Monday, May 11, 2009

Wall Street Breakfast: Must-Know News

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Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

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  • Antitrust charges likely for Intel. EU regulators are expected to rule that Intel (INTC) violated antitrust regulations by illegally paying computer makers to postpone or cancel the launch of products containing chips made by rivals. The European Commission will decide the case on Wednesday, and will likely fine Intel and order changes in its business practices.
  • GM looks for new board. General Motors (GM) hired an executive search firm to find replacements for at least half its 12-person board. The new directors could join the company as early as this summer. The government will likely pick a small number of the directors, while the UAW could pick at least one. Meanwhile, Germany might consider government loan guarantees for GM's Opel unit if GM declares bankruptcy and a deal with an investor willing to take over the unit is 'close at hand.'
  • Gov't may end up with GMAC stake. GMAC has the largest capital shortfall of the 19 stress-tested banks, relative to the size of its equity, with a gap of $11.5B compared to $21.9B of equity. Since the company probably won't be able to raise that money from the public, and since it plays a key role as lender to General Motors (GM) and now Chrysler, the government will likely end up taking a large stake in GMAC. Last week Geithner said the government will provide the company with 'substantial support,' and media reports say the lender could receive a $7.5B infusion as soon as this week.

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  • Strong I-bank boosts HSBC profits. HSBC (HBC) said Q1 profits were 'well ahead' of last year as the bank gained value on its own debt and saw record results from its investment bank. Loan impairment charges and other credit risk provisions were higher than a year ago but lower than the previous quarter. The bank's Tier 1 capital ratio stood at 8.6% at the end of March. Shares -4.1% premarket (7:00 ET).
  • Beefing up antitrust. Regulators plan to restore an aggressive antitrust enforcement policy targeting firms that use their market dominance to elbow out or suppress competitors. The policy is a reversal from the Bush administration's stance, which strongly favored defendants in antitrust suits, and restores the regulation that led to antitrust lawsuits against Microsoft (MSFT) and Intel (INTC) in the 1990s.
  • MUFG gets Morgan common shares. Mitsubishi UFJ Financial Group (MTU) will obtain $600M of Morgan Stanley's (MS) new common shares, after investing $9B in Morgan Stanley last year. The new common shares will be swapped on May 13 for preferred stock Mitsubishi UFJ already held, leaving its stake at around 21%.
  • AIG's long recovery. An internal AIG (AIG) memo suggests the insurer, which once hoped for a quick recovery, now anticipates a multiyear restructuring process. The memo described an initiative code-named Project Destiny, which involves a 45-day review of AIG's businesses as a precursor to drawing up a multiyear recovery plan. Shares -3.0% premarket (7:00 ET).
  • Swiss discuss UBS stake. The Swiss parliament will reportedly hold a hearing this week to decide what the government should take with its stake in struggling UBS (UBS). The Swiss government took a 9.3% stake in October, but stressed at the time it did not want to hold the stake for years and would sell to private investors as soon as possible. Shares -1.1% premarket (7:00 ET).
  • WSJ to charge per article. The Wall Street Journal's (NWS) online site will launch a "sophisticated micro-payments service" this fall as the news industry struggles to find a more viable online business model. The Journal will be the first major newspaper to adopt a model of micro-payments for individual articles in addition to premium subscriptions. Senator John Kerry, who last week held hearings on the future of journalism, said publishers may be given limited exemption from antitrust laws to discuss online pricing models.
  • Satellite IPO. DigitalGlobe Inc. will have an initial public offering on the New York Stock Exchange on Thursday. The satellite firm, which gets 75% of its revenue from the U.S. government, originally filed to go public in April 2008 but was delayed as the IPO market dried up.

Earnings: Monday Before Open

  • Allied Capital (ALD): Q1 EPS of $0.16 beats by $0.03. (PR)
  • American Oriental Bioengineering (AOB): Q1 EPS of $0.11 misses by $0.01. Revenue of $46M (+18.9%) vs. $48M. (PR)
  • Dish Network Corp. (DISH): Q1 EPS of $0.70 beats by $0.13. Revenue of $2.9B (+2.5%) in-line. (PR)
  • Energy Conversion Devices (ENER): FQ3 EPS of $0.03 beats by $0.01. Revenue of $66M (-5.7%) vs. $69M. (PR)
  • King Pharmaceuticals (KG): Q1 EPS of $0.26 beats by $0.14. Revenue of 429M (-0.7%) vs. $451M. (PR)
  • RRI Energy (RRI): Q1 EPS of -$0.30 misses by $0.18. Revenue of $466M (-47%) vs. $487M. (PR)
  • Silver Wheaton (SLW): Q1 EPS of $0.06 in-line. "Key operations on pace to meet sales guidance for 2009." (PR)
  • Southern Union Company (SUG): Q1 EPS of $0.59 beats by $0.09. Revenue of $684M (-28.2%) vs. $656M. (PR)
  • Warner Chilcott (WCRX): Q1 EPS of $0.39 in-line. Revenue of $246M (+7.2%) vs. $250M. (PR)

Today's Markets

Overseas markets were mostly lower Monday. There were a couple gainers, but the losers outnumbered and were more pronounced.

  • Asia: Nikkei +0.2% to 9,452. Hang Seng -1.74% to 17,088. Shanghai -1.75% to 2,580. BSE -1.63% to 11,683.
  • Europe at midday: London +0.8%. Paris -1.15%. Frankfurt -0.5%.
  • Futures: Dow -0.8% to 8447. S&P -1% to 915. Nasdaq -1.3%.
    Crude -1.8% to $57.60. Gold flat at $914.
    30-year Tsy +0.4% to 120-26. 10-year +0.34%. 5-year +0.21%.
    Euro -0.2% vs. dollar. Yen +0.6%. Pound -0.8%.

Monday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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