In a reorganization of China's telecom industry, which will change the face of the wireless industry, the country plans to merge two of its largest mobile companies, China Netcom (NYSE: CN) and China Unicom (NYSE: CHU). The new firm will be issued on of the three high-speed wireless licenses that the government plans to grant.
China's two largest phone companies, China Mobile (NYSE: CHL) and China Telecom, will receive the other two contracts.
The news may also be a benefit to handset makers as they rush to offer products for the new 3G networks. Apple (NASDAQ: AAPL) has still not found a home for the iPhone in China.
More competition among carriers will give it a greater chance to strike a good deal. A new market could also give some aid to Motorola's flagging handset sales and to rivals Samsung and Sony Ericsson.
Douglas A. McIntyre is an editor at 247wallst.com.
MOST NOTEWORTHY: Seagate, Nortel Networks and Ann Taylor were today's noteworthy downgrades:
Thomas Weisel downgraded Seagate (NYSE: STX) to Market Weight from Overweight as they believe the company's growth will be more muted given high existing market share and overall industry growth.
Baird downgraded Nortel (NYSE: NT) to Neutral from Outperform citing checks that indicate deteriorating US Enterprise sales in the last few weeks of Q1. The firm now expects companies to guide flat QoQ instead of up and to make cautious 2H08 comments.
Ann Taylor (NYSE: ANN) was cut to Neutral from Buy at Piper to reflect concerns over the LOFT division as well as consumer spending.
OTHER DOWNGRADES:
Citigroup lowered TJX Cos (NYSE: TJX) to Hold from Buy.
WestLB downgraded to Hold from Add Novartis (NYSE: NVS).
Nortel Networks Corp. (NYSE: NT) stock is plummeting this morning after the company reported a fourth-quarter net loss of $844 million, or $1.70 per share. Adjusting for a onetime noncash expense of $1.06 billion related to a deferred Canadian tax asset, NT earned 34 cents per share, but that was still lower than Wall Street's expectation of 44 cents per share. NT executives blamed higher operating costs for the disappointing earnings If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on NT.
After hitting a one-year high of $30.27 last February, the stock hit a one-year low of $10.28 in January. This morning, NT opened at $10.28. So far today the stock has hit a low of $9.67 and a high of $10.28. As of 10:45, NT is trading at $9.76, down 1.69 (-14.8%). The chart for NT looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
A slowdown in growth in the telecommunications equipment industry may result in a joint venture between Motorola Inc (NYSE: MOT) and Nortel Networks Corporation (NYSE: NT), that would have combined sales of about $10B, the Wall Street Journal reported.
The Wall Street Journal also reported that Yahoo! Inc's (NASDAQ: YHOO) board is planning to reject the Microsoft Corporation (NASDAQ: MSFT) bid of $31 per share, feeling that Microsoft would be taking advantage of a deteriorated Yahoo! share price. Sources said Yahoo! will not consider any offer under $40 per share.
Sony Ericsson, a joint venture between Sony Corporation (NYSE: SNE) and LM Ericsson Telephone Company (NASDAQ: ERIC), admitted that its business is weak in India, China, and the U.S. The joint venture has designated those three countries as priorities, the Financial Times reported.
WEB SITES:
According to a source, the Silicon Alley Insider reported that Yahoo! is expected to let go 1,000 employees or more during the week of February 12.
Often taking a look at 52-week low gives a hint as to which sectors are in trouble. But, it also may provide investors a look at shares that could come back under the right circumstances. Bottom fishing sometimes pay dividends.
McClatchy Co. (NYSE: MNI): The Wall Street Journal did a major story on McClatchy last week. Its shares are down over 70%, but the company CEO insists that when weak parts of the economy in Florida and California make a comeback, newspapers will recover, too. There may be some wisdom to the observation, but probably not for McClatchy. Most of the company's newspapers are in median-sized markets and that makes it harder for the firm to have a major presence in the internet ad business. Companies like The New York Times Co. (NYSE: NYT) and Gannett Inc. (NYSE: GCI) with their large internet operations like USAToday.com have a much better chance of offsetting falling print revenue with online sales.
Sandisk Corp. (NASDAQ: SNDK): This tech company finds itself in the wrong place at the wrong time. At just over $33, its shares are down by almost half this year. The company is one of the world's largest producers of flash memory chips and the prices for the products are crashing. The turnaround at the company may come when prices for these chips become more stable because demand is moving up. Sandisk products are a big part of what goes into cell phones, digital cameras, and multimedia players. A bottom on flash prices should bring shares back.
Nortel Networks (NYSE: NT): Supplying infrastructure to the world's big telecom and cable companies used to look like a sexy business. But, Nortel shares are off to $15.20 from a 52-week high of $31.79. Rival Alcatel-Lucent (NYSE: ALU) is doing no better. The build-out of systems like 3G and WiMax is going slower than planned and mergers of big telecom companies have taken some customers out of the picture. The market may begin to improve, but companies with more advanced tech, like Cisco Systems (NASDAQ: CSCO), are likely to benefit.
Douglas A. McIntyre is an editor at 247wallst.com.
Vonage (NYSE: VG) must has 100 people in its general counsel's office. The company only has 1,600 people.
The comment may be fanciful, but the Vonage patent problems are not. Nortel (NYSE: NT) has now become one of a long list of companies to sue the VoIP company, which went public at $17. Vonage shares now trade for $2.
The Wall Street Journal writes (subscription required) that "the patents relate to technology that forms the basis of Internet-based voice service, as well as features such as 911 and 411 calling and click to call, according to Nortel spokesman Mohammed Nakhooda."
Investors in Vonage had hoped that the company's intellectual property problems were behind it. The company has already lost legal actions to several large U.S. telecom companies, including Verizon (NYSE: VZ).
And, Nortel needs to be careful. The Canadian company may be better off with a quick settlement than with a lengthy lawsuit. Vonage is already crippled by lost legal battles and negative cash-flow. On its last balance sheet, the company had $350 million in cash and investments and $275 million in long-term.debt. Payables were $332 million.
Nortel could win the suit and end up with nothing to show for it.
Douglas A. McIntyre is an editor at 247wallst.com.
The holiday season may have just begun, but the earnings season continues. Here are some highlights of this past week's earnings coverage from BloggingStocks:
MOST NOTEWORTHY: Total SA, HLTH Corp, Aflac First Solar and Town Sports were today's noteworthy upgrades:
Citigroup upgraded Total SA (NYSE: TOT) to Buy from Hold following the company's Q3 results. JP Morgan upgraded shares to Overweight from Neutral, as they believe the company's Q3 results underlined the strength of exploration and production growth prospects versus peers.
Friedman Billings raised its rating on HLTH Corporation (NASDAQ: HLTH) to Outperform from Market Perform following the company's proposal to merge into WebMD Health Corp (NASDAQ: WBMD) for a combination of cash and stock.
The firm also added shares of Aflac (NYSE: AFL) to its Top Picks List, as they believe Aflac is the only high quality, defensive growth story in the Life Insurance sector.
CIBC upgraded shares of First Solar (NASDAQ: FSLR) to Sector Outperformer from Sector Performer following the Q3 upside and set a $230 target on the stock.
Banc of America upgraded shares of Town Sports (NASDAQ: CLUB) to Neutral from Sell on valuation as they believe the downside risk is now priced into the stock.
OTHER UPGRADES:
Credit Suisse upgraded Nortel Networks (NYSE: NT) to Neutral from Underperform.
However, Ontario is more than just Canada's financial center. Its abundance of resources and location on Great Lakes have made Ontario a manufacturing powerhouse, including steel production and automobile manufacturing in southern Ontario, and mining and forestry in the north. Toronto is Canada's film and media center, as well as an important tourism destination. Niagara Falls is one of world's most popular tourist destinations. Other Ontario companies the Motley Fool liked include Research in Motion Ltd. (NASDAQ: RIMM), Nortel Networks Corp. (NYSE: NT), and IMAX Corp. (NASDAQ: IMAX).
Research in Motion (RIM), Canada's largest public company, is well know for its BlackBerry smart phones, but it also provides software development tools and produces radio-based modems used in portable devices. The consensus recommendation of analysts surveyed by Thomson Financial is to buy RIM, and has been since April. RIM met analysts' earnings per share estimate when it reported second quarter FY2008 earnings in early October, and Wall Street expects EPS of 62 cents in the third quarter, double the 31 cents actual from a year ago. RIM has a five-year EPS growth rate of 73.5%, easily beating the S&P 500 and the technology sector average. RIM's share price has been climbing since a share split in August, to reach a 52-week high of $128.36 on Tuesday; it opened today at $124.75. Also this week, RIM announced plans to sell the BlackBerry in China, and introduced Facebook for the BlackBerry as well. For more on Microsoft Corp.'s (NASDAQ: MSFT) challenge to RIM and other RIM-related news, see Bloggingstocks' RIM coverage.
Carl Icahn is not targeting Motorola Inc. (NYSE: MOT) for any big shareholder action now. He is not trying to put himself on the board. But, yesterday he once again called for the company to break itself up.
Icahn said that "the company's handheld business could be worth about $10 billion," according to Reuters. This means that Icahn's math could be off, at least for current Motorola shareholders. The company has a market cap of $44 billion. It is hard to see how the firm's two smaller divisions would be worth more than $35 million.
Motorola's network and home mobility division has its set-top box operation and the business that sells infrastructure products for telecommunications. The operation had revenue of $2.5 billion last quarter and operating income of $191 million. Given what has happened to the share prices of competing operations like Nortel Networks Corp. (NYSE: NT) and Alcatel-Lucent (NYSE: ALU), it is hard to imagine that this could be sold for more than one time its $10 billion in annual revenue.
This leaves the company's enterprise mobility business, which does business for government and private networks. The division is in good shape. Last quarter, on $1.8 billion in revenue, the operation had $303 million in operating income. In the June quarter, this part of Motorola grew 41%. But, even if it is worth 3x sales, the $30 billion would bring Motorola's entire value to $50 billion.
MOST NOTEWORTHY: CheckFree (CKFR), Talbots (TLB), SPSS Inc (SPSS), Network Appliance (NTAP) and Pozen Inc (POZN) were today's noteworthy downgrades:
Following FiServ's (NASDAQ: FISV) acquisition of CheckFree, Raymond James cut CKFR shares to Market Perform from Strong Buy and Baird downgraded shares to Neutral from Outperform.
Talbots (NYSE: TLB) was cut to Sell from Hold at Citigroup based on valuation, continued earnings disappointments, and a lack of earnings visibility.
Cowen downgraded shares of SPSS Inc (NASDAQ: SPSS) to Underperform from Neutral citing decelerating growth and poor earnings quality.
Bear Stearns cut Network Appliance (NASDAQ: NTAP) to Underperform from Peer Perform on the negative Q1 pre-announcement. Pacific Crest downgraded shares to Sector Perform from Outperform.
After Pozen (NASDAQ: POZN) received a second approvable letter for Trexima, shares were downgraded by three firms:
To Neutral from Strong Buy at First Albany
To Hold from Buy at Jefferies and Lazard...
OTHER DOWNGRADES:
Oppenheimer downgraded Applebee's (NASDAQ: APPB) to Neutral from Buy.
Gabelli downgraded Boston Beer (NYSE: SAM) to Hold from Buy.
Lehman downgraded Luxottica (NYSE: LUX) and Clorox (NYSE: CLX) to Equal Weight from Overweight.
Thomas Weisel downgraded Nortel Networks (NYSE: NT) to Market Weight from Overweight.
Nortel Networks
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