Blackstone buying Hilton

Private equity firm Blackstone Group said Tuesday it would buy Hilton Hotels Corp. for about $26 billion cash, a deal that will give Blackstone one of the leading brand names in the hotel business.

Under terms of the deal, Blackstone (Charts) will pay $47.50 for each share of Hilton (Charts, Fortune 500), one of the most prominent global hotel brand names.

That's a 32 percent premium over Tuesday's closing price. Ahead of the post-close announcement, shares of Hilton had risen 6.4 percent to close at $36.05 on the New York Stock Exchange.

Options volatility and volume in Hilton stock was well above average before the close of trade Tuesday, said Paul Foster, an options strategist at theflyonthewall.com.

The battle to be 'King of the Street'

The deal is expected to close during the fourth quarter of 2007 and was approved by Hilton's board of directors on Tuesday, the company said.

Blackstone, which raised $4.1 billion in an IPO late last month, said it intends to invest in the Hilton properties and brands globally to enhance and grow the business.

The hotel industry is enjoying a multiyear boom as robust demand has allowed hoteliers to steadily raise rates. The upbeat market environment, supported by limited construction of new hotels, has made lodging assets hot commodities.

Many investors think the notoriously cyclical U.S. hotel industry has more room to grow and could provide risk-adjusted returns that outperform other asset classes, according to Thomas Callahan, an analyst with hospitality industry tracking firm PKF Consulting in San Francisco.

"The perspective is that the industry still has a few more good years left in this upturn that began -- depending

Blackstone already has a significant portfolio of hotel and resort properties, which includes more than 100,000 hotel rooms in the United States and Europe. Its properties include La Quinta Inns and LXR Luxury Resorts and Hotels.

Hilton's brands include Hilton, Conrad Hotels & Resorts, Doubletree, Embassy Suites, Hampton Inn, Hilton Garden Inn, Hilton Grand Vacations, Homewood Suites by Hilton, and The Waldorf-Astoria Collection.

The Hilton chain was founded in 1919 by Conrad Hilton, the great-grandfather of U.S. celebrity socialite Paris Hilton.

Her grandfather Barron Hilton, co-chairman of the Hilton board of directors, owns 5.3 percent of Hilton shares, according to the company's April proxy. He is the brother of the late Conrad Nicholson Hilton Jr., called Nicky, who was the first husband of actress Elizabeth Taylor.

Private equity IPOs unfazed by taxman

Blackstone said it expects no significant divestitures as a result of the transaction.

So far this year, several private equity groups have made multibillion-dollar offers for hotel assets.

Investors believe the limited supply of new hotel rooms in key markets means they can achieve higher returns by buying and investing in existing hotels, said Joseph Toy, president of Hospitality Advisors LLC in Honolulu.

"The game here is acquire at a premium, then renovate and reposition," Toy said. "And with capital as abundant as it is, it's something we're seeing across the market, including Hawaii."

Last month, Goldman Sachs' (Charts, Fortune 500) real estate fund, Whitehall, said it would buy Equity Inns Inc., a mid-market hotel chain, in a deal worth $2.2 billion including assumed debt.

Also in June, Legacy Hotels Real Estate Investment Trust, the biggest lodging REIT in Canada, said it was in talks with investment groups over a possible takeover and had received nonbinding offers valuing its equity at $1.36 billion.

In February, luxury hotel operator Four Seasons Hotels Inc agreed to a $3.37 billion takeover offer from a group that included Bill Gates' Cascade Investments LLC and Saudi Prince Alwaleed bin Talal.

In January, a unit of Wall Street investment bank Morgan Stanley said it would buy privately held REIT CNL Hotels & Resorts Inc. in a transaction worth $6.6 billion.

Hilton said last month that it had a letter of understanding with Somerston Hotels UK Ltd to develop new hotels in the United Kingdom.

The hotel workers union UNITE HERE applauded the proposed Blackstone deal Tuesday, saying it enjoys a "positive partnership" with Hilton and that Blackstone "has demonstrated its commitment to fair treatment" for workers.

Blackstone shares closed up 45 cents at $29.72 on the New York Stock Exchange Tuesday.

Nokia N73

The Nokia N73 is endowed with all possible advanced multimedia functions to make an impression as a mobile computer than just a mobile phone. Next in line after the highly successful Nokia N70, this imaging wizard is even a great media player, office tool and a powerful communicator. The Nokia N73 is enriched with features that are necessary requirements of your life – both personal and professional. All great tools and functions of this smartphone is accomodated in a sleek candy bar case in colour choices of Silver Grey-Deep Plum, Frost White-Metallic Red and a Black, Music Edition version.

Neat short cut buttons and keypad with a beautiful 2.4-inch (diagonal) QVGA screen with display capacity of 262,144 colours is a sight to behold. The handset's user interface, as well as pictures and videos seen on Nokia N73 come out apt and really clear even under the bright sun. The Light Sensor of the Nokia N73 makes sure images produced does not fade away in different light conditions. The handset's weight of 116 grams seems quite decent for a 3G smartphone with such evolved imaging skills.

The Nokia N73 is loaded with a elite 3.2 megapixel camera module with Carl Zeiss optics. This camera phone has the same feel like that of a digital camera. Sliding protective cover to activate the camera, dedicated capture key, zoom keys gives the handset a feeling of any normal digital camera. Furthermore, full-screen landscape viewfinder, auto focus and mechanical shutter further accentuates the imaging experience. To add fun to it, the Nokia N73 is made ready to share pictures on sites like Flickr.com etc. You might want to stick to the 'old school' of image sharing via MMS or even emails.

The Nokia N73 comprises of number of productive tools based on Symbian OS platform. Voice connectivity via quad band GSM network, data connectivity via 3G, EDGE and GPRS, Bluetooth, Infrared and USB for local connection – the Nokia N73 has it all that you'd expect in an N series phone.

Toyota's next generation

Toyota's next generation Prius likely won't have the spectacular boost in fuel economy that was once expected. In late May, the Japanese newspaper Nikkan Koyogo reported that Toyota was considering nixing the idea of putting lithium-ion batteries in the next generation Prius. The newspaper stated that there were concerns within the company about the safety of lithium-ion batteries -- something that Sony is already well aware of.

The Wall Street Journal confirmed today that the next-generation Prius will not use lithium-ion battery technology -- at least for the first few years. The lithium-ion batteries that were to be used in the Prius would have been provided by Panasonic EV Energy Company.

The Prius will instead continue to use nickel-metal hydride batteries -- albeit in a higher capacity form to boost mileage over the current generation vehicle.

Toyota's decision to not use lithium-ion battery technology could be a big break for General Motors. GM has long been in Toyota's shadow when it comes to hybrid technology, but the company is looking to reverse its fortunes in the coming years.

The company has launched its new "mild hybrid" Saturn Aura Green Line sedan and is nearing the release of dual-mode hybrid Chevrolet Tahoe and GMC Yukon full-size SUVs. GM's coup de grâce, however, could be the upcoming Saturn Vue Green Line mid-sized crossover.

In 2009, the Saturn Vue Green Line will be equipped with a 2-mode hybrid powertrain and plug-in capabilities. Owners will be able to charge their vehicle overnight via a standard 110-volt outlet and drive 10 miles on fully charged lithium-ion batteries before the internal combustion engine takes over. In addition, GM says that its plug-in hybrid Vue Green Line is good for 70MPG.

All hope is not lost for the Prius in the quest for increased fuel economy. Current and future Prius owners can always look to third-parties to retrofit their vehicles with lithium-ion batteries. Lithium Technology Corporation has produced a lithium-ion battery pack (comprised of 63 LTC LiFePO4 cells) for the current Prius. When coupled with a plug-in system, fuel economy jumps from 46MPG combined to 125MPG

Is Baidu still a buy?

Is Baidu still a buy?
Think that Google’s (GOOG) stock has been on a tear lately? Maybe so, but Google’s got nothing on Baidu (BIDU), aka the Google of China.
Shares of Baidu, China’s top search engine, have surged more than 40 percent in just the past month. The stock is up about 72 percent year-to-date. But the stock took a bit of a breather on Monday after Citigroup analyst Jason Brueschke downgraded Baidu from “buy” to “hold” citing valuation concerns. The stock dipped about 2 percent in mid-afternoon trading.
Still, that’s not that big of a drop considering how much momentum the stock has had lately. And a closer inspection of the Citigroup report shows that Brueschke isn’t exactly turning into a Baidu bear.
“To be clear, we do not recommend liquidating an entire position in Baidu,” he wrote, adding that he believes Baidu will report revenues for the second quarter that are higher than Wall Street’s consensus expectations of $48.9 million, which would be an increase of 105 percent from a year ago. What’s more, Brueschke even raised his price target for Baidu to $218 a share, about 12 percent higher than the stock’s current price.
I’ve already written about how Baidu and several other Chinese Internet stocks such as Sohu (SOHU), Sina (SINA) and Shanda Interactive (SNDA) have been hot performers as of late. Baidu’s gains have dwarfed the appreciation of these stocks, though.
But that’s precisely what makes putting new money into Baidu a little bit of a scary proposition now.
Much like Google, Baidu’s growth potential appears, on the surface, to justify its performance. But as Brueschke points out, the valuation may be ahead of itself. Baidu’s triple digit P/E - the stock trades at 107 times 2007 earnings estimates - makes it an exceptionally expensive stock.
Sure, profits are expected to increase by nearly 70 percent this year and in 2008 and at about a 48 percent clip, on average, for the next five years. But the stock is a bigger gamble now since expectations for the next few quarters are so high.
After all, Baidu has surpassed earnings estimates by nearly 20 percent a quarter, on average, for the past four quarters. So the pressure is on Baidu to keep wowing the Street in order to satisfy the momentum investors that have bid up the stock to just under $200 a share in the past few weeks.
That’s exactly why Ryan Jacob, manager of the Jacob Internet fund, has been reducing his stake in Baidu recently. He still owns a small position in the stock in his fund but said he’s concerned about the valuation.
“The problem is that Baidu is such an early stage company. By far, they are the search leader in China and all indications are that they will have a very strong quarter. But we’ve cut back our position because at these prices, there’s a lot more risk,” he said.
Still, Jacob agreed with Brueschke and said investors should not completely bail on Baidu.
“Long-term, this is what’s hard. Baidu’s extremely well positioned and they’ve done an excellent job competing against Google and other local players in search. So eventually, the company will justify its valuation,” he said, but added that there’s more to China than Baidu and recommended that investors diversify their holdings in the country.As such, he also owns Sohu, Sina, Chinese travel site Ctrip (CTRP) and Tencent, a popular instant messaging company. Tencent shares aren’t as easy to purchase for the average investor, though, since they trade only in China and do not have a U.S. Nasdaq listing

iphone

David Flashner thought he had it wired: Buy two iPhones last Friday when they first went on sale, keep one and sell the other at a profit so big it would pay for most of the first one.

Flashner wasted no time. He began advertising the extra phone while still in line at an Apple store in Burlingame, Calif., south of San Francisco. During his 21-hour wait, he posted half a dozen ads to website Craigslist .com — with prices ranging from $800 to $1,200 — and waited for the calls to come in.

But no calls came because consumers expect that stores will soon have phones in stock. He continued to advertise the extra phone through the weekend, and ended up with just one call, which went nowhere. On Wednesday, he returned the phone.

Flashner, 25, who manages an audio-visual equipment rental company, is not the only would-be iPhone reseller whose plan failed to follow the script. "I haven't heard of a single person who sold one," he said.

Across the nation, people looking to make a quick and easy profit bought one, two or as many phones as they could by recruiting friends to stand in line with them. Many of them were the first to get in line, camping overnight outside the stores. But now they are finding that the iPhone is much more like a Harry Potter book than a hard-to-find Wii video game machine: a great thing to be one of the first to own, but not high in resale value because supply is not constrained.

Last Friday, just after the first iPhones were sold, thousands of listings showed up on eBay and Craigslist, with prices of $1,000 for the 8-gigabyte phone, a $400 markup. Some bold sellers were asking $2,000. But as it became clear that supply was meeting demand, they found themselves stuck. Few of the phones have sold for more than $700, which after sales tax, is not a remarkable profit margin.

Corey Spring, a columnist at newsvine.com who analyzed eBay auctions, estimated that a significant number of sellers "were only making their money back, even closing at a loss." Most Apple stores in the United States have no phones available, but the most-determined customers seem to have been able to buy phones. Few people seem willing to pay even $100 over the retail price.

Some frustrated resellers say they will keep trying, then return their extra phones within the 14-day return period.

Demand for the phone was remarkably strong in the first days. Analysts estimate that Apple and AT&T stores have sold around 500,000 phones so far. One analyst ventured a guess as high as 700,000. But Apple appears to have anticipated demand and contracted with manufacturers in Asia to build far more. Apple has said it expects to sell as many as 10 million phones by the end of 2008.

Over the last few weeks, Apple stirred a great deal of speculation about inventory levels by shrouding them in secrecy. As a result, resellers decided to take a chance. The company declined to comment on the rush to resell the phones or on the status of iPhone inventories.

Job growth, subprime on investors' minds

NEW YORK (Reuters) -- Investors are hoping this week brings some answers to the question of whether an improving U.S. economy unleashes inflationary forces, and one place to look will be in the government's June employment report.
At the same time, the potential for defaults in subprime loans to spill over to the general economy remains a concern. Nervousness that tighter credit may affect the availability of financing for buyouts prompted investors to sell banks' and brokers' shares on Friday, which helped cut short a morning rally.
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In this holiday-shortened week, the most significant data, the June payrolls report, will come on Friday.
U.S. financial markets will be closed on Wednesday, July 4, for the Independence Day holiday and the New York Stock Exchange will close early, at 1 p.m. ET on Tuesday.
Stocks can't muster turnaround
Last month, investors were cheered by news that employers added 157,000 jobs in May. But a Reuters poll of economists found forecasts for weaker job growth in June: analysts on average said payrolls added 120,000 jobs last month.
Bill Dwyer, chief investment officer at MTB Investment Advisors in Baltimore, expects growth of 120,000 to 130,000 jobs. "I think the economy is still chugging along and the consumer is in pretty decent shape," Dwyer said. He added that with decent economic fundamentals, no recent announcements of major layoffs and signs that manufacturing is picking up, the payrolls report should be at or a little better than the consensus.
Other reports due during the week include the Institute for Supply Management's readings on June manufacturing, on Monday, and the services sector, on Thursday. The Reuters survey forecasts that ISM's June index of national factory activity will be unchanged at 55.0. The ISM services index is expected to drop to 58.0 from 59.7 in May. Any reading above 50 points to growth in the sector.
Al Kugel, chief investment strategist at Atlantic Trust in Chicago, noted that some recent data from regional Federal Reserve banks has been good. He said he expects the ISM data to be strong. "People need some new information to become more bullish and the ISM could be the trigger," he said.
The stock market turned in a strong performance for the second quarter, but has hit a wall in recent weeks after Treasury bond yields climbed above 5.0 percent and problems surfaced at two Bear Stearns hedge funds that held investments in subprime loans, home mortgage loans to borrowers with weak credit.
Cracks in the buyout boom
For the second quarter, the Dow industrials jumped 8.5 percent, the S&P 500 rose 5.8 percent and the Nasdaq gained 7.5 percent. So far for the year, the Dow is up 7.6 percent, the S&P is up 6 percent and the Nasdaq 7.8 percent.
After losing ground Friday, the Dow finished last week up 0.4 percent, the Nasdaq gained 0.6 percent and the S&P ended little changed.
In the week ahead, Tuesday will bring its fair share of numbers. A government report on May factory orders is due that day, along with car and truck sales in June. After a lull this week, S&P 500 companies' earnings will begin to trickle out the following week and then the quarterly deluge begins later in July.
Bob Millen, co-portfolio manager of The Jensen Portfolio, a $2.3 billion mutual fund, noted that S&P 500 earnings growth is down significantly from the double-digit readings of a year ago. He said price-to-earnings multiples are unlikely to expand, and that companies generating significant revenue from outside the United States are the best bets now.
News of a probe into two Bear Stearns (Charts, Fortune 500) hedge funds heavily invested in subprime mortgages added to investors' worries last week that the potential fallout could spread throughout the banking industry. One company was forced to postpone a bank loan and another firm delayed the pricing of a $1.1 billion high-yield bond offering.
Mergers fail to lift media stocks
Referring to the problems in subprime debt, which have devastated some hedge funds that made heavy bets in the sector, RiverSource Investments chief market strategist David Joy said he believes that "it's the primary preoccupation of equity investors and that is going to continue next week.
"The issue is: 'Does it result in a tightening of lending standards that could spill over into a general credit tightening?' That's the biggest concern."
As for the week's statistics, Joy said he will be watching the average hourly earnings figure that is included with the payrolls data, as well as the prices paid numbers in the ISM reports."Our view is that inflationary pressures are probably going to increase in the second half of the year" but at a modest rate as the economy picks up steam, Joy said.

Oil steady above $70; terror risk considered

SINGAPORE (Reuters) -- Oil prices steadied Monday, the start of a holiday-shortened week, as traders looked ahead to a recovery in U.S. refinery use to offset declining gasoline stockpiles.
U.S. light crude eased 13 cents to $70.55 a barrel in electronic trading, after a $1.11 rally Friday to the highest settlement since August 2006. London Brent crude traded 9 cents lower at $71.32, after gaining 89 cents Friday.
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Oil traders worried about geopolitical supply risks saw London's Heathrow airport and New York's JFK terminal reopened Sunday after bomb scares, following an explosion at a Scottish airport Saturday and failed car bombing attempts in London.
"We can see some profit taking after short covering brought the market up to $71," said Ken Hasegawa at Himiwari CX in Tokyo. "The market will be rangebound until the U.S. holiday."
Wednesday's Independence Day holiday will delay until Thursday weekly U.S. inventory data, in which some analysts expect to see higher U.S. fuel production after several plants returned from maintenance.
Retail gasoline price dips below $3
ConocoPhillips (Charts, Fortune 500) planned to begin a restart of a gasoline-making unit in Texas Friday, while two crude units at a BP (Charts) refinery in Indiana, the country's fifth biggest, will reach full rates within two to three weeks after a fire slashed output in April.
A series of outages in the world's top consumer has helped drive down gasoline stockpiles during peak summer demand, though crude stockpiles have risen to nine-year highs despite OPEC production cuts.
Oil market speculators trimmed their exposure to rising prices in the week ended June 26, paring their net long gasoline and heating oil positions from the previous week's multi-year highs. Crude oil net length was almost unchanged.
Crude stockpiles in Cushing, Okla. - the delivery point for U.S. crude futures - fell by 1.4 million barrels in last week's data, leaving the price gap between American and European oil benchmarks at under $1 a barrel after U.S. crude has been trading at an atypical discount to Brent since February.
Iran's dispute with the West over the country's nuclear program is still in focus after an Iranian official said Saturday a team from the U.N. nuclear watchdog will visit Iran on July 11-13 for discussions.Worries over Iran's nuclear dispute together with disruptions to Nigerian supplies, OPEC supply curbs and growing fuel demand have left Brent oil prices up 17 percent this year.