Thomson Reuters To Buy Breakingviews.com?

Thomson Reuters (TRI) is in :”advanced talks” to buy the financial news site Breakingviews.com for about 10 million pounds, or about $16.2 million, according to London’s Sunday Times. The story said the two companies have been in talks on a deal since July. Breakingviews has about 15,000 subscribers, and syndicates content in a number of newspapers, including The New York Times, Le Monde, El Pais and Handelsblatt. The story notes that there are more than 40 holders in Breakingviews, including the Wall Street Journal, which at one point had been publishing some of the site’s content in the paper.

Note: the Journal, The Sunday Times, and this blog are all published by News Corp.

ComScore: Needham Ups To Buy

Needham analyst Mark May today raised his rating on ComScore (SCOR) to Buy from Hold, setting a price target of $20. The stock last week finished at $17.01.

“ComScore has made important product strides in recent months that address concerns we’ve had in the past,” he writes in an intra-day research note. He notes that the company May launched Media Metrix 360, a panel-centric hybrid approach to audience measurement; today, he adds, the company launched a new partnership with Omniture that he says should speed the 360 offering to market by easing implementation for Omniture’s customers. “This new product and partnership not only give us confidence in our financial forecasts but make us believe there could be more upside,” he writes.

May upped his 2009 EPS estimate to 68 cents, from 67 cents. For 2010, he goes to 83 cents, from 75 cents.

SCOR today is up 56 cents, or 3.3%, to $17.57.

Dell/Perot: Kind of Pricey, Dontcha Think?

Not surprisingly, the Street has reacted to this morning’s news that Dell (DELL) is buying Perot Systems (PER) by driving up Perot shares - the bid came at a 68% premium - and selling off Dell shares.

There are a few key things to think about in evaluating the deal. One, it isn’t a huge surprise. Dell has $12 billion in cash, and has said openly that it was mulling acquisitions, though it had expressed a preference for smaller deals. As I noted in my previous post, there had even been speculation about this specific combination, given Dell’s desire to expands its service arm, and the fact that the two Texas companies are physically close together. (It’s about 200 miles from Perot HQ in Plano to Dell HQ in Round Rock.) The Street is keen on the fact that Perot has heavy exposure - close to half of revenues - from the health-care sector. And they also see an advantage in Perot’s large overseas presence, with 8,000 of 23,000 employees in India.

But there is also some general agreement that the deal is pretty expensive. A number of analysts pointed out in research notes that Dell is paying 1.5x last 12 months sales, and 29x calendar 2010 EPS, way more than what Hewlett-Packard paid for EDS, at 0.6x LTM sales and 19x EPS.

Here is some of the early read from the Street:

  • Toni Sacconaghi, Bernstein Research: “We are not surprised…and think it makes strategic sense,” he writes, while adding that “the deal premium is rich and the acquisition is expensive.” He also notes that the acquisition is “not financially transformational.” Perot, he points out, had $2.6 billion in revenue and operating profit of $182 million over the past 12 months, compared with Dell at $54 billion in revenue and $3.3 billion in operating profit. He also notes that the two companies have a similar margin structure. Sacconaghi notes that the company will have plenty of cash for other deals, but thinks future transactions will be smaller and focused outside of services.
  • Jayson Noland, Baird: “We continue to recommend a a wait-and-see approach to Dell due to uncertainty regarding M&A integration, restructuring and the timing of a client replacement cycle.”
  • David Wong, Wells Fargo Securities: “We view this latest acquisitions as a positive for Dell, helping to build on the company’s strength in enterprise computing in a way that should add to EPS and drive up profit margin.”
  • Keith Bachman, BMO Capital: “We are mildly enthusiastic…however…Dell is not substantially moving the needle in terms of operating margin and is using a considerable amount of its cash, leaving less room for future and needed deals to add IP, not just people.”
  • Amit Daryanani, RBC Capital: “We think Perot is a great asset…but…the deal looks somewhat expensive in our view.”
  • Robert Cihra, Caris & Co.: He says the price tag is “rich,” and contends the company will need to go beyond cost cutting and create real strategic synergies to grow Perot beyond its core health-care and government focus. Near-term, he adds, the deal “adds a whole new level of uncertainty to Dell’s momentum and EPS recovery.”
  • Mark Moskowitz, J.P. Morgan: “Seems relatively expensive.”

Dell today is down 76 cents, or 4.6%, to $15.93.

Bound in the Range

Portfolio manager's picks for a range-bound market in Barron's traded flat in Monday's dull market.

Yahoo Reportedly Losing eBay Text Ad Biz To Google; Hit To Revs, Little Profit Impact

Citing “some online advertising agencies,” JMP Securities analyst Sameet Sinha writes today that eBay (EBAY) has replaced its Yahoo (YHOO) text ads with Google’s (GOOG) syndicated search ads.

Sinha estimates that the loss of this relationship could cost Yahoo $271 million to $305 million a year in affiliate revenue; he adds, however, that the impact at the bottom line would likely be very small, likely under 1% of operating income, given Yahoo pays out 80%-90% of affiliate revenue back to eBay as traffic acquisition costs.

“While, on its own, this will have a big impact on Yahoo,”: he writes, “an exodus of other affiliate relationships could be an issue.”

Sinha maintains his Market Perform rating on the stock.

YHOO today is down 35 cents, or 2%, to $17.04.

Activision Sees Market For Games Without Consoles

Activision (ATVI) CEO Robert Kotick last week laid out a vision of a future in which the video game company will sell products that can be played on a TV without a console from Sony, Microsoft or Nintendo, the New York Post reports.

Kotick, speaking at an event in San Francisco, said to expects to see many of the company’s games offered independent of the consoles. The Post noted that one example he gave as a potential fit for the no-console model is Guitar Hero. The theory is that the game would included the necessary hardware as part of the package. The result would be more profits for Activision - and access to people who aren’t inclined to buy a console.

ATVI today is up 51 cents, or 4.3%, to $12.30.

Yahoo Seeking Buyer For Zimbra?

Yahoo (YHOO) wants to unload Zimbra, the open-source email company it bought in 2007 for $350 million, according to AllThingsD, citing “numerous sources.” The piece note that Zimbra is one of “many assets” Yahoo is shopping, including its personals business and HotJobs.

The piece asserts that potential buyers include Google (GOOG) and Comcast (CMCSA), “as well as private equity investors.” What will they get for Zimbra? Hard to say - but it would hardly be a shocker if the price tag was a lot less than $350 million they originally paid.

YHOO today is off 36 cents, or 2.1%, to $17.03.

Tekelec Gets A Lift From Cramer (Again)

Tekelec (TKLC) shares are sharply higher today after the company got a push Friday afternoon from Jim Cramer on Mad Money. He notes that the company is an infrastructure play on the mobile Internet, with a particular focus on text messaging and number portability technology. This is not the first time Cramer has been banging the table on Tekelec; he was loud about the stock back in May. Cramer said the stock could move as high as $27.

TKLC today is up $1.05, or 6.5%, to $17.24.

Here’s the Cramer screed on TKLC:


Monster: UBS Upgrades To Buy

UBS analyst Andrew Fones this morning upped his rating on Monster Worldwide (MWW) to Buy from Neutral, while lifting his price target on the online jobs site to $27, from $15. He raised his 2009 EPS estimate to 10 cents in the black, from a loss of 2 cents; for 2010, he goes to 30 cents, from 2 cents.

“Recent hiring trends and currency suggest modest upside to near-term estimates, while new search technology could boost 2010,” he writes. “U.S. and Europe Monster Employment Indices have shown recent improvement and together are showing sequential seasonally adjusted growth. While unemployment is still high, it is stabilizing, initial unemployment claims are now declining, and the ISM employment surveys have risen to the highest level since last fall.”

He adds that the company’s new Trovix search technology “could be a game-changer in how employers view Monster versus its competition.” and could allow the company to grow share while maintaining or even increasing pricing. Trovix allows ranking job applicants, and “should make for a more efficient and user friendly experience for employers and seekers.”

MWW is up 49 cents, or 2.8%, to $18.27.

Also see the bullish story on the company in this week’s Barron’s by my colleague Robin Goldwyn Blumenthal.

OmniVision: Morgan Keegan Now Bullish

OmniVision (OVTI) shares received a vote of confidence from Morgan Keegan analyst Harsh Kumar, who this morning raised his rating on the maker of image sensors to Outperform from Market Perform.

Kumar says the upgrades reflects his view that “the company has been taking market share, is on track to increase margins and profitability an is attractive at current valuation.” He contends the company has weathered the downturn better than some of its rivals, and says it is “well-positioned in each of its end markets.”

OVTI today is up 33 cents, or 2%, to $16.94.

Qwest: Goldman Adds To Conviction Sell List

Qwest (Q) shares are feeling some heat today, after Goldman Sachs added the telco to the firm’s Conviction Sell list. (Goldman already had a Sell rating on the shares.)

In making the move, Goldman cites higher rates of revenue decline, the potential for margin contraction, a below average payout ratio and less opportunity than peers to to extract value through strategic M&A. The firm’s price target on Q remains $2.75. Friday, the stock closed at $3.50.

Today, Q is down 8 cents, or 2.3%, to $3.42.

MicroStrategy Rallies On Roth Upgrade

MicroStrategy (MSTR) shares are higher today after Roth Capital analyst Nathan Schneiderman upped his rating on the business intelligence software provider to Buy from Hold. His new price target is $90, up from $70; the stock closed Friday at $67.23.

“After spending time with MicroStrategy management earlier this month, we come away increasingly confident that the company is seeing a positive inflection in its business; the momentum improved noticeably in Q2, and we believe that these positive trends have continue,” he writes in a research note.

He says customer and partner feedback has been “very positive” on the new MicoStrategy 9 platform, “particularly the enhancement that allows customers to issue queries that span multiple data sets.” He also says feedback from Europe is improving, and that the weak dollar should provide “some added lift.” Schneiderman adds that expenses could come in lower than expected; he says the company has quietly cut 10% of its headcount this year.

He raises his 2009 EPS estimate to $3.65, from $3.55; for 2010, he goes to $4.20, from $4.

MSTR today is up $4.25, or 6.3%, to $71.48.

Take-Two Slides; Wedbush Turns Cautious

Take-Two Interactive (TTWO) shares are trading lower after Morgan Wedbush analyst Michael Pachter cut his rating on the stock this morning to Neutral from Outperform. He keeps a $13 price target on the stock, which closed Friday at $11.73.

“In our view, the company’s share price fully reflects an increasingly positive outlook and the lack of other company specific catalysts,” he writes. Pachter sees no significant news coming for the video game company until it releases BioShock 2 in February. He contends investors “may be disappointed by the company’s holiday lineup.”

Pachter says the next installment of Grand Theft Auto should be announced by mid-June 2010 at the next E3 Expo.

TTWO toay is down 65 cents, or 5.5%, to $11.08.

American Superconductor Slides; Kaufman Turns Cautious

American Superconductor (ASMC) shares are sharply lower this morning after Kaufman  Bros. analyst Theodore O’Neill cut his rating on the wind turbine designer to Hold from Buy. His target rmains $36; the stock closed Friday at $37.19. Through last week, the stock had rallied 125% year to date.

“We do not see backlog growing as rapidly as we had thought,” O’Neill writes. “Although orders from additional customers have emerged as expected, these orders are small and do not show signs of offsetting what could be a declining backlog in Chinese business.” The analyst writes that he had been expecting backlog to grow to $1 billion by the end of the March 2010 fiscal year, but says “that appears somewhat at risk.”

AMSC today is down $3.34, or 9%, to $33.85.