Friday, September 15, 2006


According to the WSJ' "Ahead of the Tape" column investors are hoping the technology sector's recent troubles are behind it. But judging from the dust gathering on some tech co shelves, there might be more pain to come. When it issued results in August, Applied Materials (AMAT) gave a cautious forecast for its business and said it was hearing from chip makers that inventory was picking up in the PC mkt. Last week, National Semiconductor (NSM) reported a slowdown in orders and said it would bring down inventory levels. And this week, Best Buy (BBY) reported results that generally pleased Wall St., except for one detail: Inventories increased more than sales. A quarterly survey of CFOs released this week by Duke University and CFO Magazine suggests a wide swath of tech co's are seeing rising inventory levels. On avg, tech CFOs expect their inventory levels to be 2.6% higher in the next year than they were in the past year. Only construction co's, which have been getting hit hard by the slowdown in housing, expect a bigger increase in inventories, points out Duke professor John Graham. It's a sign that tech co's "are expecting corporate spending to slow and consumer demand to stay low," he says.

The WSJ's "Heard on the Street" column discusses Viacom (VIAB), whose stock has recovered 8% tumble, it saw after Chmn Sumner Redston booted CEO Tom Frestone. According to the article, there are signs Mr. Redstone's drastic action may have the effect it intended, to renew confidence in Viacom's prospects and jump-start a rally in Viacom stock. Many investors say Viacom is a buy. The stock is down 12% from where it started in January after Viacom was split from CBS. Some on Wall St. believe the arrival of new top mgmt promising a more aggressive Web strategy means the stock may be headed upward. "We're very confident holding on to the stock and will perhaps add to our position," says Kurt Funderburg, of Harris Associates, which had about 21.5m Viacom shares as of June 30.

Barron's Online says after 4 years on life support, Tenet Healthcare (THC) is finally showing signs of life. The same goes for its stock, which has dropped 84% since Oct'02, but has been rebounding in recent weeks. A former profit engine, Tenet, lost money in '04 and '05 as the entire hospital industry faced slowing admissions and more uninsured patients unable to pay their hospital bills. But at Tenet, the problem was exacerbated by govt probes and scandals that sullied the co's reputation and had doctors referring patients to rival facilities. Tenet's legal troubles are in the past since the co agreed in June to settle a massive Medicare fraud probe. So while the industry still faces troubles, Tenet is breathing life into its bottom line by filling empty beds and investing more money in operations. Despite a 42% jump since closing at a 5-year low of 5.81 a share on Aug. 1, the stock still looks cheap. "Tenet is a turnaround story," says Diane Jaffee, portfolio manager of the TCW Diversified Value Fund. "It's on track to return to profitability this year."

"Inside Scoop" section reports that mgmt changes at Viacom (VIAB) have spawned robust insider purchases of the co's limping stock. Amid this share-price weakness, newly named CEO Philippe Dauman and newly named Chief Administrative Officer Thomas Dooley wasted no time to collectively purchase $9m worth of shares in the open mkt, which they were required to do within 3 months of their Sept. 5 start date under their employee contracts. Both of their contracts expire in Dec 2011. Those purchases may not be as bullish as they seem on the face of it, since they were compulsory for compensation in stock units. Ben Silverman, of, says, "I think the point of the employment contract is to align these guys with shareholders…but this is a sweetheart deal."

According to the LA Times, Rupert Murdoch spent more than a decade trying to gain control of DirecTV (DTV). But the Chmn of News Corp. (NWS) appears willing to give that up for something he values even more: bulletproof control of his own co. Murdoch is negotiating to swap his 38% stake in DirecTV to cable pioneer John Malone for the 19% voting stake in News Corp. owned by Malone's Liberty Media, according to two ppl familiar with the negotiations. The trade would free Murdoch from fears that Liberty's chunk could fall into unfriendly hands and threaten his family's grip on News Corp. If he gains control of DirecTV, Malone eventually would pursue a merger with its sole rival, EchoStar Comm. (DISH), according to sources at News Corp.

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