Filed under: Management, Industry, Law, Consumer experience, Google (GOOG), Marketing and advertising

Google (NASDAQ:GOOG) has been a target for a number of internet privacy groups who feel that it keeps personal data on users for too long. Google argues that having the data helps deliver better search results. Plus, the company decided to cave into pressure and agreed to keep data on individuals no longer than 18 months.

Now, Google want to be out in front of the drive for Internet privacy. It is an unlikely about face, but it is one nonetheless. According to the Financial Times, Google is “calling for new international laws to be set up to protect personal information online.” It wants a body like the UN to draw up the rules.

Google’s position is clearly one that it would rather not be forced to take, but it is making the best out of a bad situation. Clearly, the more data a search engine has, the better the results. This allows for better text ad targeting and better profits. Now that Google has purchased DoubleClick the use of data collected from users is even more important to get good results for display ads.

But, Google has to protect its image and so instead of just going along, it will lead the parade.

The company may figure that if it take a central position in drafting new rules so that it can at least slant them a bit to its advantage. It is not being helpful for nothing.

Douglas A. McIntyre is a partner at 24/7 Wall St.

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Filed under: Major movement, Deals, Good news, Competitive strategy, Google (GOOG), Yahoo! (YHOO), Options, Technical Analysis

Yahoo! Inc. (NASDAQ: YHOO) shares are gaining today on the heels of a couple of reports creating buzz around the company. First, a new report shows that more people than ever are spending more time than ever viewing video on the Internet (shocking, right?). Yahoo! trails Google’s (NASDAQ: GOOG) YouTube for second place in market share, but still holds a significant portion of the market. Second, news came today from the WSJ that Yahoo is purchasing BuzzTracker, a popular news and editorial website, which could help Yahoo! gain market share in the online news and blogging sphere. If you think that the company won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on YHOO.

After hitting a one-year high of $33.61 in May, the stock has dropped over the past four months, hitting a one-year low of $22.27 in late August. YHOO opened this morning at $23.69. So far today the stock has hit a low of $23.65 and a high of $24.43. As of 11:05, YHOO is trading at $24.43, up $0.71 (3.0%). The chart for YHOO looks neutral and improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $20 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in just 5 weeks as long as YHOO is above $20 at October expiration. Yahoo! would have to fall by more than 18% before we would start to lose money.

YHOO hasn’t been below $20 since late 2003 and has shown support around $23.50 recently. This trade could be risky if the company’s earnings (due out 10/16) disappoint, but even if that happens, this position could be protected by the strong support the stock formed between $22 and $23 in August and early September.

Brent Archer is an options analyst and writer at Investors Observer.

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Filed under: Industry, Competitive strategy, Google (GOOG), Verizon Communications (VZ)

Verizon (NYSE: VZ) has decided to take its fate into its own hands and challenge the FCC’s ruling that the new radio spectrum that it will auction must be open to new devices and handsets. This runs counter to the old system which allowed carriers to by spectrum and then close it to anything other than the products that they sell consumers.

According to The Wall Street Journal, Verizon “appealed the Federal Communications Commission’s rules for a coming radio spectrum auction, charging the agency with exceeding its authority in requiring carriers to open their networks to any devices and cellphone applications.” Google (NASDAQ: GOOG) and other companies have lobbied the FCC to allows a portion of the spectrum being offered to be open to “allow any handset to work on its cellular network and let customers download any software applications to their phones.”

While the Google position has been popular to software and consumer electronics devices, Verizon kind of has a point. If its spends billion of dollars on spectrum, why should it allow competing product to be offered on its system. It buys the spectrum and then loses money because it cannot control how the spectrum is used.

If the FCC wants open airwaves, that is fine. But, it should donate some of the spectrum to the public and allow companies to develop products and services that will run on it. Requiring companies to buy what they cannot control is almost un-American.

Douglas A. McIntyre is a partner at 24/7 Wall St.

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In another case of “what took so long?” Chase has announced the elimination of their no income and stated income ChaseFlex loan types.  The change, announced yesterday, goes in to effect on the 19th.  Just the latest in a long line of investors who find that secondary market buyers want to see proof of capacity to repay; something that was minimized in favor of credit score over the last few years.  As we’ve maintained - “FICOs can’t make your mortgage payment” and the market seems to finally be agreeing.

From the announcement:

As a responsible lender and investor, we continue to monitor the lending environment and make changes as necessary. The security of our customers, employees, and shareholders is our highest priority, and as such, we are charged with ensuring that our products and policies remain prudent and further support our commitment to help borrowers sustain home ownership.

When reviewing product performance, we find adequate documentation is a key risk driver in loan repayment. From a financial standpoint, we need to take this risk component into account when making loans in this environment.

Consequently, we have decided to eliminate the ChaseFlex No Doc and No Ratio programs from our Alt A product suite effective September 19, 2007.

While there will be hold outs it appears a certainty that lack of capacity will only be tolerated on low LTV and high FICO loans - and little else.  Seems to me like we’re getting back to “common sense” in a hurry - which has to be seen as a good thing.

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In the latest broker letter from Countrywide attempts are made to reduce anxiety building in the broker community about the onslaught of bank closures and strategic changes away from the wholesale and correspondent lending models.  Clearly with WaMu shuttering correspondent lending, and lots of chatter about the need to improve quality by focusing solely on retail origination, brokers are rightfully worried about their place in the industry when all is said and done.

From Countrywide:

 Dear Business Partner:

As we continue to adapt to challenges in the mortgage market, this communication is the second of a series from Countrywide®, America’s Wholesale Lender®. In these ongoing communications, my goal is to present open and direct assessments of the current state of wholesale lending, and the measures we can take collectively — as originators and lenders — to successfully evolve the wholesale lending channel.

My first communication in this series, emailed to you on August 28, was met with a wide range of reactions from the broker community as expected. I’m pleased that so many people took the time to share their views as it demonstrates how engaged and passionate we all are about this business. Truly productive communication should inspire dialog that airs points of agreement as well as honest differences of opinions.

Undoubtedly, these communications are about looking forward and about helping to define what success will look like for all of us — tomorrow and in the future. To flourish, all players in the wholesale lending channel — lenders and brokers alike — must work together to evolve and prosper in today’s ever-changing environment. As a former loan originator who once operated as a mortgage broker, I couldn’t believe more in the vital role that strong, high-quality, and service-oriented mortgage brokers play in the mortgage lending process.

Adapting for Change

In this virtually unprecedented period in our industry, it is clear that we must all take decisive action to ensure the long-term health of our business and of the wholesale lending channel. Given the current soft housing market conditions and the tighter credit standards that are in place today, we already know that 2007 will produce lower origination volumes than expected. We are now estimating that these variables will reduce the size of the originations market in 2008 by 25% or more from 2007 volumes. In addition to these forecasts, Countrywide is now only offering non-prime financing options that are eligible for sale or securitization under programs supported by the GSEs (Fannie Mae, Freddie Mac) and FHA.

Despite these and other reductions to our product guidelines, Countrywide, America’s Wholesale Lender continues to offer among the broadest product menus in the industry. Nevertheless, we must evolve our business model to adapt to these significant changes in the market.

Accordingly, we recently announced our plans to integrate our prime and non-prime sales forces into a single, industry-leading sales organization dedicated to supporting our extensive product line — including Non-Prime, Government, Custom Construction, and Reverse Mortgage*. This evolution of our organization truly strengthens our commitment to our One Source lending strategy and provides you easier access to the home loan solutions that can help drive your business.

As a result of this integration, we made a difficult decision and, earlier today, reduced the size of our sales organization across the country. It was necessary to make these adjustments to ensure appropriate broker account assignments in light of the projected lower size of the overall mortgage market.

Your One Source for Success.SM

In spite of these actions, Countrywide, America’s Wholesale Lender is well positioned to continue its leadership role in the channel and remains relentless in our pursuit of achieving a dominant status among wholesale lenders.

Our new sales force and structure is designed to better meet the needs of our Business Partners as we work together to evolve and strengthen the wholesale lending channel. Our distributed Account Representatives and fulfillment resources are truly devoted to helping you drive your success with one simple goal in mind — delivering responsive and knowledgeable service each and every time you call upon them for assistance.

As a result of today’s changes, we are quickly working to restructure our account assignments across our existing sales force. If you have any questions regarding this process, please contact your Account Representative or the Area Sales Manager in your market. You may visit www.cwbc.com or call 1-800-877-POWER® if you need assistance with contact information.

Looking to the Future

At Countrywide, America’s Wholesale Lender, we remain steadfast in our commitment to our broker Business Partners and our goal of providing solutions that can help drive your business. Working together, I am confident that we can successfully evolve the wholesale lending channel to adapt and prosper in the new market paradigm. To do so, however, we must all be willing to constantly examine our business strategies and practices and to affect change where change is needed.

In my next communication, I plan to address the ongoing importance of the mortgage broker “value proposition” in today’s mortgage lending environment. I also plan to share observations on the topics of strengthening consumer loyalty and enhancing the broker role as a trusted advisor in the housing finance industry.

Together — as originators and lenders — we can and will revitalize the wholesale lending industry. Thank you once again for your time.

Todd A. Dal Porto
Senior Managing Director & President
Countrywide, America’s Wholesale Lender

My thoughts? Well in the last communication there was quite an uproar from the broker community from what appeared (not to this recipient however) that Countrywide was looking for a way to ease the news that less production would be coming from the wholesale (broker) channel in the future.  While not implicit, the first message seemed to raise that concern among brokers.

This is clearly an attempt to show that Countrywide is not running for the wholesale aisle - yet.  However, it must be in context with the layoff scheme to reduce the workforce by 20%.  Will they be concentrated in wholesale or evenly between all origination channels?  From early accounts it seems they are taking their most drastic steps in reducing wholesale capacity.  However, this is just my opinion and we have yet to see the final strategy revealed from Countrywide.

I will say though that they are at the mercy of the secondary market like everyone else.  If investors only want retail loans, retail loans is what they’ll get - regardless of what Countrywide may or may not say now.

Personally I’ve seen staff layoffs, account reassignments and more that make it look like a paring down of wholesale is well underway - but I could be wrong.

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Filed under: Deals, Consumer experience, Competitive strategy, Campbell Soup (CPB), Hershey Co (HSY)

According to a report from Bloomberg this morning, Campbell Soup Co. (NYSE: CPB) is looking to rake in somewhere between $1 billion to $1.5 billion when it sells off its boutique chocolate brand Godiva Chocolatier. News of the company’s interest in selling off the brand came early last month, at which time analysts had predicted the sale would bring in between $750 million and $1 billion.

The company first got involved with Godiva back in 1966 when it purchased one-third of the company, and following that took over ownership. Godiva represents around 7% of Campbell’s total revenues, but the company has been careful to keep the brand separate from the core Campbell’s name brand.

It makes sense that Campbell’s would try to unload Godiva as it is trying to focus on “centering on convenience, wellness and quality,” and are looking to expand its soups business more in China and Russia, two countries that have faster growing economies and larger soup consumption than America.

Some potential buyers for Godiva could be Hershey Co. (NYSE: HSY), Mars Inc. and Cadbury Schweppes Plc (NYSE: CSG), according to Credit Suisse. Another company that has publicly stated interest is Swiss chocolate maker Lindt & Spruengli, which has announced yesterday that it will be raising its product prices from between 6 and ten percent, depending on the country, and will be looking into the possibility of picking up Godiva.

[Thanks to Jaye_Elle for the photo]

Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor’s Observer

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Filed under: Earnings reports, Good news

If you took a driving trip through the Midwest during the summer, chances are you, and several hundred thousand others, stopped at one of almost 1400 Casey’s General Stores Inc. (NASDAQ: CASY) to refuel both car and driver. On Sept. 5 Casey’s reported record earnings for 1Q FY 2008, which ended on 31 July, and did it through real growth in both sales and income. Casey’s, despite having a goal of acquiring 50 new locations by the end of the year, actually acquired none during the quarter. Casey’s has its priorities in the right order in terms of cost control. Senior management does not let operating expenses increase by any percentage amount greater than the percentage increase in gross profits.

Total sales of both gasoline and food were up 17% to $1.3 billion. Most of this amount came from increases in food and beverage sales, which were up 15% to $260 million for packaged food items and cigarettes and $75 million for fresh pizza and sodas.

Oddly, gasoline sales were up imperceptibly, not even half a percent, in terms of volume. But as many of us have suspected, the profit margin on gasoline has increased, in this case to 15.8 cents per gallon, compared to 9.8 cents per gallon in the summer of 2006. Casey’s is still expanding its presence throughout the nine state Midwest region. Casey’s continued to show strong sales during August as well, with gasoline sales up 1% but food, groceries and general merchandise up almost 12% in same store sales. Clearly, Casey’s has the right product mix at the right prices for tis customers. Casey’s recently announced a quarterly dividend of $0.065 per share. The stock currently trades just under $29.00, and seems a good bet to appreciate in price without much downside risk.

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Filed under: Best Buy (BBY), Options

Best Buy (NYSE: BBY) September volatility elevated as expected into 9/18 EPS.

• BBY is expected to report EPS on 9/18.
• RBC Capital Mkts says, “our price target of $61 is based on approximately 17 times our FY09 EPS estimate of $3.60.”
• BBY September option implied volatility is at 41. BBY over all option implied volatility of 32 is near its 26-week average of 30 according to Track Data, suggesting flat outer month risk.

Cablevision (NYSE: CVC) volatility flat into 10/24 CVC shareholder merger vote.

• CVC, a leading entertainment & communications company controlled by the Dolan family, closed at $34.62.
• The Dolan family’s proposal of taking CVC private at $36.26 a share will be voted on at special meeting of CVC shareholders on 10/24/07. CVC has secured its board and its special committee approval.
• CVC December call option implied volatility is at 22; puts are at 27, near its 26-week average of 23 according to Track Data, suggesting non-directional price risks.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

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Filed under: Analyst reports, Research in Motion (RIMM), Fortune Brands (FO), Sun Microsystems (JAVA), Analyst initiations

MOST NOTEWORTHY: Sun Microsystems (JAVA), FMC Technologies (FTI), TorreyPines (TPTX), and Exelixis (EXEL) were today’s noteworthy initiations:

• Sun Microsystems Inc (NASDAQ: JAVA) was initiated with a Market Perform at BMO Capital, which views the shares’ risk/reward as favorable around $5.
• FMC Technologies Inc (NYSE: FTI) was initiated with a Buy by Jefferies, which believes strong subsea fundamentals will drive strong earnings by the company.
• TorreyPines Therapeutics Inc (NASDAQ: TPTX) was initiated with a Strong Buy at JMP Securities, which said PhIIb data in Q4 on the company’s tezampanel drug could increase investor conviction on the first in-class drug.
• Exelixis Inc (NASDAQ: EXEL) was initiated with a Buy by Lazard, which believes Exelixis has a promising pipeline.

OTHER INITIATIONS:

• Fortune Brands Inc (NYSE: FO) was assumed with a Neutral rating by JMP Securities.
• Evergreen Solar Inc (NASDAQ: ESLR) was assumed with a Hold rating by Jefferies.
• Research in Motion Limited (NASDAQ: RIMM) and Kodiak Oil & Gas Corp (AMEX: KOG) were initiated with Outperform ratings at BMO Capital.

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Filed under: Bad news, General Motors (GM)

General Motors Corp. (NYSE: GM) has the UAW as a thorn in its side once again, as UAW President Ron Gettelfinger has picked a fight with GM about proposed funding for the automaker’s retiree health fund. Is this the same old song and dance as we’ve seen before?

UAW officials officially labeled GM as a “strike target” less than 24 hours after disputing procedures for funding GM’s retiree health care fund, and the contract between the union and Detroit’s GM ends at midnight tonight. So, there are about 14+ hours left for the two boys in the sandbox to put aside differences and come to a compromise. Place your bets now.

With the big three (or big two, if you’re talking public companies) having a combined $114 billion in health care obligations, the fight between auto unions and large domestic automakers will see no end, if ever. But, in recent contract talks, the spirit of the meetings was described as “cooperative talks.” Well, until the last minute (like always). Tempers are flaring most likely, and egos are dropping bombs all over the meeting room floor (maybe even f-bombs, heh).

But with the three largest domestic automakers losing a combined $15 billion in 2006, the UAW relented in its fight to get them agreeing on paying for all health care costs for all employees, active and retired. Looks like that “you all pay for everything” stance is back in some form. GM does not need employees walking out to picket at this point in 2007, but that is possibly what could happen over the weekend based on what happens in Detroit today.

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