Science & Technology
Science and Technology
Science and Technology
Wed, June 16, 2010
Tue, June 15, 2010 Dell, Intel, Advanced Micro Devices, International Paper and Natural Resource Partners
CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Dell Inc. (Nasdaq: [ DELL ]), Intel Corporation (Nasdaq: [ INTC ]), Advanced Micro Devices (NYSE: [ AMD ]), International Paper Co. (NYSE: [ IP ]) and Natural Resource Partners L.P. (NYSE:[ NRP ]).
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Here are highlights from Mondaya™s Analyst Blog:
Dell to Settle SEC Investigation
Dell Inc. (Nasdaq: [ DELL ]) disclosed that it is in talks with the Securities and Exchange Commission (SEC) to resolve certain accounting inconsistencies that were discovered by the SEC for periods going back to 2005. However, the situation really got more publicized when the company, including its CEO, Michael was dragged through the press due to some underhand dealings with chip maker Intel Corporation (Nasdaq: [ INTC ]).
The company stated that irrespective of Mr. Della™s involvement with Intel, he would continue to function as the Chairman and CEO of the company. In 2007, a class-action lawsuit was filed by Della™s investors, alleging that the company had been illegally receiving $1billion a year from Intel for buying its chips exclusively from Intel, thereby creating unfair competition for Intela™s competitor, Advanced Micro Devices (NYSE: [ AMD ]).
To take care of the possible settlement expenses, Dell has made a provision of $100 million, which is expected to take care of all the settlement expenses.
Keeping pace with the economic recovery, Dell has improved its performance over the last two quarters. The company reported strong first quarter numbers, with the EPS exceeding the Zacks Consensus Estimate, although revenue remained flat sequentially. The EPS was also better than the year-ago quarter. New products, a stronger services business, opportunities in the Electronic Medical Record sector and its smart phone initiative are working in favor of the company.
International Paper Closes Plant
International Paper Co. (NYSE: [ IP ]) afflicted by the loss of five big customers as well as a declining Mid-South economy, has decided to shut down a corrugated container plant in Jonesboro, Arkansas resulting in a layoff of 86 workers.
International Paper intends to close down the plant in the next several weeks and consolidate the planta™s operations with its Olive Branch, Mississippi plant. The production relocation will add a third shift in Olive Branch.
The Jonesboro workers will get a chance to apply for the extra 20 jobs created from the consolidation. The laid off workers will be eligible for severance and outplacement assistance, and will receive 60 days of pay.
The Jonesboro plant produces corrugated boxes for poultry and industrial companies. It began operation in 1982 as Tate Container and was acquired by International Paper in 1999.
During the first quarter, International Paper witnessed the first year-over-year increase (2.5% to $5.8 billion) in quarterly sales since the recession. However, the company continued to be plagued by higher raw material costs, which ended up affecting its bottom line. Wood fiber (used for making its paper and packaging products) costs were particularly high due to extremely wet weather and wood shortages. Consequently, earnings per share of 4 cents was down from 8 cents in the year-ago quarter.
The economic downturn has proven to be a severe headwind for the company. However, the company has been taking proactive measures to combat the tough environment by curtailing and closing capacity, further reducing costs and preserving cash.
During 2009, the company closed or announced the closure of five mills globally, closed 24 converting or distribution locations, and reduced the overhead headcount by 6,000. These actions helped the company reduce its fixed costs, bring down payroll costs and should result in higher operating rates in 2010 and beyond. The annual savings from these actions are expected to be around $650 million.
International Paper has prudently used its cash to pay down debt. The companya™s debt-to-capitalization as of March 31, 2010 was 61%, down from 74% as of March 31, 2009. Given its accelerated debt pay back and strong cash position, International Paper has recently hiked its quarterly dividend in April 2010 from 2.5 cents to 12.5 cents. Earlier, in March 2009, the company had slashed its quarterly dividend by 90% to 2.5 cents in an effort to preserve cash in light of the economic downturn.
We believe the International Papera™s acquisition of Sweden-based SCAa™s Asian packaging business in April 2010 provides the company the scope to expand in the growing Chinese packaging market. However, weak volumes, input cost pressures and the company's inability to offset the same with increased prices remain points of concern. We thus maintain a Neutral rating on the stock.
In a separate development, International Paper and Houston-based Natural Resource Partners L.P. (NYSE:[ NRP ]) announced the completion of its previously announced joint venture on May 27, 2010 to own and manage the current leases as well as further develop more than 7 million mineral acres previously held by International Paper. As agreed, International Paper received a payment of $42.5 million from Natural Resources.
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