Filed under: Deals, Industry, Competitive strategy, Google (GOOG), Microsoft (MSFT)

Shares sold short in Microsoft (NASDAQ: MSFT) fell 14.1 million shares in September to 83 million. It seems that the shorts knew enough to get out ahead of good news.

So far this year, Microsoft’s stock has been flat, but over the last three days it has moved up more than 3% on news that it had released its Halo 3 video game and that it is in talks to buy part of social network Facebook.

The enthusiasm about Halo may be well-placed. In the company’s last fiscal year, its devices business lost $1.9 billion on $6.1 billion in revenue. The previous year was not any better. The world’s largest software company needs a catalyst to drive sales of its Xbox 360, and Halo 3 may well do that.

The Facebook deal has also drawn a great deal of attention. Rival Google (NASDAQ: GOOG) is building a large advertising platform using its own search inventory combined with impressions that it gets from its AdSense network. To expand that business, it is buying DoubleClick and has a deal to sell ads on social network leader MySpace. AOL is making moves in the same business. It owns Advertising.com, the largest ad network, and has just bought behavior targeting company Tacoda.

That leaves Microsoft sitting well behind its rivals. A deal with Facebook could help expand a network around its portal, MSN. Online services lost $732 million last year.

It may be that the company is facing up to its online and devices problems. That could be good news.

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

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Filed under: Management, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Sony Corp ADR (SNE)

For years Microsoft (NASDAQ: MSFT) has taken the approach that it is best to fill senior management jobs from within the company. While this may have worked in areas like running the operations for Windows OS, server software, and Office, it has not worked in the device and internet businesses. Microsoft’s software divisions can be run by engineers, but other areas of the company probably cannot.

To fix this, CEO Steve Ballmer is turning outside the company for management.

Brian McAndrews, who now runs Microsoft’s online ad business, has insisted that certain engineering groups report to him, according to The Wall Street Journal. The company also brought in its chief operating officer, Kevin Turner, from Wal-Mart (NYSE: WMT) and Don Mattrick, who runs video games, from Electronic Arts (NASDAQ: ERTS).

Why the change of heart? Microsoft has done poorly in several of its divisions, and its online and devices operations lose hundreds of million of dollars each year. While the Xbox has moved ahead of Sony’s (NYSE: SNE) PS3, it still trails the Nintendo Wii. Microsoft’s MSN and Live online operations have failed to gain ground on Yahoo! (NASDAQ: YHOO) and Google (NASDAQ: GOOG).

It could be argued that Microsoft should never have gotten into businesses so far afield from building PC and server software. Investors probably would have been better off if the company had not been saddled with losses from these new divisions.

But, if Ballmer insists on going down the road of diversification, he might as well do it right.

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

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Filed under: Bad news, Newspapers, Scandals

According to research released by the Center for Responsible Lending, people ages 18-24 pay an average of $3 in overdraft fees for every dollar they are overdrawn, compared with $2 paid by all adults.

This is likely a result of young people using debit cards more frequently, and for smaller purchases. Overdrawn by 19 cents on that bottle of water? You could be hit with a $25 dollar fee. According to the USA Today, “Congress is considering a bill sponsored by Rep. Carolyn Maloney, D-N.Y., that requires, among other things, that banks warn customers before they overdraw, so they have the option to back out of the transaction.”

I can’t wait to watch the banks justify their opposition to a bill like that — or to see politicians oppose it in line with their campaign contributions. After all, there is no all-powerful Poor College Student’s Lobby. Poor college students are more likely to sleep in the lobby.

But why shouldn’t consumers be given the option of deciding to forgo a bottle of water and save $25? Can anyone honestly make some sort of rational argument as to why people shouldn’t be warned before they are hit with an overdraft fee?

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Filed under: International markets, India, China, Brazil, Russia, Indices, Market matters, Money and Finance Today, Technical Analysis, Eastern Europe

Most investors are probably aware that the stock markets of “emerging,” or developing, nations have been the big winners so far this year.

Since January, the MSCI Emerging Markets index has outpaced the MSCI World index by a hefty 18.1%.

But even then, the divergence in performance between various regions has been striking, with some of these traditionally volatile markets doing far better than others.

For instance, the “BRICs” — Brazil, Russia, India and China — have beaten the emerging markets benchmark by 7.7%, while its solely European-based counterpart has lagged by 13.65%, or nearly twice as much.

It just goes to show that when it comes to investing overseas, choosing the right stocks, sectors, and “themes” can really make a world of difference.

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.

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Filed under: Good news, Chevron Corp (CVX), Oil

Chevron Corp. (NYSE: CVX) announced that is has approved a buyback program that will result in the company repurchasing $15 billion worth of outstanding stock over the next three years.

The stock has been moving higher today following the news, and is currently trading up 0.6% to $92.39, up $0.51. Earlier in the session shares rose as high as $93.32. Shares of CVX traded up to a new 52-week high Monday of $95.50.

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: Ford Motor (F), General Motors (GM), Options, Bear Stearns Cos (BSC)

Bear Stearns Companies (NYSE: BSC) — implied volatility decreases after EPS as BSC rallies. BSC is recently up $4.23 to $118.96. BSC October option implied volatility of 40 is below its 26-week average of 43 according to Track Data, suggesting decreasing price movement.

Ford Motor (NYSE: F) — implied volatility-risk collapses on tentative UAW agreement. Ford is recently up 33 cents to $8.67. General Motors Corp. (NYSE: GM) and the United Auto Workers announced a tentative agreement on a new national contract. Dow Jones reported, “The cost of protecting $10 million of fellow U.S. automaker Ford bonds fell to $590,000, after being in the $630,000 area on news of the strike at GM, according to a market participant. F’s 7.45% notes due 2031 were up 1 point to 78.75 cents, according to MarketAxess.” F October option implied of 35 is below a level of 52 from last week and below its 26-week average of 49 according to Track Data, suggesting decreasing risk.

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

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Filed under: Apple Inc (AAPL), Marketing and advertising

As my colleague Georges Yared is fond of saying, Apple, Inc. (NASDAQ: AAPL) continues to ride the train to riches every year, as it rolls out new iPod products while increasing its share of the PC market slowly but surely. As I write this, Apple shares stand at a new all-time high of $153.18. Is it time to get into these shares, or has the time passed? Those who bought in at $80 a share are probably grinning right now, as an almost 100% return may be on the horizon soon.

But, like Georges, I believe Apple shares are headed even higher. The popular iPod line has been around for over five years now, and the new generation is better than ever. The snazzy new iPods create buzz around Apple’s music products and other products like the Mac computer line, and the company’s word-of-mouth and visual marketing continues to shine with the mass consumer.

Apple goes beyond the “features for the money” approach of other digital music players. Buying an Apple product is now a cultural statement and provides a feeling of being in the “in crowd.” Over and over again, there are arguably better products that try to compete with the iPod, but none have succeeded thus far because they cannot match that special feeling.

Continue reading Apple (AAPL) at record high, going higher?

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Filed under: Earnings reports, Technical Analysis, Stocks to Buy

Monsanto Company (NYSE: MON) provides agricultural products to farmers worldwide. The company produces seeds and develops biotechnology traits that assist farmers in controlling insects and weeds. Products include canola, corn, soybean, fruit, cotton, sunflower and sorghum seed. Monsanto also manufactures the world’s leading herbicide, Roundup. Further, it provides products that focus on improving dairy cow productivity and it sells genetics lines for improving the productivity and meat quality of swine.

Early last week, the firm issued upside guidance for FY07. Management boosted its EPS estimate from $1.75-$1.80 to $2.00. That topped the consensus Street estimate of $1.83. The news popped the shares out of an early September “cup” into the mid-September “handle” of a Cup & Handle formation. The price is now completing the pattern with a bullish rise from the right-hand side of the “handle,” on word the company believes the opportunity for its biotech traits outside the United States could nearly triple the 95 million acres penetrated today.

Brokers recommend the shares with four “strong buys,” four “buys,” five “holds” and one “sell.” Analysts see a 28% average annual growth rate, through the next five years. The MON Sales Growth rate (23.08%), EPS Growth rate (67.21%), Operating Margin (18.53%) and Net Profit Margin (12.92%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 86 percent of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past twelve months, it has traded between $42.75 and $83.97. A stop-loss of $72.50 looks good here. Note that the firm is expected to release fourth quarter results in the second week of October.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

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Filed under: Competitive strategy, Microsoft (MSFT)

As reported recently, Nintendo, Ltd.’s (OTC: NTDOY) Wii gaming console climbed ahead of Microsoft Corp.’s (NASDAQ: MSFT) Xbox 360 gaming console in sales. While Microsoft’s console has been around for almost two years, the Nintendo Wii was only released last November. This came as no surprise to me, as the cost of the Wii is significantly lower and it seems to appeal to a wider audience. The Xbox 360 is in a different universe technically, but to reach out to the mass population, ‘polygons per second’ is meaningless. Mass customers want interactive fun as an experience rather than ultra-realism in the game itself.

Microsoft is not down by any means, but the company still — still — is not making much (if anything at all) on the Xbox. The hardware system simply costs too much and sales are too low to make the platform profitable. Meanwhile, Nintendo is reportedly making a nice profit on the Wii already, since it did not use cutting-edge components and sales have been high. Microsoft just can’t turn tail and run away, as the company has invested billions in the Xbox platform and overall gaming division. So, what can it do?

How about a focus on a different area of the world? Microsoft’s group product manager Aaron Greenberg recently hinted at this, saying, “The number one objective is to win on a global basis and that may mean winning some markets and losing others.” Does that mean Microsoft is prepared to hand over the most popular gaming console crown to Nintendo in the U.S. and concentrate efforts in, say, Europe? That seems like the obvious answer. Both Microsoft and Nintendo are global companies, and becoming numero uno in every global region is one mighty goal in the market for the next best gaming console. Microsoft’s sales have soured in Japan, so Europe may be a large focus for the software maker as the Xbox 360 product life winds down in the next few years.

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Filed under: Rumors, Options

Sherwin-Williams Co. (NYSE: SHW) is engaged in the manufacture, distribution, and sale of paint, coating and other related products. SHW is recently up $0.95 to $65.68 on unconfirmed buyout chatter. SHW has a market cap of $8.5 billion with long term debt of $292 million. SHW call option volume of 8,040 contracts compares to put volume of 328 contracts. SHW October option implied volatility of 36 is above its 26-week average of 28 according to Track Data, suggesting larger risk.

Take-Two Interactive Software (NASDAQ: TTWO), an interactive entertainment software game developer, is recently up 33 cents to $17.26. Activist shareholders have been involved in TTWO over the last eleven-months. Unconfirmed and renewed buyout chatter is circulating about TTWO this morning. TTWO call option volume of 2,199 contracts compares to put volume of 225 contracts. TTWO call option implied volatility is at 52; puts are at 61 near its 26-week average of 55 according to Track Data, suggesting non-directional risk.

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

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