Information Security & US & Life & Love & Fashion & Hacking & Passion

U.S. stock futures are trading mixed this morning, pointing toward a somewhat positive open, despite weakness on the Nasdaq due to poorly received earnings from Hewlett-Packard (HPQ). The leading PC and computer peripherals manufacturer reported a 13% plunge in first-quarter earnings after the close last night. Other companies in focus this morning include Whole Foods market (WFMI), which is 16% higher ahead of the open following solid quarterly results, and Sprint Nextel (S), which gained about 3% in pre-market activity due to a narrowed quarterly loss. Wall Street's mood could shift dramatically, however, as key economic data, including the January producer price index (PPI), are slated for release later this morning.

Checking in on currencies and commodities, the U.S. Dollar Index is taking a breather following a strong rally earlier this week. At last check, the index was off 0.92% at 87.19 in pre-market activity. Gold futures, meanwhile, have gained a mere $2.40 an ounce to trade at $980.60 in London, with traders closely watching the equity markets for signs of strength. Finally, crude oil futures are on the mend, with the March contract up 3.32% at $35.77 per barrel in electronic trading.

After the close last night, Hewlett-Packard (HPQ: sentiment, chart, options) reported a fiscal first-quarter profit of $1.9 billion, or 75 cents per share, compared with a profit of $2.1 billion, or 80 cents per share, last year. Revenue rose 1% to $28.8 billion from $28.5 billion. Excluding 1-time items, HPQ earned 93 cents per share. Analysts were looking for earnings of 93 cents per share on $31.9 billion in sales. For its second quarter, the company expects earnings of 70 cents to 72 cents per share, or an adjusted 84 cents to 86 cents per share. Sales should fall 2% to 3% from a year earlier, which would equal $27.5 billion to $27.7 billion. The figures were well below the current consensus estimate for 89 cents per share on $30.95 billion in sales.

Whole Foods Market (WFMI: sentiment, chart, options) reported that net income fell 17% from the year-earlier quarter due to slowing store traffic and legal costs. Whole Foods posted a first-quarter profit of $32.3 million, or 20 cents per share, down from $39.1 million, or 28 cents per share, last year. However, earnings topped analyst expectations for 19 cents per share. Sales were flat at $2.5 billion. Comparable-store sales fell 4% compared with a 9% gain last year.

Finally, Sprint Nextel (S: sentiment, chart, options) said it lost $1.62 billion, or 57 cents per share, narrowing its loss from the same quarter last year of $29.31 billion, or $10.31 per share. Revenue for the quarter was $8.43 billion, compared to $9.85 billion. Analysts had expected sales of $8.55 billion. "In tough economic times, we're generating substantial cash and reducing costs to ensure we remain financially sound. We already have the cash on hand to be able to meet our debt service requirements at least through the end of 2010," said Dan Hesse, Sprint Nextel chief executive.

Earnings Preview

Today, Apache (APA), CVS Caremark (CVS), Newmont Mining (NEM), and Crocs (CROX) are slated to step into the earnings confessional. Keep your browser at SchaeffersResearch.com throughout the day for more.

Economic Calendar

On the economic front, the Street must digest the January producer price index (PPI), the core PPI, January's leading economic indicators, the February Philadelphia Fed's manufacturing index, and the weekly reports on U.S. petroleum supplies and jobless claims. We round out the week on Friday with the consumer price index (CPI) and the core CPI.

Market Statistics

Equity option activity on the CBOE saw 1,251,244 call contracts traded on Wednesday, compared to 1,098,962 put contracts. The resultant single-session put/call ratio slipped to 0.88, while the 21-day moving average held at 0.75.

**The volume data shown above is from the Nasdaq and NYSE exchanges only. It does not include regional volume activity, which means that other daily volume quotes you see may be higher.**

Getty Images

December got off to a rough start for equities in general, with the Standard & Poor's 500-stock index down nearly 9%, to 816, on the first day of the month. But wireless carrier Sprint Nextel (S) saw its stock hammered much more than any of the major averages, with shares down 24%, to 2.11.

Why the drubbing? The only news Sprint announced for the day appeared to be relatively benign. The company said it had finalized a previously announced deal to combine its next-generation wireless broadband business with Clearwire (CLWRD), a Kirkland (Wash.) company that's building its own wireless broadband business. By combining the two operations, the companies figure they'll be able to roll out service faster and save on expenses in the process. In addition to Sprint's contribution of assets, Clearwire received $3.2 billion in funding from a number of backers, including Intel (INTC), Google (GOOG), Comcast (CMCSA), and Time Warner Cable (TWC).

Trouble is, that may not be enough money. When the Sprint-Clearwire transaction was originally announced back in May, Clearwire expected to be able to offer its service to 120 million to 140 million people by the end of 2010. But the buildout plans assumed that, in late 2009 or in early 2010, Clearwire would be able to raise an additional $2 billion to $2.3 billion. With the capital markets virtually closed, Clearwire may not be able to raise that money and its rollout schedule may have to be modified. "My preference would be that we continue moving along at the same pace, but that we look at the capital markets on a quarter-by-quarter basis," says Benjamin Wolff, chief executive of Clearwire. Wolff says Clearwire's board could decide to change its buildout schedule when it convenes in early 2009.

Network Access Denied?

Any slowdown by Clearwire could cause Sprint problems. As a Clearwire investor and customer, Sprint plans to buy access to Clearwire's network at wholesale prices and then resell the broadband Internet service to its own customers. If Clearwire's board decides to scale back its ambitions, Sprint may have to wait longer than anticipated to gain access to a high-speed network. (Sprint has two of the 13 seats on Clearwire's board.) That could slow down Sprint's ability to attract new broadband subscribers. Meanwhile, rivals like Verizon Wireless could launch their high-speed networks around 2010.

A Sprint spokesman says the company would "not discuss movements in our stock." He referred questions about the pace of Clearwire's buildout to the Kirkland company.

It's just one of the many challenges Sprint is facing. The company, once renowned for high-quality service, has suffered setbacks in customer service and other quality issues since its merger with Nextel in 2005 (BusinessWeek, 2/21/08). Customers have defected and losses have piled up. The company's stock has fallen from nearly 16 a share last year, a drop of 85%. And Standard & Poor's (which like BusinessWeek is owned by The McGraw-Hill Companies (MHP)) cut the credit rating for Sprint to below investment grade back in May.

KANSAS CITY, Mo.

Sprint Nextel Corp. watched another 1.3 million wireless subscribers head for its competitors during the third quarter, leading the company to post a loss that sent its stock skidding Friday.

Dan Hesse, the Overland Park, Kan.-based company's chief executive, told analysts that Sprint Nextel plans to work harder to attract new customers during the upcoming holiday season but acknowledged "we have yet to turn the corner."

"We made good progress on our operational priorities in the third quarter and resolved some key issues," he said. "Still, subscriber losses are too high."

The nation's third-largest wireless provider said it lost $326 million, or 11 cents per share, for the three months ending Sept. 30. It had earned $64 million, or 2 cents per share, in the same period a year ago.

Excluding one-time items, Sprint Nextel said it would have broken even during the quarter. On that basis, analysts surveyed by Thomson Reuters expected a profit of 3 cents per share.

Sprint Nextel's revenue fell 12 percent to $8.81 billion. Analysts expected $8.85 billion.

The company's shares lost 31 cents, or 8 percent, to close Friday at $3.37.

Since its 2005 acquisition of Nextel Communications Inc., the company has struggled with technical problems, unfocused marketing and difficulties integrating operations. Despite heavy investments to correct those problems, Hesse said the company still suffers from poor perceptions in the market.

Competing devices, such as Apple Inc.'s iPhone being sold through AT&T Inc., haven't helped, although Sprint has fought back with the Samsung Instinct and other comparable smart phones.

Sprint Nextel's wireless business reported a 13 percent decline in revenue to $7.5 billion as its subscriber base fell by 1.3 million. That included 1.1 million valuable "postpaid" customers who have contracts. That was worse than in the second quarter, when Sprint Nextel lost 901,000 subscribers, including 776,000 postpaid customers.

Postpaid churn, or the percentage of customers canceling service each month, was 2.1 percent, up from 2 percent in the previous quarter but below the 2.3 percent rate a year ago.

Hesse said the company would focus on slowing the losses of postpaid customers in the fourth quarter and expected the churn rate to be similar to the third quarter.

"Stabilizing revenue will be a focus area of ours going forward," he said.

JP Morgan analyst Mike McCormack said in a research note Friday that Sprint's "subscriber trends and guidance ... do not signal near-term improvement" and said he would continue to warn investors away from the stock, which has lost more than 70 percent of its value this year.

Also Friday, Sprint Nextel said it had changed the terms of its credit agreement, reducing the amount it can borrow to $4.5 billion from $6 billion but increasing the allowed debt ratio to 4.25 times earnings before taxes and other adjustments, up from 3.5 under the previous deal.

The company said it will pay higher interest under the new agreement and cannot pay cash dividends unless certain conditions are met. The company doesn't currently pay dividends to common shareholders.

Sprint also said it repaid $1 billion of the outstanding loan under the amended credit agreement.

Stifel Nicolaus analyst Christopher King said the debt moves likely would be viewed positively because they give Sprint Nextel "ample flexibility through the maturity of the agreement in 2010."

Sprint Nextel sits behind AT&T and Verizon Wireless in third place with 50.5 million customers. It fell further behind in the third quarter as AT&T and Verizon Wireless added 2 million and 1.5 million subscribers, respectively. Both said most of their new customers defected from other carriers.

Sprint Nextel said last week it was planning to hold on to its Nextel-branded network, which operates on a separate technology and has been responsible for a good portion of the subscriber losses. The move was seen as an indication that the faltering economy and tough credit environment made it impossible to sell the network at a reasonable price.

Shares of Sprint Nextel Corp. surged -- though the stock is still down more than 70 percent since the start of the year -- as the rest of the telecommunications sector also advanced Monday.

Sprint, which is scheduled to report third-quarter results on Friday, saw its shares jump 87 cents, or 27.8 percent, to $4 in Monday trading. Trading volume was low, at slightly above half of the daily average. In the past 52 weeks, the stock has traded between $2.87 and $17.46.

Sprint did not announce any major news on Monday.

Patrick Comack, an analyst with Zachary Investment Research, said with such low volume Sprint's gain may just be a case of people "jumping back into beat-up stocks." Sprint, after all, is "pretty much the most beat-up of all telecom stocks," he added. Comack has a "Buy" rating on Sprint.

Shares of Verizon Communications Inc., AT&T Inc. and Qwest Communications International Inc. all advanced. Qwest, for one, rose 24 cents, or 8.3 percent, to $3.13 -- though the stock is still off more than 50 percent year-to-date.

In a note to investors Monday, Wachovia analyst Jennifer M. Fritzsche called AT&T and Verizon "safe haven" stocks, though she said of the two she favors AT&T. Verizon, she wrote, "has controlled what it can quite well in this environment (but) we remain on the side lines here until we see how the close of the AllTel deal."

Verizon Wireless has agreed to buy Alltel Corp. in a $28 billion deal that would create the nation's largest wireless carrier.

"In terms of (Qwest), while the stock remains incredibly inexpensive on almost every valuation metric, we believe investors would be better served with AT&T or Verizon given the more stable balance sheet and lower overall leverage," she wrote.

Shares of AT&T rose $1.04, or 3.9 percent, to $27.81, while Verizon rose $1.08, or 3.6 percent, to $30.75.

Verizon Wireless is a joint venture between Verizon Communications and Britain's Vodafone Group PLC.