Money and Financial Business

I went on Friday to see the Body Worlds 3 exhibit at OMSI. The exhibit is composed of many hundreds of "plastinated" pieces (it's exactly what it sounds like) ranging from individual organs up to complete human bodies in athletic or artistic poses presented in varying levels of dissection.

Be prepared to spend a lot of time at this exhibit. The materials at the museum stated most people took about 90 minutes to go through it. Jacque and I were there for three hours and had to rush at the end because we needed to leave.

If you are unfamiliar with anatomy, you will learn much. If you do know anatomy, you will still marvel at the presentation. Photographs and illustrations of the human body are totally inferior to viewing one in three dimensions. …

It's hard to believe that something like this can happen anywhere, much less in the United States:

FORT LAUDERDALE, Florida (CNN) — Francisco Rodriguez owes more than $10,000 in back child support payments in a paternity case involving a 15-year-old girl who, according to DNA results and the girl's mother, is not his daughter.

… …

One of my co-workers broke his glasses yesterday. He couldn't get them replaced immediately because of a Washington state law (I don't know whether Oregon has a similar law) that you cannot buy eyeglasses without a recent prescription. He hadn't been to an optometrist in a long time, and didn't have one.

Hearing of the law when he went to a glasses-in-an-hour place, he wanted to see an optometrist immediately, but it was late and none were still open.

His situation affords me the opportunity to complain about two kinds of anti-consumer government interference in the health care market: Prescription and licensing requirements. …

Yesterday some people who looked like college students were going door to door in my neighborhood. I didn't answer the door because I assumed they were door-to-door salesmen, but they weren't. After muttering something about how nobody in this neighborhood was home on a Saturday afternoon (or perhaps just not wanting to be bothered by strangers, I suggest) they put a card in my my door and left.

The people were from some local political advocacy group I'd never heard of before called The Bus Project and one entire side of the card was devoted to how cool they are because they have a bus. Sure, everyone loves a bus (the wheels go round and round, round and round…) but I have my own transportation, thanks.

The other side of the card mentioned some recent Oregon legislation. Among the items was a bill to require 25% of Oregon's electricity to come from renewable sources by 2025. I was disappointed to discover that this bill has already passed. …

Catchy headline, no?

A few days ago I had an unusual telemarketing call. I get a lot of telemarketers eager to refinance my mortgage. The good ones go away peacefully when I tell them I have a 5% fixed-rate mortgage. The bad ones refuse to believe me when I explain I'd be a fool to refinance because mortgage rates are a full percentage point higher than that today. And then I got a remarkable call that prophesied the end of the world is near.

Okay, that wasn't exactly their message. But that's what I heard. You see, they had the temerity to suggest I consider cashing out some home equity to invest it in the stock market! Yeah, awesome! In fact I'll invest it all in a hot stock my dentist told me about… When you start getting unsolicited investment advice from strangers, hold on to your wallet. Someone should've warned me it's 1999 all over again. …

Consider two people, Alice and Bob, with similar incomes but different spending patterns. Let's assume Alice has a long commute to work and needs to spend $100/mo. on gasoline compared to Bob's $50/mo. For Bob, let's assume that he comes from a large family widely dispersed across the country, so to keep in touch with them he needs to spend $100/mo. on telephone services compared to Alice's $50/mo. Each person's combined spending for transportation and telecommunication is $150/mo.

Now let's consider socializing those two industries. The revenue side is simple: $150/mo. from each of Alice and Bob, or $300/mo. total. The distribution side is where things get interesting.

First imagine an egalitarian solution where both Alice and Bob get the same quantity of each good. If the government set its policy based on Alice's preferences, Alice would be happy but Bob would have too much gasoline and too little phone time. The opposite would happen if it used Bob's preferences. If the government tried to be "fair" by weighing everyone's preferences equally, it would supply $75/mo. worth of each good to both people — and neither would be happy! Alice wouldn't have enough gasoline and would have too much phone time, and Bob would have too much gasoline and too little phone time. …

Once in a while an article comes along that makes me wonder whether anybody is paying attention. A friend forwarded me such an article, from Scientific American, describing how surprised we should be that eBay works:

To some economists, this is a borderline miracle, because it contradicts the concept of Homo economicus (economic man) as a rational, selfish person who single-mindedly strives for maximum profit. According to this notion, sellers should pocket buyers' payments and send nothing in return. For their part, buyers should not trust sellers — and the market should collapse. [source]

Sorry, no. Economists are not actually confused by the longevity of eBay. It does not rock the theoretical underpinnings of the science. It is perfectly ordinary — and is in no way a threat to the model of Homo economicus.

…

As a rule I like to avoid going all computer-geek on my readers, but in this case I'll make an exception, for there's a wonderfully interesting short paper and presentation about how concurrency can be exploited to bypass security in system call wrappers.

That's right: Concurrency, security, and wrappers… oh, my! [It's like someone's trying to deliberately provoke Eric Q. - ed.]

(h/t Financial Cryptography blog)

We're on the verge of a global credit crunch. Thank the Federal Reserve. George Reisman supplies the context; I'll supply the rage.

Central banks fill the role of "lender of last resort" to provide liquidity for the purpose of avoiding financial panics. They've certainly been doing a lot of that recently — the central banks of the United States, European Union, Japan, Australia, Hong Kong, and Canada all injected funds last week, a sum of at least US$280 billion. (These are temporary funds.)

I'd rather they hadn't. The world needs a good credit crunch. …

Johnson & Johnson is suing the American Red Cross:

Mark Everson, American Red Cross president and chief executive, called the lawsuit "obscene" and said the first aid kits and other items promote its humanitarian aim of helping Americans prepare for a disaster. … "Our outside lawyers have looked at this and think we're on sound ground with what we're doing," Everson said. "We're helping Americans."

Johnson & Johnson, of course, is an evil corporation and charter member of Big Pharma — a profiteer on the sicknesses of children and the elderly. <hiss> …

Gasoline prices have dropped 17¢ in the past two weeks. That's a lot, and in a hurry.

Which is this evidence of?

• Increasing supply and/or decreasing demand
• The collapse of the gasoline cartel
• A fake-out by the gasoline cartel to reduce political pressure

For extra credit:

• Why did this happen last year, too?

My decorator and I are gathering bids for carpet installation. The contractor that visited us today was outrageously unprofessional.

He was supposed to arrive at 6:30pm. About ten minutes after that time, my decorator called to find out why the contractor was late. They were in downtown Portland and wanted to know whether we'd prefer to wait or to reschedule. I said I'd prefer to wait.

At this point, two things are wrong:

1. He didn't proactively call to let us know he would be late for the appointment.
2. He scheduled so poorly that he was in downtown Portland at a time when he was supposed to be way out here in Hillsboro.

The recent liquidity problems of financial institutions have had the usual suspects clamoring for the Fed to cut interest rates. And on Friday they did, cutting the discount rate by 0.5% (from 6.25% to 5.75%). This has only temporarily silenced the calls for rate cuts — what people really want is a cut in the fed funds rate (not the discount rate), currently at 5.25%.

Ah, but they've already done that. Not officially, mind you — the target remains at 5.25% — but actual lending over the past several days has been at interest rates below the target rate.

Go, look. Search 07/01/2007 to 08/19/2007. Notice the "daily effective rate" and "standard deviation" — up until Aug. 9^th, the daily rate had been comfortably within a few basis points of the target rate, and the standard deviations not more than 0.17. Since that date the daily rates have been under 5%, and standard deviations much higher. …

The least sugar-coated (that'll be funny in a moment) health news I've seen recently is the relationship between waist size and precursors of heart disease:

Several studies have shown waist size is clearly linked with heart attack, stroke and heart disease risk. U.S. government guidelines now say men should aim to have a waist 40 inches in circumference or less — 35 inches for a woman.

The Dallas researchers found no absolute cutoff. They simply found that the smaller a person's waist, the clearer his or her arteries were observed to be.

My lengthy 2005 Oregon tax saga is over. I had my "day in court" — actually just a teleconference with a magistrate — and we all came to an agreement in about 15 minutes.

Shortly after I mailed my court filing (perfectly bad timing!) I got a letter from the DOR offering an explanation for what happened:

Your amended return and payment was received before your original return had completed processing. As a result, the payment made with your amended return was refunded to you when your original return was processed.

Today I replaced the flapper valve in one of my toilets because it had been leaking. As I was shopping for the replacement, mindful of the bountiful cornucopia of competing products even for such a mundane item, I settled on the one whose package proudly boasted a five-year guarantee: "If it fails within five years of purchase, return to Lavelle. It will be replaced at no charge."

There are several amusing things to note about this warranty.

Flrstly, I don't think flapper valves fail very often. I expect most any flapper valve would have a good chance of lasting five years. The one I was replacing, for example, had endured six years of daily use. …

Gifts of jewelry have always been associated with love, but the connection between the two was never explained to me. I appear to be in good company. There are women who want jewelry simply because it's pretty, and men who give it only because it's customary or because she asked for (or demanded) it. To other people, jewelry is just a status symbol, a public display of their apparent worth. Then there are people who grasp that there is a connection between jewelry and love but who scorn jewelry as expensive and impractical. "Just tell her you love her. Don't waste money on jewelry."

All these attitudes are tragic. The relationship between jewelry and love is important and meaningful and underappreciated. It should be more widely understood. I want to share with you the things I have come to understand about the meaning of jewelry from a man's perspective. I welcome comments about what I have missed, and particularly on the meaning of jewelry from a woman's perspective. (This is necessarily an introspective topic, and I simply do not have a woman's perspective.)

The most important aspect of jewelry is that it is an ornament — it is meant to be worn, not stored. This is obvious on a superficial level, but it is also the key to the jewelry's deeper meaning. Every part of a man's desire to give jewelry derives from the woman actually wearing it. (Women, if you take away only one message from reading this, it should be: "Wear the jewelry he gives you.") …

The FTC has completed its investigation of high gasoline prices in the summer of 2006 and concluded that oil companies did not conspire to raise prices:

… price increases during the spring and summer of 2006 were attributable to six factors: (1) seasonal effects of the summer driving season; (2) increases in the price of crude oil; (3) increases in the price of ethanol; (4) capacity reductions stemming from refiners transition from the fuel additive methyl tertiary-butyl ether to ethanol; (5) refinery outages resulting from hurricane damage, other unexpected problems or external events, and required maintenance; and (6) increased consumer demand for gasoline beyond the seasonal effects of the summer driving season.

Quelle surprise. What a waste of taxpayer money. Any economist worth their salt could've predicted this outcome. This investigation was politically motivated grandstanding, as have been similar investigations in the past. It's outrageous that taxpayers have to fund this stuff. …

My mother is in the hospital. She lives a couple thousand miles away from me so I'm not able to be directly involved. I can, however, throw some bad puns her way. (Every little bit helps!) Well-wishers are invited to leave kind words. Or more bad puns.

Hi, mom! I hope you're feeling back to normal soon. It would sure be a weight off your family's shoulders. This is an unfortunate turn of events, but know that you have a lot of support. I don't want to write a lengthy column about this because too many puns might make you crack up, so I'll compress my thoughts into saying simply: Get Well Soon. No pressure, though! Take it easy.

Hi, everyone. I know I've sort of disappeared recently. I've been alternating between not having the time and not having the motivation to blog. I expect things will get back to normal within a few more weeks, though.

What's been happening? The most exciting thing from where I am is the bank run (1 2) on English bank Northern Rock. This is an actual bank run in a first-world economy! Wow! It kind of makes me want to watch Mary Poppins (but I'm weird).

Domestically, the stealth Fed rate cut has continued far longer than I thought it would. A quarter-point cut in the target rate is absolutely baked in, and many people are speculating that they'll cut more than a quarter point. …

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-The Bloglines Team

Are we in a recession? Charlie Ergen thinks so.

Speaking to analysts in a post-earnings conference call, the Echostar (DISH) Chairman and CEO asserted that the surprisngly high customer churn rate in the third quarter at least in part reflects an increasingly difficult economy. “I would say the odds are that we are either in a recession today or shortly headed for a recession,” he said.

Ergen, to his credit, took most of the blame for the company’s woes. “It was a very solid quarter except for churn, and churn was very disappointing,” he said. “I just didn’t do a very good job as CEO in terms of managing that.”

On Monday, Echostar shares slumped $7.68, or 16%, to $40.83.

Solar stocks have been hit today by news that Senate and House Democratic leaders are considering a plan to leave renewable energy out of a pending U.S. energy bill. An alert posted Friday by the Solar Energy Industries Association on its web site says that “there are widespread reports that a decision has been made, at least provisionally, to move energy legislation without a tax title that extends the Solar Investment Tax Credits.”

The notice asserts that “a bill without the solar ITC provisions would be a tremendous lost opportunity for our industry and our country.”

Stephen Chin, an analyst at UBS, this morning asserted that removal of the tax credits from the energy bill “increases the likelihood that the credits could expire in 2008.” He writes that “an orphaned solar ITC may not find bipartisan support during an election year, increasing the likelihood of expiration.”

Chin says that the current tax credit allows commercial system owners a 30% tax credit against total system costs. Expiration of the tax credit, he says, would likely reduce solar system demand among commercial customers, which accounted for 41% of 2006 solar installations. He adds that utilities may be slow to embrace solar if a provision allowing them to take the 30% tax credit isn’t passed.

Chin notes that Applied Materials (AMAT) could see decreased demand for solar-related equipment without the tax credit, and that there also could be a negative impact on solar-wafer producer MEMC Electronic Materials (WFR), pointing out that its largest customer, Suntech (STP), is “increasingly exposed” to the U.S. solar market.

Solar stocks are suffering significant losses today:

• First Solar (FSLR) is down $22.11, or 10.7%, to $184.74.
• Suntech (STP) is down $5.22, or 8.5%, to $56.33.
• SunPower (SPWR) is down $15.57, or 12.1%, to $113.13.
• MEMC (WFR) is down $3.04, or 4.3%, to $68.12.
• Applied Materials (AMAT) is down 28 cents, or 1.5%, at $18.43.
• JA Solar (JASO) is down $3.84, or 7%, at $50.67.
• Evergreen Solar (ESLR) is down $1.28, or 9.1%, at $12.80.
• Canadian Solar (CSIQ) is down 75 cents, or 6.7%, at $10.37.
• LDK Solar (LDK) is down $2.35, or 5.8%, at $38.07.
• Yingli Green Energy (YGE) is down $4.05, or 12.7%, at $27.80.

Yahoo (YHOO) Finance’s NYSE quotes, which were not working earlier today, appear to be fixed.

Advanced Micro Devices (AMD) is “again” holding talking with Taiwan Semiconductor (TSMC) about selling AMD’s new Fab 38 chip manufacturing plant in Dresden, Germany to TSMC, according to Jefferies & Co. analyst John Lau.

“We had heard this speculation before but those talks were deadlocked on approval by German officials,” he writes. “We now hear that the talks are on again, probably with greater clarity from the German authorities and further review of AMD’s outsourcing strategies.”

Lau says that AMD’s likely long term path will to outsource most of their wafer manufacturing. “While this is not the ideal situation for a microprocessor company, it seems to be the most practical for AMD due to their cash flow issues,” he asserts.

Lau maintains a Hold rating and $16 price target on AMD. Today, the stock is down 8 cents, at $12.29.

Salesforce.com (CRM) shares are higher today ahead of the company’s announcement after the close Thursday of financial results for its fiscal third quarter ended October.

Piper Jaffray analyst Ajaykumar Kasargod today raised his rating on the stock to Outperform from Market Perform, “based on strong cash generation.” He wrote that shares could be weak near-term “as the company continues to evolve the operating model, which may cause fluctuation in core operating metrics,” but that the stock remains a core holding in enterprise software. He notes that the company is moving from being a pure CRM company to one which also offers other on-demand applications, including HR, incentive compensation and other software. Kasargod today raised his target on the stock to $70 from $47.

Mark Murphy, an analyst at Broadpoint Capital, wrote today that the company closed “a very large transaction” last week with “a pre-eminent financial services company” which bought at least 30,000 subscriptions. Murphy says the deal is likely one of the largest in the company’s history. He also says the company beat Oracle (ORCL), which had “pulled out all the stops to try to win” the deal. Murphy repeated his Buy rating and $58 price target on the stock.

Nathan Schneiderman, an analyst with Roth Capital, writes today that “momentum is very strong” and that fears of competition are overblown. He sees the company reporting revenue of $192 million in FY Q3, with GAAP EPS of 4 cents, a penny above consensus. He repeated his Buy rating and $70 target on the stock.

Salesforce.com today is up 97 cents, or 1.9%, at $50.97.

Silicon Valley gossip site Valleywag reports that Symantec (SYMC) is conducting “mass layoffs” today and tomorrow. Valleywag, which attributed the information to “a confidential HR document seen by a Valleywag source,” says that the layoff plan “even has its own codename, Project Xpress.”

If you know any details, please pass ‘em along.

Symantec today is up 43 cents, to $17.32, thanks in part to some bullish comments on the stock in the Trader column this week’s issue of Barron’s.

Sigma Designs (SIGM) shares are getting a lift today from Roth Capital analyst Jay Srivatsa, who boosted his price target on the stock to $60 from $50. He also raised his non-GAAP EPS estimate on the company for the fiscal third quarter ended October to 52 cents, from 48 cents.

Srivatsa says the company continues to benefit from new IPTV system rollouts. (The company makes chips used in IPTV set-top boxes, as well as in Blu-Ray DVD players.) He notes that Microsoft (MSFT) has said it now has 23 customers for its Mediaroom IPTV software; he points out that they have the only chip to successfully support Microsoft’s IPTV software. He says the company should have more than 20 telco design wins in the October quarter, up from 17 one quarter earlier.

Sigma Designs today has spiked $2.82, or 5.4%, to $55.11.

The tech sell-off is continuing with abandon this afternoon. I’ll recount the carnage in more detail after the close, but I was somewhat stunned to to see this: Google (GOOG) is now down $105.71, or more than 14%, since the close of trading last Tuesday. That includes a loss today of $27.89, or 4.2%. For the four-day period, Google’s market cap has dropped $33 billion.

Adobe Systems (ADBE) this afternoon announced that president and COO Shantanu Narayen will succeed Bruce Chizen as CEO effective December 1. Narayaen will also join the Adobe board. Chizen will remain on the board through the end of his current term, which ends in Spring 2008, and will remain a strategic adviser to the company through the end of FY 2008. Adobe gave no specific reason for making the change now. Chizen has been CEO for 7 years.

Adobe also said it now sees revenue for its fiscal fourth quarter ending November near the high end of its previous guidance range of $860 million to $890 million. That is consistent with Street expectations for revenue of $885.6 million. The company also said it is targeting FY 2008 revenue growth of 13%. Given the Street consensus of $3.13 billion, that would imply revenue of $3.54 billion, right in line with the consensus.

In after hours trading, Adobe is off 19 cents at $42; the stock fell $1.05 in the regular session.

While the stock market tried valiantly to rally early in Monday’s session, in the end the tech sell-off picked up where it left off on Friday. The Nasdaq Composite today fell nearly 44 points, or 1.7%. The index has now dropped 241 points, or 8.5%, in the last four trading days. Not a lot of incrementally bad tech news today, but there remains a growing sense that there is no place to hide: corporate IT spending is looking weak, and the prospects for the consumer given the trouble in the housing market are not much better. Investors have begun to take profits in some of the tech stocks that have had the biggest gains in recent weeks and months, and in some cases the selling has begun to look a little panicky.

Here a look at 10 prominent tech stocks - the same ones I used in my Friday wrapup piece - and how they’ve performed since the close of trading last Tuesday to give you a sense of just how rough things have been for tech shares in the last few days.

• Microsoft (MSFT): Down 8.3%
• Cisco (CSCO): Down 14.6%
• Oracle (ORCL): Down 14.9%
• Apple (AAPL): Down 19.8%
• Research In Motion (RIMM): Down 21.7%
• Yahoo (YHOO): Down 17.2%
• Google (GOOG): Down 14.8%
• Amazon (AMZN): Down 11.8%
• Baidu (BIDU): Down 26.1%
• VMware (VMW): Down 27.6%

I would note, by the way, that both Cisco and Oracle actually traded higher today.

Those 10 stocks combined have now lost $186 billion in market cap in four days. Cisco, Apple and Google have all lost more than $30 billion in market cap each.

Orbitz Worldwide (OWW) this afternoon reported third quarter revenue of $221 million, with non-GAAP adjusted EPS of 23 cents. That beat the Street consensus of $211 million and 16 cents.

In after hours trading, Orbitz is up 97 cents, or 12.7%, at $8.60.

Remember, last week when I asked: What’s Up With Cognos?

Well, now we know. This morning, IBM (IBM) announced a deal to buy Cognos (COGN) for $58 a share in cash, or about $5 billion. (That comes to $4.9 billion net of cash.) The deal is supposed to close in the first quarter.

No surprise that Cognos was acquired; the company has been the target of takeover rumors for many months, and the chatter intensified when business intelligence software rival Hyperion was acquired by Oracle (ORCL).

Clearly, someone knew this was coming: amid the drubbing of the tech sector last week, Cognos shares move smartly higher, adding $3.72, or 7.6%, in the week’s final two sessions. Hey, SEC! Smells like insider trading, dontcha think? Are you on the case?

In pre-market trading, Cognos this morning is up $4.17, or 7.9%, at $57.15, while IBM is up 24 cents at $100.49.

EchoStar (DISH) shares are sharply lower this morning following the company’s disclosure of third quarter results after the close on Friday. (Did they think no one would notice?)

The basic financial results were fine: DISH reported third quarter revenue of $2.79 billion and EPS of 45 cents, compared with Street expectations of $2.81 billion and 43 cents. But the company also reported 1.94% monthly churn in the quarter, which analysts say is the highest level ever, and well above expectations. The theory is that the company is being hit by fallout from the sub-prime mortgage mess.

In its 10-Q filing with the SEC on Friday, the company specifically blamed the housing market for its troubles: “We believe our gross new subscribers additions have been and are likely to continue to be negatively impacted by increased competition, including the relative attractiveness of promotions; adverse economic conditions, including, among other things, the deteriorating housing market and increased mortgage defaults due to subprime lending practices and weakness in the economy; and operational inefficiencies.”

Citigroup’s Jason Bazinet this morning cut his rating on the stock to Hold from Buy, and wrote that “sub-prime churn is our new concern.” He says the high churn rate will likely persist through 2008 due to sub-prime mortgage defaults. Bazinet does say, however, that he still thinks there is a 65% chance that the company is acquired by AT&T (T) at some point in the next 12 months. “However, the risks have increased of the shares pulling back due to more tepid fundamentals,” he writes.

Other analyst notes this morning likewise focused on churn. Kaufman Bros.’ Todd Mitchell wrote that the “spike in churn is a red flag that marred an otherwise uneventful quarter.” He notes that the 1.97% churn rate was up from 1.76% a year ago, and above his estimate of 1.7%.

Craig Moffett, an analyst with Bernstein Research, notes that gross subscriber additions fell 6% year over year, which lead to net subscriber additions of just 110,000, down from 295,000 a year ago, the “lowest total since the company’s earliest days as an operator in 1997.”

Moffett notes that the company tends to serve the low end of the market, which is not the right place to be at the moment. “EchoStar is a well run company,” he writes. “It has a good product. It offers customers a compelling value proposition. But EchoStar operates at the low end of the market, and the low end, it would seem, is the wrong place at the wrong time.”

EchoStar shares today are down $5.51, or 11.3%, at $43; shares of rival DirecTV are down 34 cents, or 1.3%, at $26.78.

While the overall stock market seems to have stabilized after a three-day clobbering that clipped 7% from the Nasdaq Composite, most of the big tech momentum stocks that had lead the market higher until the recent swoon are all showing further losses:

• Apple (AAPL) is down $2.71, or 1.6%, at $162.66.
• Research In Motion (RIMM) is down $4.55, or 4%, at $108.67.
• Google (GOOG) is down $3.08, or 0.5%, at $660.89.
• Baidu (BIDU) is down $8.75, or 2.6%, at $334.20.
• Amazon (AMZN) is down 93 cents, or 1.2%, at $77.96.
• VMware (VMW) is up $1.04, or 1.2%, at $88.78.

The VoIP blog on the Internet telephony trade publisher site TMCnet.com asserts that there are rumors that Google (GOOG) is going to buy Sprint Nextel (S). Ye gads, why would they do that? Sprint, big mess that it has been lately, still has a market cap of $46 billion, and another $21 in long term debt. That’s $67 billion without any acquisition premium. So let’s assume there is a modest premium, and it would cost then $80 billion. A deal of that size would require the company to take on mountains of debt. Oh, and this crazy post proposes that after buying Sprint, Google would then give away wireless service for free. Think Google holders would like this idea? Think again. Anyone care to guess how many billions of market cap would be destroyed if Google were actually to pursue this hare-brained scheme?

XM Satellite Radio (XMSR) this morning announced that it has been notified by the Federal Trade Commission that the FTC has closed its investigation into XM’s marketing and customer service practices and decided to take not action. The probe started in April 2006.

Very nice, except XM holders would be a lot more interested in hearing news from the FCC and the Justice Department, which are both mulling whether to let the company proceed with its proposed merger with Sirius Satellite Ratio (SIRI).

Today, XMSR shares are up 70 cents, or 5%, at $14.80; Sirius is up 9 cents, or 2.6%, to $3.54.

So, let me briefly interrupt today’s regularly scheduled programming to make a small announcement. That Leap Wireless item I posted a little while ago turned out to be the 5,000th post on Tech Trader Daily since I started the blog in late May 2006. That’s a lot of earnings reports, downgrades, upgrades, conferences, product launches, acquisitions, rumors and musings under the bridge. Thanks for reading - and here’s hoping you stick around for the next 5,000.

Clearwire (CLWR) shares are sharply lower this morning after the company confirmed a Wall Street Journal report last night that its deal to work with Sprint Nextel (S) on a nationwide broadband wireless network using WiMax technology has been terminated.

In its announcement, Clearwire said that the two companies are continuing to hold discussions on how collaborate on a nationwide WiMax network, but that the original plan “was likely to introduce a level of complexity to each party’s business that would be inconsistent with each company’s focus on simplicity and the customer experience.”

Meanwhile, Clearwire today reported third quarter revenue of $41.3 million, above the Street consensus of $38.63 million; as expected, it lost a ton of money. The company added 49,000 net subscribers in the quarter, to boost the total to 348,000. But the financial results are not the story this morning; it’s all about the termination of the Sprint deal.

“The termination of the agreement certainly dramatically impacts the longer-term financial pressures on Clearwire and its aggressive buildout strategy,” Stifel Nicolaus analyst Christopher King said in a note this morning. J.P. Morgan’s Jonathan Chaplin adds that the termination of the deal “is a clear negative,” but that a combination “will be back on the table” once Sprint chooses a new CEO. Chaplin puts the floor value for Clearwire at $18, based on the valuation AT&T paid for its 2.5 GHz spectrum in the southeastern U.S.

Craig Moffett, an analyst with Bernstein Research says the news is positive for Sprint, and contends a shutdown of its WiMax efforts to focus on its core wireless business would be well received on the Street. He says the news is obviously negative for Clearwire, and could also be trouble for the cell tower companies, American Tower (AMT), Crown Castle (CCI) and SBA Communications (SBAC). He says it is also incrementally negative for both EchoStar (DISH) and DirecTV (DTV), each of which have signed deals to bundle service with Clearwire. And he says it can be seen as a positive for Comcast (CMCSA); he says it opens the door for cable operators to join forces with Sprint on a nationwide WiMax offering.

This morning:

• Clearwire is down $4.03, or $22.35%, to $14.
• Sprint is down 31 cents, or 1.9%, to $16.23.
• American Tower is down 27 cents, or 0.6%, to $42.92.
• Crown Castle is down $1.29, or 3.3%, to $37.70.
• SBA is down $2.52, or 6.9%, to $34.25.
• EchoStar is down $1.01, or 2%, to $49.46.
• DirecTV is unchanged at $27.12
• Comcast is down 37 cents, or 1.9%, at $19.45.

Limelight Networks (LLNW) shares are down sharply today after Friedman Billings Ramsey’s David Hillal cut his rating on the stock to Market Perform from Outperform.

Hillal cites three reasons for his downgrade:

• Tough pricing environment in content delivery networks sector.
• Increasing competition.
• Upcoming IPO lock-up expiration.

Hillal says he underestimated the pricing pressure in the sector and over-estimated LLNW’s ability to differentiate its offering in the CDN market. “While industry growth remains healthy, our expectations for LLNW have been reduced because of increasing competition, further commoditization of vanilla content delivery, lack of end-market diversification and a product offering that is too narrow,” he writes.

Hilal notes that the lock-up on 63 million shares expires on December 5; the current float is 18.4 million shares.

Hillal cut his price target on the stock to $11 from $15.

Today, LLNW is down $1.11, or 11.2%, to $8.82.

Previously: Limelight: Q3 Tops Street; Q4 Outlook Light; Stock Slips (November 5, 2007)

Cree Research (CREE) shares are coming under pressure today, perhaps due a jury verdict yesterday in a patent infringement case filed in federal court in San Francisco in which Seoul Semiconductor was found to be in violation of certain patents held by Nichia. Seoul Semi is a large Cree customer for LED lighting products, accounting for about 14% of revenue. American Technology Research analyst Andrew Huang, by far the loudest bull on the Street when it comes to Cree, today asserted that the decision should not impact Cree in the short run.

“Bears will claim that this could ripple through to Cree and cause it to miss December and/or March quarter revenue guidance,” he writes. But Huang disagrees. He notes that the Seoul Semi’s products that allegedly infringed on Nichia’s patents were only sold in sample quantities in the U.S. and are nearing the end of their life. He says Seoul Semi has “a wide variety of other products” that do not infringe. He also notes that Cree and Nichia have a cross-license agreement.

Cree today is down $1.93, or 7.2%, to $24.79.

Liberty Media, the media holding company controlled by investor John Malone, today reported somewhat disappointing earnings for its two tracking stocks, Liberty Interactive (LINTA) and Libert Capital (LCAPA).

Liberty Interactive, the piece of the company which holds the QVC shopping channel, reported 4% revenue growth in the quarter, but a 1% drop in operating cash flow; J.P. Morgan analyst Imran Khan notes that he had expected 5% revenue growth and 3% cash flow growth. The issue: weak results at QVC. Liberty said it was “disappointed” with soft sales results in the U.S. at QVC, “driven in part by a sluggish retail environment,” as well difficult year-over-year comparisons. Khan adds that “domestic economic pressures and international operating and regulatory challenges will weight on QVC longer than we expected.” Khan today downgraded LINTA to a Neutral rating, from Overweight.

Liberty Capital, which includes the Starz cable channel, the Atlanta Braves baseball team, stakes in in News Corp. (NWS), Time Warner (TWX) and Sprint (S), and various other assets, reported an 11% jump in revenue, and a 96% increase in operating cash flow. Just to keep things interesting, Liberty Media is going to issue a new tracking stock, and carve out of Liberty Capital another entity to be called Liberty Entertainment, which will hold the 40% stake in DirecTV (DTV) that the company is acquiring from News Corp., as well as regional sports networks and cash.

During a conference call with analysts today, both Liberty CEO Greg Maffei and Chairman John Malone expressed enthusiasm for the pending break-up of IAC/Interactive (IACI) into five separate companies. Liberty Interactive holds a 24.1% stake in IAC, and 57.9% voting control, though IAC CEO Barry Diller holds the right to vote Liberty’s shares. There has been speculation that Liberty might end up owning one or more pieces of IAC before the restructuring of the company is completed.

Maffei notes that the two companies have held talks on a possible transaction involving HSN, but did not reach an agreement. “We played our hand and had our dialog about potential transactions prior to the spin but haven’t reached fruition, so we’ll continue that dialog headed into the spin and see where we end up,” Maffei said on the call. “I can’t predict which businesses will ultimately be owned, consolidated, held at all by Liberty or affiliates. I think the fact that it is happening will create opportunities, but I don’t know exactly where they’r egoing to go in terms of our relationship.”

Malone said that IAC plan is “terrific” for Liberty. “I think it represents great opportunity for Liberty and frankly for IAC shareholders generally” to invest in the pieces of IAC that they care about most. “It goes a logn way towards resolving what’s for a long time been a mild disagreement between Mr. Diller and myself about the appropriate use of leverage in each of these businesses.”

Liberty Interactive today is down 63 cents, or 3.1%, to $19.88. Liberty Capital is off $1.98, or 1.6%, at $120.93. IAC/Interactive is up 4 cents at $29.71.

Let’s hope things are better on Monday. The tech-heavy Nasdaq Composite index has now lost nearly 7% in three days, thanks to fears of recession, warnings from key companies like Cisco (CSCO) and Qualcomm (QCOM), cautionary rumblings from Fed Chairman Ben Bernanke and an increasing sense on the Street that the tech sector simply can’t be immune to record-high oil prices, a collapsing dollar, weak enterprise spending and a softening consumer economy.

Add to that the recent frothiness in big cap tech, and you had the recipe for a sell-off. I can’t tell you what happens Monday, but I would hardly be surprised to see it continue; as someone who lived through the ‘87 crash, the 2001 Nasdaq collapse and various debacles in between, I am well aware that it could get a lot worse than this.

That said, it certainly feels pretty bad right now if you own tech stocks. I did some quick fiddling with Excel and came up with some alarming numbers on the three day rout. Here is a list of 10 key tech stocks and how they fared since Tuesday’s close:

• Microsoft (MSFT): Down 7.3%
• Cisco (CSCO): Down 15.9%
• Oracle (ORCL): Down 14.9%
• Apple (AAPL): Down 13.5%
• Research In Motion (RIMM): Down 13.4%
• Yahoo (YHOO): Down 13.7%
• Google (GOOG): Down 10.4%
• Amazon (AMZN): Down 9.5%
• Baidu (BIDU): Down 16.4%
• VMware (VMW): Down 21%

Those 10 companies together lost a whopping $151 billion in market value. Cisco alone saw its value drop by nearly $33 billion; Google, Apple and Microsoft each lost more than $20 billion in market cap. And I would note that several of these stocks actually peaked earlier than the Nasdaq did; so depending on how you want to count it, the numbers could look even worse.

Have a nice weekend.

Applied Materials (AMAT) shares are nicely higher this morning after upgrades this morning from both Citigroup’s Timothy Arcuri and J.P. Morgan’s Jay Deahna.

Deahna upgraded the stock to Overweight from Neutral. “The key point to our thesis going forward is our expectation that the solar equipment business is likely to drive sustained above-average growth once revenue recognition begins, which we expect to start in the [fiscal fourth quarter ended October 2008],” he writes. “As such, we now expect sustained above-market-average stock appreciation for AMAT shares over the next several years as think the Street wil ascribe an increasingly higher probability (i.e., P/E multiple) to the growth potential of Applie’s nascent but potentially explosive solar equipment business.”

Deahna says he estimates fiscal 2008 solar contracts at $1.62 billion to $2.4 billion, versus about $800 million in FY ‘07.

Deahna adds that the recent pullback in the shares “creates a major buying opportunity.” He sees a potential catalyst for the stock in a meeting with analysts scheduled for January 17 in New York. “We suspect that comments on new contracts, technical performance, upside revenue potential on upside specification performance, margin expectations and/or acquisitions are likely,” he writes.

Deahna ups his FY 08 EPS estimate to $1.37 from $1.23.

Arcuri raised his rating to Buy from Hold, and upped his price target to $23 from $22. Arcuri says equipment stocks lately have finally succumbed to 2008 cap ex cuts, and are now the worst performing industry group in the S&P 500 for the year to date. He expects further estimate cuts ahead for the group, but thinks AMAT shares will soon start discounting a mid-’08 turn in capital spending. “While demand remains uncertain, tool orders per chip unit (adjusted for wafer size) are now near [a] historical trough,” he writes.

Arcuri adds that his valuation work shows the current price effectively places zero value on the company’s solar business.

This morning, Applied shares are up $1.24, or 6.92%, to $19.15.

This morning, the tech selling spree continues; and this year’s big growth darlings continue to take a pounding:

• Apple (AAPL) is down $2.72, or 1.6%, at $172.75.
• Research In Motion (RIMM) is down $6.63, or 5.3%, at $117.85.
• Google (GOOG) is down $25, or 3.6%, at $668.84.
• Baidu (BIDU) is down $17.54, or 4.9%, at $340.33.
• Amazon (AMZN) is down $2.67, or 3.2%, at $80.91.
• VMware (VMW) is down $4.89, or 5.3%, at $86.99.

In addition to the factors which triggered yesterday’s sell-off - Cisco’s (CSCO) cautious comments on U.S. enterprise IT spending and Fed Chairman Ben Bernanke’s warning that business was likely to slowdown - today we get more trouble in the form of disappointing earnings guidance from Qualcomm (QCOM), which is off $2.52, or 6.3% at $37.24. Menawhile, Cisco is down another 95 cents, or 3.2%, to $28.68.

Yesterday: Panic! Cisco And Bernanke Trigger Tech Selling Spree; Huge Drops In RIMM, AAPL, GOOG, BIDU, AMZN, VMW

Leap Wireless (LEAP) shares are getting pounded this morning after the company announced that it will restate results for 2004, 2005, 2006 and the first two quarters of 2007 to reflect accounting errors in previous reports concerning service revenue, equipment revenue and operating expenses. On a cumulative basis, the company said it over-stated both service revenue and operating income by about $20 million each.

The company said the restatements resulted from an internal review of its revenue activity and forecasting process, and are not due to misconduct by company employees. Leap said the most significant adjustment reflects accounting for customers who voluntarily disconnected service; revenue was being recognized after their service was disconnected.

Leap said the inaccurate financial statement “may result in a default” under $890 million in outstanding borrowings under its senior secured credit agreement; if a default were declared on the credit agreement, it would also trigger a default on $1.1 billion of senior notes. Leap says it is negotiating a waiver of any potential fault with its lenders.

Also, Leap said it now sees service revenue for the third quarter of $348 million to $352 million; that is down from previous forecasts of $430 million to $460 million. Leap sees adjusted OIBDA of $94 million to $98 million, and net customer additions of 36,484, with 5.2% customer churn. Previously, the company had expected 40,000 to 120,000 net additions, 4.9%-5.4% churn, and adjusted OIBDA of $110 million to $120 million.

Last week, Metro PCS (PCS) abandoned a takeover bid for Leap; Leap had rejected the bid as too low.

This morning, LEAP is down $17.96, or 30.9%, to $40.14.