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National Semiconductor: Holy margin expansion

Eric Buscemi — Fri, 08 Jun 2007 11:30:00 EST

Filed under: Economic Data, Bargain Stocks, Stocks to Buy

National Semiconductor Corporation (NYSE: NSM) generating 62.5% gross margins. Who would have thought?

National also announced a recapitalization in which the company will repurchase $2.4 billion in stock. Yesterday's announcement said the semi company will actually borrow money for the repurchase -- a big change for this industry which historically has avoided leverage.

Why the confidence? Brian Halla, National's CEO, said in last night's conference call that the recent semiconductor trough saw National's gross margins bottom at 59%. This is the second trough where National has been able to generate high margins and remain cash flow positive. Halla went as far to say that "smoother sailing is ahead". A bold statement for a highly cyclical industry.

Also, National is forecasting 1% to 4% revenue growth for the upcoming quarter which historically has been a down quarter. Higher-end value products which is leading to higher ASP and volume increases is driving the higher revenue, with billings up 16% and bookings up 33%.

ROIC was above 20% and National expressed confidence it can maintain this return level for both the short and longer term.

National is becoming a must own stock. Jump into this company, this could be the beginning of a big upswing.

National Semiconductor: Holy margin expansion originally appeared on BloggingStocks on Fri, 08 Jun 2007 11:30:00 EST. Please see our terms for use of feeds.

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Global Crossing's mixed signals

Eric Buscemi — Thu, 24 May 2007 13:32:00 EST

Filed under: Earnings Reports, Analyst Reports

Global Crossing Limited (NASDAQ: GLBC), the international telecommunications company, has gotten hit recently due to weak results reported earlier this month. The stock has dropped from a recent high of $30 to $22.47.

The recent quarterly results raise a number of concerns. Global's organic revenue growth is tough to measure since it is being masked by acquisitions. Also, it appears to be going after lower margin business from governments, historically not a good sign for a stock in this industry. Further, expenses are higher than expected and the company appears to be getting into a habit of continually reporting one-time charges, also not a good sign for investors.

The positive: the company owns and continues to buy quality assets in a high-growth industry. At some point in time, they will be in high demand by a larger acquirer. Supposedly, there is an easy $100 to $200 million in annual cost synergies that can be found especially around access costs. A service provider with a broadly installed access base could substantially lower costs.

A recent analyst report said Global could be worth $30 to as much as $40 per share in a take out. It is worth a shot. The stock has gotten hit hard and the collection of an international asset base consisting of an IP network and data centers would be an attractive take out target in the next two to three years.

Global Crossing's mixed signals originally appeared on BloggingStocks on Thu, 24 May 2007 13:32:00 EST. Please see our terms for use of feeds.

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General Electric: Breaking up is hard to do

Georges Yared — Sat, 28 Apr 2007 12:10:00 EST

Filed under: Rumors, Management, Competitive Strategy, General Electric (GE)

Friday was a fascinating day for General Electric Co. (NYSE: GE); the shares were actually up $1 and trading volume was at 91 million shares, nearly triple the usual amount. The hoopla started when Citigroup research mentioned that GE should be broken up and spun off into separate companies. It's about time.

I have been writing about the possibility of GE splitting up for the past year for members of my website. It only makes sense. The problem with General Electric is that it has too many moving parts to properly predict consistent growth. GE is expected to generate revenues of $176 billion this year, with earnings per share of $2.22. For 2008, early consensus is for revenues of $196 billion and earnings per share of $2.48, barely a 10% increase over 2007.

Revenues are growing at slightly less than 10%. The 10% number is a magical number for Wall Street. If a company falls under that benchmark, serious questions about strategy and direction need to be asked -- and answered. Jeff Immelt, CEO, has been under the gun recently as the shares of GE have plodded along for the past six years in a narrow trading range. The bottom line is that there has been minimal growth for shareholders, but a decent dividend -- currently at $1.12, for a 3.1% yield.

GE has a market capitalization of $378 billion and is one of the most successful companies in the world. No question, investors who have owned the shares these past 20 years have been superbly and amply rewarded. The Jack Welch era saw skyrocketing growth of revenues and earnings, not to mention many new management principles crystallized in his books.

That was then -- this is now.

Continue reading General Electric: Breaking up is hard to do

General Electric: Breaking up is hard to do originally appeared on BloggingStocks on Sat, 28 Apr 2007 12:10:00 EST. Please see our terms for use of feeds.

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