IPC Holdings Ltd. (NASDAQ:IPCR): Color on warning

Couple of firms comment on IPC Holdings Ltd. (NASDAQ:IPCR) after the property catastrophe reinsurance provider said its second-quarter earnings will be hurt by storms and floods in New South Wales, Australia, and flooding in parts of northern England:

- Morgan Stanley is lowering their 2Q07e to 30c from $1.24 noting the UK floods, in particular, are a significant global event. Industry loss estimates stand around $3 billion, but flood claims being notoriously slow developing and difficult to adjust - the bias is higher. Consensus estimates have been drifting higher for the reinsurers, suggesting to us some may have been lulled into a false sense of security due to lower than average 2Q catastrophe claims in the US.

Having risen some 10-12% (on average) during the past quarter, earnings misses certainly weren't factored into shares of IPCR, nor are they in other reinsurance stocks, in firm's view. MSCO is content being some 5-10% below 2Q07 CE on most of the reinsurers they follow (PRE is the one exception). Would recommend waiting for weakness before getting long(er) in the space. Maintains Overweight on IPCR.

- Goldman Sachs notes that on the basis of their prior estimates, it appears that the company's catastrophe related losses will approach $90 million as compared with their earlier estimate of $9 million and $50 million for 1Q Kyril losses. It also appears that about 60% of the loss may have come from the UK with the balance from Australia. On the basis of IPC's release, they are lowering their 2Q and full year 2007 EPS estimate by $1.15 each to $0.28 and $3.65, respectively. Maintains Neutral and $37 tgt.

IPC Holdings announcement raises the obvious question of what other companies may be exposed to the UK and Australian floods. If other companies have flood exposure it will more likely be to the UK as they believe that IPC had a disproportionately larger share to the Australian market than its competitors. Companies that could be at risk of EPS disappointments due to the UK storms would include AHL, ENH, PRE, PTP, and RNR.

Notablecalls: Well, it looks like Goldman gave the traders a nice short sell list for this morning. The only stock I would not touch on the short side is PRE as the chart is just way too strong. Also, I would not chase any of these.

As regard to IPCR, I think the stock may be a bounce candidate. Insurance stocks usually are after big claims hit. It's because they can raise prices afterwards (I know IPCR is a reinsurer but it should work the same there).

Last prints in after hours were around $27, which looks like a level I'd be willing to bid this one. Would even be prepared to pay up. Small size as I'm not very familiar with the name.

Paperstand (RHD, IAR, MSM)

According to the WSJ, News Corp (NWS) reached a tentative agreement for the purchase of Dow Jones (DJ) at its original $5bn offer price. The deal will be put to the full Dow Jones board this evening for its approval. The deal still faces its biggest hurdle - getting approval from the Bancroft family. Michael B. Elefante, the Bancroft family's lead trustee, has scheduled a meeting for Thu at which he would present the agreement to all Bancroft family members before asking for their final vote. Mr. Elefante is expected to give the family several days to make a decision, suggesting a final resolution could be achieved some time next week.

“Heard on the Street” column discusses yellow-page publishers, RH Donnelley (RHD) and Idearc (IAR), whose shares have been soaring. But as individuals and businesses move to more Internet searches, rather than relying on old-fashioned telephone books, it isn't clear if the recent rally can be sustained. The stocks are popular with analysts and some hedge-fund investors b/c they appear inexpensive based on their generation of free-cash flow. In the past year, the share price of Donnelley is up more than 40%. Idearc is up more than 30%. The co’s are heading online to retain advertisers and consumers, but the co’s still make almost all their money from books. Donnelley receives less than 2% of its rev from the Internet, while Idearc receives about 9%. "Yahoo and Google are both forging alliances with newspapers to offer local search engines," says Richard Tullo, of Sidoti. "While I think these new alliances will be very good for media conglomerates, it means added competition for the directory operators."

Barron’s Online “Inside Scoop” section reports that with shares of MSC Industrial (MSM) trading near record-high territory, execs and directors of the co are exercising options and shedding stock. Last week, MSC Chmn Mitchell Jacobson sold $9m in class A shares. Several other MSC insiders also sold stock last week, in the wake of MSC's F3Q earnings report on June 28. President and CEO David Sandler exercised 57K options and then sold 50K shares for $2.9m. CFO Charles Boehlke exercised $190K in options and then sold the entire batch for $752K. Also last week, two other directors and 5 officers exercised options and then sold stock for a total of $5.4m. In light of the insider sales, Ben Silverman, of InsiderScore.com, says, "I would lean towards taking some money off the table at this point." "They were predictive last time around," Silverman says of insiders. He notes that similar levels of insider sales in May’06 preceded a bearish period for MSC stock. Silverman adds that the "stock is banging up against a perceived fair value."

First Solar (NASDAQ:FSLR): BAC ups tgt to $140

- Banc of America is yet again upping their tgt on First Solar (NASDAQ:FSLR) saying the co has the best fundamentals in the business. Tgt goes to $140 from $115. In BAC's view, FSLR's 7/9 announcement of $1.3 billion of new sales contracts validates its position as the best model in the PV business. FSLR's industry-low cost structure ($1.29/watt) and limited competition in thin film enables FSLR to command significant demand while maintaining impressive profitability (45% gross margins at full ramp in Q1).

Next shoe to drop: They also believe there may be upside potential to their 2Q07 EPS estimate of $0.04 and the Street Consensus of $0.03 if FSLR ramped its new facility in Germany faster than anticipated.

Future shoe: U.S. contract. FSLR has not announced a contract for the U.S., which is expected to grow to be the world's largest solar market. Based on industry contacts, the firm believes there would be significant demand for FSLR's thin film modules in the U.S. They expect to hear more about a U.S. contract in the next 6 months.

Notablecalls: Barron's is out negative on First Solar today saying some pretty nasty stuff about the co's tech. Also, following its very strong run, FSLR's stock is susceptible to a pullback ahead of 2Q07 as investors look to take profits. They are scheduled to report on Aug 2. From this perspective the Barron's piece looks well-timed.

In the ultra-st I think the stock will be gapped down but will recover some of the lost ground. FSLR continues to be a mo-mo fav and BAC's note will provide a nice cushion.

Brush Engineered (NYSE:BW): Comments on perpendicular media

- First Albany comments on Brush Engineered Materials (NYSE:BW) bringing their Q2 EPS estimate down to $0.40 from $0.45. Firm's channel checks at perpendicular media customers indicate no meaningful ramp in ruthenium demand through the end of 2Q. Additionally, while the inventory situation on the cellular phone side appears to be improving, commentary for 2Q remains conservative.

Ruthenium prices have declined significantly (more than 50%) after peaking in February 2007. They believe this should allay some concerns about the long-term application of this material in perpendicular media. In the near term, the firm expects this price decline to reduce the one-time gain from the sale of Brush's inventory.

Prior to the preannouncement, First Albany had recommended that clients should take any weakness in the stock until the reporting of 2Q results as a buying opportunity, as they were expecting below-consensus 2Q results. With the negative news out, the firm believes the stock is now poised to move up, given their expectation of a strong second half. Maintains Buy and $63 tgt.

Notablecalls: I highlighted BW as an actionable bounce candidate on June 20. The stock has appreciated nicely since then. While FA's comments may create a pull back in the stock today, I continue to be positive on BW in the medium term.

Motorola (NYSE:MOT): Upgraded at Deutsche!

Deutsche Bank is out with an upgrade on Motorola (NYSE:MOT) taking their rating to Buy from Hold and raising tgt to $21 from $18. Firm notes that after conducting channel checks following last week’s negative preannouncementthey believe the worst is now over at Motorola. They think all the bad news is now fully priced into Motorola’s stock price, and over the next several quarters they expect to see an improvement in earnings growth, meriting a Buy rating. In particular, the firm expects the final rationalization of the company’s management structure, a new firmwide emphasis on earnings and a clearing out of inventory and mis-priced/placed products.

While Mobile Devices (MD) continues to under perform, checks indicate thatin regions where the company did not have to offer price protection to the channel (for clearing stocks), they saw QoQ improvements in handset margins. With excess products now largely removed, they think margins should stabilize.

DB believes the company is nearing the end of its purge in senior management. While overall jobs cuts are not over, they think MOT will soon see a consolidated vision for improvement. Changes such as moving the head of supply chain to run MD indicate they are now serious about structural changes to their cost structure.

Notablecalls: An elegant move on Deutsche's part. Upgrading ahead of the turn has always made the most dough for the clients. I exect to see at least 1pt move to the upside following this call.

Now all we need is some cool handsets from the Moto labs.

Paperstand

The WSJ reports that Ford (F) is considering selling its Volvo car unit, as the auto maker continues to look for ways to bolster its slumping US operations. The shift, reversing an earlier position that the Sweden-based luxury division wasn't for sale, marks the potential abandonment of Ford's 8y effort to tap the lucrative luxury-car mkt with European brands. It sold its Aston Martin luxury nameplate for $848m and has begun considering a sale of its Jaguar and Land Rover brands as well. Those brands, along with Volvo, made up Ford's Premier Automotive Group, which has had losses of $4.8bn since ‘04.

“Heard on the Street” says that judging by the sharp selloff of REITs in recent weeks, it is clear that some investors feel the good times have come to an end for these stocks. Yet, some analysts and investors believe that the heavy selling was too extreme and that some REITs, particularly those in the office and retail sectors, could stage a comeback. Indeed, just as the residential housing slump has produced some steals for home buyers, the REIT selloff may similarly yield some good deals for stock-mkt investors. For a bargain hunter, a smart shopping list could include Simon Property (SPG), Kimco Realty (KIM), Public Storage (PSA) and SL Green Realty (SLG), which have mgmt teams with proven track records of boosting shareholder value and which will likely continue to benefit from strong economic fundamentals. According to Stifel Nicolaus analyst David Fick, more than $3bn has flowed out of US real-estate mutual funds since May 1, representing one of the strongest outflows from dedicated mutual funds in the sector's history. "Many of the investors [dumping] REITs are nontraditional real-estate investors who jumped into the mkt in recent years chasing higher returns but aren't long-term holders," Mr. Fick says.

Barron's Summary (SPWR, EPG, FTEK, PICO, CPTC.OB, FSLR, NRN)

Barron’s cover highlights 5 green growth stocks for the next decade. The 5 co’s listed below come from 4 major components of the Clean-Tech category: energy, pollution control, water and wind. They comprise a pricey group, no doubt, but one that analysts believe will hold long-term value. SunPower (SPWR) - Pricey, but bulls claim this Cypress solar spinoff has more upside. Environmental Power (EPG) - Biogas maker stands to profit from emission credits. FuelTech (FTEK) - Expensive shares could get a lift as pollution-control firm enters China. PICO Holdings (PICO) - Water portfolio is rising fast in high-growth US areas with limited supplies. Composite Tech (CPTC.OB) - An innovative new wind turbine should give the co a boost.

Barron’s negative on First Solar (FSLR), whose shares skyrocket more than 20 points Mon, after disclosing new European and N-American contracts worth $1.28bn over 5 ys. But, First Solar may not be quite what it seems. The co is perceived as thin-solar, 2G. The 1G of photovoltaic solar relied on polysilicon, making for thick, heavy panels that nonetheless could be set on a roof b/c they didn't require too much surface area. Thin-solar relies on chemicals and vapor deposition to lay down thin layers of film over a broad surface area. B/c it's so light and flexible, it can be incorporated into building materials such as roof tiles, turning roofs into big solar panels. The dirty secret on First Solar is that it uses thin-solar technology, but the film is still applied to heavy glass that resembles earlier generation panels, says Brion Tanous, of Merriman Curhan Ford. Consequently, "A vast majority of First Solar's products are panels mounted on the ground b/c they are too heavy for rooftops, which suggests that it's not a true thin-film technology," Tanous argues. Another problem: First Solar is highly dependent on European govt subsidies, especially in Germany. Just 2 weeks ago, the German environment minister confirmed that he wants to cut subsidies further for solar. The news hit European solar shares, but went largely unnoticed on Wall St. The co boasts more than a $8bn mkt value on about $400m in expected ‘07 revs and 53c in EPS. At 115, it is trading at 96x ‘08 earnings and 14x sales.

Notablecalls: Actionable.

According to the Barron’s, National Rural (NRN) could be due for a major downgrade by the top debt-rating agencies. While the finance co is rated the equivalent of single-A by the big agencies, a top independent firm, Egan-Jones, puts it seven notches lower, at a junky single-B-plus. "We're not saying it's going to go bankrupt," says Sean Egan. But, he says, the co "shouldn't be an investment-grade credit."

Rediff.com's (REDF) market cap is way out of proportion to the size of India's Internet ad market. At Sify (SIFY), subscriber growth is lagging and cybercafe competition is increasing.

“The Trader” discusses Target (TGT), saying that temple for mass consumerism, should find itself on Bill Ackman's shopping list. Pershing Square Capital has accumulated Target shares and options worth nearly $6bn and is preparing a regulatory filing detailing its stake. What might Target expect with Ackman's attention? Pershing Square previously amassed positions in co’s like McDonald’s (MCD) and Wendy’s (WEN) and then pressed mgmt to improve profits. Among other things, Ackman might broach the sale of Target's credit-card operation, which has $6.5bn in receivables. Its contribution to earnings growth is slight, but mgmt has maintained it is integral to building brand loyalty and tracking spending habits. Target might also be prodded to sell and then lease back its real estate. The co has some of the choicest retail locations, and the value of those properties presumably is understated on its balance sheet. It has been suggested the real estate could be worth nearly a 1/3 of Target's $70bn in EV. But while a sale and leaseback could raise billions, the ensuing rent expense could cut cash flow by almost $2bn. Levering up is another option, but with shares at an all-time peak, it remains to be seen if mgmt can be talked into a move that some est would boost EPS by less than 10%. If Ackman proves right on the dot, two things at the very least are clear: Target shares straining record highs might still offer good value, and widespread worries of consumer retreat may not prove as dire as many feared.

“The Trader” discusses Mueller Water (MWA), whose Class A shares made their debut in May’06 when nearly 29m were sold to the public, while its former parent, Walter Industries (WLT), held onto Class B shares and controlled 96% of the voting power. But by Dec, Walter had distributed all the B shares to its stockholders. Since then, the two classes have been inseparable on a stock chart. Then came June, when A shares, but not the B, were triumphantly added to the Russell 2000 index. Quickly, the gap between A and B shares widened from 1-2% to the current 11.5% chasm. The B shares each give 8 votes to just one for the A shares. "Apparently, indexing has created and sustained an inefficiency we'd think would be arbitraged away in today's ultra-competitive mkts," says Michael Econn, of Bondurant Mgmt.

According to the “The Trader,” options prices of Pozen (POZN) suggest that the mkt sees a 60% chance Trexima will be approved by the FDA, but Citigroup analyst Lucy Lu is more optimistic. She pegs the odds of an FDA nod at 80%, given Trexima's superior efficacy results in clinical trials and a safety profile comparable to Imitrex. Lu believes a yes could drive Pozen shares to between 23 and 25 and towards her tgt of 28. "We believe Trexima will be the new gold standard treatment of migraine headaches," she notes. There are other catalysts, too. B/c partner GlaxoSmithKline's (GSK) bestselling Imitrex will become a generic drug by late ‘08, "we believe GSK intends to aggressively convert its Imitrex sales to Trexima in order to capture significant mkt share in the migraine mkt before its Imitrex sales are at risk," Lu says. B/c Trexima is Pozen's primary candidate, any regulatory glitch can send shares tumbling to 7 or 8. Given that slim but real risk, bulls might consider buying August call options or call spreads on Pozen.

Fund holdings include BIG, GES, MDR, CROX, AMX, AVT, VSEA, AAPL, BMY and TDY.

Global Crossing (NASDAQ:GLBC) : Actionable call alert!

- Jefferies notes Global Crossing (NASDAQ:GLBC) has has declined 11% since the beginning of the week, due to concerns about 2Q07. Firm believes pricing has stabilized and 2Q07 estimates are achievable. Reiterates Buy rating & $30 tgt.

They expect to see margin improvement in 2Q07 and 3Q07 driven by 1) a historical downtick in expenses from 1Q to 2Q, 2) management's focus on cost control and 3) cost cutting activities during the quarters primarily in the SG&A line. Jeffco believes that GLBC should be able to achieve their 2Q07 expectations including revenues of $549.3 million and EBITDA before non-cash compensation of $18.1 million.

Firm's FY08 EBITDA estimates implies a 6.9x EBITDA multiple, which is less than half the industry average. Finally, GLBC currently trades at 0.87x FY08E revenues, a discount to last year's Broadwing sale of 1.3x revenues.

Notablecalls: A beautiful call, matched only by the beauty of the stock's chart. I think GLBC makes a very nice bounce candidate today and over the next weeks. Note that Jeffco's tgt offers hefty upside to current mkt price. That's bound to create interest. Going to call this one actionable!

Macrovision (NASDAQ:MVSN): Color on warning

Couple of firms comment on Macrovision (NASDAQ:MVSN) after the software maker cut its quarterly earnings forecasts last night, blaming its failure to close a major deal and a royalty dispute that cost millions of dollars in lost revenue:

- Deutsche Bank says that while they are disappointed with the execution this quarter, they are reiterating their Buy rating as their thesis remains intact and they believe the stock represents a compelling opportunity. DB believes upside potential exists in 2H07 and 2008 due to a solid DVD release cycle, Embedded Solutions momentum and better than expected operating leverage potential. At near-trough valuations, they view downside as limited.

Firm believes Q2 results are likely to mark the low-point for the year, as growth improves in 2H07. One important issue is that EPS leverage is accelerating much faster than they had anticipated. If MVSN had closed those two deals and met top-line guidance, it would have delivered significant EPS upside of almost $0.05. This suggests upside exists to firm's 2H07 and 2008 EPS forecasts based on margin expansion. DB's tgt remains $37.

- Piper Jaffray notes that while the news is clearly disappointing, they do expect the company will be able to re-capture the missed ISV deal and ACP royalty recovery revenue is not core to the story, but more of a one time issue. What has changed in firm's model is that what was previously expected to be upside in 2H07 is now necessary to achieve the FY07 guidance range.

In 2H07, they expect Macrovision will be able to recapture revenue from the ISV deal that was not completed, but revenue from the ACP royalty dispute could be somewhat unpredictable and assume the company will re-capture only a portion of that revenue. Firm believes the company expected to exceed guidance for FY07 and this set-back now brings expectations back within the guidance range.

Lowers tgt to $36 from $37 but maintains Outperform rating.

Notablecalls: To my knowledge, this is the first ever profit warning from MVSN. The stock was down over 9% in after market action. Given the one-time nature of the shortfall, I find this to be somewhat excessive. It looks like MVSN was targeting uspide to its guidance and if things turn out as the management expects, there may still be some upside. Also, note Deutsche's comments regarding EPS leverage!

With the stock trading at 16x its '08 EPS, the valuation is not high (especially given that historically, 15x has been the trough).

Possible catalysts include upside in Mediabolic, bundled deals with studios (possibly this yr), increased adoption of Vista (driving upside in Installshield) and better DVD schedules.

Looking at the action in after hours, there didn't seem to be any real selling interest. Very low volume, with bids coming in below. I think MVSN makes a nice bounce candidate today. Agressive accounts may bid the $27+ level (be prepared to pay up) with more conservative accounts looking for the 200 day MA providing support around $26.50 or so.

I also think MVSN may provide a buying oppy for LT players as the business the co is in is certainly going to grow over the next 5 yrs. One to watch!

Apple (NASDAQ:AAPL): iPhone checks show upside to current ests!

- RBC Capital notes their checks suggest Apple (NASDAQ:AAPL) may plan to produce 8M iPhones CY07, implying 12-14M unit sales end CY08, well ahead of Apple's publicly stated 18-mo 10M goal. Apple's CY07 plans may include offering higher memory (e.g. 16GB) iPhones, while refreshing existing models at lower cost to stimulate demand. Plans appear to include inventory for Canadian, European launches (est. Q4/CY07"Q2/CY08) and Asia (est. mid CY08). Firm sees a 3G/HSDPA iPhone by Spring CY08, and believes Apple is also planning a higher- resolution display (480x720).

Checks also suggest Apple may be planning an iPod line refresh Q4CY07, including new versions that they believe include: an updated iPod Nano, a new iPod and new video iPod. Some or all may include iPhone-like features (Touchscreen, Widescreen, new UI etc). RBC also expects new devices with more memory and integrated wireless (Wi-Fi).

Based on these checks, the firm is raising their iPhone sales outlook to 13.5M units (10.1M prior) end CY08. They continue to expect iPhone momentum to ease following early sales, reinvigorated subsequently on new launches. F08 estimates adjust to $32.2B revenue ($31.2B prior) and $4.52 EPS ($4.38 prior).

Reits Outperform and $160 tgt.

Notabelcalls: Is this enough to push AAPL to a new 52 wk high? Sure, why not. iPhone flow looks like the only thing that moves AAPL. I think.

Motorola (NYSE:MOT): Color on warning

The analyst community is mostly supportive of Motorola (NYSE:MOT) following a negative pre-announcement issued last night. There are some exceptions, too:

- CIBC notes that although June was tougher than expected, their thesis and Sector Outperformer rating are unchanged. Firm's positive stance is based on the long term opportunity for a recovery in the company s handset business, and they believe nothing has changed with respect to this. In fact, a closer look at MOT s results reveals positive trends that they believe over time will enable the company to exceed expectations.

First, ASPs (pricing) came in at around $130 vs. $119 in 1Q07. This suggests Motorola not only held firm on pricing but also continued to pull back on its presence in the low-end, in which CIBC believes the company never made a profit. Second, they note that the company has just completed the first round of layoffs ($400 million) suggesting we have yet to see the benefits of the cost initiatives in earnings. Third, and although Motorola has not commented on this topic, they believe inventories have improved materially which could help reverse sell-in trends. Last but certainly not least, the firm si positive on the appointment of Stu Read, Motorola s head of supply chain, as the new head of Mobile Devices.

Longer term we see positives in the pre-announcement, primarily reflected in data points suggesting management is committed to its new business strategy. To be sure, the revenue shortfall is meaningful, yet the earnings miss was small (only $0.01). Even with the miss, they believe some investors expected a bigger shortfall.

- Deutsche Bank thinks the magnitude of the miss indicates the company's intention to put the worst behind it. This includes clearing inventory, overhauling their pricing strategy and clearing the deck for possible new product launches later in the year or early CY08. While a true turnaround for Motorola depends on refreshing the product line-up, they think today's news could mark the bottom. However, the timing of the handset turnaround remains uncertain and Motorola's competitors
continue execute.

- Morgan Stanley notes the press release doesn't include any comment from CEO Ed Zander, which after the recent proxy battle seeking his ouster likely adds to speculation that his tenure at the company may be coming to a close. Regardless of one view of his role in the RAZR success or rapid deterioration over the past few quarters, calls for a change in senior leadership are likely
to increase, and, at least in firm's view, provide valuation support for shares around current levels. Maintains Equal Weight with $20 tgt.

- Goldman Sachs continues to see deteriorating fundamentals ahead. They are reducing their 2008 EPS estimates to $0.46 from $0.91. While some may view a bottoming process forming with weak 2Q results now out of the picture, they believe that most investors are underestimating the deterioration in the company's fundamentals & they continue to believe that a turnaround will be a multi-year effort. As they've highlighted in previous notes, they believe MOT's market share continues to erode into 2008 as checks indicate the company cancelled a number handset models slated for next yr, which puts it in a tough position from a product portfolio perspective. Maintains Neutral.

Notablecalls: Weakness in Asia and Europe should not come as a surprise. It looks like MOT continues to hold it own in US, its most important market. Exiting the low-end side of the business makes sense as soon there will be no low end to speak of.

It also looks like Ed is going to be between a rock and a hard place. That's one warning he could not afford. Icahn is going to have a field day.

Kudos goes to RBC Capital for their hefty cut on the rev est side last week. The stock may be weak today but as Deutsche said - MOT stock is in a midst of a bottoming process.

Paperstand (WFMI, INFN, BBW)

According to the WSJ, Whole Foods (WFMI) CEO John Mackey posted messages under a pseudonym on Yahoo forums that praised his co and blasted Wild Oats, which Whole Foods is seeking to buy. In Jan’05, someone using the name Rahodeb went online to a Yahoo stock-mkt forum and posted this opinion: No co would want to buy Wild Oats Markets at its price then of about $8 a share. "Would Whole Foods buy OATS?" Rahodeb asked. "Almost surely not at current prices. What would they gain? OATS locations are too small." Rahodeb speculated that Wild Oats eventually would be sold after sliding into bankruptcy or when its stock fell below $5. A month later, Rahodeb wrote that Wild Oats mgmt "clearly doesn't know what it is doing .... OATS has no value and no future." The comments were typical of banter on Internet message boards for stocks, but the writer's identity was anything but. Rahodeb was an online pseudonym of John Mackey, co-founder and CEO of Whole Foods. For about eight years until last August, the company confirms, Mr. Mackey posted numerous messages on Yahoo Finance stock forums as Rahodeb. It's an anagram of Deborah, Mr. Mackey's wife's name. Rahodeb cheered Whole Foods' financial results, trumpeted his gains on the stock and bashed Wild Oats. Rahodeb even defended Mr. Mackey's haircut when another user poked fun at a photo in the annual report. "I like Mackey's haircut," Rahodeb said. "I think he looks cute!"

Read whole article here.

Notablecalls: :)

The WSJ reports that General Electric (GE) and Abbott (ABT) abandoned their $8.1bn deal for 2 units that make medical-diagnostic equipment. The co’s said they had called off the deal, announced in Jan, b/c they were "unable to reach agreement on final terms and conditions." There is no breakup fee.

“Heard on the Street” out saying that Warren Buffett, Carl Icahn and big-name hedge funds have bet more than $8bn on railroad stocks in recent mo’s. But going along for the ride could be bumpy. Railroad share prices have run up on headline-fueled enthusiasm about the high-profile purchases. Since April, Berkshire Hathaway has disclosed an 11% stake in Burlington (BNI). Berkshire also has taken smaller but substantial chunks of Union Pacific (UNP) and Nortfolk (NSC). Icahn Mgmt and activist hedge funds including Atticus Capital and Jana Partners have barreled into the railroads, too. The result: As a group, railroad shares have surged more than 20% so far this year, despite a 4% decline in traffic b/c of the slowdown in automobile and home sales. So, the question is: Can they hold on to their gains? "The stocks have traded up partly on expectations that something big will happen," says Rick Paterson, of UBS, referring to speculation that a buyout firm might take one of the co’s private. "We think that is less likely than likely."

Barron’s Online out saying that the fiber-optic resurgence that has paved the way for new public stocks in the last 9 mo’s is very real. It is also rather fragile, and as a result, some of those stocks are running far ahead of the rosiest outlook for their businesses. Case in point, shares of recently public Infinera (INFN). 7-year-old Infinera makes equipment used by phone co’s to expand the bandwidth of their networks. It has a promising future, with sales soaring from $2.6m to $50m in the most recent quarter. And it's finally generating positive cash flow despite continued net losses. But even with a dramatic rise in sales this year and next, it would be hard to justify the current 20x multiple of price-to-trailing 12-mo sales, a valuation that seems to assume unreasonable growth in the fiber-optic mkt. Infinera is one of 4 recent fiber-optic IPOs. Judging by the track records of those stocks, one might pick up Infinera at a cheaper price soon. Opnext (OPXT), Optium (OPTM) and IPG Photonics (IPGP) have traded down as much as 25% from the closing price on their first day of trading.

“Inside Scoop” section reports that Morgan Stanley Investment Mgmt and Buckingham Capital Mgmt resorted to bare-knuckle tactics and sold about 3.2m shares of Build-A-Bear (BBW). Buckingham let go of all of its 1.5m shares, or 5.7% stake in Build-A-Bear. Morgan Stanley sold almost all of its 8.7% stake, or 1.7m shares, leaving the investment giant with a mere 559 shares. According to StreetSight.net, Buckingham "focuses on companies that are substantially undervalued relative to strong fundamentals" and sells its holdings when the stocks become overvalued.

Vital Images (NASDAQ:VTAL): Color on warning

Couple of firms comments on Vital Images (NASDAQ:VTAL) after the co issued terrible guidance for Q2 and 2007. Shares of the company, which develops 3-D medical visualization and analysis software, fell more than 24% in late electronic trade:

- Jefferies is taking their rating down to Hold from Buy with price tgt cut to $20 from $39 noting that after two quarters of strong Toshiba license revenue, Toshiba license revenue declined YOY from $3.9MM to $3.4MM in 2Q07. For the year, they gain comfort knowing that VTAL's agreement with Toshiba has minimums in place. This disappointing CY2Q coincides with Toshiba's seasonally weak FY1Q; however, such a decline is discouraging.

For over a year, mgmt has downplayed the impact of DRA onbusiness, even at Jeffco's late May NY investor breakfast, but they now admit that DRA does negatively affect their business more than they had originally thought.

Going forward, they have concerns about the delayedrelease of Vitrea 4.0 and Vital Connect 4.1, the apparent increasedcompetition from GE, Philips and Terarecon, and a longer sales cycle caused by morecomplex enterprise deals. While they recommend a HOLD at this time, mgmt needs to re-establish credibility, since they just shared most of these issues to the Street for the first time. The ~$10 cash per share does provide some downward safet.

- Deutsche Bank is somewhat more supportive keeping their Buy rating albeit taking their price tgt to $30 from $48. On the heels of this disappointing announcement, they have lowered FY07 EPS from $0.65 to $0.25, FY08 EPS from $1.00 to $0.60, and FY09 EPS from $1.35 to $0.95. The firm still believes that VTAL is favorably positioned long-term, but there could be some bumpiness in customer adoption.

Notablecalls: I guess this is what you get when you compete with the likes of GE and Philips. While VTAL's offering continues to be among the best on the market, it's hard to be a midget in the land of giants. The weakness at Toshiba is surprising (a large 40%+ customer) but my gut tells me it may be just a bump in the road.

With the stock down 7+ bucks on open, the valuation does not look too absurd given the opportunity ahead. Even if VTAL can manage only $0.60 in EPS next year, substracting the 10 bucks per share on its balance from $19-20 (that's where it's likely going to open for trading), you have the stock trading at 15x forward EPS.

I think VTAL will stumble below $20 level after open but will become buyable soon after.

First Horizon National (NYSE:FHN): Morgan Keegan positive

Morgan Keegen is out on First Horizon National (NYSE:FHN) saying they strongly believe that new management initiatives are accelerating and should translate into improved profitability and earnings. Recent weakness in bank stock sector and FHN has created a very attractive entry point in what they view as a well orchestrated turnaround story under a superb management team.

FHN shares are selling at a 52 week low and on an absolute basis have pulled back to January 2003 levels. Shares reflect significant discount at 2.2x tangible book versus 3.2x for MK Mid-cap Bank Index.

Firm expects FHN to report 2Q07 EPS of $0.63, $0.04 above consensus and believe that all 3 businesses will reflect marked improvement from 1Q07 results. MK's view is that this is the bottom, expense initiatives are SERIOUS and ACCELERATING, credit should be better than consensus expectations and clearer detail on strategic changes from management will be communicated during earnings.

Maintains Outperform.

Notablecalls: I love Morgan Keegan. When I see a strong worded call like this one coming from one of my fav firms, I pay attention. So should you.

salesforce.com (NYSE:CRM): Well hello there Mr. Softee..

Couple firms comments on salesforce.com (NYSE:CRM) after Microsoft Corp said on Tuesday it will offer its new Web-delivered business software for tracking customers at below-market prices. The world's largest software maker this quarter will make available Microsoft Dynamics Live CRM, the first version of its customer-relationship management software:

- JMP Securities notes Microsoft's pricing seems designed to undercut salesforce.com's prices. As a result, they believe this Microsoft announcement may freeze some salesforce.com sales cycles and put pressure on salesforce.com's pricing. The magnitude of the impact on salesforce.com may depend on how aggressively Microsoft markets CRM Live and the richness of the CRM Live functionality. Microsoft plans to offer customers an early access version to Microsoft Dynamics CRM Live Professional at no cost this year. In 2008, Microsoft plans to charge a promotional price of $39 per user per month and $44 per user per month in 2009 and beyond. This compares to salesforce.com's list price of $65 per user per month for its professional edition. JMP expects the first version of the Microsoft Dynamics CRM Live service to be released before the end of September.

Maintains Market Perform rating.

- Cowen notes MSFT's Pro Edition will be given away for free for the remainder of this year for accounts deploying five or more users. In marked contrast to SFDC's direct sales strategy, MSFT intends to drive sales by promoting its CRM solutions heavily in its Information Worker and Dynamics partner networks. While the firm is not expecting Live to generate meaningful sub counts over the next few quarters, they expect 9,500 MSFT CRM resellers and free trial program for accounts evaluating 5 or more seats to present a challenge to SFDC's sales cycles. Firm believes free trials and bundling discounts will enable MSFT to sell effectively back into its installed base. They expect MSFT's mid market dominance to present a challenge to SFDC, given that they estimate that the vast preponderance of SFDC's have signed up for 20 seats or fewer.

CRM is trading at 27x COWN's CY08 FCF forecast of $196M (+34%). Maintains Neutral.

Notablecalls: Mr. Softee's entry into the CRM space should not come as a surprise. Nor should the pricing be surprising given MSFT's usual conduct entering a new line of business. "I don't think this is a battle that will be won on price alone," said Bruce Francis, a spokesman for Salesforce.

Bruce's right of course but considering the size MSFT's client base, it's going to put pressure on CRM sooner or later. My guts tells me it's going to be later rather than sooner but with CRM trading gazillion times EPS, it's increasingly difficult to see much upside from here.

As for the ultra s-t, I think CRM may get hit following the calls but downside will be limited. Watch the 200 day MA for a bounce.

Paperstand (LIZ, NUAN, MCRS)

The WSJ reports that Liz Clairborne (LIZ) is expected to announce today that it's seeking to divest itself of 16 of its 36 apparel brands representing $800m of its $5bn in annual revenue. The move, seven months after CEO William McComb joined the co, marks a bold reversal of the strategy that Claiborne and most of its competitors in the US apparel industry vigorously pursued for more than a decade: build big brand portfolios to hedge against unpredictable fashion cycles. The 16 brands that Claiborne will try to sell or license out or possibly discontinue are Sigrid Olsen, Prana, Ellen Tracy, Dana Buchman, Mac&Jac, Kensie, Intuitions, C&C California, Enyce, Laundry, Tint, Stamp10, First Issue, Emma James, Tapemeasure and JH Collectibles.

According to the WSJ, a coming govt auction of radio spectrum could hand Google and other tech co’s their first significant victory in a battle to loosen the grip held by telecom operators on the wireless and broadband mkts. FCC draft rules would set aside part of the available spectrum for creation of an "open" network free of the constraints that large telecom operators like AT&T and Verizon normally impose. The spectrum being auctioned is estd to bring in $15bn to the Treasury. The new open-access rules would apply to a slice that is big enough to create a nationwide network. Google, a satellite-TV provider, or another new entrant could now be enticed to bid in the auction and enter the wireless mkt as a competitor to the large carriers. In a number of filings at the agency and in a letter late Mon, Google has argued that some spectrum should be set aside for an open network. eBay's Skype has also weighed in with filings to back such rules. Though Google has considered the idea of buying spectrum and outsourcing the building and operation of the network to a 3rd party, it remains unclear whether Google is ready to spend billions to build and operate a new wireless network. A direct bid by Google for spectrum is very unlikely at this point, b/c the co views such a move as outside its core activities.

“Heard on the Street” column highlights Nuance (NUAN), the largest co devoted almost exclusively to selling speech-recognition software. Nuance has about 75% of the mkt for speech-enabled call centers. And about 50% of medical-transcription devices run on its software. Growing at 22% a year, sales of such technologies are forecast to reach $2.3bn in ’07. I believe the stock is still cheap," says Michael Alpert, of J&W Seligman. "Their strategy is built around domination, and we think its earnings forecasts are low," he says. One reason for the optimism: The co increasingly is cutting deals with directory-service businesses that pay recurring rev rather than one-time payments.

Barron’s Online discusses Micros Systems (MCRS), whose stock is up 30% over the past 12 mo’s. But despite the run-up, investors can still check into value with shares of Micros. The stock is currently trading at 23x estd earnings for the next 4 qrtrs, or a 4% discount to its 5y avg, and a 33% discount to its peers in the application-software sector. Micros' share price looks very reasonable given its competitive position and strong earnings growth rate, which analysts on avg est will be 23% in F’07. The co has plenty of rev growth opportunities, particularly in its hotel segment, and from its heavy exposure to fast-growing intl mkts. In addition, its strong balance sheet gives it plenty of cash to fund bolt-on acquisitions and a generous share-buyback program. In F’07, Micros expects to bring in rev of $778-781m. By F’09, Micros expects that number to increase to $1.1bn. "We are very positive on the co," says John Wullschleger, of Mitchell Capital Mgmt. He lauds the co's "good, solid US exposure and tremendous opportunity in intl mkts" and the fact that its virtually debt-free balance sheet means that the co has "tremendous amounts of cash to fund growth and development."

“Inside Scoop” section reports that Texas oil billionaire Thomas “T.” Boone Pickens is earning some slick profits off of EXCO Resources (XCO). Pickens, a director at the co, has sold more than 2.3m EXCO shares for $42.7m. The sales trimmed his stake to 11.03m shares, or 10.6%. Ben Silverman, of InsiderScore.com, notes that Pickens was restricted from selling any shares during the customary lockup period following an IPO. Right now it seems that Pickens is "just looking to take some money off the table and book some profits." Pickens' selling poses as "a mild negative" although Silverman expects the billionaire to remain a large shareholder for some time. Amid a lack of other insider sales, Pickens' transactions are somewhat offset by some positive activity by institutional players, he adds.

Gilead (NASDAQ:GILD): Added to Focus List at Cowen

Couple of firms are out positive on Gilead Sci (NASDAQ:GILD) this AM:

- Cowen is adding Gilead to their Focus List, replacing Genzyme. Sales momentum of GILD's market-leading HIV franchise is very strong, and the firm projects the franchise will grow at a 21% CAGRfrom 2006-11. Moreover, GILD's prospects for long-term high-teens EPS growth are good. Although they project Tamiflu stockpiling will decrease, causing GILD's royalty revenue to decline from $433MM in 2007 to $200MM in 2009, they expect the lost revenue will be more than made up for by new product launches. Over the next 12-24 months COWN expects launches of Letairis (pulmonary hypertension, ongoing), Viread in HBV (2008), aztreonam lysine (cystic fibrosis, 2008), and GS 9137 (HIV, 2009). Firm's model projects GILD will have a 16% EPS CAGR for the period of 2006-11, with consistent 16-17% EPS growth for the years 2009-11. Despite these strong fundamentals, GILD looks attractively valued, trading at 22x 2008 pro forma EPS est., in line with the biotech group average. They think the shares will outperform the market by 20% over the next 12 months. Firm believes GILD's fundamentals are second to none in large cap biotech.

- Piper Jaffray is out saying they had mistakenly concluded in a previous note that GILD had abandoned efforts to obtain acomposition of matter patent covering Truvada (10/757,141) - the firm has now found a mirror image patent application for Truvada that remains under review (10/540,794). The patent application under review would extend the patent protection of Truvada until at least January 2024 (current protection for Truvada lasts through 09/2021 under the Emtriva patent). Issued. Extrapolating their 2010 total Truvada use (Truvada + the Truvada portion of Atripla) to 2021, the additional three years potentially gained through the new Truvada patent would add at least $1-$2/share in NPV to the GILD valuation. Maintains Outperform.

Notablecalls: Cowen's call makes sense. GILD continues to gain share among the HIV treatments due to the once/twice a day pill regimen. Barron's was out positive on GILD over the weekend but the stock was chopped down after open. Being added to the Focus List at Cowen may provide another chance for the bulls to push the stock higher. Will see if it sticks.

Paperstand (MCO, EYE)

The WSJ’s ”Heard on the Street” column out saying that short sellers love to tgt co’s heading into financial turmoil. Now, some of those are targeting Moody’s (MCO). But unlike some of the blowups in the recent past that the credit-ratings firm and its main rivals caught too late, such as WorldCom and Enron, its profitability and cash flows remain strong. That makes it a tough stock to bet against. Still, Moody's and other credit-rating firms are again taking heat for the meltdown in the subprime-mortgage mkt. Bearish investors are betting that Moody's shares will tumble as the co's lucrative business in providing ratings for structured debt products, such as collateralized debt obligations (CDOs) could dry up due to fears spreading from rising defaults in those mortgages extended to borrowers with poor credit histories. Together with some analysts and academics who believe the rating agencies played a key role in the subprime crisis by giving high ratings to thousands of bonds that fell quickly in value, some short sellers also are wagering that legislators, regulators and disgruntled investors will shake up the existing oligopoly structure and put an end to its fat margins and profits. "It's a great business model as long as you can get ppl to pay for it," says James Chanos, of Kynikos Associates. Mr. Chanos, among the most vocal of Moody's critics, is known for having bet early against Enron. "If they have no predictive power over that which they're rating, then why bother?"

Barron’s Online “Inside Scoop” section reports that hedge fund ValueAct sees plenty of upside in Advanced Medical Optics (EYE). Over the past two weeks, ValueAct has bought nearly $50m in shares of AMO. The buying spree has boosted ValueAct's stake in Advanced Medical to 12.6%. According to StreetSight.net, ValueAct "looks for fundamentally undervalued co’s with strong business models and potential growth opportunities." Ben Silverman, of InsiderScore.com, notes that ValueAct began building its stake in the 1Q before the recall, buying 2.8m shares. The hedge fund then embarked on its latest buying binge after AMO announced the Complete MoisturePlus recall. "That suggests that ValueAct felt [Advanced Medical] was oversold at that point, and that it was a near-term issue that would have a negative impact on the co for the next couple of quarters, but that the co's prospects are still bright," says Silverman.

First Solar (NASDAQ:FSLR): BAC ups tgt to $115

- Banc of America is reiterating their Buy rating on First Solar (NASDAQ:FSLR) and raising price target to $115 from $91. Firm's new DCF-derived price target stems from several adjustments to their model, including higher capacity, lower costs/watt, and a declining tax rate, offset by lower prices. The new model results in a FY08 EPS estimate of $1.51 (vs. $1.32 previously and Street estimate of $1.14) and a FY10 EPS estimate of $7.59. The new price target of $115 implies a 15x multiple of firm's FY10 estimate, which they believe is warranted given the visibility of FSLR's growth.

Following its recent run, First Solar appears expensive based at 84x the FY08 Street estimate of $1.14. BAC has confidence that First Solar will soundly exceed the FY08 Street estimate due to a declining tax rate (29% in FY08 vs. 41% in FY07) and higher capacity (450 MW by end of FY08). More importantly, they believe that First Solar remains attractive at current levels based on their view that the company's earnings will meaningfully accelerate in the years following FY08. Specifically, the firm expects First Solar will increase EPS to over $7.50 by FY10 from $1.51 in FY08.

Notablecalls: When you have an agressive mover like FSLR just 4 bucks away from the $100 level and there's a tier-1 firm out with a positive call, you buy the stock! No matter how boring the call is! It's going to hit that $100 today.

Group 1 Auto (NYSE:GPI): Goldman adds GPI to Buy List!

- Goldman Sachs is adding Group 1 Auto (NYSE:GPI) to their Americas Buy List with a $48 tgt. According to the firm GPI offers the best combination of earnings growth opportunity and valuation in the auto retail sector. GPI is in cost-cutting mode, which fits their investment profile for auto dealers: they prefer companies that are working on margin maximization and typically avoid those that are aggressively investing in their businesses, as the market tends not to "pay up" for these investments. With easing earnings comparisons and the lowest P/E multiple in auto retail, they see significant relative outperformance vs. peers and the broader Hardlines group.

Catalyst: Group 1 is emerging from a period of substantial earnings misses and estimate cuts associated with lapsed expense control, tough year-ago comparisons as used car volumes got a significant boost in Gulf states following Hurricane Katrina, and difficult conditions in the housing-challenged California market. GSCO sees accelerating earnings growth as the company cycles far easier comparisons beginning in the second half.

Notablecalls: Must say I couldn't believe my eyes on Friday when I saw no interest whatsoever following the wonderful call by Morgan Stanley (scroll down). I blamed it on the shorts, as the stock was ruthlessly chopped down on open. Stuff likes this comes with the territory when there's a 20% short interest.

And today we have Goldman Sachs putting GPI on their Buy list. This is bound to put fire under the shorts. I continue to be positive on GPI here. The $40 leash stays.

Barron's Summary (SONO, GILD, ITW, VMED, PAY)

Barron’s out saying that banks, brokerages and hedge funds that have been eager buyers of subprime CDOs could face losses of more than $100bn in coming years. Co’s mentioned include Bear Sterns (BSC) and MBIA (MBI).

SonoSite's (SONO) shares, after a long climb, slipped during the past year as a competitive threat from General Electric (GE) mounted. Now at 36, they could easily fall by six bucks or so, and far more if GE prevails in a lawsuit. "If the lawsuit is successful, it could be crippling to SonoSite, considering the co's one-dimensional product line," says Sean D. Lavin, of Oppenheimer.

Gilead's (GILD) stock, up some 40% in the past year, could climb another 20-25%, fueled by strong demand for both existing drugs and remedies now in the pipeline.

Illinois Tool Works (ITW) has rallied 20% this year, to 55. The co's continued success could push the shares up to 67-68 in the next year, for a prospective gain of about 23%. ITW trades for only 15x consensus ‘08 earnings, about 10% below the multiples afforded diversified industrial multinationals such as Danaher (DHR), notes Goldman Sachs analyst Deane Dray. "It's exceptionally attractive," he says. "It has had a nice pop, but has a lot more room to run."

“The Trader” column highlights Virgin Media (VMED), which confirmed it has been approached by a suitor it would not identify, and which reportedly is the Carlyle Group. Shareholder churn has swelled investor ranks with impatient fund managers. Franklin Mutual recently amassed a 9.4% stake and began prodding mgmt for action. A $12bn debt load also may not deter buyers, since Virgin generates enough cash to cover loan payments. Carlyle is no stranger to cable deals, and Virgin's infrastructure is unparalleled. Increasingly, the mkt also seems to warm to the idea of Virgin as a private entity. "The things that are delaying its turnaround are all better tackled as a private concern out of the eye of the very aggressive British media and the scrutiny of sell-side analysts," says Brad Ruderman of Ruderman Capital Mgmt. He sees good odds of a deal and says the shares are worth 35.

“Review” section highlights VeriFone (PAY), which offers a Wi-Fi bill-paying device for waiters. Credit cards with embedded chips, already in the hands of millions, make it even easier. And all of these technologies may be more secure than the current approach, where unscrupulous waiters can make personal use of your card in the back room. "I am 100% certain these devices will eliminate card-skimming in restaurants," says Isaac Lay, a California entrepreneur.

Parametric Tech (NASDAQ:PMTC): Color on warning

We have couple of firms defending Parametric Tech (NASDAQ:PMTC) this AM after the lowered its revenue outlook last night:

- Jefferies lowers their tgt to $20 from $23 but keeps Buy saying the F3Q07 license miss is bad, given management's bullish tone and the run in the stock. They think it's mostly an execution slip in a weakish North American applications market and that the story is not broken.

Just like F2Q06, they think this miss here is more down to poor execution than a fundamental change at the company. The only incremental change is that some weak competitors are now in stronger hands (AGIL/ ORCL) and their recent industry checks in North America suggest it is the weakest of the three major Geos. Given the positive feedback on products from PMTC customers and partners, they do not think the story is broken.

Near-term problem for the stock is management's bullish tone and recent competitor upgrades. Management raised FY07 cash flow guidance one month ago and talked bullishly regarding their business up until the quiet period. The stock is up from $18 just 6 weeks ago, and Jeffco expects to retrace all of that now.

- Deutsche Bank spoke with management and provides the following details: 1) weakness was concentrated in the Desktop segment (MCAD). Their checks indicated the channel was on-track - suggesting that several larger deals were pushed out; 2) some competitive pressure during the quarter, but did not result in losses - more of a timing issue; 3) large deal ($1m+) activity was comparable with F2Q, but was below plan. Again, seen as a timing issue more than a material slow down in demand; 4) management remains committed to margin expansion and is implementing cost control measures this quarter. Mostly discretionary spending, but some headcount reduction likely.

Shares were trading down 20%+ in after-market trading - an overreaction in DB's view given strong industry fundamentals and Co's competitive positioning. Tgt goes to $23 from $24 but Buy is maintained.

Notablecalls: Kaufman downgraded the stock this morning to Hold from Buy but I think the stock's a strong bounce candidate.

The most amazing part of PMTC's miss was that Goldman Sachs added the stock to their Americas Buy List on June 26 saying their checks into Parametric channel indicated the company was benefiting from strong sales in the June quarter and its outlook into September, its seasonally strong 4QFY07, remained robust. The firm even upped their ests for the yr.

The people at Goldman are generally not stupid and are rarely wrong with their checks. So to me this indicates the shortfall is not due to a slow down in demand but rather due to pushouts of couple of larger deals. Sloppy execution? Yeah, possibly. That's generally something the management can and will address swiftly.

Ah, and we have Needham out with a dg.

Costco (NASDAQ:COST): ThinkEquity out positive

- ThinkEquity is out positive on Costco (NASDAQ:COST) upping their tgt to $76 from $70 saying the co will probably report another month ofbetter-than-competitors'-comps next week... and may do so even though Costco is already so far ahead in sales volume per store.... For years 83% more per store than Sam's and 160% more than BJ's must lead to some economic advantages, and they think those advantages will be manifest ascontinued improvement in ROIs in coming years. Those better ROIs should, in turn, lead to richer valuations.

The business should be more profitable, too: customer abuse of a too-generous merchandise returns policy may have masked significant business improvements in the last year... but likely won't going forward. Gasoline margins should become less of an issue near-term and going forward as well. Earnings in the current quarter and the coming year could easily be a little better than the consensus expectations.

The current quarter's earnings could easily exceed the consensus... and "guidance," too, one reason being the widespread "understanding" that last year's "extra" week accounted for 1/17 (roughly $0.04) of last year's $0.75 EPS. It is less widely recognized, however, that 4Q06 was a lousy quarter, with operating profit up 10% on a 19% increase in sales,even though 4Q05 was a lousy quarter as well, especially considering the "extra" $0.04 from the "extra" week. Poor closing quarter profitability is best reflected in the poor gross margin remained... which the firm expects should improve, at least a little, in the current quarter.

A continuation of stronger than direct competitors' comp store sales, along with enhanced dominance of its geographic markets and the "markets" for real estate, merchandise, and so on, could result, over time, in higher and more predictable returns on investment, higher returns that would justify continued and, perhaps even more rapid investment and, of course, faster growth. Firm expects all of these things... and continued share retirements. Reits Buy.

Notablecalls: Nice call. Nice chart. Expect to see some upside in COST.

Group 1 Automotive (NYSE:GPI): MSCO reits Overweight

- Morgan Stanley is out with a wonderful call on Group 1 Automotive (NYSE:GPI) saying they reiterate their Overweight rating and $50 price target. The company's favorable geographic exposure to Texas / Oklahoma, beneficial brand exposure to Toyota, and solid used trends minimize the chance of a substantial disappointment for the rest of the year despite choppy conditions in the new vehicle mkt. If GPI stops missing estimates, investors are likely to start paying attention to the longer-term story and pay a higher multiple of current earnings. Should this happen, they expect the shares to move out of the $40 range.

At a P/E of 10.4x MSCO's 2007e and 9.1x 2008e, the shares trade at a low P/E multiple relative to peers, to the market, and to the company's history. In firm's view, this P/E multiple is implying that GPI cannot grow, improve return on capital, nor generate greater free cash flow. In contrast, they believe GPI can grow earnings, improve return on capital, and generate much greater free cash flow as capital spending slows.

If the company closed half the P/E multiple gap versus AN and PAG (Penske Auto Group), this alone would equate to about $8 of upside in the shares.

Notablecalls: Let's face it - the new vehicle market is a tough market to be in currently. Yet, GPI has lots of exposure to the central region that is doing generally better than the rest (units are actually up in TX). Also, having 36% new vehicle exposure to Toyota / Lexus helps.

Results by CarMax (NYSE:KMX) from 3 weeks ago point to a healthier used car market.

Technically, the stock has been bouncing along the $40 level, giving us a nice leash for a swing. I think MSCO's call may attract some nice buy interest today and even over the next week. Also note there's an almost 20% short interest in GPI.

Paperstand (BX, FORM, CYMI)

The WSJs ”Heard on the Street” column discusses Blackstone (BX) acquisition of Hilton Hotels, saying that it comes at an uncertain juncture for the business. With new construction jumping sharply and room demand softening, it isn't clear how long the upward trend can last. Before Blackstone's agreement to acquire Hilton was announced, Moody's downgraded the hotel industry to "stable" from "positive." The ratings firm cited a potential glut of hotel rooms b/c of slowing travel. PKF Hospitality Research says the damping effect of the housing-mkt slowdown on construction and labor prices could unleash a wave of hotel-room starts beyond those already planned. That combination of factors could help the current hotel boom end as most lodging cycles do, on a wave of oversupply, sooner than expected. And that could weigh on share prices.

Barron’s Online out saying that these are tricky times for the investor in semi equipment makers. The group is way up in the last 12 mo’s, but it's mostly on the strength of a few large co’s that have very particular reasons for outperforming. That means it's time to dig deeper into chip-equipment stocks as many of the larger, better-known names seem priced to perfection. Among these smaller co’s worth considering: Formfactor (FORM) and Cymer (CYMI). Best approach now is simply buying underperforming stocks of smaller equipment makers whose earnings should rise sharply next year. Although chip makers have tightened their spending on new equipment, the sense among Wall St. analysts is that chip-equipment spending will come on strong again in ‘08.

“Inside Scoop” section reports robust selling by insiders at Coventry Health (CVH). Since the latest round of selling that began May 1, 14 senior execs and directors at Coventry sold nearly 430K shares on the open mkt for $25.6m. Ben Silverman, of InsiderScore.com, says insider sentiment at Coventry "is always bearish" b/c selling is the norm at the co. But the collective action by insiders calls the valuation into question and suggests the stock "might not move much higher in the near term."

Pool Corp (NASDAQ:POOL): Morgan Keegan weighs in

As promised on Tuesday, here's Morgan Keegan's take on Pool (NASDAQ:POOL):

- Firm notes that while these issues do not represent new information, the degree of the shortfall provides a negative surprise; they note, that their estimate was already $0.11/share below management guidance prior to this week's release. In response to the news, Pool shares sold-off $2.75 inshortened trading hours on Tuesday; investors anticipated the shortfall to some degree, as the stock price had pulledback more than $4 over the two prior weeks. They are lowering 2007 estimate from $1.94 to $1.77 and 2008 from $2.29 to $2.15.

Based on their adjusted EPS numbers, Pool is trading at a 15% premium to the S&P 500. Since January 2003, the shares have traded at a 35% premium to the market. MK believes that Tuesday's sell-off coupled with the pressure onthe stock over the past two weeks provides an attractive entry point. They emphasize their continued belief that demand weakness is tied to the housing market spillover into home improvement spend. While near-term trends should continue to trend sideways, they believe Pool's performance is admirable in the current environment and EPS trends have been similar to those experienced by leading home improvement retailers such as Lowes. While valuation is currently attractive, the firm believes shorter-term investors may want to wait until there is a tangible improvement in the broader home improvement market; that being said, they believe a restarting of pool industry growth is likely to be swift when it ultimately does occur.

Maintains Outperform.

Notablecalls: My respect for the wonderful team at Morgan Keegan runs deep. Yet, I continue to believe the housing situation will continue to worsen, putting increasing pressure on POOL's performance. I do not see the co growing their EPS much in 2008. The service revs are more stable but do not warrant a premium to the already high market multiple here.

The stock didn't get hit hard enough to become a good bounce candidate on Tuesday. I expect POOL to drift slowly lower over the next couple of months.

Goldman positive on Hansen (NASDAQ:HANS) and Coke (NYSE:KO)

- Goldman Sachs is out positive on the beverage space saying the volume declines in key beverage segments, namely soda and beer, have not been as dramatic as expected despite aggressive pricing taken to cover raw material inflation.

The cost outlook remains challenging, with spot prices of key commodities like aluminum and corn still at elevated levels but emerging market exposure should boost results for companies with operations outside the US.

GSCO highlights Coca-Cola (NYSE:KO) and Hansen Nautral (NASDAQ:HANS) as their favorite stocks to own into the earnings report and would advise investors away from the bottlers and BUD. They are ahead of consensus forecasts for both HANS and KO and see opportunity for upward earnings revisions based on strong profit results in the quarter and an improved full-year outlook. For KO, continued strength in emerging markets, developed market recovery, and foreign currency could drive another quarter of solid concentrate business profit growth. For HANS, they expect solid continued growth for the energy drinks category and share gains by Hansen's portfolio to drive better-than-expected sales growth, albeit with some partially offsetting margin contraction. A 2H profit acceleration could be in store as Hansen benefits from price increases, the distributor transition, and new products.

Notablecalls: It's fairly quiet out there today with KO's possible deal with private equity players to buy Cadbury's Snapple and Mott's brands highlighted as big news. This, coupled with GSCO's positive call ahead of the earnings report may create some interest. HANS is my favourite of the two.

Note that scanner data on HANS been pretty strong.

Paperstand (MAR, HOT, BSX, LIZ)

The WSJ out questioning, whether Marriott (MAR) and Starwood (HOT) might be next acquisitioning targets, in light of Blackstone (BX) agreement to acquire Hilton Hotels (HLT). Blackstone already controls more than 100K hotel rooms in the US and Europe through its ownership of LaQuinta Inns and Suites and LXR Luxury. In the last 3 years, Blackstone has acquired $15bn in hotel assets. By adding Hilton, Blackstone takes on a major, long-term business commitment. Blackstone will pay $47.50 a share, a 40% premium to Monday's closing price, and assume $6bn in debt.

The WSJ reports that Wall St. bond underwriters called off a $1.15bn sale of junk bonds on Tue that would pay for a LBO of ServiceMaster (SVM). Instead, ServiceMaster received its financing from a bridge loan directly from the underwriters, which they hope to replace in the coming months.

The WSJ reports that Coca-Cola (KO) has approached several private-equity firms involved in bidding for Cadbury Schweppes' (CSG) US drinks business about buying Cadbury's Snapple and Mott's brands. If successful, the purchase would mark Coke's latest effort to expand its portfolio beyond nonsoda brands as it moves aggressively to build a larger presence in the faster-growing mkts for juices, teas and waters. Speaking in Geneva yesterday, Coke Chmn and CEO E. Neville Isdell told Reuters that the co was evaluating a bid for Snapple. "That is a valuation that we undertake, whether [Snapple] is of interest to us or whether we can do it on our own."

"Heard on the Street" column highlights Boston Scientific (BSX), a co where little has gone right since its takeover of Guidant. Guidant's growth has been slower than anticipated, the stent business has deteriorated and the firm is still being restricted by the FDA from launching new products. To raise cash, Boston Scientific recently said it would consider selling part of its endosurgery unit. Moody's decided to review the co's debt for a possible downgrade. By itself, a drop to below investment grade wouldn't necessarily do harm to the co's share price. But bears who think the shares have further to fall say the co's sluggish cash flow and added debt load are the reasons it is pondering asset sales and sharp cost cuts. The co borrowed $9bn to buy Guidant, projecting that it would have $2.4bn in operating cash flow this year. But over the past year, defibrillator and pacemaker sales have declined 4%, and sales of the co's flagship Taxus stent have seen a 26% drop. Analysts generally expect $1bn in operating cash flow this year, less than half the premerger prediction. One drain on cash flow is interest payments, scheduled at $521m this year and $497m next year. A $650m principal payment is due on the Guidant debt in April. The co also has to make an annual payment in Jan to former shareholders of Advanced Bionics, which it expects will be about $200m. About $475m in capital expenditures are expected this year. Meanwhile, "probable" costs are rising from lawsuits that accuse Guidant of hiding flaws in its cardiac devices. After acquiring Guidant, Boston Scientific first predicted it would have to pay at least $381m in legal fees and settlements or damages in the first 477 cases. By March 31, that est had risen to $732m in 1,350 lawsuits. Assuming the cases were settled by the end of '08, and adding that to other likely expenditures, the co is looking at $3.5bn in cash outflows in the next 18mo's. With $1.3bn in cash on hand, it would run out of money in less than 3 years at that rate. Matthew Dodds, of Citigroup, who has a Sell recommendation on the stock, says that "in the world of medical technology, this is the most precarious I have seen a large-cap co in terms of their debt load and ability to pay it down."

Barron's Online discusses Liz Clairborne (LIZ), sayiong that the co is tailoring a turnaround that could get its profits and stock climbing like teenage hemlines. Fueled by unexpected bad news of falling sales and earnings, its shares fell 28% from their record reached in Feb to a 52w low in May. But at an investors meeting slated for next week, mgmt may unveil sweeping and profitable changes at Liz, including cost cuts, and big divestitures. Before the confab, insiders and big shareholders are buying the stock in anticipation of profits getting back on a growth track again next year. In May, Aim Trimark Investments and Lazard Asset Mgmt, two of Liz's biggest shareholders, added significantly to their holdings. And on May 3, director Paul Tierney made the biggest insider purchase of Liz stock in 4 years -- 30K shares for $1.1m. Liz will transform from an M&A-driven co to an organic-growth story," says Omar Saad, of Credit Suisse.

"Inside Scoop" section reports that Crown Castle's (CCI) largest shareholder, SPO Partners, spent $301.3m to purchase 8.41m shares during Crown's June 28 secondary offering. The hedge fund boosted its Crown stake to 42.4m shares, or a 14.9% stake. Michael Painchaud, of Market Profile Theorems, says that SPO's purchases are "supportive of the fundamentals of the co." Even so, this particular buying "doesn't do a heck of a lot in terms of timing and entry point" for investors b/c of the stock other institutions put up for sale in the secondary offering.

Motorola (NYSE:MOT): Hefty Q2 revenue cut at RBC

- RBC Capital comments on Motorola (NYSE:MOT) noting the second quarter is a wash and so may be the third quarter, and they are reducing their unit estimates. For 2Q07 they are formally reducing unit assumptions from 46M to 40M. With channel inventories winding down but no real pick-up in Motorola's handset division, they are now estimating just 45M units for 3Q07 vs. consensus of 47M.

RBC's not sure Motorola's new found strategy of holding firm against the US carriers is working too well. It's either units or ASPs and not both it seems, hence the unit reductions. In the US, Apple remains the top-story at AT&T and on the margin Samsung and LG may be gaining incremental share at Verizon and Sprint. Recent top-selling phones include LG's VX8700, Samsung's SCH-u740, and Blackberry's Pearl family.

Motorola's stock is washed-out in firm's view and may shake-off further downward estimate revisions. But with no clear winning product cycle to provide some sorely needed boost, they believe the shares may drift for the balance of this year's investment horizon. 2Q07 revenue forecast declines from $9.5B to $8.7B vs. consensus of $9.3B, EPS remains at $0.03. RBC's 3Q07 forecast declines from $10.0B and $0.09 to $9.4B and $0.07, vs. street of $9.7B and $0.09. For CY08 they still estimate EPS of $1.00. Maintains Sector Perform and $19 tgt.

Notablecalls: That's a pretty hefty rev cut for Q2. Yet, it looks like MOT stock can handle this. Last week there was some talk of Ichan doubling his stake in MOT but no filings have showed up yet.

Pool Corp (NASDAQ:POOL): Color on warning

Swimming pool distributor Pool Corp (NASDAQ:POOL) said on Monday that it expected full-year profits to fall signficantly below its prior forecasts. In a statement, the Louisiana-based wholesale distributor said it expected full-year earnings to be in the range of $1.75 to $1.85 per diluted share compared with previously projected range of $2.00 to $2.10 per share.

- Baird notes POOL cited decreased new pool construction in FL, AZ and CA which constitute three of the company's four largest markets (the fourth being TX) due to a slowing housing market. This is more consistent with firm's outlook which is for new pool construction down between 10-15% given deteriorating home values and consumer uncertainty.

There is currently a large short interest in the stock (10 million shares, or 18.3 days to cover), so short covering could support the stock in the near term. POOL hasdeclined 11% since its most recent peak on June 15. Either way, they would become more interested in POOL in the low $30s and their outlook is unchanged in the $35-$40 range.

Baird believes investors have time with POOL because they think that 2007 will likely be more volatile than average and with expectations of a stronger 2H07, there is the additional risk of downside if 2H07 does not come through as expected. Maintains Neutral.

Notablecalls: No surprises here. The housing market stinks and that put pressure on the pool business. The insiders knew it and sold their stock and the market saw it coming and sold. Just take a look at POOL's chart over the past couple of weeks. Heck, even Barron's figured it out last week.

Looks like Wedbush was the only one that didn't see it coming as they upped their tgt to $46 from $41 (reit Buy) on June 20.

Short interest stands at over 20% of float. That's big. The stock should be down 5 bucks today but I suspect we won't see such downside. More like 3-4 bucks. I think anything beyond 4 bucks is buyable for a bounce. Please do note I think things will continue to deteriorate in housing, possibly putting additional pressure on POOL. The only reason for buying the bounce is the huge short interest. POOL had become a somewhat crowded short and I think some of these positions will be covered into today's weakness.

I'm also very interested to know what Morgan Keegan has to say about POOL following the warning. Will do a follow-up.

Paperstand (HMC, TM, GM, UA)

The WSJ's "Ahead of the Tape" column out saying that sweet deals by Honda (HMC) and Toyota (TM) may leave big three in dust. A weak yen means Japanese auto makers are as well-armed as ever to steal mkt share from the Big Three. Honda and Toyota have tried not to play the incentive game the past few years, content to watch General Motors (GM), Ford (F) and DaimlerChrysler (DCX) eat away at their own profit margins by showering US consumers with 0% financing deals and cash giveaways. But the Japanese are using incentives more aggressively now, at a time when the Big Three have little ammunition left for a price war. US auto makers held the line or decreased incentives in June, compared with a year earlier, while the top two Japanese players increased deals by as much as $627 per vehicle sold. Toyota is offering cheap financing on big trucks, a segment dominated by the Big Three. Honda has nearly doubled incentives in June to $1,400 a vehicle compared with Jun'06. The Japanese enjoy a huge labor-cost advantage over the Big Three, which gives them room to push incentives. Meantime, the yen's weakness means Honda and Toyota can ship parts and vehicles from Japan cheaply to the US, further holding down their costs as they cut prices. Incentives mean June auto sales, which are reported by the auto makers today, probably showed vigor. Analysts believe domestic sales of cars and light trucks hit an annual rate between 16.4m and 16.8m in June, up as much as 5% from a year ago. It also means the Big Three continued to lose mkt share.

"Heard on the Street" column discusses General Motors (GM), saying that it has been quite a ride for GM over the past few weeks. Since June 7, the auto maker's stock has zoomed ahead 28% on increasing optimism that GM and its Detroit rivals will haul away a truckload of concessions from this summer's contract talks with the UAW. While the possibility of a transformational deal with the union has made GM shares attractive as a near-term trading play, investors looking down the road should still proceed with caution. Fundamentally, GM's business is still under stress. It is burning cash, its core N-American operations aren't making money and several broad industry trends are combining to damp its ability to boost rev, which it needs to fuel its turnaround. "The longer-term story remains highly challenged," says Peter Nesvold, of Bear Stearns.

Barron's Online "Inside Scoop" section report that Lone Pine Capital has found a snug fit in shares of Under Armour (UA). The $8bn hedge fund led by Stephen Mandel Jr. disclosed a 7.8% stake in Under Armour shares in a late Fri. Lone Pine and affiliated funds now own 2.7 million shares of class A shares. The stake makes the firm Under Armour's second-largest institutional holder. Wall St. analysts overall are bullish on Under Armour's prospects. On avg, 14 firms rank the stock a Buy.

BAC adds Navteq (NYSE:NVT) to their Top Automotive Stock Picks List

- Banc of America has added Navteq (NYSE:NVT) to their Top Automotive Stock Picks List saying they believe Navteq's First Call estimates have significant upside potential, driven by the exponential growth/elasticity being experienced in the US portable navigation device end market and the high operating leverage in Navteq's model. Price elasticity in the end market has been running 7x over the last year. Year-to-date sales of portable navigation devices in US are up 300% y/y compared to the 100% growth estimate by the company for 2007. Most of this upside should flow to the bottom line as the company's reinvestment would not be able to keep pace with the revenue growth. We could see some of that as early as the 2Q07, to be announced July 31st.

Maintains Buy and $56 tgt.

Notablecalls: I continue to like NVT. The chart however does not look so hot here! Just keeping the readers posted.

Citi: Another round of 2H order cuts from INTC and TSCM

Citigroup has some fairly intelligent comments on the DRAM capex after a warning from Novellus Systems (NASDAQ:NVLS) last week:

- Firm's checks suggest NVLS's negative pre-announcement and new cost-cutting initiatives in 2H are primarily due to another round of 2H order cuts from INTC and, to a lesser extent, TSMC, owing to more equipment re-use at leading edge technology nodes. With CQ2 earnings, they expect the start of a process where consensus estimates come in ~20-30% over the next 6 mos and orders get progressively worse through 2H:07 (led by DRAM).

There appears to be a school of thought among bullish investors that DRAM capex per DRAM unit is at record lows and therefore DRAM capex is not at risk. Firstly, this is faulty analysis as capex relative to chip units always must be adjusted for wafer size (300mm cost ~30% more but drives more than 2x units). When adjusting for wafer size, DRAM capex is ~$0.22 per DRAM unit - up more than 2X since C2002, about equal to C1995 and eclipsed only by C1996.

The bottom line in DRAM, from Citi's view, remains the "funding gap" that has developed this year. As a reminder, C2007 is only the 3rd period in the past 15 years in which memory industry EBITDA will fall meaningfully short of capex. In prior funding gaps (C2001 and mid-1990's), capex was cut at least 30% the year after - in other words, history suggests memory capex (particularly DRAM) will be under significant pressure in C2008. Near term, they believe internal capex approval requirements in Korea (Samsung and Hynix) have been tightened dramatically in recent weeks. While few cuts have been made yet, this is moving in that direction and argues against the view that DRAM capex is OK.

Notablecalls: I continue to be bearish on the Semi Equipment space, especially the names with high exposure to DRAM capex.

Color on Apple's iPhone launch

We have several tier-1 firms out positive on Apple (NASDAQ:AAPL) this AM:

- Piper Jaffray spent Friday evening at Apple stores in New York,San Francisco, and Minneapolis, quantifying the iPhone launch. According to rough estimates they believe Apple sold 500k units over the weekend, which wouldprovide upside to their estimate of 200k units in the June quarter. Overall, Apple met strong demand over the weekend with adequate supply. PJ was surprised by the rate at which Apple was able to sell the handsets, with 50 cashiers processing up to 1,000 iPhones/hour in some stores. Also, the setup process involved some hiccups, but the touchscreen, keyboard and battery life are better than they expected. Maintains Outperform and $160 tgt.

- Goldman Sachs notes Apple's iPhone launch, which started on Friday, blew through expectations that have been climbing since January when the product was announced and provides another example of Apple's ability to bring dramatic change to an industry. They now think that Apple unit sales over the weekend were at least double their prior 350,000 estimate (Apple's June quarter ended Saturday so Sunday's sales will show up in September quarter results) and they have increased their iPhone forecast to 5.25M for calendar 2007 and 12M for 2008, up from 4M and 10.5M, respectively. 2007 and 2008 EPS estimates go to $3.58 and $4.30 from $3.52 and $4.08 - still with the bias firmly to the upside.

GSCO is leaving their price target at $135 but they think all of Apple's key products - especially iPhone and Mac - have an opportunity to show upside over the next couple of quarters, keeping the stock firmly moving ahead.

- Morgan Stanley says they have strong conviction in their higher earnings forecast relative to consensus and continue to view Apple as a top pick in their group. While the success of Apple's iPhone won't be determined anytime soon, the successful launch over the weekend is indicative of their positive thesis. Perhaps the most important takeaway from initial research is Apple's ability to drive customer traffic, and therefore margin leverage, in its retail stores. If sustainable, they view their bull case of $7 C08 EPS and $225 stock price as more likely.

Notablecalls: I think AAPL will dictate the overall sentiment over the next couple of days or even more. If AAPL gets sold on this positive gaga, it won't be because of activation issues. This will send a clear message to the market we are headed towards lower levels.

Frankly, I have no feel for AAPL here. Sorry.

Paperstand (BCE, ZQK, AMD)

The WSJ reports BCE (BCE) said it agreed to be acquired by the investment arm of Ontario Teachers' Pension Plan, Providence Equity Partners and Madison Dearborn Partners for $32.6bn. The deal also includes an additional $15.9bn in debt, preferred equity and minority interests, for a total value of $48.5bn, making it also the largest private-equity buyout package in history. "The plan in private equity is to go after bigger and bigger deals, and this is yet another level," says Shahid Khan, of Interactive Broadband Consulting Group.

The WSJ reports that AT&T (T) said it was working to resolve problems preventing some buyers of Apple's iPhone from activating the device. The hiccup affected about 2% of those who purchased an iPhone. Neither co disclosed sales, although industry observers expect the new product to be a strong seller.

According to the WSJ, Vivendi's Universal Music Group is considering notifying Apple that it isn't renewing a long-term contract to sell digital-music downloads through iTunes Store. Such a move wouldn't mean Universal would remove its vast catalog from iTunes in the foreseeable future. Instead, Universal hopes to go to a short-term sales agreement rather than a contract that lasted more than a year.

"Heard on the Street" column out saying that Quicksilver (ZQK) may be ready to quit the sport it took up just 2 years ago. And that could give the co's share price a nice run. The co last mo posted its 1st quarterly loss since '92. The main reason: a foray into the ski business via the co's '05 acquisition of Rossignol. The European brand, once seen as a growth opportunity, now seems to be dragging the co under the waves. Rossignol was always viewed as an odd choice for Quiksilver. Then the weather changed for the worse. Last winter saw record-low snowfalls in both N-America and Europe, drawing few skiers to the slopes and even fewer into stores. Sales plummeted along with the stock price. The price has since recovered, with investors returning after solid performances by the co's apparel ventures. The stock's recovery isn't enough to quell analysts who believe the Rossignol brand remains a near-certain liability for investors and the co. Quiksilver is considering whether to backtrack completely by selling Rossignol. Any sale would undoubtedly be at a loss to what the co paid, but observers say it would nonetheless boost interest in the stock by removing a cloud hanging over the co. "They are probably going to sell something, either all or part of Rossignol," says Jeff Mintz, of Wedbush.

The NY Times reports that the Carlyle Group is in discussions with Virgin Media, the British cable co whose largest investor is Richard Branson, over a potential bid worth around $20bn. The talks are still early and may not lead to a bid.

DigiTimes reports that AMD's (AMD) Phenom processors were originally planned to begin test-production between Sep and Oct, and to start shipping in Nov this year. However, AMD may now be planning to postpone Phenom's launch date to the 1Q08.

Barron's Summary (AAPL, ELNK)

Barron’s discusses Apple (AAPL), saying that a lot of iPhone sizzle is in the shares, so profit-taking makes sense. Even some bulls anticipate a postlaunch stumble in the shares. "There have been letdowns after Apple product launches in the past," says Glen Kacher, of Integral Capital. But if the phone is reliable and AT&T (T) delivers, a dip won't last long. And a new OS is coming. Walter Price Jr., of Allianz Capital, says he has been cutting his Apple position, with the idea of rebuilding it for the long haul after shares stop sputtering.

Notablecalls: Actionable.

Fund manager likes BONT, JWN, SAH, UAG, RICK and PTT, dislikes casual-dining stocks.

Barron’s discusses Discover Financial Services (DFS), whose CEO has told that the co will have better opportunities for growth as an independent concern, as it seeks to gain greater acceptance of the Discover card among merchants, and higher transaction volume. But both goals may be more elusive than Discover fans think, given the dominance of industry rivals American Express (AXP), MasterCard (MA) and Visa. Craig Maurer, of Calyon Securities, has a Sell rating on the stock and a price tgt of 22, or 15x his below-consensus est for ‘08 earnings of around $1.50 a share. He contends Discover deserves to trade at a 5-point discount to his tgt '08 multiple for American Express.

Seaspan (SSW) is seaworthy: It offers about a 6% yield, the prospect of a 15% price rise in the next year and is a good play on the rapid rise in global trade -- with less risk than other shippers.

Wall Street’s worries about the financing of giant LBOs have depressed the shares of takeover tgts, creating opportunities for investors willing to bet that the deals will be completed. Pending LBOs could require up to $300bn in financing, prompting concern about the willingness of banks and high-yield investors to absorb that mountain of debt. In the face of such uncertainty, investors now can earn 10%-plus returns on such tgts as HET, AT, ADS and FDC. "The mkt is about as attractive as we've seen in a while," says Mike Shannon, of Merger Fund. He says the annualized return on about 150 tgts worldwide is about 15%, vs 12% just a week ago. Othr stocks mentioned include ASN, CCU, JNC, SLM and TRB.

“International Trader” out saying that Vodafone (VOD) looks like the front-runner in the race to secure exclusive European rights to Apple's iPhone. But the co should be careful about what it wishes for. Vodafone might get the deal, but on terms far less favorable than it's accustomed to receiving from other equipment suppliers. Doing a deal with Apple comes with extra costs. To carry iPhone-compatible e-mail traffic, European operators will have to invest in their infrastructure. Thus, it's hard to believe that Vodafone would agree to an AT&T-style arrangement - giving away subs rev to Apple. But the selling price of Apple's handset is one reason for not projecting sales on the scale of the iPod's. European mobile customers are used to receiving heavy discounts on phones. Persuading ppl to spend a possible €450 on the iPhone will prove difficult. And with only 10m iPhones expected to be sold worldwide in the first year, the device's overall mkt share will be small. So, even though shares of Vodafone edged up last week, after newspaper reports that the co was the favorite to get rights to the iPhone in Europe, investors should keep in mind that a deal with Apple could be an expensive venture.

“Follow Up” section highlights Lionsgate (LGF), sayin that the co has a very healthy balance sheet, it continues to spin off from its franchise of horror movies. On top of that, it's been among the faster movers into new methods of digital delivery: The 15 movies that Lionsgate made available earlier this year to Microsoft's Xbox Live helped boost digital rev 50%, while CEO Jon Feltheimer notes that VOD sales for Employee of the Month "exceeded $3m on a film that grossed about $27m at the domestic box office." The co has, he explains, "nearly a dozen active agreements in place for digital delivery" of its content with major co’s, including Bst Buy. Finally, Lionsgate is one of the last remaining pure-play entertainment co’s, and has been rumored to be a takeover candidate, especially on the strength of its library of more than 11K titles. Says Feltheimer: "There are no more libraries out there to be bought." Three analysts see the shares headed above 15.

Interface (IFSIA) will sell its underperforming fabric business, clearing the way for the co to further reduce its debt load, improve its balance sheet and focus on its high-margin core tile business. Interface will receive approximately $63.5m at the closing of the transaction, and an additional $6.5m, subject to the division's meeting certain performance measures. "Look for a leaner, cleaner co going forward, with much less drag on their operating profits," says Chad Kilmer, of Value Discovery Fund. Bulls expect the stock to climb to 22.

“Technology Trader” highlights Earthlink (ELNK), whose new CEO Rolla Huff tells Barron’s that he plans to spend the next 60-90 days sorting through Earthlink's moving parts and figuring out exactly what he's got. By the end of the process, he says, he should have a workable strategy. Huff says it's possible Earthlink could keep all of its parts, but it seems clear some are going to have to go. The co has a mkt-cap of $950m. In ‘07, the Street expects rev of $1.3bn. It has net cash and investments of more than $200m. And Huff has made it clear that changes, of the shareholder-value enhancing variety, are coming. Huff says he comes to Earthlink "with no pre-conceived notions...I am not married to anything other than driving a return for our shareholders. And for me." That last statement reflects the fact that Huff bought 100K shares of the co's stock on the day he took the job. "I didn't do that to make a statement," he says. "I did it b/c I think I am going to make a great return on that money." In short, Earthlink is going to be fixed, and soon. Eventually, it might be sold. Huff has not historically been shy about finding M&A exits. Meanwhile, if Huff take the aggressive approach to remaking the business, holders should get a short-term reward.

Notablecalls: Actionable.