Monday Afternoon Readings

Quite a few interesting reads, in what is otherwise expected to be an light week:

• Economic Improvement two-fer:

-Labor Data Show Surge in Hiring of Temp Workers (NYT)
-Treasury Yield Curve Steepens to Record Amid Growth Outlook (Bloomberg)

Why can’t Americans make things? Two words: business school (TNR)

Fed’s approach to regulation left banks exposed to crisis (Washington Post)

Dollar Strength Seen in Stocks 1st Since Lehman Died (Bloomberg)

Down-Payment Standards Eased (WSJ)

Year’s best business books to make sense of financial crisis (USA Today)

DNA Shifts Timeline for Mammoths’ Exit (Science Times)

I killed myself on Facebook, and lived to tell the tale (The Punch)

Top Ten Astronomy Pictures of 2009 (Discovery)


What are you reading?


Microsoft’s CFO is headed for GM

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General Motors said Monday it has tapped Christopher P. Liddell, chief financial officer of Microsoft Corporation (MSFT), to take over its troubled finance operations. Liddell, 51, will be GM's first permanent top management hire from outside the company since it left bankruptcy protection in July.

Liddell joined Microsoft in 2005, and led the company's efforts this year to cut $3 billion in costs in light of the economic meltdown. These efforts included Microsoft's first mass layoffs, wage freezes, and cuts to employee travel. The stockpiling cash was also a priority during Liddell's tenure, which Microsoft announced last month would end on Dec. 31.

Continue reading Microsoft's CFO is headed for GM

Microsoft's CFO is headed for GM originally appeared on BloggingStocks on Mon, 21 Dec 2009 16:40:00 EST. Please see our terms for use of feeds.

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Were Retailers Snowed In?

The East Coast of the United States was slammed by a major snowstorm over the weekend, one of the busiest shopping periods of the year. Kristin Bentz of Talented Blonde explains how retailers were affected. (Dec. 21)


Credit Suisse Names Boon Sim Head of Global M&A

LONDON(Reuters) - Credit Suisse promoted two bankers with experience advising technology companies, both veterans who joined the Swiss bank in 1992, to head its global and European mergers and acquisitions (M&A) businesses.

In an internal memo dated Dec. 21, the Swiss bank said Boon Sim, its head of Americas M&A, would become global head of M&A from Jan. 1. The role was previously held by Marc Granetz, also co-head of global investment banking. Sim, who once worked as a semiconductor designer for Texas Instruments (TXN.N), holds degrees from Massachusetts Institute of Technology (MIT), Yale University, and the National University of Singapore.

He has worked on deals such as Bayer AG’s (BAYGn.DE) takeover of Aventis Crop Science, and the $21 billion leveraged buyout of hospital firm HCA by a consortium including Kohlberg Kravis & Roberts [KKR.UL] and Bain Capital.

Andrew Lipsky, head of the Americas diversified industrial and services team, will lead Americas M&A.

In Europe, Guiseppe Monarchi, the bank’s co-head of European technology, media and telecom, takes over as head of M&A for Europe, the Middle East and Africa (EMEA) from David Livingstone, who becomes chief executive of Credit Suisse in Australia.

Credit Suisse ranks 7th for global M&A this year, having advised on $304.9 billion of deals. The bank moved up one place from 2008, and it ranks second for European M&A, up from 6th in 2008, according to Thomson Reuters data released on Friday.

By Quentin Webb
(Editing by Rupert Winchester)


Jabil FYQ1 Beats, Q2 View Strong

Shares of contract manufacturer Jabil Circuit (JBL) are rising this afternoon after the company’s fiscal Q1 ending November beat expectations and the compay offered a much stronger-than-expected forecast for the current quarter.

Revenue fell 9% to $3.1 billion, in line with estimates, yielding profit per share, of 32 cents, excluding some costs, which was ahead of the average 29-cent estimate and higher than the year-earlier period.

For the current quarter, the company sees revenue of $2.9 billion to $3.1 billion, ahead of the average $2.9 billion estimate, and profit per share of 20 cents to 32 cents, ahead of the average 19-cent estimate.

Jabil has “a good pipeline” of projects and a “stable to improving end market” said CEO and president Tim Main in the company’s press release.

Jabil shares are up 50 cents, or 3%, at $15.52 in after-hours trading. The stock rose 1.5% during the regular session.

Jabil’s report is the second positive read from the electronics supply chain after Arrow Electronics (ARW) raised its Q4 forecast this morning.

Commerzbank analyst sees oil falling below $60 in 2010

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Can one forward a strong argument for a downtrend in oil's price in 2010?

Commerzbank AG Senior Analyst Eugen Weinberg attempts do just that -- predicting that oil will fall to $59 per barrel in Q4 2010, due to OPEC production increases.

"Next year, I see risk from the downside," Weinberg told Bloomberg News Monday. "OPEC discipline is receding, and I think this will continue." He added that until there's evidence of production discipline from OPEC, prices have increased prematurely, according to his analysis.

Continue reading Commerzbank analyst sees oil falling below $60 in 2010

Commerzbank analyst sees oil falling below $60 in 2010 originally appeared on BloggingStocks on Mon, 21 Dec 2009 16:20:00 EST. Please see our terms for use of feeds.

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Snowfall Boosts E-Commerce

Sales in the last seven days through last night were up 15% over the same period (the last week before Christmas) last year, according to data this afternoon from privately held Coremetrics, a Web analytics firm.

That’s a surprise, given that prior years saw a drop in e-tailing for the last minute period, when online stores often dropped free shipping, but blizzards in the Northeastern and Mid-Atlantic U.S. helped keep shoppers coming to Web sites, according to the Coremetrics.

The Mechanics of a Graceful Exit: Interest on Reserves and Segmentation in the Federal Funds Market

Paper by Morten L. Bech, and Elizabeth Klee

To combat the financial crisis that intensified in the fall of 2008, the Federal Reserve injected a substantial amount of liquidity into the banking system. The resulting increase in reserve balances exerted downward price pressure in the federal funds market, and the effective federal funds rate began to deviate from the target rate set by the Federal Open Market Committee. In response, the Federal Reserve revised its operational framework for implementing monetary policy and began to pay interest on reserve balances in an attempt to provide a floor for the federal funds rate. Nevertheless, following the policy change, the effective federal funds rate remained below not only the target but also the rate paid on reserve balances. We develop a model to explain this phenomenon and use data from the federal funds market to evaluate it empirically. In turn, we show how successful the Federal Reserve may be in raising the federal funds rate even in an environment with substantial reserve balances.

Closing Bell: Decoupling of inverse dollar and stock relationship (POT, CHTT, ETFC, ATHX, V, BIIB)

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Stocks had effectively no real market moving economic data to trade off of. We also saw a break-away from the inverse relationship between stocks and the US Dollar, as both were up on the day.

Here were today's unofficial closing bell levels:

Dow 10,414.07 +85.18 (0.82%)
S&P 500 1,114.05 +11.58 (1.05%)
Nasdaq 2,237.66 +25.97 (1.17%)

Top Day Trader Alerts
Top 10 Analyst Calls

Continue reading Closing Bell: Decoupling of inverse dollar and stock relationship (POT, CHTT, ETFC, ATHX, V, BIIB)

Closing Bell: Decoupling of inverse dollar and stock relationship (POT, CHTT, ETFC, ATHX, V, BIIB) originally appeared on BloggingStocks on Mon, 21 Dec 2009 16:00:00 EST. Please see our terms for use of feeds.

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UTStarcom Gets $140M for China Factory; Shares Up 11%

UTStarcom (UTSI), maker of Internet Television devices and other networking technology, rose 21 cents, or 11%, to $2.13, after the company earlier today announced it reached an agreement with Zhongnan Group to sell its R&D facility in China for $140 million, or $132 million after taxes.

The company, which has been trying to trim costs, started shopping around the facility back in June, and had said in its most recent quarterly filing that the plant had a carrying value of $160.5 million, though whether the company actually thought it would get that much is another matter.

UTSI management remarked that the deal should “position UTStarcom for growth in 2010″ — or it could just position the company for a sale, I’d imagine.

Smile Brands Files for $143 Million IPO

Smile Brands Group Inc., a Santa Ana, Calif.-based provider of support services to dental groups in the U.S., has filed for a $143.75 million IPO. It plans to trade on the NYSE, with Credit Suisse and Jefferies & Co. serving as co-lead underwriters.

The company reports around $341 million in revenue for the first nine months of 2009, compared to $333 million during the same period in 2008.

Private equity firm Freeman Spogli & Co. holds a 77.3% pre-IPO ownership position. Other shareholders include CalSTRS (9.8%), Gryphon Investors (6.5%) and ASF Co-Investment Partners (6.5%).


What eBay Can Teach the U.S. Treasury

Treasury has had mixed results in selling the warrants it holds in banks it rescued amid the financial crisis.

The agency notched a $1.1 billion profit after privately negotiating a price for warrant in Goldman Sachs Group, which received $10 billion in bailout funds. That compares with the $931 million profit from an auction of warrants from J.P. Morgan Chase ($25 billion in rescue funds). The winning bid was higher than the minimum, but lower than traders expected. And last week, the Treasury delayed plans to sell Citigroup warrants because of weak bids.

So, what is the best way for the Treasury to sell the warrants in the roughly 200 banks the agency still owns a stake in: auctions or direct negotiated sales?

For insight, Deal Journal talked with Adam Galinsky, an ethics and management professor at Northwestern’s Kellogg School of Management who analyzed the outcomes of auctions versus negotiated deals for a recent study he co-wrote.

Deal Journal: When is it better to auction something off instead of negotiating its sale?
Galinsky: The key determining factor is figuring out what the market is like. When there is a huge market for something, an auction will make the seller better off. But if there is not sufficient market, there is going to be no one bidding and you end up with a low price. I had a friend who sold a baby Bjorn (baby carrier) on ebay for 85 Euros when you can get one new for 75 Euros. It tells you there was a lot of demand, but also how irrational auctions can be. Another friend tried to sell his Indie record collection, and he only got one bid because there weren’t a lot of people who shared his tastes.

Deal Journal: What about starting prices?
Galinksy: We found that the auctions that started with a low price ended up with higher final prices. Whenever you are selling something, you want to reduce barriers to entry to get access to your goods. That is why you start with a low price.

Deal Journal: What are some other auction strategies?
Galinksy: The one thing people do is to make the auction too short. The longer it goes, the the more bidders have invested in it. The other mistake is that sellers don’t think about the competition. On eBay, too many people end their auction at the same time, between 5 and 7 p.m., when there is a flood of sellers. It may be better to end it at 2 a.m. If there are other investments that people are making at the same time it could be distracting.

Deal Journal: What about pricing strategy in negotiations?
Galinsky: It is typically better to start with a higher price if you are the seller. It is called the anchoring effect. You walk into a suit store and the salesman is going to start with the $1,000 suit and move down. It gives the seller room to make concessions and make the buyer think they are getting a good deal. Also, if you start with a high price when you are selling a car it sticks in people’s minds. Their mind tends to focus on the good things about the car. The essence of the thing comes out in the price.


Deal Journal:
Do all these tactics work for skilled sellers and buyers and not just casual EBay users?
Galinksy: There is data to suggest that experts are less likely to jump in when they see a large number of bidders. Experts see bidders as a barrier to entry. Novices see them as truly high value.


Lightspeed and Gemini Close Israeli IT Incubator

Lightspeed Venture Partners and Gemini Israel Funds have closed a joint incubator program that provided seed capital to early-stage Israeli Internet companies. No explanation was provided for the shutdown, in an announcement on the Lgilab blog (yes, this appears to be an old story, but I haven’t seen it elsewhere):

After more than 3 great years, the LightSpeed Gemini Internet Lab is ending its operations. The joint venture from LightSpeed Venture Partners and Gemini Israel funds has been a great opportunity to fund and support some of the most interesting web startups in Israel.

Both funds are still actively looking for new opportunities for fund new internet projects at early stage.

I’ve put in a call to Lightspeed’s Silicon Valley office, to find out what will happen to the incubator’s portfolio companies (Eyeview, OutBrain, StyleShake, Vahu.com, Vestopia, etc.). Also would be interested to know what this means for Lgilab general manager Ouriel Ohayon, Lgilab’s only fulltime employee without a pre-existing connection to either Lightspeed or Gemini…


NY Fed: Federal Reserve Will Indeed Be Able to Raise Rates

A new paper by the Federal Reserve Bank of New York offers some empirical support to the view among senior Federal Reserve officials that they do have the technical means to raise interest rates when needed, despite some naysayers who caution there is too much money in the system to do so effectively.

The Fed has pumped $1 trillion into the banking system in the past year, which in theory means all of that cash floating around in the financial system puts downward pressure on bank lending rates, interfering with the Fed’s ability to raise rates as the economy improves to fend off inflation.

But there is a way around it: The Fed can pay banks interest on bank reserves of unused cash.

That puts the Fed in a position to bid up rates if and when it chooses to, even if there’s a lot of cash in the financial system. The New York Fed paper argues that the Fed could get its target fed funds rate to 2% or higher even if there were $800 billion of extra cash in the banking system.

Right now, the effective fed funds rate is a little under one-quarter of a percentage point. Although the recession almost certainly has ended, Fed officials have said they intend to keep it there for an extended period because the economy is still weak and inflation low.


Southern Co.: Steady Region, Steady Profits

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The Southern Co's (SO) stock has broken through key resistance, and that's one reason I'm reiterating my buy rating for the company's shares, first recommended on June 19, 2009 at a price of $30.61.

Further, another reason is SO's Atlanta-based operations: the commercial side of energy use (primarily the industrial segment), will take longer to snap back, but a quicker residential recovery should offset that industrial sluggishness;the greater Atlanta region did not experience as large a residential housing bubble as the West and East coasts, hence the bust was not as severe, from a household formation standpoint. And as the macroeconomic tenet states-- "as household formation goes, so goes revenue." Hence, SO is in a metro area that should fare well in the years ahead.

Continue reading Southern Co.: Steady Region, Steady Profits

Southern Co.: Steady Region, Steady Profits originally appeared on BloggingStocks on Mon, 21 Dec 2009 15:30:00 EST. Please see our terms for use of feeds.

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Six3 Systems Buys BIT Systems

Six3 Systems Inc., a provider of national security and defense intelligence services, has acquired BIT Systems Inc., a provider of intelligence, surveillance, and reconnaissance solutions. No financial terms were disclosed. Six3 Systems is a portfolio company of GTCR, and was advised on the deal by Cook Associates.

PRESS RELEASE

Chicago-based Cook Associates M&A Advisory Services (Cook M&A; www.cookassociates.com/ma) is excited to announce that Robert Coleman, Chief Executive Officer of Six3 in partnership with GTCR, one of the nation’s leading private equity firms, has acquired BIT Systems, Inc. (“BITS”)

In April 2009, through the CEOVisions® Acquisition Services program, Cook M&A partnered Mr. Coleman with GTCR to form Six3 Systems, a new company headquartered in Fairfax, VA, focused on building a government services platform specializing in national security and defense intelligence. CEOVisions® is a service designed to partner exceptional executives who have an investment thesis with PEGs to build industry-leading companies.

The acquisition of BIT Systems, Inc. is Six3’s second acquirement since its inception in April 2009. BITS is an Intelligence, Surveillance, and Reconnaissance (“ISR”) company that specializes in the design, development, integration and maintenance of signal processing systems, data analysis, software development, and other mission operations. Six3 Systems completed its first transaction in July, 2009 when it acquired Harding Security Associates, Inc. (“HSA”), a leading provider of identity intelligence, forensics analysis and security services.

“Mr. Coleman’s recent successful completion of the BIT Systems acquisition is yet another testament to the effectiveness of the CEOVisions® program,” reiterated Arnis Kins, President of Cook Associates, Inc.

About Cook Associates CEOVisions® Acquisition Services

Cook Associates M&A Advisory Services has built a solid track record of connecting clients to ideal M&A opportunities and facilitating their successful closing. Using our FocusFirst® strategy, Cook M&A partners with private equity groups to execute industry investment strategies and collaborate on market opportunities for potential acquisition on their behalf. Through our CEOVisions® Acquisition Services program, we partner industry-leading executives with private equity groups to acquire and build companies. Since its establishment in 1996 the firm has completed more than 65 transactions ranging from $5 million to $800 million in enterprise value. To learn more about Cook M&A, please visit us at www.cookassociates.com/ma.

About Six3 Systems
Six3 Systems, headquartered in Mc Lean, Virginia, is a company focused on acquiring government services providers with a focus on national security.

About GTCR

GTCR manages more than $8 billion in equity and mezzanine capital invested in a wide range of companies and industries. The firm principally invests in high-growth industries, including business services and outsourcing, consumer products and services, healthcare, technology, and transaction processing. Growth strategies are driven by industry dynamics and generally include a combination of acquisitions and internal growth.


A.P Moeller Maersk Offers $1.3 B for Oil Fields

European markets edged higher on the prospects of improved earnings in 2011 and speedier global markets recovery. A.P. Moeller Maersk agreed to pay $1.3 billion to acquire energy fields in the Gulf of Mexico. Areva T&D division received €200 million contract from a utility in Dubai,UAE.

Is Twitter Already Profitable?

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It's going to be a nice Christmas for the folks at Twitter -- as well as the company's investors. Because of its red-hot growth, the website is attracting eager customers.

Customers? Yes, Twitter is working on a business model. In fact, according to a report in Bloomberg.com, it looks like the company is already profitable.

Continue reading Is Twitter Already Profitable?

Is Twitter Already Profitable? originally appeared on BloggingStocks on Mon, 21 Dec 2009 15:00:00 EST. Please see our terms for use of feeds.

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What’s main catalyst for US Treasury selloff? A bit of everything?

With the US Treasury market selling off sharply again where the 10 yr note yield is at the highest level since mid August, it begs the question of what the main catalyst is. Is it the growth belief, inflation worries and/or concerns with deteriorating US government finances? The markets are saying a little bit of all. Earnings last week from RIMM, ORCL and NKE gave a sentiment lift to the economic outlook as has some of the recent economic data. Today, inflation expectations implied in the 5 yr and 10 yr TIPS are breaking out to the highest level since early August 2008. The US 5 yr CDS is rising another 2 bps to 39 bps, up 7 bps in the past two weeks and is at the highest level since mid July.