Under The Radar News - Monday

Bunge soaking up cash. Soybean and fertilizer giant Bunge (BG) is burning cash at a record pace. Soaring soybean and commodity prices, which should benefit Bunge (and have seen shares double over the past two years), are actually crushing the company due to its hedges, which are forcing Bunge to borrow at record rates. 2007 cash flow was -$411M, vs. -$289M in 2006 -- and it has already used another $353M in cash this year. In 2007, Bunge added $1.6B to its debt, bringing the total to $4.2B. The company's woes are complicated by the fact that soybean farmers are being squeezed by record fertilizer prices, resulting in defaults on their obligations to Bunge. EnCana gushes on breakup plan. Shares of EnCana (ECA) are up 7% after it announced plans to split into a natural gas company and an integrated oil-sands producer. Based on a sum-of-parts analyst, UBS analyst Andrew Potter thinks the company could be worth C$110/share, vs. the C$93 it was trading at this morning. Herbalife whistleblower. Former Herbalife (HLF) Director of Venezuela and Colombia, Ricardo Hollander, says employees of the company are committing fraud by falsifying their official addresses in order to get paid in the currencies of Columbia or Panama despite living in Venezuela. He says he was fired for reporting the illegal activity to his supervisors, and has been stonewalled by the company's human resources department. iPhone to hit Asia. Apple (AAPL) agreed to distribute the iPhone in Asia and Australia through four companies. SingTel will sell the iPhone in Singapore, Bharti Airtel in India, Globe Telecom in the Philippines and Optus in Australia. The iPhone will go on sale in Asia sometime this year. The agreements are not expected to be exclusive, and other carriers could still sign on. Fannie preferred offering. Sources say Fannie Mae (FNM) will market an issue of preferred shares worth at least $1.5B today, with a dividend yielding 8.25%. Fannie said last week it would raise at least $6B in fresh capital. Fannie also said it will sell $2B of three-month benchmark bills due Aug. 13, 2008, and $1.5B in six-month bills due Nov. 12, 2008, in a Dutch auction Wednesday. Friendly move. Sources say Google (GOOG) is set to launch a new set of APIs that allow Open Social participants to pull profile information from social networks. The protocol, called "Friend Connect," is thought to be similar to MySpace's (NWS) Data Availability and Facebook's Facebook Connect. Nvidia denies interest in Via. Nvidia (NVDA) says it is not looking at buying VIA technologies. "They don't need our money. I don't need theirs," Huang said. "They're doing fine. People want to create drama." Via makes chipsets for x86-based computers. "Our shtick is that we just focus on one thing," says Huang. "We said we're a visual computing technology company and we're completely focused on this." ADM faces criminal charges. Archer Daniels Midland (ADM) disclosed it is under criminal investigation by the EPA for wastewater-discharge practices at a Missouri facility. Power plant plan fizzles. BP (BP) and Rio Tinto (RTP) cancelled a plan to build a $1.5-2B coal-fired power plant in Australia. The plant was canned after the firms discovered rock formations in the area would not fully seal-in carbon dioxide deposits. Strikes hurt GM dealers. General Motors (GM) dealers say parts shortages and a lack of inventory due in part to the UAW strike against American Axle & Manufacturing (AXL) is causing clients to wait indefinitely for custom cars. GM says the strikes haven't broadly impacted individual retail sales. Turning up the heat on energy trading. A House committee is probing energy-market speculation, sources say. Regulators believe hedge funds and investment banks may have played a role in driving crude oil prices to record highs.

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Wall Street Breakfast: Must-Know News

TI dips on weak guidance. Texas Instruments (TXN) reported in line Q1 EPS of $0.43 on revenue of $3.27B (+2.5%, in-line). TI's Q2 revenue forecast ($3.24-3.5B) fell short of analyst estimates ($3.44B). Anticipated Q2 EPS is even weaker: $0.42-0.48 vs. $0.51 consensus. "Given uncertainty in the near-term economy, we have become more conservative with our outlook for the second quarter," CEO Rich Templeton said. In that light, and given that shares gained 3.3% in regular trading Monday, a 2.5% drop in extended trading is hardly a selloff -- perhaps a testimony to TI's long-term growth potential. Citi turns to HP; selling $6B in hybrids. In a novel move to defend its controversial business model, Citigroup (C) is asking Hewlett-Packard (HPQ) for advice on both IT issues and general strategy. Sources say Citi execs want to know how HP managed to overcome investor pressure to spin off its computer business, similar to the present calls for Citi to split its wholesale and retail banking units. Meanwhile, Citi is bolstering its balance sheet by selling $6B of hybrid bonds at 8.4% for 10 years, after it posted writedowns of almost $16B last week. Hybrid bonds allow banks to bring on cash with deferred interest payments, while the bulk of the offering is considered equity by credit-raters. "It's a way of not upsetting the apple cart," portfolio manager Bill Larkin said. "They don't want to dilute shares, and they don't want to issue more debt." RBS: Big writedown, big share sale. Royal Bank of Scotland (RBS), #2 UK lender, is selling £12B ($23.7B) in shares to reinforce its capital. It announced £5.9B in asset markdowns, and said it will cut its 2008 dividend. RBS said its 2008 outlook is still "inevitably clouded" by U.S. subprime fallout, not to mention its $22.7B spend on ABN Amro, which now seems impossibly expensive. RBS has lost almost half its market value; shares were down 5% in London. "I can well understand this is not easy for shareholders. It is not easy for me," CEO Fred Goodwin said. He told journalists he would consider selling the firm's insurance unit, but not ats "fire sale" prices. Netflix plunges on weak outlook. Netflix (NFLX) posted in-line EPS and revenue of $0.21 and $326M. For Q2, it sees EPS of $0.33-0.42 (consensus: $0.39). Netflix lowered its full-year guidance to $1.16-1.29 from $1.18-1.30 (consensus: $1.25). On its conference call, NFLX said that the numbers assume its market continues to grow. Investors were spooked: shares fell 13.5% in AH trading. Gross margin (31.7%) was down 2.1% sequentially and 4.4% from a year ago. Churn rate dropped to 3.9% from 4.4%. Netflix shares were up almost 50% YTD on reduced competition from Blockbuster (BBI), which turned its focus back to in-store rentals, and is now bidding for brick-and-mortar retailer Circuit City (CC). The wildcard is how emerging online video offerings from Apple (AAPL) and Amazon.com (AMZN) will affect its sales. CIT to squeeze $1B from stock sale. Commercial lender CIT Group (CIT) will raise $1B in a stock offering, as it tries to escape a liquidity crisis. It will use the proceeds for general corporate purposes; to pay a dividend; and to meet debt payments. Unfortunately, CIT already cut its dividend by 60%. It also sold $5B in assets and drew down $7.3B of its emergency credit lines. Shares fell 13.7% in AH trading. Intrepid Potash's intrepid IPO. Fertilizer producer Intrepid Potash (IPI) priced its 30M share IPO at $32 ($960M) -- $3 better than the top range of the $27-29/share forecast (which was originally 24M shares at $24-26). Underwriters including Goldman Sachs (GS), Merrill (MER), Morgan Stanley (MS) can purchase another 4.5M shares. Intrepid accounts for about 1.5% of global potash production. Some have compared its IPO to that of Google (GOOG) and Visa (V). CME beats on large volume jump. CME Group's (CME) Q1 EPS of $4.67 were just short of analyst estimates ($4.80). Revenue of $625M (+25.5% adjusted for CBOT acquisition) was in line. Volume grew a robust 32% during the quarter amid broad strength. "This performance illustrates the benefits of the exchange model for managing risks in diverse global markets," CEO Terry Duffy said. DuPont beats; guides in line. DuPont (DD) reported Q1 EPS of $1.31, $0.05 better than consensus. Revenue of $8.57B (+9.3%) was in line. For Q2, DuPont sees EPS of $1.05 (consensus: $1.08). For 2008, sees EPS of $3.40-3.55 (consensus: $3.48). "Our investments in agriculture and emerging markets enabled us to capitalize on robust growth in those areas which, when combined with gains from our productivity improvement programs, more than offset higher ingredient costs and weakness in certain U.S. markets," CEO Charles Holiday said. Baker Hughes beats by penny. Oilfield servicer Baker Hughes's (BHI) Q1 EPS of $1.21 was slightly better than analyst estimates ($1.20). Revenue of $2.67B (+8%) was in line. "Results from North America were better than expected," CEO Chad Deaton said. "Improving fundamentals for natural gas reflected in lower storage levels, higher natural gas prices, increased oil-directed drilling, and announcements by E&P operators of spending increases support higher drilling activity and additional opportunities for Baker Hughes in North America in the second half of 2008." Oil-services provider Smith International (SII) posted in-line EPS of $0.87 on in-line revenue of $2.37B (+12.5%). Slick quarter for EnCana. EnCana (ECA) beat Q1 EPS estimates of $1.28 by $0.11. Revenue of $5.34B (+20.4%) were better than $4.9B consensus. Free cash flow rose to $540M from $271M. AU Optronics shines. Liquid panel developer AU Optronics (AUO) smashed Q1 EPS estimates: $1.12/share vs. $0.48 consensus. Revenue of $4.5B (+85%) was better than consensus estimates of $4.24B. For Q2, AUO expects PC LCD shipments to fare better than TV panels. The firm said it will build a new factory. "In my crystal ball, I'd say visibility of the LCD industry is clear because it's a growing market," Taiwan asset manager Kevin Yang said. "TV is a very promising sector and the pie is getting bigger and bigger." UnitedHealth drops outlook. UnitedHealth Group (UNH) posted Q1 EPS of $0.78, $0.02 short of consensus estimates. Revenue of $20.3B (+6.6%) beat consensus of $19.88B. UNH lowered its full-year guidance to $3.55-3.60 from $3.95-4.00 (consensus: $3.87). "These financial results are not acceptable for a company with our capabilities and potential. They are due in part to broader economic challenges and in part to our own performance. We are adjusting our approaches, in particular to strengthen organic growth and address operating costs, to deliver financial performance that more appropriately represents the capacity and potential of our organization," CEO Stephen Hemsley said. Shareholders are unlikely to be appeased. SunTrust sees cloudy future. SunTrust Banks' (STI) Q1 EPS of $0.81 were $0.21 short of analyst estimates. Revenue of $2.3B (+22.9%) beat consensus of $2.13B. SunTrust increased its loan-loss provision to $560M (1.25%) due to the deterioration of residential real-estate markets. "The backdrop of emerging recession fears clouds the near-term outlook," CEO James Wells said, adding, "SunTrust is financially strong, with ample liquidity, adequate capital, and a solid balance sheet." Cash infusion socks NatCity. National City (NCC) agreed to sell a $7B stake to a private-equity group led by Corsair Capital at a 40% discount, sending shares plummeting 28% to $6.03. Shares are down 84% over the past 12 months. KBW analyst Melissa Roberts thinks banks will still seek to raise another $12.4B, adding to the $163B they've already sought since July (not sure if she's including Citi's $6B hybrid offering). "There's an appetite out there for risk, but at a price," RBC analyst Jason Arnold said. Oil price keeps gushing. Oil posted new highs of $117+ a barrel amid a falling dollar and attacks on Nigerian pipelines owned by Royal Dutch Shell (RDS.A). "We are clearly headed over $120 a barrel and we are targeting $125," said MF Global's John Kilduff. "The last thing we need is another supply disruption. The outage certainly adds to the bullish sentiment." Lexmark beats; guidance midpoint is low. Lexmark (LXK) posted Q1 EPS of $1.16, $0.26 better than the consensus. Revenue of $1.18B (-6.8%) was in line. For Q2, Lexmark sees EPS of $0.65-0.75 vs. $0.73 consensus. WSJ loses managing editor. WSJ managing editor Marcus Brauchli is expected to resign as early as today after just 11 months; publisher Robert Thompson may take over for now. The separation is said to be "amicable" and Brauchli is expected to stay on with WSJ parent News Corp. (NWS). Sources say that Brauchli tried (unsuccessfully?) to find a middle-road between the Journal's traditionalists and Rupert Murdoch's new vision for the paper. Separately, sources say Murdoch has all but sealed a deal to buy Tribune's Newsday (excluding its real-estate) for about $580M. Murdoch is thought to see Newsday as the solution to the New York Post's lack of profitability. Today's Markets Markets in Asia were mixed Tuesday. Nikkei -1.09% to 13,548. Hang Seng +0.88% to 24,939. Shanghai +0.99% to 3,148. BSE Sensex +0.27% to 16,784. In Europe, markets are essentially flat at midday. FTSE flat at 6,053. CAC +0.22% to 4,921. DAX +0.13% to 6,794. U.S. futures are also flat at 7:15 AM. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.
Wall Street Breakfast: Must-Know News

Even more firms may gain access to TARP. Sources say the Treasury may use some of its $700B rescue fund to buy stakes in financing companies such as GE's (GE) GE Capital and CIT Group (CIT). Presently the program only includes publicly-traded banks and insurers, although the Treasury is already mulling opening the door to some privately-held firms. The U.S. government could eventually own even more of the American financial system than first envisioned. Yahoo, Google tone down ad tie-up. Yahoo (YHOO) and Google (GOOG) submitted a revised version of their search-ad pact to the Justice Department in the hope gaining approval. New provisions limit the scope of the deal, including shortening the agreement to two years from ten, and capping Yahoo's revenue from the deal to 25% of its search revenue total; previously there was no cap. The revised plan also gives Google advertisers the ability to opt out of having their ads displayed on Yahoo sites. It's unclear whether the changes will suffice to appease regulators who worry the deal will allow Google (GOOG) to monopolize online advertising. Separately, Yahoo said Monday Microsoft (MSFT) executive Jeff Dossett will take the lead position in its online media properties after veteran Scott Moore left "for other opportunities." UBS posts earnings, warnings. UBS (UBS) confirmed a Q3 profit of 296M Swiss francs ($256.3M) helped by credit and tax gains, with outflows of 49.3B francs from its wealth management unit and 34.4B francs from its asset management unit. The world's largest wealth manager, UBS had already reported much of its Q3 results last month when it announced a capital injection of 6B franc from the Swiss government and said it would unload $60B of risky assets into a central bank fund. UBS noted some positive client money flows in October, but warned 'difficult' market conditions would hurt fee-earning businesses and Q4 results would be weighed down by the accounting effects of transferring risky assets. Shares -2.6% premarket. Outlook sours for RBS. Royal Bank of Scotland (RBS) abandoned its full-year profit forecast after it wrote-down £1B in October against assets connected to Lehman Brothers and Icelandic banks and as bad loans rose. It also posted £1.4B of markdowns in Q3 before new accounting rules allowed it to claim back £1.2B. CEO Stephen Hester said the latest writedowns, coming in addition to £5.9B in H1, show the bank has too much risk and could face a full-year loss. RBS is in line for a U.K. bailout, and the government could own up to 60% of the bank unless investors buy some of the £20B of stock to be issued later this year. Shares -14.9% premarket. Goldman hedge fund down $1B. A flagship Goldman Sachs (GS) hedge fund - Goldman Sachs Investment Partners - has lost almost $1B of its $6B since its launch in January, further evidence of the crisis facing the industry. "We anticipate that these results will lead to net outflows from the hedge fund industry," managers said, although GSIC itself imposed a two-year lock-in at inception. More than half of its 13% Q3 loss was on positions in commodities, basic materials, metals, mining, energy and agriculture. Tough 2009 for JPMorgan. JPMorgan (JPM) CEO Jamie Dimon told employees the firm faces "highly challenging conditions" in 2009, but sees a possible "strong recovery" in 2010. JPM's recent acquisitions of Bear Stearns and WaMu will improve performance in the "longer term," he said. Dimon warned Asia is "going to get worse than you think" as the tidal wave that began with a collapse of the U.S. mortgage market washes over it. Still, longer-term, he sees "very substantial natural growth" in the region. iPod master leaves Apple. Tony Fadell, one of the fathers of the iPod, is leaving Apple (AAPL) for personal reasons, sources say. Former IBM (IBM) executive Mark Papermaster will take his place. During Fadell's tenure, the iPod grew from a curiosity into a major cash cow; Apple sold 54.7M iPods during its most recent fiscal year. But growth has cooled off as saturation becomes a factor in many countries. Still, Apple shows no signs of giving up any of its 70% U.S. market share. Dismal October for automakers. General Motors (GM) said October was likely the auto industry's worst month since WWII after its sales plunged 45%, Ford's (F) fell 30%, Nissan's (NSANY) declined 33%, Honda's (HMC) dropped 25%, while Toyota's (TM) declined by 23%. GM marketing chief Mark LaNeve said he believes there's plenty of pent-up demand, "but until the credit markets open up and consumer confidence improves, the entire U.S. economy, and any industry like autos that relies on financing, will suffer." U.S. auto sales are now down 14.6% YTD. "It's weaker than we were anticipating," J.D. Power's Bob Schnorbus said, warning leaders should take heed: "The auto industry is important to the economy and it should not be taken too lightly." Manufacturing paints bleak picture. The ISM's Manufacturing index fell to 38.9 in October, its lowest level since 1982, and worse than the expected 41.5. The only industries reporting growth were apparel and leather & allied products. Petroleum & coal and nonmetallic mineral products led the laggards. The weaker than expected data increases the risk the current slump will outdo the recessions of 2001 and 1991. Companies are cutting back on investments and hiring as Q3 consumer spending plunged by 3.1% - the biggest decline in 28 years. The survey "indicates a significantly faster rate of decline in manufacturing when comparing October to September," ISM director Norbert Ore said. "It appears that manufacturing is experiencing significant demand destruction as a result of recent events." Prices also rose at a much slower rate: the price index plunged to 37 from 53.5 in September - the lowest level since December 2001. Export orders dropped for the first time in 70 months. September Construction Spending fell 0.3% from August's revised numbers, better than the expected 0.8% drop. Residential private construction -1.3%; non-residential +1.2%. Earnings: Before Open Ameren (AEE): Q3 EPS of $1.17 misses by $0.08. Revenue of $2.06B (+3.2%) vs. $2.29B. Sees full-year EPS of $2.80-3.00 vs. $3.01. Shares -5.3%. (PR) Archer Daniels Midland (ADM): FQ1 EPS of $1.63 vs. consensus of $0.69. Revenue of $21.16B (+65%) vs. $15.98B. (PR) Autodesk (ADSK): Sees Q3 EPS of $0.53-0.55 vs. $0.55 consensus and revenue of $604-607M vs $624M. "The sharp downturn of the global economy is substantially impacting our business... Demand for our products fell dramatically in October in all geographies as the financial crisis worsened. (PR) Cimarex Energy (XEC): Q3 EPS of $2.19 misses by $0.07. Revenue of $576.5M (+67.7%) vs. $568M. (PR) Dean Foods (DF): Q3 EPS of $0.28 misses by $0.03. Revenue of $3.19B (+2.5%) in-line. (PR) Emerson Electric (EMR): FQ4 EPS of $0.88 beats by $0.02. Revenue of $6.7B (+11.1%) in-line. (PR) GrafTech (GTI): Q3 EPS of $0.55 beats by $0.10. Revenue of $316M (+25.7%) vs. $303M. Shares +6.7%. (PR) HCP Inc. (HCP): Q3 FFO of $0.71/share beats by $0.05. Revenue of $270M vs. $242M. Sees full-year FFO of $2.38-2.42 vs. $2.29. (PR) Holly (HOC): Q3 EPS of $1.00 beats by $0.13. Revenue of $1.72B (+42.3%) in-line. (PR) Louisiana-Pacific (LPX): Q3 EPS of -$0.38 misses by $0.08. Revenue of $390M (-17.5%) in-line. (PR) Magna International (MGA): Q3 EPS of $0.17 vs. consensus of $0.90. Revenue of $5.53B (-9%) in-line. (PR) Marvel Entertainment (MVL): Q3 EPS of $0.64 beats by $0.19. Revenue of $182.5M (+47.7%) vs. $146M. Sees full-year EPS of $2.45-2.65 vs. $1.93 and 2009 EPS of $1.00-1.35 vs. $1.94. (PR) Myriad Genetics (MYGN): FQ1 EPS of $0.30 beats by $0.16. Revenue of $74M (+52.4%) vs. $70M. (PR) NiSource (NI): Q3 EPS of $0.03 in-line. Revenue of $1.42B (+11.8%) vs. $1.36B. (PR) PPL Corp. (PPL): Q3 EPS of $0.45 misses by $0.15. Sees full-year EPS of $2.00-2.05 vs. $2.29, and 2009 EPS of $1.60-1.90 vs. $2.17. "Many of the pressures that affected our results in 2008 also are expected to continue into 2009..." (PR) Rowan (RDC): Q3 EPS of $1.00 beats by $0.13. Revenue of $527M (+5%) vs. $540M. "Continuing weakness in capital markets and commodity prices will, eventually, affect customer demand for our products and services, though we have experienced little impact thus far." (PR) St. Joe (JOE): Q3 EPS of -$0.12 misses by $0.12. Revenue of $32.8M (-57.6%) vs. $47.3M. (PR) Talisman Energy (TLM): Q3 EPS of $0.72 beats by $0.08. Revenue of $2.82B (+50.9%) vs. $2.89B. (PR) Tenneco (TEN): Q3 EPS of $0.01 misses by $0.22. Revenue of $1.5B (-3.8%) in-line. (PR) Tenet Healthcare (THC): Q3 EPS of -$0.06 misses by $0.03. Revenue of $2.14B (+5.2%) vs. $2.21B. Shares +14.1%. (PR) W&T Offshore (WTI): Q3 EPS of $0.79 misses by $0.03. Revenue of $290M (+13.6%) vs. $276M. (PR) Earnings: Monday After Close Automatic Data Processing (ADP): FQ1 EPS of $0.54 beats by $0.04. Revenue of $2.18B (+9.5%) in-line. Shares -2.5%. (PR) Coldwater Creek (CWTR): Sees Q3 sales of $225M vs. $265M consensus, and EPS of -$0.07 to -$0.09 vs. $0.03 consensus. "The overall macro-economic environment has proven to be substantially more challenging than anticipated." Shares -5.9%. (PR) Comstock Resources (CRK): Q3 EPS of $1.20 beats by $0.20. Revenue of $169M (+103.7%) vs. $158M. (PR) Embraer (ERJ): Q3 EPS of $0.32 misses by $0.07. Revenue of $1.55B (+8.1%) vs. $1.63B. (PR) EOG Resources (EOG): Q3 EPS of $2.34 beats by $0.10. Revenue of $3.22B (+226.5%). Shares +1.9%. (PR) Forest Oil (FST): Q3 EPS of $1.26 misses by $0.12. Revenue of $474M (+51.5%) vs. $465M. (PR) Herbalife (HLF): Q3 EPS of $0.89 beats by $0.03. Revenue of $M in-line. Sees Q4 EPS of $0.65-0.70 vs. $0.91, and 2009 EPS of $3.50-3.55 vs. $3.71. Shares -13.5%. (PR) MasterCard (MA): Q3 EPS of $2.47 beats by $0.22. Revenue of $1.34B (+23.7%) vs. $1.27B. Gross dollar volume rose 12.3%. "As we are not immune from the long-term effects of the current economic environment, we have significantly accelerated the focus on our cost structure..." Shares +8%. (PR) Mohawk Industries (MHK): Q3 EPS of $1.10 misses by $0.02. Revenue of $1.76B (-9%) in-line. (PR) Open Text (OTEX): Q3 EPS of $0.53 beats by $0.03. Revenue of $183M (+11.4%) vs. $179M. Shares -1.1%. (PR) Pepco Holdings (POM): Q3 EPS of $0.59 misses by $0.11. Revenue of $3.06B (+10.4%) vs. $2.73B. (PR) Pitney Bowes (PBI): Q3 EPS of $0.67 misses by $0.03. Revenue of $1.55B (+2.6%) vs. $1.6B. Sees full-year EPS of $2.75-2.82 vs. $2.85. (PR) St. Mary Land (SM): Q3 EPS of $1.20 beats by $0.08. Revenue of $324M (+31.4%) vs. $329M. Shares +1.2%. (PR) Viacom (VIA): Q3 EPS of $0.62 beats by $0.07. Revenue of $3.41B (+4.2%) vs. $3.32B. Shares +1.5%. (PR) Today's Markets Asia closed mixed Tuesday. Tokyo was the standout, +6.27% to 9,115. Shanghai -0.76% to 1,707. Hang Seng +0.28% to 14,384. BSE Sensex +2.84% to 10,631. European markets posted strong morning gains. London +1.75%. Paris +2.1%. Frankfurt +2%. U.S. futures are markedly higher at 7:00 AM. Dow +1.88% to 9506. S&P +1.96% to 988.50. Nasdaq +2.18%. Crude +1.16% to $64.65. Gold +1.49% to $737.60. Tuesday's Economic Calendar 7:45 ICSC Retail Store Sales8:55 Redbook10:00 Factory Orders5:00 PM ABC Consumer Confidence Index Notable earnings before Tuesday's open: ADM, AEE, AMSC, DF, DNR, EMR, ENTG, EXPD, FE, GTI, HCP, HL, HNT, HOC, JEC, JOE, LPX, MAC, MGA, MYGN, NI, NNN, NXG, PPL, PQ, RDC, TDC, TEN, THC, TLM, VNO, WTI, XEC Notable earnings after Tuesday's close: AMMD, BRE, CBL, DCT, FCH, HRP, JKHY, ME, NHP, PXD, UPL, USU, VTR Seeking Alpha editor Rachael Granby contributed to this post. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up. After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.
Will Google's Android Play DOS to Apple's iPhone?

Daniel Eran Dilger Today's broad array of smartphone operating system contenders are offering lots of potential answers to a problem that only requires one. It appears the market has two options ahead: either pool generic hardware makers behind a single operating system and deliver a smartphone marketplace that resembles the Windows PC market, or watch them fall to a dominant leader and have a smartphone market that resembles Apple's iPod ecosystem. This decision isn't going to be made by a class of intellectual elite, or by government mandate. it's going to be made by the market itself. Here are the factors that will influence the outcome, either marginalizing Apple's iPhone into a niche as the company has twice experienced previously at the hands of DOS in 1981 and Windows in 1991, or positioning it as the dominant leader as Apple has achieved for itself with the iPod since 2001. The third segment in this series looks at Google's Android and the Open Handset Alliance as a possible “DOS-attack” against Apple's iPhone. Subsequent segments will look at Nokia's newly opened Symbian and other mobile contenders challenging the iPhone. Will the iPhone Meet its Match from a Modern Day DOS? Will Windows Mobile Play DOS to Apple’s iPhone? Will Google's Android Play DOS to Apple's iPhone? Will Symbian Play DOS to Apple's iPhone? Google Acquires Android. In 2005, Google purchased a startup named Android, which had been in business for nearly two years. The secretive startup was known only to be working on software for mobile phones. It was being run by a who's who of mobile industry veterans, including Andy Rubin, the founder of Danger. Rubin had earlier worked at WebTV along with Chris White and Andy McFadden, both of whom had also joined Android. Richard Miner of Orange and Nick Sears of Tmobile also brought their mobile provider experience to Android. At the time of the acquisition, Google didn't announce any plans for Android and instead only told BusinessWeek, “We acquired Android because of the talented engineers and great technology. We're thrilled to have them here.” It appeared that Google was only going to be expanding its search services for mobile phone users, along the lines of the Google SMS answer system it had recently released. Google Buys Android for Its Mobile Arsenal - BusinessWeek Windows XP Media Center Edition vs Apple TV: The Fall of WebTV The GPhone Myth. As reports began to leak out about talks between Google and hardware makers throughout 2007, rumors began to fly about “the GPhone,” a competitive offering that was supposed to take on the iPhone. Some phone enthusiasts hoped Google would jump in to rescue the struggling OpenMoko project and turn it into a viable project that could attack Apple's new smartphone. In October 2007, I printed the Great Google GPhone Myth, taking apart the idea that Google would be directly competing against the iPhone, and describing that Google was really working on a free alternative to Windows Mobile as a conduit for getting its search and related services on a broader variety of mobiles. Google's services were already on the iPhone. In November, Google played its hand: it had organized a consortium of companies called the Open Handset Alliance to develop open standards for mobiles. The first product from the group would be Android, a mobile operating system built on the Linux kernel. Google wasn't getting into the phone handset business at all; it was only making sure that its mobile search products would not risk being marginalized by the threat of Windows Mobile on phones in the same way Microsoft had been working to leverage its PC monopoly to push Google search off the Windows desktop. The Great Google gPhone Myth Introducing Android: Leader of Linux. Two weeks later, Google released an early version of the Android software. On top of a Linux kernel, Android uses a specialized version of a Java Virtual Machine that takes Java language code and turns it into what Google calls “Dalvik bytecode” rather than Java bytecode as a standard JVM would. This allows Google to leverage existing and familiar Java language tools without paying Sun for a Java license. Like Mac OS X and its fraternal iPhone OS, Android includes a variety of open source libraries, including SQLite and WebKit. On top of that, Google developed a series of frameworks that handle the tasks Cocoa Touch does on the iPhone. Android also bundles a set of applications. While Apple adapted its existing Mac OS X to work in a mobile environment to create the iPhone OS, Android is more like a customized Java environment running on a specialized mobile Linux variant: elements of maturity in an otherwise experimental new platform. What is Android? -Google Android was by no means the first mobile OS using Linux. Both Palm and its amputated ACCESS software arm have Linux-based mobile platforms. Nokia has Maemo, which it uses in its Internet Tablets, and also recently acquired Trolltech and its Qtopia mobile Linux platform. Motorola has teamed up with MontaVista Software to use its Mobilinux. Intel created the Moblin project for mobile Linux, aimed at Internet devices. Google's OHA also isn't the first consortium to attempt to standardize a mobile Linux platform. The OSDL started the Mobile Linux Initiative to define requirements for hardware; the Consumer Electronics Linux Forum (CELF) then worked to define various phone profiles aimed at the Japanese market; the Linux Phone Standard (LiPS) Forum tried to do the same thing in Europe. In 2007, LiPS was folded into the new LiMo Foundation, along with the OSDL. All of these committees have had some overlap and some complementary features. Several of Google's OHA partners are also LiMo members, including NTT DoCoMo, Wind River, and Motorola. So why didn't Google just join LiMo? “LiMo, very candidly, wasn't moving fast enough,” OHA board member John Bruggeman told CNET. Google hopes to herd the Linux cats into a progressive, structured platform that can battle against Symbian and Windows Mobile to succeed as the new DOS of smartphones. Will Google fracture or unify mobile Linux? The Presumption of the Necessity of DOS. The previous segment examining Windows Mobile pointed out how the PC industry as a whole assumed that Microsoft's desktop Windows monopoly would easily take over dominance in the MP3 player market, pushing Apple into a niche position. This was expected because DOS had pushed Apple's early computers into a reduced role starting in 1981, and Microsoft had repeated this again in 1991 when the DOS world migrated to Windows, effectively pruning Apple's Macintosh into a Bonsai platform. The inability of one company to dominate any product category has been frequently repeated by PC industry pundits as a given, despite the fact that history is full of examples of this happening. Sony dominated personal music players for two decades under the Walkman brand even while equally large competitors tried to push it from this position; Nintendo has similarly owned handheld gaming despite ill-fated efforts to grab a piece of its pie by products running a generic platform such as Microsoft's WinCE (Gizmondo), Linux (GP32), and Symbian (N-Gage). In fact, outside of the Windows/DOS PC, there are actually few examples of a generic platform taking over an industry. Nearly every other consumer-facing product uses proprietary platforms: car makers, stereo equipment, appliances and so on typically all use designs custom to their maker. The paradox of the Windows PC market has been that Microsoft's broadly licensed software supposedly saves hardware makers from investing in software development while ensuring compatibility, when in reality it adds significant costs to PC makers while limiting their ability to differentiate themselves. That explains why PC makers have been perpetually merging together and going out of business while Microosft has rolled in money over the last two decades. Parallel efforts to copy Microsoft in broadly licensing an operating system have regularly failed: IBM's OS/2, Apple's Mac OS, Palm's PDA OS, even Microsoft's own efforts to duplicate Windows dominance in other markets, from copy machines to PDAs to smartphones to SPOT watches to music players. The closest copy may be Symbian, but its customers are partners, not simply consumers of a generic third party's operating system as Windows licensees are. That indicates it is not necessary to duplicate the dominance exercised by Microsoft over the PC industry in the smartphone market. Google's Android and Symbian exist more as technology sharing pacts among manufacturers, but both aspire to take Microsoft's DOS role among smartphones. However, the idea that Apple's iPhone must be dethroned by a modern-day DOS, whether Windows Mobile, Android, or Symbian, is not just debatable, but does not sync with the reality of more recent events. Apple's recent history of the iPod further refutes the idea that a software analog to Microsoft is needed. The iPod Emergence: Apple & Pixo vs IBM & Microsoft. Apple's iPod in 2001 made no effort to clone the DOS business model; it actually did the opposite. When Apple entered the market, there were a number of existing MP3 devices using custom software, hardware designs, and DRM codecs. The iPod used off the shelf components to deliver a custom MP3 player using third party software, but Apple also added its own technologies: easy to use sync with iTunes, a fast Firewire interface that made uploading music far faster than the prevailing USB 1.0, and an attractive industrial design. With the iPod, Apple played the role of IBM in 1981, using Pixo's embedded operating system to enter the market quickly, just as IBM had used DOS. The difference was that Apple didn't direct any market attention toward Pixo and added a lot of value on top of that core embedded OS. A modern day Compaq couldn't simply clone the hardware and license Pixo to run on it in order to compete against the iPod, because the iPod was much more than just generic hardware running Pixo software. As the iPod developed, Pixo's role diminished and was eventually displaced. Just like IBM, Apple jumped into a new market just as demand was beginning to explode. Apple made MP3 players far more attractive to a general audience by delivering greater playback capacity than most entry level devices offered, along with an ease of use that encouraged buyers to jump in at the higher end of the market. That left Apple with not only the lion's share of the market, but also by far the most profitable segments of the market. Two decades prior, IBM badly fumbled its play with the early PC and ended up irrelevant in the PC world by the late 80s, sideswiped by Microsoft's DOS and the cloners who were licensing it in parallel, notably Compaq and later HP and Dell. Steve Jobs had witnessed that happen, and was determined to not let it happen again to Apple. Rather than being manipulated by a software middleware vendor as IBM had, Apple worked to incrementally develop the iPod market itself. After consuming the hard drive-based player market, Apple took on the Flash RAM-based market with a tiny hard drive system used in the iPod Mini, and followed up with Flash-based devices of its own in the Nano and Shuffle. This allowed Apple to progressively serve an increasingly wider market, incrementally growing upon an established foundation. With the iPod, Apple became, in effect, an IBM with its own internal Microsoft. Microsoft's Failure Despite Features. In contrast, Microsoft entered the music player market by promoting music player hardware reference designs around WinCE. However, it was unable to ship a finished design until the iPod had become firmly established around 2005. Later branded as PlaysForSure, the devices were sold by various hardware makers and all purported to support the same DRM and the same music subscription services while also offering a broader array of hardware that presented video before the iPod did, supported wireless before the iPod, and so on. Despite these unique features, all of those PFS designs still failed. Microsoft blamed the failure of PFS upon its music store and hardware partners and decided to take Apple on itself in 2006. It relaunched a Toshiba PFS player as its own device under the Zune brand, adding WiFi music sharing features and a larger display than the current Pods had. It failed dramatically as well. Did Microsoft's attempts to float a new DOS among music players fail because of Apple's success, or due to Microsoft's own problems? The failure of the Zune, which followed the iPod model rather than the DOS model, seems to suggest that Microsoft itself was to blame. Consider too that Microsoft's Windows Mobile phones, which use the same underlying operating system as its failed PlaysForSure music players and the Zune, had similarly flopped even before Apple could release a charismatic phone equivalent to the iPod. Of course, when the iPhone was released, it hit Windows Mobile hardest. The iPhone made Windows Mobile Smartphones look ridiculous and underpowered, and made Windows Mobile Pocket PC phones look clumsy and awkward, despite the fact that they both supported a variety of features the iPhone didn't, including the ability to edit documents, capture video, send MMS, and so on. Simply adding on features did not enable Microsoft to compete against Apple. The only conclusion that can be drawn from all this is that competing against Apple requires more than just having a feature arsenal. Microsoft's failures in themselves do not necessarily mean that Google's Android will fail in its attempts to float its own smartphone platform. Why Microsoft’s Zune is Still Failing Microsoft’s Zune, Vista, and Windows Mobile 7 Strategy vs the iPhone Will Google Succeed where Microsoft Failed? Microsoft's demonstrated inability to successfully enter consumer markets for MP3 players and smartphones has given observers little faith that the company will somehow turn things around in late 2009 when its next generation of devices are expected to be released. However, prior to that the first fruits of Google's efforts to build its own smartphone operating environment will arrive. Will Google's Android take over Microsoft's crown as the “DOS vendor” among smartphones? Supporters of Google's Android project point to some parallels between Android for smartphones and Windows on the PC: Android will allow hardware makers to differentiate in ways that can offer features Apple can't (or doesn't want to); it should allow software developers to offer features Apple does not allow on the iPhone; it embraces open, hobbyist experimentation in ways that Apple currently isn't; and it opens the potential for content providers that Apple is not interested in allowing. Openness is Android's key competitive feature. Will all this openness allow Google to unseat the iPhone to become the primary platform developers want to participate in, and subsequently soak up the market for third party hardware makers that Windows Mobile serves? While Google currently has no market share due to the fact that no Android phones have yet shipped, it does have broad vocal support from a variety of the same kinds of hardware manufacturers that supported DOS and Windows and helped to make those platforms successful in the desktop PC market. HTC and Android. The first Android phone is expected to be the HTC Dream; Taiwan's HTC (High Tech Computer) also manufactures Palm's Treo Pro phone as well as many of the most visible Windows Mobile devices. In addition to models produced under its own name, HTC also sells Windows Mobile devices under the Dopod brand, as well as no-name phones branded by providers, such as AT&T, Orange, Sprint, T-Mobile, Verizon Wireless, Vodafone, and others. HTC will also be building the XPERIA X1 Windows Mobile phone for Sony Ericsson. HTC was quick to throw its support behind Android despite its long term alliance with Windows Mobile. Why would it so enthusiastically support an unproven platform from a company that has no experience in consumer hardware platforms? One can only assume that HTC is not happy with the current state of Windows Mobile, and desperately wants another “DOS” to succeed where Microsoft's has so spectacularly failed. As an Original Design Manufacturer for Palm, HTC watched as Palm adopted Windows Mobile in place of the Palm OS and subsequently fell even deeper into crisis. Palm's only successful phone since has been its Palm OS-based Centro. HTC undoubtedly sees Android as its ticket to becoming the next Dell, but without a similar dependance upon Microsoft. Android for mobile phones is essentially playing the role of Linux for PCs, except that it has the backing of a major company behind it. Can Android Take on the iPhone with Openness as its Feature? As great as this sounds, it's important to consider that Linux on the desktop has made no significant progress in eating into Windows dominance after a decade of trying. Being open, free, flexible, and decentralized hasn't been enough of an advantage to get consumers to migrate from Windows to Linux in any fraction of significance. Similarly, in the music business, Linux-based MP3 players have had no impact on the iPod, despite offering more features, flexibility, support for additional codecs, and so on. In the mobile phone area, Linux enjoys a sizable portion of the smartphone market, but this is almost entirely due to phones sold by Motorola in China, where the advantages of Linux' openness are void. Motorola's Linux phones offer nothing to users in terms of openness or flexibility, and are really no different in terms of features than other appliance 'feature phones' based upon closed operating systems. And again, a key problem with assaulting Apple in a feature war is that neither the iPod nor the iPhone became popular by being “highly featured.” They both delivered perhaps 80% of the functionality found in all other devices in the market. Rather than trying to match every feature and cater to every niche as Microsoft had with Windows Mobile, Apple's devices did a few things very well at launch, and incrementally developed into full featured devices that still lack some of the more unique features of their competitors. Further, in terms of openness, the demographic that embraces Linux' characteristic freedoms is not the same as the demographic that buys smartphones in quantity and then pays for data service. This is a critical fact to consider because a big part of the iPhone's success stems from the fact that it is being pushed by mobile providers who want to capture the cream of the market willing to pay a premium for data services. The Frankenphone. Combining the fractured aesthetic of HTC's Windows Mobile phone hardware with Android's software, based upon Linux' perpetually unfinished DIY openness and Google's Java-like development platform, will not result in a product similar to the iPhone. Instead, it will look a lot like phones that have already failed in the market. Apple's advantage comes from slick hardware designs with a close attention to detail, combined with software that purposely does less so that it can do what it does better. Even Apple's own conservative attempts to broaden its software capabilities with iPhone 2.0 have resulted in instability problems that can be blamed upon both Apple's early releases of its phone operating system and software from inexperienced third party developers new to the platform. Would the current frustrations with iPhone 2.0 be somehow mitigated by additional openness that also embraced all kinds of variables from different hardware makers with less quality control than Apple, a loose committee of additional cooks working to serve up operating system features targeted at every possible conceived need, and a wider third party software group with fewer constraints on illegal behaviors? The Failure of Open. While it is politically unpopular to criticize the well meaning efforts of open source contributors, the failure of Linux on the desktop, the failure of the vaporware Indrema game console, and the failure of the OpenMoko project to deliver a workable phone within a year of its deadline all underline the serious problems open development faces in the world of consumer oriented devices. Open has simply failed to deliver on its promises in the world of consumer hardware. OpenMoko was supposed to release its first mobile phone to consumers for $250 several months in advance of the iPhone. When the iPhone shipped, the group then announced new plans to get its phone out by the end of 2007. Instead, this spring the group announced new plans to move to an entirely different development platform, and ship its phone mid year for $400 with limited functionality and incomplete software outside of basic GSM phone features. Linux's notable successes, from Motorola's Linux phones to the Tivo DVR to Linksys Routers, have often come without any associated openness or freedom, and were instead delivered simply to provide their manufacturer with a free kernel to build upon. This indicates that while Linux may find its way into an increasing number of smartphones, it will likely not be accompanied by the glorious freedom of an open development environment Google has said it would offer with Android. Apple iPhone vs the FIC Neo1973 OpenMoko Linux Smartphone Can Google Succeed Where Open Has Previously Failed? Despite “openness” being Android's strongest competitive feature compared to Apple's iPhone, Google recently revealed that its wide-open development model is intentionally gravitating towards a closed association of top tier partners due to practical considerations. In July, Google accidentally sent out a notice that revealed that it had been seeding private SDK updates to only a subset of its contributors, angering those who believed that Android would be as open as Linux on the desktop or the OpenMoko project. Further, Google has restricted initial development to higher level APIs just as Apple did, further indicating that Google itself realizes that being wildly open to impress a minority of hobbyists will not result in the commercial success of its new platform. That serves to neuter Android's primary advantage over the iPhone. Without delivering on the premise of being wide open, Android is really just a less mature set of Java libraries used to create a specialized binary that runs on a Linux foundation. Unlike Apple's iPhone, Android phones won't have a slick user interface developed by professional artists, nor the iPhone's legacy of mature software development frameworks crafted over the last thirty years, nor the iPhone's tightly integrated hardware with award winning industrial design, nor its marketing power tied into the iPod and Apple's retail stores. Android won't be an open iPhone, it will only be a Windows Mobile phone with a better kernel that runs specialized Java software instead of Win32 or .NET code. Don't expect consumers to be impressed by that. The Biggest Missing Feature. There is one remaining factor that strangles to death any last remaining hope that Android might assassinate the iPhone and assume the crown of the “DOS of smartphones.” That is: Android delivers zero price advantage to consumers. In 1981 and 1991, consumers who wanted Apple computers faced the sticker shock of a somewhat arrogant price tag. Apple sold its computers, as it still does, at the higher end of the market, but there was simply far more range in prices available. In 1981, that meant the Apple II was $2600 and the new Apple III was $3500, even before you added a monitor. On the low end, Commodore sold its far less powerful, but “still a computer” Vic-20 for $300, while IBM entered the market with the IBM PC at $3000. Over the next few years, Apple focused on delivering additional sophistication at the same price, releasing the $10,000 Lisa and then the $2,500 Macintosh. IBM continued selling PCs in the same $3,000 to $10,000 range, but other DOS PC vendors began selling machines at prices that ranged as low as $1500. That left Apple with a roughly $1000 price premium over low end PCs. The products weren't really comparable, but consumers only saw the huge price difference. In 1991, Apple was still selling moderate to high-end Macintoshes for $3,800 to $10,000; the crippled Mac LC was $2500, and obsolete-at-birth Mac Classic ranged from $999 to $1500. Windows allowed PC makers to ship a functional $1500 PC and claim a rough approximation to Apple's $2500 entry level system, maintaining that apparent $1000 price premium. Today, pundits are lucky to find a Dell or HP system that is even a couple hundred dollars less than a comparable Mac. However, in the smartphone business, the iPhone 3G is now the same price, if not less, than generic competing phones on the market. Even more significant is the fact that the price of the phone hardware is nearly nothing compared to the cost of the service plan. This fact simply eases any price premium that could cause buyers to flock to a smartphone running a generic operating system over buying the iPhone 3G, regardless of whether it runs Windows Mobile or Android. 1990-1995: Planting Software Seeds Android Partners Have Already Failed. That same pricing principle similarly prevented buyers from considering many of the alternatives to the iPod. While Apple's original iPod models were more expensive than many of the first MP3 players on the market, they were price competitive with models offering similar features. By 2004, it was Apple who was undercutting MP3 competitors on price. Microsoft offered zero price advantage when it began selling the Zune, a major factor in its failure, but Microsoft simply couldn't out-price the iPod; it was already losing money offering the Zune at the same price as the iPod. Apple now has tremendous market power in buying RAM and other components that will prevent any competitors from being able to offer a huge discount over the iPhone's $199 price tag. Even if competitors were to give their phones away, they would only offer a $200 discount to users who would then still need to pay the same mobile fees to use the phone. Android's other partners, including Samsung and LG, have already failed to capture any significant market share in the music player market. Are they going to maintain their position as smartphone makers now that they face similar competition from Apple, its iPod ecosystem, its iTunes Music and Apps Store, Apple's retail store experience, and other factors that are pushing the iPhone? If they can, it is not obvious how partnering with Android will help. Other Problems for Android. Android was announced in early November 2007 and was followed with an early preview SDK within a couple weeks, a month ahead of Apple's initial announcement of the iPhone 2.0 SDK. However, between March and July 2008, Apple delivered nine progressive releases of its SDK, opened its App Store, and sold 60 million apps, raising $30 million to support iPhone software development in just the first month. It has since released three more SDK updates to developers related to iPhone 2.1, which is expected next month. Android just published its first open SDK beta update earlier this week, warning developers that “applications developed with it may not quite be compatible with devices running the final Android 1.0.” Additionally, Android still has no phones available. By the time the HTC Dream is expected to launch, Apple will have an installed base of around ten million iPhone (and iPod touch) users supporting software development through iTunes. The business model for selling Android apps is no better than that for selling jailbreak iPhone apps: there is no iTunes Apps Store to promote them, so users will have to track them down on their own. Android developers also have no real freedom that jailbreak iPhone developers lack. The only difference is that there are ten million iPhones to sell jailbreak apps to, and currently zero Android phones. If selling a jailbreak iPhone app sounds like more trouble than its worth, imagine trying to sell Android apps to a non-existant audience. Now add the official iPhone App Store into the mix, where publicity, promotion and profits are booming. What platform is going to have the most applications? How many users will flock to a smartphone platform with no apps? The wisdom of releasing a desirable phone and achieving a significant installed base before releasing an SDK makes a lot more sense in retrospect. Additionally, while Apple has a decade of experience in shipping regular updates to Mac OS X and its Xcode developer tools, Google has only shipped a random assortment of web-oriented SDKs (a number of which have been abandoned) as a tangent to its core business of selling advertisements. When the Android SDK 1.0 is finished later this year, developers will not only lack an installed base to sell their apps to, but will also have no high profile market for selling their apps in, and subsequently no financial incentive to develop applications that add value to the Android platform, just like Linux on the PC desktop. Around the same time, possibly within the next month, Apple will be shipping its second major OS release: iPhone 2.1. Apple will also be upgrading its entire user base to the new software so that developers will have a cohesive platform to target. This mirrors the efforts Apple has taken to upgrade its Mac OS X users to the same reference release. Mobile developers will be seeing money pouring in via iTunes while crickets chirp in the Android section of various mobile online stores. Apple’s iPhone Vs. Other Mobile Hardware Makers: 5 Revenue Engines Same Same, But Different: DOS Model Problems. Android developers will also have a series of other problems to manage. Like Windows Mobile, Android is intended to support everything, from BlackBerry-style keypad phones with a small touchscreen to the simple Windows Mobile Smartphone form factor lacking a touch screen to iPhone-like full size touch screens. Also like Windows Mobile, Android phone makers will have the option to leave off Bluetooth, WiFi, GPS location services, graphics hardware acceleration, and so on. Each Android phone will also have unique camera hardware, support for different video and audio codecs, and varied support for other differentiating proprietary services demanded by mobile operators. This will force developers to to make complex decisions regarding the lowest common denominator they choose to support. So while the iPhone will have a cohesive feature set, a managed software environment, and a functional market, Android will be a loose federation of hardware makers selling the same random features found on Windows Mobile today, with a chaotic development environment that lacks any central market for users or developers. And it will be run as an experiment by a company with no experience in consumer hardware or platform development. The Missing Tap. One specific example of the “DOS model problem” is that Android currently does not support multitouch. It's not touched on in the API, and Google quietly tap dances around its omission. Why no multitouch? Because multitouch screens are expensive, and most OHA hardware members are more interested in making a profit in a competitive phone market rather than impressing consumers as Apple did with the iPhone. Most existing smartphones, even those trying to directly rival the iPhone, use a stylus driven, pressure sensitive tap screen or a simpler, cheaper touch technology that lacks support for sensing multitouch. The iPhone's screen can actually sense up to five fingers at once, but the primary feature multitouch offers on the iPhone is the two fingered tapping and the pinching effects everyone associates with it. Android could certainly support multitouch if there were a demand for it, but that's the point: Google knows that its hardware partners are cheap and unlikely to put out hardware that actually competes with the iPhone. Instead of using expensive technologies that deliver clever yet largely invisible functionality, OHA members, just like PC makers, are far more likely to add flashy, impractical gadgety fluff that's cheap to tack on, such as slide out keyboards, neon tubes, and scratch and sniff stickers. That's how you impress gullible nerds on the cheap. Google itself is blowing smoke and erecting mirrors to distract from the reality that it being a “DOS vendor” means supporting bargain basement hardware from penny pinching duplicators. Android has been demonstrating some “wow” features such as a Street Maps app that pans around based on an internal compass in the demonstration phone. The problem is that that kind of thing only makes for a fun demo. Nobody needs to twirl around their phone in the air to see a view of the other side of the street, but everyone who has used an iPhone will wonder why they can't pinch to zoom out. Even worse, most Android phones aren't going to have a compass built into them, so Google is demonstrating features most Android users won't be able to use. That Sounds Like Microsoft… Google's design decisions are beginning to look a lot like Windows Vista; rather than actually working to make laptops boot faster, Microsoft came up with the idea of adding a small screen to the back of Vista laptops so users could check their email without having to wake the system up. But this was a stupid idea for a number of reasons, the most obvious being that most users just want a laptop that boots up quickly. Few laptops got the mini screen, but every user who tries Vista on their laptop will wonder why it doesn't boot up as fast as Mac OS X Leopard. In the same way, Google is advertising features for Android that most users won't ever see in their actual phones while ignoring things people will expect based on their exposure to the iPhone. Android is simply selecting the wrong features. Android will offer the advantages of supporting MMS, recording video, and the list of other features Windows Mobile already supplies. Those features didn't stop Apple from firing past Microsoft in the smartphone arena however, just as the Zune's highly touted WiFi and screen didn't phase iPod buyers. Incidentally, just months after the Zune, Apple had not only demonstrated a larger display but a higher definition multitouch screen, and not only WiFi, but functional WiFi that could be used to browse the web or check email. This suggests that Apple, with its faster release schedule, won't stay behind any of the leading features potentially offered by Android for very long. Android partners, however, will find it as difficult to catch up with Apple's unique features, just as Microsoft has been stymied to keep up with Mac OS X, the iPod, and the iPhone. The underlying reason: both Google and Microosft are tasked with maintaing support for a huge variety of hardware options demanded by all their partners. Apple has the unique circumstances to do only what it needs to do itself. Android in Windows Mobile's Shoes. Like Windows Mobile, Android faces a difficult market. In the US, it competes against the popular BlackBerry in corporate markets and the iPhone among consumers. Worldwide, it competes against entrenched market leader Nokia. The difference is that Google, unlike Microsoft, has no in. Windows Mobile was adopted by Windows-bound IT shops despite its weaknesses. Nobody has any preexisting reason to try an Android phone apart from hobbyists and open software enthusiasts, a demographic that has done little to move Linux on the PC desktop. Google also lacks Microsoft's installed base; it's starting from zero. The smartphone industry initially doubted Apple's chances of making much progress with the iPhone, despite the company having the Mac platform, the iPod, retail stores, platform development experience, marketing savvy, industrial design prowess, and so on. Google doesn't have any of those things. Mobile Providers vs Android. Apple also started with an exclusive partnership with AT&T, a three legged race that demanded effort from both. Google is hoping that hardware makers handle the hardware details and that mobile providers will be excited to sell its Android phones. While hardware makers such as HTC clearly appreciate having found a free alternative to Windows Mobile, it's not obvious why providers would be excited about Android, as it promises an openness that most mobile providers strongly oppose. AT&T took a big risk in getting behind the iPhone, as the phone encouraged users to use email rather than fee-based SMS and MMS, it supported WiFi for data access, and it bypassed AT&T's MEdia Net services to plug into iTunes instead. Verizon refused to parter with Apple and grant it those kinds of concessions. Is AT&T going to take a similar risk to partner with a phone that is not exclusive to it, and is Verizon now going to open its arms to support phones that do not exclusively support BREW, VCast and its other proprietary services? While Android may well eat into Microsoft's Windows Mobile business by stealing away its hardware makers, it seems unlikely that Android will ever serve as more than free alternative to Windows Mobile in a market where Windows Mobile is increasingly irrelevant. Android may have the dubious distinction of swallowing Microsoft's mobile business the same way Microsoft ate up the Palm OS, but even if it accomplishes that goal, Google will likely find itself unsustainably hungry immediately afterward. It will also find itself swimming in a shark tank of hungry rivals, including Nokia's Symbian, RIM's BlackBerry, and Apple's iPhone. Symbian is the final generic platform vying for the opportunity to play DOS in the smartphone market. The next article will examine Nokia's chances in its bid to match Microsoft's PC dominance in the mobile market while setting out in a new venture to copy Android's open software model. Did you like this article? Let me know. Comment here, in the Forum, or email me with your ideas. Like reading RoughlyDrafted? Share articles with your friends, link from your blog, and subscribe to my podcast (oh wait, I have to fix that first). It's also cool to submit my articles to Digg, Reddit, or Slashdot where more people will see them. Consider making a small donation supporting this site. Thanks!
August 2007 Zoon Awards for Technical Ignorance and Incompetence

Daniel Eran DilgerIn an effort to recognize the spectacular efforts of individuals and organizations promoting the regression of human achievement in the field of technology, a series of nominations await your vote to determine the recipients of August 2007 Zoon Awards.Meet the Zoons.Segregated by color, the various Zoons highlight the world's absolute worst in small minded ignorance, paid to say propagandism, and blind devotion to products without merit.The Pink Zoon is awarded for a spectacular effort in fear-based propagation of uncertainty and doubt, or efforts to infect headlines with false information with the primary goal of preventing innovation, competition, and the emergence of new ideas, or simply to make a quick profit. The White Zoon is awarded for the blinding glare of a shiny blank brain, particularly when such ignorance is presented with authoritarian emphasis by an individual or news source operating well outside its abilities. This award may also be assigned to a company or organization in recognition of epic failure. The Brown Zoon is awarded for squirting extraordinary amounts of intentionally noxious misinformation, whether dredged from an impacted recollection of twenty years ago, sucked from the trusty bucket of canned responses, or simply invented as needed to create an intolerable outburst of stink.These should not be considered as first, second and third placements, as each tie for an equal standing in the Zoon Hall of Shame. It is also possible to award multiple parties for the same award, either as shared participants or, in the case of an unclear majority vote, tied nominations.Meet the Zoon Nominees.As one might imagine, determining the most fitting recipient might be difficult given the wide range of potential candidates standing in line. Here's a brief background on the nominations for August.Troy Wolverton, San Jose Mercury News.A writer for the Street and most recently, the San Jose Mercury News, Wolverton always manages to dig up an unattractive headline for any news related to Apple. A series of articles documented his negative spin and inaccurate reporting, particularly when the subject related to Apple.Wolverton promised me and other readers that he would answer the questions related about his shoddy journalism record, then cowardly ran away. He also wrote emails to RDM readers assuring them that he was only ever honest and unbiased, and that RoughlyDrafted should be read with great suspicion.[10 FAS: 8 - San Jose Mercury News’ False Apple Scandal][Troy Wolverton Documents Faux Apple Shareholder Outrage]Wolverton is nominated for a White and Brown Zoon.Neil Cavuto, Fox News.While actually based on reports from the end of July, I wrote about Cavuto in August, qualifying his nomination for arrogantly complaining about how Apple purportedly over promised iPhone shipments it then failed to deliver. In reality, Apple didn't indicate any sales goals for its first weekend. Cavuto also confused AT&T authorization numbers with Apple's sales figures. Fox News subsequently corrected his comments to suggest that he hadn't made the error, but still failed cover up the core problem that Cavuto's entire rant been a specious bit of ignorant rambling delivered--rather hypocritically--with far too much arrogance than the subject required.Cavuto is nominated for a Pink and White Zoon.[10 FAS: 9 - Troy Wolverton, Neil Cavuto, and the Apple Stock Scandal]Jim Cramer, Scott Moritz and Brett Arends, the Street.After documenting how he would spin false information to manipulate the market as a hedge fund manager, Cramer praised his apprentice Moritz for publishing a string of articles dredging up or simply inventing false information about the iPhone with the intent to knock value from Apple and suggest that Apple's phone was not competitive, not selling as expected, and that Apple's deal with AT&T was an unprecedented deal earning unconscionable profits. Arends is thrown in for good measure after delivering similar work directly from the mouths of Street-savvy Verizon shill, Roger Entner of IAG Research.Cramer, Moritz, and Arends are nominated for a White and Brown Zoon.[More on Scott Moritz and the Jim Cramer Street Misinformation Engine][The Street's Flaccid Campaign Against the iPhone][Unraveling Anti-Apple Panic: the iPhone Launch Success]George Ou, ZDNet, CNET.Nominated in August primarily for his article misrepresenting typography technology and falsely portraying Mac OS X as incompetent in the area of text rendering, Ou deserves extra reason to earn your Zoon vote for failing to admit that he falsified his report, and instead attacking those who pointed out his error.[Tech: Zoon for George Ou]After posting the article detailing why he was wrong and establishing a pattern of his consistently inaccurate and tilted writing, someone who appeared to be Ou emailed me to say:“If you're gonna do a hit piece, at least do it accurately... I'm not going to get uptight about a little man like you chewing on my feet and I'm not even going to bother cursing at you for writing a blatant hit piece on me. It's not worth my time.�?Assuming that the author was unlikely to actually be Ou, I did a search on the email and found an online comment from the same address mentioning being a former ballet dancer. To determine if the author was Ou or just simply a joker trying to get a response, I wrote back, “Hi George, What was inaccurate in my article? Are you really a ballet dancer?�?Ou tu?In reply, Ou wrote, “I was a professional Ballet dancer up till 2000 and I still try to perform now and then,�? but didn’t note anything that was incorrect in the article. When I asked for the correction again, I got two emails, one insisting that, “The 'FreeBSD community' is essentially Sam Leffler. Sam pretty much wrote all that wireless code. Sam is an employee (contractor) of Atheros. Atheros is involved in that FreeBSD code.�?The second said, “You don't even understand the fact that the same Atheros ‘team’ led by Sam Leffler that wrote Apple's wireless drivers is the same team that wrote the open source MadWiFi drivers for Linux and FreeBSD. The same wireless drivers Apple said there was no problem on had to be patched three times a month later. And here you are slandering me because I defended two researchers against a billion dollar corporation.“When you smear my photograph and slap a "SHILL" on top of it, that is slanderous and insulting. You're accusing me of taking payola which is a crime and only a ‘little man’ would slander someone like that. It's one thing to disagree with me or not like a certain piece I wrote, but smearing someone's photo with accusations of shill is nothing but the act of a coward. Unprofessional? There's nothing unprofessional about calling trash like you little and I'd say that to your face.�?Pearls Thrown.How could a professional writer fail to understand his subject matter, fail to grasp basic logic, and then be so arrogant about it on top? I wrote, “George, I don't have to prove that people from FreeBSD did not contribute to Apple's driver. I never stated that, and it has no relevance to statements I made. You had to prove that Atheros did not deliver the driver, and that it came directly from FreeBSD without Atheros' involvement. That was the question, and your misunderstanding of the architecture of Mac OS X helped you to confuse the situation.“The truth is that Atheros contracted with an expert to port some of the FreeBSD code for use in its driver for Mac OS X, which only shares significant similarities with FreeBSD in its userland environment. Atheros had to deliver unique work for Apple to offer a working driver for Mac OS X, and paid a contractor to complete that work.“You maintained that Atheros simply wasn't involved at all, and that Mac OS X's driver just came from the FreeBSD repository. That was wrong. Your explanation of why this was the case was also wrong. It is clear you still do not understand the situation entirely. That's why you shouldn't be writing about it as if you are an expert, simply because someone told you something that sounded believable off the record. You don't understand the issues involved, but operate under the assumption that everything you think up as a plausible idea is also the truth. It isn't.“Slander, as noted in my article, is spoken. Libel is written. Just FYI. Also, a shill doesn't necessarily need to be paid, so calling you a shill isn't ‘accusing you of payola.’ Also, payola really only is illegal in broadcasting. There are plenty of people who are paid to say things, and nobody is arresting them. The company you work for largely serves advertisers; that isn't illegal, or all of CNET would be shipped off to jail.“There is nothing cowardly about pointing out that you are a shill and then documenting your attempts to spread misinformation in efforts to make Vista look good and Apple look bad. There is something very cowardly about fuming that you've been outed, and rather than apologizing and correcting your error, and then maintaining that you're simply better that others so your misinformation campaigns don't matter.“I don't have a little man complex, so repeating that doesn't really bother me. It does make it clear that you have some size issues in addition to your general lack of professionalism and technical incompetence.�?To which Ou elegantly replied, “Go find yourself a bathhouse in the city where you belong. You have no business writing.�? Using the same address, Ou responded to several other online sites defending himself and ignoring the errors of his article. How does Ou have a job? Ou is nominated for a Pink, White, and Brown Zoon, and his winning will also earn a Zoon for ZDNet and its CNET parent.Windows Genuine Advantage, Microsoft.After choosing a delightfully ironic name for its software DRM system, Microsoft then bungled its validation system for users worldwide. The hundreds of millions of PCs running Windows XP and Windows Vista phone home to Microsoft at regular intervals, but the company set up the system with a single point of failure. An inevitable failure prevented the company from maintaining resilience to downtime--something the company highly touts as an Enterprise feature of Windows Server--but it also highlighted the problem of validating software in general using a system that assumes guilt when there is any question in reaching the validation server. Windows users who tried to verify their genuine software had software features remotely turned off because of the WGA problems.[Tech: WGA the Dog]WGA is nominated for a White Zoon.Oliver Rist, InfoWorld, IDG.Suggested by reader Robert de Bie, Rist yesterday wrote an article titled “Does Mac OS X suck? Apple's desktop platform has impressive technical chops, but it falls short from a business perspective.�?Never mind the sophisticated and professional headline, the real question is, did Rist back up his headline, or simply cower in a bed of second hand fear, uncertainty and doubt? No need to guess, really; this is InfoWorld, a rag primarily useful for its ads. No competent IT manager wastes much time reading the ramblings of such stuffshirt columnists.Rist brings up the idea that Mac OS X is really just Unix with some frosting, making it easy to coo about, but not really ready for real business. Unfortunately, Rist offers no basis for anything that he says. In fact, his headline and (forgone) conclusion don't even match what he writes in between. Under the subject of networking, Rist says, “OS X has an excellent networking client, both wired and wireless — due in large part to FreeBSD rather than anything coming out of Cupertino.�? But wait, does FreeBSD write the Mac’s Apple File Protocol? Does it maintain Samba for Windows networking? Wrong on both counts. By spouting the dittohead myth that Mac OS X is just FreeBSD with an Apple logo, Rist has already established that he knows nothing about the subject he's pretending to be an expert in. He then says nothing else about networking, granting that Mac OS X has no real issues.Security Absurdity. On the subject of security, he says “It's a pretty secure system. Yes, ever since OS X has become more popular, attacks and breaches on the platform have become more numerous. And, yes, those numbers are high enough that if I were managing a portfolio of MacBooks I'd be installing anti-virus on them.�? Rist linked his comment to another IDG article reporting on a Mac OS X worm threatened by the anonymous "InfoSec Sellout," which turned out to be a fraud. That's the extent of the acceleration in Mac OS X “attacks and breeches,�? a crank call? There are yet no viruses for Mac OS X, and all the malware that exists is proof of concept ideas hatched in a lab. Strike two for Rist in trying to write about security issues. Even so, he concedes, “once the personal firewall is up and the AV installed, I'd fully expect to see far, far fewer security-related problems from my Mac clients than my Windows clients.�?[10 FAS: 10 - Apple’s Mac and iPhone Security Crisis.]Many Words, Little Point.On the subject of reliability, Rist beats up Artie MacStrawman for insisting that Mac OS X apps never crash. He then provides some recollected figures for estimating how many times he has noticed a Mac app crash compared to Vista crashes. He passes by saying, “Apple's probably less crash-prone overall.�?On the subject of software compatibility, Rist says Apple “treats third-party developers like the proverbial redheaded stepchild, which results in significantly fewer third-party software options for Apple users than Windows users,�? then follows up with the genius, “When it comes to mission-critical, vertical-type business software, Windows clients far outnumber Apple clients. If they didn't, Macs would be populating a much larger number of corporate desktops.�?How does this guy get work writing? By the end of page one, Rist had said nothing at all. On page two, Rist really gets going. He starts off referring to "Apple jihaders," as if he has a fundamentalist shock radio show rather than a column designed to inform IT managers. Rist says people don't want to retrain employees to use Macs, and then suggests that retraining users for the significantly different Vista would not be an issue. He gives the Mac a “grudging�? pass again and moves to hardware. [Paul Thurrott's Merciless Attack on Artie MacStrawman]Mac OS X’s Hardware Features.He says that Gateway has more USB ports and a finger print scanner in the same form factor for less cost, without outlining his comments with any factual basis. He then complains that his MacBook suffered a hard drive failure after four months. “That's a pretty short time frame for serious hardware failure,�? Rist wrote. It's odd that hardware issues are being outlined in an article about “why Mac OS X sucks,�? but someone writing to an audience of experienced IT users should be aware that computing hardware--particularly hard drives--is most likely to fail in its first few months. Past that break in period, most hard drives typically have a relatively stable three year life span, after which problems become statistically more likely to occur. It's called the bathtub lifespan curve, because like the contour of a tub, it starts high, then drops low for a long stretch, then begins to rise again. Clearly, Rist doesn't know what he's talking about at all, even when complaining about consumer Mac hardware in the context of Mac OS X as a business operating system.Dude, You’re Being a Shill.After "passing" all of his categories, Rist then fails Mac OS X in “business orientation.�? There are good and justified reasons for faulting Apple in the IT arena, but Rist doesn't mention a single one. Instead, he prattles on about Apple's consumer ads, and how they portray the typical Mac user with a “SOHO, I'm-cooler-than-you, coffee house image.�? For all the dittoheads who like to repeat this idea, I'd like to remind you all that Dell's memorable mascot was a smirky pothead who couldn't finish sentences beyond, “Dude, you're gettin’ a Dell! (excited thumbs up).�? That had no impact on Dell's Enterprise sales, because serious enterprise users don't make their decisions based on watching prime time TV and deciding whether they like the advertisements targeted at families. So please shut up about the Justin Long and John Hodgman Get a Mac ads. Enterprise Worthy Dell Pothead Vs. the Too Good for You Coffee Drinking Mac.Highly Unqualified.Rist is a “senior senior contributing editor�? at InfoWorld. With this sort of incompetence and ignorance, it makes one wonder what kind of single celled organisms must pass for junior editors at IDC and its various ComputerWorld, PC World, and InfoWorld properties.While writing “a column devoted to running Microsoft technologies in medium and large enterprise environments,�? Rist only notes experience in running a small Microsoft-oriented software business and writing for rags like Computer Shopper. That qualifies him as a Microsoft shill, but not as a columnist offering advice about ‘medium and large enterprise’ IT environments.Rist is nominated for Pink, White and Brown Zoons.Microsoft’s Pseudo-Philanthropy in New Orleans.Bob Emery notes that Microsoft is offering free software for hurricane-hit businesses in the devastated New Orleans area. However, in order to qualify, users have to sign up for a three year plan, of which Microsoft only covers the first year. A local paper noted “For the typical small business of 50 employees and 25 personal computers licensing Microsoft Windows Vista and the Office 2007 suite of programs, the free year can result in savings of as much as $12,050.�?Of course, what that really means is that recovering small businesses will actually have to shell out $24,100 just for software licenses, in addition to buying computers capable of running Vista. One might think that a company earning $50 billion in revenues might be able to offer more than an advertisement to struggling businesses, particularly since software costs Microsoft nothing to deliver.[Microsoft gives free software to hurricane-hit businesses - New Orleans CityBusiness]Votes toward Microsoft's headline friendly, fake philanthropy will help the company earn its White Zoon for its WGA fiasco.Vote in the Forum and add your comments.Official awardees: Pink : George Ou, ZDNet, CNETWhite : Windows Genuine Advantage, MicrosoftBrown : George Ou, ZDNet, CNETWhat do you think? I really like to hear from readers. Comment in the Forum or email me with your ideas. Like reading RoughlyDrafted? Share articles with your friends, link from your blog, and subscribe to my podcast! Submit to Reddit or Slashdot, or consider making a small donation supporting this site. Thanks!
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Under The Radar News - Monday

Biofuel bias. GM (GM) CEO Rick Wagoner says a UN report linking biofuel production to rising food prices is "shockingly misinformed." Skyrocketing oil prices, he says, are a "far bigger driver" of increased food prices than the corn used for ethanol production. He bemoaned the lack of more ethanol stations in the U.S. Wagoner thinks China will be the first country to build the necessary infrastructure for clean cars -- which he says could give it a strategic advantage. GM is a leading advocate of E85 use. Buongiorno 3G iPhone. An unlocked, untethered 3G iPhone will being selling in Italy "in a matter of weeks." The move would be a radical departure from Apple's (AAPL) insistence on a revenue-sharing model. The phone will be sold through Italy's Telecom Italia Mobile for a higher price than in other European countries. Italians are the #1 consumer of pre-paid wireless contracts. Bloomberg denies he's interested in NY Times. New York mayor Michael Bloomberg is being encouraged by aides to merger Bloomberg LP with the troubled New York Times (NYT). The idea was floated in the May issue of Vanity Fair by Michael Wolff. "It's the most logical idea in the newspaper business," Wolff said yesterday. "The New York Times is vulnerable, and Bloomberg is a potential buyer who has the money, the credibility, the interest and the chops." Chatter of a rumor is growing louder as a redesigned WSJ (NWS) prepares to take on the Times. CNBC says Bloomberg categorically denied the report, saying he's "not a buyer of other people's problems." Whitney whacks Citi, Wells Fargo. Influential Oppenheimer analyst Meredith Whitney tripled her 2008 loss estimate for Citigroup (C) to $0.45/share and predicted Citi would further cut or even eliminate its dividend. She also said Wells Fargo (WFC) may soon face a $4.5B reserve shortfall. At 11:15 AM, Citi is down 2.35%; WFC is off 3.5%. Influential union looks for Citi split. The American Federation of State County and Municipal Employees, one of America's largest unions, plans to call for a breakup of Citigroup's (C) investment banking and commercial banking units at tomorrow's shareholder meeting. Traders bet on bank failures. Put buying on large financial institutions has increased in recent weeks despite a recent bounce in share prices. Puts on Lehman Brothers (LEH) jumped 13% for the month to last Thursday; puts on Morgan Stanley (MS) were up 8%; for Merrill Lynch (MER) they climbed 20% over the same period. Are we better off now than five years ago? According to a recent Pew summary, only 41% of Americans think so -- a 44 year low. Microsoft / Google prepping for regulatory battle. Microsoft (MSFT) has hired a lobbyist firm to lobby federal regulators to approve the not-yet-agreed-upon Yahoo (YHOO) merger. Meanwhile Google (GOOG), which opposes the deal, recently took on lobbyists to help with "competition issues in the Internet industry." Five-year notes claim sweet spot. Five-year Treasurys are trading at five-year high spreads relative to two-year notes as bond traders grow increasingly wary of further Fed rate cuts amid accelerating inflation. Experts say the five-year notes are presently the fixed-income "sweet spot"; two year notes are "horrifically rich," while 10 and 30-year Treasurys "look awful generally." (Government bond ETFs) All aboard. GE Rail Services (GE) is for sale. The sale process is in the first round of bids. DellShack? RadioShack (RSH) jumped on speculation of a Dell (DELL) buyout. Sources say Michael Dell's MSD Capital is one of the private-equity investors in a rumored $6-7B cash infusion being finalized by National City (NCC). India BlackBerry to roll out sans government blessings. India's Tata Teleservices is rolling out Research In Motion's (RIMM) BlackBerry without waiting for governmental approval. Tata told the government the delay was costing it "significant loss of business opportunity and recurring revenues." Tech M&A to stand firm. M&A activity in the recently-hot tech sector will remain strong, notwithstanding the credit crunch and a broad M&A pullback. "Current activity levels and deal pipelines suggest strategic and transformational deals are still very much on the boardroom agenda of technology companies, and the demise of the leveraged buyout has been overplayed in the sector," a PricewaterhouseCoopers report says. Overall, global M&A is down by 1/3. MySpace turns analysts off. Analysts are cutting ratings and earnings estimates on News Corp. (NWS) after recent warnings highlight Rupert Murdoch's inability to turn social-networking powerhouse MySpace into a profitable enterprise. "When you have such a powerful asset as MySpace and you can't successfully monetize it, that's a problem for investors," National City's Daniel Poole says. They say marketers are reluctant to place their ads next to unpredictable user-generated content. YRC hit by credit crunch fallout. Shares of YRC Worldwide (YRCW) are down after the company said in an SEC filing it expects an interest expense increase of $1.5-4M per year due to a rate hike on its $950M revolving facility and a $150M term loan. YRC will have to pledge physical assets to the credit line if its credit rating [BB] falls any further.
Wall Street Breakfast: Must-Know News

UBS posts Q2 loss, plans to restructure. Swiss banking giant UBS (UBS) reports a Q2 net loss of CHF358M ($329M), including $5.1B in writedowns. Looking ahead to the second half, UBS says it doesn't expect any improvement "in the adverse economic and financial market trends that affected this quarter's results," adding, "UBS will continue its program to reduce personnel levels, costs and risk." As anticipated, UBS said it will begin separating its troubled investment bank from its wealth-management unit - but said it has not plans to sell the I-bank. UBS continued to cut back on its exposure to toxic debt: Subprime holdings fell to $6.7B from $15.6B while Alt-A exposure dropped to $6.4B from $17.1B. Shares rose 2.8% in overseas trading. Cuomo drags three more banks into ARS melee. NY AG Cuomo sent letters to JPMorgan (JPM), Morgan Stanley (MS) and Wachovia (WB), warning them to get on board with auction-rate securities settlements. Morgan Stanley's $4.5B ARS offer fails to impress Cuomo. Morgan Stanley (MS) said it is willing to buy back $4.5B in auction-rate securities, following similar settlements by Citigroup (C), UBS (UBS), and Merrill Lynch (MER). NY Attorney General Andrew Cuomo called Morgan Stanley's (MS) buy back offer "too little, too late." Cuomo is expected to press for fines on top of a more substantive settlement. After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long. IEA breathes a bit easier. The IEA (International Energy Agency) says tight global oil supply that has seen crude rise to record heights this year is easing - but cautions that heavy China consumption and geopolitical tension still have the potential to send prices back up. "In terms of oil fundamentals, crude and product supply tightness has eased," it said. But "we continue to stress the supply uncertainty that's out there. The events over the past week in Georgia and Turkey have only reconfirmed that." The IEA dropped its global demand growth forcast by 100K barrels/day due to a major demand pullback in the U.S. (-3.1% this year and -2% next year). (.pdf) JPMorgan hit with $1.5B writedown. JPMorgan (JPM) warned that credit-market turbulance forced it to take a $1.5B writedown on mortgage-backed assets in July. The firm says mortgage market trading conditions have substantially deteriorated since the beginning of July. Bankers are saying July was the worst month for mortgage-backed bonds since the crisis began. Mitsubishi UFJ plans UnionBanCal buy out. Mitsubishi UFJ Financial Group (MTU) plans to spend $3B to buy out minority investors in U.S. commercial-banking unit UnionBanCal (UB). At $63 per share, Mitsubishi UFJ's offer represents an 8.3% premium on UnionBanCal's Monday closing price. Mitsubishi UFJ has made it clear that it wants a bigger presence in the U.S., and plans to take part in future consolidation of the U.S. banking industry. The bid is the latest in a series of multi-billion dollar deals in the U.S. by Japanese companies that have emerged relatively unscathed from the subprime crisis. Middleby buying TurboChef for $200M. Middleby Corp. (MIDD) announced an agreement to acquire TurboChef Technologies (OVEN) for approximately $200M. TurboChef shareholders, who need to approve the merger, will receive a cash-stock payout combination of $3.67 in cash and 0.0486 Middleby shares for each TurboChef share. TurboChef has greatly expanded its customer base in recent years and is a leader in speed cook technology, a field Middleby believes is in the beginning stages of gaining broader market acceptance. 3M iPhones in first month. After just one month, iPhone 3G (AAPL) sales reportedly top 3M - way ahead of expectations. "They are seeing unprecedented demand," Michael Cote of the Cote Collaborative says. While not commenting on Cote's estimates, Apple did disclose it sold 1 million iPhones during the first three days; it took Apple 74 days to hit the one million mark with the original iPhone. Germany mulls limiting foreign investment. The German government will vote on August 20 on a bill that could be used to prevent foreigners from buying 25% or more in German companies deemed crucial to the country's security. Opponents say it will deter foreign investment. (ETF: EWG) Airlines soon profitable? Airline stocks extended their rally Monday after Morgan Stanley said there's a chance the industry could return to profitability by 2009 if the price of oil stays down. The broker says recent moves by carriers to reduce seats and increase fees could ultimately be a positive for the battered sector. UAL +10%. AMR +8%. CAL +8%. UAUA +5.4%. Fed Survey on Bank Lending. 65% of banks said they tightened credit-card lending, car and consumer loans during the last quarter. 70% say they'll tighten standards on commercial real estate loans. Major loan categories were tighter across the board. Toyota mulls exporting us gas guzzlers. Trying to stay ahead of the auto industry downturn, Toyota (TM) said it is considering downsizing U.S. manufacturing jobs, and may start exporting U.S.-made U.S. pickups and SUVs abroad. Some analysts were puzzled by the proposal; the larger vehicles are not big sellers outside of U.S. borders. Precious metals plunge again. Gold, platinum, and silver hit 7-month lows on concerns of reduced demand for raw materials. Commodities descend Monday into bear territory, with S&P's GSCI index off 22% from its July 3 highs. Blue Chip economists sour on H2 and 2009. They now see Q3 GDP growth of 1.2%, down 0.1% from previous estimates, and Q4 growth of just 0.3% - down 0.3%. Year-end unemployment is seen at 6%. 56% think the U.S. economy is in recession. India production up 3.4%. India's production in six key industries, accounting for a quarter of the country's industrial production, grew 3.4% in June from a year earlier. (ETFs: INP, EPI) Inflation pulls back in China. China's inflation slows to a ten-month low, allowing the government a chance to focus on sustaining economic growth instead of fighting rising prices. (ETFs: FXI, PGJ) Earnings: Tuesday Before Open Fossil (FOSL): Q2 EPS of $0.36 beats by $0.11. Revenue of $353M (+15.2%) vs. $347M. [PR] JA Solar (JASO): Q2 EPS of -$0.01 vs. consensus of $0.15. Revenue of $180M (+170.7%) vs. $170M. [PR] Earnings: Monday After Close Fluor (FLR): Q2 EPS of $0.87 beats by $0.05. Revenue of $5.77B (+36.8%) vs. $5.18B. Sees full-year EPS of $3.39-3.54 vs. $3.29. Shares +3.9%. [PR] LDK Solar (LDK): Q2 EPS of $1.29 beats by $0.87. Revenue of $442M vs. $282M. Sees 2008 revenue of $1.65-1.75B vs. $1.16B. Shares +25.3%.[PR] Napster (NAPS): FQ1 EPS of -$0.10 misses by $0.01. Revenue of $30.3M (-6%) vs. $30.5M. Shares -1.1%. [PR] McDermott International (MDR): Q2 EPS of $0.77 in-line. Revenue of $1.79B (+26.4%) vs. $1.85B. Shares -8.1%. [PR] Safe Bulkers (SB): Q2 EPS of $0.82 beats by $0.21. Revenue of $51.4M (+48.1%) vs. $49.6M. Shares +3.6%. [PR] TravelCenters of America (TA): Q2 EPS of -$0.69 beats by $0.23. Revenue of $2.28B vs. $2.15B. [PR] TW Telecom (TWTC): Q2 EPS of $0.00 misses by $0.01. Revenue of $290M (+2.7%) in-line. [PR] Verasun Energy (VSE): Q2 EPS of $0.15 beats by $0.13. Revenue of $1.01B (+498.7%) vs. $925M. [PR] Today's Markets Asian markets closed lower on Tuesday. Nikkei -0.95% to 13,304. Hang Seng -1.0% to 21,641. Shanghai -0.52% to 2,457. BSE -1.88% to 15,213. Europe at midday: London +0.2%. Paris +0.05%. Frankfurt -0.05%. U.S. futures at 7:10 AM: Dow -0.08%. S&P -0.04%. Nasdaq +0.15%. Crude -0.74% to $113.63. Gold -0.65% to $822.80. Tuesday's economic calendar: 7:45 ICSC Retail Store Sales8:30 Trade Balance8:55 Redbook Chain Store Sales10:00 IBD/TIPP Economic Optimism10:00 Job Openings and Labor Turnover10:30 Fed's Gary Stern on CNBC2:00 PM Treasury Budget5:00 PM ABC Consumer Confidence Index Notable pre-open earnings: CNO, FOSL, GOL, JASO, TJX, UBS, VSE Notable post-close earnings: AMAT, BZP, CREE, DNDN, MELI, NVDA Seeking Alpha editor Rachael Granby contributed to this post. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.
Wall Street Breakfast: Must-Know News

Third time's the charm? The Federal Reserve launched its third attempt to ease money markets strains, announcing a program to fund purchases of up to $600B in money market mutual fund assets. In its official statement, the Fed said the initiative "should improve the liquidity position of money market investors" and increase their ability to meet future redemption requests. The Fed, which will announce the program's start date by the end of the week, could lend up to $540B to five "special purpose vehicles" established to buy CDs and commercial paper from highly rated institutions. Around $500B has been withdrawn from prime money-market funds since August. Bernanke stands behind stimulus package. Federal Reserve's Bernanke voiced his support for a congressional stimulus package, testifying a stimulus "seems appropriate" for an economy that will be weak for several quarters and faces "some risk of a protracted slowdown." Democrats are considering a $150B initiative, though some economists are pushing for twice as much, arguing that significantly more money will have to be pumped into the economy and the banking sector in order to survive the downturn. Policy makers are also pushing forward with efforts to overhaul government regulation of the financial sector, calling for greater transparency and oversight. Asian countries move to shore up economy. Thailand has proposed a plan for Asian countries to pool $350B, or 10% of their foreign exchange reserves, to help cushion their economies in the event of a global recession. Around $150B would be earmarked for currency protection, if necessary, while the other $200B would be used to buy equities, bonds and fund infrastructure projects. Meanwhile, acting unilaterally, South Korea says it is prepared to follow up its $100B bailout plan with whatever measures are necessary, including a possible fiscal stimulus package, in order to restore confidence in its financial system; China will inject $19B into the Agricultural Bank of China, completing a reorganization of China's banking system that has cost the government $500B so far; and Bank of Japan may announce plans to begin paying interest on reserves deposited at the central bank. Trio creates gas cartel. Iran, Qatar and Russia met on Tuesday and agreed to form an OPEC-style group for gas-exporting countries. Gas producing nations have long discussed the possibility of creating a "gas OPEC" but building a cartel could be difficult since gas markets, unlike oil markets, are mostly fragmented and regional. Moreover, trade volume is relatively small and prices are often pegged to oil, making it harder for a cartel to control prices. The U.S. imports virtually no natural gas from Iran, Qatar or Russia, but U.S. politicians and Western allies worry closer ties between Russia and Iran could harm strategic political relationships. Auto woes continue. Tracinda Corp, the investment company of billionaire Kirk Kerkorian, sold shares worth about $18M in Ford (F) at a major loss and is considering selling its remaining 6% stake, raising concerns about the automaker's health. To raise cash, Ford may have to sell its roughly 33% stake in Mazda (MZDAF.PK), while uncertainty about the future Ford-Mazda relationship sent Mazda shares down by the most in over eight years in Tokyo trading. Kerkorian's move, along with efforts by Cerberus to sell its Chrysler stake, could leave the auto industry short of funding at the same time sales are heading to a 26-year low. General Motors (GM), the preferred buyer for Chrysler, is looking for a large capital injection from an outside investor as a possible alternative to a Chrysler deal, while Chrysler is exploring a possible alliance with Nissan (NSANY) and Renault. Samsung drops buyout offer. Samsung abandoned its $5.85B ($26/share) hostile bid for SanDisk (SNDK), citing tough economic conditions and failure to make "meaningful progress" with the bid over the last six months. A successful bid would have been Samsung's largest acquisition and a good chance to widen its lead over Toshiba (TOSBF.PK). Analysts believe Samsung may launch a renewed bid at a later date to gain access to SanDisk's patents, but a Samsung spokesman said "we withdrew our offer and there should not be further room for speculation." Pre-market: SNDK -10.5% to $13.21. Samsung -2.1% in Seoul. Apple shines after Jobs talks up prospects. Share of Apple (AAPL) are up 9.3% in early pre-market trading after beating analyst expectations despite a contracting economy (see below). CEO Steve Jobs made a surprise appearance on Apple's analyst conference call (transcript), likely to talk up the company's prospects amid a close-to-recessionary U.S. economy and a 54% drop in its shares YTD. "I think this economic downturn may present some extraordinary opportunities to companies that have cash," he said, adding Apple is comfortable with its cash, and doesn't feel it's "burning a hole in our pocket." Jobs told investors Apple, as it always has, understates its results. Yahoo's so-so Q3 gets boost from job cuts. Yahoo (YHOO) reported Q3 net income of just $54M, down 64% from a year ago and in line with consensus (see below). Yahoo also said it plans to cut its global workforce of 15,000 by at least 10% during the current quarter, as part of a broader cost-cutting plan, as CEO Jerry Yang tries to orchestrate a turnaround despite a softening economy and internet-advertising landscape (conference call transcript). Shares gained 5.2% in extended trading, but Cowen's Jim Friedland was circumspect: "Cost cutting is important, but I wouldn't call that a positive longer-term sign." Retail sales. ICSC chain-store sales rose 0.9% last week vs. a year ago and fell 1.6% vs. the week before. Stores continue to face a "tough retail landscape" as consumers spend cautiously. Redbook reported a 0.8% gain last week from a year ago, but a 1.1% fall in October vs. September. Consumers far from confident. ABC's Consumer Confidence Index dropped 7 points in the last two weeks to a dismal -50, one point away from the lowest rating in 22 years of weekly polling, and markedly worse than this year's -40 average. Earnings: Wednesday Before Open Air Products and Chemicals (APD): FQ4 EPS of $1.26 beats by $0.01. Revenue of $2.7B (+14.5%) vs. $2.6B. [PR] Arkansas Best (ABFS): Q3 EPS of $0.61 in-line. Revenue of $496M (+2.0%) vs. $498M. [PR] Baker Hughes (BHI): Q3 EPS of $1.29 misses by $0.06. Revenue of $3.0B (+12.4%) vs. $3.1B. [PR] Dover (DOV): Q3 EPS of $1.01 beats by $0.03. Revenue of $2.0B (+5.4%) in-line. [PR] Kinetic Concepts (KCI): Q3 EPS of $0.96 beats by $0.09. Revenue of $503M (+22.5%) vs. $507M. [PR] Knight Capital Group (NITE): Q3 EPS of $0.40 beats by $0.16. Revenue of $270M (+31.7%) vs. $212M. [PR] Philip Morris (PM): Q3 EPS of $0.93 beats by $0.03. Revenue of $7.0B (+17.5%) vs. $6.6B. [PR] WellPoint Health Networks (WLP): Q3 EPS of $1.60 beats by $0.10. Revenue of $15.3B (+2.2%) vs. $15.5B. [PR] Earnings: Tuesday After Close Amylin Pharmaceuticals (AMLN): Q3 EPS of -$0.57 misses by $0.07. Revenue of $218M (+14.9%) vs. $229M. Shares +4.5%. (PR, earnings call transcript) Apple (AAPL): FQ4 EPS of $1.26 beats by $0.15. Revenue of $7.89B (+27%) vs. $8.05B. Sees Q1 EPS of $1.06-1.35 vs. $1.65, and revenue of $9-10B vs. $10.57B. Shares +13.25%. (Briefing.com) Boston Scientific (BSX): Q3 EPS of $0.16 beats by $0.05. Revenue of $1.98B (-3.4%) in-line. Shares +5.6%. (PR) Broadcom (BRCM): Q3 EPS of $0.31 beats by $0.09. Revenue of $1.3B (+36.7%) in-line. Shares +8.7%. (PR, earnings call transcript) Canadian National Railway Company (CNI): Q3 EPS of $1.16 beats by $0.17. Revenue of $2.26B (+11.6%) vs. $2.15B. [PR] Century Aluminum Company (CENX): Q3 EPS of -$0.57 misses by $0.89. Revenue of $552M (+21.5%) vs. $549M. [PR] Cerner (CERN): Q3 EPS of $0.57 beats by $0.01. Revenue of $423M (+13.4%) in-line. Shares +5.1%. (PR, earnings call transcript) E*TRADE Financial (ETFC): Q3 EPS of -$0.09 beats by $0.19. Provision for loan losses triples to $518M. While ETFC continues to make progress toward returning to profitability, it does not expect to report a quarterly profit Q4. ETFC plans to take advantage of the government's bailout plan. Shares +0.4%. (PR, earnings call transcript) Illumina (ILMN): Q3 EPS of $0.22 beats by $0.06. Revenue of $150M (+54.2%) vs. $146M. Shares (PR, earnings call transcript) Sigma-Aldrich (SIAL): Q3 EPS of $0.64 misses by $0.01. Revenue of $541M (+7.4%) vs. $564M. Shares -7.2%. (PR) VMware (VMW): Q3 EPS of $0.24 beats by $0.04. Revenue of $472M (+32.1%) vs. $463M. Operating margin of 24.4% vs. guidance of 20-22%. Shares +24.6%. (PR, earnings call transcript) Yahoo (YHOO) Q3 EPS of $0.09 in-line. Revenue of $1.32B (+3.3%) vs. $1.37B. Shares +5.2%. [PR] Today's Markets Asia markets closed broadly down. Nikkei -6.8% to 8,675. Hang Seng -5.1% to 14,267. Shanghai -3.2% to 1,896. BSE -4.8% to 10,170. In Europe: London -2.8%. Paris -2.8%. Frankfurt -2.9%. U.S. futures: Dow -1.4%. S&P -1.7%. Nasdaq -0.8%. Gold -1.4% to $757.20. Wednesday's Economic Calendar 7:00 MBA Mortgage Applications 10:35 EIA Petroleum Status Notable earnings before Wednesday's open: ABFS, ABI, APD, ARW, ATI, BA, BHI, COP, DOV, EMC, FCL, GD, GENZ, GSK, KCI, KMB, MCD, MRK, NFX, NITE, NOC, NTRS, NWA, PM, R, RAI, ROH, RYN, SEIC, T, TCB, TRV, WB, WLP, WYE Notable earnings after Wednesday's close: ADS, ALL, AMGN, AMZN, ANAD, BIDU, CDNS, CNB, CNW, CRUS, CTXS, CVA, EQIX, FFIV, FNF, ISIL, KNX, LRCX, LSI, NE, OMTR, OSIP, PHM, QTM, RHI, RRC, RYL, SLM, SSCC, STX, TER, TEX, TQNT, WSH Seeking Alpha editor Eli Hoffmann contributed to this post.
Wall Street Breakfast: Must-Know News

JPMorgan, Morgan Stanley take back $7B in ARS. JPMorgan (JPM) and Morgan Stanley (MS) settled with regulators Thursday, agreeing to buy back at part more than $7B in illiquid auction-rate securities that were marketed as near-cash equivalents. They will also will pay damages to retail clients who sold their holdings for a loss. "The industry is taking responsibility for correcting a problem they helped create and that's a good thing," NY AG Andrew Cuomo said. "The fundamental goal has been to return money into the hands of investors and that's what these deals do." JPM rose 3%; MS +1%. Economists expect GSE bailout. A WSJ survey of economists finds chances are better than 50/50 (59%) that the Treasury will ultimately prop up Fannie Mae (FNM) and Freddie Mac (FRE) with taxpayer money, despite Secretary Hank Paulson's insistence to the contrary. "Blank checks almost always get filled in and cashed," one says wryly. One-third think the GSEs should be nationalized now. FNM +7%; FRE +8%. After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long. Bank funds still draw. Funds that invest in banks are attracting more money, even as they post their biggest losses in almost five decades. Financial ETFs raised $8.6B since January - while banks in the S&P 500 lost 54% from their 2007 records. Robert Leiphart of Birinyi Associates explains "When people say, 'It's the worst it's ever been,' it's usually the bottom and the time to start to buy." Not everyone is so bullish: some are investing in bank funds to hedge short positions on financial stocks. Oil speculators: Slippery target. New data show oil market speculators are playing a more prominent role than previously understood. A recent reclassification of large market players bumped speculators' share of trade to 49% from 38%, a development that will bolster calls to increase regulation - and will force authorities to gain a better understanding of who's in the market and why they're there. Pickens still an oil bull. Despite oil's recent pullback, T. Boone Pickens says crude will not drop below $100 due to America's heavy dependence on foreign oil. Yesterday the NY Post reported Pickens' hedge fund, BP Capital, which manages about $7B in assets, plunged 35% in July. BP suffers Russia blow. A Moscow labor court banned TNK-BP (BP) CEO Robert Dudley from holding executive office in Russia for two years. BP's Russian JV partners "are getting away with nothing short of murder... they can terrorize BP, making any excuse to wrestle control of their joint venture," Oppenheimer analyst Fadel Gheit said. "You cannot run a company long distance like that." If TNK-BP is forced to take on a new CEO, Russian stakeholders will be in the driver's seat to make the choice. Google-powered smartphone by Christmas. A Google-powered (GOOG) phone is finally here, almost. T-Mobile (DT) will be the first carrier to offer a mobile phone powered by Google's Android software, and the phone is expected to go on sale in the U.S. before Christmas - possibly as early as October. The high-end phone is expected to compete with Apple's (AAPL) iPhone and other smartphones from Palm (PALM), RIM (RIMM), Microsoft (MSFT), and Nokia (NOK). The phone will have a touch screen, like the iPhone, and will also have a full five-row keyboard that slides out. Soros Fund buys big stake in Petrobras. Soros Fund Management bought an $811M stake in Petroleo Brasileiro [Petrobras](PBR) in Q2, making the Brazilian oil company its largest holding at 22% of the fund. Soros has been increasing his mining and commodities holdings, and in November Petrobras announced the discovery of a new oil field, the largest such find in the Americas in over thirty years. Share of Petrobras, however, have fallen 28% since June 30, marking a $235M loss in value for the fund. More newspaper downsizing. Gannett (GGI) said it is cutting jobs 1,000 jobs at its Community Publishing division. McClatchy (MNI) said it will freeze wages for all employees for one year. GGI +10.6%. MNI +2.6%. GM rises 10.6% on downsizing, Volt plans. GM (GM), struggling to turn profitable as demand falls for its cars and trucks, said Thursday it will cut capacity by 500,000 vehicles between now and 2010, moving production away from trucks, with minimal capital investments. It also said it will finalize the design of the all-electric Chevy Volt by mid-September, and hopes to have 50 prototypes by the end of 2008. Global picture gets gloomier. Four of the world's five top economies (U.S., euro-zone, Japan, U.K. Not: China) are now flirting with recession, a trend that will pressure multinational corporations and stock market investors who until recently thought the global marketplace had decoupled from the U.S. "The global economy is sputtering amidst a widening in the slowdown from the United States to Western Europe and Japan," JPMorgan economist David Hensley says, noting emerging economies are also beginning to feel the squeeze. Most recent data points: 0.2% GDP contraction in the euro-zone; 5.6% inflation in the U.S. CPI jumped to 5.6% Y/Y, way higher than the 5.1% consensus. Core CPI also exceeded expectations; +0.3% vs. +0.2%. Prices increased 0.8% from June, double economist consensus of 0.4%. Economist Keith Hembre says we've probably seen the peak of the inflation readings, at least in the near-term. Some anomalous readings are likely to reverse out in coming months. Weekly jobless claims were 450,000, down 10K from last week (revised to 460K from 455K), but 15K above consensus. The four-week moving average jumped by 19,500 to 440,500. Existing Home Sales fell 16% to 4.91M in Q2, the NAR says. Prices fell by 7.6% to $206,500 as surging foreclosures drove bargains. Foreclosures and short sales (homes sold for less than the unpaid mortgage balance) accounted for 1/3 of all Q2 sales. China's factory and property spending growth accelerates, with urban fixed-asset investment jumping 26.8% in H1 (vs. an expected 26.6%). The latest of several indicators underscoring the strength of the world's fastest-growing major economy. Earnings: Before Friday's Open Abercrombie & Fitch (ANF): Q2 EPS of $0.88 beats by $0.02. Revenue of $846M (+5.1%) vs. $851M. Sees 2009 EPS of $4.95-5.00 vs. $5.36. [PR] New York & Company (NWY): Q2 EPS of $0.14 beats by $0.05. Revenue of $296M (+3.8%) vs. $284M. [PR] Earnings: After Thursday's Close Agilent Technologies (A): FQ3 EPS of $0.57 beats by $0.03. Revenue of $1.44B (+5.1%) in-line. Sees FQ4 EPS of $0.58-0.62 vs. $0.64. Shares +0.4%. [PR] Autodesk (ADSK): Q2 EPS of $0.56 beats by $0.04. Revenue of $619.5M (+17.8%) vs. $606M. Shares +8.9%. [PR] Kohl's (KSS): Q2 EPS of $0.77 beats by $0.04. Revenue of $3.73B (+3.8%) in-line. Sees Q3 EPS of $0.51-0.56 vs. $0.57. Shares +4%. [PR] Nordstrom (JWN): Q2 EPS of $0.65 beats by $0.01. Revenue of $2.29B (-4.3%) vs. $2.31B. Sees Q3 EPS of $0.49-0.54 vs. $0.56. Shares -2.1%. [PR] Today's Markets Asia Friday: Nikkei +0.48% to 13,019. Hang Seng -1.09% to 21,161. Shanghai +0.56% to 2,451. BSE Sensex -2.44% to 14,724. Europe markets are higher at midday. London +0.1%. Paris +0.6%. Frankfurt +0.3%. U.S. futures: Dow +0.32%. S&P +0.31%. Nasdaq +0.29%. Crude -1.57% to $113.21. Gold -3.23% to $788.20. Silver -9.9% to $12.82. Friday's Economic Calendar 8:30 Empire State Mfg Survey9:00 Treasury International Capital 9:15 Industrial Production10:00 UofM Consumer Confidence Notable earnings before Friday's open: ANF, JCP Seeking Alpha editor Rachael Granby contributed to this post. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.
Under The Radar News - Thursday

Credit markets appear to be thawing. Deals like Cablevision's (CVS) $650M acquisition of Newsday (thanks to a loan arranged by Bank of America (BAC)) and HP's (HPQ) proposed buyout of EDS (EDS) $13.25B, mostly with debt, suggest the worst may be over. DirecTV (DTV) raised $2.5B from junk bond sales, and will use the cash to repurchase shares. The pipeline of unsold leveraged loans has shrunk to about $100B from more than $300B, while the spread between junk bonds and Treasurys has narrowed by nearly two percentage points to 6.8%. A handful of firms recently issued junk bonds with rates below the key threshold of 8%. While the tone of the market is clearly improving, some fear it may be short lived. Motorola could cede top spot by Q4. Motorola (MOT) is in danger of losing top spot in U.S. mobile handset sales. Motorola's market share dropped to 25%, down from 37% a year ago (ouch!). LG and Samsung each control 21% of the market. "The U.S., their bread and butter, is not immune anymore to their problems," IDC's Ramon Llamas says. GE lands blowout order. T. Boone Pickens ordered 667 wind turbines from GE (GE), worth about $2B. Pickens plans to build the world's biggest wind farm in the Panhandle, which will include 4,000 MW of windmills (worth $10-12B) -- enough power to energize 1.2M homes. Pickens says he'll build his own transmission lines if the Power Utility Commission can't sail his ship. Just one iPhone. AT&T (T) seems to be limiting iPhone (AAPL) sales to one per customer. London may get first dibs. The first 3G iPhone (AAPL) may be launched in the UK, after Telefonica's (TEF) O2 suggested an announcement Apple "in the coming weeks." Tailor made ads. Turner Entertainment (TWX) unveiled a new system that will match TV commercials with what's going on in the shows they interrupt ("TV in Context"). Examples include matching allergy medicines to a theatrical allergic reaction, ads for an online dating service following a romantic TV moment, and sweaty football players with... deodorant? Crossing the Line in Consumer Health Education? An article in NEJM criticizes an ad for Johnson & Johnson's (JNJ) Cypher stent, saying it fails to warn patients about the stent's potential dangers. "In making the leap from pharmaceuticals to medical devices, the ad campaign raises important questions regarding the net societal benefit of medical advertising directed at the lay public." CAW may settle with GM, Chrysler. The Canadian Auto Workers is on the verge of reaching tentative labor agreements with General Motors (GM) and Chrysler (DAI). Sotheby's brings home the Bacon. Shares of Sotheby's (BID) are up more than 5% this morning after its Contemporary Art Evening Auction yesterday brought in $362M, up 42% from a year ago. A 1976 triptych by Francis Bacon brought $86.3M, a new record for contemporary art -- and a retort to art market bears. Blockbuster's new game. Blockbuster (BBI) is expanding in-store game sections, a move that puts it in direct competition with GameStop (GME), sort of. Blockbuster is more likely to focus on the casual gamer, while GameStop will continue to appeal to the hard-core. Judge levels Lovenox patent. A U.S. appeals court upheld a lower court ruling that struck down patents for Sanofi-Aventis's (SNY) anti-clotting drug Lovenox, which may open the door for generic competition from Teva (TEVA) and others. Lovenox had $4B in sales in 2007. AP to buy Moreover from VeriSign. The Associated Press agreed to acquire news search and delivery firm Moreover Technologies from VeriSign (VRSN). VeriSign beat out Google (GOOG), Reuters (RTRSY), the AP and Factiva (NWS) for Moreover in 2005, paying $30M. Now all we need to know is how much AP paid. Amazon's iPod. Citigroup's Mark Mahaney thinks Amazon's (AMZN) Kindle could contribute 3% of overall revenue within the next two years. Amazon backs music video developer. Amazon.com (AMZN) is funding Animoto, a machine-driven music video creator which boasts over 160K users. Conoco quiets EnCana rumors. ConocoPhillips (COP) CEO Jim Mulva says he has no plans to buy EnCana's (ECA) Canadian oil-sands unit post spinoff. That leaves the door open for BP (BP), Shell (RDS.A), and Exxon (XOM), who would like to expand their unconventional energy portfolios. "We done a lot of acquisitions," he said. "We need to demonstrate that we can grow the company organically rather than through M&A." Pepsi takes top spot. Lehman moved PepsiCo to #1 on its consumer staples favorite list. (In order:PEP, KMB, GIS, KO, AVP, K, PM.) Bidz says Buenos dias. Bidz.com (BIDZ) is launching a complete Spanish-language version of its online auction site. Allstate loses appeal. An appeals court allowed Florida's suspension of Allstate's (ALL) license. Allstate can't write new policies until it fully complies with the state's subpoena for documents and information about its rate-setting process. Another Sprint defector. Embarq (EQ) is terminating its wireless resale deal with Sprint (S) next year, the latest in a recent spat of ship-jumpers. Sales were far short of Embarq's expectations. Quest (Q) dropped Sprint for Verizon Wireless