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EMC Corp. (NYSE: EMC), the data storage company that powers much of the digital storage needs for large companies and internet providers, has seen its shares hit a six-year high not because of its own merits, but because it owns so much of software virtualization company VMWare, Inc. (NYSE: VMW).
This sounds an awful lot like the LBO situation Seagate Technology (NYSE: STX) found itself in six years ago when the disk drive maker owned a third of the software company Veritas -- and that stake alone was worth double what Seagate itself was worth. If you're a billionaire, opportunities like that present handsome profit potential.
An analyst at Pacific Crest Securities Inc. this week said that EMC may be a takeover target soon due to its majority stake in VMWare, whose shares have tripled since going public less than two months ago. Perhaps IBM, Inc. (NYSE: IBM) or Hewlett-Packard Corp. (NYSE: HPQ) would be interested?
VMWare would be very attractive to a n operating software company due to the nature of the software products it markets, and there are probably more than a few companies that would like to get their hands on its product base. The last time EMC shares were this high was back in July 2001 when shares peaked at over $22.57 each. Right now, shares in VMWare stand at over $107 each.
MOST NOTEWORTHY: First Solar, JA Solar, Alcatel-Lucent, Nokia and Ericsson were today's noteworthy initiations:
First Solar (NASDAQ: FSLR) and JA Solar Holdings (NASDAQ: JASO) were initiated with Buy ratings and targets of $160 and $61 at Collins Stewart. Collins Stewart sees room for margin expansion and is positive on First Solar after channel checks; the firm expects JA Solar to expand capacity given its long-term supply agreements with four wafer suppliers.
Merrill Lynch started shares of Alcatel-Lucent (NYSE: ALU) with a Sell rating, citing a lack of revenue growth prospects.
The firm also started shares of Nokia Corporation (NYSE: NOK) with a Buy rating, as they believe the company's share gains and margin expansion will continue.
Merrill also resumed coverage of Ericsson (NASDAQ: ERIC) with a Neutral rating, expecting high single digit earnings and share growth, but not enough for a Buy rating.
OTHER INITIATIONS:
Goldman initiated the trucking and railroad sectors with Neutral ratings.
MOST NOTEWORTHY: Abbott Labs, Barclays, SanDisk, Mission West Properties and Texas Instruments were today's noteworthy downgrades:
Wachovia downgraded shares of Abbott Labs (NYSE: ABT) to Market Perform from Outperform reflect several challenges to the company's key franchises. In particular, Wachovia cites the potential delay of the drug-eluting stent Xience launch in the U.S. and decelerating growth of Humira.
ABN Amro downgraded shares of Barclays (NYSE: BCS) to Hold from Buy to reflect the capital markets, lower UK bank non-interest income and higher bad debts.
Oppenheimer downgraded shares of SanDisk Corporation (NASDAQ: SNDK) to Neutral from Buy as they expect many of the advantages that drove shares to unwind in Q4 and into 1H08.
Mission West Properties (NYSE: MSW) was downgraded to Hold from Buy at Stifel, as they now believe the possibility of a sale is 50%/50% and could be pushed back to 1H08.
Think Equity downgraded shares of Texas Instruments (NYSE: TXN) to Source of Funds from Accumulate as they believe competition could hinder Q4 and 2008 growth for wireless.
MOST NOTEWORTHY: Pharmacopeia, Zumiez, Norfolk Southern and OccuLogix were today's noteworthy upgrades:
CIBC upgraded Pharmacopeia (NASDAQ: PCOP) to Sector Outperformer from Sector Performer, as they believe its lead cardiovascular drug DARA has the potential to become an important new therapy for hypertension and diabetic nephropathy.
Think Equity upgraded shares of Zumiez (NASDAQ: ZUMZ) to Buy from Accumulate to reflect the company's strong same store sales growth.
Caris upgraded shares of OccuLogix (NASDAQ: OCCX) to Above Average from Average, as they believe weakness in the stock creates a buying opportunity. The firm believes the stock has dropped due to concerns about the company's cash position, but thinks the current stock price underestimates the revenue potential of the company's assets.
OTHER UPGRADES:
BRE Properties (NYSE: BRE) was upgraded to Outperform from Neutral at Credit Suisse.
Wal-Mart Stores Inc. (NYSE: WMT) shares are up over 3.5% in premartket trading after the world's largest retailer reported a 1.4% rise in September sales at U.S. stores open at least a year, toward the low end of its forecast. Analysts were expecting a 1.9% rise according to Reuters. Wal-Mart, however, raised its third-quarter earnings estimate to 66 cents to 69 cents per share, up from a previous forecast of 62 cents to 65 cents.
Apple Inc. (NASDAQ: AAPL) is up nearly 1.4% in premarket trading. Apple 2.0 reports on a Bernstein analyst note that claims Apple has 29% market share of the top priced notebooks. He points out to a few strengths -- like the growth it has achieved in PCs -- and vulnerabilities -- like having a dominant market share in some areas without much room for growth.
Google Inc. (NASDAQ: GOOG) shares continue to set daily records. After finishing the day up 1.66% yesterday to $625.39, shares are trading up another 1% in premarket action. Google has surpassed Wal-Mart's market cap!
Johnson & Johnson (NYSE: JNJ) J&J's McNeil-PPC unit voluntarily recalled certain infant cough and cold products, citing "rare" instances of misuse leading to overdoses "particularly in infants under two years of age."
Wachovia Capital Markets downgraded its rating on Abbott Laboratories Inc (NYSE: ABT) to Market Perform from Outperform, citing a large number of challenges facing the company's key franchises, like possible delay of Abbott's drug-eluting stent, Xience.
From the tlyonthewall.com: Citigroup reiterated its Buy rating on Coca-Cola (NYSE: KO) and raised its target price to $67 from $60. Citigroup expects above consensus earnings results in Q3 and beyond due to the turnaround in KO's Japanese business.
Sirius Satellite Radio Inc. (NASDAQ: SIRI) and XM Satellite Radio Holdings Inc. (NASDAQ: XMSR) surged yesterday after Citigroup analyst Eileen Furukawa estimated that the proposed multibillion-dollar merger has a greater than 60% chance to succeed. The analyst believes regulators have shifted in favor of the merger and that the market, currently giving the deal only a 24% chance of passing regulatory muster, is underestimating the chances and is too bearish. Furukawa has upped XM's price target to $19.50 from $15.
Still, if the merger goes through, Furukawa estimates it could produce up to $7.2 billion in cost savings and further, this estimate might be conservative as it does not include capex savings. In addition, the merged company could drive higher ad revenues and move away from the subscriber-based model into the ad-revenue one that seems to be where many believe the money is, especially as the early subscriber growth both companies experienced has cooled.
If the merger indeed succeeds and the cost savings are achieved, there may be a chance the combined company could rediscover the earlier growth it once witnessed. As Dana Cimilluca of the WSJ Deal Journal notes, this cost savings is bigger than XM's market cap of $4.67 billion, so no wonder both companies and their shareholders pushed the merger forward so passionately. They know what might happen if the merger doesn't go through.
One last comment on this. Contrary to Furukawa, Jonathan Jacoby of Banc of America Securities thinks that the stocks' recent prices actually imply that investors think there is an 85% chance of the merger succeeding. I'm not sure what could explain such a big difference in the two opinions, but I do know what mine has been all along and why I'm in trouble with many satellite fans. I do believe these to be too risky for their potential upside and I'm staying out.
Tuesday, SIRI shares closed up 3.77% to $3.5799 and XMSR shares up 6.87% to $15.24. Today, XM shares are cooling a bit, down over 1% to $15.08, while Sirius shares are continuing to climb, up more than 3% to $3.69 by midday.
MOST NOTEWORTHY: Shutterfly, Drugstore.com, S.Y. Bancorp and Stericycle were today's noteworthy initiations:
Oppenheimer started shares of Shutterfly Inc (NASDAQ: SFLY) with a Buy rating and $42 target. The firm believes secular growth in digital photography and increasing adoption of user generated print publishing will drive EBITDA growth of 30%-40% over the next 2-3 years.
Oppenheimer also initiated Drugstore.com Inc (NASDAQ: DSCM) with a Buy rating and $5 target, as they expect growth in the company's higher margin beauty segment could drive EBITDA above consensus estimates.
Baird is positive on S.Y. Bancorp Inc's (NASDAQ: SYBT) valuation, capital-rich balance sheet, and top-tier profitability and resumed coverage with an Outperform rating.
The firm also started shares of Stericycle Inc (NASDAQ: SRCL) with a Neutral rating, noting it would be more aggressive on shares in the mid-$40s or if earnings catch up with the passing of time.
OTHER INITIATIONS:
UBS initiated Praxair Inc (NYSE: PX) with a Buy rating and $94 target and added shares to its Strategic Stock Selection List.
From among its hghest-rated stocks, Standard & Poor's analysts selects a "Stock of the Week" for its advisory service, The Outlook, and it latest is Teva Pharmaceutical Industries (NASDAQ: TEVA).
The service explains, "Teva has what we believe to be the broadest product line and most extensive generic drug pipeline in the U.S., as well as a leading generic lineup in other countries. We believe Teva's ability to offer 'one-stop shopping' for a wide variety of generic drugs has enabled many of its products to garner leading market shares.
"In 2006, Teva launched 30 new products in the U.S. and by yearend was selling 315 generics. As of June 30, 2007, Teva had 153 Abbreviated New Drug Applications filed with the FDA, representing more than $89 billion annually in brand value."
The Outlook continues, "Teva recently submitted its first biogenerics filing with the European Medicines Agency and the first biogenerics filing in Switzerland. We believe that the company has the technology and manufacturing capacity to be a major player in generic equivalents of biotech drugs.
"We lack visibility as to how large a market in such drugs Teva will be able to command once it launches its biogenerics in Western Europe and, eventually, we believe, the U.S. Nonetheless, we expect demand for its biogenerics to be sizable owing to our view of the high cost of biotech drugs."
MOST NOTEWORTHY: Jones Lang LaSalle, Digital River, Dynamic Materials, Allot Communications and Oxford Industries were today's noteworthy downgrades:
Wachovia downgraded shares of Jones Lang LaSalle (NYSE: JLL) to Market Perform from Outperform, as they expect the deterioration in the credit markets to lead to fewer closed deals over the next year.
Oppenheimer transitioned coverage of Digital River (NASDAQ: DRIV) and downgraded shares to Neutral from Buy. The broker finds shares fairly valued given the pricing pressure and customer concentration.
Jefferies downgraded shares of Dynamic Materials Corporation (NASDAQ: BOOM) to Hold from Buy on valuation as they believe shares are already pricing in the company's near-term earnings potential.
Allot Communications (NASDAQ: ALLT) was downgraded to Sector Performer from Outperformer at CIBC World Markets after the company pre-announced weaker-than-expected Q3 results.
Oxford Industries (NYSE: OXM) was downgraded to Hold from Buy at Morgan Joseph and to Neutral from Buy at SunTrust following the disappointing Q1 report and guidance.
OTHER DOWNGRADES:
Piper Jaffray downgraded Target Corporation (NYSE: TGT) to Market Perform from Outperform.
Thornburg Mortgage (NYSE: TMA) was downgraded to Underperform from Market Perform at Keefe Bruyette.
MOST NOTEWORTHY: The ocean shippers sector, Tesoro, Siemens AG and MGI Pharma were today's noteworthy upgrades:
Bear Stears upgraded the ocean shippers sector to Market Weight from Market Underweight, citing higher day rates in the dry bulk market. The firm sees potential upside for dry bulk firms Eagle Bulk Shipping (NASDAQ: EGLE), Quintana Maritime Limited (NASDAQ: QMAR) and Ultrapetrol Ltd (NASDAQ: ULTR).
Bernstein raised shares of Tesoro Corporation (NYSE: TSO) to Outperform from Market Perform and expects a rebound in West Coast refining margins.
ING upgraded shares of Siemens AG (NYSE: SI) to Buy from Hold on valuation and the possibility the company may exit businesses.
MGI Pharma (NASDAQ: MOGN) was upgraded at JP Morgan to Overweight from Neutral, citing expectations for a strong Q3, Aloxi re-acceleration, Dacogen growth, and Auqavan opportunity.
OTHER UPGRADES:
UBS upgraded shares of Agnico-Eagle (NYSE: AEM) to Buy from Neutral.
PetSmart Inc. (NASDAQ: PETM) this morning trimmed its sales and profit forecast for the rest of the year due to weak consumer spending and warmer-than-usual weather. PetSmart now expects 17 cents to 20 cents per share for the third quarter, from a previous forecast of 21 cents to 23 cents earnings per share.
ConAgra Foods Inc. (NYSE: CAG) "voluntarily stopped production at the Missouri plant that makes its Banquet pot pies after health officials said the pies may be linked to 139 cases of salmonella in 30 states, including Wisconsin."
Oracle (NASDAQ: ORCL) yesterday announced it has agreed to acquire LogicalApps, a provider of automated Governance, Risk and Compliance (GRC) controls management solutions.
While many schools ban and confiscate Apple Inc.'s (NASDAQ: AAPL) iPods, some found a good use for them, The New York Times Reports -- to help bilingual kids with some difficulty understanding English. As for the iPhone, Piper Jaffray conducted a survey and found that 3% of teens already own an iPhone.
Hoping to capitalize on the social networking craze, eBay Inc. (NASDAQ: EBAY) has launched its own version of a social networking service today, Neighborhoods, and is promising other customer-friendly features by year's end.
Google Inc. (NASDAQ: GOOG) has bought Jaiku, an activity stream and presence sharing service that works from the Web and mobile phones.
There was much news on Sirius Satellite Radio (NASDAQ: SIRI) and XM Satellite Radio (NASDAQ: XMSR) yesterday and the shares surged after a Citigroup analyst Eileen Furukawa estimated the transaction's likelihood of closing at greater than 60%. The merger, she said, could produce up to $7 billion in cost savings. She has upped XM's price target to $19.50 from $15. The market, however, still gives the deal only a 24% chance of passing regulatory muster. SIRI shares closed up 3.77% and XMSR shares up 6.87%.
Countrywide (NYSE:CFC), a U.S. home mortgage lender, is down .92 to $19.18. According to Dow Jones Source; From CFC's Chairman of the Board Angelo R Mozilo sold 139,918 shares at $20.14 for a value of $2,818,368 on 10/8/07 after exercising 139,918 shares for $9.94 for value of $1,390,785 on 10/8/07. CFC November option implied volatility of 68 is above its 26-week average of 59 according to Track Data, suggesting larger risk.
US Airways (NYSE: LCC) is recently up .95 to $31.52. Goldman Sachs upgraded LCC to Buy from Neutral and raised its price target to $36 from $33. LCC over all option implied volatility of 57 is above its 26-week average of 52 according to Track Data, suggesting slightly larger risks.
Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
MOST NOTEWORTHY: Entertainment software stocks, Luxottica and Hansen Medical were today's noteworthy initiations:
Citigroup initiated Electronic Arts (NASDAQ: ERTS) and Activision (NASDAQ: ATVI) with Buy ratings and targets of $75 and $29, respectively; the firm initiated Take-Two (NASDAQ: TTWO) and THQ Inc (NASDAQ: THQI) with Hold ratings and targets of $23 and $34, respectively.
Citigroup also started shares of Luxottica Group (NYSE: LUX) with a Buy rating. The firm believes the company can maintain its dominant market position given its house brands portfolio and early expansion into emerging markets.
Merriman started shares of Hansen Medical (NASDAQ: HNSN) with a Buy rating and thinks the company's Sensei System could radically change the landscape of catheter based surgery. The firm believes the stock can trade to the $34-$41 range in 12-18 months.
MOST NOTEWORTHY: Coca-Cola, PepsiCo, Business Objects, Cognos and Cooper Companies were today's noteworthy downgrades:
Deutsche Bank downgraded Coca-Cola Company (NYSE: KO) and PepsiCo (NYSE: PEP) to Hold from Buy on valuation, as they believe shares reflect prospects for growth.
Business Objects (NASDAQ: BOBJ) was downgraded to Neutral from Buy at UBS following the acquisition by SAP AG (NYSE: SAP) and to Hold from Buy at Jefferies, as the firm finds the acquisition price fair and does not expect a counter-bid. Soleil believes the SAP offer is reflected in the stock price, and downgraded Business Objects to Hold from Buy.
Roth Capital downgraded shares of Cognos (NASDAQ: COGN) to Hold from Buy based on recent share appreciation as shares capture a vast majority of a potential takeover bid; Goldman downgraded shares to Neutral from Buy and Jefferies downgraded shares to Hold from Buy on valuation.
JP Morgan lowered shares of Cooper Companies (NYSE: COO) to Underweight from Neutral. The firm believes Street estimates are too high given a negative mix shift in the company's contact lens business, which could lead to a FY08 EPS shortfall.
Elizabeth Arden (NASDAQ: RDEN) was downgraded to Neutral from Buy at SunTrust.
UBS downgraded Healthcare REITs to Market Weight from Overweight. UBS downgraded Health Care REIT (NYSE: HCN) and Ventas (NYSE: VTR) to Neutral from Buy and Omega Healthcare (NYSE: OHI) to Sell from Neutral.
MOST NOTEWORTHY: CyberSource, Century Casinos, Spectrum Pharm and Winnebago were today's noteworthy upgrades:
JMP Securities upgraded shares of CyberSource (NASDAQ: CYBS) to Market Outperform from Market Perform citing valuation, positive management comments regarding BidPay, and incrementally positive industry checks on its fraud product.
Brean Murray upgraded shares of Century Casinos (NASDAQ: CNTY) to Buy from Hold based on continued progress at recently opened properties, reduced Street expectations, and potential catalysts.
Brean Murray also upgraded Spectrum Pharmaceuticals (NASDAQ: SPPI) to Buy from Hold. The firm is highly confident that Spectrum's ozarelix will demonstrate similar efficacy and safety in the current U.S. Phase IIb trial and expects statistical significant. The firm expects Ph III initiations by year-end 2007 and Ph IIb data to be released on 2Q08.
Winnebago Industries (NYSE: WGO) was upgraded to Outperform from Sector Perform at RBC Capital. The firm expects Winnebago to begin to post better earnings from more favorable mix and pricing in the 2008 model year.
EMC Corp. (NYSE: EMC), the data storage company that powers much of the digital storage needs for large companies and internet providers, has seen its shares hit a six-year high not because of its own merits, but because it owns so much of software virtualization company VMWare, Inc. (NYSE: VMW)..gif){kind=logo}
Wal-Mart Stores Inc. (NYSE: 
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