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Aren’t you glad Sunday is a party day again? I’m a Jew, so when it’s not football season, Sunday literally has nothing to offer except long lines at Trader Joe’s and suffering through my friends complaining about the upcoming work week. That is, unless some generous souls offer to throw a weekly pool party blowout. Luckily for us, the Dim Mak fellows are those generous souls, and their Sunday Summer Night Swim Parties are putting our Sundays back on the right track. It’s just, some people aren’t exactly used to partying on God’s Day, so they make rookie mistakes. Here, then, are a few little tips and tricks to look like an old pro. Read the full story

SEC Eyes Charges For Bond Players (WSJ)
Securities and Exchange Commission officials are pushing hard as part of their ongoing probe of collateralized debt obligations and other mortgage-related products developed by Wall Street to bring charges against individuals, such as executives involved in selling the deals or outsiders who managed the assets, these people said. While the situation remains fluid, the agency also could file civil charges against hedge-fund managers who helped structure certain mortgage-bond deals but then bet against them.

U.S. bank failure costs to exceed estimates by $2 billion (Reuters)
The FDIC’s 2010 loss estimate for bank failures rose to $24.18 billion at year’s end, up from initial estimates of $22.17 billion. The bank regulator increased the loss estimate for 102 out of 157 banks that failed in 2010, according to SNL Financial.

Brevan Howard, Jamison Hedge Funds Said to Advance During Commodities Rout (Bloomberg)
The Brevan Howard Commodities Strategies Master Fund Ltd., which managed $368 million as of March 31, gained 1.1 percent in the first week of May, an investor report obtained by Bloomberg showed. Jamison’s Koppenberg Macro Commodity Fund Ltd., which manages more than $600 million, advanced about 4 percent, said two people with direct knowledge of the matter, declining to be identified because the information is private.

Germany and France Surprise With Strong Growth (NYT)
The euro area’s two largest economies, Germany and France, showed surprising strength in the first quarter of the year, helping lift the entire continent’s performance despite sharp pain along the edges. As a result, the European Commission said in its spring forecast, released Friday, that prospects for 2011 looked “slightly better” than six months ago.

Greece Default Anticipated by 85% in Investor Poll (Bloomberg)
Eighty-five percent of those surveyed this week said Greece probably will default, with majorities predicting the same fate for Portugal and Ireland, which followed Greece in seeking European Union-led bailouts, a new Bloomberg Global Poll shows. The outlook for all three countries deteriorated since January.

Goldman’s O’Neill Says ‘Black Swan’ Concern Overblown, Stocks Set to Rally (Bloomberg)
The view that “the West is in trouble” is wrong when nations including Germany, Sweden, Australia and Canada are performing strongly, O’Neill said in an interview with Bloomberg Television in Hong Kong, recorded yesterday and broadcast today. Investors should “stop worrying so much,” said O’Neill, known for coining the BRIC acronym for Brazil, Russia, India and China…“Every little problem that crops up somewhere in the world is not going to create another black swan,” he said, adding that “there’s far too much conservatism,” in terms of investors holding cash.

Rajaratnam Loss Raises Questions Over Defense Strategy (WSJ)
Mr. Dowd’s closing argument was one of many components of Mr. Rajaratnam’s ultimately failed defense strategy. Many moves by the defense team and Mr. Rajaratnam are now likely to be evaluated, including the selection of a largely working-class jury in a case involving a billionaire, his choice not to take the stand, Mr. Dowd’s often-combative style, and the overarching attempt to convince jurors that the hedge-fund titan only relied on publicly available information in the face of recordings to the contrary.

Rand Paul says people who support universal healthcare ‘believe in slavery’ (LA Times)
Rand Paul, the freshman senator from Kentucky, was speaking recently about healthcare, specifically the new healthcare law some refer to as “Obamacare.”  Like many Republicans, Paul, the son of Rep. Ron Paul (R-Texas), doesn’t like it. Unlike many conservatives, the “tea party” darling doesn’t like the law  because it reminds him of slavery.

China Fund Confident of Getting More Cash (WSJ)
China Investment Corp. is making progress toward getting fresh funds, one of its top officials said, addressing uncertainty about the future of the sovereign-wealth fund, which faces critical scrutiny over its performance after investing all of its initial $200 billion.

Crédit Agricole doubles profits to €1bn (FT)
Crédit Agricole’s quarterly net profit rose to €1.0bn ($1.42bn) from €470m a year ago, which was higher than average analyst expectations of about €992.5m, according to a Reuters poll.

I.R.S. Moves to Tax Gifts to Groups Active in Politics (NYT)
Invoking a provision that had rarely, if ever, been enforced, the Internal Revenue Service said it had sent letters to five donors, who were not identified, informing them that their contributions may be subject to gift taxes depending on whether the donations exceeded limits under the tax laws.

1 in 3 young NYers plans to leave state (AP via NYP)
A recent poll finds that 1 in 3 New Yorkers under age 30 plans to move to another state at some point…The poll finds that most of those who plan to move will do so because of economic reasons including jobs, the cost of living, and taxes.

‘Fair Value’ Accounting Guidelines Tweaked (WSJ)
Perhaps the most significant changes affect companies’ disclosures about their “Level 3″ assets, which are the risky, illiquid securities valued using a company’s own estimates and models rather than market prices. Companies will have to disclose more about the processes and assumptions they use in their Level 3 valuations. They will also have to discuss what might happen to the company’s valuations if the factors they are using were to change.

Ashton Kutcher Will Join ‘Two and a Half Men’ (Hollywood Reporter)
Two sources close to the deal-making tell The Hollywood Reporter that the actor is putting the final touches on a deal to replace Charlie Sheen as the star of TV’s No. 1 comedy.

Article courtesy of Dealbreaker

Shares of First Solar (FSLR) continue to trade down this morning following an 8%-or-so drop last night after a Q1 report that beat estimates but saw the push-out of a project in Q2 and some cautious comments about solar energy subsidy regulation in Europe.

First Solar shares are down $8.66, or 6.4%, at $126.

None other than hedge fund titan Jim Chanos was on CNBC yesterday afternoon talking down the stock, predicting the price could drop to “the mid double-digits.” Note that Chanos’s remarks came in the context of his warning to get the heck out of China, where he thinks the growth path of the economy is unsustainable.

There’s a real easy part of the story: Insiders are selling lots and lots of stock over the past year, and insiders are leaving the company. That’s never a good sign. Whether you should be short, we have some issues with some of their accounting, we have some issue with some of their subsidized markets. And quite frankly, solar, still, is at a point where it does not compete with natural gas. we cannot rely on wind and solar for base load. We’re still looking for the magic bullet for solar and wind. I think the stock certainly could earn a lot less than the $9 run-rate the bulls are looking at.

(See the video below.)

Eric Rosenbaum of TheStreet.com today offers some thoughts on what he says are Chanos’s repeat appearances on CNBC with bad things to say about FSLR.

I see three downgrades this morning — I missed one earlier, from Credit Suisse — and one upgrade in the Street’s initial assessment, but also a deep divide between those who don’t like how much emphasis has been put on the latter half of the year to make the $9 profit mark, and those who see plenty of levers for First Solar to pull:

Bullish!

Mark Bachman, Auriga Securities: Raised his rating on the shares to Buy from Hold, with a $160 price target. “First Solar modules remain in high demand given the combination of low price and high energy yield,” writes Bachman. Bachman observes that while subsidy reductions create uncertainty, as long as investors can obtain debt financing and as long as First Solar’s modules offer investment returns that are “above project hurdles,” then there will actually be a “dramatic increase” in solar investment as projects rush to get going before the next subsidy adjustment. First Solar has the ability to increase project installations in the U.S., and to get into new Asian markets. “We also recognize management’s historical accuracy of forecasting both sales and profitability, thus the reiteration of 2011 guidance speaks volumes to us.”

Robert Stone, Cowen & Co.: Reiterates an Outperform rating. The project push-out woes, the hand-wringing over Europe, and the back-end-loaded year outlook make for a buying opportunity in the stock, he thinks, as this is just a “pause” for the company.

Ramesh Misra, Brigantine Advisors: Reiterates a Buy rating and a $170 target. Today is a buying opportunity, as the North American utility-scale projects provide a buffer to European troubles. The projects push-outs and the tariff issues were “not entirely unanticipated,” he writes. “While any revenue push-out [from the company’s Agua Caliente project] is a negative development, we are not overly concerned about this. The company’s EPC business will, almost by definition, tend to be lumpy based on the timing of revenue recognition.” Misra also offers that any rise in the Chinese renminbi could have an adverse impact on Chinese competitors to First Solar.

John Hardy, Gleacher & Co.: Reiterates a Buy rating and a $165 price target. He’s keeping his 2011 estimate of $3.8 billion in revenue intact, while trimming his EPS estimate to $9.66 from $9.70. “Stock and sector are likely to remain under pressure until Italy is sorted out and poly module pricing begins to solidify, but we continue to view FSLR as an outperformed given project flexibility in the U.S.

Mark Wienkes, Goldman Sachs: Reiterates a Buy rating and a $190 price target, saying that he likes “the risk-reward in the stock, particularly given increased strategic interest in solar companies (Total, GE, Hanwha), cost cuts are tracking on plan and are allowing for constructive ASP declines, larger markets, and fewer variable competitors, and 2011 production is allocated, with the pipeline buffer offering a profitable source of demand in both the second half of 2011 and 2012 should European markets remain soft.”

Bearish!

Ben Pang, Caris & Co.: Cut his rating on the stock to Average from Above Average and cut his price target to $139 from $172. “We think there is much higher risk to estimates due to growing uncertainty regarding renewable energy programs in Europe.” With Europe accounting for 70% of shipments, by his estimate (I’m assuming he means industry shipments), Pang sees increasing political gridlock in Europe as being not fully compensated for by First Solar’s “buffer” in North America. Pang cut his full-year estimates to $3.74 billion in revenue and $9.38 in EPS from a prior $3.79 billion and $9.43.

Dan Ries, Collins Stewart: Cut his rating to Neutral from Buy, with a $144 price target from $180, and cut his 2011 estimates to $3.75 billion and $9.36 per share in earnings from a prior $3.79 billion and $9.60 per share. “Given that the Department of Energy process [which is part of the Agua Caliente ramp-up] is an unknown to investors, we expects First Solar’s P/E multiple to contract while the risk of additional delays is present,” writes Ries. He cut his own P/E to 12 times from 15 times. “We will reconsider our rating if the stock approaches $100 or if we get greater clarity on the construction schedule for its large systems backlog.”

Satya Kumar, Credit Suisse: Cut his rating to Neutral from Buy and cut his price target to $115 from $137. “Our view has been that the stock is not interesting until it is closer to the $100 to $125 range.” Kumar’s sum-of-the-parts valuation of the stock assumes $90 of value for the panel business; $11 for the system business; and $14 worth of value for the cash on the balance sheet and “management premium.”

Gordon Johnson, Axiom Capital: Reiterates a Sell rating. “First Solar’s guidance implies an acute recovery in the second half. We believe this year will be defined by multiple estimate revisions for First Solar.” Johnson thinks First Solar is implying it can double or triple the build-out rate of the Agua Caliente project to meet the $9.50 earnings target. That would imply, he argues, 50 megawatts per month for the project, when project terms as agreed to were for just 20 megawatts per month. “While this is admittedly possible … we believe there has been a fundamental change in the story,” given the implied cut to Q2 outlook, a lower outlook on module sales for Q2, which he thinks implies a build-up of inventory; and an average cost for modules that is flat, year over year, implying “the business of selling modules is becoming less profitable,” he believes.

Weston Twigg, Pacific Crest: Reiterates a Sector Perform rating. Twigg sees a “ramp-up” of the utility-scale solar business as a buffer for First Solar in the second half of the year against lower module prices caused by competing silicon products. Twigg is concerned, however, by the recent departure of Bruce Sohn, who was the company’s “manufacturing guru,” in his view. While there’s upside potential for $182 per share, he writes that he has “little conviction” in the stock hitting that.

Article courtesy of Tech Trader Daily

David Sokol’s Ways Questioned In Past Suits (NYT)
The most serious lawsuit centered on the accounting of an irrigation project by MidAmerican Energy, where Mr. Sokol was chief executive when Berkshire bought it in 1999. In a rebuke last year, the judge ruled in that case that MidAmerican had improperly changed its accounting on the project and criticized Mr. Sokol directly. The change in accounting was “intended to eliminate the minority shareholders’ interests,” the judge wrote, awarding more than $32 million to the minority shareholders. The case had taken more than five years to work its way through the courts. During that time, Warren E. Buffett, the chief executive of Berkshire, expressed confidence in Mr. Sokol by broadening his portfolio beyond MidAmerican to include Netjets, a company that sells fractional use of private aircraft.

Bernanke Downplays Inflation (WSJ)
Bernanke said the recent rise in prices of oil, grains, and other global commodity prices is likely to be temporary and won’t translate into a broader inflation problem. However, the Fed chief was quick to add that if his prediction is wrong and inflation begins to mark strong gains, the central bank would respond. “I think the increase in inflation will be transitory,” Bernanke said. He attributed the sharp increases in prices for oil and food to “global supply and demand conditions,” adding he reckoned these prices “will eventually stabilize.”

Geithner Sees ‘Severe Hardship’ If Debt Limit Isn’t Reached (Bloomberg)
Congress needs to raise the limit to maintain vital services and avoid “questions about our ability to defend our national security interests,” Geithner said. The U.S. would face sharply higher interest rates and would have to stop or delay payments to the military, retirees and others, he said. “Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover,” Geithner said. “For these reasons, default by the United States is unthinkable.”

Apple Crunched In Nasdaq Rebalance (WSJ)
In a move likely to ripple across the stock market, Nasdaq OMX plans to announce Tuesday a rare rebalancing of its Nasdaq-100 index, which will reduce the big weighting of Apple Inc. The company currently makes up more than 20% of the index.

Barclays Chief Set To Raise Appetite For Risk (FT)
Bob Diamond has decided Barclays must increase its risk appetite amid internal expectations at the bank that a key measure of its profitability will fall or stay stagnant this year. Barclays’ new chief executive is considering increasing the bank’s risk profile, in order to hit profitability targets over the next three years, according to people familiar with the bank’s thinking. Mr Diamond, who began in his job in January, has set a target of achieving a 13 per cent return on equity by 2013.

Santander Tops Goldman As Greenest Bank (Bloomberg)
At Banco Santander SA headquarters on the outskirts of Madrid, Joaquin de Ena says he’s gotten used to wearing his sweater vest indoors after the bank turned down the heat to trim power use and greenhouse-gas emissions. “This is OK,” de Ena, director of corporate social responsibility, says with a laugh as he looks at a conference room thermostat as a chilly wind blows through the capital on an early March day. “I’m not sure if it should go any lower.” Santander’s in-house conservation and ecominded investments won it top billing in Bloomberg Markets’ inaugural ranking of the world’s greenest banks…Goldman Sachs was second overall and topped the list for green investing. New York-based Goldman, along with No. 4 bank Credit Suisse, managed the $3 billion initial public offering of Enel Green Power SpA, Rome-based operator of wind, geothermal and hydropower plants. Goldman also co-led the IPO of Tesla Motors, the Palo Alto, California, maker of the $109,000 all-electric Roadster. Read the full story

Content farm Demand Media has delayed its IPO because of questions about its accounting practices, according to All Things Digital’s Kara Swisher.

Demand amortizes the cost of its cheap, substandard content over five years, meaning that only a fifth of those costs are matched against the current year’s revenues, which boosts reported profits. That’s not necessarily illicit or even wrong, but according to Swisher’s sources, discussions between Demand and government regulators over how to explain its accounting practices to investors have held up the initial offering, which had been expected by year’s end.

Demand filed an amended S-1 on Wednesday explaining that because its content is “long-lived” (it publishes a lot of “evergreen” content, like “How to rotate your tires,” as opposed to timely news articles), it continues to collect revenue on it for years after publication. And so, Demand’s novel idea has it, the costs of creating that content should similarly be spread out over years.

Most media companies, online and off, immediately report the total costs of content creation.

“Obviously,” Swisher writes, “since this accounting treatment results in more attractive financial results, the longer expense period is of great interest to many other online content creators–such as AOL and Yahoo–which are watching the Demand IPO closely.”

In its S-1 SEC filing, Demand says that if it spread the costs out over six years, its net loss for 2010 would fall by $1.6 million. If it accounted for costs over only four years, losses would rise by $2.4 million. The company says it uses an algorithm to determine the “useful life” of its content.

In November, venture capitalist Bo Peabody wrote a scathing report outlining his reasons he would “never invest in Demand Media’s IPO.” The company’s content amortization was among those reasons. The practice “might make sense if Demand broke out its advertising revenue by time,” he wrote, “and demonstrated that the revenue associated with each piece of content follows this same five-year amortization schedule. But Demand doesn’t do that because it’s likely not true.”

Most likely, he wrote, “the majority of the revenue generated by each piece of content is realized within the first year of its life, if not sooner. The long tail of content is interesting. The long tail of revenue is a myth.”

Swisher’s sources said Demand’s road show for investors will have to wait until the Securities and Exchange Commission approves the IPO. Demand hopes to raise $125 million, giving the company a valuation of $1.5 billion.

Photo via Woodley Wonderworks

Tags: accounting practices, content farms, content mills, IPO

Companies: aol, Demand Media, Yahoo

People: Bo Peabody

Article courtesy of VentureBeat » deals

The chip industry is surprisingly bullish in its outlook for 2011, even though it already enjoyed record results in 2010. Typically, a boom year in the semiconductor industry is followed by a bust.

But leading indicators suggest things won’t be that bad next year, according to a survey by the accounting and consulting firm KPMG. Based on a survey of 118 industry executives, overall confidence is flat at 60 points out of a possible 100 index for the 2011 outlook, compared to 61 a year ago. Having confidence that high in a year after a record year is remarkable, said Gary Matuszak (pictured above), a KPMG partner who presented the results at a breakfast event co-hosted by the Semiconductor Industry Association on Tuesday. By comparison, the confidence index was at a very pessimistic 36 in 2008 in the midst of the recession.

The chip industry is critical to the tech economy, as semiconductor chips are the building blocks of all things electronic. In the U.S., chip makers employ more than 185,000 people and chips are the country’s No. 1 export.

The confidence index measured factors such as expectations for revenue growth, hiring, capital spending, profit growth and research and development spending. In each of those categories, the executives offered positive responses when asked if the industry’s numbers would grow in 2011. This kind of measurement goes deeper than simple revenue growth forecasts offered by the SIA, the chip industry trade group, which expects growth to slow from 32.8 percent in 2010 to 6 percent in 2011.

About 39 percent of executives interviewed said that they expect revenue growth to be above 10 percent in 2011. Some 29 percent said they believed the work force would grow 5 percent or more. Some 37 percent said profits will grow 5 percent or more. About 45 percent said that R&D spending will increase more than 5 percent in 2011. And 63 percent said that capital spending will grow in 2011.

Of course, many of these numbers could be viewed as a glass half empty, or half full. On the half empty side, 53 percent of the executives said the chip industry cycle will hit its peak in the next 12 months.

In terms of categories, growth is expected in industrial and automotive semiconductor markets. Demand in Europe and the U.S. is also relatively strong. But expectations for solar power are down a third, from 32 percent of executives saying it would grow in 2009 to only 21 percent saying it would grow in 2010.

The most important drivers for growth will be wireless handsets, consumer electronics, computing, and industrial equipment. Interest in renewable energy products was relatively low, with 23 percent saying it was very important. The value of chip content in smartphones will go up 7.5 times in the coming years, according to Credit Suisse.

About 36 percent of respondents believe that their intellectual property litigation cases will increase in the next 12 months. Rod Steger (pictured right), a partner in charge of the chip industry practice at KPMG, said, “I think this is the No. 1 issue facing the industry.”

The executives also said they believe that the value of merger and acquisition deals in the chip industry will increase in 2011. Some 24 percent said that valuations will increase by 11 percent or more in 2011, while another 41 percent said valuations will increase by 1 percent to 10 percent in 2011.

John Pitzer, a managing director and chip analyst at Credit Suisse, said that chip stocks will likely have an upside of 40 to 50 percent from current stock valuations. Long-term growth is expected to accelerate for the chip industry, he said.

“On every cyclical metric, things are relatively healthy now,” Pitzer said. “Inventories are not yet back to October, 2008 (pre-recession) levels.”

Brian Toohey, president of the SIA (pictured right), said that the U.S. industry remains healthy with a 51 percent share of the global $226 billion chip market. But he said the industry remains concerned about various policy issues. He said the U.S. needs to create the right incentives for investment by revising its tax policy to be competitive with other nations such as Singapore.

He also said that chip makers are concerned about new rules for measuring greenhouse gas emissions from chip factories. The problem is the Environmental Protection Agency may be slow at issuing permits for new factories as it awaits data from the greenhouse gas measurements. Toohey also said other critical issues include streamlining export controls, investing in technology, and engaging with China on its intellectual property and market access policies.

Tags: chip forecast, chips, semiconductors

Companies: KPMG, Semiconductor Industry Association, SIA

People: Brian Toohey, Gary Matuszak, Rod Steger

Article courtesy of VentureBeat » deals

New York startup Profitably recently closed a $300,000 round of funding with a group of New York investors. The company offers an online software application that analyzes data from Quickbooks, a small business accounting package sold by Intuit.

Bidz.com (BIDZ), which was supposed to report Q1 results today, has postponed the announcement until Thursday afternoon “in order to allow additional time to complete the company’s financial statements.”
The company said the postponement in related to the accounting treatment in the 2007-2009 period for the exercise of employee stock options [...]

Article courtesy of BARRONS.com: Tech Trader Daily

As I noted in a post yesterday afternoon, Juniper Networks (JNPR) reported Q1 results that appeared to nicely beat Street expectations – but the stock nonetheless traded lower after hours, and today is suffering a significant loss.

And here’s why.

As several analysts pointed out in research notes today, the company during the quarter chose to implement an accounting change that recognizes revenue in proportion to the percentage of services rendered rather than on completion. Juniper said adoption of the rule affected business from one particular customer, and lifted Q1 reported revenue by $25 million. Back that out, Rodman & Rednshaw analyst Ashok Kumar points out in a research note, and the actual number would have been $888 million, not $913 million, and then would have been at the low end of the company’s guidance range of $880 million to $910 million.

Bernstein Research analyst Jeff Evenson likewise took note of the $25 million  boost from the accounting change; he points out that the company claims it took the move into account when it gave the original guidance, but notes that it was never communicated to the Street. He thinks the result is that management has “partially undermined investor confidence in the transparency of its communications with the Street.”

Both Kumar and Evenson have Market Perform ratings on Juniper shares.

I just took a quick look at a transcript of the company’s conference call from yesterday afternoon, and  the $25 million revenue boost almost completely dominated the discussion during the Q&A. Juniper clearly took the Street by surprise here – and accounting changes are not the kind of surprise the Street generally likes.

JNPR is down $1.76, or 5.6%, to $29.80.

Article courtesy of BARRONS.com: Tech Trader Daily

$$$ NYU Professor’s Admonition Becomes a Student Motto [Daily Intel]

$$$ Investigators Focusing Further on Lehman’s Use of Accounting Gimmicks [FBN]

$$$ Bank of America ML on BJ’s, Dick’s [BI]

$$$ Buffett Bet on Goldman Sachs ‘Integrity,’ Olson Says [BW]

Article courtesy of Dealbreaker