Many Wall Street analysts thought that when Microsoft (NASDAQ: MSFT) lost its bid for Yahoo! (NASDAQ: YHOO) that it would take the $45 billion it was going to spend and buy other online companies.
Think again. Microsoft's management says it is not so. According to the FT, "Steve Ballmer, chief executive, scotched talk that Microsoft would turn to a `plan B' of other acquisitions to boost its online presence." Ballmer feels that buying more internet companies will not improve its share of the search market. He is not simply after more pageviews.
The news is probably disappointing to several large online companies. AOL, Facebook, Monster (NASDAQ: MNST), and Digg might all have been part of a Microsoft plan to improve the size of its presence on the web.
The Microsoft comments send another message. Search is important. Display advertising is not. Search is an efficient way to make money. Display advertising's best growth years are behind it.
If Ballmer is right, the online world is about to go through a major upheaval.
Douglas A. McIntyre is an editor at 247wallst.com.
Auction-rate securities were supposed to be cash equivalents. Individuals and companies could move in and out of them in a day. The financial instruments have existed since 1985. In an auction, any imbalance in securities bought and sold were picked up by banks and brokerages and sold at the next event. These auctions went on as often as several times a week.
The problem with the market is that when banks started to run low on money, they pulled their commitments to run the auctions, the market fell apart, and the securities do not trade. Because they are illiquid, their values are falling.
Many companies put cash into auction-rate paper to get a slightly higher yield than with government securities. The firms even put the money on their balance sheet as cash equivalents. Now that practice is haunting them.
Several technology firms are stuck with these investments. According toThe Wall Street Journal, Monster (NASDAQ: MNST) had $357 million of this paper at the end of last year. Palm (NASDAQ: PALM) had almost $75 million at the end of February. The companies are going to have to write-down some of the value of this capital which will affect their earnings.
The problem cannot really be blamed on the companies. The market for he paper is over 20-years-old and has functioned like clockwork until recently. It does raise the specter of lawsuits against the banks and brokerages who made the market. They positioned these securities as cash and then pulled the plug on the auctions.
It is one more headache for financial companies in trouble, but in this case, they probably deserve it.
Douglas A. McIntyre is an editor at 247wallst.com.
MOST NOTEWORTHY: Priceline.com, Monster and Internap were today's noteworthy downgrades:
Susquehanna downgraded Priceline.com (NASDAQ: PCLN) to Neutral from Positive as they believe upside may be difficult given the macro environment, competition, and currency headwinds.
JP Morgan lowered Monster (NASDAQ: MNST) to Neutral from Overweight following the company's expectations for higher 1Q08 operating expenses.
Internap (NASDAQ: INAP) was downgraded by Merriman to Neutral from Buy as they believe upside will be limited until the company can complete its integration of the VitalStream CDN acquisition.
If I had $61 million in cash, I think I could do much better with it than Monster Worldwide (NASDAQ: MNST). That's how much the company shelled out for Affinity Labs, which got its start last year.
In fact, the company says it is in the "development stage" and has about one million registered users. So yes, I guess Monster is expecting a monstrous number of job listings to come from this deal (at least I hope so).
OK, what is Affinity all about? Basically, it's a network of sites that cater to certain professions and vocations, such as PoliceLink, FireLink, GovCentral, and so on.
True, these sites have social networking features, such as profiles, photo sharing, and videos. Yet, the technology seems fairly generic.
But keep in mind that the founder of Affinity, Christopher Michel, sold Military.com to Monster.com back in 2004. That site is a thriving community with more than 10 million members.
So perhaps Monster is trying to snag Michel to get his social networking credentials. But, it sure does look like a hefty price tag.
In yesterday's trading, Monster.com's stock was down 4% to $27.73.
MOST NOTEWORTHY: Gen-Probe, Monster Worldwide, LabCorp and Quest Diagnostics were today's noteworthy initiations:
Deutsche Bank initiated shares of Gen-Probe (NASDAQ: GPRO) with a Buy rating and $78 target and expects the company's broad product portfolio in Clinical Diagnostics and Blood Screening to drive growth.
CIBC initiated Monster Worldwide (NASDAQ: MNST) with a Sector Performer rating, as they believe their macro concerns are more important than the company's intermediate-term prospects and its position within the global recruiting market.
William Blair views the valuation of LabCorp (NYSE: LH) as compelling given the company's growth outlook. The firm started shares off with an Outperform rating.
William Blair also initiated Quest Diagnostics (NYSE: DGX) with a Market Perform rating, and prefers a wait-and-see approach as the company's diversification strategy unfolds.
Lately, Monster Worldwide Inc. (NASDAQ: MNST) has scared away investors. This is despite a bull run for mega internet franchises like Google Inc. (NASDAQ: GOOG) and Amazon.com (NASDAQ: AMZN). Yet Barron's thinks that Monster can roar again.
No doubt, the company has some serious issues. For one thing, the economy appears to be slowing down. Also, competition in the sector is fierce, with players like Indeed.com and Dice (NYSE: DHX) fighting for every dollar.
But it looks like the bad news is baked into the stock already. Keep in mind that Monster trades about 20 times the projected profits for 2008. Additionally, Monster has been building out its global footprint, such as in Europe and Asia. And there are no shortage of buyout suitors, like Google, News Corp. (NYSE: NWS), and Microsoft Corp. (NASDAQ: MSFT).
What's more, Monster owns 44.4% of ChinaHR.com, which is the #2 jobs site in China. In light of the crazy valuations of Chinese IPOs, this could be a highly valued asset.
Monster Worldwide Inc. (NASDAQ: MNST) shares have been slipping today after a Wachovia Capital Markets analyst downgraded the stock to Market Perform from Outperform. The broker cited a sluggish domestic economy and fewer recruitment advertising. If you think this stock won't be rising too far in the coming months as a result of this downgrade, then it could be a good time to look at a bearish hedged play on MNST.
This stock has been sharply falling since the beginning of the year and hit its 52-week low of 32.37 in mid-September. This morning, MNST opened at $35.15. So far today the stock has hit a low of $35.00 and a high of $38.85. As of 11:20, MNST is trading at $35.53, down $0.28 (-0.8%). The chart for MNST looks neutral but improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider a December bear-call credit spread above the $45 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. This particular trade will make a 5.3% return in 11 weeks as long as MNST is below $45 at December expiration. Monster would have to rise by more than 26% before we would start to lose money.
MNST has not been above $45 since June, and has shown some resistance around $37 recently. This trade could be risky if the company's earnings (due out in late October) disappoint, but even if that happens, this position could be protected by the resistance the stock formed between $40 and $45 in July.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: At publication time, Brent neither owns nor controls positions in MNST.
MOST NOTEWORTHY: Monster Worldwide, Business Objects, Arcelor Mittal, Walgreen and Sealy Corp were today's noteworthy downgrades:
Wachovia downgraded shares of Monster Worldwide (NASDAQ: MNST) to Market Perform from Outperform citing increased risk of an economic slowdown and execution issues in its N.A. Careers segment.
Credit Suisse downgraded shares of Business Objects (NASDAQ: BOBJ) to Neutral from Outperform on valuation with shares above their $46 target.
Banc of America downgraded Arcelor Mittal (NYSE: MT) to Neutral from Buy on valuation. The firm also downgraded Walgreen (WAG) to Sell from Buy, as they see further downside following the Q4 miss and believes the problems in Q4 are company-specific and not industry-wide.
Citigroup downgraded shares of Sealy Corporation (NYSE: ZZ) to Sell from Hold following the Q3 results, as they believe Sealy faces increased competitive pressures at the high end of the market where the best margins are derived.
OTHER DOWNGRADES:
Goldman Sachs removed Cisco Systems (NASDAQ: CSCO) and Nucor (NYSE: NUE) from its Conviction Buy List.
British bank Barclays PLC (NYSE: BCS) withdrew its takeover offer for ABN Amro Holding NV (NYSE: ABN) on Friday, saying not enough shareholders tendered their shares. This leaves a consortium led by Royal Bank of Scotland PLC in position to buy ABN Amro in a deal worth €70.5 billion (US$99.9 billion), the largest takeover in the history of the financial industry.
Yahoo! Inc. (NASDAQ: YHOO) shares are up over 2.2% in premarket trading after Alibaba.com Corp., a unit of China's Alibaba Group, which is partly owned by Yahoo! won approval from the Hong Kong Stock Exchange to sell up to $1 billion worth of shares in its long-anticipated IPO.
The U.S. attorney in Brooklyn is investigating the collapse of two mortgage-related Bear Stearns (NYSE: BSC) hedge funds whose failure this summer cost investors an estimated $1.6 billion, according to the Wall Street Journal. The criminal probe is in the early stages and has yet to generate subpoenas.
Spring Nextel Corp. (NYSE: S) shares are up over 2% in premarket trading after the Wall Street Journal reported it has quietly launched a hunt for a successor to CEO [subscription] Gary Forsee amid investor pressure. The board hopes to name a new leader by early December.
Alcoa Inc. (NYSE: AA) announced yesterday it would take charges of $845 million as it closes in on the sale of two businesses - packaging and consumer products, and automotive castings - enabling it to focus on new growth opportunities.
Rio Tinto (NYSE: RTP) shares are up nearly 1.5% in premarket trading despite being downgraded to Hold from Buy by ABN Amro, mostly on valuation. Wachovia Securities downgradedMonster Worldwide, Inc. (NASDAQ: MNST) to Market Perform from Outperform, citing recent evidence of a slowdown in its North America Careers division. Walgreen Co. (NYSE: WAG) was downgraded to Sell from Buy at Banc of America Securities.
On August 16th, Symantec Corporation (NASDAQ: SYMC) informedMonster Worldwide, Inc. (NASDAQ: MNST) of a thread of malicious software, called Infostealer.Monstres, which uploaded 1.3 million entries with personal information from a remote server. The information contained on this server was limited to names, addresses, phone numbers and email addresses.
It took Monster Worldwide five days to comment on the situation. "Regrettably, opportunistic criminals are increasingly using the Internet for illegitimate purposes," the company said in a statement Wednesday. The company is in the process of reaching out to its users and law enforcement on this issue.
Now, one might quickly say, "five days is a long time to keep quiet about this," but you'd be mistaken. Take a look at a few of the recent security breeches and how fast the response has been from corporations:
Back on June 17th, 2005, MasterCard Incorporated (NYSE: MA) announced the information from 40 million credit cards "may" have been stolen. According to CardSystems, a third party processor of payment data, the credit card theft possibly occurred late last month, CNet.com reported. The company continued to say, "It identified a 'potential security incident' on Sunday, May 22nd and called the FBI the next day.
CNBC's Charlie Gasparino reported earlier this month that a 'major identity-theft incident' occurred at Merrill Lynch & Co., Inc. (NYSE: MER). According to his sources, the device stolen from Merrill's corporate offices included personal information, including Social Security numbers, of nearly 33,000 employees. Gasparino said the incident allegedly occurred two weeks ago, but Merrill is now "only getting around to telling people."
Massachusetts-based TJX Companies, Inc. (NYSE: TJX) reported on the week of January 15th than an "unauthorized intruder" gained access to its systems in mid-December, taking 45.6 million credit card and debt card numbers over a period of 18 months.
Monster Worldwide should be applauded on its immediate response on the matter. While the data stolen did not include credit card numbers or social security numbers, people need to be know what is happening with the information they hand out to websites.
For hundreds of thousands of eager job hunters out there, one of the quickest way to get their resumes out to perspective employers is using the online job site from Monster Worldwide (NASDAQ: MNST), Monster.com.
It all seems easy enough; just post your resume and wait for the job offers to roll in. Well, it has been discovered that hackers have cracked into the site's database in order to garner personal information that could help them tailor targeted "phishing emails" to the site's users.
"Phishing" is a long running problem for unsuspecting internet users, where users get e-mails -- seemingly from respected companies -- that convince them to log into various sites and turn over personal information. The most lucrative phishing programs come to users from sites pretending to be bank institutions, or large internet sites such as eBay.com. These try to get the users to log onto the sites and update passwords, or something similar.
Five insiders bought $592.7K in Orbitz Worldwide Inc's (NYSE: OWW) stock at per-share prices ranging from $9.55 to $10.10, reported Barron's Online's (subscription required) "Inside Scoop" column.
The Financial Times (subscription required) reported that General Electric Company (NYSE: GE) is believed to be considering the sale of Lake, its Japanese consumer finance subsidiary.
According to security company Symantec Corporation's (NASDAQ: SYMC) blog, there is a new Trojan called "infostealer.monstres" which is attacking online recruitment site Monster.com (NASDAQ: MNST).
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Before the bell: Waiting for jobs report, futures
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