Nasdaq --- Robert (slow)
Interview: Ford
>> shares of qualcomm are down in extended trading after the company cut its forecast. robert gray is standing by at the nasdaq marketsite. i have a feeling you have other companies to talk about, as well.
>> indeed, qualcomm shares down 5% in extended hours trading after they cut their forecast for the full-year profit, sales and handset sales. they see third-quarter earnings per share at 24 cents to 26 cents, below the average estimate of 28 cents per share for qualcomm. you see the shares on the screen, now down 4.6%. those shares, incidentally, already down 22% year to date, particularly after their last quarter forecast for the quarter just ended, saying those were disappointing forecasts, as well. it will be interesting to see, the stock dropped 8% the day after their last earnings forecast and we’ll see how they fare tomorrow, as well. albert lin telling us the biggest challenge for them is breaking into new markets and on the chip side, they are running into major competition from texas instruments. ellen mentioned other stories, today. ebay, that stock initially was lower on the earnings report, although they were boosting their forecasts. the shares have turned around, now up 1.3%. the conference call has begun and we’ll have more for you. meg whitman will be on with greg miles coming up shortly. they’re boosting their 2005 earnings per share forecast to 76 cents to 78 cents a share, pretty much bogating the average analyst estimate of 77 cents per share and boosting their revenue, as well. the upend of the forecast barely meeting the average analyst estimates of $4.36 billion. the growth slowing, the smallest profit gain of in three years, one of the reasons the shares haven’t risen more after their disappointing earnings and profit forecast from last quarter and analysts pointing out that they may be raising it, but the bar had been lowered after the profit disappointment from last quarter. david garrity says he’s cautious on the stock, that investors aren’t willing to pay up for ebay, still trading at over 40 times this year’s earnings.
>> robert, thank you very much. what we’ll do is put this into broader perspective, looking at how the averages closed for the day. stocks resumed their 2005 decline. government reports showed inflation rose more than had been forecast. the decline in the dow and s&p put those averages at their lows for 2005. the nasdaq, that drop represents a 1% decline. volume, 11% more than this time a week ago and over on the nasdaq, quick check there, over two billion shares changing hands --
>> ford stock up for the first time in nine sessions, but the outlook for the auto giant is not improving. deirdre bolton tells us why.
>> excluding some costs, first-quarter earnings and revenue declined less than forecast. net income dropped to 60 cents a share. sales last quarter also dropped. here, again, they were better than what investors and analysts expected for the current quarter, though, ford says it may post a loss. its auto operation is not making money. only its auto loan business is generating profits. portfolio manager at m.t.b. investment advisers says ford needs to cut production. ford is cutting output of cars and trucks 5% from a year ago. ford, like g.m., is losing market share to toyota and other asian automakers gaining ground. one analyst says the loss of market share is appalling. as for the stock, the analyst says it will get worse before it gets better. over the past year, ford down 30%, g.m. off 44%. s&p 500 during that time unchanged. some analysts saying ford’s only hope is continued cost-cutting. dan gentener with r.n.c. capital management saying what it comes down to for ford and g.m. is the need to cut costs like healthcare, pensions and benefits. the real financial difficulties revolve around those factors, he says. ford bonds dropping, as well. whether it will go to junk status or not, traders pointing out that the bonds are already trading at that level so no real practical impact on that space.
>> thanks so much. one money manager described it as a little better than we were expecting. he is talking about j.p. morganchase, which announced record first-quarter earnings, thanks, in part, to investment banking and bond trading. the company was also helped by the purchase of bancon. the net income rose over 17% to over $2.2 billion. earnings per share fell because the company issued stock to pay for the bank one purchase. coming up, the heads of fannie mae and freddie mac tell congress not to cut their portfolios, or else. learn what the “or else” means when we return.
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Listen Market briefing --- Ellen (fast)
NYSE --- Julie (fast)
>> the new york stock exchange has just announced it is buying the archipelago electronic trading system.
>> we believe our new combined company will be a world-class competitor in every respect. it will be good for investors and good for america. we will be stronger, more diverse.
>> people holding seats on the nyse will be given a chance to trade in their seats for stock in the new company and will own 70% of the shares. the big board has been trying to fend off challenges from electronic systems and from the nasdaq. john thain says the nyse trading floor will remain, it will not trade nasdaq stock. s.e.c. commissioner william donaldson had this to say.
>> it is ilstrative of the intense competition growing between the various marketplaces and i think that it illustrates vividly with the crossover with, let’s say nasdaq issues traded in archipelago and new york stock exchange issues, it illustrates the importance of the level playing field that we have tried to put in place between the various markets .
>> joining us now to get his reaction is professor, director of the center of study of securities markets at pace university, he was chief economist of the big board for 18 years . what is the most important thing to take take away from this?
>> it was quite a surprise. i do believe it’s a brilliant move by john thain. what it does is recognize that institutions now dominate the trading of stocks.
>> what do you mean by institutions?
>> the large mutual funds, the large pension funds, large retirement funds and they trade not in 100 shares or 1,000 shares or even 5,000 shares. they trade in very large lots, very large orders to execute and what has happened is competitors have grown up known as e.c.n.’s, or electronic communications networks, archipelago was one. that electronically match these large orders.
>> did he have any other choice?
>> i don’t think they had much choice but to provide an electronic execution service and of course the new york stock exchange was planning to do that in any case with its hybrid markets system, announced some months ago. what the new york stock exchange has accomplished, it has killed not two birds with one stone, but three birds with one stone. it becomes, as you said, it becomes a public company. a for-profit company with all the incentives that provides to the management. secondly, it becomes an electronic communications network, able to compete with the others, like instanet, recently acquired by nasdaq. and thirdly, it provides a diversification of products because archipelago trades nasdaq stocks.
>> reports that instanet will be acquired.
>> yes, reports, and i assume that will happen.
>> in terms of that, how much is his hand being forced? the real question becomes is this too little, too late for the big board?
>> i don’t believe so. i think archipelago is one of the largest players in the field and i foresee a great success for the merger.
>> is this the correct partner? reports that instanet is in play. is archipelago a second choice, is it the right choice?
>> archipelago has been an immensely successful e.c.n. and i think the combination will work very well to maintain the dominance of the nyse and not only in its dominance in trading, its listed stocks, but in trading other products it’s not now trading. it’s been largely a one-product shop but now it will trade nasdaq stocks, options, as well as companies that have not been listed on the big board.
>> you know, it’s interesting that it is archipelago because a.i.g., back in january, started talking about and doing a dual listing with the new york stock exchange and with archipelago as a sign that the nyse was perhaps losing significance. so in terms of that issue, tell us more about why this is the right deal in terms of keeping companies listed with the nyse.
>> the new york stock exchange has had 80% of the trading in its listed stocks and the fear has been that market share would decline. one brilliant stroke, the new york stock exchange has expanded its opportunities immensely. i will also like to mention this. there is ongoing a consolidation of trading markets . we’ve seen that in europe. we’ve seen it all over the world. there is over capacity in the industry, by that i mean too much capacity to execute trades in stocks and so there is every reason to consolidate.
>> what happens, then, to the regional exchanges?
>> i think, well, you know, as i recall, the pacific stock exchange was acquired by archipelago.
>> william, we’ll leave it there, thank you very much for your time.
>> my pleasure.
>> william freund is director of securities markets at pace university. we have julie hyman live at the new york. tell us, what are we watching for there?
>> definitely this has been a topic of conversation among traders. in talking to them what, we really need to be watching in tomorrow’s session to find out exactly how the folks who are members here at the new york stock exchange, the people receiving the shares in the transaction, how they’re reacting. we have to watch the seat prices. the last seat sold on april 15 for $1.6 million. according to john thain, what he talked about in the pres conference, these seats will be valued around $300,000 per seat, exchangeable for shares and $400 million in cash exchanged in this transaction in addition to the share trades. so that will being it, to see where seat prices to, to see if the members believe this transaction fairly valued the new york stock exchange versus archipelago, if it’s a good deal in their minds. it’s an interesting quandary because not only will someone who owns a seat here have to think about, is this a good deal in the grander scheme of things for the new york stock exchange. if they trade here on the floor, if they use that seat, they’ll have to think about whether it’s good for business for them versus how archipelago will be integrated into the business of the new york stock exchange so a lot of questions for folks here to ponder and definitely this is a sign that john thain is trying to move things forward and take the new york stock exchange into the next era. not only is this going on, there have been talks about early trading, an extended trading day. john thain at the press conference saying that has not been decided, whether the trading day here will be extended. the c.e.o. of archipelago, jerry putnam, pointing out that their trading day goes from 4:00 a.m. to 8:00 p.m., which is not an option on the trading floor but john thain is considering that option and has been talking about the hybrid system which is expected to be enacted around the same time that this merger would close, which is in about 12 months’ time. a lot of changes in store for the new york stock exchange and definitely a lot of things for people here to digest. ellen?
>> julie, the report came out about an hour before the press conference happened so i’m curious to hear what kind of buzz and reaction there was in the initial minutes when people were anticipating and figuring out what was going on.
>> there was a lot of buzz. people have been talking about it all day, trying to figure out what was going on. the problem, before the press conference happened, there were few details so people were reluctant to talk about it. they heard that archipelago and the new york stock exchange was doing a deal but it wasn’t clear what. if it was going to be an acquisition, a merger, if the new york stock exchange was just buying some of archipelago’s technology so people weren’t talking a lot about it. they are excited about it but wanted more detail it’s financial nature of the transaction to decide exactly how they felt about it. most of the people here have left the day so we’ll bring you more detail tomorrow in terms of trader and member reaction.
>> julie, thanks so much for the report. we will continue to track the story and get reaction throughout the afternoon. also reaction to the host of earnings that came out after the bell today. qualcomm, motorola, ebay. ebay boosting its forecast and profit and revenue this year. also, you have the dow and s&p closing at new 2005 lows. we’ll also bring you details on the trading day. keep it here.
