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Gold Index
Updated 05-Sep-08
Quotes at time of story, top stories today:
Altria Looking to Buy UST for $10 Billion
U.S. cigarette manufacturing giant Altria Group (MO 20.66) is in advanced talks to buy fellow tobacco company UST (UST 54.00) for $10 billion, the New York Times reports, citing people familiar with the negotiations.
The New York Times could not get any terms and said the deal could still fall apart.
Earlier this year, Altria spun off its international business to free itself from regulatory and legal scrutiny facing its domestic business. As a result, each MO shareholder received one share of Phillip Morris International (PM 53.37).
Altria, through Phillip Morris USA, offers some of the most popular cigarette brands in the United States, including Marlboro. UST operates in two segments, smokeless tobacco -- which includes the popular Copenhagen and Skoal brands -- and wine. In 2007, smokeless tobacco pulled in 79% of revenue, while the wine segment accounted for 18% of revenue.
UST is based in Stamford, Conn. and has a market cap of $8.0 billion. Altria is based in Richmond, Va. and has a market cap of $42.6 billion.
UST is up 23% in premarket action, MO is flat.
Nokia Trims Q3 Market Share Outlook
Global mobile phone and handset maker Nokia (NOK 22.31) trimmed its outlook for its third quarter mobile device market share. The firm initially expected third quarter market share to be on par with the second quarter, but now sees the third quarter being lower. However, Nokia continues to target an increase in market share for fiscal 2008.
With concerns of a global slowdown gaining momentum the announcement is not completely surprising. Nokia is being cautious as consumer headwinds stiffen across the globe. Hampered by tighter credit, rising living costs, and depressed personal assets, there is a fear that consumers will put on hold such discretionary purchases as a new phone or handset.
While such threats are very real, Nokia remains one of the best in its class. The firm expects new product deliveries will arrive as planned in the third and fourth quarters and continues to take market share as it is profitable in the long run. Further, we trust Nokia's management to tailor future deliveries according to demand so that the company avoids inventory pile-ups and potential markdowns in the future.
As we noted before, the frequency of macro concerns assigns a degree of risk to shares of Nokia. Yet Nokia's long-term growth prospects remain compelling and the firm still boasts enviable fundamental strength. With shares trading at a 52-week low the stock trades at an attractive price, offering long-term investors a compelling opportunity.
No Good News in August Jobs Report
Nonfarm payrolls declined by 84,000 positions last month while the July number was revised down to -60,000 from -51,000 and the June figure was revised to -100,000 from -51,000.
The August number was basically in-line with expectations that called for a decline of 75,000 positions and marked the eighth straight month of a decline in nonfarm payrolls. The average workweek held steady at 33.7 hours while hourly earnings rose 0.4% versus an estimate for a 0.3% increase.
The big surprise from a headline perspective was the spike in the unemployment rate to 6.1% from 5.7%. This headline prompted a sharp sell-off in the futures market as traders didn't like the implications for consumer confidence and consumer spending in the months ahead.
The 84,000 decline in nonfarm payrolls represents a 0.06% decline from a nonfarm employment base of 137.6 million. That qualifies as a slight decline and isn't as bad as will be reported in the papers, which will focus on the unemployment rate.
Overall, there isn't any real good news in the August employment report.
SanDisk Soars on Samsung Takeover Talk
Shares of SanDisk (SNDK 13.46) spiked 26% in premarket action following various reports that Korean conglomerate Samsung showed interest in the flash-memory maker.
According to MarketWatch.com, Samsung said in a regulatory filing "We are exploring all options, including a buyout and an alliance, but nothing has been decided at this time."
Milpitas, Calif.-based SanDisk issued a press release stating, "SanDisk periodically has conversations with multiple parties, including Samsung, regarding a variety of potential business opportunities. We evaluate all of these opportunities, but maintain a policy of not commenting on market rumors or speculation."
SNDK has been hit hard during the recent stock market downturn, falling 76% from its 52-week high at the previous session's closing level. The sharp decline came as slowing demand met a surplus of inventory in the commoditized flash memory market.
Grand Theft Auto Drives Take-Two Profits
Take-Two Interactive (TTWO 23.60), the maker of hit video game series Grand Theft Auto, blew past Wall Street's quarterly earnings forecast, reversing a year-ago loss.
Fiscal third quarter revenue spiked 110% year-over-year to $433.8 million, which is better than the average analyst estimate of $381.3 million. The revenue growth was due to stronger-than-expected demand for Grand Theft Auto IV -- which was the biggest video game release in history (note that GTA IV was released one week before the end of the company's second quarter). GTA IV has sold more than 10 million units as of Aug. 16.
GTA IV was an internally developed game, which gives TTWO larger profits than the games its licenses. Gross profit margins rose to 40.0% from 18.5%. As a result, TTWO earned $0.93 per share, excluding nonrecurring items, or $72 million. The results soared past Wall Street's forecast of $0.54 per share, and are a huge improvement over the year-ago third quarter loss of $0.64.
The company's fourth quarter outlook is not as strong, it expects revenue to grow between -2.6% and 14.5%, or $285 million to $335 million and non-GAAP earnings of $0.01 to $0.05 per share.
But its fiscal full year outlook is strong. The company forecast revenue growth of roughly 53%, or $1.5 billion to $1.55 billion and earnings of $2.08 to $2.12 per share. Wall Street expected full year earnings of $1.84 per share.
On Feb. 25, Electronic Arts (ERTS 46.00) made a $26 per share in cash, or $2 billion, unsolicited offer to acquire TTWO. Despite the offer representing a 50% premium, TTWO rejected the bid as being inadequate. EA let the offer expire on Aug. 18, and then it was disclosed in late August that the two companies entered a confidentiality agreement that prevents the public disclosure of the status or terms of discussions unless EA or Take-Two informs the other they are terminating negotiations.
Since discussions are ongoing, there is a possibility that the deal goes through at a price above $26 per share. However, there is plenty of downside risk in TTWO, considering the odds that the deal falls through and taking into account that the company gets most of its revenue from one source -- the Grand Theft Auto franchise.
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