Stock Market Predictions

Another activist fund takes big Navistar stake

Stock Market Predictions

MHR Fund Management LLC said it had taken a 13.6 percent stake in Navistar, edging Carl Icahn's 11.9 percent to make it the company's largest shareholder.

Navistar shares leaped as much as 11.6 percent on the New York Stock Exchange, on investor hopes that the board will be forced to tackle some of the problems that prompted an unexpected quarterly loss last week.

"Things are going to start to happen faster now," said Robert Wertheimer, an analyst with Vertical Research Partners. "If you were the board or you were senior management, I think you would have to be considering a variety of options."

Navistar, whose roots are in agriculture and which was once called International Harvester, has been struggling for the past year to contain the costs of its program to develop a new style of diesel engine for heavy trucks, and has seen its shares lose about half their value along the way. The company has been in the spotlight since October, when Icahn disclosed his stake and proposed a merger with rival Oshkosh Truck Corp (OSK.N).

MHR, founded by Mark Rachesky, a former associate of activist investor Icahn, built its position during an exceptionally volatile period for Navistar shares.

The stock plunged as much as 28 percent on June 7 after it reported the loss, then recovered a day later when Icahn raised his stake from 10 percent and Fiat Industrial (FI.MI) Chairman Sergio Marchionne hinted he was keen on the company.

UNLIKELY ALLIANCE?

One question Rachesky's move raises is whether he and Icahn plan to work toward the same end.

Rachesky worked for Icahn before co-founding his own investment firm. His company is the largest shareholder of film studio Lions Gate Entertainment Corp (LGF.N) - a position it solidified after Icahn last year gave up a long battle to take over the company, which included a lawsuit Icahn filed against his former chief investment adviser.

"Clearly, Icahn had a game plan and while these two guys were in the past at odds, so were the French and the Germans, what can I tell you?" said Mario Gabelli, whose Gabelli Funds is the fourth-largest Navistar shareholder.

An MHR spokesman declined to comment on the company's plans. Icahn could not be reached for comment.

MHR now holds 9.4 million shares in Navistar, bought May 22 through June 13, it said in a filing with the U.S. Securities and Exchange Commission.

That makes it the biggest investor in the Lisle, Illinois-based company, based on current Thomson Global Markets data.

In the filing, New York-based MHR said it "may seek to engage in discussions with (the) management and others concerning the business and operations of the company."

MHR noted in the filing that it may seek seats on the company's nine-member board of directors or advocate for a sale or reorganization of the company.

Navistar, which makes International brand trucks, Monaco recreational vehicles and school buses, declined to comment on the news.

ENGINE TROUBLE

Shareholders received more unwelcome news this week when a U.S. appeals court ruled it would no longer allow the company to pay fines to avoid curbs on selling diesel truck engines that fail to meet U.S. pollution standards.

While that engine may yet win the U.S. Environmental Protection Agency's approval, the company should have a backup plan in place in the meantime, suggested analyst Wertheimer.

"It's certainly time for a change in course and whether that be pursuing the sale of the company at this time or simply changing management, the time has come for the board to take action," said one investor with a stake in Navistar who said his company had not authorized him to speak publicly. "The board needs to take a more proactive role at this point."

Navistar's board is next scheduled to meet on Tuesday.

Late last year, Navistar's CEO, Daniel Ustian, said he was open to Icahn's idea of merging with Oshkosh, in which Icahn holds a 10 percent stake. But Oshkosh shareholders and management beat it back, voting down an Icahn-nominated slate of directors at the company's January annual meeting.

Analysts have said there could be obstacles to a foreign company buying Navistar, since it also makes military vehicles.

When the company reported the quarterly loss it also named Troy Clarke, a former General Motors Co (GM.N) executive who previously ran Navistar's Asian operations, to the new role of president of trucks and engines, essentially overseeing all the company's business lines.

Ustian, 61, said last week that the company had succession in mind when it promoted Clarke and another top official.

Navistar's competitors also include engine maker Cummins Inc (CMI.N) and truck maker Paccar Inc (PCAR.O).

Navistar shares were up 8 percent at $30.01 on Friday afternoon, off an earlier high at $31.06. The shares have lost almost half their value over the past 12 months, while Oshkosh has fallen 22 percent. Both slumps are far deeper than the 3 percent decline of the Standard & Poor's capital goods industry index. .GSPIC

(Reporting by Scott Malone in Boston; Additional reporting by Ross Kerber in Boston, Lynn Adler in New York and A. Ananthalakshmi in Bangalore; Editing by Bernadette Baum, Matthew Lewis and M.D. Golan)

RIM shares drop after minor board shuffle

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The company, whose share price has tumbled alongside its once-dominant share of the smartphone market, also said it paid its new CEO more than $10 million in the company's last fiscal year and gave him hundreds of thousands of stock options to take the top job in January.

It also revealed millions of dollars in payments to former co-CEO Jim Balsillie, when he parted ways with RIM.

"There may be some tough questions asked or some shareholder backlash if the change at the top is just this," said Sameet Kanade, an analyst at Northern Securities, referring to the announcements, made in a filing ahead of RIM's annual meeting next month.

Kanade said the filing suggested the company was making little progress toward the broad changes investors are seeking.

RIM has lost favor as the email-centric BlackBerry falls behind in a fast-changing smartphone market now dominated by Apple Inc's iPhone and devices using Google Inc's Android software.

Still, the nomination of financier Timothy Dattels to the board could indicate RIM is more seriously considering going private, or mulling a leveraged buyout for the company.

Dattels, a senior partner at private equity firm TPG Capital LP, previously served as Goldman Sachs' head of investment banking for Asia excluding Japan.

He replaces Antonio Viana-Baptista, a former Telefonica SA executive who had been a RIM director since September 2009. RIM said Viana-Baptista opted out so he could spend more time in his role as CEO of Credit Suisse in Iberia.

RIM is proposing the re-election of the remainder of its board at an annual meeting on July 10. It said it would look to add one or more new board members in the current fiscal year.

RIM's Nasdaq-listed shares closed 2.5 percent lower at $10.40 on Thursday. The stock has lost more than 70 percent of its value over the past year.

COMPENSATION ISSUES

The company said Thorsten Heins, who was promoted to chief executive earlier this year, received total compensation of $10.2 million in fiscal 2012, which ended late in March. He received an award of 400,000 restricted stock units, which vest over a three-year period, for taking the top job.

"It didn't excite anyone," Fred Ketchen, director of equity trading at ScotiaMcLeod, said of the filing. "I think the money aspect is a factor" in the stock decline, he said.

A year ago, RIM narrowly avoided a vote of confidence on its management when an investor withdrew a motion to split the CEO and chairman roles after the company promised to study the issue. The roles were shared at the time by Mike Lazaridis and Jim Balsillie.

Some watchers were hoping for more agitation this year.

"It would be nice to see an activist make a play but they would have to believe that it could be fixed and they don't," said Eric Jackson, a fund manager at Ironfire Capital.

Lazaridis and Balsillie stepped down from their roles in January, though Lazaridis remains an influential member of the board, serving as vice-chairman. When Heins took over as CEO in January, board member Barbara Stymiest became chairwoman.

"Over the past six months, the board and Thorsten have been proactively working together to introduce significant changes in the company as we move towards the launch of our next generation BlackBerry platform," said Stymiest in a statement.

"We are actively exploring new partnerships and other opportunities to extend the reach of BlackBerry and enhance long-term value for all RIM stakeholders," she added.

In its filing, RIM said Balsillie was paid $4.8 million in relation to his resignation, while Lazaridis was paid more than $850,000. Both had agreed to cut their base salary to $1 in their last days in the top job.

Balsillie's stock options, which he will be able to access quicker since he left the board in March, takes the total value of his entitlements to $7.9 million. Lazaridis would receive entitlements totaling $3.9 million should he leave the board, and would retain an office, company car and driver.

The smartphone maker, headquartered in Waterloo, Ontario, has warned it expects to post an operating loss in the quarter just ended. Those numbers are due to be released on June 28.

That latest warning follows a stream of lowered earnings forecasts, product delays, writedowns and an embarrassing global network outage that left millions of people without email on their BlackBerry phones for several days.

A string of senior staff have left - including RIM's top salesman and chief lawyer last month - and it has hired bankers for a strategic review that could lead to an overhaul of its business model or less drastic moves such as partnerships and licensing deals. It has not ruled out a sale of the company.

(Additional reporting by Euan Rocha and Jon Cook in Toronto; Editing by Frank McGurty)

Green Mountain K-Cup office sales slowing: report

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Boston-based research firm Detwiler Fenton said sales growth is typically expected to ease in June and rebound in August. This year's earlier-than-expected slowdown is causing some distributors to revisit their autumn outlook and look at alternatives, it said, notably single-serve cups compatible with Green Mountain's Keurig machines which are not licensed by Green Mountain.

A Green Mountain spokeswoman did not immediately return a call seeking comment.

The report came just as Green Mountain is facing more competition at retail stores, including from manufacturers making cups compatible with Keurig machines without paying Green Mountain licensing fees.

One such manufacturer is California-based Rogers Family Co, which is making cups for U.S. supermarket chain Safeway Inc (SWY.N).

Rogers already sells its San Francisco Bay OneCup at locations including Costco Wholesale Corp (COST.O). It is already being sued for patent infringement by Green Mountain.

Late on Friday, Kroger Co (KR.N), the largest U.S. grocery chain, told Global Markets that it would soon sell Keurig-compatible coffee cups. The company declined at the time to say whether the cups would be made in cooperation with Green Mountain or independently.

The report pointed out that as more competitors enter the K-Cup market, space on grocery shelves will get tighter. That could lead "slotting fees," or what vendors pay for shelf access, to go up, it said.

According to Thursday's report, Detwiler has heard that some unlicensed manufacturers have locked in orders with existing office clients of Green Mountain.

Office coffee services, which helped drive Green Mountain's early popularity, accounts for about 10 percent of the company's sales, the report said.

Green Mountain shares fell $1.18, or 5.5 percent, to $20.13 on Nasdaq.

(Reporting By Martinne Geller and Melvin Backman in New York; Editing by David Gregorio, Marguerita Choy and Richard Chang)

Nokia cuts 10,000 more jobs as losses deepen

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In a second profit warning in nine weeks, Nokia said on Thursday that its phone business would post a deeper-than-expected loss in the second quarter due to tougher competition, which it expected to continue.

Once the world's dominant mobile phone provider, Nokia was wrongfooted by the rise of smartphones and is struggling to keep up with Apple, Samsung and Google. It is also losing market share in cheaper, more basic phones.

Chief Executive Stephen Elop is placing hopes of a turnaround on a new range of smartphones called Lumia, which use largely untried Microsoft Corp software. But Lumia sales have so far been slow, exasperating investors who have seen its stock crash more than 70 percent since it announced the software switch in February 2011.

"The job cuts and profit warning underline the seriousness of the challenges Nokia is facing, particularly in light of the eye-watering competition from Apple and Samsung," said Ben Wood, head of research at CCS Insight.

Nokia, whose cash position is increasingly scrutinized by investors, also said restructuring-related cash outflows would be around 650 million euros in the remaining three quarters of 2012 and around 600 million in 2013.

With the cost of Nokia's debt rising, the most bearish of analysts in a Global Markets poll last month said the company could even be at risk of default if it fails to slow its cash burn.

Over the past five quarters, the onetime darling of mobile telcoms has eroded its cash pile by 2.1 billion euros - a rate that would wipe out its entire 4.9 billion reserves in a couple of years.

Analysts at JP Morgan said on Thursday they expect operating losses, combined with restructuring outflows, to leave Nokia with 1.63 billion euros cash at the end of next year.

"This is not a comfort zone for a company as large as Nokia," the analysts said.

Nokia's five-year credit default swaps (CDS) were at a new all-time high of 933 basis points on Thursday according to Markit. This means it costs $933,000 annually to buy $10 million of protection against a Nokia default using a five-year CDS contract and implies a default probability of 55 percent.

Bernstein analyst Pierre Ferragu said he expects the company to have minimal net cash position at the end of its restructuring.

"We therefore see continued potential downside to the recent stock price and maintain our underperform rating," Ferragu said.

Shares in Nokia were down 16 percent to 1.87 euros, below the psychologically important 2 euros mark, not seen since 1996.

Analysts have said that even with the dramatic fall in the share price, the worsening outlook made it hard to judge how much lower the shares could go.

"I won't comment on the stock price anymore, since it's been seen over and over, that there is no definitive bottom," said Evli analyst Mikko Ervasti.

"People are worried over Lumia sales. I think expectations for the third quarter will be cut," said Nordea analyst Sami Sarkamies.

The 10,000 job cuts, which include the closure of Nokia's only plant in its homeland Finland, bring total planned cuts at the group since Elop took over as chief executive in 2010 to more than 40,000 staff, or every third worker.

Of the latest job cuts, 3,700 will take place in Finland, where the firm will also close its plant in Salo - the last major cellphone manufacturing site in western Europe, the cradle of the global industry.

"This is a major blow. This is due to the operational mistakes made already during the previous CEOs. Maybe the signs of success are running low for Elop too," said Antti Rinne, chairman of labor union Pro.

Nokia said it expects its operating margin in the second quarter to be below the negative 3 percent level reported in the first quarter due to pressure on its smartphone business. It previously forecast it would be similar to or below that level.

On average analysts forecast the second-quarter phone unit margin to be at -4.6 percent, narrowing to -2.2 percent in the third quarter.

Nokia also said it would sell luxury phone business Vertu to venture firm EQT and revamp its management team. ($1 = 0.7953 euros)

(Additional reporting by Eero Vassinen and Terhi Kinnunen in Helsinki; Editing by Erica Billingham)

II-VI shares fall on weak outlook

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Falling prices and weak demand for tellurium - used to manufacture infrared optics, thermoelectric coolers and photovoltaic solar panels - hurt II-VI's metals and chemicals business, the company said in a statement Thursday evening.

It expects to write down about $1.7 million to $1.9 million of tellurium inventory in the current quarter.

II-VI acquired Philippines-based Pacific Rare Specialty Metals & Chemicals Inc in 2007. The business sells selenium and tellurium, by-products of refining materials such as copper and zinc, to manufacturers of steel, glass, animal feeds, fertilizers and other products.

The company said the current quarter was also hurt by softness in bookings and revenue at its compound semiconductor unit.

For the quarter ending June 30, II-VI said it expects to earn 23 to 25 cents per share on revenue of $135 million to $137 million, below its prior forecast of 27 to 31 cents per share on revenue of $139 million to $142 million.

For the year-ending June 2013, the company forecast earnings of between $1.14 per share and $1.21 per share on revenue of $582 million to $588 million.

Analysts on average had been expecting II-VI to earn $1.34 per share, excluding items, on revenue of $593 million, according to Thomson Global Markets I/B/E/S.

Shares of the Saxonburg, Pennsylvania-based company fell 8 percent to $17.08 on the Nasdaq. The stock was one of the top percentage losers on the exchange on Friday morning.

(Reporting by Sagarika Jaisinghani in Bangalore; Editing by Sreejiraj Eluvangal)

JA Solar's $100 million buyback plan lifts shares

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Other China-based solar companies such as LDK Solar Co (LDK.N), Yingli Green Energy Holding (YGE.N) and ReneSola Ltd (SOL.N) have also been buying back shares amid a brutal selloff in the stock market.

"We believe a share buyback is not where solar companies should spend their cash; and see the (JA Solar) rally as overdone," Jefferies & Co analysts, who rate the stock "underperform", wrote in a note.

"We recommend investors take profit."

Based on JA Solar's closing price of 93 cents on Wednesday, the company can buy back up to 107.5 million shares, or more than half its current outstanding.

The company, the world's third-largest maker of solar cells, had long-term bank borrowings of 4.35 billion yuan ($683 million) at the end of last year. About 885 million yuan worth of loans were due in 2012.

Thiemo Lang, a senior portfolio manager at Zurich-based Sustainable Asset Management, said the buyback will help push up JA Solar's stock in the short term, but he does not expect other Chinese companies to follow suit given their high debt level.

"JA Solar must make sure it reaches profitability again soon, which is still more than uncertain in the current environment," he said.

The Shanghai-based company posted losses for the last four quarters as product prices tanked due to falling renewable energy subsidies in top European markets.

Analysts expect the company to return to a profit only in 2014, according to Thomson Global Markets I/B/E/S.

Of the 15 analysts covering the company, five recommend a "sell" or a "strong sell", while nine rate it "hold", according to Thomson Global Markets data.

JA Solar and its top lenders, state-owned Export-Import Bank Of China EXIMC.UL and Bank of China Ltd (601988.SS), could not be reached for comment outside of regular business hours in China.

"The company's lenders may not appreciate this news as much as (their) equity investors will," Raymond James analyst Alex Morris wrote in an email.

Chinese solar companies raked up huge debts in the last two years as they expanded rapidly, helping the Asian country become the largest producer of solar cells in the world.

Western solar companies have complained that cheap loans from state-run banks have helped Chinese firms sell their products at cheaper prices.

Last month, the United States imposed duties of 31 percent on solar panel imports, ruling in favor of local companies that accused Chinese firms of dumping.

"We hope JA Solar finds ways to extend its debt maturities, but this may be difficult because credit has become increasingly tight in China," Simmons & Co analysts wrote in a note.

JA Solar shares rose to a one-month high of $1.16 on Thursday on the Nasdaq.

The WilderHill Clean Energy index .ECO, which has fallen about 17 percent this year, inched up 0.18 percent to 42.98 points.

($1 = 6.3691 Chinese yuan)

(Reporting by Krishna N. Das in Bangalore; Editing by Viraj Nair, Sreejiraj Eluvangal, Saumyadeb Chakrabarty)

AOL shareholders re-elect board, defeat activist

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AOL shares slid 6 percent to $25.49, their steepest slide on the New York Stock Exchange in more than two months, a move that reflected investors selling ahead of fears that Starboard would look to unload its 5.3 percent stake in the company.

Starboard had aimed to shake up AOL, which is working to transform itself to an ad-driven media destination as it winds down its old business of selling dial-up Internet access.

For its part, AOL management pointed to the roughly 40 percent rise in the shares over the past 12 months and the announced plan to pay out to shareholders the $1 billion in proceeds from the sale of patents to Microsoft Corp (MSFT.O) as proof that they are responding to investor concerns.

Chief Executive Tim Armstrong said the preliminary results showed shareholders had faith in his strategy.

"It was a referendum on our long-term holders and what they feel about our strategy," Armstrong, a former Google Inc (GOOG.O) official who took the helm of AOL in 2009 as it unwound from its disastrous merger with Time Warner Inc (TWX.N), said of the vote.

Company officials cautioned the voting results were preliminary and said they would confirm the final tally in a filing with the U.S. Securities and Exchange Commission.

WAITING ON PATENT PAYOFF

The selloff took AOL shares to their lowest point since early May, when management disclosed its plan to pay out the patent proceeds to shareholders.

"Traders are getting out since they want to be out before Starboard potentially starts to sell its 5 percent stake in the company," said Miller Tabak & Co analyst David Joyce. "Those who want to hold onto the stock for six months or more are going to benefit from the roughly $11 per share payout from the patent sales."

Shareholders asked Armstrong only one question at the meeting, just what form that payment would take.

"We have been out soliciting shareholder feedback in terms of how they would like it returned," Armstrong said, adding that the company was looking for the most tax-efficient way to proceed and that in any event it needed the sale to close first.

"It would not be unusual to expect it to close soon," he told reporters after the meeting, held in Boston which is home to an AOL office and is also close to Armstrong's hometown of Littleton, Massachusetts.

Armstrong also invited Starboard CEO Jeffrey Smith to address the crowd, which met at Boston University.

"We all agree that AOL is undervalued. We also all agree that AOL can achieve substantial revenue growth and far more profitability. The challenge is how to get that accomplished," said Smith, whose fund holds a 5.3 percent stake in AOL. "We hope and expect the newfound energy of the board and management will continue long after this spotlight fades."

Starboard declined to comment when asked whether the fund planned to hold onto its stake in AOL.

DIRECTOR SEARCH

The company has also decided to add two additional directors to its board, and hopes to find them within the next year. It is considering Starboard's nominees, which included Smith, but also soliciting recommendations from other large shareholders and has hired the executive search firm Spencer Stuart to seek nominees.

"We would really like to have a sitting CEO who hopefully is in the tech or mobile space," Armstrong said. "The second one is probably somebody with either deep financial or tech operating skills and ability."

Starboard is the company's fifth-largest shareholder, according to Thomson Global Markets data. It launched a campaign late last year to shake up the Internet company, including improving results in its display advertising operation and at the local-news site Patch.com.

Dissident shareholders have been gaining ground in board elections this year. Dissidents have won at least one seat in 12 contested elections this year, according to data from Institutional Shareholder Services released prior to Thursday's vote.

(Additional reporting by Jennifer Saba and Ryan Vlastelica in New York and Ross Kerber in Boston; Editing by Sofina Mirza-Reid, Dave Zimmerman and Tim Dobbyn)

Esprit rises 6.3 percent after CEO reassures on turnaround plan

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The fashion retailer's shares, which lost about one-third of their value in the last two days following news of the resignations, were set to open at HK$9.81.

That was compared with a 0.62 percent gain in the benchmark Hang Seng Index .HSI

Outgoing chief executive Ronald van der Vis said late on Thursday that his family was the only reason behind his resignation from the retailer and that a crucial turnaround plan would go ahead as planned.

He said the timing of the double resignations had been "unfortunate" but his case was unrelated to that of Chairman Hans Joachim Korber, who quit on Wednesday.

(Reporting by Donny Kwok; Editing by Michael Urquhart)

Samsonite shares drop 16 percent on HK report of chemicals in handles

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Hong Kong's Consumer Council said in a statement on Friday that excessive levels of polycyclic aromatic hydrocarbons (PAHs) had been found in the handles of four samples of the company's suitcases. The amounts exceeded the limits set by a German voluntary labeling scheme on consumer plastic products, it said.

Samsonite issued a statement late on Friday that said the company's Tokyo Chic, Cubelite and Westlake luggage - the items referenced in the Council report - were "completely safe."

"Based on the independent test results as well as on specialist expert opinion, we are absolutely confident that consumers can continue to use our luggage without any safety or health concerns at all," Ramesh Tainwala, President, Asia-Pacific & Middle East, said in the statement.

"We do not anticipate this incident having any material impact on our results whatsoever."

The Council said a research and testing unit conducted tests on 19 models, with prices ranging from HK$350 to HK$5,100 ($660).

"The Customs and Excise Department has advised the agent for the suitcases of which the handles are found with high PAHs to stop the sales of the concerned model and to replace the handles," the Council said.

For the full statement, click: r.reuters.com/gyt78s

CANCER RISK

Research reports indicate that PAHs can cause cancer. They are released into the environment through the burning of coal, crude oil and refined oil products.

Samsonite, based in Luxembourg and listed in Hong Kong, makes luggage, business bags and travel accessories aimed at the mid-to-upper end of the market.

The stock fell as low as HK$12.02, the lowest since February 1. The shares ended at HK$12.12 on Friday, still down 16.1 percent, compared with a 2.26 percent gain in the benchmark Hang Seng Index .HSI.

Samsonite, among the world's best known luggage brands, went public on the Hong Kong stock exchange last year, listing on June 16. The IPO was priced at HK$14.50, and struggled immediately after it began trading.

The company, named after the biblical figure, aimed to tap China's growth as part of its move to list in Asia.

(Reporting by Donny Kwok and Tan Ee Lyn; Editing by Michael Flaherty and Muralikumar Anantharaman)

Chile soccer club shares plummet after loss; trade resumes

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Shares in Azul Azul AZU.SN, which runs the popular Chilean soccer club, resumed trading on Friday afternoon to sink 19.5 percent to 1,700 pesos ($3.41 U.S. dollars) after Boca Juniors went up 2-0 against "La U" in the first leg of their semifinal matchup on Thursday.

"Some desperate (shareholders) came out to sell. They're betting the club will be left out of the cup," said Monica Nunez, a trader with Vantrust brokerage in Santiago.

On Friday morning, shares plummeted 32.8 percent to 1,419 pesos ($2.84 U.S. dollars)- prompting the Santiago Stock Exchange to halt trading in Azul Azul, as any share price variation of more than 20 percent automatically prompts a trading suspension.

Shares in Azul Azul are generally volatile after cup clashes. Analysts say the shares are often illiquid, held for sentimental reasons and driven more by fans' passion than economic fundamentals.

The club's shares had climbed steeply in recent months, buoyed by a series of major victories in soccer-crazed Chile.

Santiago's blue-chip IPSA stock index .IPSA was trading 0.57 percent stronger on Friday afternoon.

(Reporting by Felipe Iturrieta. Writing by Anthony Esposito and Alexandra Ulmer. editing by Gunna Dickson)