Headline: Starbucks to Close 600 Stores

By my estimates, assuming 3000 caffeine-addicted ‘regulars’ per store, this will displace 1.8 million Starbucks customers. Now they’ll have to walk another 40 feet to go the Starbucks across the street from the one they normally go to, since their store is closing.

I was convinced we could be in the middle of a nuclear war, and somebody would still be sipping a cafe latte at their local Starbucks. Guess the shiny has worn off now that push has come to shove. Or, maybe the world’s starting to realize a $6 cup of coffee is still just coffee.

We’re not even going to pretend to be Jim Cramer, though we don’t mind hosting something of a ‘Lightning Round’ of our own. We’ve gotten some questions about a handful of stocks the last few days, so we’re going to compile our responses and thoughts all in one place.

Of course, it’s not live, and it’s not impromptu…..which I guess takes the ‘lighting’ part of the description out. Anyway….

1) What are your thoughts in Aussie Soles (AUSE)?

You could do a lot worse, though that’s an unqualified opinion.

For those of you who don’t know, Aussie Soles is an Australian shoe maker. They specialize in making hyper-comfortable shoes…not unlike Crocs. Their claim to fame is the use of advanced ‘closed cell’ polymer foam. It’s light, sturdy, and ant-bacterial.

To answer the question from our reader, I like the chart, but I don’t know enough about the company to make a judgement call.

This bulletin board stock has traded well since it started trading on the board, though that was only in January. I have no history of the company’s success….maybe because the stocks is basically a new-comer. Do you have any information? My concern is the $85 million market cap. They would need to do about $40 million in sales each year to justify that. Maybe they can, but I just don’t see it happening. Let me know if there’s something I’m not seeing.

2) What do you think about Arena Pharmaceutical (ARNA)?

I liked it a lot better on Friday when it was rallying than I did on Monday when it was falling.

I’ll sum it up in seven words…..bad technicals, poor fundamentals, minimal future demand. Other than that, it’s great.

Their core focus is insomnia and weight loss drugs? Not that there’s not a need, but is this the best market they can come up with? OK, in all truthfulness, they’ve got other drugs in development; it’s just kind of hard to take them too seriously when they’re working so diligently on something that (frankly) isn’t all that hard-hitting.

If you’re one of those investors that likes profits - now or in the foreseeable future - you’re not going to be a fan of Arena.

As far as the chart is concerned, each rally effort is being met with even more selling. The 100 day moving average line appears to be the short-term hurdle, but even getting above it doesn’t seem inspiring.

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Geez, if they turned in a bad quarter and fell short of expectations, I can understand yesterday’s 13% drubbing. However, I think Layne Christensen (LAYN) may have been unfairly punished yesterday for not meeting analyst’s expectations for quarterly earnings of 54 cents per share. Their sin? They only earned 52 cents per share.

What seems to have been overlooked was a 29% increase over the last Q1’s earnings, and a 21% increase in the top line from the same quarter a year earlier.

Just for perspective, the company’s top line has been growing like crazy for three years. So has the bottom line. But, one quarter, and poof!….even when results are good.

Here’s my all-too-rhetorical question….why do analysts get to dictate what’s good enough? I know, I know - that’s an esoteric question to which there is no answer. However, given just how bad most analysts are, I’m more than happy to take advantage of an opportunity they create.

The fact is, Layne Christensen is a solid company. You could definitely do worse. The chart looks pretty good too. I’m not interested in adding it to our open trade list - we have enough fish to fry with recently-added stock picks Imation (IMN) and The9 Limited (NCTY). But, I may be adding it to my own personal portfolio. (I’ll disclose it if I do.)

The point I’m trying to make (again) though is this…analysts don’t always know what they’re doing. I don’t want them to steer investors clear of a relatively good stock.

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Ever since we started our coverage of small cap stock pick MIV Therapeutics (MIVT), I’ve been following the heart stent industry rather closely…it’s a fascinating arena. Why? Despite the fact that the drug-eluting stent business was practically shut down in 2006 due to health concerns (they could have been making things worse strather than better), there’s still between $4 billion and $6 billion up for grabs in the drug-eluting stent business each year. And, if safety concernes are alleviuted there could be even more money for this market. Yet, there are very few coated stent manufacturers.

MIV Therapeutics is working on a promising one, while Abbott’s (ABT) Xience stent and Boston Scientific’s (BSX) Taxus stent are already on the market. Johnson & Johnson’s (JNJ) drug-eluting Cypher stent is also in use, though it’s a bit of an antique by biotech standards.

Anyway, all the major coated heart stent manufacturers came out with news yesterday about their latest R&D efforts. (They were all in attendance at the EuroPCR conference, where they each presented an update.) Here’s the thumbnail sketch top get you caught up….

Abbott said their next-generation Xience stent - the Xience V - has clinically tested to be safer than the nearest competition…Boston Scientific’s Taxus stent. And by ’safer’, they meant using the Xience stent rather than alternatives led to less thrombosis (arterial scarring) and fewer stent-caused heart attacks.

Boston Scientific didn’t respond to the Abbott claim, instead focusing their attention on their current coated stent called Promus. However, it’s not likely that Boston Scientific is going to publicly disagree with Abbott’s research. After all, PROMUS AND XIENCE V ARE THE SAME STENT!

That’s right - the only difference between Abbott’s new stent and Boston Scientific’s new stent is the name. Abbott has licensed Boston Scientific to sell the device under a different moniker. It/they are currently approved for use in many overseas markets, and may win the FDA’s approval for the United States (which is half the market) within a few weeks.

Side note: If you’re Boston Scientific, standing in Abbott’s stent shadow has got to be a little frustrating, considering Boston Scientific was forced to sell their Promus/Xience technology to Abbott (remember the Guidant spin-off?) a couple of years ago. It’s not a parent/child kind of partnership, but Abbott looks like the hero here….and stands to gain more than Boston Scientific does.

What about Johnson and Johnson’s Cypher stent? J&J didn’t present anything at the conference, nor have they done any meaningful R&D on any new stents. Perhaps they gracefully bowed out of the competition, yielding to the heir-apparent Abbott/Boston Scientific stent. Like we said above, Cypher’s days are probably numbered.

Medtronic (MDT), on the other hand, is still swinging away. They also used the EuroPCR conference as a platform to highlight their Endeavor stent’s long-term success. The first-generation Endeavor is already selling in the U.S. as well as abroad, and so far looks as promising as the Promus and Xience V stents could be.

In other words, a three way competition could be heating up, even if Medtronic is a distant third.

What’s any of this got to do with a small cap company like MIV Therapeutics? Though still several months (and perhaps more than a year) way from winning approval anywhere, MIVT’s stent may actually be superior to any of the stents we mentioned above.

In a nutshell, the coating on MIV’s stents is the same stuff your bones and teeth are made of…which means the odds of thrombosis or related problems are slim. How slim when compared to Promus/Xience V? That’s the question the company is trying to answer.

The first MIV stents were implanted about a year ago, so it’s too soon to say whether or not they’ll be effective or safe. However, I don’t mind saying I think they’ll be at least as safe as Promus.

The FDA requires two years of data - at a minimum - before approving any medical device like a drug-eluting stent. Overseas, the wait wasn’t as long, which is why MIV Therapeutics is focusing on locales other than the United States, at least to start.

And how will a small company like MIV compete against giants like Abbott, Boston Scientific, or Medtronic? Good question. I see two ways. The first way is, their stents have to be almost perfect…much better than the others. Second, they have to be able to get that message across to the doctor’s who see other sales reps all day long.

If they can do those two things, I think they can carve out a very nice piece of the coated heart stent pie. I don’t think they’ll be able to dethrone the big guys, but they have a shot at making a dent. Or, I wouldn’t be a bit surprised to see one of the majors acquire MIV to get ahold of their technology.

In the meantime, I don’t see how Abbott can avoid being the future dominator here. Even if doctors and patients chooses Promus over Xience, Abbott still gets a cut from the licensing agreement.

Regardless, I think all these latest developments in technology are setting up a revival in the drug-eluting stent market. That’s good for all these stocks.

By the way, if you want more background on MIV’s technology, the industry’s past problems, and the industry-wide opportunities, revisit our first look at MIV Therapeutics’ place within the heart stent world.

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I’m a total of 0% surprised about Sprint-Nextel’s (S) dismal quarterly results. They posted another quarterly loss - a bigger one - for Q1. The reason? Severance charges, and of course, lost customers. They ended the quarter with a million less subscribers than they started with. That slow burn-off of their customer base has been an issue since 2005 when they Sprint bought Nextel.

I’m still baffled why they can’t (or won’t) fix it.

That’s not to say it’s easy to be a mobile service provider. But, Verizon, AT&T, and T-Mobile can do it and at least maintain market share.

What I’m not baffled about is Sprint looking to hook up with Clearwire (CLWR). Clearwire is a mobile broadband company. Their interest in Sprint is using them as a framework on which to build a mobile network using Clearwire’s WiMax technology.

The new company will be called Clearwire, so I’m guessing we’ll see all ‘Sprint-Nextel’ fade away over the next few months. That’s all well and good, especially considering Sprint’s bad karma. My concern is just who’s running the new Clearwire. If it’s Clearwire, great. If it’s Sprint, how can it be any better? The issue was never technology - it was service.

Based on the underlying partners though, I don’t see Clearwire lasting long either…at least not in its present form. Intel, Google, Time-Warner, and Comcast all have money invested in the WiMax partnership. My guess is they’re all test-driving the technology before doing the same on their own….or perhaps before making an acquisition?

Maybe that’s the real value of the new Clearwire - that someone who knows what they’re doing will eventually own the WiMax enterprise. I think it’ll be Comcast, which would be a good move for both parties. Anything to take the service and management aspect out of Sprint’s hand would be a plus; their only asset is that they have some of their customer base left.

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Geez, I can understand Yahoo’s (YHOO) shareholders not being happy about Jerry Yang’s stubbornness, but I’m not entirely sure an unwillingness to do a deal with Microsoft (MSFT) merits a downgrade. I guess Colin Gillis at Canaccord Adams disagrees - he downgraded the stock to a ’sell’ earlier today when it became clear Yahoo wasn’t going to lay down. ThinkPanmure analyst William Morrison made the same decision.

Though it seems as if everyone except Jerry Yang liked the deal, I’m not sure a downgrade at this point is entirely fair. Did these two analysts upgrade YHOO when the potential union was first introduced? Nope. So, what’s actually changed with the company that makes it a ’sell’ now? That’s the point - nothing’s changed.

By now you’re realizing this has less to do with Yahoo and more to do with analysts. More specifically, it’s vented frustration that analysts are far too often lemmings, and/or late to the party. It doesn’t really do any investors any good to downgrade the company to a ’sell’ rating after the stock has plunged 14%.

In any case, I doubt this is anywhere close to being over. Microsoft has tipped their hand; they really can’t go back now, lest Google (GOOG) or Time-Warner/AOL (TWX) could step in. Google I could stomach, but a deal with AOL is a deal nobody’s gonna’ like.

Hostile takeover, here we come? Maybe.

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A couple of you recently wrote in and asked about bulletin board company NuTech Digital (NTDL). It was a good inquiry - the stock had surged and you made some good money on it. You just wanted to know why.

My assumption was that since we got a few inquires on the same stock at the same time, that we had covered it before…perhaps before I got on board with the SmallCapNetwork. I checked the archives though, and we never covered it here. No problem - we can still take a look. We can’t take credit, however, for getting you into the small cap stock in the first place.

Anyway, the chart tells the tale. The stock took a couple of shots at a breakout in ‘06 and ‘07, but really couldn’t get over the 2 cent hump. That is, it couldn’t get over it until recently. It ran up to a high of 16 cents in March, and is now holding its ground at 9 cents.

Two questions come to mind. (1) Why the surge? (2) Will it last?

I’ll answer both as best I can.

The reason for the surge is simple enough - they started selling wireless video products. This is not only new for the company, but something of a new category of technology. It’s my understanding that what they build is basically real-time, two-way television. Actually, it seems like a pretty cool idea….well ahead of its time though.

Will it last? I have a hard time thinking it will - at least like this. Eventually as the technology is understood and embraced, NuTech looks like it will be a leader. For now though, I don’t see enough demand for the technology to justify this bulletin board stock’s price.

In other words, I suggest you take some profits if you haven’t already. If you still like it after it settles down (and the company is doing its part) you can step back into this small cap name.

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