Wii Works Magic On Nintendo Results

Strong holiday sales of its Wii videogame console and Nintendo DS portable game device helped Nintendo Co. nearly double its nine-month net profit and raise its sales forecasts for the third time this business year.

The Japanese company said its net profit for the April to December period jumped 96% to ¥258.93 billion ($2.43 billion) from ¥131.92 billion a year earlier. Sales rose 85% to ¥1.316 trillion from ¥712.58 billion.

Nintendo doesn't break out its results for the latest October-December period.

Nintendo has benefited from the tremendous popularity of the Wii, which lets users intuitively play games like virtual tennis and bowling by swinging a controller. In the U.S., the console was in such high demand during the holidays that stores were sold out of them. In Japan, a new game launched in December called Wii Fit, which lets users play exercise games by standing on a board that can detect shifts in weight, saw strong sales.

The Wii, which launched in November 2006, has outsold both Sony Corp.'s PlayStation 3 and Microsoft Corp.'s Xbox 360 world-wide. Nintendo said it now expected to sell 18.5 million Wii consoles this business year, which ends March 31, compared with its forecast of 14 million at the beginning of the year.

Over the past few years, Nintendo has made a conscious effort to expand the videogame market by targeting new game players such as women and the elderly with easy-to-play casual games. In addition to the Wii, its Nintendo DS portable game machine, with its two screens including a touch screen that detects handwriting, has also been a huge hit. The company raised its full-year forecast for the DS to 29.5 million units from 28 million.

Nintendo has already achieved 94% of its full-year net profit forecast. Still, the company, known for its conservatism, kept its profit outlook unchanged even as it raised its operating profit forecast to ¥460 billion from its previous forecast made in October of ¥420 billion. In the year-earlier period, its operating profit was ¥226 billion. It also raised its sales forecast to ¥1.63 trillion from its previous forecast of ¥1.55 trillion. Sales in the year-earlier period were ¥966.5 billion.

The company, which records significant sales outside of Japan, typically adjusts its full-year net profit forecast in early April after it has accounted for the effect of foreign-exchange rates on its business.

Analysts say they believe that videogame sales will continue to be strong despite worries of an economic slowdown in the U.S. as consumers spend more time at home. Nintendo in particular is likely to continue to see strong momentum as highly-anticipated games like Wii Fit enter markets in the U.S. and Europe later this calendar year.

Nintendo raised its dividend forecast for the full year to ¥1,190 per share from ¥1,090 per share. Last year, it paid out ¥690 per share. Nintendo's results are based on Japanese accounting standards.
Source : http://online.wsj.com

Bank of France to open inquiry into Socgen fraud

The Bank of France said on Thursday it would open an inquiry into an alleged fraud at French bank Societe Generale which will have a 4.9 billion euros negative impact on the group.

The central bank said it had been immediately informed about the fraud and noted the bank had taken steps to reinforce its capital in the light of the news and the crisis in financial markets.

"In these conditions, the financial situation of the bank does not require any particular comment," the Bank of France said in a statement.

Bank of France Governor Christian Noyer, who is also a governing council member of the European Central Bank, will hold a news conference on SocGen at 1330 GMT.

Last Friday, Noyer said in an interview with the International Herald Tribune that he was not expecting any "strong shocks" from French banks' 2007 earnings.

He said he was reasonably confident that French banks were in a position to weather the turmoil in financial markets.

SocGen also announced on Thursday a 2.05 billion euros writedown related to the global credit crunch.

The IHT website reported Noyer as saying, without directly quoting him, that he had been assessing the balance sheets of banks like SocGen and BNP Paribas before they revealed their 2007 results.

However, the Bank of France later issued a statement saying: "In the interview that appeared today, Governor Christian Noyer at no moment mentioned the name of a bank."
Source : http://www.reuters.com

Bush Meets Democrats on Stimulus

President Bush met with leaders from both political parties in Congress to brief them on his trip to the Middle East last week. But it was concern about the U.S. economy that dominated Mr. Bush's session with lawmakers.

"I believe we can find common ground to get something done that is big enough and effective enough so that an economy that is inherently strong gets a boost to make sure that this uncertainty does not translate into more economic woes for our workers and small business people," said Mr. Bush.

President Bush says he has reasonable expectations about how quickly an economic stimulus plan can get through Congress, but he is optimistic that it will.

Mr. Bush says broad-based tax relief must be big enough to make a difference. So he is proposing an amount equal to about one percent of the value of all U.S. goods and services. That is between $140 billion and $150 billion.

Before their meeting at the White House, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi met with Treasury Secretary Henry Paulson, who was named by President Bush as his lead negotiator on the stimulus plan.

Speaker Pelosi told reporters that congressional Democrats are ready to work with their Republican colleagues and the president.

"It's important that we have a stimulus package that is timely, that is temporary, and that is targeted," she said. "To that end, we are going to work in a bipartisan way in Congress and with the president to do just that."

President Bush wants tax incentives for businesses to make investments this year as well as direct and rapid income tax relief for individuals.

Democrats agree on the need to help individual taxpayers, but they also want to boost unemployment benefits and food aid in the stimulus package. That social spending may face opposition from a president who says the deal should not include spending projects with little immediate impact on the economy.

President Bush remains determined to make his record tax cuts permanent, but removed what would have been a big obstacle to any deal by agreeing not to include that demand in this request for temporary economic stimulus.

Stock markets around the world have declined recently as investors worry that a slowing U.S. economy could hurt businesses in the many nations that trade with the United States. Federal Reserve officials say they cut rates to 3.5 percent to ease tight credit.
Source : http://voanews.com

Emerging debt-Wary but resilient markets eye US recession risk

Emerging markets felt the heat but were not seriously burned on Tuesday after U.S. shares fell sharply on recession fears despite the U.S. Federal Reserve's largest cut in a key interest rate in 23 years.

Dollar-denominated sovereign bonds and a broad measure of emerging market stocks fell, albeit above earlier lows. On the positive side, Latin American stocks and currencies rallied.

In volatile trade, global markets recovered ground after the Fed's surprise cut in the federal funds rate by three-quarters of a percentage point.

Following Monday's carnage in international markets, brought on by U.S. recession concerns, the Fed brought the rate down to 3.5 percent. U.S. markets were closed on Monday for a holiday.

Historically, emerging markets are putting in strong performances given the volatile environment. In the past, their less mature economies and markets would have suffered bigger routs. This has led some investors to believe emerging markets have "de-coupled" from developed markets.

"On a trend basis, a multi-month or even multi-year basis, I would expect emerging markets will probably do fairly well, in that after this correction their growth is to hold up reasonably well, better than what we are seeing in the U.S. and Europe," said Nick Chamie, head of emerging market research at RBC Capital Markets in Toronto.

"Over the long term, that is going to be the case, but in the short term I think they are still quite vulnerable to significant sell-offs," he said.

"I think the whole de-coupling myth is well on its way to becoming debunked," Chamie added.
Source : http://www.reuters.com

Bond Insurers’ Distress Rattles Wall Street

If it was a terrible week for Wall Street, it was a devastating one for companies that promise to protect investors against bond losses.

Already under siege for having branched into risky mortgage-related debt from far safer municipal bonds, two bond guarantors — who have insured hundreds of billions of dollars of debt — ended the week in severely weakened conditions.

One insurer, Ambac Assurance, which lost nearly three-fourths of its stock market value in the first four days of the week, lost one of its most coveted assets on Friday: the AAA credit rating that has allowed it to guarantee lower-rated bonds. The company has guaranteed $556 billion in bonds, and about $66.9 billion of the amount is issued by collateralized debt obligations that have come under scrutiny in recent months. Altogether, bond guarantors have written nearly $3.3 trillion in insurance.

A smaller bond guarantor, ACA Financial Guaranty, was facing a midnight deadline to restructure its insurance contracts with investment banks or face a bankruptcy filing.

Ambac, ACA and other bond guarantors are far from household names, but their troubles have sent ripples down Wall Street and Main Street. Bonds issued by states and governments that were insured by the companies have already lost value and the problems may raise the cost of new debt they raise. For investors and banks that have insured their portfolios with Ambac, its downgrade to AA, from AAA, by Fitch Ratings raises fresh questions about just what value the insurance holds, if any.

“The most damning effect is on the value of bond insurance itself,” said Joseph R. Mason, a professor of finance at Drexel University and the Wharton School, both in Philadelphia. “The big question that should be asked for issuers is: ‘Why should I buy bond insurance?’ ”

Ambac, which had won clean bills of health from ratings agencies a month ago, surprised Wall Street on Wednesday by writing down its insurance portfolio by $5.4 billion and ousting its chief executive, Robert J. Genader, after he and the board disagreed over whether the company should raise more capital.

While much of the write-down was the result of declining market value of its contracts, the company admitted that an estimated $1.1 billion represented credit losses on which, over time, it would have to pay claims, something that the credit ratings firms had not anticipated.

After initially saying it would raise capital to shore up its AAA ratings from Standard & Poor’s, Moody’s Investors Service and Fitch Ratings, Ambac reversed itself on Thursday after its stocks lost half their value and a big shareholder called on the company to give up on the AAA rating. A day later, Fitch lowered its rating and S.& P. put a “negative” outlook on the company. Analysts say a downgrade from Moody’s and S.& P. would now seem likely.

“They blew it and lost their window of opportunity to raise capital,” Rob Haines, an analyst at CreditSights, a research firm, said about Ambac.

A spokesman for Ambac declined to comment.

Shares of Ambac closed down 4 cents, to $6.20 on Friday; they fell more than 70 percent for the week, from $21.73.

Mr. Haines said the downgrade did not mean that Ambac was insolvent. While the company will not be able to write many of the insurance contracts it used to before, it can “plod along” by collecting premiums on its existing contracts and pay out claims as bond defaults occur. Fortunately for the company, it only makes payments on lost interest and principal on the debt it insures as it comes due, not all at once when a default occurs.

“Even though this is a big, big negative,” Mr. Haines said, “it doesn’t mean it’s going to go out of business, policyholders can’t pull contracts.”

Customers who have bought insurance protection from Ambac will have to decide whether they should write down the value of that guarantee or sell the underlying bonds. Investors that are required to only own AAA-rated debt may have to sell Ambac insured bonds that no longer have that top implied rating.

“Investment funds, pension funds just flat out refuse to hold anything that is not AAA,” Mr. Mason said.

The New York Insurance Department, which oversees Ambac and MBIA, the nation’s largest bond guarantor, has been holding daily meetings with the companies, according to a spokesman, David Neustadt.

“As a regulator we have to be a facilitator” of several solutions, including a possible bailout, Eric R. Dinallo, the state’s insurance superintendent, said at a news conference before the Fitch downgrade. “That’s our No. 1 goal.”

ACA, which only had a single-A credit rating that was cut to CCC last month, is in a tougher position. Its insurance contracts require it to post collateral when the value of its contracts, or credit default swaps, fall. The company would have to put up at least $1.7 billion, money the company does not have. The company has ceded significant control to the Maryland Insurance Administration, a state agency that regulates it.

Shares of ACA Capital were up 2 cents, to 48 cents, in over-the-counter trading.
Source : http://www.nytimes.com

Sprint’s Customer Erosion Prompts Cutbacks

Sprint Nextel’s announcement on Friday that it is losing customers more rapidly than expected is making investors nervous about a weak economy’s effect on other wireless companies.

Shares of Sprint fell $2.87, or 25 percent, to $8.70 after it said that it planned to lay off 4,000 workers and close stores to trim costs as its customer base shrinks.

The stock prices of AT&T and Verizon also slipped after the news. AT&T, the largest wireless carrier, was down more than 3 percent, and Verizon, which owns Verizon Wireless along with Vodafone, fell more than 4 percent.

Sprint has been struggling for more than a year, and installed a new chief executive only last month. But the sharp drop in the company’s customer count during the traditionally strong holiday quarter, analysts say, raises concerns that the problem extends beyond Sprint.

“The broader question here is whether this is the tip of the iceberg in a deceleration of the U.S. wireless market over all,” said Craig Moffett, an analyst at Sanford C. Bernstein & Company.

Industry analysts had estimated that in the fourth quarter Sprint lost about 350,000 contract subscribers — a carrier’s most valuable customers, signed up for contracts of a year or more. Instead, Sprint announced that it had a net loss of 638,000 contract customers.

“It’s the magnitude of the weakness that is shocking,” said Michael Nelson, an analyst at the Stanford Group, an investment firm.

To reduce costs, Sprint said it planned to cut its payroll by 4,000 workers. The company, based in Reston, Va., currently has about 60,000 employees.

Sprintsaid it would also close 125 company-owned retail stores, about 8 percent of the nearly 1,400 in the Sprint chain. The total labor savings, the company said, should be $700 million to $800 million a year.

The cutbacks were the first major step taken by Sprint since the arrival last month of its new chief executive, Daniel R. Hesse. He had been the chief executive of Embarq Corporation, a local-phone spinoff of Sprint.

Cutting costs at Sprint, analysts say, is a logical step, given the decline in business. But they say the company must address other fundamental issues — some unresolved since Sprint completed its $35 billion purchase of Nextel in 2005. The company, the analysts say, runs two networks that use different technologies, and making the transition to a single compatible technology is proving to be more time-consuming and costly than expected.

Sprint, Mr. Nelson said, has also not settled on a consistent marketing strategy. By contrast, he said, Verizon has successfully promoted the quality of its network with advertisements that include the catchphrase “Can you hear me now?”

And AT&T has carved out a position as offering a reliable network and stylish handsets. It was the first to offer Motorola’s Razr and, later, Apple’s iPhone.

“But Sprint has not come up with a broad enough marketing strategy to appeal to a mass consumer audience yet,” Mr. Nelson said.

It is unclear whether Sprint’s travails are solely its own or portend broader troubles for cellphone carriers. Before the Sprint announcement, Mr. Moffett of Bernstein published a report that noted the telecommunications industry has long been considered a safe haven when the economy is weak. “Suddenly,” he wrote, “that looks like a riskier bet.”

The reason, he said, is doubt about the outlook for the wireless business. The industry has been adding 3 million to 5 million new subscribers a quarter in recent years. But by now, more than 85 percent of Americans are subscribers — well into the 90s, if one includes only adults.

The growth in net new subscribers will inevitably slow. Some of the slippage will be offset by increased revenue per user, as subscribers buy more data services like Web searching, video and audio. But the main engine of growth for the industry, Mr. Moffett said, has been new subscribers.

In the last national economic slowdown, the pace of new-subscriber signups fell approximately in half from 2000 to 2002, before rebounding again.

“If we’re headed into a recession,” Mr. Moffett said, “wireless growth expectations are suspect.”
Source : http://www.nytimes.com

NYSE Buys Amex for $260M

(NYX - Cramer's Take - Stockpickr) said late Thursday that it would acquire the privately held American Stock Exchange for $260 million in stock.

The deal, approved by boards of both companies, will provide the Big Board with additional listings as well as increase its scale in U.S. options, exchange traded funds, closed-end funds, structured products and cash equities. Amex members also will be entitled to additional shares of NYSE Euronext stock based on the planned sale of Amex's lower Manhattan headquarters.

"The addition of the American Stock Exchange to the NYSE Euronext family is highly beneficial for our customers and shareholders, and demonstrates our ongoing commitment to growing our business and product lines," said NYSE CEO Duncan Niederauer. "NYSE Euronext is the established leader in global financial-market consolidation, offering the most attractive and diverse array of products of any global exchange. This transaction is consistent with our strategic objectives and will strengthen our competitive position in the U.S., produce significant operational efficiencies, and create new business opportunities."


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Source : http://www.thestreet.com

NYSE Buys Amex for $260M

(NYX - Cramer's Take - Stockpickr) said late Thursday that it would acquire the privately held American Stock Exchange for $260 million in stock.

The deal, approved by boards of both companies, will provide the Big Board with additional listings as well as increase its scale in U.S. options, exchange traded funds, closed-end funds, structured products and cash equities. Amex members also will be entitled to additional shares of NYSE Euronext stock based on the planned sale of Amex's lower Manhattan headquarters.

"The addition of the American Stock Exchange to the NYSE Euronext family is highly beneficial for our customers and shareholders, and demonstrates our ongoing commitment to growing our business and product lines," said NYSE CEO Duncan Niederauer. "NYSE Euronext is the established leader in global financial-market consolidation, offering the most attractive and diverse array of products of any global exchange. This transaction is consistent with our strategic objectives and will strengthen our competitive position in the U.S., produce significant operational efficiencies, and create new business opportunities."


P.S. Hurry: Save $50 + Get Jim Cramer’s #1 Business Bestseller FREE!
Get a double bonus when you subscribe now to Jim Cramer’s Action Alerts PLUS service: save $50 off an annual subscription and get a FREE copy of Jim’s Stay Mad for Life (a $26 value). To get this limited-time offer, worth over $76,
Source : http://www.thestreet.com