MOST NOTEWORTHY: Sears Holding, Reuters Group and Shire Plc were today's noteworthy downgrades:
Goldman downgraded shares of Sears Holding (NASDAQ: SHLD) to Sell from Neutral as they expect continued share loss and profit pressures in this macro environment.
ABN Amro lowered its rating on Reuters Group (NASDAQ: RTRSY) to Sell from Hold as they believe the credit crisis will impact the company's banking profitability.
Shire Plc (NASDAQ: SHPGY) was downgraded to Neutral from Buy at Merrill. The firm sees limited upside to 2008 earnings.
In a step toward expanding its reach into China, UCBH Holdings Inc (NASDAQ: UCBH) has acquired a full stake in Shanghai-based Business Development Bank in a deal valued at $205M, the Wall Street Journal reported.
According to "people familiar with the plan," Amgen Inc. (NASDAQ: AMGN) may sell its Japanese unit in an effort to help cut global costs due to a slump in sales and lower earnings forecast, Bloomberg reported.
Next year Nestle USA will sell Jamba Inc's (NASDAQ: JMBA) Jamba Juice at stores in eight states in the western U.S., according to the Wall Street Journal.
Last May Canadian information provider The Thomson Corporation (NYSE: TOC) bought Reuters Group Plc (NASDAQ: RTRSY) for GBP8.7B. While the deal was beneficial to Reuters, the credit crunch could have a severe impact on its bottom line over the next few years, the Wall Street Journal's "Heard on the Street" said.
Jeffrey Zucker, General Electric Company's (NYSE: GE) NBC Universal media unit would be interested in DreamWorks SKG if it were to become available, Bloomberg reported.
CNN Worldwide, a part of the Time Warner Inc. (NYSE:TWX) franchise, is expanding its staff of correspondents by 10% as it looks to increase its original content. The investment is said to be under $10 million and will add about 16 correspondents to its staff of 150.
About two months ago, CNN announced it was abandoning the relationship with Reuters Group PLC (NASDAQ:RTRSY) and would instead bolster its own news capabilities. The idea is to capture more advertising by owning the content as the content can simultaneously be pushed out over multiple distribution platforms.
What is interesting here, is that the focus is in the United Arab Emirates, where CNN operates CNN.com Arabic. It will use some of the investment for a digital production unit in London, as well as to increase its staff in Hong Kong. Mexico City and Johannesburg. Additional staff, and news operations are being planned in Belgium, Poland, India, Afghanistan, Nigeria, Kenya, Malaysia, the Philippines, and Vietnam.
Reuters (NASDAQ:RTRSY) has a blog section at the bottom of most business stories at Reuters.com. It is called Business Blog Posts, and it is powered by Blogburst. Blogburst is part of blog syndication service Pluck. And, Reuters is one of Pluck's owners.
Complicated? Yes.
The business blogs that Reuters runs are mostly small, one-person operations like Phil's Stock World and Captain Currency. Some, like The Kirk Report and Bill Cara, are well regarded. But, Reuters does them a disservice. It keeps the traffic for their content when it runs on Reuters.com. So, Reuters gets the ad revenue on those pages. The bloggers get their names on Reuters, and a link back to their sites, which is probably rarely used.
It is interesting to note that none of the big business blog sites like SeekingAlpha or Ticker Sense run in the Reuters program. They understand that the deal is good for Reuters and bad for the blogs. They aren't prepared to let Reuters compete with them for eyeballs using their own blog content.
It is a shame that Reuters has handled bloggers this way. Many other media outlets like WSJ.com and TheStreet.com comment on blogs but send traffic to the bloggers. Reuters has decided not to give the little guy a leg up.
Douglas A. McIntyre is a partner at 24/7 Wall St. which was approached about the Reuters program and turned the company down.
MasTec Incorporated (NYSE: MTZ) was upgraded to Buy from Accumulate at Think Equity and to Buy from Hold at SMH Capital on valuation following yesterday's sell-off.
JP Morgan upgraded shares of Cognos Incorporated (NASDAQ: COGN) to Overweight from Neutral citing solid end demand, expanded sales capacity, indications that C8 adoption should see an uptick, and the Applix Inc (NASDAQ: APLX) acquisition.
Forest Laboratories Inc (NYSE: FRX) was upgraded to Buy from Hold at Jefferies, as the firm believes Forest's victory in the Lexapro patent case eliminates a major overhang and returns the focus to the company's pipeline.
Lehman upgraded shares of Reuters Group (NASDAQ: RTRSY) to Overweight from Equal Weight to reflect benefits from the company's merger with Thomson Corporation (NYSE: TOC).
Thornburg Mortgage (NYSE: TMA) was upgraded to Sector Perform from Underperform at RBC Capital Markets.
CIBC World Markets upgraded EDO Corporation (NYSE: EDO) to Sector Outperformer from Sector Performer.
Bernstein upgraded shares of Rio Tinto (NYSE: RTP) to Outperform from Market Perform and shares of Anglo American (NASDAQ: AAUK) to Market Perform from Underperform.
In a sign of the increasing importance of high-end financial blogs, Reuters Group Plc (NASDAQ: RTRSY) is starting a new network of the sites. Or, it could be that the Reuters business development people have down time because of its upcoming purchase by Thomson Corp. (NYSE: TOC).
The offer that Reuters is making to a number of high-end blogs is that it will link to the participating sites from Reuters.com, offer free access to selected Reuters Headlines (RSS or Headline Wizard) and Reuters Video Player to publish Reuters News, and get 30% of an advertising program that the big financial services company will manage.
In return, each blog agrees to execute contracts with comScore and NetRatings to assign its traffic to Reuters.com. NetRatings ranks Reuters.com as the No.7 financial website with unique visitors of 6.1 million in May.
Reuters may be trying to match blog initiatives at media outlets including FT.com, WSJ.com, and AOL.com.
Either Reuters has a very high regard for financial blogs or it needs to pump up its audience ratings.
Disclosure: 24/7 Wall St. was approached by Reuters about this opportunity.
Douglas A. McIntyre is a principal at 24/7 Wall St.
Every week, there seems to be yet another mega M&A deal. It's not just in the US but across the world. Yes, everyone is going ga-ga for M&A.
And, according to a recent report from Bloomberg, the stats are off the charts. So far this year, M&A volume has surged 60% to $2 trillion. Keep in mind that the same period last year was also a record.
So who is the leader in the space right now? It's the pioneer of leveraged buyouts, KKR. The firm has racked up about $118 billion in deals.
There has also been a surge in strategic buyouts. For example, Thomson is buying Reuters (NASDAQ: RTRSY), HeidelbergCement is making a bid for Hanson Plc, and Barclays (NYSE: BCS) is trying to acquire ABN Amro Holding NV.
Although, as we go into the summer months, things will probably slow down. But, I'm sure things will rev up quickly by the last part of the year. Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
The Thomson Corp. (NYSE: TOC) locked up its deal to buy Reuters (NASDAQ: RTRSY) for $17.2 billion. The combination gives the new entity 34% of the global financial services information market. Bloomberg has 33%.
The Wall Street Journal said that the deal may face regulatory problems [subscription required]: "The agreement sets the stage for a long battle with regulators to win clearance for a combination that would unite the second- and third-largest providers of financial news and data, behind Bloomberg LP, of New York." Assuming that those can be overcome, one of the losers may be Dow Jones & Co., Inc. (NYSE: DJ). While it still has a tremendous presence in print with The Wall Street Journal, its Dow Jones Newswire terminals may have greater competition. So might the online WSJ.com, which already vies with Reuters online news service. Thomson has products that could improve a Reuters offerings.
Because Dow Jones is nowhere near as large as the new entity, it might find it difficult to match the resources of its competitors, including the number of journalists, sales forces, and completeness of content. Dow Jones had a financial terminal business in Telerate, but it sold that business a decade ago.
If Dow Jones does not take an offer from Rupert Murdoch, it is left with an operation that has relatively small margins that may get even smaller as the print business shrinks.
The company founded by New York Mayor Mike Bloomberg -- and my former employer -- is the 1,000 pound gorilla in the business data market. It has gained marketshare at the expense of both Reuters and Dow Jones & Co. (NYSE: DJ) for years.
Bloomberg and Thomson were on friendly terms until fairly recently. Then, Thompson wouldn't answer questions from Bloomberg reporters about the company's earnings estimates. Eventually, Bloomberg decided to do its own polls of analysts.
The combined company may be able to erode Bloomberg's pricing power. When I first started with Bloomberg, it was a mark of status on Wall Street to have your own Bloomberg terminal. Most users that I see now share a Bloomberg to save money.
Nonetheless, Thomson and Reuters have a tough challenge. In addition to Bloomberg, there's the potential that a Rupert Murdoch-owned Dow Jones can pour money into digital publishing products that compete against offerings of the merged company. The Bloomberg threat isn't theoretical.
Though the Bloomberg terminals aren't cheap and aren't very user friendly for the untrained, it's tough to beat their functionality. Many companies have tried and failed to develop a "Bloomberg killer" over the years. Bloomberg terminals even have survived the Internet age.
But it's going to take more than just data for the combined Thomson-Reuters to thrive. More and more financial data is available on the Internet for free. Most individual investors don't need the proprietary data that these companies offer. To survive, they will need compelling content, which in the old days was called news.
Stock futures are indicating a lower start for stocks today, falling ahead of the CPI report and after weak earnings from Dow components and retails giants Wal-Mart and Home Depot.
Yesterday, news of DaimlerChrysler (NYSE: DCX) selling 80% of Chrysler to a private equity firm Cerberus dominated the headlines. But sentiment seems to become more cautious and some investors may be seeking quality as once again the Dow Jones Industrial Average was up, the Nasdaq and S&P 500 down.
Today, earnings have already affected futures, but there is one very important piece of data coming out at 8:30 a.m., before the market opens -- CPI. Consumer Price Index, or prices at the consumer level, is a measure of inflation and will continue to give investors indications as to the Fed's possible future policy. So far, despite the apparent signs of slowing growth, inflation remained a concern and the Fed kept rates at the same level. Some still hope for a rate cuts by the end of the year as prices at the wholesale level seemed to have moderated, others believe inflationary pressures are still too strong.
For April, CPI is expected to rise 0.5% after a 0.6% in March. Core CPI, which excludes the volatile food and energy prices is forecast to have risen 0.2% compared to a 0.1% increase the month before.
At the same time, the NY Empire State manufacturing survey for May is due.
Also today, the National Association of Home Builders will release its housing market index.
Corporate: Wal-Mart Stores Inc. (NYSE: WMT) reported an 8% first-quarter net income increase to $2.83 billion, or 68 cents a share, with revenue up 8.5% to $86.41 billion. Analysts, on average, were expecting earnings of 68 cents a share on revenue of $86.94 billion, according to Thomson Financial. Going forward, Wal-Mart sees comparable-store sales improving and second-quarter earnings from continuing operations between 75 cents and 79 cents a share. WMT shares declined in Europe.
The Home Depot, Inc. (NYSE: HD) reported a 30% net income drop in first-quarter to $1.05 billion, or 53 cents a share. Sales rose 0.6% to $21.6 billion. Analysts had been expecting earnings of 59 cents a share and revenue of $21.83 billion, according to data complied by Thomson Financial. Home Depot said that the home improvement market is expected to remain soft in 2007 and for earnings to come in at the low end of its guidance range. HD shares are declining 3.9% in pre-market trading (7:25 a.m.).
Financial companies might continue to be under pressure today if the CPI report shows higher inflation and lower possibility of a rate cut this year. The Thomson Corp. (NYSE: TOC) agreed to buyReuters Group Plc (NASDAQ: RTRSY) for 8.7 billion pounds ($17.2 billion), creating the biggest financial news and information company.
Overseas, Asian markets closed lower and European stocks are also lower. Europe's economy expanded 0.6% in the first quarter, more than forecast as corporate investment offseting the effects of higher euro and a German sales- tax increase.
The British newspaper, The Independent, reports that Reuters is a heart beat from being sold to Thomson (NYSE: TOC). According to its report, the "Reuters Founders Share Company, the trust that acts as guardian to the editorial independence of Reuters Group Plc" is prepared to approve the deal. Reuters has been independent since it was founded in 1850.
Thomson's bid sent the Reuters (NYSE: RTRSY) ADRs from below $60 to over $77. While the premium is nowhere near the one that News Corp (NYSE: NWS) has offered for Dow Jones (NYSE: DJ), Thomson is family controlled, and the Reuters CEO would run the combined company.
A combined Thomson/Reuters would have a share of the financial news delivery business that would only be matched by privately-held Bloomberg.
The merger of the two financial news and information giants could put Dow Jones in a bit of a bind. Its revenue would be dwarfed by larger competitors, and a rejection of the News Corp. offer could end up looking short-sighted.
But Dow Jones's management has made mistakes before.
The Wall Street Journal (subscription required) reported that it was March 29, not the week of April 9 that News Corporation's (NYSE: NWS) Rupert Murdoch began talks with Dow Jones and Company Inc (NYSE: DJ), as securities regulators sort out the timing of events as insider trading allegations have surfaced in connection with News Corp.'s $5B offer for Dow Jones.
According to people familiar with the matter, the SEC is investigating claims made by Fairfax Financial Holdings Limited (NYSE: FFH) against a group of hedge funds, the Financial Times (subscription required) reported.
OTHER PAPERS:
Clear Channel Communications Inc's (NYSE: CCU) shares have risen, Barron's Online notes, to near $38 on talk that Fidelity Investments will reverse its stance and back a buyout led by Thomas H. Lee and Bain Capital.
WEBSITES:
Globe and Mail reported that Russian billionaire and automotive entrepreneur Oleg Deripaska's companies are going to buy 20 million shares of Canadian auto parts company Magna International Inc (NYSE: MGA) for $1.54B.
MOST NOTEWORTHY: Today's most noteworthy downgrades included Armor Holdings, Inc (AH), Alcan Inc (AL), Advance Auto Parts, Inc (AAP) and Reuters Group PLC (RTRSY):
Armor Holdings Inc (NYSE: AH) was downgraded to Neutral from Overweight at JP Morgan based on the news that the company will be sold to BAE Systems PLC (BAESY) for $88 a share in cash. The firm expects the deal to close with no higher offers. Bear Stearns cut Armor Holdings to Peer Perform from Outperform and Friedman Billings cut shares of the vehicle armorer to Market Perform from Outperform.
Alcan Inc (NYSE: AL) was cut to Neutral from Buy at Bank of America and DA Davidson following the Alcoa (AA) bid.
Baird cut Advance Auto Parts (NYSE: AAP) to Neutral from Outperform following CEO Michael Coppola's resignation. Kevin Dann downgraded Advance to Hold from Buy to reflect an increased level of uncertainty following Mr. Coppola's departure.
Lehman Brothers downgraded Reuters Group (NASDAQ: RTRSY) to Equal Weight from Overweight pending further information on the Thompson Corp (TOC) bid; Credit Suisse cut shares to Neutral from Outperform and Deutsche Bank cut shares to Hold from Buy.
OTHER DOWNGRADES:
Matrix downgraded UST Inc (NYSE: UST) to Sell from Hold.
U.S. stocks seem posed to a lower opening as indicated by stock futures, taking a well-deserved breather from the recent rally that had the Dow closing at a new record almost daily and the S&P marking a six-year high and nearing its all-time high.
Yesterday, following Alcoa's $27 billion bid for Alcan, the Dow posted yet another gain, making it the 24th gain in 27 sessions and matching an 80-year (1927) record. The S&P was also up, but the Nasdaq nearly flat, down 0.05%, or 1.20 points.
No news is good news? Apparently, not today. With not much news on the economic front, earnings or other corporate news, futures seem to be taking a breather. Perhaps a much needed breather. The selloff overseas is undoubtedly contributing to this morning's sentiment.
Tomorrow, the Federal Reserve's Federal Open Market Committee will announce its decision on monetary policy, and is expected to leave interest rates unchanged. Today, at 10:00 a.m., the Commerce Department will report March wholesale inventories. Economists expect a 0.4% rise in March inventories, after a 0.5% increase in February.
Overseas, European stocks fell. Some analysts say that after Europe's Dow Jones Stoxx 600 Index, which has rallied 6.9% this year and closed yesterday at the highest since September 2000, so profit taking is in order. Asian markets closed mostly with declines as well.
Earnings: Cisco Systems Inc. (NASDAQ: CSCO) and Walt Disney Co. (NYSE: DIS) are due to report earnings after the close today.
Try as he might, Carl Icahn didn't succeed this time around to enforce his will. The billionaire investor failed to win a seat on the board of Motorola Inc. (NYSE: MOT). Final results will be available in three weeks, but MOT shares were down 2.2% in Europe.
After announcing Friday it was approached by an unnamed source, Reuters Group PLC (NASDAQ: RTRSY) confirmed that it and Thomson Corp. (NYSE: TOC) are discussing a combination of their businesses which values Reuters at $17.7 billion. Thomson would pay $7.03 per Reuters share in cash and 0.16 Thomson shares for each Reuters share. Reuters shares have gained over 4% in London.
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MOST NOTEWORTHY: Sears Holding, Reuters Group and Shire Plc were today's noteworthy downgrades:.gif){kind=logo}
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Every week, there seems to be yet another mega M&A deal. It's not just in the US but across the world. Yes, everyone is going ga-ga for M&A.
Stock futures are indicating a lower start for stocks today, falling ahead of the CPI report and after weak earnings from Dow components and retails giants Wal-Mart and Home Depot..gif){kind=logo}
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