leh

Before the bell: Futures higher on SBUX, YHOO, ahead of inventory report

Deutsche Bank (NYSE: DB) shares are trading 4.2% higher in premarket action after the bank, seeking to calm investors, said it expects a profit in its second quarter.

While AT&T Inc. (NYSE: T) unveiled its pricing strategy for Apple Inc. (NASDAQ: AAPL)'s 3G iPhone to go on sale July 11 with a $199 and $299 (with contract) price points as expected, Canadians are outraged over Rogers Communications Inc. (NYSE: RCI)'s 3G iPhone rates and have created an online petition that collected over 19,000 signatures already.

AstraZeneca (NYSE: AZN) rose in Europe and is rising over 2.7% in premarket trading after winning a court case against Teva Pharmaceutical (NASDAQ: TEVA) and the Sandoz unit of Novartis (NYSE: NVS) over patents on its Seroquel schizophrenia drug.

A day after car sales were seen as "not as bad as expected," comes Merrill Lynch and downgrades General Motors (NYSE: GM). Shares are down over 3% in premarket trading.

TheStreet.com's Jim Cramer says this is a crucial moment for the dividend-payers, which should be getting support here.

You can't even find protection in yields these days. It just went away. Perhaps we will get it if Sen. Obama gets elected. Perhaps with higher rates. Perhaps with the downfall of the high-yielding American financials. (Nice discussion of the lack of dividend safety courtesy of the man who knows more about dividends than anyone, Dave Peltier, in the Columnist Conversation last week.)

For ages, it seemed you could get to a magic number, typically 4% yield, where stocks would bounce, or at least be given a parachute that opened for a gentle landing.

Last week that parachute failed. You have stocks like Con Ed (NYSE: ED) (Cramer's Take) just getting trashed here, pushing the yield to 6%. You have stocks like Weyerhauser (NYSE: WY) (Cramer's Take), Carnival Cruise (NYSE: CCL) (Cramer's Take), Gannett (NYSE: GCI) (Cramer's Take), just slicing through the protection. The former's got cyclicality, the middle's got consumer and fuel worries, and the latter is in secular. But they all have no trouble paying the dividend.

Or consider Verizon (NYSE: VZ) (Cramer's Take) and AT&T (NYSE: T) (Cramer's Take). The first is at a 5% yield, the other is almost there. No one questions their ability to support that dividend.

This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.

Apple (NASDAQ: AAPL) is one of the great stories of corporate America and the stock market. Under the leadership and genius of Steven Jobs, Apple is emerging as the premier technology growth company of this decade and the next. In the past five years the stock has rocketed from $9 to the current $175, and yet the story is actually stronger than ever before.

Apple has three major legs of growth in its arsenal and a distribution system that is second to none. The products of Apple are both cool and revolutionary. The 2002 introduction of the iPod defined the MP3 player space. Apple has sold over 150 million units as of March 2008 and commands over 70% of the market share. Many iPod owners are on their 3rd and 4th units, so the actual penetration of addressable customers has been barely scratched. The newer versions include touch screen and of course can store up to 20,000 songs and numerous movies and pictures.

The Mac computer has been re-engineered these past couple of years and is now the rage of the personal computer market. The new Mac is beginning to enter the traditional enterprise sector while maintaining its dominance in the consumer sector. The Leopard operating system became available in mid-2007 to rave reviews. Apple is taking market share in the competitive personal computer sector while maintaining its pricing structure. The company doesn't compete on price but offers such superior functionality that buyers do not mind paying full retail price. The attendant software programs are also seeing a resurgence and also carry high margins.

Verizon (NYSE: VZ) is making a fairly concerted effort to get Vodafone (NYSE: VOD) out of its equity position in Verizon Wireless. The question is, why would Vodafone get out? Verizon Wireless makes a lot of money.

According to the FT, the head of Verizon, Ivan Seidenberg said, "Would I like to have 100 per cent of the earnings given we're doing 100 per cent of the work? Yeah, I would."

Verizon Wireless does not pay dividends to Vodafone, so it does not get much of a cash benefit from its piece of the pie, but the FT points out that the British company's stake is worth about $60 billion.

Reflecting on the debate, it would probably be in the best interests of Vodafone shareholders to sell out to Verizon. Their benefits of ownership are limited. Vodafone could use the cash for expansion in Europe, Asia, and the Middle East.

Perhaps the greatest reason for Vodafone to make a graceful exit is the US market itself. Growth of wireless subscribers is slowing as the market reaches a point of saturation. Competition is tough, especially with AT&T (NYSE: T) having about the same number of subscribers as Verizon Wireless. A price war could take down margins at both companies.

Vodafone's stake may never be worth more than it is now.

Douglas A. McIntyre is an editor at 247wallst.com.

AT&T (NYSE: T) shares are trading higher today after an analyst at Bernstein upgraded the stock to "Outperform" from "Market Perform" citing the stocks current valuation. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on T.

After hitting a one-year high of $42.97 in September, the stock hit a one-year low of $32.95 in February. T opened this morning at $34.89. So far today the stock has hit a low of $34.87 and a high of $35.25. As of 12:30, T is trading at $35.10, up $0.83 (2.4%). The chart for T looks bearish and steady, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.

For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $27.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in four months as long as T is above $27.50 at October expiration. AT&T would have to fall by more than 21% before we would start to lose money. Learn more about this type of trade here.

J.P. Morgan upgraded Tibco Software (NASDAQ:TIBX) from "neutral" to "overweight", according to MarketWatch.

Sandler O'Neill & Partners cut its earnings targets on Discover Financial (NYSE:DFS) ahead of earnings, according to the AP.

Boeing (NYSE:BA) was cut to "sell" from "neutral" at Goldman Sachs, according to the AP. Briefing.com also reports that AT&T (NYSE:T) was raised to "outperform" at Bernstein

During the challenging market conditions over the past year, the telecom sector has felt its fair share of the pain. BusinessWeek brings Standard & Poor's Todd Rosenbluth who suggests that some of these telecommunication stocks could now be good investments for traders as they have a safe dividend.

Despite worries tied to the slowing U.S. economy and increased competition, "we think that some of the concerns are overdone and believe selective stocks are attractively valued," Rosenbluth stated. Rosenbluth also noted that telecom stocks have started showing signs of recovery for the past few weeks, helped by the launch of new handsets and merger and acquisition agreements.

Some of investors' favorite companies are AT&T Co. (NYSE: T) and Citizens Communications Co. (NYSE: CZN). Rosenbluth believes that the launch of Apple (NASDAQ: AAPL)'s new iPhone, 3G iPhone, will stir increased demand for smartphones, helping such companies, while putting pricing pressure on some of their competitors.

Apple Inc. (NASDAQ: AAPL)'s new 3G iPhone will hit store shelves on July 11 for a breakout new price of $199. Figuring that this new version is quite a bit more enhanced than the existing version -- but is going to sell for half the price -- who is losing out here? Nobody. It's Apple's way of hitting a new price point by agreeing not to take a monthly cut of revenue from every AT&T Inc. (NYSE: T) subscriber who uses the iPhone. Where's the cash flow part for Apple in the agreement then?

One theory is that AT&T is paying Apple $325 in cash for every 3G iPhone that will be sold soon. To help ward off phone unlockers and other potential miscreants, the new iPhone will have to be purchased and activated in an AT&T or Apple store, in person. This will probably eliminate almost all of the "buy here, use on another carrier" mentality that many non-AT&T folks would love to accomplish. It also preserves revenue for both companies by tight-fisting consumer control over where they use the device they just purchased.

Before the bell: Oil, financials woes send futures lower

Some wonder whether Sprint (NYSE: S) can do anything to turn around its fortunes. It almost always ranks last in customer service among cellular carriers. It is still losing subscribers and its stock is down to $8.22. A year ago, it traded at almost $23.

Sprint continues to lose money. The firm has decided to get more deeply into the smartphone business with a product that it hopes can challenge the Apple (NADSAQ: AAPL) iPhone, which is marketed by AT&T (NYSE: T). Fat chance.

According to The Wall Street Journal, the No.3 cellular service provider "will be taking on the iPhone with a lower price for its own touch-screen smart phone, the Samsung Instinct."

While the new handset may be a good one, it is hard to find a product that sells itself more than the iPhone. The Apple phone is part of a cult of buyers who love products from Jobs & Co.

And even if the Samsung phone was better than the Apple product, Sprint's customer service may well undermine its sales. A hot product only does well for a short time if the company that markets it has an awful reputation for taking care of its subscribers.

Douglas A. McIntyre is an editor at 247wallst.com.

Before the bell: Futures higher ahead of Goldman, PPI, housing data

Klausner Technology Inc, which has sued several companies for damages and future royalties, has settled the suits and reached an agreement Monday with Apple Inc (NASDAQ: AAPL), eBay Inc (NASDAQ: EBAY) and AT&T Inc (NYSE: T) to license its "visual voicemail" technology that sends visual alerts to computers or mobile telephones when a user has a voice message.

Meanwhile, Barron's Tech Trader Daily gave several analysts' assessments of the upcoming 3G iPhone: At RBC, they're expecting "massive" shipments of the phones in Q4; this was supported by an analyst at Deutsche Bank. The Goldman analyst didn't stop there but said he expects improvements in the iPod and Mac business segments as well.

And while Apple is increasing its global foot print, so is Yahoo! Inc. (NASDAQ: YHOO). The internet portal company said on Tuesday that its mobile search service will be offered by six more telecom companies in Asia, bringing the total to 60 partnerships with companies reaching 600 million subscribers. A Yahoo! exec said he expects the mobile advertising market to rise to $16.2 billion in 2011 up from $1.5 billion in 2006 where Yahoo! is well poised to get a large share.

But all is not rosy at Yahoo! to say the least, as is evident by the massive loss of talent. The recent is Yahoo's EVP Jeff Weiner. Yahoo's president Sue Decker has apparently emailed employees following his resignation. TechCrunch has the surprisingly cheerful and positive email.

MOST NOTEWORTHY: Verizon, AT&T, Invitrogen and General Electric were today's noteworthy downgrades:

• UBS downgraded Verizon (NYSE: VZ) and AT&T (NYSE: T) to Neutral from Buy citing the weak economy and increased wireless competition.
  
• Banc of America downgraded shares of Invitrogen (NASDAQ: IVGN) to Neutral from Buy as the company's acquisition of Applied Biosystems (NYSE: ABI) alters their investment thesis. The company's target was cut to $38 from $50.
  
• JP Morgan downgraded General Electric (NYSE: GE) to Neutral from Overweight citing further risk to earnings and dislocation from necessary portfolio management in 2009.

OTHER DOWNGRADES:

• Office Max (NYSE: OMX) was cut to Neutral from Outperform at Credit Suisse.
  
• Goldman lowered Ryanair (NASDAQ: RYAAY) to Sell from Buy.
  
• WebMD Health (NASDAQ: WBMD) was downgraded to Sell from Source of Funds at ThinkPanmure.

UBS downgraded Verizon (NYSE:VZ) from "buy" to "neutral" and took the same action with AT&T (NSYE:T) according to Briefing.com. The news service also reports that JMP upgraded Sandisk (NASDAQ:SNDK) to "market perform" from "underperform".

General Electric (NYSE: GE) was cut to Neutral from Outperform at JPMorgan, according to 24/7 Wall St. The financial website also reports that Wendy's (NYSE: WEN) waised to Equal Weight from Underweight at Morgan Stanley.

Douglas A. McIntyre

According to a Billboard report on Tuesday, Apple Inc. (NASDAQ: AAPL)'s newly introduced iPhone will not feature a new method to download music from iTunes. Instead, users will only be able to "access and download music" from iTunes with the phone's WiFi connection. Luckily, the new 3G phone will allow a better connection to access the store and download music, but Billboard speculates that Apple has not improved the method because the company is "less enthusiastic" about sharing profits from iTunes purchases with the operator, in this case AT&T Mobility, a part of AT&T Inc. (NYSE: T).

AT&T Mobility apparently expanded and constructed much of the 3G network the iPhone will use over the course of the last year, when the iPhone was first being readied for release. The original iPhone worked on AT&T's slower EDGE network and utilized WiFi hotspots, but "the upgrade allows for faster Web surfing from any location in At&T's 3G coverage area." Ideally, using the upgraded network would also provide users with better access and faster downloads.

It's no surprise that Apple would keep the music features on the iPhone the same as on the previous model, since the improvements made to the new iPhone make it much better over the previous model. At the same time, it seems unlikely that record companies would object to this similarity either, since it means they can still seek out new deals and arrangements with the phone carriers outside of Apple (in this case).

So what happened?

For months now that investors and Apple Inc. (NASDAQ: AAPL) enthusiasts have been expecting the 3G iPhone. The past few weeks, there was so much hype that speculation over features, dates and even a new business model surfaced daily, from bloggers, reporters, investors and analysts.

Finally the day came and Steve Jobs announced a 3G iPhone for $199 to be released on July 11 in 22 countries at first with the intention of selling the iPhone in 70 countries. Not only that, but the new model includes a GPS and push email.