Wall Street Breakfast: Must-Know News

• A Kure for UBS? "Putting UBS (UBS) back on its feet would be a daunting task even for somebody with more banking experience than little-known lawyer Peter Kurer, its prospective new chairman." Mind you, Kurer does know UBS -- he's been top legal adviser for seven years. As one might expect, there was wide disagreement about the move: some called Kurer the "dream candidate," while others thought UBS should be anointing a heavyweight banker.
• Leveraged debt market revival. Deutsche Bank (DB), JPMorgan (JPM) and six more lenders are going to try to deal the £8B in leveraged loans they underwrote in KKR's acquisition of Alliance Boots. To do so, they will likely have to entice buyers with a 10-15% discount. An earlier $237B LBO loan backlog is down to just $95B, the lowest in more than a year.
• eBay, Craigslist duke it out. eBay (EBAY) sued Craigslist, alleging it took "unilateral actions" to dilute eBay's 28.4% stake by more than 10%. Craigslist fired back, saying eBay's suit smacks of ulterior motives. "Ebay has absolutely no reason to feel threatened here — unless of course they’re contemplating a hostile takeover of craigslist, or the sale of Ebay’s stake in craigslist to an unfriendly party. (In which case, they’re out of luck.)" Craigslist doesn't disclose its revenue, but claims 9B pageviews per month.
• Some servers. IBM (IBM) plans to unveil a new line of servers that target heavy-hitting internet search and email providers. iDataPlex servers will cost "north of $20M"; they are intended for less than 1,000 customers with "staggering volumes of servers." Analysts say the servers could be game-changers within the market due to their reduced cost (20-25% cheaper), space (138% more servers) and power (40%) requirements. Yahoo (YHOO) is an early tester.
• Apple picks up PA Semi for $278M. Apple (AAPL) is buying boutique chip designer PA Semi, renowned for its sophisticated, low-power processors. Sources say it is paying $278M in cash. It is thought Apple wants to ensure control over a new generation of iPhones, a move that will disappoint Intel (INTC), which was pushing for Apple to use its Atom chips.
• ConocoPhillips hopes to clinch $10B Abu Dhabi deal. ConocoPhillips (COP) expects to seal a JV to work on Abu Dhabi National Oil Company's $10B sour gas project within 1-2 months. Royal Dutch Shell (RDS.A) also coveted the contract.
• Advantage Bain and Lee. Private-equity firms Bain and Thomas H. Lee spurned a Tuesday offer by the banks (C, MS, CS, RBS, DB and WB) who agreed to fund its $22B buyout of Clear Channel Communications (CCU) to settle their dispute through binding arbitration. Wall Street took the banks' offer as a sign of weakness, raising expectations they will have to follow through.
• Existing Home Sales were in line at 4.93M. Supply increased to 9.9 months from 9.6. Borrowers continue to face restrictive lending practices, and buyers continue to bide their time. The median price fell 7.7% from a year ago to $200,700.
• Ousted Journal editor signals more changes. WSJ (NWS) managing editor Marcus Brauchli confirmed his resignation. Sources say new owner Rupert Murdoch wanted change at a faster pace than Brauchli was willing to provide. His departure will likely be the beginning of sweeping changes at the Journal. Murdoch wants faster, more concise and newsier coverage. Publisher Robert Thomson will not assume the position.
• Not everyone's in a cash crunch. MetLife announced a $1B share buyback. Shares rose 1.1% in AH.
• Newsday any day. Rumors of a $580M News Corp. (NWS) buyout of Tribune's Newsday are getting even louder.
• Water IPO sinks below forecast. Water utility American Water (AWK) priced its 58M share IPO at $21.50/share, below estimates of $22-23, which was lowered from the original range of $24-26.

Earnings

• Yahoo's Q1 beat: no game changer. Yahoo (YHOO) surpassed estimates with EPS of $0.11 (consensus: $0.09); revenue rose 14.3% to $1.35B (consensus: $1.32B). It reiterated 2008 revenue guidance of $7.2-8B. While impressive, analysts said the beat would not be enough to jolt a substantially higher bid from suitor Microsoft (MSFT), and shares fell 0.5% in AH trading. Microsoft CEO Steve Ballmer seized the opportunity: "We are offering a lot of money," he said. "If Yahoo's shareholders like it, that's great. We are prepared to go forward without a merger with Yahoo."
• Boeing (BA): EPS of $1.62 vs. $1.35 consensus. Revenue of $15.99B (+4.1%) vs. $16.52B consensus. Boeing sees 2008 EPS of $5.70-5.85 vs $5.93 consensus and revenue of $72-73B vs. $74.49B consensus.
• Ambac (ABK): Loss of $6.93/share vs. -$1.31 consensus (that's right). Writedowns on credit derivative exposure were $1.725B. "The housing market crisis continues to disrupt the global credit markets and our credit derivatives and direct mortgage portfolios were severely impacted once again," but ABK says it exceeds S&P's AAA capital target by a comfortable margin and that it has enough capital to get it through the difficult period.
• Delta Air Lines (DAL) lost $0.69/share, worse than the $0.51/share loss analysts predicted. Revenue of $160.5M beat the $138M consensus.
• Schering-Plough (SGP): Q1 EPS of $0.53 vs. $0.37 consensus. Revenue of $4.66B (+56.5%) vs. $4.52B consensus.
• Moody's (MCO): Q1 EPS of $0.48 beat consensus of $0.35. Revenue of $431M exceeded estimates of $417M. Moody's reaffirmed 2008 EPS outlook of $1.90-2.00 vs. $1.83 consensus.
• EMC (EMC): Q1 EPS of $0.16 in line. Revenue of $3.47B in line.
• Philip Morris (PM): Q1 EPS of $0.89 beat consensus by $0.12. Revenue of $6.33B (+14.1%) vs. consensus of $6.1B. Upwards revised 2008 EPS guidance to $3.18-3.24 from $3.11-3.17; consensus $3.19. PM will acquire Interval and other trademarks from Imperial Tobacco Group (ITY) for €254M.
• VMware (VMW) posted a modest Q1 beat (EPS of $0.22 in line; revenue of $438M vs. consensus of $422M), but that didn't stop traders from bidding up shares 14.6% in AH trading. VWware expects 50% revenue growth in 2008, or about $1.99B -- in line with estimates. License revenue grew 73% to $294M; service revenue increased 62% to $144M.
• Infineon Technologies AG (IFX) lost €1.82/share in FQ2 on revenue of €1.05B. IFX sees Q3 revenue flat to down slightly Q/Q.
• WellPoint (WLP): EPS of $1.13 was $0.06 short. Revenue of $15.37B (+3.5%) was in line. For 2008, WLP sees EPS of $5.42-5.67 vs. $5.73 consensus, and revenue of $62.3B (in line).
• Broadcom (BRCM): EPS $0.14 (not comparable with $0.28 consensus). Revenue: $1.03B (+14.5%) vs. $0.99B consensus. BRCM said stronger-than-expected results were due to greater demand in its traditional wireline business. It remains cautious on the macroeconomic front, but sees "solid revenue growth" in Q2. Shares rose 9%.
• Yum! Brands (YUM) beat by $0.02 with EPS of $0.42. Revenue: $2.41B (+8.3%) vs. $2.35B consensus. 2008 EPS guidance of $1.87 vs. $1.86 consensus. Shares were flat in AH.
• Tupperware (TUP): EPS of $0.56 beat by $0.07. Revenue of $543M (+18.9%) vs. $523M consensus. Q2 EPS guidance of $0.62-0.67 vs. $0.67 consensus. 2008 EPS guidance of $2.67-2.77 (up from $2.50-2.60) vs. $2.57 consensus. 2008 revenue guidance of +13-15% vs. a previous +8-10%. Shares were flat in AH.
• Sony Ericsson (SNE) (ERIC) said Q1 sales fell 7.6% to €2.7B and net income dropped to €133M from €254M. Units shipped of 22.3M were up 2% Y/Y. Average selling price fell sequentially and Y/Y due to soft mid-to-high-end model sales. Market share fell 1% to 8% from Q4.

Today's Markets

• Asian markets climbed Wednesday. Nikkei +0.23% to 13,579. Hang Seng +1.4% to 25,289. Shanghai +4.15% to 3,278. BSE Sensex-0.26% to 16,741.
• In Europe, markets are down at midday. FTSE -0.49% to 6,005. CAC -0.21% to 4,863. DAX -1.32% to 6,697.
• U.S. futures began dropping at 5:00 AM. At 7:00, Dow -0.32% to 12,697. S&P -0.42% to 1,375. Nasdaq -0.29% to 1,889.50.
• Oil is down 0.44% to $117.52. Gold is down 0.72% to $918.30.

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Comments

[deaverb]

I love Eli's work. Especially the EPS drill. Saves so much time. Go Alpha--support Eli. Reminds me of the classic statements of Warren Buffett: "What is the biggest vice of investors?" Warren, "Being overactive." "How could you have made more money?" Warren, "Sat on the porch more; done less." Eli helps me do both. My addition: Most companies need a MBA/Mgt playground so they do less and keep sustaining their brands....

[Growin$$]

This column cites housing inventories -I think they are understated. Do you know what sales rate is being used in the divisor??

[sumosama]

Agree with the first post...thanks, Eli!

[RichardSchweitzer]

We have to keep in mind, these are summaries, and not analytical reports. He reports on opinions rather opines However, he should be free to opine on the quality of those opinions.

[JasonR]

A lot of opining going around.

Can't help seeing a little humor in the little things.