Filed under: Deals, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO)

Even though Microsoft Corp. (NASDAQ: MSFT) could have upped its offer for Yahoo, Inc. (NASDAQ: YHOO) this past weekend, it did not. Microsoft CEO Steve Ballmer walked away from the deal after Yahoo held out for more money. At this time, Microsoft was wise to walk away from Jerry Yang’s ego. The reason? No company should spend over $40 billion for a bunch of unmonetized eyeballs. But then again, Microsoft needs to up its game in the consumer space; not so much in the enterprise business space.

Yahoo! has one of the most lucrative audiences on the web, if not the most lucrative. The company, to save its life, can’t figure out how to continuously grow revenue with that huge audience it has. I won’t beat a dead horse here, but if Yahoo! thinks it’s really worth $37 per share, some reality needs to be put in its pipe and smoked. Microsoft would have purchased the rights to combine its ailing Internet properties with a huge audience that Yahoo! can’t seem to squeeze money out of with any kind of strategy. Customers want everything for free, but Yahoo! doesn’t have the advertising strategy down to allow that. We can thank former CEO Terry Semel for that.

And the kicker is this: If Google, Inc. (NASDAQ: GOOG) will soon be providing Yahoo! with its search infrastructure (after a successful test), just what was Microsoft buying, anyway? Engineering talent? Employees with a combative culture? We all know Microsoft wanted Yahoo! badly, but the mixing of oil and water here would not have instantly made a neat company or anything. And Yahoo!? It’s not worth what it thinks it is. Period. Get over it, find out how to more effectively compete and monetize those eyeballs — then come back to the table if anyone will sit there with you then.

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Filed under: Earnings reports, Forecasts, Bad news, Consumer experience, Sprint Nextel Corp (S), Economic data

Shares of wireless carrier Sprint Nextel Corp. (NYSE: S) are plunging after the company reported a large first quarter loss this morning. The company posted stronger-than-expected adjusted earnings, but this was not enough to reassure investors who pushed the stock down more than 3%.

Sprint Nextel posted a quarterly loss of $505 million, or 18 cents per share, compared with a loss of $211 million, or 7 cents, in the same period a year ago. Its quarterly numbers were dragged down by losses of more than 1 million subscribers and severance charges. However, excluding one-time charges, the company would have earned 4 cents. Analysts had expected earnings on that basis of only 2 cents per share, according to Thomson Financial. Revenue tumbled 7.5% to $9.3 billion, well below expectations of $9.4 billion.

Continue reading Sprint Nextel’s quarterly loss widens

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Citi released some guideline changes in the wholesale changes that can be described easily as the first big step towards killing stated income loans. I’m not sure if these are reflected on the retail side as well. The big changes? 75% max loan-to-value on rate and term refinances with a minimum FICO score of 720. That guideline change essentially narrows the universe of qualified borrowers to a thin sliver of the home-owning population these days.

Other details on the stated income guideline restrictions:

70% max LTV on cash-out refinances

Increased FICO requirements from 660-720 to 680-720 for SIVA

Increased FICO requirements from 660-720 to 700-740 for SISA

Click the thumbnail below for the full details:

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Source [blownmortgage]

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Filed under: Earnings reports, Forecasts, Rumors, Sprint Nextel Corp (S)

Despite Sprint Nextel Corp.’s (NYSE: S) share price being down more than 50% in the past year, shares were up 7.5% last week — up 46.5% in the past montyh — on all the buzz surrounding Sprint lately. There are rumors that Deutsche Telekom (NYSE: DT) may buyout Sprint and merge it into T Mobile. Then there were rumors that Sprint may spin off Nextel (i.e., undo its troubled merger). And there’s the excitment around a joint venture with Clearwire Corp. (NASDAQ: CLWR) to create a high-speed wireless internet network that covers most of the U.S.

But when Sprint reports its first-quarter results tomorrow, analysts polled by Thomson Financial expect the company to report earnings of a mere penny per share, down from the same period in 2007 when it earned 18 cents per share, and from the previous quarter’s 21 cents per share. The company has beat quarterly estimates over the past year — by 17.3% in the fourth quarter — and it certainly has plenty of room to best analysts’ low expectations for this past quarter.

Overland Park, Kansas-based Sprint Nextel operates a nationwide digital wireless network with more than 50 million subscribers. In the past year, Sprint’s revenues were $40.1 billion. The company’s long-term EPS growth forecast is 8.22%, which is less than the 8.67% of rival Verizon (NYSE: VZ) and the S&P 500. The consensus recommendation of analysts continues to be to hold Sprint.

Shares closed Friday at $9.39, up from a 52-week low of $5.48 in March, but still well off the 52-week high of 23.42 last June.

For news that could influence these results, see BloggingStocks’ Sprint coverage.

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Citi released some guideline changes in the wholesale changes that can be described easily as the first big step towards killing stated income loans. I’m not sure if these are reflected on the retail side as well. The big changes? 75% max loan-to-value on rate and term refinances with a minimum FICO score of 720. That guideline change essentially narrows the universe of qualified borrowers to a thin sliver of the home-owning population these days.

Other details on the stated income guideline restrictions:

70% max LTV on cash-out refinances

Increased FICO requirements from 660-720 to 680-720 for SIVA

Increased FICO requirements from 660-720 to 700-740 for SISA

Click the thumbnail below for the full details:

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Source [blownmortgage]

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Filed under: Earnings reports, Forecasts, Wal-Mart (WMT), Penney (J.C.) (JCP), Kohl’s Corp (KSS), Abercrombie and Fitch (ANF), Nordstrom, Inc (JWN), Urban Outfitters (URBN)

The earnings season continues to roll on, and next week’s results offer a peek at the state of fashion retailing, as a variety of companies — from the discount to the upscale, from the hip to the pedestrian — are scheduled to report earnings.

Analysts surveyed by Thomson Financial expect earnings growth, compared to the same period in the previous year, from Urban Outfitters (NASDAQ: URBN) to be 22.7% to 22 cents per share, from Wal-Mart Stores (NYSE: WMT) to be 9.3% to 75 cents per share, and from TJX Companies (NYSE: TJX) to be 7.5% to 40 cents per share.

Analysts expect earnings declines from the previous year from JC Penney (NYSE: JCP) by 52.9% to 49 cents per share, from Kohl’s (NYSE: KSS) by 34.4% to 42 cents per share, and from Nordstrom (NYSE: JWN) by 18.3% to 49 cents per share.

In the case of Abercrombie & Fitch (NYSE: ANF), analysts expect earnings to remain flat, year over year, at 65 cents per share.

And then there’s Macy’s (NYSE: M), which is expected to swing to a loss of 2 cents per share, compared to a profit of 16 cents a year ago.

The sample size may be too small to define any significant trends, but the numbers do suggest that analysts expect profit declines to be deeper than profit growth, and that consumers may be more likely, given the current state of the economy, to buy clothes at Wal-Mart or TJ Maxx than at Nordstrom or Abercrombie.

The coming results will reveal if those expectations are correct.

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Orange County, an area with over 3,098,121 people sometimes has a reputation at least nationwide as being an exclusively prime area. What most people that don’t live or work here realize is that the media perception of the “OC” is guided by a few prime cities such as Laguna Hills and Newport Beach. […]
Related Posts:
■Real Homes of Genius: Today we Salute you Santa Ana. 498 Square Feet for $440,000, What a Deal!
■Real Homes of Genius: Lifetime Achievement Award. Nearly 80 Percent Loss in Oakland California.
■Home Sales: Worst Drop in 18 Years. Enjoy your Day!
■C.A.R. says 2007 will see a -2% Drop in California. Does This Feel like a 2% Yearly Drop?
■Real Homes of Genius: Today we Salute you Maywood. 853 Square feet for $385,000.

Orange County, an area with over 3,098,121 people sometimes has a reputation at least nationwide as being an exclusively prime area. What most people that don’t live or work here realize is that the media perception of the “OC” is guided by a few prime cities such as Laguna Hills and Newport Beach. These tiny cities hold a very small percentage of the overall county population. The largest city Santa Ana, has 353,428 people making up for over 11 percent of the entire county. Let us take a look at the county and run some quick numbers:

Source: Wikipedia

Let us look a few of the most populace cities in terms of population:

With these 5 cities, 1.26 million people make up these areas or more specifically, they make up over 42 percent of the entire county’s population. As you can see from the average household income, we aren’t in incredibly affluent areas although certain enclaves such as Anaheim Hills, Huntington Harbor, or certain areas in Irvine have very expensive niches but this isn’t the majority as you can see from the average. So let us now take a look at a few of the more expensive mainstream ideas of what Orange County is:

Now with these 5 cities, we have a total population of 143,993 or 4.7+ percent of the entire county population. The point again here is that incomes never justified the absurd prices reached in certain cities. Will the wealthier areas stay high? Of course! But look at how much of the entire population they impact. We haven’t even talked about Westminster, Stanton, Fullerton, Tustin, and Orange which also have similar income profiles like Santa Ana and Anaheim.

The overall halo effect took a major hold of prices during the past decade. Just because you were a few miles away from a prime area doesn’t mean you are prime. We saw this in Los Angeles County and I have talked about this extensively for a county with 10,000,000 people and 88 cities. That is why Orange County as a whole has seen the following:

-Orange County Median Home Price: $506,000 (down 19.6% from a year ago)

-Sales are down by 46.9% from a year ago.

Now with that background, let us now look at the largest percentage drop ever in Orange County (hat tip to reader J). Before we begin, you must brace yourself and take your motion sickness meds because we are jumping onto a crazy rollercoaster! Today we salute you Santa Ana with our Real Home of Genius Award.

Real Homes of Genius - 68 Percent Drop in Santa Ana

There are few homes that encompass the mania of the housing bubble. Multiple sales, quick price movements, and an ultimate fall from grace. This home is located in the largest city in Orange County and as we have stated above, the average household income for the city is slightly over $44,000. This majestic 825 square foot home with 2 bedrooms and 1 bath has it all. It was built in 1918 and has been on the market for almost one full year. For all you folks out of town who want to own a piece of the OC here you go.
This home has a current selling price of get this, $177,495! Before you go running to your agent let us look at the background story of this place. It is always important to look at previous sales history and once again, here is the reason we discussed why housing will continue to go down because technology has leveled the playing field:

Sales History:

With this home, you can see the amazing appreciation that occurred during this decade long boom. In fact, we get a perfect view of what happens in a financial mania. Don’t forget this is a 825 square foot home that is nearly 100 years old! What you see above is 4 sales transactions which each subsequent buyer got a taste of the “real estate never goes down” Kool-Aid. It was manic! The most significant jump of course occurred during the 2006 sale price where it almost sold for twice the price in 3 years! Or what about the person that sold it for a 124.8% profit in 6 months back in 2002? This went over and over like a broken record here in California. This seemed all orderly but what wasn’t orderly is the correction. Let us now dive into the listing price action. Get your scroll button finger ready:

Listing Price:

Now that has to be the worldwide record for most price changes in less than one year! I’m actually at a loss for words here. How do you go from an initial listing price of $569,000 in July of 2007 to the current price of $177,495? What is certain is that lender who financed that sale in 2006 for $505,000 is going to be in a world of hurt. Aren’t you ecstatic that your tax money is going to bailout places and lenders like this? I have placed a link on the right hand sidebar that’ll take you directly to your Congressional Representative so make sure you write a polite letter letting them know you will not stand for having your money squandered on speculative banana republic mortgages. I plotted this listing movement on a graph so you can see bubblicious prices in a graphical format:

Today we salute you Santa Ana with our Real Home of Genius Award.

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Related Posts:
■Real Homes of Genius: Today we Salute you Santa Ana. 498 Square Feet for $440,000, What a Deal!
■Real Homes of Genius: Lifetime Achievement Award. Nearly 80 Percent Loss in Oakland California.
■Home Sales: Worst Drop in 18 Years. Enjoy your Day!
■C.A.R. says 2007 will see a -2% Drop in California. Does This Feel like a 2% Yearly Drop?
■Real Homes of Genius: Today we Salute you Maywood. 853 Square feet for $385,000.

Via [DrHousingBubble]

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Filed under: Google (GOOG), Microsoft (MSFT)

The New York Times quotes Harvard Business School (HBS) professor David Yoffie as saying “the right way to think about” Google Inc. (NASDAQ: GOOG) is as “the next Microsoft Corp. (NASDAQ: MSFT).” Setting aside for the moment, the arrogance that we need Yoffie to tell us how to think is the simple notion that he’s wrong.

Here are three reasons why:

• Google is an innovator, Microsoft never has been. Microsoft got started by licensing an operating system for the PC. And it prospered by making it the dominant operating system and tying it to office software — each component of which it copied or bought from an innovator. Google has won because it has developed an improved a search ad technology that gives advertisers a higher return on their investment;
• Google has succeeded because its product works better, Microsoft’s not so much. Microsoft has lost market share in search advertising since it started to focus on it — watching its share fall from 11% in 2005 to 5% today. The reason Microsoft has lost share is that its product simply does not work as well as Google’s; and

• Microsoft can’t compete with Google’s superior algorithm in search advertising so it’s trying to acquire its way in. Microsoft in the past has tried to take markets away from innovators by copying their products and using its operating system power to force people to use them. But this strategy is not working for Microsoft so it tried, unsuccessfully to do something it’s never done well — buy market share through acquisition. Google bought YouTube — but not to take share from an innovative incumbent. Instead, Google wanted to use YouTube as the basis of creating a new market — video search advertising.

This may be just an academic debate, but I think it matters for investors. If you think of Google as Microsoft, then you should sell it now. That’s because Microsoft stock is down 44% from its January 2000 high a few months before Steve Ballmer took over as CEO while Google’s has gone up 631% since it August 2004 IPO.

Despite its vast capital resources, Microsoft simply cannot innovate and Google can. That’s why it matters that an HBS professor is telling you the wrong way to think about the two companies.

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: Earnings reports, Analyst upgrades and downgrades, Technical Analysis, Stocks to Buy

eResearchTechnology (NASDAQ: ERES) provides technology and services to the pharmaceutical, biotechnology and medical device industries. The company streamlines the clinical trials process by enabling customers to automate the collection, analysis and distribution of data in all phases of clinical development. The firm’s flagship product, EXPeRT, processes and interprets electrocardiogram data collected during trials, to insure cardiac safety. eResearchTechnology operates in the US and the UK.

The firm pleased investors earlier in the week, when it reported Q1 EPS of 11 cents and revenues of $33.7 million. Wall Street analysts had been looking for nine cents and $31.6 million. Management also guided Q2 EPS to 10-12 cents (ten cent Street), Q2 revenues to $34-$36 million ($32.95M Street), FY08 EPS to 44-49 cents (44 cent Street) and FY08 revenues to $133-$140 million ($134.99M Street). Friedman Billings subsequently reiterated its “outperform” rating on the shares and boosted its price target to $18.

Continue reading eResearchTechnology (ERES): Shares define bullish ‘flag’ consolidation pattern

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