Archive for February, 2007
February 28, 2007 at 9:53 pm · Filed under macroeconomy
(02-28) 11:32 PST Kansas City, Mo. (AP) —
Sprint Nextel Corp., the nation’s third largest wireless carrier, said Wednesday that fourth-quarter profits rose 33 percent on stronger revenue, but the company continued to lose high-quality subscribers.
The company, based in Reston, Va., with operational headquarters in Overland Park, Kan., reported earning $261 million, or 9 cents per share, during the October-December period, compared with $195 million, or 7 cents per share, a year earlier.
The fourth quarter earnings were one penny better than that expected by analysts surveyed by Thomson Financial.
Revenue for the quarter rose 6 percent to $10.44 billion from $9.79 billion, surpassing analysts’ prediction of $10.39 billion.
Sprint Nextel shares, which have traded in a 52-week range of $15.92 to $26.89, were up $1.30 at $19.75 in afternoon trading Wednesday on the New York Stock Exchange.
The company’s customer base grew by 1.3 million customers during the quarter, to end the year at 53.1 million. But that number reflected gains in less-valuable “pay-as-you-go” customers, whereas monthly subscribers, who tend to generate more revenue, fell by 306,000. And once again, most of the lost “post-paid” customers came from the Nextel side, which has been struggling with network quality issues. Nextel’s subscribers are especially valuable because many of them are business users with higher monthly bills.
Chief Executive Gary Forsee told analysts in a conference call that the company has invested heavily in the Nextel network to avoid dropped calls and poor signal quality. He also said the company plans next year to introduce Q-Chat, an application that places calls across both networks. The company already has begun rolling out hybrid Nextel phones that can connect with the data portion of the Sprint network.
Sprint Nextel also is attempting to weed out low-quality customers through tougher credit requirements. Chief Financial Officer Paul Saleh said that would continue to hamstring growth in the first quarter, but that he expected post-paid customer numbers to begin rising in the second quarter.
The company first warned of disappointing subscriber numbers in January, adding that it planned to cut 5,000 jobs. Forsee said he expects most of those job cuts to be completed by April 1, saving the company $400 million annually.
The company acquired 830,000 new subscribers from wholesale channels. Boost Mobile, the company’s youth-oriented pre-paid service, saw a gain of 171,000 customers.
Post-paid churn, or the measure of subscribers dropping their service, improved slightly to 2.3 percent per month of the subscriber base. That was down from 2.4 percent in the third quarter, but still above the 2.1 percent churn reported in the year-ago period.
The company said most of those dropping service were in markets served by former affiliate Nextel Partners, which the company bought last year.
Average revenue per post-paid user declined during the quarter to $60, 1 percent below the third quarter and about 5 percent lower in the final quarter of 2005.
The company’s long-distance phone business continued to shrink, with revenues dipping 2 percent to $1.64 billion. But the company said it was now serving 1.5 million customers through its partnership with four cable companies, an 80 percent gain over the end of 2005.
For all of 2006, profit slumped to $1.33 billion, or 45 cents per share, from $1.78 billion, or 87 cents per share, in 2005. Revenue rose 43 percent to $41.03 billion. The 2005 results only include revenue from Nextel Corp. starting in August, when the merger was completed.
The company reiterated the 2007 guidance it issued on Jan. 8, saying it expected annual revenue between $41 billion and $42 billion.
Analysts predict 2007 earnings of 82 cents per share on $41.14 billion in revenue.
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On the Net:
http://www.sprint.com
February 28, 2007 at 9:53 pm · Filed under macroeconomy
FRANKFURT: The German truck maker MAN bowed Tuesday to pressure and dropped the \10.5 billion hostile bid for its Swedish rival Scania, vowing to hold further negotiations to reach a friendly deal instead.
MAN also left the door open to abandoning its efforts entirely to create the largest European truck maker, and it said in a statement that it might “explore other options to achieve greater efficiency through scale.”
Scania along with its two largest shareholders, Volkswagen and the Swedish holding company Investor, welcomed MAN’s decision to withdraw a bid that all three parties had rejected.
“Volkswagen is convinced that a friendly solution is the best way to leverage the high potential synergies of such a combination,” VW, the largest carmaker in Europe, said, adding that such a deal would also include its Brazilian heavy truck business.
The move by MAN followed intense pressure on MAN from Volkswagen and its powerful chairman, Ferdinand Piech, to drop its hostile intentions and seek a friendly deal.
The Scania chief executive, Leif Oestling, has said that MAN’s offer undervalues his company and that he sees greater growth potential as an independent organization.
MAN’s stock closed up \1.69 at \75.79, or $98.53, in Frankfurt. Scania shares recovered to finish up 5 Swedish kronor at 465 kronor, or $66.55, in Stockholm.
“This will fuel break-up fantasies at MAN, which should support its share price for the next few days,” said Michael Raab, a Sal. Oppenheim analyst.
MAN also manufactures heavy two- stroke diesel engines for ships and turbomachines for power plants, among other products that Scania has made clear it does not want included in a merged group.
While MAN reaffirmed that a deal would have made industrial sense, it acknowledged that the bid, which was set to expire at the end of this month, was doomed due to the opposition from Volkswagen and Investor, a group controlled by the Wallenberg family.
Investor said that it would “continue to support Scania’s successful development as a stand-alone company, but we will naturally evaluate possible industrial partnerships and combinations in order to develop Scania further.”
MAN said that it wanted to continue in its effort to merge with another company to create a European giant.
“As a shareholder of Scania, MAN is therefore looking forward to entering into further discussions during 2007 to seek a friendly combination of MAN AG, Scania AB and Volkswagen Heavy Trucks,” said MAN, which holds 14.5 percent of the votes in Scania.
A spokesman for MAN said that the company’s chief executive, Hakan Samuelsson, would lead those talks “without question.” There has recently been speculation in the media that Samuelsson would be replaced.
On Monday, the German industrial conglomerate and truck maker was forced to issue a statement denying the reports, stating that Samuelsson, a Swede and former Scania executive, continued to enjoy the complete backing of the MAN supervisory board.
MAN was counting on taking a bigger share of the European heavy-truck market that Scania has forecast will increase by more than a third to 390,000 vehicles within seven years.
$@
February 28, 2007 at 9:53 pm · Filed under macroeconomy
US Cellular (http://host.businessweek.com/businessweek/Corporate_Snapshot.html?Symbol=USM)
Downgrades to 2 STARS (sell) from 3 STARS (hold)
Analyst: Todd Rosenbluth
Despite a lack of clarity amid ongoing restatements and the company’s failure to hold quarterly conference calls, we are rolling forward our relative analysis for US Cellular to 2007. We see 4% revenue growth in 2007 combined with EBITDA (earnings before interest, taxes, and depreciation and amortization) margin stability supporting EPS growth. But we think the company will have difficulty growing as fast as both larger and more niche-oriented peers, reflected in downside to our $60 12-month target price, raised Jan. 8 from $58, based on a discounted enterprise value (market capitalization plus net debt)-to-EBITDA multiple of 6.5 times. At current valuation, we see buyout from 82% owner Telephone & Data (http://host.businessweek.com/businessweek/Corporate_Snapshot.html?Symbol=TDS) as unlikely.
Sprint Nextel (http://host.businessweek.com/businessweek/Corporate_Snapshot.html?Symbol=S)
Reiterates 4 STARS (buy)
Analyst: Kenneth Leon, CPA
Sprint intends to launch Mobile WiMAX broadband services in initial markets Chicago and Washington, DC, by year-end 2007, with a larger roll-out covering 100 million or more people by end of 2008. We believe WiMAX is closer to reality, given the leading wireless device makers are supporting Sprint’s network rollout and the planned IPOs for Clearwire and NextWave Wireless, two WiMAX carriers, filed with the SEC. In Las Vegas this week, Sprint and MobiTV will demonstrate WiMAX mobile TV. Priced at an enterprise value of 5.7 times our 2007 EBITDA estimate, below peers, our recommendation is buy.
RadioShack (http://host.businessweek.com/businessweek/Corporate_Snapshot.html?Symbol=RSH)
Reiterates 2 STARS (sell)
Analyst: Michael Souers
Despite its projection of a 7.8% decline in comparable-store sales, slightly worse than we had forecast, the retailer expects fourth quarter net income to increase. We believe the company has done an admirable job in terms of cost containment. However, we believe continued top-line weakness will hamper operating margin expansion over the longer term. We continue to look for fourth quarter EPS of 43 cents, and are keeping our respective 2006 and 2007 estimates of 73 cents and 93 cents. We find RadioShack unattractive at about 20 times our 2007 EPS estimate, a premium to faster-growing peers and modestly above the company’s 3-year historical average.
Audible (http://host.businessweek.com/businessweek/Corporate_Snapshot.html?Symbol=ADBL)
Ups to 3 STARS (hold) from 2 STARS (sell)
Analyst: Scott Kessler
Shares have fallen some 15% since the high on December 7 and are now below our 12-month target price of $8. From the low on September 26, Audible has risen 20%. We are still skeptical of the company’s prospects for longer-term growth and nearer-term profitabilty. However, we have seen recent indications that Audible has been advertising online more aggressively. Moreover, we think near-term positive catalysts could include a conference presentation scheduled for Wednesday, January 10, and fourth quarter results, which we expect by February. Our upgrade reflects risk-reward considerations.
Varian Semiconductor (http://host.businessweek.com/businessweek/Corporate_Snapshot.html?Symbol=VSEA)
Cuts to 2 STARS (sell) from 3 STARS (hold)
Analyst: David Kaplan
With Varian Semiconductor shares trading at 26 times our calendar 2006 earnings per share (EPS) estimate of $1.76 and 18.9 times our calendar 2007 estimate of $2.42, we view stock as overvalued. Shares have risen 10% in the last 30 days, and now exceed our 12-month target price of $44. While we believe Varian Semiconductor gained market share in 2005 and 2006, we think competition is likely to heat up from competitor Acxelis (http://host.businessweek.com/businessweek/Corporate_Snapshot.html?Symbol=ACLS), which is making slow but steady progress in the ramp of its new Optima HD product.
Sanyo Electric (http://host.businessweek.com/businessweek/Corporate_Snapshot.html?Symbol=SANYY)
Cuts to 2 STARS (sell) from 3 STARS (hold)
Analyst: Tuna Amobi
We see continuing major challenges for the company’s key consumer electronics unit, which in Dec. 2006 made surprise exit from the LCD TV business, as makers of flat panel TVs trigger a sharp price erosion for its CRT/projection TVs. Also, we think the late 2006 mobile phone battery recall further dented the company’s battered image, even as it recently broadened the scope of its restructuring. While shares are already down sharply in recent months, we see further modest downside. We are lowering our target price by $5 to $6.
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