Opening Bell: 3.24.06

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Lucent And Alcatel In Merger Talks (WSJ)
Two networking has-beens are rumored to be far along in merger talks, which would create a $33 billion company. While the deal is ostensibly a merger of equals, Alcatel's greater size ($20.2 billion vs. $12.6) means that it may be structured as a buyout of Lucent. It's also likely that Lucent's workforce will see the brunt of the staff reductions, as laying off workers in France (as you might have heard) is notoriously difficult, and full of red tape. Though these companies aren't close to the stature they achieved during the dotcom bubble, they're still important telecom suppliers.
First Bank Of Wal-Mart (NYT)
Wal-Mart has been quite upfront, in recent years, that they'd like to open a retail bank. It's not hard to imagine the strength they would have in this area. They already have nationwide retail space, could offer rebates on in-store goods, cheap loans, no-fee ATMs, etc. We'd argue that they'd do more to retail finance than online banking has! Of course, regional bank heads don't want them to be allowed to (which is another way of saying that Wal-Mart could do better for the customer). It's a pitched battle with many charity and non-profit groups lobbying the FDIC on both sides. If they are allowed to open a bank, expect bankruptcies and rapid consolidation among the regional players. Oh, and Wall St., you're not out of the woods either, they're opening up an international arbitrage operation next.
Big Pharma Thinks Small (CNN Money)
Analysts expect big pharma to take a $100 billion sales hit over the next five years, as key drugs come off patent. With pipelines that look unpromising, the pharmaceutical makes are looking to smaller companies, and licensing deals, as a way to have something to sell. The licensing deals are probably smarter than Pfizer's strategy in the 90's, which was to buy out every company with a drug they wanted. Now Pfizer is a bloated behemoth. The drugs are gone, but the employees hung around. But will licensing be any better? Unless these actually prove to be blockbusters, the companies are going to spend a fortune on controversial direct-to-consumer advertising, which will both hurt their image (and studies show it does), as well as their bottom line. Unfortunately, in this business, there's not substitute for not developing good products, and the companies are going to learn that the hard way.

Tesco shares jump on report it may set up REIT (Reuters)

You should probably get to know Tesco. The UK retailing giant is coming to a town near you, to give Wal-Mart a battle. Shares in the UK jumped on news that the company is considering splitting up their share into two separate stocks, one for its actual stores, and a REIT for all the property it owns. This concept has been picking up steam, as the same idea has been floated, in recent months for McDonalds. Call it the Eddie Lamptertization of retail investing -- trying to unlock these hidden real estate investments. But, forgive us for our skepticism, how do you really unlock a piece of real estate's potential when it has a McDonalds or a K-Mart sitting on it?


Israeli Firm Abandons Purchase Over U.S. Aecurity Objections (AP)
Dubai can feel better now; the US has blocked Israel's Checkpoint, a maker of security software, from buying out Sourcefire. The FBI claimed that Sourcefire held technology critical to US safety, that couldn't be trusted with a foreign firm. All in all though, isn't the continued blocking of international mergers (CNOOC, Dubai Ports) based on some out-of-date thinking? It's not that security isn't important, but what does it mean to be an Israeli or American company? They all have offices around the world, if an employee were to leak critical information, they could do it from anywhere, and be of any nationality.
Laptops Prove Weakest Link In Data Security (WSJ)
Here's what your CIO won't tell you (as if you ever talked to the CIO): You're the biggest danger to your firm. This week Fidelity announced that they mad misplaced a laptop containing the information of thousands of clients, in an unencrypted format. Does this really mean that the laptop is the weakest security link in the firm? No. Idiot employees are. In a recent stunt, corporate employees demonstrated their willingness to tell strangers their passwords, when a company posed in NYC, giving away free "I Love NY" t-shirts, in exchange for, among other things, signing up for an account, and writing down a password on a piece of paper. Since so many people use the same password for everything, the company was able to get all this information simply from a t-shirt. All the best encryption, key-cards, passwords, metal detectors, etc. don't do anything if someone doesn't know how to use the security, or leaves their laptop on the subway.
TV advertising set for massive slump (BrandRepublic)
This doesn't bode well for the big media gloms, but are we surprised? Just in the last two years there's been a sharp decline in advertiser satisfaction from TV spots. DVRs are predictably to blame, as viewers have more options during commercial time. It's also bad news for the Manhattan's top advertising houses. In case you don't know, they rival their downtown brethren in terms of waste, perks, and overpay. As more advertisers allocate money to cheap internet advertising, both the top line and the margins may shrink considerably.
Google's Print Auction Fizzles (BusinessWeek)
Newspapers rejoice! A Google Venture Fails! Oh wait, it turns out that not even Google's brand name, and unique auction-based pricing could get people to buy advertising in print publications. In one case, a company snagged three half-page ads in Martha Stewart Living for a mere $4,000 bucks. What a deal. Really, it was less than a drop in the bucket for Google, but a failed opportunity for print.
For Regis, the Unkindest Cut of All (BusinessWeek)
Some companies, when times are bad, blame the weather, or they blame Hurricane Katrina, or they say that shoppers didn't go out because they all went to see Shrek that weekend. But Regis Salons, the largest player in hair, is bliming weak sales on a.... drum roll please.... the protracted longhair cycle. That's right, long hair is back (actually, we sorta noticed that). So cuts are becoming less frequent, and even then they're just trims. As the industry saying goes , "you can't pay the bills on trims alone.". Still, you think they'd be able to make it up on the high margins from dye jobs, or is natural back too? Oh wait, we think it might be.

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