ValuePlays

More than two years after the acquisition that formed Sprint Nextel (S), the now nation’s third-largest wireless provider(down from #2) is about 80 percent done with integrating the two sides together, the company’s CEO Gary Forsee said last week. Let’s just ignore the fact that almost 3 year to complete the merger is just way too long.

“We have a big opportunity in front of us,” said Forsee in the meeting with analysts. He said the company should see profit margins improve as it begins next year to pare down its two wireless networks to one.

Sprint bought Nextel in August 2005 and has struggled with merging the two systems. Technical problems and a required swap of frequencies used by Nextel’s press to talk network hurt call quality and customer service fiascos lead hundreds of thousands of customers to drop the service.

This year, the company began finally selling hybrid phones that work on both the Nextel network and Sprint’s regular CDMA network, and it expects to have 2 million of the devices operating by the end of the year. Next year they will begin switching Nextel customers over to the CDMA network with a new press-to-talk system called QChat, which will go into widespread testing in Q4.

“We believe there’s a lot of growth opportunity in push-to-talk,” he said.

Sprint says having all their customers on one network will save money on operational costs and reduce investment in new cell sites and other support infrastructure.

All this is good and well but what Sprint needs to address is the fact its current customers are just not very happy. Sprint will make more than a dime a share when the network is combined and the cost savings alone will make for an improvement in results but they have yet to stop the exodus of customers to other providers. It is not the network issue(s) making them do it, it is the treatment they get when they call Sprint that is making them flee. Sprint’s firing of customers was a PR fiasco and likely gave more than a few potential customers serious pause about joining Sprint. There are plenty of providers out there for people to choose from, having an adversarial relationship with them is not the way to grow. this is the reason they have fallen far behind rivals AT&T (T) and Verizon (VZ).

Until that issue is fixed, any upside and real improvement for Sprint will be put off indefinitely.

Another day of digestion of Goldman Sachs (GS) blowout quarter sheds some light.

When the world was running around talking of the “subprime meltdown” and the “freezing of credit markets” Goldman quietly looked at the situation and placed their bets accordingly. Rather than dumping positions or just sitting tight and riding out the storm and taking huge losses like Morgan Stanley (MS), Lehman (LEH) and Bear Sterns (BSC), Goldman jumped on, rode the wave down and collected the profits.

The question for shareholders of these companies might not be “why is Goldman so good” but “what the heck were you guys doing?”

Now, the media has pumped up Goldman’s move as “stunning”, “bold” and “breathtaking” and implied they bet the farm on this. The reality is just the opposite. One of the metrics investment banks use to estimate the market risk on a their balance sheet is called Value at Risk, or VaR. This indicator for Goldman moved up only 5% in Q3 vs Q2. If Goldman was placing huge bets in volatile markets like the short trade in mortgages, VaR would have been expected to move up by much more. Since it didn’t, we must conclude that these bets were neither “bold” or “breathtaking”, just simply “savvy”.

Now the latest report out is that Goldman has $69 billion in short term debt it must rollover in relatively soon and the new debt it takes on will invariably be more expensive, hurting earnings. Here is the thing though, if the analyst who wrote this knows this, and now we know it, is there a chance in hell Goldman doesn’t? Also, if we know this now do we really think Goldman has not been aware of it for a whole lot longer? Based on their history, do we really think they have not already taken steps to offset that increase? Me either…

This is one group of people I am not willing to bet against.

MONDAY’S PICKS

Jeff Macke recommended selling General Motors (GM). Open $34.94

Karen Finerman liked NYSE Euronext (NYX). Open $76.05

Pete Najarian preferred BJ Services (BJS). Open $27.81

FRIDAY’S PICKS

Jeff Macke recommended Activision (ATVI). Open $20.96 Close $20.93 Loss $.03

Guy Adami said Oracle (ORCL) is a raging buy. Open $21.04 Close $21.97 Gain $.93

Pete Najarian preferred Sohu.com (SOHU). Open $38.76 Close $40.01 Gain $1.25

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)

Guy Adami= 25-17 Gain $41.04
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 29-22 Gain $9.76
Pete Najarian= 18-15 Gain $25.04
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 9-5 Gain $3.25
Stacey Briere-Gilbert= 2-0 Gain $1.61

Thank You Sir, May I Have Another!!! Kevin Bacon, Animal house

“Mattel (MAT) takes full responsibility for these recalls and apologizes personally to you, the Chinese people, and all of our customers who received the toys,” said Mattel executive Tom Debrowski. Oh do you?

I would personally love to see the “design flaw” that said “cover toys with deadly levels of lead paint”. When I first heard it I thought it was a sarcastic joke. How much pressure are the Chinese putting on Mattel to cause them to publicly cane themselves? How high were the lead levels? Tests had found that lead levels in paint in recalled toys were as high as 110,000 parts per million, or nearly 200 times higher than the accepted safety ceiling of 600 parts per million. Now, it has been pointed out that only 13% of the 21 million toys were recalled due to lead paint but, the question must be asked, why did Mattel apologize for that?

This has to be without a doubt one of the most pathetic acts a corporation has ever done in the name of the almighty dollar. China, getting sick of being bashed most likely told Mattel to apologize or get your toys somewhere else. Rather than pay a few bucks more for a Elmo doll from Thailand, Mattel promptly caved.

It is nice to see that the apology they gave the producers of the toxic toys the same sincerity they gave us consumers whose children may have played with and been damaged by them. Sweet huh? This act really does mitigate the effects of any previous ones, doesn’t it. This is like a beaten spouse saying “I deserved it, dinner is a 5pm not 5:15”. Pathetic

At least to date the other company effected, RC2 (RCRC) has yet to ask forgiveness from the Chinese for the lead coated Thomas the Tank Engine toys they sent them earlier this summer.

Mattel, world’s largest toy maker has been in China for 25 years and about 65 percent of its products are made in China. This summer it recalled 21 million toys made in China for various reason.

If you do not believe my reasoning for the apology take a look at this exchange.

Chinese product safety chief Li Changjiang publicly reminded Debrowski that “a large part of your annual profit … comes from your factories in China. He then added, “I really hope that Mattel can learn lessons and gain experience from these incidents,” adding that Mattel should “improve their control measures.”

Or, grow some stones…

Texas Instruments (TXN)= 25%

Buckle Inc. (BKE)= 25%

Corn Products (CPO)= 22%

Premier West Bancorp (PRWT)= 20%

Kamen Corp. (KAMN)= 12%

Genworth Financial (GNW)= 11%

“There is only one reason insiders buy shares, they feel the price is going up”, Peter Lynch.

Zymogenetics (ZGEN)= $5,622,000

Halozyme Therapeutics (HALO)= $3,749,000

Barnes and Noble (BKS)= $3,295,000

General Growth Properties (GGP)= $2,888,000

World Acceptance Corp. (WRLD)= $1,544,000

A small list today.

TWC Time Warner Cable Inc 31.83
TRBN Trubion Pharmaceutica l 11.30
SVN Sun-Times Media Group Inc 2.56
KFY Korn Ferry Intl 16.35
JBSS John B Sanfilippo & Sons 7.92
FFHS First Franklin Corp 12.93
FFFD North Central Bancsha re 38.00
POOL Pool Corporation 24.85
PLCE Childrens Place Retail S 25.02
PEIX Pacific Ethanol Inc 9.80

A stunning announcement for owners of GRACO & Simplicity cribs

WASHINGTON, D.C. – The U.S. Consumer Product Safety Commission (CPSC) is announcing today a voluntary recall with Simplicity Inc., of Reading, Pa., of about 1 million cribs. The drop-side can detach from the crib, which can create a dangerous gap and lead to the entrapment and suffocation of infants. CPSC is aware of two deaths in Simplicity manufactured cribs with older style hardware, including a 9-month-old child and a 6-month-old child, where the drop-side was installed upside down. CPSC is also aware of seven infant entrapments and 55 incidents in these cribs.

CPSC is also investigating the death of a 1-year-old child in a Simplicity crib with newer style hardware, in which the drop-side was installed upside down. CPSC is warning parents and caregivers to check all Simplicity cribs to make sure the drop-side is installed right side up.

The drop-side failures result from both the hardware and crib design, which allow consumers to unintentionally install the drop-side upside down. This, in turn, can weaken the hardware and cause the drop-side to detach from the crib. When the drop-side detaches, it creates a gap in which infants can become entrapped.

CPSC is also aware of two incidents that occurred when the drop-side was correctly installed with older style hardware, though the upside down installation greatly increases the risk of failure.

The recalled Simplicity crib models include: Aspen 3 in 1, Aspen 4 in 1, Nursery-in-a-Box, Crib N Changer Combo, Chelsea and Pooh 4 in 1. The recall also involves the following Simplicity cribs that used the Graco logo: Aspen 3 in 1, Ultra 3 in 1, Ultra 4 in1, Ultra 5 in 1, Whitney and the Trio.

The recalled cribs have one of the following model numbers, which can be found on the envelope attached to the mattress support and on the label attached to the headboard: 4600, 4605, 4705, 5000, 8000, 8324, 8800, 8740, 8910, 8994, 8050, 8750, 8760, and 8996.

The cribs, which were made in China, were sold in department stores, children’s stores and mass merchandisers nationwide from January 1998 through May 2007 for between $100 and $300.

As an immediate precaution, consumers should check to see if the drop-side is installed right side up. To do this, check to see that the slightly rounded rail with the decorative groove is installed at the top and the plain rail is on the bottom. Next, consumers should make sure the drop-side is securely attached to the tracks in all four corners

Apple’s (APPL) CEO Steve Jobs has been subpoenaed to testify in a stock option backdating case brought by the SEC against Apple’s former general counsel Nancy Heinen. Mr. Jobs and his lawyers will no doubt brush this news aside as “old news”, but it is a perilous situation for him.

Jobs has danced around Apple’s backdating mess, despite it being determined that he helped select the dates. Defenders have said he is innocent because he “didn’t appreciate the accounting implications” of backdating. However, Apple’s former CFO, Fred Anderson has said that Jobs misled him about board actions on stock option grants. This means that one of Jobs’ former confidants is accusing him of lying on this issue. The company’s official investigation pardoned him only because of his mindset about what he did (surprise!!!). It was the old “I did it but did not know it was wrong” excuse. Hard to believe it but it worked.

The subpoena creates a minefield for Jobs. Even though he is only a witness and not a target, the SEC’s and Heinen’s lawyers are sure to ask him questions that will require him to revisit previous statements and this time it will be under sworn testimony. I am guessing that the tone of the conversation this time will be a bit more contentious than the Apple “investigation” was.

Since Apple’s defense of his conduct relies on the distinction between what he knew and thought, Jobs’ testimony will be dissected for any discrepancies related to prior statements and what Heinen’s lawyers believe to be the truth as told to them by their client.

The SEC is no doubt unhappy that a CEO was able to admit to backdating of options and still walk on the action. Does anyone think that this subpoena is not making them very happy to get more testimony from Jobs on the record?

Since Jobs is Apple and without him Apple is just another company, shareholders are going to want to keep close tabs on events here. It looks a bit to me like a set-up but, if Jobs is able to walk away from this unscathed, and he very well may, it will only serve to elevate his “God” like status in the cult that is Apple shareholders.

Either way, it will be interesting..

A Monsterous Cramer flip flop, No way, The Juice, A Tear Jerker

– First Jim Cramer says a 1/2 point cut would be disastrous in this video, then after the 1/2 point cut, says it is wonderful. He is rapidly becoming irrelevant and just a side show.

– This can never happen

– And I thought Micheal Vick was the dumbest person on earth

– If this does not bring a tear to your eyes, you have no soul.

I have read a whole lot on Wal-Mart’s (WMT) new ad campaign but until this morning had yet to see the ads. Personally, I thought they were perfect.

Before we start the conversation, you can view one of the ads here.

What Wal-Mart does with the ads is remind you what you can do with the money you save at their stores. Rather than the previous ad campaign that only told you they had “low prices” they are now saying “look at the fun things you can do with the money you save”. The images of a family vacation with the kids is sure to spur memories in people of their childhood and the desire to create similar memories with their kids.

It also is going to inspire people to want to save a little cash to enable them to do one or two more things on that vacation. Wal-Mart is telling us that if we shop there we can do just that.

What they have done is turned a logical ad campaign that said shop here because it “makes sense to save money” into an emotional one. Now the message is shop here so you can have “more fun and do more with your kids” with the money you save. I found myself smiling during the commercial and that is exactly what Wal-Mart needs. When it comes to money, emotion controls the overwhelming majority of peoples spending habits, not logic.

That is why this campaign will be a winner..