Friday, September 29, 2006

RIMM Analysts Ignore Governance

Research in Motion (RIMM) announces that a review of stock options will most certainly result in restatement of previous earnings in the range of $25 to $40 million. Management is convinced that there will be no material changes to current earnings. In the conference call transcript carried by Seeking Alpha it is obvious that none of the analysts considered the topic. The focus was on short-term issues. No one asked about governance ramifications. While management is to be applauded because they initiated the investigation, sell-side-analysts want to look the other way. Or at least not say anything in public.

Thursday, September 28, 2006

Smithfield Labor Unrest

Smithfield (SFD) may be experiencing a labor protest on Friday Sep 29 outside of their New York Offices according to union sources familiar with the situation. Smithfield owns the worlds largest pork processing plant in Tar Heel South Carolina. The plant is experiencing labor dissatisfaction. Regardless of the legitimacy of the claims the company cannot afford major disruptions. Meat has a short shelve life. Institutional Shareholder Services reports Smithfield Foods Inc.'s Corporate Governance Quotient (CGQ) as of 1-Sep-06 is better than 19.6% of S&P 400 companies and 68.1% of Food Beverage & Tobacco companies.

JNJ Files Lawsuits

Johnson & Johnson (JNJ) “has filed suit in federal court against Abbott Laboratories (ABT) and two medical device manufacturers, seeking at least $5.5 billion for alleged tortious interference and breach of a merger agreement” according to the New Jersey Law Journal. The law suit claims that Guidant leaked information to Boston Scientific (BSX).

Wednesday, September 27, 2006

KFx Name Change

Asensio continues to stay on the KFx (KFX) case noting senior executive and board changes. All changes seem to be sudden and unannounced. KFx also has announced a name change as they attempt to shake off negative PR. Watch for the financial equivalent of rebranding to kick off shortly. The new name “Evergreen Energy” is suspiciously environmentally correct sounding. If the rebranding does not work, watch for the stock to continue a downward spiral.

Tuesday, September 26, 2006

Advanced Medical Optics Poor Optics

Advanced Medical Optics AMO (EYE) has revised guidance downward claiming that the shift to higher margin products is taking longer than anticipated. Long term debt has mounted at an alarming rate almost doubling since year end from $500 million to $871 million at last quarter. Much of this debt was taken on assuming higher margins could adequately debt service the obligations. The company soft peddled their leverage saying that it expects total debt outstanding to be approximately $900 million at the end of the third quarter and adjusted cash from operations for the nine months ended September 29, 2006 to exceed $70 million. Management has been playing with fire. Investors are getting burned.

Monday, September 25, 2006

HP's CEO Conflicted Statements.

Hewlett Packard's (HPQ) current CEO may be issuing conflicted statements according to which carried an article from The Recorder. Mr. Hurd may have pointed the finger or the smoking gun at his own head when he announced last Friday that "Morgan Lewis reports to me, not to the HP board" Mr. Lewis was hired Sep 8 to conduct an independent investigation and represent HP in talks with federal and state prosecutors. Followers of the conflict have noted the evolution from a supposed board problem to governance issues affected by individual executive actions. As investors lose confidence in anyone senior at HP watch for M&A activity as a way to save an otherwise fine investment. Should disgraced executives and board members score on their stock options when the take ovecommenceses?

Weekend Follies Sep 23-24

The following companies release information at oddball hours over the weekend when investors are typically not looking at their screens. Basically they are sneaking news out and hoping to call it disclosure. The culprits are:

Adept (ADEP) which has reported preliminary financials but will not be filing a 10Q because they have discovered accounting abnormalities.

Reliant Energy (RRI) has created a credit enhanced retail structure with Merrill Lynch and chose Sunday afternoon to tell everyone about it.