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Usana founder makes offer to take the company private - good idea!Posted by: in Latest NewsI and many others have been critical of Usana Health Sciences (NASDAQ: USNA) for a while now. Fraud fighter Barry Minkow has argued quite compellingly that the company’s business model amounts to tiny more than a cleverly disguised pyramid scheme. How did he figure that out? He read the company’s filings with the SEC. Since Minkow’s report, the stock has taken a beating: an auditor resigned, numerous credentials flaps were uncovered, the SEC opened (and closed, sadly) an investigation, and the company has repeatedly failed to meet the growth expectations of the Street. Now founder Myron Wentz — who owns half the stock through Gull Holdings — is offering to take the company private at $26 per share. His reasoning? In the press release announcing the offer, Wentz explained, “Going private will provide significant cost savings and will allow USANA’s talented management team, employees, and Associates to focus solely on providing industry-leading products and building USANA’s strong Associate network without the pressures and distractions brought on by the public market.” Exactly! Going private will allow the company to operate its shady business model free from scrutiny. The selling of overpriced vitamins based on the promise of the potential to earn a six-figure income working from home has earned a lot of money for Usana. But having to disclose the business model in black and white has attracted the scorn of critics. Now Usana can go back to what it does best: luring people in to a multi-level marketing business without having to disclose as much information about what a rip-off it is. But before shareholders get too excited, they might want to take a look at Wentz’s history of offering to buy the company. Back in 2002, Wentz made a similar offer (for a lot less money), but then Wentz later announced, “To grant our shareholders to benefit from any increased value, I’ve decided to terminate my current effort to acquire USANA’s operating assets on the terms previously announced.” What a swell guy! This is starting to remind me of the whole Parlux (NASDAQ: PARL) buyout that never was fiasco.
Read | Permalink | Email this | Linking Blogs | Comments Filed under: Deals, Microsoft (MSFT), Research in Motion (RIMM)
While RIM figured out long ago that instant access to secure email in a small, portable device was the key to its fortune, Microsoft took years to discover that same fact, and now provides a similar solution on its Windows Mobile platform. But providing access to Windows Live to the biggest competitor it has in the smartphone arena can mean only one thing: Microsoft is trying to fend off Apple Inc.’s (NASDAQ: AAPL) iPhone. At the same time, Microsoft wants to get as many customers using its Windows Live services on those mobile phones as possible. The iPhone reportedly will shortly work with Microsoft’s Exchange corporate email servers to allow the same “push email” functionality that put the BlackBerry on the map. That’s, instant, real-time email wherever you are. Those with Microsoft’s Hotmail email service will also enjoy real-time “push” email with this new partnership. But make no mistake — RIM and Microsoft will need to do more to fend up the upstart competitor, Apple. If a new iPhone is announced this summer as expected, both RIM and Microsoft will see even more turbulence in the mobile markets.
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05
2008
Toll Brothers (TOL) falls on preliminary earnings, but looking for dealsPosted by: in Latest NewsFiled under: Deals, Bad news, Industry, Toll Brothers (TOL), Options, Technical Analysis, Housing
After hitting a one-year high of $31.15 nearly a year ago, the stock fell much of 2007 to hit a one-year low of $15.49 in January. This morning, TOL opened at $23.25. So far this day the stock has hit a low of $22.66 and a high of $23.67. As of 12:45, TOL is trading at $23.00, down $0.37 (-1.6%). The chart for TOL looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating. For a bearish hedged play on this stock, I would think about a June bear-call credit spread above the $27.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 a 4.2% return in six weeks as long as TOL is below $27.50 at June expiration. Toll would have to rise by more than 20% before we would start to lose money. Learn more about this type of trade here. TOL hasn’t been above $27.50 since June and has shown resistance around $25 recently. This trade could be risky if the company’s earnings (due out on 6/3) are a positive surprise, but even if that happens, this position could be protected by resistance TOL might find around $25, where it topped out twice over the past two months. 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 may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in TOL.
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05
2008
Finmeccanica buys DRS as foreign firms seek U.S. defense contractsPosted by: in Latest NewsFiled under: International markets, Deals, Boeing Co (BA), Lockheed Martin (LMT) According to an article on Bloomberg, “European defense contractors have sought work and acquisitions in the U.S., where military spending has grown faster than in their home markets. BAE Systems Plc, Europe’s largest weapons maker, purchased Jacksonville, Florida-based Armor Holdings Inc., the biggest maker of armor for Humvee transports, last year for more than $4.1 billion.” Now an Italian firm is bidding $5.2 billion for DRS Technologies (NYSE: DRS). According to the same article in Bloomberg, the acquiring firm, Finmeccanica, makes carbon-fiber frames for Boeing Co. (NYSE: BA)’s 300-seat 787 Dreamliner, and its AgustaWestland helicopter division has a supply contract with Lockheed Martin Corp. (NYSE: LMT) for the U.S. presidential fleet. DRS makes flight recorders, sensors and thermal-imaging devices that are used on U.S. military helicopters and ships. Finmeccanica is partly owned by the Italian government. An acquisition like this rounds out the Italian defense supplier’s product-line and positions it well to penetrate U.S. military spending. Much of the premium paid by the Italians has been realized already as the venerable Wall Street Journal reported of the possible deal last week. Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.
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That’s something HP’s CEO, Mark Hurd, definitely has mentioned on various occasions. Basically, how can a behemoth continue to grow? Perhaps a smart strategy is to make large acquisitions? Well, today HP has announced a hefty $13.9 billion buyout deal for EDS (NYSE: EDS), an information technology (IT) consulting operator. Over the past year, EDS posted about $22 billion in revenues. But Hurd is not just concerned about the top-line. If anything, he’s highly disciplined with generating profits. In fact, since he has come on board HP (back in 2005), Hurd has been masterful in finding efficiencies - while still pushing revenue growth. While the history of transformative M&A is filled with failures, with the HP-Compaq combination a prime example of what can go wrong, the strategic rationale for the EDS deal makes sense. In today’s global environment, customers want strong technologies but also sophisticated services. Actually, companies are increasingly outsourcing services to players like EDS. Moreover, with much more heft, HP and EDS will become a formidable alternative to IBM (NYSE: IBM), which has proven the technology/services model. Finally, I’m sure that Hurd will take out his cost-cutting knife. It’s something that hasn’t been emphasized but I’m sure it will be a huge part of the deal. Tom Taulli is the author of various books, including The Complete M&A Handbook
Filed under: Deals, Hewlett-Packard (HPQ), International Business Machines (IBM), Electronic Data Systems (EDS)
That’s because EDS and HP would under perform in services when it comes to profitability. EDS’s bigger business earned a 1% net profit margin in the first quarter. But HP’s services business generated a far higher 9% estimated net margin. Unfortunately — for reasons described below — the combined company will probably have lower margins. Meanwhile, IBM’s profit lagged HP’s slightly — it made an estimated 7% net margin in the first quarter in its services business. But IBM is and will remain a much larger player. Combined, EDS and HP’s services business will control 5.3% — lagging IBM. That’s because IBM controlled 7.2% of the tech-services market in 2007 while EDS was a distant second at 3% and HP was fifth, with a 2.3% share. I think HP’s most profitable business, printers, might be able to make superior use of the $12.8 billion in capital. This Imaging and Printing Group earned a 13% estimated net margin. It grew a mere 4% to $7.3 billion in revenue and given that this unit is by far the most profitable in HP’s stable of businesses, this would appear to be the best place to invest for future growth. Now may be a good time to sell HP stock. Mark Hurd came into HP as a nuts-and-bolts operator. This deal recommends that Hurd has run out of growth options and that HP can’t grow earnings through more cost cuts. I have no doubt that Hurd could cut costs once EDS has been integrated. However, government work — which accounts for the biggest part of EDS’s revenue — is inherently less profitable than the commercial work which HP performs in its services business. So, I would guess that the EDS merger will lower HP’s services margins. What HP really needs — and lacks due to Hurd’s particular skills — is the ability to innovate as it did successfully in printers back in the 1980s and 1990s when it invented the highly profitable printer and ink business. Peter Cohan is President of Peter S. Cohan & Associates. He also instructs management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.
Read | Permalink | Email this | Linking Blogs | Comments Filed under: Deals, Competitive strategy, Hewlett-Packard (HPQ), International Business Machines (IBM), Electronic Data Systems (EDS)
HP brings in less that 25% of its revenue from services. But that business is growing quickly. According to the company’s 10-Q, it had revenue of almost $4.4 billion in the first quarter. In the same period a year ago, that number was $3.9 billion. The prevailing theory is that HP plans to buy EDS (NYSE: EDS) for $12.6 billion for its revenue from consulting and outsourcing to better compete against IBM (NYSE: IBM). That might be true, but the actual reason might be much more simple than that. With its stock up 50% over the last two years, HP needs a new business to keep its revenue growing and its shareholders happy. That’s not going to come from its ink and printer business. Buying EDS nearly guarantees another two years of rising revenue and earnings. Douglas A. McIntyre is an editor at 247wallst.com and the author of the Ten Stocks Under $10 letter.
Read | Permalink | Email this | Linking Blogs | Comments Filed under: Earnings reports, Deals, Management, Industry, Law, Amer Intl Group (AIG)
Through his own holdings and those of a foundation he controls, Greenberg has enough shares to make trouble for AIG, and now he might have cause. The company lost $7.8 billion in the last quarter. Greenberg insists that if he had been in charge, none of that would have happened. According to The Wall Street Journal, Greenberg has “upped the pressure on current management in a sharply worded letter that stated ‘AIG is in crisis’ and called on directors to postpone Wednesday’s annual meeting.” Greenberg’s view is somewhat convenient. The company started selling derivatives when he was still there. His attack on management assumes that he could have escaped the problems that have hit nearly every major financial company in the US and Europe. Greenberg dreams that things would have been different if he’d stayed as CEO, but it is only a dream that he can’t support with any reality. Douglas A. McIntyre is an editor at 247wallst.com and the author of the Ten Stocks Under $10 letter.
Read | Permalink | Email this | Linking Blogs | Comments Filed under: Before the bell, Earnings reports, Analyst upgrades and downgrades, Deals, Google (GOOG), Apple Inc (AAPL), Coca-Cola (KO), XM Satellite Radio (XMSR), Sirius Satellite Radio (SIRI), Amer Intl Group (AIG), Staples Inc (SPLS)
Staples (NASDAQ: SPLS) stepped up its hostile campaign to acquire Dutch office supplies group Corporate Express (NYSE: CXP), lifting its offer to 8 euros ($12.43) a share, up from 7.25 euros previously and taking its bid directly to shareholders. CXP shares were 6% higher. In its attempt to shore up its balance sheet, American International Group Inc. (NYSE: AIG) priced an offering of 171.1 million common shares at $38, valuing the deal at $6.5 billion. On Monday AIG also stated it priced an offering of 72 million equity units at $75 each, a deal value of $5.4 billion. LDK Solar Co. Ltd. (NYSE: LDK) shares are down over 6% in premarket trading after the Chinese solar energy company reported first-quarter results late Monday. While earnings topped forecasts and the company raised its revenue outlook for the year, raw material costs caused it to cut its gross margin forecast. Sirius Satellite Radio Inc. (NASDAQ: SIRI) also reported results after closing bell Monday. While the results are important, they don’t have the weight they would had the Street not expected Sirius to complete the purchase of bigger rival XM Satellite Radio Holdings Inc. (NASDAQ: XMSR). Both companies reported more losses, although Sirius narrowed its loss, while at XM, the loss increased. This may be the reason why StreetInsider states that Merrill Lynch upgraded Sirius from Sell to Neutral. Interestingly, though, XM shares climbed Monday following its results, while SIRI shares are down in premarket trading following its. The CEO of Coca-Cola Co (NYSE: KO) stated the company is seeking more acquisition opportunities in the fast-growing soft drinks market to expand its revenue sources. As people opt for healthier drinks, sales of established soft drinks are declining and Coca-Cola wants to be able to better keep up with the trend, just as its rivals had with different acquisitions. It seems that Google’s Friend Connect, Google Inc. (NASDAQ: GOOG) attempt to “bring the social” to any page around the web was well received when launched Monday. We heard about the deal Monday and this day it’s already operational — HBO programming on Apple (NASDAQ: AAPL) iTunes store. Six of HBO’s most popular series are available for download for prices ranging from $1.99 to $2.99 per episode including Sex in the City and The Sopranoes.
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