantial warranties on its used cars. Between the initiatives, GM is likely to move inventory, but the cost may be high enough so the the remedy poisons the patient.

GM's US sales are running about 20% behind the pace of last year. The company cannot survive that much longer, so priming the customer pump may be its only alternative.

Saving Fannie Mae (FNM) And Freddie Mac (FRE) Shareholders

A share of Fannie Mae (FNM) goes for $6. Freddie Mac's (FRE) shares are at just above $4. The market caps of the two companies combined is only about $9 billion.

The most recent estimate of the balance sheet and earnings problems at the two agencies is that they will have to raise $100 billion. The quasi-governmental operations have $223 billion in bonds maturing on September 30.

HP's (HPQ) Next Quarter Will Not Be Pretty

Hewlett-Packard's (HPQ) last quarter was hailed as a testament to superior management and intelligent diversification. Much of the growth came from overseas, but that is supposed to be a hallmark of the new American corporation.

Net revenue rose 10% to $28 billion. Operating profit was up 20% to $2.5 billion. But, some of HP's core businesses barely grew at all.

Is Rupert Murdoch Overpaid? Of Course, But Not Really (NWS)

News Corp. (NWS) chairman and CEO Rupert Murdoch's pay fell 14% for 2008 -- before you get out the Kleenex, consider that it still totaled $27.5 million.

Given that shares of the stock is off nearly 35% year to date, investors might wonder whether Murdoch is overpaid at that price. Surely they could have gone and last 65 cents on the dollar on their own. And they're right to wonder about that and, if you think Rupert Murdoch is overpaid, you'll get no argument from me.

China's Economic Stimulus Package Can't Be Real

The term "China economic stimulus package" has to be an oxymoron.

NBC recently made the point that China's economy can no longer be driven hard by exports. They have become too expensive as labor costs and commodities have risen. Some industries are actually cutting jobs.

Media Digest 8/20/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to Reuters, US inflation rose as the housing market continued to be troubled.

Reuters reports that Hewlett-Packard (HPQ) beat Wall St. expectations.

Reuters reports that Ebay (EBAY) will drop some of its listings fees.

Reuters reports that Fed officials said they must be ready to curb inflation.

Asia Markets 8/20/2008 Shanghai Up Over 7% (LFC)(CN)

Shares in Asia were mixed while the Shanghai Composite rose 7.6% to 2,523.

The Nikkei was down .1% to 12,852. Bridgestone fell 4.2% to 1860 Casia was off 3.7% to 1229.

The Hang Seng rose 1.9% to 20,878. China Life (LFC) fell 1.2% to 37.35. China Netcom (CN) fell 2.1% to 20.90.

Data from Reuters.

Douglas A. McIntyre

Starbucks (SBUX): A Good Contrarian Investment

It's been a tough run for contrarians. Badly beaten down companies facing overwhelmingly bearish negative market sentiment have continued to weaken: for now, the bearish masses have been right.

Part of the problem is that many of the financials that seemed cheap suffered from opaque accounting and a lack of transparency. But now there's at least one big contrarian stock that may be poised deliver some real value: Starbucks (SBUX).

Saks (SKS) May Have Overly High Hopes For Its New York Flagship Store

Luxury retailer Saks Inc. (SKS) today reported abysmal results, indicating that higher-end consumers are starting to feel the economic pinch as well. The company is betting that that its flagship Saks Fifth Avenue store in New York is going to help lead the company out of its funk even as Wall Street continues to flounder.

The company had a net loss of $31.7 million, or 23 cents per share, compared with a net loss of $24.6 million, or 17 cents, a year earlier. Revenue fell 3.6 percent to $662 million and same-store sales dropped 4 percent. The results missed Wall Street expectations and the shares are tanking.

H-P Scores a Punch (HPQ)

Hewlett-Packard Co. (NYSE: HPQ) posted earnings of $0.86 EPS and $28 Billion revenues after today's close.  First Call had estimates at $0.83 EPS on $27.41 Billion in revenues.   As far as guidance for next quarter (fiscal Q4), the PC and IT giant put earnings at $1.01 to $1.03 EPS and $30.2 to $30.3 Billion in revenues.  Estimates for the October quarter (also the year-end) are expected at $1.00 EPS on $30.22 Billion in revenues.  Those estimates do not reflect any addition of EDS to the numbers.

The 52-Week Low Club 8/19/2008 (JCG)(CCJ)(FNM)(SIRF)

J Crew Group (JCG) Analyst downgrade. Drops to $24.86 from 52-week high of $52.44.

Cameco Corporation (CCJ) Bad profits. Down to $27.56 from 52-week high of $52.33

Fannie Mae (FNM) Ongoing concerns about shareholders being wiped out. Plunges to $5.75 from 52-week high of $70.57.

Sirf Technology (SIRF) Losing case against Broadcom will not get ITC review. Falls to $1.96 from 52-week high of $30.16.

Douglas A. McIntyre

As Shareholders Bleed To Death, Bank Of America (BAC) Honored For Environmental Commitment

Why any bank which has undermined the value of its shares by poor management and taken billions of dollars in low-cost loans from the Fed would promote it environmental intiative is beyond imagining.

Bank of America (BAC) will be honored for its environmental commitment at a special reception on Monday, August 25, 2008 during the upcoming Democratic National Convention in Denver.

At least shareholders know the bank like Obama.

Barnes & Noble's (BKS) Future Leaves The Building

Barnes & Noble's (BKS) online CEO left the company today. Marie J. Toulantis ran the part of the company on which its future is largely dependent. Call it a metaphor. BKS has to be a major force on the internet, and it is not.

BKS shares are down 25% this year, and it is any wonder? The company's last quarter was pathetic. Barnes & Noble had an operating loss of $6.4 million on $1.158 billion in revenue. The firm no longer has any margins. As long as most of its sales are through stores, that won't change.

Bracing for H-P Earnings: Did Its Dominance Peak? (HPQ, EDS, IBM, DELL)

Traders and investors alike are braced for the long awaited earnings out of Hewlett-Packard Co. (NYSE: HPQ) after today's close.  First Call has estimates at $0.83 EPS on $27.41 Billion in revenues.  Estimates for the October quarter (also the year-end) are expected at $1.00 EPS on $30.22 Billion in revenues.  Please see below for the forward estimates of 2009 because of key developments and issues around the stock.

Carlyle Chairman Retires (IBM)

Private equity giant The Carlyle Group has announced that Lou Gerstner will retire as Chairman of Carlyle and will become a senior advisor to its buyout funds in the U.S., Europe, and Asia.  Carlyle hasn't named a successor, but the effective date will be September 30, 2008.

Gerstner joined Carlyle as Chairman in 2003, after he had served as Chairman of IBM (NYSE: IBM) from 1993 to 2002.  Normally we would not cover issues such as this, particularly as Carlyle is private.  But Gerstner has long been considered as one of the workhorses and more commonly recognized individuals in corporate American leadership roles from the 1990's into this decade.

Jon C. Ogg
August 19, 2008

Motorola's (MOT) US Sales Slammed

Motorola's (MOT) share of the US cellphone market is falling fast. The NPD Group said overall sales of handsets from all manufacturers dropped 13% to 28 million in the second quarter.

According to the AP, "Motorola Inc.'s phones were the most popular, but its share of the units sold dropped to 21 percent, from 32 percent last year."

There has been speculation what Motorola's handset business has an value of zero due to falling revenue and huge losses. The market now has another data point to affirm that.

Douglas A. McIntyre

Energy Watch Part IV: Pipelines (DPM, BGH, APL, AHD, EPD, KMP)

Just looking at the drop in price for common units of pipeline master limited partnerships could lead one to believe the midstream business is going to hell in a handbasket. DPC Midstream Partners (NYSE:DPM) is down 48% from its 52-week high, Buckeye GP Holdings (NYSE:BGH) is down 44%, Atlas Pipeline Partners (NYSE:APL) is down 32%, and Atlas Pipeline Holdings (NYSE:AHD) is down 30%. Even the two largest companies are lower -- Enterprise Products Partners is down 12% and Kinder Morgan (NYSE:KMP) is off 6%.

24/7 Wall St. Day-Trading Alerts (SPLS)(CNFT)(XFML)(JOSB)

According to VSInvestor, several stocks are moving this morning on large volume.

Staples (SPLS) is off 9% on poor earnings. These are notes on China Techfaith (CNFT) hitting an all-time low.

Xinhua Finance Media (XFML) opened up sharply. Jos. A Bank Clothiers (JOSB) sold off on no news.

Douglas A. McIntyre

Annual Inflation Heads Toward 10%

The annual inflation rate in the US will be above 10% by the end of the year. Almost all the signs are pointing that way.

The AP writes "The Labor Department reported that wholesale prices shot up 1.2 percent in July, pushed higher by rising costs for energy, motor vehicles and other products. The increase was more than twice the 0.5 percent gain that economists expected."

What does that mean?