Goldman Sachs cut its view of U.S. department stores to Neutral from Attractive. Specifically, the broker downgraded J.C. Penney (NYSE: JCP) and Nordstrom Inc. (NYSE: JWN) to Neutral from Buy after its commodity team upped 2008 oil price forecasts to $149 a barrel. Still, Goldman upgraded TJX Cos. (NYSE: TJX) to Buy from Neutral and removed Kohl's Corp. (NYSE: KSS) from its conviction-buy list in favor of Wal-Mart Stores Inc. (NYSE: WMT).
By now I'm getting confused with all the deals Apple Inc. (NASDAQ: AAPL) is signing with wireless operators to sell the iPhone in different countries around the world. I believe the past two weeks we heard of at least two deals, including one with a S.Korean company. Today, French wireless operator Orange said it has signed a deal to sell its iPhone in the Middle East, Africa and several European countries. Orange will be the exclusive iPhone provider in Belgium and Romania. It seems that by now Apple's got the world covered.
General Motors Corp. (NYSE: GM) is apparently considering launching its Chevrolet brand in South Korea. In its attempt to stay ahead of fast growing Toyota (NYSE: TM), GM will try to capture a larger share of S.Korea's growing market for imported cars.
According to internal company and agency documents, the Wall Street Journal reported that the FAA is investigating into why AMR Corporation's (NYSE: AMR) American Airlines ordered mechanics to skip specific safety instructions to detect damage to planes from potential lightning strikes.
Yahoo! Inc (NASDAQ: YHOO) is trying to quickly put the finishing touches on a search advertising deal with Google Inc (NASDAQ: GOOG) as billionaire Carl Icahn launches a proxy fight for control of Yahoo's board, according to the New York Post. Yahoo! hopes to announce a deal with Google to create an open platform system within the next week, two inside sources said.
The New York Post reported that a partnership of MGM Mirage (NYSE: MGM) and investment company Dubai World may seek to buy the Drake Hotel site from developer Harry Macklowe. If a deal is reached, MGM and Dubai World would assume $580M in defaulted debt and interest, inside sources said.
Google, Inc. (NASDAQ: GOOG)'s market share in April increased once again, going from 67.25% to 67.90% of all internet searches performed in the U.S. Sounds like a tiny increase, but we're talking hundreds of millions of additional searches here. Even a tenth of 1% is a major increase.
Google also earned the distinction today of being named the No. 1 most-visited site by ComScore, topping Yahoo for the first time.
Both Microsoft Corp. (NASDAQ: MSFT) and Yahoo, Inc. (NASDAQ: YHOO) saw decreases in search market share due to Google's continued dominance. April data from internet traffic research firm Hitwise indicated that Google continues to dominate U.S. internet searches, while being responsible for the lion's share of connecting web searchers with specific industries as well.
For example, 31% of of web traffic and health and medical sites was supplied by Google, as well as 23% of web traffic to travel websites. This alone demonstrates the power Google has over the web. Some industries would see huge decreases in traffic if Google were to go away. In effect, Google's web search dominance has a very broad and meaningful over entire industries on the web, including shopping and classifieds, news and media, entertainment and others.
IAC/InterActiveCorp (NASDAQ: IACI) needs to build up its little Ask.com franchise before it is spun out in a breakup of the parent company. Ask.com is an "also ran" in the search engine fight which includes Google (NASDAQ: GOOG), Microsoft (NASDAQ: MSFT) and Yahoo! (NASDAQ: YHOO).
In an attempt to turn a loser into a contender, IACI is buying Lexico, which owns Dictionary.com, Thesaurus.com and Reference.com. According toThe Wall Street Journal, "Lexico sites drew about 15.6 million unique U.S. visitors in March, according to comScore Inc., compared with 55.4 million for Ask and an array of affiliated sites."
Even if the price of the new addition is low, the Lexico sites are not likely to do much good for the Ask.com franchise. It has already fallen so far behind the three search leaders that it almost certainly cannot catch up. Internet users have already set their preference in this part of the online market. Owning a dictionary site is not going to help that.
IACI's Ask.com can't come from behind and buying additional reference sites is not going to change that.
CBS Corp. (NYSE: CBS) announced Thursday it has signed a deal to buy CNet Networks Inc. (NASDAQ: CNET) for $11.50 a share in cash. CNet operates not only the CNET site, but also ZDNet, GameSpot.com, TV.com, mp3.com and others. The deal values CNet at about $1.8 billion and push CBS to among the 10 most popular Internet companies in the United States. CBS shares are down 2.9% in premarket trading while CNET shares are of course up over 42% to $11.31.
IAC/InterActiveCorp (NASDAQ: IACI)'s Ask.com has bought Lexico Publishing Group LLC, the parent of Dictionary.com, Thesaurus.com and Reference.com among other sites. Earlier this year, Lexico already agreed to be sold to Answers Corp (NASDAQ: ANSW), but the latter couldn't secure the necessary funds. Now, Lexico sold itself to Ask.com, for an undisclosed amount, although the number people are throwing around is $100 million. Could this acquisition help IACI gain -- even a little -- on market leader Google?
United Airlines (NASDAQ: UAUA) and Continental Airlines Inc. (NYSE: CAL), dropping ideas of a merger, are now talking about forming an alliance to still gain some benefits of working together. United appears relentless in its attempts to help its bottom line through a merger or an alliance. While talking to Continental about an alliance, it is still negotiating with US Airways Group (NYSE: LCC).
Staples (NASDAQ: SPLS) stepped up its hostile campaign to acquire Dutch office supplies group Corporate Express (NYSE: CXP), lifting its offer to 8 euros ($12.43) a share, up from 7.25 euros previously and taking its bid directly to shareholders. CXP shares were 6% higher.
In its attempt to shore up its balance sheet, American International Group Inc. (NYSE: AIG) priced an offering of 171.1 million common shares at $38, valuing the deal at $6.5 billion. On Monday AIG also said it priced an offering of 72 million equity units at $75 each, a deal value of $5.4 billion.
LDK Solar Co. Ltd. (NYSE: LDK) shares are down over 6% in premarket trading after the Chinese solar energy company reported first-quarter results late Monday. While earnings topped forecasts and the company raised its revenue outlook for the year, raw material costs caused it to cut its gross margin forecast.
Sirius Satellite Radio Inc. (NASDAQ: SIRI) also reported results after closing bell Monday. While the results are important, they don't have the weight they would had the Street not expected Sirius to complete the purchase of larger rival XM Satellite Radio Holdings Inc. (NASDAQ: XMSR). Both companies reported more losses, although Sirius narrowed its loss, while at XM, the loss increased. This may be the reason why StreetInsider says that Merrill Lynch upgraded Sirius from Sell to Neutral. Interestingly, though, XM shares climbed Monday following its results, while SIRI shares are down in premarket trading following its.
The BBC reported on Saturday that demands are being made for careful government scrutiny of any potential alliances between Internet giants Yahoo Inc. (NASDAQ: YHOO) and Google Inc. (NASDAQ: GOOG).
According to the BBC report, a coalition of activist groups including the Black Leadership Forum, the League of Rural Voters, the National Black Chamber of Commerce, and the American Agriculture Movement, is concerned that allowing any kind of unregulated working relationship between Yahoo and Google could put Internet neutrality in serious jeopardy. Gary Flowers, representing the Black Leadership Forum, is quoted by BBC as stating, "We all suffer in such mega mergers." He further stated that the nature of such a partnership could "condense competition, increase prices and limit new business opportunity on the Internet."
The BBC indicates that the Justice Department is already in the process of reviewing joint operation trials that the two companies have engaged in. However, the department seems to be down playing the citizen coalition's demands, citing that the two companies have no working agreements to address. At a recently held Google shareholders meeting the matter was addressed by Chairman Eric Schmidt who stated, "If there were a deal [with Yahoo], we would anticipate structuring the deal to address the antitrust concerns that have been widely discussed."
I would tend to echo the valid concerns of Gary Flowers: too much control over Internet communications by any one particular entity or alliance would inevitably be bad for all of us. I think the matter needs to be taken to a broader base of examination than the justice department alone can provide.
Apple Inc. (NASDAQ: AAPL) was the big winner among only four that had appreciated. The following indicates commonly used metrics for tracking and comparing stocks.
Reviewing the stocks in order of lowest to highest P/E ratio (TTM):
It is interesting to note that only two of the eight have a below market P/E ratio, while only two are average. On the other hand, four are double the average and beyond, which leads me to believe the overall market consensus is that it is still very early in the game for these stocks and their futures are yet to be determined. The P/E ratios of the four are also the most volatile as are the stock prices.
Microsoft Corp. (NASDAQ: MSFT) will soon further into the world of online video as it has introduced software that will allow customers to watch online videos and chat about them in real-time. Called Messenger TV, the new service will combine Microsoft's Windows Live instant messaging program with an integrated video player. Windows Live Messenger, though, still is not the world's largest instant messaging platform. That honor belongs to AIM, one of AOL's more successful products ever.
Microsoft's goal in introducing the new instant messaging program with integrated video is to get its customers talking about the videos they are watching, as well as allowing them to watch and share clips from such companies as MTV, Sony BMG and EMI Group, some of the largest music companies on the planet.
Is this yet another attempt by Microsoft to try and "catch the wave" of online video usage? If that is its thought, it's already missed the boat. Google, Inc. (NASDAQ: GOOG)'s YouTube is where online video is already at, so this new Messenger TV product needs to offer something new and compelling. Microsoft will be rolling out this new service in Europe first, though, as there are 95 million users of Windows Live on that continent already -- the lion's share of the company's total base of 240 million customers.
One of the messages out of the Google (NASDAQ:GOOG) shareholder meeting was that management plans to make more money on huge video-sharing site YouTube. Without going into detail, the search company said it would bring out sets of software tools which would make it easier for marketers to use the site more effectively.
According toReuters, Eric Schmidt, the company's CEO "said getting the video sharing site to make money is the Web search company's top priority for the year." It is a nice promise, but it is hard to see how it will work.
Unlike new video sites including Hulu, a premium content web destination used by the large media companies to showcase their video, most of the YouTube content is posted by the ordinary citizen. The clips are primarily short and of poor quality. For some time, one of the most popular videos on YouTube was "The Farting Preacher." That may not be the kind of content big marketers find appropriate to use to draw new customers.
YouTube's problem is not its size. It is the largest video site in the world, based on visitors. But, it is also a website based on a community of people who see its as a place to homestead with the own content. Advertisers may never be comfortable with that.
After Microsoft Corp. (NASDAQ: MSFT) walked away from a $40+ billion dollar deal with Yahoo, Inc. (NASDAQ: YHOO) this past week, competitor Google, Inc. (NASDAQ: GOOG) was very, very relieved. After all, a combined Micro-Hoo would have been a significant competitor (in a best-case scenario) to Google. To help dissuade both parties to make a deal, Google ran a two-week test on Yahoo! to supply the competitor with its own advertising system. The test went well.
Now that Yahoo! has proved that is could one day dump its search technology and outsource that piece of its business to Google, Google executives are looking for that exact scenario. They believe it will help prevent another attempt by Microsoft to purchase Yahoo! in the future. They are probably right -- if Google were to become one of Yahoo!'s largest partners, there would be issues with Microsoft buying Yahoo! now or in the future, from a regulatory perspective.
Google co-founder Sergey Brin said that "We have been talking to Yahoo and we are very excited to be working with them ... we share a lot of values with them" in his remarks at yesterday's annual Google shareholder's meeting at Google's Mountain View, Ca. headquarters. Brian added that a potential deal with Yahoo! was "not about scuttling (the deal)." Hogwash -- I say that was exactly why the Google-Yahoo! test was performed. Look for a Yahoo!-Google search advertising partnership in the very near future, folks.
Stock futures were once again lower this morning, setting up stocks for a sharp decline after AIG reported a big $7.8 billion loss and oil set a record above $125 a barrel. With credit crunch concerns resurfacing and inflation worries on investors' minds, futures point to heavy losses today.
On Thursday, U.S. stocks ended higher despite another surge in oil prices following better-than-expected April sales reports from many retailers including Wal-Mart and Costco. The Dow industrials ended 52 points, or 0.41%, higher, the S&P 500 rose 5 points, or 0.37% and the Nasdaq Composite rose 12 points, or 0.52%.
Without much economic news set for today except for the March U.S. trade gap, investors will focus on AIG's results and their implication on the financial and credit market as well as on oil prices.
American International Group (NYSE: AIG) reported a quarterly $7.8 billion loss after the market close Thursday. AIG also said it will raise $12.5 billion in the coming months as its capital base has deteriorated due to the crisis in the credit markets. Shares of AIG have declined over 7.2% in premarket trading, but the real affect of its results can seen across the financials as fears have resurfaced once again about the impact of the credit crunch on financial firms.
As if that was not enough, adding to the negative sentiment is oil. Crude oil for June delivery climbed as much as $1.43, or 1.3%, to $125.12 a barrel. While prices have retreated somewhat, they remained near $125 at around $124.8 a barrel. For the week, oil has risen 7.4%, making Wall Street nervous about inflation. Mind you, 55%of 372 petroleum industry executives surveyed by KPMG LLP said they think the price of a barrel of crude will drop below $100 by the end of the year.
After hitting a one-year high of $747.24 in November, the stock hit a one-year low of $412.11 in March. GOOG opened this morning at $586.20. So far today the stock has hit a low of $582.05 and a high of $589.30. As of 12:20, GOOG is trading at $585.23, up 6.23 (1.1%). The chart for GOOG looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $540 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just one week as long as GOOG is above $540 at May expiration next Friday. Google would have to fall by more than 7% before we would start to lose money. Learn more about this type of trade here.
GOOG hasn't been below $540 since rising sharply in April and has shown support around $579 recently. This trade could be risky if the economy continues to weaken and the stock reverses course, but even if that happens, this position could be protected by the support the stock might find around $540, where it found some support after its initial climb after its last earnings release.
As Tom mentioned earlier, Sprint Nextel Corp. (NYSE: S) is merging its next-generation wireless assets with Clearwire Corp. (NASDAQ: CLWR) to form a new joint partnership that -- finally -- will create a high-speed wireless internet network that covers most of the U.S. Although Sprint's Xohm service has been decried by investors as a "non-core" asset weighing down Sprint's pocketbook, it still has enormous potential in the near future. Sprint's not in terribly good shape -- but it does have vision. Of course, vision and execution are two different things.
So, it is pleasing to think that if the new Sprint-Clearwire venture can build out is national presence successfully and capture customers tired of limited high-speed internet service, the world will be its oyster. Of course, other companies are contributing to the venture as well, including Google, Inc. (NASDAQ: GOOG). Why would Google want to put money into this? Because this could be Google's most important investment ever.
Bypassing the telephone and cable companies that have a stranglehold on most of the high-speed internet business in the U.S. has long been the dream of Google. It doesn't want a middleman in the way of it connecting consumers and businesses with the information they seek. Although Google wasn't successful in the recent FCC radio auctions (maybe by design), finding a way to provide internet service directly to its customer base would give Google on a much more powerful perch than it has even today. Google could even buy the new Clearwire partnership outright once it's established.
I think they're starting to get giddy in the Google board room.
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Monday, May 19
About a month ago I posted 
One of the messages out of the 
After 
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Just how high will U.S. gasoline prices rise?
Nordstrom and Kohl's post smaller-than-expected Q1 profit declines
Oil hits record $127.43 on supply concerns, raised Goldman forecast
