Filed under: Rumors, Google (GOOG), Yahoo! (YHOO), IAC/InterActiveCorp (IACI)

Will InterActive Corp. (NASDAQ: IACI) be dumping its search and information portal Ask.com? Sort of, according some insider accounts. It wouldn’t be jettisoning Ask.com entirely — it would just be getting rid of the technology that powers the search engine’s results. The engine behind Ask.com, Teoma, could be taken out and replaced by Google, Inc. (NASDAQ: GOOG)’s technology.

Google already has a stranglehold on internet search. It’s been suggested for quite a while that Yahoo, Inc. (NASDAQ: YHOO) dump its pride in its search engine technology (known as Project Panama for the last few years) and just use Google instead for powering its search engine. Does Google have that much power — one that would make competitors use its search engine technology to power their own sites? Yes, it does.

If Ask.com were to switch to just using Google, then the search service really would hold little value to the customers using it. Sure, Ask.com would wrap Google search results in its own brand and customer interface, but would there truly be a compelling reason to use Ask.com at that point? Not really. Just like Yahoo!, Ask.com has spent huge amounts of cash to improve its search technology with little to show for it.

That’s the first-mover advantage Google has. Even if either had a better search service, that wouldn’t mean more search customers. Then again, does either have a superior search service? I personally use Ask.com daily in addition to Google — it’s great. For my sole search engine service, though, it’s not that good.

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Filed under: Earnings reports, Google (GOOG), Texas Instruments (TXN), Technical Analysis, Stocks to Buy

China Techfaith Wireless Communication Technology (NASDAQ: CNTF) is a mobile handset maker in the People’s Republic of China. Products include smart phones, feature phones, wireless modules, data cards, printed circuit boards and wireless software. Services involve hardware design, component selection, sourcing, prototype testing, pilot production and production support. The firm creates sets for platforms developed by Philips (NYSE: PHG), Texas Instruments (NYSE: TXN) and Skyworks Solutions (NASDAQ: SWKS). Customers include leading Chinese and international mobile handset brand owners.

The firm pleased investors last week, when it reported Q4 EPS of seven cents and revenues of $45.7 million. Analysts had been expecting four cents and $43.3 million. Management also guided Q1 revenues to $48-$49 million ($42.86M consensus) and disclosed plans to work with Google (NASDAQ: GOOG) to develop a phone based on that firm’s Android operating system.

The CNTF share price popped on the news and then moved into a bullish “flag” consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the shares with one “strong buy”, two “buys”, two “holds” and one “underperform”. Analysts see a 65% growth rate, through the next year. The CNTF Price to Sales ratio (1.78), Price to Book ratio (1.49), Sales Growth rate (56.83%) and EPS Growth rate (-0.09 to +0.07 yr/yr) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 20% of the outstanding shares. Over the past 52 weeks, the stock has traded between $3.40 and $9.98. A stop-loss of $5.00 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.

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Filed under: Launches, Industry, Consumer experience, Competitive strategy, Google (GOOG), Microsoft (MSFT), Merrill Lynch (MER)

Google (NASDAQ: GOOG) Apps is a set of server-based word processing, spreadsheet, and presentation software created to go after a number of the features of Microsoft (NASDAQ: MSFT) Windows. While Windows uses the memory of the PC, Google’s product runs over the internet on Google’s servers.

Microsoft is getting sick of having sand kicked in its face. The big software company said that it would increase “the availability of its online services for e-mail and collaboration software,” according to Reuters. The software had been available to smaller businesses but now it can be used by companies of any size.

Google claims that it has signed up 500,000 businesses to use Google Apps. That has to be a real headache for Microsoft.

Now, Redmond is forced to walk a fine line. If it offers too many services over the internet at too low a price, it could cut into its profitable Vista franchise. Most of Microsoft’s margins are based on Windows, its server software, and Office. If the margins on those fall, the company’s stock price is likely to take a large hit.

The news is another example of how Google is bedeviling the world’s largest software company and hitting it where it hurts most, in its large profit centers.

Microsoft’s problem may be that it cannot do anything about the problem other than match Google’s products and probably drop what it charges. It is an unhappy option.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Rumors, Google (GOOG), Yahoo! (YHOO), IAC/InterActiveCorp (IACI)

Will InterActive Corp. (NASDAQ: IACI) be dumping its search and information portal Ask.com? Sort of, according some insider accounts. It wouldn’t be jettisoning Ask.com entirely — it would just be getting rid of the technology that powers the search engine’s results. The engine behind Ask.com, Teoma, could be taken out and replaced by Google, Inc. (NASDAQ: GOOG)’s technology.

Google already has a stranglehold on internet search. It’s been suggested for quite a while that Yahoo, Inc. (NASDAQ: YHOO) dump its pride in its search engine technology (known as Project Panama for the last few years) and just use Google instead for powering its search engine. Does Google have that much power — one that would make competitors use its search engine technology to power their own sites? Yes, it does.

If Ask.com were to switch to just using Google, then the search service really would hold little value to the customers using it. Sure, Ask.com would wrap Google search results in its own brand and customer interface, but would there truly be a compelling reason to use Ask.com at that point? Not really. Just like Yahoo!, Ask.com has spent huge amounts of cash to improve its search technology with little to show for it.

That’s the first-mover advantage Google has. Even if either had a better search service, that wouldn’t mean more search customers. Then again, does either have a superior search service? I personally use Ask.com daily in addition to Google — it’s great. For my sole search engine service, though, it’s not that good.

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Filed under: Deals, Management, Law, Merck and Co (MRK), Stocks to Buy

For over three years Merck and Co. (NYSE: MRK) has been distracted by its pain medication Vioxx. The company voluntarily withdrew the drug from the market in the fall of 2004 following its own study that showed potential higher risk of heart attack. Law suits ensued. This morning, it has been reported that 44,000 plaintiffs have submitted paperwork to accept the $4.85 billion settlement agreement and it is believed that Merck will reach the self imposed 85% threshold to go forward with the deal.

If this comes to pass, Merck, which has been defending itself case by case with mixed results, will be able to take a giant step forward in terms of putting this dubious part of its history behind it. Merck has won more cases than it has lost, but until this is settled, the unknown leaves doubts in some investors’ minds and naturally some drag on the stock.

When Vioxx was originally pulled off the market, the stock immediately tanked and sensationalist analysts envisioned losses as high as $50 billion. At the time, I did my own analysis and this settlement turns out to be very close to my own guesstimate. Trusting my own analysis, I began recommending the stock on this site and to family members, and bought into Merck in several portfolios.

Continue reading Merck nearing 85% settlement target; worth considering

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Filed under: Private equity

KKR is the firm that pioneered the private equity business getting its start in the mid 1970s. Over the years, the firm has established 14 funds and generated average returns of 20% (net of fees).

Lately, though, KKR has come under attack (as have many other private equity operators). So, when the firm’s Private Equity Investors holding, which is publicly traded in Amsterdam, had its conference call recently, Henry Kravis talked about the state of private equity.

It was not an easy talk since the fund had to mark down the valuations of seven holdings. In fact, the return of the portfolio was a horrible -0.1% last year, and the fund is trading at a 38% discount to its net asset value.

Simply put, Kravis says that dealmakers will need to be creative. This means locating capital from alternative sources, such as private investors and hedge funds. There will also be more minority investments.

Kravis also stressed that KKR will continue to stick to its investment philosophy. This means focusing on companies that have stable revenues, diversified global platforms and room for operational improvement.

More importantly, Kravis said that the private equity business is about the long-term. If anything, the best opportunities are when markets are in the midst of dislocations - which is certainly the case now.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Filed under: Earnings reports, Management, Dell (DELL)

As Doug McIntyre mentioned last week, Dell, Inc. (NASDAQ: DELL) didn’t hit its most recent quarterly numbers amid continuing higher costs during the quarter. The company “has a lot more work to do” — so much that it seems the one golden boy of cost control is out of sorts with itself. Founder and CEO Michael Dell did say that “we won’t grow at all costs” during the conference call. This was directed at the analysts’ mosh-pit that expects growth over every other metric. Because, you know, profits are secondary.

Although its retail effort seems to be going well, Dell fights for shelf space and sales with all of its largest competitors at almost every retailer. Entering into retail was not some kind of exclusivity magic shell-game for the computer maker. It has to work long-term, and it hasn’t even been a year since Dell entered retail. The company indeed made moves towards “transforming itself” during the quarter (read: cutting costs). But can it continue to expand its business in the U.S. and overseas without washing itself in red ink at the same time? That’s the delicate challenge. Unfortunately, top competitor Hewlett-Packard Co. (NYSE: HPQ) is the strongest it’s been in over a decade behind CEO Mark Hurd.

Dell went on to say that “improvements in profitability will take some time,” and it will continue to lower headcount to reduce overall costs in addition to designing market-leading notebook PCs for consumers. Both strategies are paying off: one on the costs side and one on the revenue side. Then again, another huge challenge is increasing sales outside the U.S., where Hewlett-Packard currently enjoys roughly two-thirds of its sales. As such, a downturn in any particular market insulates HP from sagging results with the breadth of global sales it has. If Dell can also achieve that level of padding, any consumer downturn that could happen this summer won’t hurt nearly as much.

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Filed under: Earnings reports, Google (GOOG), Texas Instruments (TXN), Technical Analysis, Stocks to Buy

China Techfaith Wireless Communication Technology (NASDAQ: CNTF) is a mobile handset maker in the People’s Republic of China. Products include smart phones, feature phones, wireless modules, data cards, printed circuit boards and wireless software. Services involve hardware design, component selection, sourcing, prototype testing, pilot production and production support. The firm creates sets for platforms developed by Philips (NYSE: PHG), Texas Instruments (NYSE: TXN) and Skyworks Solutions (NASDAQ: SWKS). Customers include leading Chinese and international mobile handset brand owners.

The firm pleased investors last week, when it reported Q4 EPS of seven cents and revenues of $45.7 million. Analysts had been expecting four cents and $43.3 million. Management also guided Q1 revenues to $48-$49 million ($42.86M consensus) and disclosed plans to work with Google (NASDAQ: GOOG) to develop a phone based on that firm’s Android operating system.

Continue reading China Techfaith Wireless Communication Technology (CNTF): Shares in bullish ‘flag’

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Filed under: Major movement, Earnings reports, Good news, Industry, Options, Technical Analysis, Economic data

HSBC Holdings PLC ADS (NYSE: HBC) shares are trading higher this morning after the company reported a 21% rise in profit in 2007, to $19.1 billion, beating analyst expectations. While the bank suffered loan impairment charges of $11.7 billion in 2007, net operating income rose 13% to $61.75 billion. 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 HBC.

After hitting a one-year high of $99.52 in October, the stock hit a one-year low of $69.25 in February. HBC opened this morning at $77.95. So far today the stock has hit a low of $77.63 and a high of $79.35. As of 11:00, HBC is trading at $78.61, up $3.36 (4.5%). The chart for HBC looks bearish but improving slightly, 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 April bull-put credit spread below the $65 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 6.4% return in just one and a half months as long as HBC is above $65 at April expiration. HSBC would have to fall by more than 17% before we would start to lose money.

HBC hasn’t been below $69 at all in the past year and has shown support around $75 recently. This trade could be risky if the worldwide economic situation continues to worsen, but even if that happens, this position could be protected by the support the stock might find around $70 where the stock bottomed over the past month.

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

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Filed under: Major movement, International markets, Consumer experience, Middle East, Economic data, Politics, Commodities, Oil, Federal Reserve

Oil prices rose to new highs today, with crude moving up as high as $103.95 earlier in the session, before cooling off slightly. Prices are now trading at $103.36, up $1.52.

There are two main driving forces today that are pushing prices higher. The first is the continued weakness of the U.S. dollar, and the second is the general consensus that OPEC will decide to leave output unchanged at this week’s meeting.

First, taking a look at the dollar, today it hit a new record low versus the euro. The dollar continues to suffer as world markets prepare for a possible recession hitting America this year. With America’s economic slowdown on traders’ minds, the dollar continues to fall as many expect that the Federal Reserve is going to be forced to cut interest rates even further to keep the economy moving. Of course, any rate cuts will only further weaken the already struggling currency.

Continue reading Oil climbs to new highs

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