Filed under: Deals, Industry, Motorola (MOT), Nokia Corp. (NOK)

After almost two years of falling market share in the mobile handset business, Motorola (NYSE: MOT)’s board this day stated that is would explore selling or otherwise disposing of its largest unit. “We are exploring ways in which our mobile devices business can accelerate its recovery and retain and attract talent while enabling our shareholders to realize the value of this great franchise,” Chief Executive Greg Brown said in the company’s statement.

Motorola’s popular Razr model lifted its global share to about 22%, but that was two years ago. In the latest quarter, the company only shipped 40 million handsets, about 12% of the market. The US company has been handed a beating by Nokia (NYSE: NOK), Samsung, and Sony Ericsson.

Without handsets, Motorola would be a much smaller but more profitable business. Its set-top box, enterprise, and government telecom operations all make money.

It would have been nice to sell-off the cell phone operation when it had some real value. Now, it is too late for that.

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

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Filed under: Earnings reports, Deals, Microsoft (MSFT), Sony Corp ADR (SNE)

For years Playstation revenue carried Sony’s (NYSE: SNE) earnings. The PS2 was one of the great selling consumer electronics products of all time.

Sony nearly failed with the launch of the PS3. Microsoft’s (NASDAQ: MSFT) Xbox had taken too many customers and the Nintendo Wii became the world’s top game console. Sony’s CEO had to step down, and Sir Howard Stringer was brought in from the US to run the company.

Net income at Sony moved up 25% to $1.9 billion for the quarter ending December 31. Revenue rose nearly 10%. Some of this is due to the fact that for the first time in years Sony’s game division has finally gone into the black.

Television sales were the huge winner for Sony during the quarter. Financially, the game unit, which includes PS3 only made a modest contribution. But it is no longer a drag on earnings. According to Reuters, “its game business swung to a profit after Sony cut production costs and retail prices of the PlayStation 3 game console and broadened its game software lineup.”

Sony waited a long time for the PS3 to work out. That might be paying off.

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

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Filed under: Earnings reports, Deals, Good news, Bank of America (BAC), Countrywide Financial (CFC), Options, Technical Analysis

Countrywide Financial Corp. (NYSE: CFC) shares are rising this day although the company posted a fourth-quarter loss of $421.9 million, or 79 cents per share, much worse than analysts’ predictions of a loss of 32 cents per share. However, shares are trading higher as some analysts have speculated that by simply reporting and showing that it is still in business, CFC may be able to keep potential buyer Bank of America (NYSE: BAC) from rescinding its buyout offer. In fact, BAC CEO Ken Lewis said after CFC’s earnings release that “everything is a go to finish this transaction.” 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 CFC.

After hitting a one-year high of $45.19 in February, the stock hit a one-year low of $4.25 last week. CFC opened this morning at $6.35. So far today the stock has hit a low of $6.07 and a high of $6.46. As of 11:45, CFC is trading at $6.21, up $0.26 (4.4%). The chart for CFC looks neutral and improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a March bull-put credit spread below the $5 range. A bull-put credit spread is an options position that combines the purchase 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’ll make an 8.7% return in just two months as long as CFC is above $5 at March expiration. Countrywide would have to fall by more than 18% before we would begin to lose money.

CFC hasn’t been below $5 by more than a few cents in the past year and has shown support around $5.75 recently, now that BAC has expressed interest. This trade could be risky if the Fed doesn’t take bold action tomorrow, but even if that happens, this position could be protected by the support the stock might find around $5 where it has started to form a bottom.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that might include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in BAC or CFC.

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Filed under: Deals, Private equity, Clear Channel Commun (CCU), SLM Corp (SLM), Blackstone Group L.P (BX)

For the private equity space, it’s been a blended bag this week. The good news is that the $17.1 billion acquisition of Harrah’s Entertainment got done (the largest casino deal in history). The buyers included TPG and Apollo Global Management LP.

But there was some bad news too — it looks like Blackstone (NYSE: BX)’s proposed buyout of Alliance Data Systems (NYSE: ADS) is on the rocks.

So, in this environment, it’s understandable that Wall Street is jittery with buyout deals. Just look at the pending buyout of Clear Channel Communications (NYSE: CCU).

Despite reassurances from the private equity sponsor — Thomas H. Lee - the deal still has an enormous spread. In other words, the buyout price is $39.20 and the current market price is $29.69.

What’s going on?

Well, investors should be concerned. Besides the ADS transaction, there have been other deals that have imploded - such as United Rentals (NYSE: URI), SLM (NYSE: SLM) and Harmon (NYSE: HAR).

What’s more, the slowing economy is likely to negatively impact marketing spending, which should be a drag on radio. Clear Channel has already talked about this.

Besides, the credit markets are still tight, making it difficult to raise big sums for buyout transactions.

True, Clear Channel still has strong competitive advantages and it looks like there’s room to cut costs, but right now, Wall Street traders certainly are not in a risk-taking mood.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar On the web Guide to Decoding Financial Statements.

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Filed under: Deals, Bank of America (BAC), Countrywide Financial (CFC)

A piece in today’s Wall Street Journal recommends [subscription required] that Countrywide Financial (NYSE: CFC) was driven into the arms of Bank of America (NYSE: BAC) also by fears of a regulatory crackdown.

According to the Journal, “Though the large home-mortgage lender faced big and unpredictable losses on defaults, the more immediate danger was pressure from regulators, politicians and rating firms, these people state.”

The acquisition of Countrywide by the much more massive Bank of America will ease the company’s liquidity problems, making it less reliant on the Federal Home Loan Banks for funding. According to the Journal’s source, the company was near the cap for funding, and a scandal surrounding the company might have jeopardized its capability to secure additional cash.

The company had been paying far-above market interest rates on CDs and savings to attract further cash — a sign of its desperation for money.

Bank of America can easily solve the mortgage-home lender’s liquidity problems because of its sheer size. But given the regulatory heat surrounding Countrywide — shareholder lawsuits, attorneys general in Florida, California, and Illinois investigating, and an SEC investigation of its record-keeping — Bank of America might have inherited some pretty significant liabilities.

Of course, BofA will have attempted to figure out the extent of the possible damage before it agrees to the deal, but multiple federal investigations are a pretty serious wild card.

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Filed under: International markets, Deals, Competitive strategy, Commodities, Oil, Agriculture

CME Group is preliminary talks to buy energy/precious metals market Nymex, CME announced Monday, in a statement.

Under terms being discussed, CME Group Inc. (NYSE: CME), the world’s largest derivatives exchange, would pay Nymex Holdings, Inc. (NYSE: NMX) $36 per share in cash and 0.123 of a CME common share, which would value the deal at about $11 billion, Reuters reported Monday.

Nymex shares rose $9.01 to $116.17 on the news, while CME’s shares fell $12.77 to $616.01 in Monday afternoon trading.

CME Group was created in July 2007 via the merger of the Chicago Mercantile Exchange and the Chicago Board of Trade in a $9.3-billion deal. Nymex, which is short for the New York Mercantile Exchange, went public in November 2006.

Nymex is the world’s largest, physical commodities futures exchange, and features contracts for crude oil, gasoline, natural gas, and electricity; and precious metals such as gold, silver and copper. CME’s product strengths include interest rates, foreign exchange, stock indexes, and agricultural commodities.

A logical deal

Independent stock analyst C. Leonard Bauer told BloggingStocks Monday a potential CME/Nymex could get done, “as the logic is there”. Bauer added that he does not have a rating on either company, nor does he own shares of either company.

Nymex’s products have almost no overlap with CME’s strengths in interest rates, foreign exchange, stock index and agricultural commodities, he stated. Nearly, he underscored. However, a CME/Nymex deal would have “an 80% or better market share in U.S. futures and futures on option volume,” he said. Any proposed deal is subject to review by the U.S. Department of Justice.

“The onus would be on CME to demonstrate to public officials how in the electronic age, the number of electronic exchanges would counteract CME’s market dominance in that segment,” Bauer said. “The issue isn’t one of global competition. The issue is ‘how will a CME/Nymex merger lower trading prices and improve services?’ If they can demonstrate that, then that dimension, and the product mix, and economies of scale points would most likely put the deal in motion.”

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Filed under: Deals, Next big thing

Only eight months old, the Rubicon Project has already raised roughly $21 million. In fact, this day the company announced its latest infusion: $15 million. The investors include: Mayfield Fund, IDG Ventures Asia, Stanford University, University of California Berkeley, Matt Coffin (founder and former CEO of LowerMyBills.com) and Clearstone Venture Partners.

Essentially, the Rubicon Project helps companies manage the complexities of on the web advertising networks. The system is getting lots of traction, with more than 3,000 websites signing up.

“We are seeing big demand,” stated Frank Addante, CEO and Founder, in an interview with me on Friday. “Customers also want a way to benefit from advertising networks in global markets.”

I asked Frank about the concerns of a slowdown in on the internet advertising (especially in light of the cloudy economy in the U.S.). His take? Well, he’s not seeing a slowdown. “I experienced the downturn in 2001,” said Addante. “That was mostly the result of dot-coms running out of money. As of now, things are different because it’s traditional companies that are buying online advertising.”

Interestingly enough, the genesis of the Rubicon Project’s funding came from Frank’s trip to Hawaii - which he wrote about it in his blog.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar On the web Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Filed under: Deals, From the boards, Wendy’s Intl (WEN)

Wendy’s (NYSE: WEN) handling of its review of strategic alternatives has been very strange from a PR perspective. Back in June, the company earned a place on TheStreet.com’s “5 Dumbest Things on Wall Street” for its slew of press releases announcing that the company was for sale: “Under its latest effort to win over Wall Street, the company has taken to announcing once a month that it’s up for sale.”

With its stock down about 40%, no buyer has yet emerged for the company. This day Wendy’s announced that the “Special Committee of its Board of Directors, which is reviewing the Company’s strategic options, believes that it is in the final stages of its review process.”

That’s right: a press release saying nothing except that they’re almost done with their review — What does that even mean? 2 more days? 2 more months? They don’t state but they caution investors that “there is no assurance that the process will result in any changes to the Company’s current plans or when a specific announcement might be made.”

The press release added: “The review process being undertaken by the Special Committee has taken longer than anticipated, primarily due to the continuing turmoil in the financial markets.”

What goes unsaid is that the stock’s sharp decline in value would seemingly make it more attractive as an acquisition.

But with the stock down more than 7% this day, it doesn’t look like investors are betting on that.

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Filed under: Deals, Rumors, Circuit City Stores (CC)

When Mark Wattles stepped up his holdings in consumer electronics retailer Circuit City Stores, Inc. (NYSE: CC) last week, shares in the retailer jumped over 33% to $5.04 Tuesday-Wednesday last week. Circuit City’s share price has settled back down to $4.74 this morning — still a gain of over 25% from a week ago close of $3.76. The retailer still isn’t worth that amount with the current leadership in place.

Circuit City is now valued at just over $800 million, which puts the company in prime shape for acquisition. One must ask, though, why private equity wasn’t interested a week ago when the company’s market cap was valued under $600 million? That’s a little over half a billion for the second-largest consumer electronics chain in the U.S. with nationwide locations. Apparently, not a single entity besides Wattles sees any value here.

Wattles did state that he is considering an outright buy of the company or a forced leadership change now that he has amassed over 6% of the company’s shares. Something — anything — needs to shake up Circuit City back into profit reality soon. No other money has come calling, so it may be Wattles’s sole call to make. If you’re holding on to your CC shares — and you haven’t sold them on fear — you may soon be rewarded. That’s, if you haven’t taken profits from the company’s wild increase last week.

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Filed under: Deals, Blackstone Group L.P (BX)

Over the past few months, investors were curious about the deal spread — the difference between the acquisition offer and the market price — of Blackstone (NYSE: BX)’s proposed buyout deal for Alliance Data Systems (NYSE: ADS). This was a tell-tale sign that the deal was in trouble.

Despite all this, there was still lots of talk that the deal would close. After all, ADS is a strong company (even if there are some issues with the economy). Besides, the merger agreement was airtight.

Well, investors failed to take into account something important: regulatory hurdles. Basically, it seems that the Office of the Comptroller of Currency (OCC) wants Blackstone to be an unlimited source of financial support if there are troubles at ADS (this is perhaps based on the current turbulence in the financial markets).

For a savvy firm like Blackstone, this was certainly a dealbreaker.

The recourse for ADS? Of course, the company may pursue litigation. However, this will be time-consuming and hideous.

Investors are making their own judgment: the stock price of ADS is down $23.87 to $41.73 in today’s trading.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar On the web Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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