How $AAPL Can Get its Mojo Back

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“FORTUNE — “The big question we get from investors is whether the greatest turnaround and growth story of the past decade is over?”

So begins a note to clients issued Tuesday morning by Sterne Agee’s Shaw Wu. His short answer is “no.”  His slightly longer answer is that Apple (AAPL) needs to think different to regain its “mojo.”

How exactly does it do that? Wu offers a four-step program:

1. Make a bigger iPhone. “In many markets, the 4.8- inch (Samsung Galaxy S III) to 5.55-inch (Galaxy Note II) form factors are the new high-end of the market where the iPhone 5 is viewed as mid-range but with a high-end price.”
2. Reclaim the high end. “We believe AAPL is leaving money on the table by not participating in larger touchscreen form factors. But more importantly, we believe AAPL needs to reclaim high-end leadership as that is what its brand is about.”
3. Address the mid-range better. “The iPhone 4 and 4S are highly desired by many but not as widely available as they could be… We believe this isn’t because of components but because iPhone 4 and 4S manufacturing capacity had been scaled back in favor of iPhone 5.”
4. Let the margins fall. “Investors have shown a willingness to accept lower margins for sustainable top-line growth. We have seen this with Amazon (AMZN) and Google (GOOG).”

Wu rates Apple as a “buy” with a $715 price target. Apple closed Monday at $442.32, down $11.30 (2.49%) for the day. The stock could use some mojo.”

“Media billionaire John Malone is eyeing a potential bid for the second-biggest U.K. pay TV operator Virgin Media, a deal that would set him up to challenge market leader Rupert Murdoch.

Virgin Media (VMED), which has a market value of over $10 billion and debt of $9 billion, confirmed it has been approached by Malone’s Liberty Global (LBTYA, Fortune 500)about a possible transaction. Liberty Global declined to comment. Liberty’s interest in buying Virgin was first reported by the Financial Times…”

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Holder says despite internal analysis of deterioration in the quality in RMBS, S&P decided to ignore and hide deterioration by issuing top ratings.

The securities in question not only deteriorated, but failed.

developing…..

“This will be another year of buoyant earnings, sending the Standard & Poor’s 500 Index up to 1,600 by year-end, according to Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America.

That would represent a 7 percent gain from Monday’s close of 1,495.71, and a 12 percent increase for the year.

“The big surprise for the U.S. equity market is that we might not see a pullback this year, despite what many in the markets are expecting,” Subramanian tells CNBC, noting that the market can avoid its typical 5 percent correction.

Of the 264 S&P 500 companies that had reported earnings as of Monday’s close, about 73 percent beat analysts’ profit forecasts, and 66 percent beat analyst’s sales projections, according to Bloomberg data….”

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“The Federal Reserve’s massive easing program is going to end in financial disaster, says Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland and former chief economist at the U.S. International Trade Commission.

The Fed has become “an enabler of presidential and congressional inaction [on entitlements, etc.] by keeping interest rates artificially low for five years and now by printing money to buy U.S. bonds and mortgage backed securities at a $1 trillion annual pace,” he writes on his blog.

“Record low interest rates are propping up weak consumer demand but sowing the seeds of another financial crisis.”

Urban real estate is rising to unsustainable levels, as are junk bonds, Morici says. The Fed’s low interest rates have helped push student debt over $1 trillion, with one in six loans in default. The easing also has allowed many states to avoid pension reform, he adds.

“Inevitably, all that money will push up inflation, and then the Fed will be compelled to stop buying bonds and let interest rates rise to levels the federal and state governments can’t bear easily,” Morici writes.

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Would be a small deal if it occurs, but another addition to AOL’s new push in re-creating itself….

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“The company formerly known as RIM is holding its first developer event in Europe since launching its new BlackBerry 10 platform last Wednesday. Speaking at the BlackBerry Jam event in Amsterdam, UK MD Stephen Bates said the launch of the first BB10 device —the full touch Z10 — has exceeded expectations, with some U.K. retailers selling out a few days after launch. Bates did not, however, put any concrete figures on early sales. The U.K. was the first market to get the Z10 but the device will launch in Canadian today, and additional European markets this week, including France, Germany, Switzerland, Spain and the Netherlands.

“The response we’ve seen exceeded all of our launch partners’ expectations. Customers are choosing to buy the BlackBerry Z10 in large numbers,” said Bates. “In fact some of our partners have told us that they sold out over the weekend in some of their key retail locations.

“The partners’ call centres are also flooded with calls, as people phone to ask for more information about the device, and also where and how to buy it.”

Yesterday, AllthingsD reported on channel checks conducted by Jefferies & Co. –  quoting Jefferies analyst Peter Misek reporting lines outside a number of U.K. retailers selling the device, and describing sell-outs of the white Z10 as widespread.

Asked about early Z10 sales, U.K. carrier EE also declined to share specific figures but told TechCrunch: “We’re really happy with the interest so far.”

Historically, the U.K. has been a strong market for BlackBerry — especially with the youth sector. Orange commissioned research last November suggested close to half of U.K. teens still owned a BlackBerry. But of course the company needs to win over more than just the youth market with BB10 if it is to turn the platform into a sustainable mobile ecosystem and keep developers working for it generating the apps that are, in turn, needed to attract and grow the user-base….”

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“Amazon has just announced a new virtual currency for Kindle Fire owners to use on in-app purchases, app purchases, etc. in the Amazon Appstore.

The service will launch in May, at which point Amazon will be giving away tens of millions of dollars worth of Amazon coins to customers. Users then have the choice of paying for apps or in-app purchases with their credit cards or with Amazon coins.

Developers who already have their app in the Appstore don’t need to do anything to leverage the Amazon Coin system, but if new developers would like to get in on the virtual currency they must have their app approved by the Appstore by April 25.

The idea is to take advantage of what Amazon calls already-high conversion rates from Kindle Fire users on the Amazon platform and give users a new way to spend money. Amazon has been giving developers more options to generate revenue in the Appstore, most recently with the introduction of in-app purchases….”

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“Technorati has released a new Digital Influence Report, and the big theme (probably not surprising coming from a blog and social media ad network) is that most online marketing dollars aren’t being directed to the “blogs and influencers” where they could have the greatest effect. At the same, social ad spending is expected to increase significantly this year.

The company previously released annual State of the Blogosphere reports, but starting this year it’s expanding the report’s scope to include social media — hence the change in name. The company says that it surveyed 1,200 consumers, 150 brand marketers, and 6,000 influencers. (I sent Technorati CEO Shani Higgins an email asking how those influencers were identified, and she said that surveys were sent out to the company’s index of 2.5 million influencers, Technorati waited for 6,000 completed responses, and then it checked them to “make sure we get top influencers participating and a wide sample set.”)

Among the marketers, Technorati says 60 percent predicted that social ad spending will increase this year, and that the average predicted increase was 40 percent. However, the vast majority of their online spending still goes to display, search, and video advertising, with social only accounting for 10 percent of the total. And within social itself, most of the spending goes (in descending order) to Facebook, YouTube, and Twitter, with only 11 percent going to the “blogs and influencers” category that Technorati focuses on.

The report argues that this isn’t the best way for brands to spend their money….”

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“Back in December, as always happens every year for the past 3, a margin call driven liquidation wave pushed the price of the gold to multi-month lows, providing merely yet another lowball buying opportunity (for which let’s all thank John Paulson, again). One buyer who certainly would love to thank whichever marginal seller was liquidating their gold, is none other than China, which as was reported a few hours ago, imported an all time record 114.4 tons of gold in the month of December, or more than all the gold held by the Greek central bank (assuming it hasn’t been confiscated by ze Germans or the ECB, or deposited in G-Pap or Venizelos’ private HSBC safe in Geneva yet: a very aggressive assumption).

This means that for all of 2012, total China imports of gold have hit a staggering 834.5 tons, double the 431 tons in 2011, and that the PBOC’s determination, whose official holdings are still a laughable 1054 tons, when in reality they are likely 3-4 times greater, to convert to a commodity-backed currency the day it decides to become the world’s reserves currency, as we predicted back in 2011, is as steadfast as ever.Recall from the December 2009 edition of China Youth Daily, which we reported previously that State Council advisor Ji was saying “that a team of experts from Beijing and Shanghai have set up a “task force” last year to consider growing China’s gold reserves.,,,,”

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“Walgreen Co. WAG +3.58% posted its first monthly same-store sales gain in a year in January, aided by an active flu season and firmer prescription orders stemming from the resolution of a contract dispute with a major pharmacy-benefits manager.

The 3.7% increase in same-store sales in January came above the projected 1.5% increase, according to analysts surveyed by Thomson Reuters.

Results last year were hurt by a rate contract dispute with pharmacy-benefits manager Express Scripts Holding Co. ESRX +1.64% that led millions of customers to transfer their prescriptions to rival pharmacies. But since Walgreen and Express Scripts entered a new multiyear agreement that began in September, millions have returned to the fold.

The loss of the Express Scripts customers, as well as higher demand for lower-priced generic drugs, hurt Walgreen’s same-store sales throughout 2012. In 2012, January’s same-store sales dropped 4.6%.

Walgreen has also successfully courted some customers it had lost in the dispute and hopes to win back more, gains executives expect will be reflected in many of 2013’s monthly sales reports. In January, pharmacy sales grew 8.7% and same-store pharmacy sales increased 6.2%, compared with an expected 2.4% jump. Prescriptions filled at comparable stores soared 14%.

Overall, total sales in January grew 6.3% to $6.15 billion from a year ago. Front-end sales were up 1.3%, while same-store front-end sales slid 0.4%, compared with expectations of a 0.5% drop….”

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Janjuah said in November the S&P would spike above 1500 briefly with an eventual retreat over the next few years to the 800s. Let’s hope he stays half right!

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“$DELL has officially announced that it’s going private after weeks of reports and negotiations.

The final price is $13.65 a share. The deal is valued at $24.4 billion.

Company founder Michael Dell is taking the company private in partnership with private equity firm Silver Lake.

According to the release, the buyout will be funded by a big consortium. Dell and Silver Lake are going to finance it along with Microsoft which is kicking in $2 billion as a loan, according to the release. Other financing will come from BofA Merrill Lynch, Barclays, Credit Suisse and RBC Capital Markets.

Microsoft’s involvement in the process is particularly noteworthy. The reason Dell is going private is that its business of selling Windows-based PCs has not been going well. If, as a private company, Dell wanted to initiate a radical change and break away from its reliance on Microsoft, that would appear less likely with Microsoft’s involvement.

And from Microsoft’s perspective, it is likely to upset its partners. Remember, the entire PC industry is in decline. This isn’t a Dell-only problem. If HP is on the cusp of going to out of business, will Microsoft rush in with billions of dollars to bail it out?

At $13.65 a share, Dell says in the release it’s buying the company for a 25% premium over the stock’s closing price before news leaked of a potential buyout.

We expect there will be multiple shareholder lawsuits over this deal. Just a year ago, the stock was trading at ~$17.66 a share. Today, Dell and Silver Lake want to buy the whole thing for considerably less. Dell has a 45-day “go-shop” period where the board can look for a better deal….”

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“The January reading of the ISM non-manufacturing (services) index fell to 55.2 in January.

But this was a tad higher than the 55.0 expected by economists.

Any number above 50 signals expansion.

From ISM:

…This indicates continued growth at a slightly slower rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index registered 56.4 percent, which is 4.4 percentage points lower than the seasonally adjusted 60.8 percent reported in December, reflecting growth for the 42nd consecutive month. The New Orders Index decreased by 3.9 percentage points to 54.4 percent, and the Employment Index increased 2.2 percentage points to 57.5 percent, indicating growth in employment for the sixth consecutive month. The Prices Index increased 1.9 percentage points to 58 percent, indicating prices increased at a faster rate in January when compared to December. According to the NMI™, eight non-manufacturing industries reported growth in January. Respondents’ comments are mixed about the economy and business conditions; however, the majority of respondents are optimistic about the overall direction.” “

“(Reuters) – MasterCard Inc doubled its quarterly cash dividend and said it would buy back up to $2 billion of its Class A shares, days after the card payment network reported strong fourth- quarter results helped by its performance in emerging markets.

The new buyback program will become effective after the company completes its existing $1.5 billion repurchase program, which had about $440 million remaining as of January 25.

MasterCard shares were up 1.4 percent before the bell.

The new dividend of 60 cents per share effectively returns $75 million to shareholders every quarter, based on 124 million shares outstanding as of January 31.

“Our strong financial performance allows us to increase the return of cash to shareholders through our dividend and share repurchase programs,” MasterCard Chief Executive Ajay Banga said in a statement.

MasterCard’s fourth-quarter results topped Wall Street estimates, but the company said global economic uncertainty could slow revenue growth in 2013….”

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NYSE

NASDAQ

AMEX 

BIDU, BBVA, BBBY, CIT, CLWR, DHI, HMY, HGG, KBH, M, MRVL, PHM, RYL, SD, SWC, TGT, TOL, UNH, WSM, ZNGA,

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In Play ,

On the Wires 

“Legendary Dow theorist Richard Russell says investors should approach the latest dow theory buy signal with trepidation.

In brief, Dow theory says that when the Dow Jones Industrial Average and the Dow Jones Transportation Average move in tandem, up or down, the rest of the market will move with it. If one is making a new high, while the other is not doing well, you should be skeptical of the durability of the rally….”

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“NEW YORK (AP) — Shares of Dell climbed in premarket trading Tuesday on reports the personal computer maker is nearing a deal to go private worth between $23 billion and $24 billion.

The transaction is said to involve a group including Microsoft Corp., private equity firm Silver Lake and CEO and company founder Michael Dell.

The Wall Street Journal, citing people familiar with the matter, says the price being discussed is between $13.50 and $13.75 per share. This would be better than the $11 per share the stock was hovering at before word of the buyout talks trickled out last month, but a steep markdown from the shares’ price of $26 less than five years ago.

Dell’s stock closed at $13.27 on Monday.

Dell spokesman Jess Blackburn said in an emailed statement Tuesday that the Round Rock, Texas company does not comment on speculation….”

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