Investors are taking their money out of hedge funds more now that at any time over the past 10 years, according to the Wall Street Journal. Firms are bracing for the end of June when the next big wave will hit.
First it was a demand for management changes, and now shareholders, including one time director Eli Broad and fund managers Shelby Davis of Davis Selected Advisors and Bill Miller of Legg Mason Inc (NYSE: LM), are again upset with American International Group Inc (NYSE: AIG) and want changes in the boardroom as well, the Wall Street Journal reported.
Spotlight Capital is increasing pressure on Chico's FAS Inc (NYSE: CHS) and said it has been in touch with 25 major shareholders in order to oust CEO Scott Edmonds and unseat board member John Burden, who are accused of having a conflict of interest, the New York Post reported.
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Advanced Micro Devices Inc (NYSE: AMD) denied reports certain of its new dual-core chip, code-named Kuma, have been canceled, according to CNet. A spokesman for the company said that the launch of Kuma, scheduled for the second half of 2008, remains on track.
Advanced Micro Devices (NYSE: AMD) shares opened in the green this morning but have dropped as the day moved on after rumors surfaced that the EU was planning to take action against competitor Intel (NASDAQ: INTC). AMD headed back down after the EU denied that it has yet reached a decision in the matter. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on AMD.
After hitting a one-year high of $16.19 in July, the stock hit a one-year low of $5.31 in January. This morning, AMD opened at 7.01. So far today the stock has hit a low of $6.77 and a high of $7.07. As of 12:45, AMD is trading at $6.80, down $0.12 (-1.7%). The chart for AMD looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $9 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 will make an 11.1% return in five months as long as AMD is below $9 at October expiration. AMD would have to rise by more than 32% before we would start to lose money. Learn more about this type of trade here.
The Wall Street Journal reported that New York state's attorney general, Andrew Cuomo, has launched an investigation into auction-rate securities and is seeking information from some of Wall Street's biggest institutions including UBS AG (NYSE: UBS), Citigroup Incorporated (NYSE: C) and Merrill Lynch & Co Inc (NYSE: MER), a person familiar with the matter said.
According to the Financial Times, Deutsche Bank AG (NYSE: DB) and other investment banks are working on plans to develop a clearing house for the credit derivatives markets. In an attempt to reduce counterparty risk, the banks are trying to develop a system that would only allow institutions with strong capital bases and credible trading histories to clear trades in the credit default swap markets with a central counterparty.
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The news that The Royal Bank of Scotland Group Plc (NYSE: RBS) is planning a rights issue of between GBP5B and GBP12B received mixed reviews from British analysts and investors, the Telegraph reported. The analysts expect the bank to cut its dividend.
Ever since Intel (NASDAQ: INTC) announced that it had plans to partner with Apple (NASDAQ: AAPL), there has been a steady and rather disconcerting direction seen for Advanced Micro Device shares.
The real question is: Is it a buy into earnings? As that insightful financial analyst Borat would say: Ish no think so....
Goldman Sachs has continued its stance on AMD as a SELL: (4/8/08)
AMD downwardly revised its Q108 revenue guidance on Monday after the market close due to lower than expected sales across all business segments. The company now expects Q108 revenues to be -15% qoq or $1.5bn versus its previous expectation that Q108 revenues would be in-line with normal seasonality of -5% to -10% qoq. Additionally, AMD will be implementing a 10% workforce reduction by the end of Q308. We are reducing our estimates on lower revenues: CY08 goes to -$2.20 from -$1.65; CY09 goes to -$1.30 from -$0.75; CY10 goes to -$0.30 from $0.40.
In addition, there is an overriding concern that there has been a continual burn-rate that has become alarming. Now, AMD is saddled with over $5 billion of debt and only $1 billion of cash. Not the right balance for a tech company. This is even more worrisome as we have been seeing a rise in cash for many within the sector. In a recent WSJ article, Pui-Wing Tam explored some of the rationale as companies hoard money to protect against an economic downturn.
She pointed out a few selected tech companies cash positions as a percentage of assets: (source: WSJ/Strategas) Apple: 62% Google: 57% Cisco :41% Qualcom: 40% eBay:39%
How does AMD compare to that? Not so well ... Goldman goes on further to discuss the idea that at the rate of burn they are seeing, AMD will have no other alternative than to do some type of equity offering. Of course this will not be taken well by shareholders who will see further dilution of their holdings. I wonder why investors would buy shares anyway, unless they are hoping for a miraculous buyout/rescue.
Although, there the is the odd notion that Wall Street does not seem to care much if companies are in hock up to their eyebrows. In fact, in this market, AMD could actually thrive as investors are giving a pass to many companies with worse news and outlooks. Even so, while you just have to wonder how much worse it can get, I would not be involved here since there are plenty of other names that seem to have a much better outlook.
Disclosure: Horowitz & Company clients do not hold positions of AMD as of the date of publish. BUT, they do have LONG positions in MSFT, APPL and INTC.
Most technology stocks are being dragged down again today after a gloomy statement from Advanced Micro Devices Inc. (NYSE: AMD) stirred new worries over the tumbling economy. Novellus Systems Inc. (NASDAQ: NVLS) is joining the market anxiety after issuing a warning related to its earnings numbers. The company slashed its first-quarter earnings outlook, and said it expects revenues at the low end of the earlier expected range.
The semiconductor equipment maker now expects first-quarter earnings in a range between 15 cents and 17 cents per share, down from its previous range of 21 to 24 cents. Quarterly revenues are expected to be at the low end of the previously communicated range of $315 million and $325 million. Analysts were waiting for Novellus Systems show quarterly earnings of 23 cents a share on sales of $319.4 million, according to Reuters Estimates.
Advanced Micro Devices (NYSE: AMD) lowered its outlook for 1Q08 due to lower than expected sales across all business lines.
AMD also indicated it plans to reduce 10% of its headcount by the end of 3Q08.
Jeffries & Co says: "The difficult transition to 45-nanometer geometry and large net debt position cause us to maintain our Hold rating and $7 price target."
Abu Dhabi purchased a $622 million dollar stake in AMD in November 2007.
AMD overall option implied volatility of 73 is above its 26-week average of 67 according to Track Data, suggesting larger price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Poor Advanced Micro Devices (NYSE: AMD). The company's stock has been a terrible performer as of late, and the chip maker delivered another batch of bad news to shareholders Monday. According to the following article, AMD intends on eliminating 10% of its work force -- this translates to about 1,800 positions.
Also, business is pretty weak; AMD announced that its sales for the recent quarter would come in around 15% lighter than what was reported last year at this time. Adding insult to injury, the top line missed the expectations of analysts; Wall Street was looking for approximately $1.6 billion in net sales -- AMD thinks it will deliver $1.5 billion.
Make no mistake, AMD is suffering. As the article makes clear, the chip maker is having a hard time generating profits. AMD will be trying its best, I'm sure, to restructure its operations so that it will once again be a force to be reckoned with in the near future. But how near is near?
The Wall Street Journal reported that private loans under the Federal Family Education Loan, or FEEL, program have begun to give way to the federal direct loan program, as private lenders run into subsidy cuts and problems raising capital. To date about 60 colleges and universities have made the switch.
Carl Icahn, a 6.3% Motorola Inc (NYSE: MOT) shareholder, has sued the company to get board of director documents, turning away offers of two board seats, the Wall Street Journal reported. Icahn wants information about the company's unprofitable handset business.
According to the Business Review, New York State Senator Charles Schumer is planning to 'reveal details' of a conversation he had with the CEO of Advanced Micro Devices Inc (NYSE: AMD) on March 21 about the company's plans to build a $3.2B computer chip plant in Saratoga County.
It may be too late, but AMD (NYSE: AMD) is coming out with a product that just might do well. The company will put two of its most powerful chips on one graphics card.
According toThe Wall Street Journal, "The company, which has fallen behind Nvidia (NASDAQ: NVDA) lately in high-end personal-computer graphics, says a series of benchmark tests suggest the new ATI Radeon HD 3870 X2 card is the clear speed leader." Of course Nvidia is very likely to come to market with a similar product very soon.
AMD has not had much product success. Its new flagship, the Barcelona chip, was late to market and underpowered. It was set to go up against offerings from larger rival Intel (NASDAQ: INTC). There is no evidence so far that it has picked up any market share from the new product.
Nvidia is also no pushover as a competitor. Its successes have moved its market cap to $14 billion, and it trades at 3.7x sales. AMD's market cap is $4.1 billion and it trades at .7x sales. Nvidia's graphics chips are currently considered state-of-the-art.
A nice press release from AMD. A new product. Hope of better sales and revenue.
Maybe.
Douglas A. McIntyre is an editor at 247wallst.com.
Liberty Media Corporation (NASDAQ: LCAPA) filed a lawsuit in Delaware against IAC/InterActiveCorp's (NASDAQ: IACI) Barry Diller in an attempt to block Mr. Diller from completing the spinoffs of several units on terms that could dilute Liberty's voting power; the suit follows a suit filed by IAC against Liberty seeking to complete the divestiture on its own terms, the Wall Street Journal said.
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The Evening Standard learned that billionaire Wilbur Ross is in takeover talks with AMBAC Financial Group Inc (NYSE: ABK) and that a deal could come within the next two weeks.
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According to analysts, TheDeal.com's Dealscape blog reported that the troubles at WellCare Health Plans Inc (NYSE: WCG) could lead to a sale of the company after the departure of the company's three executives.
Citing a source close to Advanced Micro Devices Inc (NYSE: AMD), CRN.com reported that rumors of a merger between the company and International Business Machines Corporation (NYSE: IBM) "is nothing but speculation." A rumor in Mergermarket, which caused AMD's share price to spike almost 11% on Wednesday, said IBM's microelectronics division could merge with AMD "possibly in the near term."
AMD (NYSE: AMD) reported another lackluster quarter. The lipstick on the pig was that most of the company's fourth quarter losses were writes downs arising from the purchase of graphics chip company ATI.
What AMD spent little time talking about was that revenue was slightly down from a year ago, dipping slightly to $1.77 billion. Gross margins rose to 44% from 36% in the same period a year ago. That is still well below the 58% that Intel (NASDAQ: INTC) reported. After backing out a huge write-off, AMD had a modest loss.
The company also had $95 million in interest expense. Long-term debt is over $5 billion. With shares at $6.34, down from a 52-week high of $18.18 and a price of over $40 less than two years ago, Wall Street has left the company for dead.
There is not much in the current quarterly report to bring money back into the stock.
Douglas A. McIntyre is an editor at 247wallst.com.
It would be hard to do worse for shareholders that AMD (NYSE: AMD) has. The chip maker's shares have fallen from over $42 a little under two years ago to a 52-week low yesterday. It is actually a four year low, but who is counting. Over that last two years, AMD shares are down almost 70%.
The company has made a number of mistakes. The latest one was to have a meeting with securities analysts. What came out of that meeting was that a key product would be delayed. According toThe Associated Press "in a note to investors, Citi analyst Glen Yeung said his view of the company was confirmed at the meeting, in which AMD acknowledged delays in key products."
AMD said that it would reach a operating profit in the second half of next year. Based on the drop in the stock over the last several days, it would appear that almost no one believes that.
AMD once had what appeared to many to be a lead in the chip performance department, especially compared to its larger rival Intel (NASDAQ: INTC). AMD picked up market share from Intel in both the server and PC markets. But, Intel made an intensive effort to improve its chip performance and the cut energy consumption in its products. The two companies also went through a price war which cut AMD's gross margin.
Most analysts also think that AMD's purchase of graphics chip company ATI was a mistake. It added a lot of debt to the AMD balance sheet.
As much as any large tech company in America, AMD needs to replace its senior management, starting with CEO Hector Ruiz. His last two years as head of the company have been nothing short of a disaster. AMD has to show Wall St. that it is willing to turn over a new leaf.
Douglas A. McIntyre is an editor at 247wallst.com.
Advanced Micro Devices Inc. (NYSE: AMD) stock is falling this morning after an analyst yesterday expressed concern that microchip producers are falling behind industry leader Intel (NASDAQ: INTC) in product offerings. The Cowen and Co. analyst said that AMD continues to lag behind Intel's new graphics processor offerings while the market is increasingly demanding graphics-intensive applications. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on AMD.
After hitting a one-year high of $23.00 in December, the stock has fallen much of the last year and hit a one-year low today. This morning, AMD opened at $11.15. So far today the stock has hit a low of $10.52 and a high of $11.50. As of 11:45, AMD is trading at $10.65, down $0.63 (-5.6%). The chart for AMD looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
Google Inc (NASDAQ: GOOG) may have plans for a gPhone, but their real objective is to run their own mobile network, reported the Wall Street Journal. The company is reportedly looking at a $4.6B wireless network bid.
Abu Dhabi's Mubadala Development may look to take a 9%, or approximately $700M, stake in Advanced Micro Devices Inc (NYSE: AMD), the Financial Times' Alphaville blog noted. An investment may draw the attention of the U.S. committee on foreign investment.
OTHER PAPERS:
According to Business Week's "Inside Wall Street" column, the patent Biodel Inc (NASDAQ: BIOD) was granted in September for its VIAdel technology was "key," as it opens up markets for products estimated at $2.3B.
Glass container maker Owens-Illinois Inc (NYSE: OI) is defying the current market tumble due to earnings momentum, reported Business Week's "Inside Wall Street" column.
According to BW's "Inside Wall Street" column, some money professionals are "snapping up" shares of retailer Staples Inc (NASDAQ: SPLS) despite the housing slump, credit crunch and rising gas prices.
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