Motorola Exec Won’t Cut His Hair Until Stock Price Rises
Posted by Eddy Elfenbein on April 8th, 2008 at 3:11 pm

This is pathetic:

At a meeting of Motorola Inc. executives in May 2000, Patrick Canavan loudly announced that he wouldn’t cut his hair until the company’s share price matched its all-time high of about $60 reached earlier that year. (The figure reflects a subsequent stock split.) Growing a ponytail represented “a symbol of confidence in the company,” recalls Mr. Canavan, then its senior vice president for corporate governance.
Nearly eight years later, Motorola shares are languishing more than 80% below Mr. Canavan’s target. He’s twice lowered the goal, and employed some financial hair-splitting to avoid shears. When it’s wet, his hair now stretches halfway down his back.
Mr. Canavan first lowered his goal to $28 in 2003. With Motorola’s stock around $23 in September 2005, Mr. Canavan agreed, at the urging of then-Chief Executive Edward Zander, to reduce the target again, to $25. He announced the change in an email to Mr. Zander, titled “Hair Today, Gone Tomorrow.”
When Motorola shares topped $25 several times in early fall 2006, Mr. Zander says he walked into Mr. Canavan’s office and declared, “C’mon, we gotta go cut your hair.” The CEO threatened to fetch a ladder and let colleagues take turns snipping the tail.
Mr. Canavan balked. “It did not feel right to grow hair for almost seven years, then cut it” after a short-lived stock-price bounce, he says. In another email, he assured Mr. Zander that he would fulfill his pledge if Motorola’s share price stayed above $25 through its Jan. 19, 2007, release of full-year earnings. But Motorola’s stock plunged in early January after the company said it would miss profit targets.

Earnings Preview: Bed Bath & Beyond
Posted by Eddy Elfenbein on April 8th, 2008 at 9:53 am

Bed Bath & Beyond (BBBY) is set to report its earnings tomorrow. Here’s part of a preview from AP:

BY THE NUMBERS: Bed Bath & Beyond said it January that it expects to earn 64 cents to 67 cents per share in the fourth quarter, which ends March 1. Analysts polled by Thomson Financial predict earnings of 65 cents per share on revenue of $1.96 billion.
ANALYST TAKE: Matt Nemer of Thomas Weisel Partners LLC said he is concerned about Bed Bath & Beyond’s bedding and textiles segment, which potentially accounts for up to 40 percent of its revenue.
“Continued weakness in the category could pressure the top line, and promotional activity could further impact margins,” the analyst wrote in a Friday client note.
Home furnishings and accessories retailers are being pressured as the housing market sags and consumers curb discretionary spending due to worsening credit problems and high energy costs.
Nemer anticipates a quarterly profit of 64 cents per share on sales of $1.95 billion.
Deutsche Bank North America’s Mike Baker said Bed Bath & Beyond’s margins are being squeezed as it deals with higher advertising and postage and paper costs. The company has had to send out more coupons to stay competitive in the latest economic environment, he said. Bed Bath & Beyond is also fighting rising depreciation and a shift toward lower-margin hard goods.
WHAT’S AHEAD: Nemer anticipates Bed Bath & Beyond will provide a weak fiscal 2008 forecast, due to the current economic climate and management’s cautious view of the market. He estimates 2008 earnings at $2.11 per share.
Analysts predict full-year net income of $2.15 per share.

Mouse Increases Demand on Tiger
Posted by Eddy Elfenbein on April 7th, 2008 at 9:11 am

From the NYT:

Yahoo on Monday reiterated its rejection of a takeover offer from Microsoft, again calling it too low.
The company was responding to a letter from Microsoft that threatened to lower the price of its buyout offer and take it directly to Yahoo shareholders.
Although Microsoft’s offer was initially valued at $31 a share, a drop in the price of Microsoft shares has reduced the offer to just more than $29 a share.
Microsoft’s chief executive, Steven A. Ballmer, raised the pressure on Yahoo’s directors on Saturday in a letter warning that Microsoft would begin a proxy fight seeking to oust them if the two companies did not reach a negotiated deal in the next three weeks.
“Our board’s view of your proposal has not changed,” Yahoo said in a statement. “We continue to believe that your proposal is not in the best interests of Yahoo and our stockholders. Contrary to statements in your letter, stockholders representing a significant portion of our outstanding shares have indicated to us that your proposal substantially undervalues Yahoo. Furthermore, as a result of the decrease in your own stock price, the value of your proposal today is significantly lower than it was when you made your initial proposal.”
The statement added: “We consider your threat to commence an unsolicited offer and proxy contest to displace our independent board members to be counterproductive and inconsistent with your stated objective of a friendly transaction. We are confident that our stockholders understand that our independent board is best positioned to objectively and knowledgeably evaluate our company’s alternatives and to maximize value.”
Senior executives from the companies have met on two occasions since Microsoft made its offer public on Feb. 1, but they have not entered formal negotiations. Yahoo rejected Microsoft’s offer, saying it “substantially undervalues” the company.

Inside Sadr City
Posted by Eddy Elfenbein on April 4th, 2008 at 6:49 pm

What Happens to Bear’s Lacrosse Team?
Posted by Eddy Elfenbein on April 4th, 2008 at 10:31 am

If you have any experience with Wall Streeters, you know that these are the most competitive people you’ll ever meet. With the decline and fall of Bear Stearns, we now must ask what will happen to its lacrosse team.

Among the remaining questions hanging over Bear Stearns Cos. is this: What happens to its lacrosse team?
On ultracompetitive Wall Street, lacrosse-loving traders are keenly watching the fate of the battered firm’s squad. Bear Stearns vanquished rival Lehman Brothers Holdings Inc. in triple overtime and then upset Credit Suisse First Boston last summer to win bragging rights in the Street’s inaugural Gotham Lacrosse tournament.
“I had a couple buddies [at Bear Stearns] who gave me a hard time,” says Chad Burdette, Trinity College ’06, who is now at Lehman’s private investment-management division and is the Lehman team’s informal manager. “I guess I got the last laugh now,” he jokes.
Lacrosse, a contact sport in which players fling a rubber ball from a net attached to the end of a stick, long has been part of Wall Street’s culture. It’s popular in the New York area and at many prep schools and Ivy League colleges. According to one old joke, the only way to get a job on Wall Street is to have high test scores or play lacrosse.
“Specifically with lacrosse, people hiring on Wall Street have a lot of respect for athletes,” says Bear Stearns’s Pete LeSueur, Johns Hopkins ’05 and an Academic All-American. “There’s definitely a strong correlation between being able to handle pressure as a trader and being able to handle pressure as an athlete.”

Perfect Logic
Posted by Eddy Elfenbein on April 2nd, 2008 at 9:30 am

My post yesterday on gold and if it’s possibly a deflating bubble elicited a number of interesting, and predictable comments from the gold bugs over at Seeking Alpha. My personal favorite came from Gigem77:

Now let’s look at time. Gold is up 34% year over year despite the recent correction. How is the dow doing year over year?

So gold can’t possibly be in a bubble. The reason: Because it’s up so much.

FT: A Hard Lesson in Bank Management
Posted by Eddy Elfenbein on April 2nd, 2008 at 9:09 am

The Financial Times looks at the UBS mess. Here are the two last two paragraphs:

The Swiss bank’s rivals should learn, too, from its failure to identify early on the scale of its exposure to mortgage-related assets. Providing as full a disclosure as possible may well help the share price. At least, it is essential for smoother relations with investors.
It will take years for UBS to recover from the fix it finds itself in. The new chairman must rebuild relations with investors and stabilise the bank, and find new opportunities for business, perhaps by expanding wealth management. It will be quite a task.

Wallstrip Does CLARCOR
Posted by Eddy Elfenbein on April 1st, 2008 at 11:22 am

Julie profiles CLARCOR (CLC), one of our Buy List stocks.

Here’s a spreadsheet of Clarcor’s results for the past few years.

The End of the Gold Bubble
Posted by Eddy Elfenbein on April 1st, 2008 at 10:17 am

A few weeks ago, I wrote a post criticizing the fear the something must be done to counteract investment bubbles. I said that one of the problems is, how do we even know if we’re in a bubble? I wrote:

How can we be sure it’s a bubble when an asset inflates? In the 1950s, stock prices soared and they never really came back down. The phrase “permanently high plateau” hasn’t had a good record since the 1920s, but I think that’s an accurate description of what happened in the 1950s.
Is gold a bubble right now? What about oil? Or the Euro? Or could it be that we’re simply adjusting to a new era of commodity prices? I don’t know and for now, I’m happy to consider these open questions. I will note, however, that adjusted for inflation, commodity prices have historically plunged.

Some commenters wrote that I was crazy (as they often do) because it was perfectly obvious (in all caps) that we were in a credit bubble. But no one addressed my concerns that we could be in a gold bubble. In fact, come said that we’re certainly not because of…well, the standard bullish arguments for gold.
Now it looks like gold’s run may be coming to an end. Again, I’m not saying it is, but look at what’s happening. As I writing this, the contract for June gold is down to $892. That’s a huge drop just in the last two weeks.

W.R. Berkley to Change Ticker Symbol
Posted by Eddy Elfenbein on April 1st, 2008 at 9:54 am

Here’s a heads-up to BER shareholders. In two weeks, W.R. Berkley Corp. will change its ticker symbol from “WRB” from “BER.” This is the second ticker symbol change for a stock on our Buy List. In 2006, Harley-Davidson switched from HDI to HOG.
I like HOG a lot better. Personally, I’m a big fan of the fun tickers. Here’s a list of my favorites:
1. (BUD) Anheuser-Busch
2. (WOOF) VCA Antech (veterinary services)
3. (BOOM) Dynamic Materials
4. (FIZ) National Beverage
5. (LVB) Steinway Musical Instruments (in honor of Ludwig Van Beethoven)
6. (ZEUS) Olympic Steel
7. (CHUX) O’Charley’s Inc.
8. (TAP) Molson Coors Brewing
9. (BID) Sotheby’s Holdings
10. (LENS) Concord Camera