Filed under: Other issues, Deals, Competitive strategy, Stocks to Purchase

Amsterdam-based Royal Philips Electronics will buy Respironics for $5.2 billion or about $66 per share, Philips announced Friday in a statement.

Respironics, Inc. (NASDAQ: RESP) shares surged more than 20% on the news, gaining $12.23 to $65.34. Koninklijke Philips Electronics NV (ADR) (NYSE: PHG) shares declined 80 cents to $43.35 in Friday afternoon trading.

Philips stated the acquisition significantly strengthens Philips Healthcare, will provide a strategic platform for further growth, and also leverages the acquisitions of Lifeline and Raytel.

Pennsylvania-based Respironics manufactures masks and ventilators for use in patients homes for the treatment of breathing disorders.
With the deal Philips has allocated more $26 billion to acquisitions and buybacks since 2005, and the company has also noted that’ll have as much as $26 billion more available for acquisitions, deals, and buybacks for the next three years, Bloomberg News reported.

In addition to medical services and other businesses, conglomerate Philips competes with General Electric Company (NYSE: GE) and Siemens AG (ADR) (NYSE: SI) in the lighting/light bulb sector, a feverishly competitive sector given the near-global push by nations to replace incandescent bulbs with more-efficient fluorescent bulbs.

Stock Analysis: It looks like another smart buy by Philips, which earlier this year purchased Genlyte to gain greater access to the North American lighting market. Still, the proof regarding today’s deal will be whether Respironics can add to PHG’s earnings per share in a year or two.

Reviewed in this space in October 2007 when the stock was around $40, Philips is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 1 year should be rewarded from Philips’ shares. Sell/Stop Loss if you were to buy shares in this company: $26.

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Filed under: Deals, Good news, International Business Machines (IBM), Options, Technical Analysis

International Business Machines Corp. (NYSE: IBM) shares are trading higher today on news that it will buy privately-held Solid Information Technology, a data-retrieval company. The move will grant IBM to add real-time data access ability to its database and information management offerings. Terms of the deal were not disclosed. If you think that the company won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on IBM.

After hitting a one-year low of $88.77 in March, the stock hit a one-year high of $121.46 in October. IBM opened this morning at $109.90. So far this day the stock has hit a low of $109.15 and a high of $110.99. As of 11:40, IBM is trading at $110.36, up $1.52 (1.4%). The chart for IBM looks bearish but improving, while S&P gives the stock its highest 5 STARS (out of 5) strong purchase rating.

For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $100 range. A bull-put credit spread is an options position that combines the buy and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just 4 weeks as long as IBM is above $100 at January expiration. IBM would have to fall by more than 9% before we would start to lose money.

IBM hasn’t been below $100 by more than a few cents since April and has shown support around $104 recently. This trade could be risky if the economic slowdown puts a damper on the technology sector, but even if that happens, this position could be protected by the strong support the stock found at $100, where it bottomed in November.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in IBM.

Related:

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Filed under: Deals, Newspapers, Private equity, Tribune Co. (TRB)

Sam Zell formally completed his buyout of the Tribune Company yesterday. It only cost $8.2 billion and months of difficult negotiations — but now he has the ability to go out and get the pitching his newly acquired Chicago Cubs have long needed to win it all. Well, maybe not. Word on the street is that he plans to sell the Cubs and Wrigley Field for a cool billion as soon as he can.

Zell has made it clear that he plans on allowing the various units within the Tribune Company to stand on their own feet. By his count, there are over 60 entities within the company, and every one needs to strike out on its own. As Zell put it, “As I’ve stated over and over again, there are something like 60 entities in the Tribune Co. and I view it as 60 ways to get lucky.”
Zell also plans to sell a number of Tribune assets — and there are plenty to choose from. Tribune owns 23 TV stations and nine newspapers, including the Los Angeles Times, the Chicago Tribune and the Baltimore Sun (for a complete list of assets owned by the company, take a look at this Wikipedia page). Tribune also owns stock in a number of companies, some or all of which could be liquidated for hundreds of millions of dollars, if not billions.

So while the media environment is a difficult one, and newspapers in particular face a difficult future, I wouldn’t be surprised to see Zell turn the Tribune Company around, and in short order. He’s already moved to get rid of the old guard, which had gotten fat on the troubled company. Former CEO Dennis FitzSimons stepped down yesterday, taking $38 million in cash and prizes with him. Losing a few more executives like that will do the Tribune a world of good — and maybe with the money saved getting rid of the corporate fat cats, Zell can find a way to keep the Cubs and grab a World Series ring.

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Filed under: Deals, Campbell Soup (CPB)

Campbell’s (NYSE: CPB) has reached a deal to sell Godiva to Turkey’s Yildiz Holding for $850 million, about 15 times EBITDA.

This marks the end of a more than 40-year run for Godiva as a subsidiary of Campbell’s. During that time, the chocolatier has grown to more than 270 retail locations around the world. Campbell’s sought to divest the brand as part of an effort to focus on its core brands, including Campbell’s, Pepperidge Farms, and V8. Godiva is different from these brands in that it’s higher end and generally distributed more through specialty stores, rather than mass market grocers.

In a press release announcing the deal, Campbell’s CEO Douglas Conant stated that, “We are very pleased with the value we obtained for Godiva. The sale price reflects the strength of the Godiva business. Godiva is one of the world’s leading premium chocolate businesses and is an excellent strategic fit within Ulker’s portfolio. The agreement grants Ulker to expand and diversify its portfolio with an elite, global luxury brand and enables Campbell to sharpen our strategic focus on easy meals, anchored by soup, baked snacks, and vegetable-based beverages…”

It’s interesting that a Turkish firm emerged as the high-bidder, perhaps further evidence that American companies are not in acquisition mode in the current market.

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Filed under: Deals, Bad news, Citigroup Inc. (C), Bank of America (BAC), Merrill Lynch (MER)

Merrill Lynch (NYSE: MER) may be worse off than expected. A report in The Wall Street Journal states that the sovereign fund of Singapore, Temasek Holdings, may put $5 billion into the investment bank. The news would be an indication that Merrill is facing massive losses in the last quarter of the year.

The price action in companies like Citigroup (NYSE: C) and Bank of America (NYSE: BAC) has been bad the last two days. Credit agencies have indicated that there may be more financial company downgrades and bond insurance firms may lose the ratings levels that have made them such useful backstops.

The question now isn’t whether Merrill and its peers will need more investment capital. It is whether the process will repeat itself once or twice more next year if the mortgage market gets substantially worse.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Before the bell, Earnings reports, Analyst reports, Deals, Microsoft (MSFT), Apple Inc (AAPL), Cisco Systems (CSCO), Dell (DELL), International Business Machines (IBM), Campbell Soup (CPB), Merrill Lynch (MER), Morgan Stanley (MS), Red Hat Inc (RHT), Bear Stearns Cos (BSC)

Before the bell: Futures up after RIM reports, Merrill news

With Macworld is a couple of weeks away, speculation grows as to what Apple Inc. (NASDAQ: AAPL) CEO Steve Jobs could introduce this year, given his tradition of showcasing new products during the Expo. It seems the agreement among analysts and Apple enthusiast is on a slimmed-down laptop to capitalize on the MacBook success, as well as a higher-capacity model of the iPhone.

The Wall Street Journal has reported that “U.S. regulators, led by the Securities and Exchange Commission, are probing how financial firms priced mortgage securities on their books and whether they should have told investors earlier about the declining value of those securities.” Among the companies the SEC is probing is UBS AG (NYSE: UBS) and Morgan Stanley (NYSE: MS). Merrill Lynch & Co Inc (NYSE: MER) and Bear Stearns Co Inc (NYSE: BSC) have already been reported to be under investigation.

Cisco Systems Inc. (NASDQ: CSCO) changed its management structure where a “development council” composed of several executives will replace Cisco Systems Inc. CEO heir-apparent Charles Giancarlo, who has resigned.

Micron Technology (NYSE: MU) is down 3.5% in premarket trading after it reported a quarterly loss of $262 million.
Red Hat (NYSE: RHT) is trading up 6.4% in premarket trading after reporting third-quarter net income rose 36% to $21.2 million, or 10 cents a share and naming new CEO.
Jabil Circuit Inc. (NYSE: JBL) is down nearly 9% in premarket trading after reporting a first-quarter profit of $62 million, or 30 cents a share, below analysts’ expectation.

Campbell Soup (NYSE: CPB) is selling its Godiva Chocolatier unit to Turkey’s Yildiz for $850 million.

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Filed under: Deals, Bad news, Citigroup Inc. (C), Bank of America (BAC), Merrill Lynch (MER)

Merrill Lynch (NYSE: MER) may be worse off than expected. A report in The Wall Street Journal states that the sovereign fund of Singapore, Temasek Holdings, may put $5 billion into the investment bank. The news would be an indication that Merrill is facing large losses in the last quarter of the year.

The price action in companies like Citigroup (NYSE: C) and Bank of America (NYSE: BAC) has been bad the last two days. Credit agencies have indicated that there may be more financial company downgrades and bond insurance firms might lose the ratings levels that have made them such useful backstops.

The question now isn’t whether Merrill and its peers will need more investment capital. It is whether the process will repeat itself once or twice more next year if the mortgage market gets substantially worse.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Before the bell, Earnings reports, Analyst reports, Deals, Microsoft (MSFT), Apple Inc (AAPL), Cisco Systems (CSCO), Dell (DELL), International Business Machines (IBM), Campbell Soup (CPB), Merrill Lynch (MER), Morgan Stanley (MS), Red Hat Inc (RHT), Bear Stearns Cos (BSC)

Before the bell: Futures up after RIM reports, Merrill news

With Macworld is a couple of weeks away, speculation grows as to what Apple Inc. (NASDAQ: AAPL) CEO Steve Jobs could introduce this year, given his tradition of showcasing new products during the Expo. It seems the agreement among analysts and Apple enthusiast is on a slimmed-down laptop to capitalize on the MacBook success, as well as a higher-capacity model of the iPhone.

The Wall Street Journal has reported that “U.S. regulators, led by the Securities and Exchange Commission, are probing how financial firms priced mortgage securities on their books and whether they should have told investors earlier about the declining value of those securities.” Among the companies the SEC is probing is UBS AG (NYSE: UBS) and Morgan Stanley (NYSE: MS). Merrill Lynch & Co Inc (NYSE: MER) and Bear Stearns Co Inc (NYSE: BSC) have already been reported to be under investigation.

Cisco Systems Inc. (NASDQ: CSCO) changed its management structure where a “development council” composed of several executives will replace Cisco Systems Inc. CEO heir-apparent Charles Giancarlo, who has resigned.

Micron Technology (NYSE: MU) is down 3.5% in premarket trading after it reported a quarterly loss of $262 million.
Red Hat (NYSE: RHT) is trading up 6.4% in premarket trading after reporting third-quarter net income rose 36% to $21.2 million, or 10 cents a share and naming new CEO.
Jabil Circuit Inc. (NYSE: JBL) is down almost 9% in premarket trading after reporting a first-quarter profit of $62 million, or 30 cents a share, below analysts’ expectation.

Campbell Soup (NYSE: CPB) is selling its Godiva Chocolatier unit to Turkey’s Yildiz for $850 million.

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Filed under: Before the bell, International markets, Earnings reports, Deals, Rumors, Market matters, Walgreen Co (WAG), Circuit City Stores (CC), Merrill Lynch (MER), Research in Motion (RIMM), Economic data

Stock futures were higher this morning after Research in Motion reported strong earnings after the bell Thursday and reports Merrill Lynch could be in talks to get a $5 billion capital infusion.

Thursday, U.S. stocks completed another volatile session higher after Oracle reported blow-out profits and a good outlook. The Dow industrials rose 38 points, or 0.29%, the S&P 500 gained 7 points, or 0.49%, and the Nasdaq Composite outdid them, climbing 39 points, or 1.53%.

Several economic readings are due today:

Overseas, Asian markets completed higher, with Japan’s Nikkei shaking some of the gloom of recent days ending 1.5% higher. There have been reports that Japanese electronics rivals Toshiba and Sharp would be joining forces in the liquid crystal display business.
European shares have also been rising by midday.

Headlines this morning focus on Merrill Lynch (NYSE: MER) and Research in Motion (NASDAQ: RIMM):

• The BlackBerry maker reported that calendar third-quarter profit more than doubled to $370.5 million, or 65 cents per share, compared with $175.2 million, or 31 cents per share, in the same quarter last year. The growth was attributed to strong demand for its BlackBerry smartphones and related services by consumers and businesses. Third-quarter revenue rose to $1.67 billion from $835.1 million last year. This beat analysts’ expectation of earnings of 62 cents per share on $1.65 billion in revenue according to Thomson Financial. RIMM shares traded up 12.86% in premarket action.
• The U.S. investment bank, plagued by subprime losses like other Wall Street firms, might get a capital infusion of as much as $5 billion from Singapore state-owned investment agency Temasek Holdings Pte. Ltd., according to the Wall Street Journal. Merrill had already wrote down $7.9 billion in the third quarter, a number analysts expect could double.

Reporting this day are Circuit City Stores (NYSE: CC) and Walgreen (NYSE: WAG).

Also in deal news, Holland’s Philips Electronics (NYSE: PHG) said it’s going to buy Respironics (NASDAQ: RESP) for $5.1 billion, or $66 a share.

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