Archive for October, 2006

  • Marvell Warns
    , October 3rd, 2006 at 9:24 am

    Just seven shopping days until earnings season starts. The traditional first major announcer is Alcoa (AA), which should have outstanding earnings.
    We’re also getting cautionary announcements of what to expect this season. Today’s earnings bomb is brought to you courtesy of Marvell Technology Group (MRVL). The company anticipates that its revenues will fall 10% from last quarter’s total of $574 million.

    The anticipated decline in net revenue is largely due to lower than expected demand from a number of the Company’s hard disk drive customers. The Company believes the shortfall of demand is primarily due to a combination of weaker than normal seasonal shipments in the personal computer market as well as excess inventory held by some of its significant storage customers.

    If that’s not enough, the company is also looking at its options practices.

  • Wachovia Closes Golden West Purchase
    , October 2nd, 2006 at 9:38 am

    It’s official:

    Banking and financial services company Wachovia Corp. said Monday it closed its acquisition of Golden West Financial Corp. and named three new board members, two of them Golden West officials.
    Oakland, Calif.-based Golden West, which operates as World Savings Bank, is one of the largest thrifts in the U.S. Its shareholders will receive 1.051 shares of Wachovia stock and $18.65 cash for each Golden West share they own.
    Of the new board members, Jerry Gitt, 63, and Maryellen Herringer, 62, had been directors of Golden West. Timothy Proctor, 56, is the general counsel of Diageo PLC, a London-based beverage company.
    Herbert and Marion Sandler, the husband-and-wife team who ran Golden West for much of their 45-year marriage, will continue to advise the new management.

    Wachovia (WB) will now appear on the Buy List in place of Golden West Financial. For Buy List tracking purposes, we have to make some changes (someone please double-check my math!).
    At the beginning of the year, we added 757.5758 shares of Golden West at $66 each. With the merger, we now have 796.2122 shares of WB, plus $14,128.79 in cash. Going by Friday’s closing price of $55.80 for WB, that cash is being exchanged for another 253.2041 shares. So now we have a total position of 1049.4163 shares of WB with a cost basis of $47.64554.

  • The Housing Bust–Not So Easy Investing
    , October 2nd, 2006 at 9:22 am

    Henny Sender notes in today’s WSJ that the long-awaited housing bust isn’t developing into a good investing there:

    Playing the housing slowdown in financial markets is proving tougher than anyone expected.
    Some obvious bets against housing haven’t been working out. Even though housing statistics are sinking, home-builder stocks have risen since July and demand for mortgage-backed securities has held up.
    Just last week, the National Association of Realtors made the case for housing bears stronger by reporting that prices of existing homes had fallen for the first time in 11 years.
    The Federal Reserve is working against the bears by pausing its campaign of short-term interest-rate rises.
    If the Fed were to allow interest rates to get too high, that would raise mortgage costs and could tip the economy into a serious slowdown. That is why some investors believe the Fed might cut rates next time it meets. Long-term interest rates already are falling, which is holding down mortgage costs at a critical time.

    New Century Financial (NEW) paid out a dividend of $1.85 a share in September. The company has raised its dividend by a nickel a share for the past several quarters.
    To give you an idea of how negative the market is on housing, if we assume that New Century doesn’t cut its dividend, that means that the stock is indicating a dividend yield of close to 19%, which is the equivalent of 2,200 Dow points.