Charter, WCI Communities splatter on earnings; EMC continues slide; CompuCredit up; mixed solar readings

By Evan Weinberger

New York, Nov. 8 - Charter Communications Inc. convertibles got slammed by earnings Thursday. WCI Communities Inc. suffered a similar fate for similar reasons.

EMC Corp. continued to plunge as tech convertibles and stocks got hammered on the day. Intel Corp. and Micron Technology Inc. convertibles were also down. SINA Corp. convertibles also suffered a steep decline based on competition fears.

On the plus side of the ledger, CompuCredit Corp. convertibles were up, although still bottom feeders, as some financials stabilized a bit, an analyst said.

Solar power convertibles Suntech Power Holdings Co. Ltd. and SunPower Corp. were mixed.

No new issues priced in the United States Thursday.

A day after the Dow Jones Industrial Average tumbled 360 points, the index opened lower. Federal Reserve chairman Ben Bernanke's testimony to Congress that the economy would see a noticeable slowdown helped drive all three major stock indices down. "Anytime he's talking, that's going to be a big mover in the market," an analyst said.

Then there was a rally. "It seemed like a lot of momentum selling right off the bat," another analyst said. "Once people started seeing buyers step in, you saw the momentum switch."

In the end, after falling nearly 200 points, the Dow closed down 33.73 points, or 0.25%, at 13,266.29.

The Nasdaq continued to get hit hard as tech stocks took it on the chin again. The tech-heavy index closed at 2,696, a drop of 52.76 points, or 1.92%.

The Standard & Poor's 500 gave back a modest 0.85 point, or 0.06%, for a 1,474.77 close.

One catalyst for the rally may have been a letter sent by James B. Lockhart III, the director of the Office of Federal Housing Enterprise Oversight, to New York State attorney general Andrew Cuomo Thursday. In the letter, Lockhart chastised the former Secretary of Housing and Urban Development for his actions against Fannie Mae and Freddie Mac, including Cuomo's demand that the two federally backed lenders stop doing business with Washington Mutual.

"I believe that all relevant government agencies shoulder a responsibility to eliminate fraudulent and otherwise bad actors from the market while also respecting the many legitimate parties - borrowers, appraisers, lenders and investors - trying to participate in this market during this uncertain period," Lockhart said in the letter. "We need not aggravate the latter in pursuit of the former."

A trader said the letter "put a bid back in the entire market."

Charter splatters on earnings

Troubled St. Louis-based cable television and internet provider Charter Communications announced that it lost $1.10 per share, or $407 million, in the third quarter of 2007. By comparison, the company lost 41 cents per share, or $133 million, in last year's third quarter.

Charter said that the losses were driven by costs related to its expansion of services.

Analysts polled by Thomson Financial expected losses of 89 cents per share, according to Thomson Financial.

Charter got beaten to a pulp following the announcement. The company's 5.875% convertible senior notes due Nov. 16, 2009 closed Thursday at 82.8049 versus a closing stock price of $1.16. The convertibles closed Wednesday at 102.91, versus a stock price of $1.78.

Stock in Charter (Nasdaq: CHTR) dropped 62 cents, or 34.83%, on the day.

WCI down on earnings, cancellations

Bonita Springs, Fla.-based luxury home builder WCI Communities announced losses of $69.7 million, or $1.66 per share, for the third quarter of 2007 Thursday morning. In last year's third quarter, WCI saw a 25-cent-per-share profit.

"Demand continues to be unpredictable from week to week, and we saw an increase in defaults and cancellations during the third quarter," WCI Communities president and chief executive officer Jerry Starkey said in a statement announcing the results.

Following the announcement, Moody's Investors Service cut WCI Communities to "Caa2," eight levels below investment grade.

Investor flight from WCI Communities ensued. The company's 4% convertible senior subordinated unsecured notes due Aug. 5, 2023 closed Thursday at 80.4 versus a stock price of $4.24. They closed Wednesday at 86.5 versus a stock price of $5.29.

WCI Communities stock (NYSE: WCI) spilled $1.05, or 19.85%, on the day.

EMC continues to fall

Hopkinton, Mass.-based computer storage developer EMC continued to slide Thursday. "I think there's probably some feeling that they're over-priced," an analyst said, adding that the same perception held over much of the tech sector. Stock in EMC has nearly doubled in the last year.

EMC, which is traded on the New York Stock Exchange, saw its 1.75% convertible senior notes due Dec. 1, 2011 close Thursday at 144.953 versus a closing stock price of $20.67. They closed Wednesday at 153.9 versus a stock price of $22.24.

EMC's 1.75% convertible senior notes due Dec. 1, 2013 closed Thursday at 144.509 versus a stock price of $20.67 after closing Wednesday at 155.9 versus a stock price of $22.24.

EMC stock (NYSE: EMC) fell $1.57, or 7.06%, on the day.

Broader techs fall

The analyst added that market watchers were beginning to see the entire tech sector as over-valued and pointed to the recent troubles in the Nasdaq as proof.

Tech convertibles were broadly down Thursday, several market sources said.

Santa Clara, Calif.-based chip maker Intel saw its 2.95% junior subordinated convertible notes due Dec. 15, 2035 close at 106.354 versus a closing stock price of $25.93. They closed Wednesday at 108.823 versus a stock price of $26.90.

Intel stock (Nasdaq: INTC) gave back 97 cents, or 3.59%, on the day.

Boise, Idaho-based semiconductor producer Micron saw its 1.875% convertible senior notes due June 1, 2014 close at 90.5228 versus a closing stock price of $9.33 Thursday. They finished trading Wednesday at 91.5971 versus a stock price of $9.49.

Stock in Micron (NYSE: MU) dropped 10 cents, or 1.69%, on Thursday.

Alibaba.com drives down SINA

Chinese online shopping giant Alibaba.com's recent IPO is putting pressure on Shanghai-based online media company SINA. The tightening of tech isn't helping matters either.

SINA's zero-coupon convertible subordinated notes due July 1, 2023 closed Thursday at 203.429 versus a closing stock price of $49.88. They closed Wednesday at 218.984 versus a stock price of $54.58.

SINA's stock (Nasdaq: SINA) fell $4.70, or 8.61%, on Thursday.

CompuCredit rebounds

Atlanta-based credit card and financial services firm CompuCredit rebounded some Thursday, although its levels are still low.

CompuCredit's 5.875% convertible senior notes due Nov. 30, 2035 closed Thursday at 52.2138 versus a closing stock price of $12.36. They closed Wednesday at 46.5563 versus a stock price of $10.27.

The company's 3.625% convertible senior notes due May 30, 2025 closed Thursday at 59.0715 versus a stock price of $12.36 after finishing Wednesday at 56.5271 versus a stock price of $10.27.

CompuCredit stock (Nasdaq: CCRT) was up $2.09, or 20.35%, on the day.

Financials "seemed to solidify," an analyst said.

Mix of sun and clouds in solar

A shining third-quarter earnings report from First Solar Inc. raised most, but not all, of the solar energy sector Thursday.

Wuxi, China-based photovoltaic cell producer Suntech saw its 0.25% convertible senior notes due Feb. 15, 2012 close Thursday at 147.13 versus a closing stock price of $65.17. They closed Wednesday at 146.091 versus a stock price of $64.80.

Suntech stock (NYSE: STP) rose 37 cents, or 0.57%, on the day.

San Jose, Calif.-based solar power products producer SunPower's day wasn't quite as bright. The company's 0.75% convertible senior debentures due Aug. 1, 2027 closed Thursday at 179.722 versus a closing stock price of $141.93. They finished Wednesday at 180.445 versus a stock price of $145.

SunPower's 1.25% convertible senior notes due Feb. 15, 2027 closed Thursday at 257.109 versus a stock price of $141.93 after finishing Wednesday at 258.478 versus a stock price of $145.

SunPower stock fell $3.07, or 2.12%, on the day.

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