Filed under: Before the bell, Analyst reports, Analyst upgrades and downgrades, Deals, Microsoft (MSFT), Apple Inc (AAPL), Hewlett-Packard (HPQ), Pfizer (PFE), Bristol-Myers Squibb (BMY), Federal Natl Mtge (FNM), ConocoPhillips (COP), Mattel, Inc (MAT), AMR Corp (AMR), Lilly (Eli) (LLY), Analyst initiations, Economic data, Oil, Housing

U.S. stock futures were lower this morning on fear Tropical Storm Gustav’s path may pose a threat to refinery activity along the Gulf of Mexico coastline and some would have to close down. Indeed, oil prices rose to above $117 a barrel Wednesday. Also in focus today is the upcoming durable goods order to be reported before the opening bell. Meanwhile, the FDIC is considering borrowing funds from the Treasury, amid an expected wave of bank failures. Nine banks have failed so far this year, and the number of troubled U.S. banks rose 30% to 117 in the second quarter.
[Update: Futures turned positive after durable goods unexpectedly gained.]

Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), which stocks jumped massive Tuesday, both had several ratings cut by Standard & Poor’s. Still, both stocks seem to continue their climb in premarket with Fannie shares up 7.5% and Freddie’s up 10%. At least two analysts, from Citigroup and Goldman stated Tuesday the situation isn’t as bad as it may seem.

From financials to toys: A federal jury awarded Mattel Inc. (NYSE: MAT) $100 million in damages on Tuesday in a federal copyright lawsuit against MGA Entertainment Inc., the maker of the saucy Bratz dolls.

Moving to pharmaceuticals, Amylin Pharmaceuticals Inc. (NASDAQ: AMLN) and Eli Lilly & Co. (NYSE: LLY) shares are down 10% and 1% respectively in premarket trading after four more patients taking their Byetta diabetes medication have died. Baird downgraded Amylin from Buy to Neutral and cut its price target from $37 to $27. Soleil downgraded AMLN from Hold to Sell.

Meanwhile, Bristol-Myers Squibb Co. (NYSE: BMY) and Pfizer Inc. (NYSE: PFE) said that early results from a Phase III study show the companies’ blood-clot-drug candidate apixaban did not meet its primary goals.

In Apple Inc. (NASDAQ: AAPL) news, The Guardian reports that “A TV ad for Apple’s iPhone has been banned by the UK’s advertising watchdog for misleading consumers after it over-hyped the internet abilities of the smart phone.” Since the iPhone does not support Flash or Java, claims that “all the parts of the internet are on the iPhone” are deemed misleading.
And if you missed it Tuesday, iPhone 3Gs now outnumber first generation iPhones.

A recent comScore data release show Microsoft (NASDAQ: MSFT) was the top display advertiser in June 2008, which was due in huge part to its promotional campaign for Windows Live Search and other such promotions.

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Filed under: Deals, Electronic Arts (ERTS)

Shares of Take-Two Interactive (NASDAQ: TTWO) are up about 3% today after the company disclosed that it has entered into a confidentiality agreement with Electronic Arts (NASDAQ: ERTS), in a sign that a deal might get done after all. Last week, Electronic Arts let its tender offer expire but said that it would listen to a confidential presentation on the company’s operations.

In an 8-K filed with the SEC yesterday, Electronic Arts disclosed the confidentiality agreement and added that its terms prohibit the company from commenting publicly on the negotiations until a deal is reached or discussions are terminated.

It’s hard to know what to make of this. By getting Electronic Arts to sign a confidentiality agreement, Take-Two has put an end to the tit-for-tat soap opera aspect of this takeover battle. Whether they’re serious about getting a deal done remains to be seen. Given Take-Two’s track record of filibustering and questionable governance, I’m skeptical. At this point, investors should be evaluating shares of Take-Two Interactive based on its prospects as a stand-alone business, not the chances of a deal that Take-Two’s board has demonstrated a lack of enthusiasm about.

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Filed under: Deals, Merrill Lynch (MER), Lehman Br Holdings (LEH)

Temasek Holdings is one of Singapore’s sovereign wealth funds (SWFs), managing $130 billion. Over the past few years, the fund has been diversifying into emerging markets as well as developed economies.

In fact, Temasek was one of the early investors in some major U.S. financial institutions. It has invested $5 billion in Merrill Lynch (NYSE: MER) back in December.

While Temasek hasn’t tracked well, SWFs focus on the long term. Temasek still appears to be bullish on U.S. financial services companies as the portfolio concentration is a whopping 40%. And there are even rumors that Temasek may invest in Lehman Brothers (NYSE: LEH).

According to its annual report, Tamasek reported a $12.8 billion net profit for the past year as of the end of March. Keep in mind that the fund has engaged in a variety of asset sales.

Going forward, Tamasek is glum on its forecast, though. Basically, the fund thinks that the credit crunch will last another two years - which is certainly depressing.

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

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Filed under: Deals, India

In India, the growth of the information technology (IT) industry has been stunning. For the most part, the strategy has been to focus on internal growth. However, this may be changing; that’s, anticipate more M&A.

In fact, this week Infosys Technologies Ltd. (NASDAQ: INFY) has concurred to pay $753.1 million for UK rival, Axon Group PLC.

In a way, the Indian IT service providers are victims of their own success. For example, wages are skyrocketing and it’s getting tougher to find quality consultants.

With the Axon deal, Infosys will add about 2,000 consultants who specialize in the complex work of SAP (NYSE: SAP) implementations — projects that can certainly generate juicy fees. Infosys will also get a stronger platform in Europe. Last year, Axon generated $378.3 million in revenues, with $37.4 million in profits.

According to Murray Beach, managing Managing Director of TM Capital:

“This transaction is an impressive step for Infosys. Many of the leading offshore services firms have talked about climbing up the value chain of services offerings and improving on-site customer presence, but none have completed a deal of such magnitude to back up their rhetoric. We anticipate the acquisition of Axon to mark the first of many acquisitions by the leading Indian offshore players of traditional on-site strategic and technology consulting companies in the US and Europe.”

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 MergerBook.com.

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Filed under: Before the bell, Earnings reports, Analyst reports, Analyst upgrades and downgrades, Deals, Apple Inc (AAPL), General Motors (GM), Market matters, Coach Inc (COH), Broadcom Corp’A’ (BRCM), Economic data, Marvell Technology Group (MRVL), Rio Tinto plc ADS (RTP), Anadarko Petroleum (APC), Oil, salesforce.com inc (CRM), Delta Air Lines (DAL), Lehman Br Holdings (LEH), Housing

U.S. stock futures were mixed on Tuesday. Following Monday’s broad sell-off and volatile session, which was also marked by low volume, this day might not be different — volatile and low volume. Several reports are in focus today, specifically some housing data that could shine more light on the sector, and consumer confidence, which could also move stocks. Meantime, oil prices declined and the dollar strengthened against major currencies.

Rio Tinto (NYSE: RTP) shares are down over 3% in premarket trading after the mining giant reported fiscal first-half profit more than doubled. RTP’s acquisition of Alcan and soaring commodity prices helped Rio achieve the results. RTP shares have been declining due to worldwide slower growth.

Meanwhile, Anadarko Petroleum (NYSE: APC) shares were 2.4% higher in after-hours after it announced a plan to buy back up to $5 billion of stock.

Staying with share buybacks, Coach (NYSE: COH) are also 1.7% higher in premarket trading after announcing a buyback program of up to $1 billion, which follows the completion of a similar repurchase.

And of course, Lehman Brothers (NYSE: LEH). Shares of the embattled banker are rising this morning following speculation that Kohlberg Kravis Roberts may be interested in buying Neuberger Berman, according to CNBC, while Blackstone Group backed away.

Moving to autos, General Motors Corp (NYSE: GM) has apparently received interest from two separate investors from the Gulf Arab region to purchase its Hummer brand, according to the company’s Middle East chief, reports Reuters. GM shares are 1% higher this morning.

And from autos to airlines, Delta Air Lines (NYSE: DAL) borrowed the $1 billion available on a revolving-credit facility, “which it says will give it flexibility as it closes its Northwest (NYSE: NWA) merger.” Shares of NWA are pushing 2.7% higher in premarket.

To rumor land we go: The blogosphere is circulating a rumor that Apple Inc. (NASDAQ: AAPL) is planning an Apple Event for new iPod nanos, a less pricey iPod touch, and iTunes 8 on September 9.

Analyst calls:

• Salesforce.com (NYSE: CRM) was upgraded by Citigroup from Hold to Purchase and set its target price on the stock to $70.
• Broadcom (NASDAQ: BRCM) was downgraded by Oppenheimer from Outperform to Perform.
• Marvell (NASDAQ: MRVL) was downgraded by Jefferies & Co from Buy to Hold and lowered the target price from $22 to $15.

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Filed under: Deals, Time Warner (TWX), Sony Corp ADR (SNE), Comcast Cl’A’ (CMCSA)

Famed studio MGM, which is owned by a bunch of companies including Texas Pacific Group, Providence Equity Partner, Sony (NYSE: SNE) and Comcast (NYSE: CMCSA), is considering a public offering as it looks to deal with its $3.1 billion debt load. The company has hired Goldman Sachs (NYSE: GS) to explore options for a way out of the 2005 buyout that left the company over-leveraged.

Studios have slowed production because of the credit crunch that’s making financing films harder than it’s been in a long time.

Other possible alternatives include a bond offering or some other form of debt refinancing, but the company says it’s not for sale, although it remains coy on that topic, saying that that “there is no ‘asking price’ for the company.”

Is that a veiled invitation for bids? Sounds care about it. But in this environment, there might not be many takers. Time Warner (NYSE: TWX) made an unsuccessful bid back in 2004, but most the other interested celebrations ended up walking away with various sized stakes in the company.

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Filed under: Deals, Private equity, Anheuser-Busch Cos (BUD)

For financial markets, August is always a slow time as Wall Streeters head for their vacations. But this year, there was more than just seasonality. Simply put, it was a very tough month for M&A operators.

In fact, according to Reuters, August was the worst month since 1992.

It’s been about a year since the credit crunch started, and it looks like things aren’t getting better. If anything, it’s a good bet we’ll continue to see volatility and layoffs in the financial services space.

In August, the M&A volume in the U.S. came to about $28.5 billion, which is 53% off from the same period a year ago.

Ironically, while private equity funds have a massive amount of capital to put to work, there is not much bank financing. As a result, most of the private equity deals have been fairly small (below $2 billion or so).

Also, some of the current mega deals - such as InBev’s $45 billion acquisition for Anheuser-Busch Cos. (NASDAQ: BUD) - are crowding out the financing market.

In other words, investment bankers may need to wait until next year for things to warm up again.

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 MergerBook.com.

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Filed under: Deals, Options, Precision Drilling TR (PDS)

Precision Drilling (NYSE: PDS) announced the purchase of Grey Wolf (NYSE: GW) for $5.00 in cash and 0.1883 newly-issued Precision trust units for each GW share.

The transaction will establish PDS as one of the largest U.S. land drillers with a combined fleet of 371 drilling rigs.

PDS September option implied volatility of 46 is near its 26-week average of 43 according to Track Data, suggesting non-directional price movements.

GW overall option implied volatility of 45 is near its 26-week average, suggesting non-directional price movements.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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Filed under: Before the bell, Deals, Magazines, Apple Inc (AAPL), Citigroup Inc. (C), Advanced Micro Dev (AMD), Alcoa Inc (AA), Federal Natl Mtge (FNM), Amer Intl Group (AIG), Broadcom Corp’A’ (BRCM), Economic data, Rio Tinto plc ADS (RTP), Oil, Lehman Br Holdings (LEH), Housing, Federal Reserve

Stock futures were blended Monday morning, indicating stock would start on a down note a week full of economic data. This morning, investors are focusing on rising oil prices and existing home sales data to be released at 10:00 a.m. EDT. Also, over the weekend, Federal Reserve Chairman Bernanke commented from the Fed’s yearly retreat, saying that problems in credit markets not yet over and are a threat to economy. Meanwhile, economists are saying inflation is catching up to the credit crisis as the major concern for the economy.

American International Group’s (NYSE: AIG) credit ratings might be downgraded by Fitch due to uncertainties over AIG’s exposure to mortgage backed securities. AIG was down 1.5% in after-hours Friday.

The Australian government approved Chinalco 14.99% stake in Rio Tinto’s (NYSE: RTP) but warned the Chinese firm against buying more shares without prior approval. Alcoa (NYSE: AA) backed the purchase. RTP shares were up over 1% in Australian trading.

Broadcom Corp. (NASDAQ: BRCM) will pay around $192.8 million in cash to acquire chipmaker Advanced Micro Devices Inc.’s (NYSE: AMD) digital TV business, the companies announced Monday.

Freddie Mac (NYSE: FRE) and Fannie Mae (NYSE: FNM) shares are continuing their slide in premarket trading this morning. Freddie is set to auction its three- and six-month bills. On Friday, both Freddie and Fannie had their preferred stock ratings and bank financial strength ratings downgraded by Moody’s Investors Service.

Meanwhile, Lehman Brothers (NYSE: LEH) shares are also trading lower in premarket after rumors of a takeover Friday caused the stock to surge. CEO Richard Fuld is facing an internal campaign to force him out by the end of the year, U.K.-based daily The Observer reported Sunday.

Citigroup Inc. (NYSE: C) plans to reorganize the capital markets business within its investment bank, The Wall Street Journal reported.

On Apple Inc. (NASDAQ: AAPL), read MarketWatch’s commentary about the iPhone’s current launch in India: “Steep pricing and absence of 3G poses a major challenge to iPhone success, but usage of data and value-added services might take off.”

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Filed under: Deals, Wachovia Corp (WB), Oil, Bear Stearns Cos (BSC), Housing, Recession

Minyanville Founder and CEO Todd Harrison dares to share the kind of keen insight and actionable information you won’t find in any prospectus. For more original thought, visit www.minyanville.com.

Holy cow, can it be any slower out there? I’m taking a break from trying to set the all-time record for meetings on a “slow” summah Friday to offer a quick take on a few topics.

Will Lehman Brothers Holdings Inc. (NYSE: LEH) get married over the weekend?

• There hasn’t been any price talk on Lehman so even if it happens, it’s a bit of a crap shoot. Remember Minyans, Bear Stearns was taken over too.
• There’s no doubt franchise value and a lot of smart people at Lehman. There’s also a lot of baggage on their balance sheet. It — like most of the financials — is a double-edged sword.

Should the Fed step in to do something about Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE)?

• With $233 billion due by end of quarter, they must, but there are structural and societal ramifications, which is why it’s so tricky.

• What happens to the dollar if all that debt is assumed by the government?

• Where do you draw the line of socialization? That, in a nutshell, is the moral hazard debate.

Odds and Ends

• Crude: we talked about the $10 technical increments and they continue to play out. It failed at $120 and $110 is back on the radar.

• Wachovia Corporation (NYSE: WB): you can learn a lot just by watching and this stock isn’t participating in the bank rally this day.

• Retail HOLDRs (AMEX: RTH): if our take on the migrating phases of the credit crisis plays out, a nice short could be setting up as this puppy approaches par ($100).

• We’re hearing (not confirmed) that a $3 billion commodity fund halted redemptions and that could be behind the price action in commodity land today.

We’re almost there, my friends — keep your focus and remember that the danger profile you go home with is the one you’ll awake with during next week’s holiday thinned stretch.

R.P.

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