Tremendous excitement over the weekend about the likely Verizon announcement of a CDMA-based iPhone on Tuesday. Stifel Nicolaus thinks five to six million AT&T subscribers may switch to Verizon, despite two-year contracts and Family Plans from AT&T.
Not only is Verizon likely to attract AT&T subscribers, they are likely to suck subscribers from other carries like Sprint NextelSprint Nextel. Even if many wait for contract expiration (AT&T raised the early termination fee for 2-year smartphone subscribers to $325 from $175), the migration may still be notable.
Either way, AppleApple wins. How much? Cross Research thinks iPhone could penetrate 12 percent of Verizon's 83.2 million wirless subscribers; that alone would add $2.15 to AAPL EPS this year.
And Verizon? Not clear, but many think Verizon will initially take a big hit to earnings. Why? The iPhone will likely sell for roughly $200; most reports I have seen indicate at that price there is at least a $400 subsidy. Also, many of the existing Verizon customers are already using smartphones and generating significant revenue for the company; switching to a heavily subsidized phone makes the economics more difficult for Verizon. Regardless: Verizon cannot afford to continue to lose customers to AT&T.
1) Alcoa1) Alcoakicks off earnings season today; aluminum demand strong. Key is hearing about pricing and demand, but both seem to be improving. Morningstar says that "Global demand is expected to grow about 10% in 2010, with rising consumption in all major regions." Pricing is strong, they note, and Alcoa continues to be a cost-cutting monster; that will help improve margins even as energy and other costs go up.
2) Emerging market stock worries. Bangladesh's stock market was halted after dropping 9 percent in the first hour of trading. Regulators have taken steps to cool the markets after stocks doubled last year. The runup attracted many new, small investors. Elsewhere, Indonesia's main stock index dropped 4 percent, following a 3 percent drop the day before, on inflation concerns. Indonesia was the performing Asian stock market last year.
3) DuPont 3) DuPont announced it is acquiring Danish food ingredient maker Danisco for $5.8 billion in cash. DuPont will also assume $500 million in debt and will use the transaction to broaden its biosciences operations. The deal is expected to close in the second quarter and be accretive to DuPont's earnings by next year.
4) Progress Energy 4) Progress Energy falls 1 percent despite agreeing to be acquired by Duke Energyacquired by Duke Energy for $13.7 billion in an all-stock deal. Progress Energy shareholders will get 2.6125 shares of Duke Energy for each of their shares. That values Progress Energy's shares at $46.48, a 4 percent premium to last week's close. Upon the deal's closing, Duke will assume $12.2 billion in debt and gain exposure in Florida and the Carolinas, while the combined company will become the largest utility firm in the U.S.
5) LDK Solar 5) LDK Solar jumps 11 percent after the Chinese solar wafer manufacturer boosted its Q4 and 2011 revenue outlook. The firm cited stronger demand for its solar wafers and also boosted its shipment forecasts for the fourth quarter. Meanwhile, 2011 revenues are now seen between $3.5 billion and $3.7 billion — significantly above estimates of $2.7 billion.
6) Shares of Playboy Enterprises 6) Shares of Playboy Enterprises soar 17 percent after announcing it will be taken private by a limited partnership controlled by the company's founder Hugh Hefner. The deal gives the adult media firm's shareholders $6.15 per share, an 18.3 percent premium to Friday's close. That offer tops Hefner's earlier proposal, and nearly matches a competing bid from FriendFinder Networks.
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