Filed under: Products and services, Competitive strategy, Dell (DELL), Hewlett-Packard (HPQ)

When Dell (NASDAQ: DELL) reported Q3 numbers last week, the market was underwhelmed by the computer maker’s results. Dell, in the midst of staging a comeback under founder and CEO Michael Dell, missed earnings by a penny. Although this was the first solid quarter of honest-to-goodness results after a string of quarterly “preliminary” results due to an accounting scandal, the market didn’t let up. Missing estimates by even a penny can be disastrous in the short term.

Well, larger competitor Hewlett-Packard (NYSE: HPQ) continues to add to that misery, as research firm iSuppli recently stated that the Palo Alto, Calif., company increased its market share over rival Dell in the third quarter of the calendar year. Adding insult to injury, Taiwanese computer maker Acer stole the number two spot in laptop sales away from Dell in the Q3 period as well, after completing its acquisition of the Gateway brand in the same quarter.

According to iSuppli, Hewlett-Packard took home 19.2% of all computer shipments in the third quarter, widening its lead against Dell’s 14.6% share. In 2006’s Q3 period, the difference was 16.5% for HP compared to 16.3% for Dell. My, what one year can do. Dell, ever one to control internal costs, let that one area get out of hand in its Q3 period and that dented its profit even as revenues grew. With laptop PCs continuing to grow way faster in unit shipments than desktop PCs, and with a resurgent Acer not giving an inch, it’s going to be one large, uphill battle for Dell from here on.

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Filed under: Deals, Options, Technical Analysis, Garmin Ltd (GRMN)

Garmin Ltd. (NASDAQ: GRMN) announced that it has completed the acquisition of Electronica Trepat S.A., the principal distributor of Garmin’s products in Spain. Garmin will rename the firm Garmin Iberia S.A. and will retain its management, sales, marketing and supporting staff. It will also continue operations at its current headquarters and warehouse facility located close to Barcelona. Financial terms of the proposed transaction were not released. If you think this stock won’t be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on TSO.

After hitting a one-year high of $125.68 in October, the stock has fallen over the past two months. This morning, GRMN opened at $106.36. So far today the stock has hit a low of $102.07 and a high of $106.83. As of 11:15, GRMN is trading at $104.77, down $2.58 (-2.4%). The chart for GRMN looks bearish but improving slightly, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

Continue reading Garmin (GRMN) completes deal for Spanish distributor

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Filed under: International markets, Exxon Mobil (XOM), Venezuela, ConocoPhillips (COP), Oil

Over the weekend there was a referendum in Venezuela that would have scrapped constitutional the term limits for president Hugo Chavez. He has been president of Venezuela since 1998 and constitutional term limits will not allow him to run again in for reelection in 2012. The left- leaning Chavez has been following in the steps of Fidel Castro and turning Venezuela into a communist state. He has enacted emergency powers, nationalized oil infrastructure, expelled foreign missionaries and allowed crime to run rampant. In order for him to constitutionally stay in office though he needed to get rid of the presidential term limits. That referendum this weekend failed, which is good news for democracy.

Venezuela is the forth largest oil exporter to America after Canada, Saudi Arabia, and Mexico. About one half of its 2.3 million exported barrels a day come to the US representing about 9% of all US oil imports. Like Iranian President Mahmoud Ahmadinejad, Chavez likes to talk and can move oil prices higher with off handed remarks and his railing against US foreign policies.

The Venezuelan people led by Chavez have headed down the road to socialism and almost a Cuban style dictatorship. While by no means the end of the story, this referendum is a win for democracy and should help the long term stability in the region which is important for US oil prices. Exxon Mobil (NYSE: XOM) and ConocoPhillips (NYSE: COP) have both been had investments in the country in past years.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

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Filed under: Analyst reports, Good news, Industry, Options, Technical Analysis, Politics, Suntech Power Hldgs ADS (STP)

Suntech Power Holdings Co. Ltd. (NYSE: STP) shares are are continuing to rise after last week’s comments by analysts that suggested a separate energy-tax package if solar tax incentives don’t make it into the current energy bill. The comments set off a bullish sector rally on Wall Street that looks like it is continuing into this week. 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 STP.

After hitting a one-year low of $29.25 last December, the stock hit a one-year high of $84.94 on Friday. STP opened this morning at $79.32. So far today the stock has hit a low of $78.59 and a high of $82.15. As of 11:05, STP is trading at $80.20, up $1.03 (1.3%). The chart for STP looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $50 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. This particular trade will make a 4.2% return in just 7 weeks as long as STP is above $50 at January expiration. Suntech would have to fall by more than 37% before we would start to lose money.

STP hasn’t been below $55 since October and has shown support around $65 recently. This trade could be risky if the cost of energy falls, but even if that happens, there should still be demand for alternative energy innovation.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in STP.

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Filed under: Merrill Lynch (MER), Goldman Sachs Group (GS)

FT.com reports that newly appointed Merrill Lynch & Co. (NYSE: MER) CEO, John Thain, wants to remake Merrill in Goldman Sachs Group’s (NYSE: GS) image. In particular, Thain wants different parts of Merrill to work more effectively as a team.

The irony of this idea is high. That’s because Thain’s predecessor, Stanley O’Neal hammered his subordinates every quarter as Goldman outperformed Merrill. O’Neal led a big increase in Merrill taking on more trading risk because he thought that was what led Goldman to do so well. It was this Goldman envy that ultimately led to O’Neal’s downfall.

Now Merrill’s board has someone who worked at Goldman — Thain spent most of his Wall Street career in the Goldman system, rising to become co-president before leaving in 2003 — to try again to remake Merrill in Goldman’s image. In my book, Value Leadership, I compared the Goldman and Merrill cultures and concluded that Merrill has a long history — dating back at least to 1995 — of encouraging internal competition based on a star system that creates massive amounts of turnover at executive levels.

I predict that Thain will face enormous resistance when he tries to impose the Goldman system of teamwork onto the Merrill culture. If he succeeds, he deserves enormous admiration.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

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Filed under: Analyst upgrades and downgrades, Bad news, UAL Corp (UAUA), Options, Technical Analysis

UAL Corporation (NASDAQ: UAUA) stock is falling this morning after being downgraded to Equal Weight from Overweight. The Lehman Brothers analyst cited concerns about the stock price being overly inflated due to merger speculation. This negative stock action comes despite lower oil prices today, which are generally a bullish sign for airlines. If you think this stock won’t be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on UAUA.

After hitting a one-year high of $51.60 in October, the stock has declined over the past two months. This morning, UAUA opened at $40.27. So far today the stock has hit a low of $39.70 and a high of $40.66. As of 10:55, UAUA is trading at $40.19, down $0.75 (-1.7%). The chart for UAUA looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider a January bear-call credit spread above the $55 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. This particular trade will make a 6.4% return in 7 weeks as long as UAUA is below $55 at January expiration. United would have to rise by more than 36% before we would start to lose money.

UAUA hasn’t been above $55 at all in the past year and has shown resistance around $42 recently. This trade could be risky if the price of fuel comes down dramatically, but if that happens, it will probably mean we are in a recession, which is not good for UAUA anyway.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in UAUA.

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Filed under: Options

Macy’s (NYSE: M) is recently up 33 cents to $30. M has been frequently mentioned over the last 10 months as a buyout candidate because of its real estate. M December & January option implied volatility of 52 is above its 26-week average of 42 according to Track Data, suggesting larger risk.

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

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Filed under: Microsoft (MSFT), Options

Microsoft Corp. (NASDAQ: MSFT) — Bill Gates will give the pre-show keynote address at CES on January 6th in Las Vegas. CES features 2,700 exhibitors spanning 30 product categories. MSFT overall option implied volatility of 29 is above its 26-week average of 24 according to Track Data, suggesting larger risk.

E-Trade (NASDAQ: ETFC) — ETFC is recently down 65 cents to $4.04. On November 29, ETFC announced a $2.5 billion cash infusion deal from Citadel Investment Group. Bank of America says: “Downgrade to sell (PT goes to $2) as we no longer believe the value of the ETFC’s retail brokerage business, a dwindling asset (which has lost 17% of assets already), can offset negative value at the bank.” ETFC overall option implied volatility of 111 is above its 26-week average of 72, according to Track Data, suggesting larger price fluctuations.

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

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Filed under: Google (GOOG), Comcast Cl’A’ (CMCSA), Time Warner Cable (TWC), Technology

It’s been a while since we’ve seen sharp gains on shares of cable companies. UBS is holding its Global Media Week and Communications Conference today in New York. Earlier today, Time Warner Cable (NYSE: TWC) surprised the markets today during a CNBC video interview when CEO Glenn Britt said that Time Warner wouldn’t be in the bidding for more wireless spectrum in the FCC auction. The company had been a bidder before.

Comcast Inc. (NASDAQ: CMCSA) is also opting out of a wireless spectrum bidding. The truth is that both cable companies already have access to spectrum if needed, and there is still more spectrum available on existing infrastructure that can be used if needed.

One interesting development was when Glenn Britt described the demand for a cable company to need wireless as a quadruple play against the telecoms, who now offer video solutions that compete against cable. The old triple- play is still very under-penetrated on a nationwide basis.

Maybe it pays to be patient rather than spending a few hundred million here and a couple billion there. Sooner or later it adds up to real money. Google (NASDAQ: GOOG) has said it would be participating in the spectrum auction in January for the new, more powerful 700-MHz spectrum. If the Googlesaurs want to be rewarded similarly, maybe they’d determine it is cheaper and easier to partner for spectrum openly rather than the spend-spend-spend model.

Time Warner Cable shares are up nearly 4% to $27.05 today, and Comcast shares are up some 2.5% at $21.05. Google shares are down almost 1% at $687.15.

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Filed under: Management, Motorola (MOT), Sun Microsystems (JAVA)

When Motorola (NYSE: MOT) announced this past Friday that CEO Ed Zander would be leaving his post come the first of next year, not too many industry pundits and analysts were surprised. Motorola seems to have lost its way in the last 18 months when it comes to the wireless handset marketplace, and Zander’s inability to manage through that challenge cost him his job. But can his successor, the much-admired Motorola President Greg Brown, stage a comeback for the wireless giant?

Brown has every bit as impressive (if not more) of a resume as Zander, having racked up 25 years in the tech industry along with mounds of operations expertise. Zander’s claim to fame was as past president of Sun Microsystems (NASDAQ: JAVAD), although at the helm of Motorola, his reputation took a beating as the tech giant floundered against the competition, both in market share and profit.

Continue reading Will Greg Brown rescue Motorola?

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