From Briefing.com: 4:19PM Altera boosts Q1 rev guidance (ALTR) : Co now expects that Q1 rev will increase approx 6% from Q4, vs prior guidance of up 1-3%. Sales to customers in the communications market segment have rebounded more sharply than initially anticipated. The co's newly introduced 90-nm Stratix II FPGA family continues to ramp strongly. More than 250 customers have now purchased Stratix II devices.
Close Dow -107.00 at 10805.62, S&P -12.42 at 1207.01, Nasdaq -12.26 at 2061.29: A trouncing in Treasurys, coupled with higher oil prices and few upside catalysts, underpinned a bearish sentiment for stocks from start to finish... Everything from increased economic expansion and possible inflationary pressures, as commodity prices again hit record levels, to strong German economic data and early concerns regarding lowered foreign participation in today's bond auction contributed to the bond's sell off...
Volatile trading in crude oil prices, despite better than expected weekly inventories data, pushed the commodity to its all-time high of $55.65/bbl intra-day and added to the negative tone initiated by bond yields surging to 7-month highs... Crude oil supplies rose a stronger than expected 3.2 mln barrels (consensus +1.8 mln) and distillates fell for the seventh consecutive week, to a less than anticipated 800K barrels (consensus -1.8 mln), while gasoline inventories fell 200K versus an expected decline of 125K... Even though the April futures contract closed up just $0.18 at $54.77/bbl, the damage had already been done as the benchmark 10-year note closed down 27 ticks to yield 4.50% and market breadth continued to deteriorate into the close of trading...
Meanwhile, Energy, which was strong most of the day as oil prices surged, paced the way to the downside following President Bush's comments highlighting alternative energy sources and energy conservation... Interest-rate sensitive groups like Homebuilding (-2.2%), Utility (-1.9%) and Financial (-1.3%) got hammered while weakness in Airlines dragged Transportation lower and Health Care, Consumer Staples and Consumer Discretionary were also influential sectors closing lower...
Technology closed mixed, as solid gains in networking (+1.2%) were not enough to offset weakness in Semiconductor, Software and Hardware... The latter finished lower as Apple Computer (AAPL 39.35 -1.18) extended yesterday's weakness amid increased competitive threats while gains in shares of Cisco Systems (CSCO 18.53 +0.41), following upbeat industry comments at the Deutsche Bank Conference, lifted communications equipment... Semiconductor was strong throughout most of the session following an increased Q4 sales outlook from Xilinx (XLNX 31.27 -0.19) but sold off ahead of mid-quarter updates from chip makers like ALTR and INTC...
Eking out a modest gain, however, was the Materials sector, led by weakness in the greenback, subsequent strength in gold and gains related to M&A activity in chemicals and mining... Crompton Corp (CK 15.30 +1.84) announced plans to acquire Great Lakes Chemical Corp (GLK 33.65 +6.47) in an all-stock deal valued at $1.8 bln that would create the country's 3rd largest specialty chemicals company while Canadian metals company Noranda (NRD 19.05 -0.20), a day after mining giant BHP Billiton's $7.3 bln bid for WMC Resources, agreed to acquire the 40% of Falconbridge Ltd. it doesn't already own in a stock-swap deal for roughly $2.5 bln...
The dollar lost ground against the yen (103.96), after Japan saw leading indicators reach the best level since August, and the euro (1.3387), amid possible rate hikes in Europe... Separately, the Fed's Beige Book cited a moderate pace of economic growth, a flat (but mixed) read on consumer prices, expansion in manufacturing activity and steady to stronger consumer spending... But as a lagging indicator, it provided little surprises to recently reported economic data and was somewhat ignored by equities traders...
Bonds, however, notwithstanding a modest intra-day rebound following a decent 5-year note auction, weakened as the Fed's comments hit the wires and signaled ongoing expansion and modestly higher wage pressure, pushing the 10-year yield to a session high of 4.514%...DJTA -0.8, DJUA -1.9, Nasdaq 100 -0.4, Russell 2000 -1.0, SOX -0.3, S&P Midcap 400 -1.1, XOI -2.6, NYSE Adv/Dec 722/2640, Nasdaq Adv/Dec 1017/2087
9:16AM Gapping Down : OSTK -4.4% (Q1 EPS lowered below consensus at Piper), CHIR -3.5% (restates 2004 pro-forma EPS; BofA says it's more extensive than estimated), AAPL -2.7% (extension of yesterday's 5.2% drop), ISLE -2.4% (CIBC downgrade), MSO -2.4% (NY Post says large investor is out of the stock), MCD -2% (CSFB downgrade), ORCL -1.6% (makes bid for RETK), VISG -4% (started with an Underperform at First Albany; tgt $3.80), IIG -3.8% (profit taking after 22% move yesterday), FRO -3.7% (extension of recent weakness), MAX -11% (co evaluates proposed reverse/forward split; subsequent deregistration contemplated).
9:07AM Gapping Up : RETK +18.7% (ORCL makes $9 bid for co), XLNX +2.4% (upgraded at Smith Barney and Wachovia following guidance), AMEN +11.7%, GLK +8.5% (announces merger with Crompton), HLTH +7% (reports Q4), CMTL +5.7% (beats by $0.15; announces split), BOOM +5% (announces order), MECA +4.3% (Florida slot machine vote), WLDA +4.2% (contract with Air Canada), PACT +4%, AMKR +4% (RBC upgrade).... Under $3: STKR +18.2% (reports Q4), NERX +14.1%, GNSC +12.5% (co and Monsanto team up with USDA to map soybean genome), USEY +12% (discloses merger talks), MAXM +12%, LOUD +10.9% (O2 Germany signs with Nokia for mobile music solution powered by Loudeye), AEGN +7.8% (co and Biota sign flu development agreement), FUEL +5.4% (recent momentum).
7:47AM Hewlett-Packard & AOL broaden relationship (HPQ) 20.92: As part of a three-year agreement, HP will provide maintenance and support services for equipment from HP and other vendors in AOL data centers across multiple U.S. locations. Building on the companies' more than 10-year relationship, AOL is expanding its existing one-year services contract with HP to include support of its multi-vendor environment over three years. HP offered a flexible pricing structure that would allow AOL to adapt its support services with changing needs, predict the impact on its overall support costs, and continue to more effectively and efficiently manage server support costs.
7:27AM Corning reaffirms (GLW) 11.31: Company reaffirms guidance for Q1 (Mar), sees EPS of $0.11-0.13 vs. Reuters Estimates consensus of $0.12 on revs of $980 mln to $1.03 bln, consensus $1.02 bln.
11:34AM Oracle (ORCL) $13.61 -0.01 (-0.1%) Now you've done it. Larry is mad. Even though he has repeatedly said that Oracle would not consider any additional acquisitions until Peoplesoft had been fully integrated into Oracle, he goes out and makes a bid for Retek (RETK), which which SAP (00C) had already announced acquisition plans. SAP's bid for Retek was $8.50 per share, or a total of $486 million, will Oracle's offer is $9.00 per share, or a total of $515 million. RETK is currently trading over $10 per share, implying the market believes the a bidding war is about to break out.
Some media commentary seems puzzled by the interest of these two giants in Retek, since Retek's annual revenue is just $175 million, while Oracle and SAP both have revenue around $10 billion. Some media commentators have actually said "What possible impact can owning Retek have?" But if you understand how the consolidation of the enterprise software market is playing out, the importance of Retek becomes clear.
The future of the software industry belongs to the software vendor who can provide an application product that becomes entrenched in the daily operations of the enterprise customer. The best way to for a software vendor to do this is to become the "one-stop" vendor of complete data collection and analysis tools, allowing management of revenue and expenses in the entire "data-flow-chain" - from the factory floor to the CFO's office. Today, enterprises purchase software components from a variety of vendors: databases from one vendor, supply chain software from another, and sales management software from yet another. Then they integrate all their disparate data with integration tools from yet another vendor so that it can be analyzed - the real point of the whole system in the first place - by yet another software vendor.
It is somewhat analogous to building a car by purchasing engines from one firm, suspension from another, and the body from yet another. Where is the Henry Ford of the enterprise software industry that will create the "finished product" that enterprises actually wanted to begin with? Larry might not like the comparison to Henry, but he is definitely pushing Oracle in this direction: the first vendor to provide a "top-to-bottom" information system for enterprises. To really fulfill this vision, that "top-to-bottom" product should be industry specific eventually, as well.
This where Retek becomes important: it is focused solely on the retail industry. While the revenues are just $175 million, many of its customers are extremely large enterprises, including Sears, Best Buy, The Gap, and Ingram Micro. Many Retek customers are also Oracle customers. Oracle's stated motivation for the Retek bid is to protect their current relationships with Oracle/Retek clients. But the real reason is to start building that top-to-bottom industry specific product line now. This is a BUY versus MAKE decision; its much cheaper and faster to buy Retek than it is to build a competitive product. SAP wants Retek for the same reason.
With this vision in mind, the investment play today is not Retek, we think. At $10+, the potential reward is limited, even if a bidding war develops. The better idea is to start seeking out more potential acquisition candidates that fit this vision of the future software world. We already have three picks from the Ahead of the Curve column series on Enterprise Application Software Acquisition Candidates (HYSL, WITS, and BOBJ). It is now time to start looking for those companies, large or small, that SAP, Oracle, and others will need to fill current product line gaps. The market thinks JDA Software (JDAS) is a likely target. We don't disagree, but there might be better risk/reward stocks with less attention out there. We will have an Ahead of the Curve followup on this idea in the near future. - Robert V. Green
10:28AM GuruNet (GRU) 21.54 -0.66: When searching on the Internet, users have a wide range of choices, and that is just the idea behind GuruNet. The company believes the choices are too many, and has developed a product that simply searches trusted references and then returns a scrubbed down list of possible answers.
The search engine returns results from an encyclopedia (The Columbia Electronic Encyclopedia, Sixth Edition) and other reference sources that give general information without a listing of 400,000 links from which to search through. This idea, while not new, will probably gain a lot of traction as search engines are redefined according to the results that they deliver.
A simple search of "Sears Tower" at Answers.com provides an upfront encyclopedia listing and a general dictionary listing. Finally there is a listing from Wikipedia which includes pictures and a detailed description of relevant items concerned with the building and other buildings around the world. A Google search returns 635,000 listings in a tiny fraction of a second. The links include the site for the building as well as several sites that may or may not be the official site.
Yesterday, GuruNet announced that it was in a revenue sharing and search sharing agreement with search giant Google. This announcement caused the stock to jump more than 20%, and that followed a gain of about 5% the day before. To say this stock is on a run is an understatement.
One key difference between the two searches is that there is only one sponsored at on the Google search return, while the GuruNet owned Answers.com search provided 3 sponsored ads. The single ad on the Google list was the same as the top ad on the Answers.com site and its unclear if a listing on Google translates into an automatic listing on Answers.com, but it does appear to be the case as a similar search test netted nearly the same results.
As search engines continue to evolve, we expect similar products to be employed by the big boys in the space (Google, Yahoo and MSN search), but until the method is proved as a real revenue growth driver, it is hard to see them looking to do a buyout of GuruNet. GuruNet also provides search results on Amazon's A9.com search engine, a product that hasn't seen much press since its launch, but could be revitalized due to the popularity of Answers.com and GuruNet in general.
8:51AM Page One - Ahead of the Open: The S&P futures bounced higher after the close yesterday, and were trading 3 points ahead of fair value early this morning. The gains have been given back, however, and futures now indicate a slightly lower open.
Normally, such a move would not be a big deal. The market is losing steam, however, from the earnings season bounce. The S&P is down 3 points for the week after having risen 38 points the prior two weeks. It has been surprising that the market was able to post those gains despite higher oil prices and rising rates. Those factors may now be starting to weigh on the market as the upward momentum fades.
Bonds are lower again today. The yield on the 10-year note has shot up to 4.46%. That is the highest since August. It may very well go higher over the weeks ahead. This is still obviously a low rate from a historical standpoint, but rising rates are never good for stocks. Higher interest rates slow down the economy and impact valuation models. The 10-year note yield may return as a major factor for stocks.
Oil prices are down this morning, but still above $54 a barrel. Oil inventory data will be out at 10:30 ET. There is very little corporate news. Xilinx gave upbeat guidance in their mid-quarter conference call, as was noted in our After Hours Report last night. That may provide some support to semiconductor stocks and the Nasdaq. KMart (KMRT) had a disappointing earnings report, and Talbots warned of lower profits this year than Wall Street expects. Blockbuster beat earnings estimates. There are no economic releases today, but the Fed's Beige book on economic conditions will be released at 2:00 ET. If there is talk of inflationary pressure, the stock market may react negatively.
The upward momentum over the past two weeks was impressive. We would be surprised if it continues, however, as earnings warnings season approaches. We remain neutral intermediate term, but we believe there is a risk of a reversal short term
biz.yahoo.com |
