Now that it is clear that Wal-Mart's (NYSE:WMT) international operations are growing much faster than its US division, the company is searching for new frontiers. Revenue overseas is growing at a rate better than 20%

Wal-Mart has had trouble in some countries. Its operation in Japan continues to loss money and it has pulled out of Korea and Germany.

Now, the world's largest retailer is looking to Russia and eastern Europe for more growth. According to the FT, Wal-Mart "firmly signaled its intention to expand into Russia and eastern Europe, announcing that it had recruited Stephan Fanderl, a German retail executive, to explore opportunities in the region."

It will be at least a couple of years before the market can gauge whether Wal-Mart can have success in the region. It has to compete with other companies like big European retail chain Tesco. The Wal-Mart model clearly does not work in all cultures.

A break-down of Wal-Mat's track record overseas is telling. It problems in Germany, Japan, and Korea have been more than off-set by successes in China and Mexico. To some extent that may mean that countries with lower median incomes are better markets for the company. Russia and Eastern Europe are a mixed bag. Parts of Russia have done very well financially. Eastern Europe is still in a stage of economic development.

Wal-Mart may be expanding outside the US, but its success is hardly assured.

Douglas A. McIntyre is an editor at 247wallst.com.

MOST NOTEWORTHY: Riverbed Technology, Sirius Satellite and ASML Holdings were today's noteworthy downgrades:

• Deutsche Bank downgraded shares of Riverbed Technology (NASDAQ: RVBD) to Hold from Buy after it negatively preannounced to reflect economic conditions and the company's lack of visibility.
  
• Credit Suisse said shares of Sirius Satellite (NASDAQ: SIRI) are trading near fair value and that shares will probably trade in a range between mid-$2s to $3 in 2008. Shares were downgraded to Neutral from Outperform.
  
• JP Morgan lowered ASML Holdings (NASDAQ: ASML) to Neutral from Overweight as they believe chip manufacturing equipment orders are suffering from the weak DRAM memory market.

OTHER DOWNGRADES:

• Dell (NASDAQ: DELL) was cut at Goldman to Neutral from Buy.
  
• Tesco PLC (OTC: TSCDY) was downgraded to Hold from Buy at Societe Generale.
• RBC Capital cut Radware (NASDAQ: RDWR) to Sector Perform from Outperform.

MOST NOTEWORTHY: Targeted Genetics, Tesco and The9 were today's noteworthy initiations:

• Rodman initiated Targeted Genetics Corporation (NASDAQ: TGEN) with a Market Perform rating, citing lack of key near-term drivers and the absence of definitive proof-of-concept data for its lead arthritis program.
• ING assumed Tesco Plc (OTC: TSCDY) with a Buy rating, citing the company's growing international business.
• Piper initiated The9 Limited (NASDAQ: NCTY) with a Neutral rating and $21 target, citing limited visibility around the company's FY08 and FY09 game releases and a higher risk profile than peers.

OTHER INITIATIONS:

• Baird initiated Gladstone Capital Corporation (NASDAQ: GLAD) with a Neutral rating and $19 target.
• Goldman initiated Brazilian banks with an Attractive view, starting Banco Bradesco SA (NYSE: BBD) with a Buy rating, Banco Itau Holding Financeira SA (NYSE: ITU) with a Neutral rating and Unibanco-Uniao de Bancos Brasileiros (NYSE: UBB) with a Sell rating.

Dell Inc. (NASDAQ: DELL) has been on a tear in the last six months when it comes to partnering with global retailers for its consumer PC products, and it has just announced yet another partnership. This time, European retail giant Tesco will make Dell's laptop and desktop PC products available in its stores this month. Currently, Tesco has retail operations in Asia and Europe.

Is Dell desperate? It's joined with so many larger retailers since this past autumn that it's hard not to think that the world's second-largest PC maker is trying desperately to make up for lost time by entering any and all retailers it can. In the U.S., that list includes Wal-Mart (NSYE: WMT), Best Buy (NYSE: BBY) and Staples (NASDAQ: SPLS). Those are among the three largest companies in their respective industries (discount retail, consumer electronics, and office/home business supplies).

Dell's Inspiron and XPS products will be the consumer product lines available in Tesco stores, mainly in the UK. However, Tesco outlets in Ireland, Poland, Czech Republic, and Slovakia will also carry Dell's two consumer PC lines. With Dell having retail partners in Europe, Asia (China's Gome) and the U.S., the company's retail sales efforts will be heavily scrutinized in 2008 as it competes on the shelf against retail heavyweights like Hewlett-Packard (NYSE: HPQ) and Taiwan's Acer, which also includes the Gateway brand.

MOST NOTEWORTHY: EMC Corporation, Tesco PLC, SL Green Realty, Ariba and Motorola were today's noteworthy upgrades:

• EMC Corporation (NYSE: EMC) was upgraded to Outperform from Peer Perform at Bear Stearns on valuation. Shares were also upgraded to Buy from Hold at Citigroup after coming off restriction to reflect the long-term benefits of virtualization and valuation.
  
• Tesco (OTC: TSCDY) was upgraded to Buy from Hold at Citigroup on valuation and the company's growth prospects.
  
• SL Green Realty Corporation (NYSE: SLG) was upgraded to Buy from Hold at Keybanc based on valuation. The firm views concerns regarding NYC office demand as overblown.
  
• Cowen expects FY07 to be a tough year for Ariba Inc (NASDAQ: ARBA) as benefits from the on-demand subscription model are realized. The firm upgraded shares to Outperform from Market Perform.
  
• Motorola Inc (NYSE: MOT) was upgraded to Outperform from Sector Perform at RBC Capital citing firming trends in its handset division.

OTHER UPGRADES:

• Jefferies upgraded Optium Corporation (NASDAQ: OPTM) to Buy from Hold.
  
• JP Morgan upgraded Susster Holdings Corporation (NASDAQ: SUSS) to Overweight from Neutral.
  
• Thomas Weisel upgraded Vishay Intertechnology (NYSE: VSH) to Overweight from Market Weight.
  
• Royal Caribbean Cruises (NYSE: RCL) was upgraded to Strong Buy from Outperform at Raymond James.

Welcome to the 26th installment of The Wal-Mart Weekly, a column dedicated to bringing you insight, wit, facts, results, opinions and just a bit of everything else when it comes down to a very hot topic these days: Wal-Mart. Last week we wondered whether Always Low Prices was just a myth in today's competitive climate.

This past week, I discussed Wal-Mart (NYSE: WMT) Stores, Inc.'s entry into the non-protected digital music file download business. With the retailer selling non-protected songs from its website for a maximum of $0.94, will this action dent into Apple (NASDAQ: AAPL)'s iTunes market share? Who knows at this point.

Wal-Mart has been in the news quite a bit this past week in regards to a European competitor entering a market Wal-Mart is already in (just not in a big way) -- California. Tesco (LSE: TSCO) said it will be opening smaller-concept stores soon that feature the opposite of the big-box retail feeling of the standard 100,000-square-foot Wal-Mart Supercenter. Tesco's stores will average about 10,000 square feet. What will Wal-Mart do in response?

The Financial Times (subscription required) reports that Wal-Mart (NYSE: WMT) is considering acquisitions in the U.S. as it attempts to broaden its reliance on its 2,300 colossal "Supercenters" for future growth, citing a job posting that requests an executive to assess the "strategic implications of any possible M&A on our overall portfolio."

This is Wal-Mart's first attempt in more than 25 years to acquire a company in its own backyard. The move is seen as a response to the upcoming opening of Tesco's (OTC: TSCDY) "Fresh & Easy" grocery markets in the United States. Tesco's smaller neighborhood grocery markets cover 10,000 square feet of selling space, compared to Wal-Mart's Supercenters, which dominate the landscape with 187,000 square feet. Wal-Mart also has discount stores without groceries that average 107,000 square feet.

The story of retailer Wal-Mart Stores, Inc.'s (NYSE: WMT) growth in the last 18 months or so has not been well-received by the market or many of the company's larger shareholders. Add that to the fact that Wal-Mart shares have not really moved anywhere in the last 60 months and you have to wonder if the company will ever be able to get back to the growth it witnessed in the late 1990s. Can such a large company maintain torrid growth? If history serves, it's very hard to perform such an action. Scratch that -- it's virtually possible.

By now, even Wal-Mart has said as much -- more than the ubiquitous Supercenter will be needed if the retailing behemoth is to grow in the U.S. market, which is its largest by far. Other global retailers are competing just fine with the retailer in markets outside the U.S., with Europe's Tesco being one of them. In fact, Wal-Mart took a different turn in 2006 by joining with or buying competitors in China (Trust-Mart) and India (Bharti) to gain an instant foothold in those growing markets.

MOST NOTEWORTHY: dELiA's Inc. (DLIA), Hearst-Argyle TV (HTV) and Safeway (SWY) were today's noteworthy downgrades:

• Friedman Billings downgraded dELiA's Inc (NASDAQ: DLIA) to Market Perform from Outperform citing the difficult near-term environment.

• Deutsche Bank would use Hearst-Argyle TV's (NYSE: HTV) tender offer for the remaining shares of HTV at $23.50 as an opportunity to sell shares and cut the stock to Hold from Buy.

• Merrill cut Safeway (NYSE: SWY) shares to Sell from Neutral citing the slowing California economy and the potential threat from Wal-Mart (NYSE: WMT) entering the California market with its new Tesco (OTC: TSCDY) format...

OTHER DOWNGRADES:

• Vimicro (NASDAQ: VIMC) was cut to Underweight from Equal Weight at Morgan Stanley.

• BB&T downgraded Green Bankshares (NASDAQ: GRNB) to Hold from Buy.

• Citigroup downgraded Samsung to Hold and Hynix Semiconductor to Sell.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Shareholders of British grocer Tesco are none-too-pleased with the proposed bonus package for Sir Terry Leahy, which would pay him as much as £11.5 million, or $23.1 million, in addition to his regular salary. 17% of shareholders declined to support the pay package. According to TimesOnline, "Sir Terry, who received £4.62 million in cash and shares last year, would pocket up to 2.5 million shares under the New Business Incentive Plan if Tesco cracks the US market. The shares would gradually vest between 2011 and 2014. The scheme only applies to the chief executive."

Now there's an incentive for global expansion!

While the pay package certainly seems excessive, it's a relative pittance compared to the amount that Tesco is wagering on a successful foray into key U.S. markets including Las Vegas and Phoenix. The company will be investing over half-a-billion dollars per year in the effort, so why not offer Sir Terry a big chunk of change if all goes well?

Compared to some of the pay packages CEOs here are receiving, it just doesn't seem that bad. The gradual vesting of the restricted stock means he will only stand to get really really rich if the company grows well. If it does, shareholders will have little to complain about.

Stock futures are pointing to a mix to lower open of the U.S. stock markets at this time with the S&P 500 futures showing a possible higher start and the Nasdaq a lower start. Investors await data on the housing market today as they look for direction.

Yesterday, stocks edged lower ending a three-day rally as some housing data released yesterday was weak and oil prices again became a concern and futures closing above $69 a barrel, a nine-month high.

Today, oil prices edged lower, but unrest in Nigeria continued to pressure the market.
What investors are really waiting for today is data on the housing market as May housing starts and building permits are due at 8:30 a.m. EDT. Economists estimate that housing starts fell to an annual rate of 1.48 million in May from 1.53 million in April. Permits are expected to rise to an annual pace of 1.47 million from 1.46 million last month. While housing starts is indeed expected to slip, the forward looking indicator, the permits, is expected to rebound from the 10-year low it reached in April. Try as Wall Street might to get past the weakness in the sector, any indication of worsening or spreading to other sectors will undoubtedly affect the market.

Overseas, Japanese stocks ended flat today as declines in banks and electric utilities offset gains in shipbuilders and paper makers. In general, however, Asian stocks ended higher with Honk Kong Hang Seng index jumping 1.7%. Singapore and South Korea hit new highs.
Meanwhile, European markets are mixed. Some oil stocks showed gains, but retailers, being the worst performers, offset these gains. British supermarket giant Tesco (LSE: TSCO) reported slowing non-food sales and its shares were hit with a 3.2% decline.

Corporate news:

If for some strange reason you missed it yesterday, the chatter that was picked up all day long yesterday ended up being true and Yahoo! Inc. (NASDAQ: YHOO) CEO Terry Semel resigned. He will remain as chairman. Co-founder of Yahoo!, Jerry Yang, was appointed CEO and Sue Decker, president. Here is what Jerry had to say in Yahoo!'s blog, Yodel Anecdotal, about his new job. Here at BloggingStocks we had a myriad of opinions, of course. You can read them on the Yahoo! blog. Yahoo! could give support to the market today, but the question is how much. YHOO is now up 2.6% in pre-market trading (7:28 a.m.). Yahoo rose 3.5% in Germany.

Best Buy Co. Inc. (NYSE: BBY) is set to release its second quarter earnings this morning and at 10:00 a.m. Brian White will be liveblogging the webcast. Here is Brian's earning preview.

Is Wal-Mart Stores, Inc. (NYSE: WMT) looking to smaller-format stores to try and revive sales here in the U.S.? In a retailer known for landing huge, big-box locations all over the country to make it easier to have a "one-stop shop" for customers, has this strategy been tapped out? Possibly so -- something I looked at last week in my Wal-Mart Weekly column. But what is the solution? Is the opening of smaller stores seen as a retrenchment or a refinement of strategy for Wal-Mart?

It's a last-ditch effort to revive struggling sales in the light of a rather disappointing 2006 for the retailer. While it saw record revenues for that year, profit windfalls did not follow, which speaks of loss-leader selling and moving merchandise without ramping up profit at the same time. After all businesses are in the business to make money, not just sell -- without profit -- right? It makes sense for some companies to forgive profits to build market share, but Wal-Mart is way, way beyond that point.

The New York Post said this week that Wal-Mart may be considering stores as small as 20,000 square feet, quite a drop from the 100,000 square-foot Wal-Mart Supercenter. Can Wal-Mart get into communities that have shunned the larger-format Supercenter with a small-store strategy? Perhaps -- and it's a good growth strategy as the retailer runs into roadblocks in certain areas of the country that won't permit the "big-bog" fare in their areas. Here's something to chew on: Wal-Mart's promoted a former Tesco executive (David Wild) to the position of senior vice president, new business development. An exec from Tesco, the largest supermarket chain in the U.K., may be just what the retailer needs to grow here in the U.S.

Socially conscious investors may want to grab a copy of this week's (April 2, 2007) edition of FORTUNE magazine, which is all about the greening of corporate America. No longer can companies merely not pollute: The double bottom line of both economic profitability and social responsibility demands that companies re-engineer themselves and their products to be as environmentally friendly as possible.

Companies that are ahead of the game will prosper. Companies that lag behind in environmentalism will be punished by investors as well as the media. The article "Green is Good" summarizes the green activities of 10 well known companies that stand to reap rewards for their environmentally sensitive manufacturing and operational practices. Companies taking the lead towards a low-carbon economy are:

On Tuesday, Safeway Inc. (NYSE:SWY) announced that it would expand its O Organics line into affordable baby food and food for children, as well as introducing Eating Right, a new brand for consumers in search of healthier fare. The move is part of larger effort to to attract consumers from both price-focused competitors like Wal-Mart (NYSE:WMT) and high-end chains such as Whole Foods (NASDAQ:WFMI), as well as in anticipation of the entry of British giant Tesco into U.S. markets, such as southern California, where it will compete with Safeway's Vons stores.

The O Organics line was launched a year ago, and it is featured in Safeway chains such as Dominick's. The line already includes coffee, milk, cereal, and produce, and has reached more than $150 million in sales. Eating Right products will feature icons that make it easy for consumers to make the choices that are right for them.

This is all part of Safeway's ongoing efforts to update its stores to a so-called Lifestyle format. It has already updated 43% of its 1,700 stores, and expects to have updated 94% of stores to the Lifestyle format by 2009.

A Credit Suisse analyst has upgraded Safeway to Neutral from Underperform based on its strong outlook for 2007.

Wal-Mart Stores, Inc. (NYSE:WMT) is still playing a distant second fiddle to retailer Tesco in the UK. Tesco's different strategy has gilded it with over 30% British marketshare while Wal-Mart's fully owned subsidiary -- ASDA -- has just over 16% of the British market. An analyst recently stated "ASDA has suffered over the last five years. It's up against a very strong retailer in Tesco, even Sainsbury has become more aggressive. ASDA is improving its fashion and non-food side of the business. And we expect them to turn the corner in a year or two."

Hmm -- turn the corner? How so, I wonder. Although Wal-Mart has reportedly brought much of its operational finesse and merchandising expertise -- which has flopped this year here in the states -- to ASDA, the chain still loses out to Tesco in a pretty big way. Tesco's multi-format strategy may be the key to its success, according to analysts. Tesco's stores have seven formats, from small 'Express' city stores to large out of town 'Extra' hypermarkets.

In other words, Tesco is doing what Wal-Mart probably was trying to do (and still is) here in the U.S. -- customize store locations, sizes and even store designs and product offerings to the immediate area and try not to have a "one size fits all" big-box approach to mass merchandising. Another thing Tesco has going for it that has been trumpeted by Wal-Mart execs recently (with little to show for it so far) has been Tesco's range of prices -- from low-end to premium.