2011 October

Thailand Floods Wreaking Havoc In Computer Industry

As the flooding continues in Bangkok and throughout most of Thailand, the computer industry is faced with higher pricing for computer hard drives and a supply chain that will probably be affected through the end of the year.

In Bangkok over the weekend, volunteers raced to shore up the city’s defenses against a massive flow of water that has already inundated parts of the capital and a vast swath of countryside. High tides on the Chao Phraya River are expected to peak this weekend which could inundate Bangkok with flood waters. Thailand has seen the worst flooding in decades.

Rising water levels coming in from the Gulf of Thailand were flooding riverside districts in Chinatown and making it quite difficult to channel the flood waters away from the populated and low-lying ares of Bangkok.

The computer industry has been especially hard hit by the flooding. Seagate Technology (NASDAQ:STX) and Western Digital Corporation (NYSE:WDC) have been hard hit. Both companies manufacture hard drives for computers and are second only to China as major suppliers for computer companies.

Western Digital has warned that its operations have been greatly affected by the flooding, including plant closures.

According to Marketwatch, technology research firm IHS iSuppli has estimated that worldwide shipments of hard drives could fall by 30% during the last three months of the year. Reuters reported that some retailers contacted have raised the average price on a hard drive to $90 from $60.

Other companies reporting problems with the floods are Samsung Electronics and Acer Inc. both saying sales of personal computers could be affected by the rising prices of hard drives from the region as well as the shortage of such hard drives.

Will Upcoming Week Be a Trick Or Treat For The Economy?

The upcoming week will close out October’s record setting double-digit market gains which reversed summer’s losses. The week will bring news of the monthly jobs data report, more earnings from companies and a two day Federal reserve meeting is scheduled for Tuesday and Wednesday. Investors will be closely monitoring the activity for some treats rather than tricks.

Last week, European leaders made progress on their sovereign debt crisis and are expected to take the agreement to a meeting of the G-20 in Cannes on Thursday and Friday of next week. American economists believe the European cloud is lifted for now, and so the focus comes back to the U.S. economy.

The jobs report is expected to show the creation of 100,000 nonfarm jobs in October. There is also a slew of earnings results to be reported by major companies such as Kraft Foods (NYSE:KFT). There will also be data reported on manufacturing and service sector activity.

The big focus this week will be on the Federal Reserve as it holds its next to last meeting of the year. On Wednesday, Federal Reserve Chairman Ben Bernanke will be holding a press conference after the Fed releases its statement. No doubt, investors will be listening closely.

There has been some speculation that the Fed could start up a new QE3 (quantitative easing program). Other speculation is the Fed will focus more on mortgages. The Fed is expected to give an economic update on the U.S. economy.

Most economists agree that while data points to the economy getting a little better, there is still a long way to go to get it fully cranked and running The unemployment picture continues to weigh down the prospects of growth. While consumer confidence is up, many wonder if it will hold steadfast through the crucial upcoming holiday season. Needles to say, only time will tell.

Banks Change Their Minds Over Debit Card Fees

News sources say Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC) are joining a growing list of banks who are reversing their decision to charge for debit card use. There continues to be a backlash over Bank of America’s planned $5.00 a month fee. Banks are trying to justify the fees by stating they need to recoup revenue lost to new regulations. The fees have sparked a huge backlash by consumers nationwide.

Sources say Chase said it will stop charging the $3.00 per month fee for debit card use in November when its pilot program is slated to end in Wisconsin and Georgia.

Wells Fargo had a similar pilot program in five states, but announced on Friday it was cancelling that program. Other large banks that charge a fee for debit card use are SunTrust and Regions Financial.

Senator Richard Durbin a Democrat from Illinois, called the new fees by the banks an “outrage.” Senator Durbin was one of the authors of the new regulation legislation imposed on the banks. “It is hard to believe that a bank would impose such a fee on loyal customers who simply are trying to access their own money on deposit,” he said. “Especially when Bank of America for years has been encouraging their customers to use debit cards as much as possible.” Durbin has encouraged customers to “vote with their feet” and walk away from these banks.

The “Occupy Wall Street” protests have been a vehicle for consumers to protest the outrageous fees banks come up with. There have been numerous signs spotted at the protests around the country railing against the banks.

A source from Bank of America (NYSE:BAC) said the protests haven’t gone unnoticed by the bank. It is expected that Bank of America will be announcing new ways for their customers to avoid the added fees through using direct deposit, maintaining accounts with minimum balances, or by using Bank of America credit cards.

Stocks With Above Average Volume for 10/28: STMP, FEIC, DECK, CEVA, BKI

Stamps.com Inc. (NASDAQ:STMP) has seen a nearly 600% volume increase today after the company announced third quarter results. STMP saw total revenue increase 20% compared to the same quarter last year. Ken McBride, CEO of Stamps.com, had this to say about the company’s third quarter results. “”We continued to experience record results in nearly every area of our business during the third quarter.” McBride continued, “We achieved the highest year-over-year growth rate we have ever seen in our core PC Postage business revenue at 25%, and we achieved 52% year-over-growth in our non-GAAP net earnings per share. STMP is trading up $6.20 at $32.11, a gain of 24%. Over 1.7 million shares of STMP have been traded today, its 3 month daily average volume is only 345 thousand shares.

FEI Company (NASDAQ:FEIC) has traded over 1.3 million shares today, an increase of over 300% its normal volume. FEIC is continuing higher after announcing record earnings and a $50 million share repurchase program on Thursday. FEI Company’s revenue was up 34% over the previous year’s quarter at $205.3 million. FEIC is up $5.34 at $41.85, an increase of over 14% today.

Deckers Outdoor Corp. (NASDAQ:DECK) has seen a 200% increase in volume today with over 3 million shares traded. The company announced their third quarter results yesterday after market close. Profits in the third quarter rose 48% on higher sales of their signature UGG boots. Deckers also expects 2011 earnings to beat expectations of 17% and be 22% over 2010. DECK is up over $10 at $116.93, a jump of over 10%.

CEVA Inc. (NASDAQ:CEVA) has traded close to 400 thousand shares so far today, well above its daily average of 259 thousand shares. CEVA announced third quarter results yesterday and the company raised its 2011 forecast for the third time. CEVA is up $1.15 at $32.66 today, a gain of over 3%. Since announcing third quarter results, CEVA has been up as much as $6.

Buckeye Technologies Inc. (NYSE:BKI) is trading double its 3 month daily average volume today with over 700 thousand shares traded. Buckeye announced their first quarter fiscal 2012 results earlier this week and revealed the company’s income doubled in Q1. BKI is up $2 today at $31.08, a jump of nearly 7%.

Hot Stocks Under 5 Bucks: CMM, DVR, SONS, PNX, BRCD, RTK

China Mass Media Corp. (NYSE:CMM) is up $0.95 at $2.20, a gain of 70%. CMM announced this morning an ordinary to ADS ratio change and a special cash dividend to shareholders. CMM has traded over 466 thousand shares in midday trading. The average daily volume for CMM is only 16 thousand shares.

Cal Dive International Inc. (NYSE:DVR) is up $0.36 at $2.39, a gain of 17%. DVR has traded over 400 thousand shares today with an average daily volume of nearly 2 million shares. DVR’s previous close was $2.03.

Sonus Networks, Inc. (NASDAQ:SONS) is up $0.36 at $2.69, a gain of 15%. SONS is up after announcing their earnings report late yesterday. SONS is up on big volume today with over 4 million shares traded, double its normal trading volume.

Phoenix Companies Inc. (NYSE:PNX) is up $0.19 at $1.49, a gain of 14%. PNX has been trending upward as investors wait for the company’s conference call on its third quarter results on November 2. PNX has traded 356 thousand shares in midday trading and usually trades over 530 thousand shares a day.

Brocade Communication Systems, Inc. (NASDAQ:BRCD) is up $0.13 at $4.57, a gain of 3%. BRCD shares are up as the company is looks for a buyer. BRCD has traded over 6 million shares so far today, about half its normal volume with 3 hours left in the trading day.

Rentech, Inc. (AMEX:RTK) is up $0.08 at $1.56, a gain of 5.4%. RTK has traded nearly 5 million shares so far today, more than double the stock’s normal volume. RTK has gone from $1.20 to over $1.60 since Tuesday.

Five Strong Nasdaq Stocks in Morning Trading

Align Technology Inc. (NASDAQ:ALGN) is seeing gains of nearly 30% this morning and is trading at $23.12 right now. Align released their third quarter results late yesterday and beat Wall Street’s expectations. ALGN is up on above average volume with over 1.2 million shares traded this morning. Volume is about double what ALGN usually sees on average. ALGN is has been in a steady uptrend in the month of October after hitting a low of around $14 on October 3.

ALGN Chart

China Real Estate Information Corporation (NASDAQ:CRIC) is up 16% at $6.29 this morning. E-House China Holdings announced it will buyout China Real Estate Information Corp. in a deal worth $960 million. E-House will pay a 22% premium of $6.62 a share. CRIC has traded over 200 thousand shares this morning, well above its daily average of 74 thousand shares. CRIC has nearly doubled since falling to less than $4 in mid-October.

CRIC Chart

Sonus Networks, Inc. (NASDAQ:SONS) is up 17% at $2.74 as the company’s third quarter results either met or beat analysts’ expectations. SONS is trading above its daily average volume already this morning with nearly 3 million shares traded. SONS has been trading in a range of $2 to $2.80 the past few months. The last time SONS tested $3 was in late July. Strong resistance at SONS’ 200 day moving average at $2.97.

SONS Chart

Micrel Inc. (NASDAQ:MCRL) is up 7.5% at nearly $12 this morning and has been trading in a range between $11.18-12.84. MCRL has traded over 857 thousand shares in early morning trading. This well above its 3 month daily average volume of 555 thousand shares. MCRL has been trending higher this month and was trading at just over $9 on October 1.

MCRL Chart

Canadian Solar Inc. (NASDAQ:CSIQ) is up 10% at $3.83 this morning. CSIQ has traded over 1.1 million shares in early trading, already above its average volume of 960 thousand shares. CSIQ has been in a steady downtrend since July when it was trading above $10. The past few days have seen CSIQ bounce off a bottom of around $3.

CSIQ Chart

Chevron More Than Doubles 3Q Profits

Chevron Corporation (NYSE:CVX) more than doubled its third quarter profits surpassing Wall Street’s expectation. Chevron reported its third quarter results on Friday saying its revenue growth was slower than expected.

Chevron based out of San Ramon, CA said it earned $7.83 billion, or $3.92 a share, last quarter, compared with a profit of $3.77 billion, or $1.87 a share, a year earlier. Analysts had forecasted an earnings per share (EPS) of just $3.48.

Chevron reported revenue increased 30% to $64.43 billion, widely trailing estimates for $67.93 billion. Operating margins expanded to 20.7% from 13.8%.

“We had another successful quarter,” said Chairman and CEO John Watson, “with both strong earnings and cash flow. Current quarter earnings for our upstream operations benefited from higher crude oil prices on world markets. At the same time, gains on asset sales and improved margins for refined petroleum products contributed to increased earnings for our downstream businesses.” Watson commented, “We continue to progress our major capital projects. The recent decision to develop the Wheatstone LNG project represents a major milestone in the company’s efforts to commercialize our significant natural gas resource base in Australia. The Wheatstone and Gorgon LNG projects are expected to provide substantial new energy supplies to meet growing demand in the Asia-Pacific region.”

Chevron reported its average sales price per barrel of crude oil and natural gas liquids was $97 in the third quarter 2011, up from $69 a year ago. The average sales price of natural gas was $4.14 per thousand cubic feet, compared with $4.06 in last year’s third quarter.

Shares of CVX were trading up at $109.58 at 11:19 am ET.

Drugmaker Merck 3Q Soars

U.S. drug-maker Merck & Company, Inc. (NYSE:MRK) based out of Whitehouse Station, NJ, reported a soaring third quarter as compared to the same time a year ago. Merck reported net income climbed to $1.69 billion, or 55 cents per share, in the July-September period. That’s up from $342 million, or 11 cents per share, from a year earlier. The results beat Wall Street estimates sending shares of Merck up 2% in pre-market trading after the announcement.

Excluding acquisition and restructuring charges totaling $1.22 billion after taxes, or 39 cents, adjusted income was up 10 percent to $2.91 billion, or 94 cents per share. The charges were mostly related to its November 2009 purchase of fellow drug-maker Schering-Plough Corp. for $49 billion. The adjusted earnings were 3 cents per share higher than the 91 cents per share expected by analysts surveyed by FactSet, who typically exclude one-time items.

Merck’s revenue rose 8 percent to $12.02 billion from $11.12 billion. Analysts had expected revenue of $11.62 billion. Merck also raised the lower end of its 2011 forecast, to a new range of $3.72 to $3.76 per share, or $2.03 to $2.20 per share excluding one-time items. Analysts have fore-casted $3.73 per share for the year.

Merck is the manufacturer of the the diabetes drug Januvia and the asthma drug Singulair. The company also makes the HIV drug Isentress and the Gardasil and Zostavax vaccines.

“Merck once again delivered a strong quarter,” said Kenneth C. Frazier, president and chief executive officer, “coupling top line growth and strong expense management to report an 11 percent increase to the bottom line. Going forward, Merck will continue to implement our growth strategy, while transforming the way we operate our business,” he said. “Three consecutive quarters of top and bottom line growth demonstrate our ability to consistently perform while at the same time make the strategic investments necessary for the future. We remain focused on driving innovation and value for our customers and shareholders over the long term.”

Consumer Spending Increases For September

The Commerce Department released its monthly report saying consumer spending increased 0.6% in September matching expectations. The report said consumers were saving less to spend more. Economists worry about the downside to this trend for September. Since income is not driving the spending, economists worry the momentum will be lost.

The Commerce Department reports personal savings rates as a percentage of GDP was 3.6% in September.

While spending by consumers account for approximately 70% of U.S. economic activity, income fell 0.1% in August as economists had expected a 0.3% increase in September. Inflation adjusted disposable income slipped 0.1%, declining for a third straight month.

Consumer spending contributed to gross domestic product growing at a 2.5% annual pace in the third quarter, the fastest rate in a year. This was welcomed news after the dismal 1.3% rate in the second quarter.

Unemployment rates stuck above 9% continues to restrain income growth. U.S. employment costs in the private sector rose much less than expected during the third quarter as wages and salaries posted their weakest growth in a year while benefits expanded at their slowest pace since 1999. Benefits costs, which make up about 30% of compensation, grew 0.1% in the quarter, the weakest since March 1999. Wages and salaries expanded by 0.3% during the period, slowing from a 0.4% pace during the second quarter.

HP Will Continue Selling Personal Computers

Hewlett-Packard (NYSE:HPQ) announced on Thursday that it will continue in the personal computer business. There had been speculation that the world’s biggest personal computer vendor was dropping out of the market. The decision follows H-P’s surprise announcement in August that it was considering alternatives for its PC business, including a possible spin-off, as the company focused its energies on the more lucrative segments of the corporate technology market.

“H-P objectively evaluated the strategic, financial and operational impact of spinning off PSG,” Whitman said in a statement, referring to the company’s personal systems group, which covers PCs. The conclusion echoed the worries of many analysts who said giving up its PC business would have a serious impact on H-P’s ability to leverage its enormous supply chain advantage.

H-P said its evaluation of the business unit revealed a deep integration across key operations, such as its supply chain and procurement. The review found that the cost of recreating these operations in a single company outweighed any benefits of separating the PC unit.

The decision to continue in the personal compute business was the first major one facing Meg Whitman since taking over as CEO in September. Analysts believe this will stop the bleeding at Hewlett-Packard and Whitman’s decisive decision making will clean up past mistakes at Hewlett-Packard sooner than later.
Analysts now are thinking that H-P will thin out its PC family and focus on fewer products with more attractive features.

Shares of H-P were trading at 27.64, up 2.03% in pre-market trading today.

Amazon Talking Kindle To Chinese

Amazon.com Inc. (NASDAQ:AMZN) is in talks with China to bring in its e-reader the Kindle, and its recent addition the Kindle Fire. Amazon’s Senior Vice President Marc Onetto said in an interview on Thursday that Amazon’s kindle products are still under discussion with Chinese regulators over copyright issues.

“We hope to launch products in China that are simple and user-friendly. If there are too many vendors participating, the product will become very complex. We are not only concerned with the speed to market in China but also with user needs,” Onetto said.

Amazon acquired Chinese e-commerce website Joyo.com in 2004. On Thursday, Amazon dropped Joyo from the name and is now known as Amazon China. The new local website is www.z.cn.

Amazon.com, Inc. (NASDAQ:AMZN), a Fortune 500 company based in Seattle, opened on the World Wide Web in July 1995.

Earlier in the week, Amazon reported far weaker than expected third quarter results and disappointed investors. Analysts forecasted huge results with the introduction of the Kindle Fire.
Amazon’s weak results were due to the costs of bring the Kindle Fire to market.

According to Amazon’s company website, the fourth quarter 2011 guidance is as follows:

  • Net sales are expected to be between $16.45 billion and $18.65 billion, or to grow between 27% and 44% compared with fourth quarter 2010.
  • Operating income (loss) is expected to be between $(200) million and $250 million, or between 142% decline and 47% decline compared with fourth quarter 2010.
  • This guidance includes approximately $200 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions or investments are concluded and that there are no further revisions to stock-based compensation estimates.

Shares of Amazon were trading down in the pre-market at 205.55, or negative 0.59%.

Whirpool Announces Job Cuts To Reduce Costs

Whirlpool Corporation (NYSE:WHR) shares could see some movement today after they announced the company plans to cut 5,000 jobs to help reduce cost. This round of job cuts equates to roughly 10% of the workforce in both North America and Europe. A good portion of these cuts, 1,200 jobs, will occur when the Fort Smith Arkansas refrigerator manufacturing plant closes in 2012.

Whirlpool is having to tighten the reigns on spending cost for materials is continuing to rise while demand for new appliances is continuing to soften with the recent economic slowdown. The company has been trying to combat rising cost by raising price on products to consumers to help combat decline in appliance purchases. The cuts will save Whirlpool nearly $400 million by 2013.

Recently Whirlpool reported third quarter earnings in which the company reported a net income of $177 million, or $2.27 per share. This third quarter result fell well short of Wall Street expectations which included earnings per share of $2.73. This has caused Whirlpool to lower their annual guidance to $4.75-5.25 per share down from previous guidance of $7.25-$8.25 per share.

About Whirlpool Corporation:

Whirlpool Corporation engages in the manufacture and marketing of home appliances worldwide. Its principal products include laundry appliances, refrigerators, cooking appliances, dishwashers, mixers, and other small household appliances.

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