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Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

Elan risks losing blockbuster drug. A federal judge ruled that Elan's (ELN) recent deal with Johnson & Johnson (JNJ) violates a collaboration with Biogen Idec (BIIB) to jointly market multiple sclerosis drug Tysabri. Elan must now alter its J&J deal by September 26, or potentially lose all its rights to Tysabri, a drug with nearly $1B in annual revenue.
Prius' patent problem. Toyota (TM) is facing a patent-infringement claim that could potentially prevent it from exporting the Prius and other hybrid models to the U.S. The complaint was filed yesterday by closely-held Paice LLC, which already won a 2005 case that the Prius and two other hybrids used Paice inventions.
Beijing to raise quotas on foreign investors. Chinese authorities late Friday proposed changes to current restrictions on foreign investment, including raising the ceiling on investments by individual institutions by 25% to $1B, and shortening the duration of lock-ups to one-year from three. The announcement, which came after Shanghai's close, sparked a late-afternoon rally in Hong Kong, sending the Hang Seng up 2.8%. While the implications of the proposed changes are unclear given the size of China's markets, strategists were encouraged that Beijing is considering increased foreign investment.
Losses rising at FHA. As its mortgage-related losses pile up, the Federal Housing Administration is at risk of seeing its reserves fall below the level mandated by Congress. The agency has rapidly increased its role in guaranteeing loans as part of an effort to stabilize the housing market, but its mounting losses raise concerns about whether the attempted rescuer will need its own taxpayer bailout. Another option is that the FHA may have to raise the premiums borrowers pay, although the agency says if there is a shortfall, it won't have to do anything other than report it to lawmakers.
Deutsche Telekom shops U.K. unit. Deutsche Telekom (DT) has initiated discussions with Vodafone (VOD), France Telecom (FTE) and Telefonica (TEF) about selling its flagging T-Mobile U.K. unit. Talks are still in preliminary stages, but an improving global economy has raised hopes the unit could bring in as much as €4B ($5.7B). In the meantime, Deutsche Telekom is working to improve the unit's performance so that it can either demand a more attractive sale price or, if the bids are too low, it can cancel the sale and continue to operate the unit.
Cloudy prospects for Oracle-Sun deal. The European Commission put Oracle's (ORCL) planned takeover of Sun Microsystems (JAVA) on hold, citing 'serious doubts' about competition in the database sector if the world's leading proprietary database company is allowed to take over the world's leading open source database company. As the European Commission investigates the $7.4B deal, rivals Hewlett-Packard (HPQ), Dell (DELL) and IBM (IBM) win another chance to lure away Sun's customers.
Gearing up for the G-20 meeting. Ahead of a meeting of G-20 finance ministers this weekend: the U.S., U.K., Germany and France called for work to begin on coordinated exit strategies, though they acknowledged the crisis is not yet over; ECB president Jean-Claude Trichet outlined for the first time the principles the ECB will use to unwind its exceptional policy measures; Geithner is pushing for an international accord on capital and liquidity rules, with consensus by the end of 2010 and implementation by the end of 2012; and, the U.K., France and Germany want 'binding rules' to rein in compensation at financial institutions, though a cap on total bonus pools could cause as many problems as it solves. A full G-20 summit will take place September 24-25.
Microsoft gets the last word, for now. Microsoft (MSFT) won a delay on a court order that would have required the software maker to change its Word program immediately or halt sales. The order won't take effect until an appeal of the underlying patent case is resolved, with oral arguments scheduled for September 23.
Berkshire not in the mood for ratings firm. For the second time in two months, Berkshire Hathaway (BRK.A) reduced its holdings of Moody's Corp. (MCO), this time by 2%. The sales come as the ratings firm experiences profit declines and widespread criticism over its ratings of mortgage-backed securities. With 39.2M shares remaining, Berkshire is still Moody's largest shareholder.
Android sprinting towards mass acceptance. Sprint (S) will begin selling its first mobile phone based on Google's (GOOG) Android operating platform in October. The move should help Android gain wider acceptance, as consumers have been slow to embrace the platform which has only been available through T-Mobile USA (DT).
Small steps to a new reserve currency. The U.S. dollar is safe as the world's reserve currency for now, but China took the first step towards a new reserve currency by agreeing to buy $50B of the IMF's Special Drawing Rights. The deal marks the first such agreement in the IMF's history and China's first concrete step in achieving its long-term stated currency goal.
Same-store sales down but not out. Retailers' same-store sales fell for the 12th month in a row in August, but the decline was smaller than July's drop and half of retailers beat expectations, some by large margins (including Target (TGT), Costco (COST) and Gap (GPS)). Analysts were generally positive about the results, upgrading a number of retailers' shares. (See the store-by-store breakdown: I, II, III, IV, V)
Monster's index improves (.pdf). Monster's online employment index rose 7 points in August to 121, its highest monthly rate of increase since August 2005. Year on year, declines slowed to 24%, the most moderate slowdown so far this year.
Jobless claims miss estimates. Initial Jobless Claims came in at 570,000, down 4K from a week ago (revised) but worse than the 562K consensus. Continuing claims rose 92K to 6.234M.

Earnings: Friday Before Open

H&R Block (HRB): FQ1 EPS of -$0.39 misses by $0.02. Revenue of $275M (+1.3%) vs. $280M. Full-year guidance in line. (PR)

Earnings: Thursday After Close

Cooper Companies (COO): FQ3 EPS of $0.54 misses by $0.08. Revenue of $285M (+2%) vs. $289M. Sees Q4 EPS of $0.66-0.68 vs. $0.60 and full-year EPS of $2.27-2.29 vs. $2.30. (PR)
Esterline Technologies (ESL): FQ3 EPS of $1.09 beats by $0.19. Revenue of $362M (-1%) vs. $368M. (PR)
Quiksilver (ZQK): FQ3 EPS of $0.03 in-line. Revenue of $501M (-11%) vs. $480M. (PR)
Shanda Interactive Entertainment (SNDA): Q2 EPS of $0.90 beats by $0.06. Revenue of $181M (+48%) vs. $179M. Hopes to raise $800M spinning off games unit in planned U.S. IPO. (PR)
Ulta Salon (ULTA): Q2 EPS of $0.10 beats by $0.05. Revenue of $274M (+10%) vs. $271M. (PR)

Today's Markets

Asia markets were mostly higher Friday, as is Europe. Futures edged higher overnight.

Asia: Nikkei -0.27% to 10,187. Hang Seng +2.82% to 20,319. Shanghai +0.58% to 2,862. BSE Sensex +1.89% to 15,689.
Europe at midday: London +0.8%. Paris +0.5%. Frankfurt +0.9%.
Futures at 7:15: Dow +0.3% to 9361. S&P +0.4% to 1006. Nasdaq +0.5%.
30-year Tsy -0.44%. 10-year -0.41%. 5-year -0.17%. 2-year -0.07%.
Crude +0.85% to $68.54. Gold -0.6% to $991.80.
Euro +0.1% vs. dollar. Yen +0.1%. Pound +0.2%.

Friday's Economic Calendar

8:30 Non-farm payrolls
Notable earnings before Friday's open: HRB

Seeking Alpha editor Eli Hoffmann contributed to this post.

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