Countrywide down as mortgage deal nears; Activision up on Vivendi deal; VeriFone trampled on accounting woes

By Evan Weinberger

New York, Dec. 3 - Countrywide Financial Corp. stock had another down day Monday following two days of strong gains to close out last week on reports that the government, mortgage companies and banks were closing in on a deal to help out homeowners facing foreclosure.

Treasury secretary Henry Paulson announced Monday that the deal, which would freeze the so-called teaser rates that are causing so much trouble for an unspecified number of years, could be completed soon. And Housing and Urban Development secretary Alphonso Jackson told news outlets he expected some sort of announcement on Thursday.

The talk is that the deal will involve freezing the low, introductory rates offered to subprime borrowers for three to five years before they rise. That would allow homeowners to secure other sources of financing.

Paulson stressed that no tax money would be used to ease the subprime mortgage crunch, and several analysts refuted the notion that proposed package would be a bailout. "I don't know if I would call it a bailout," one analyst said. "I think the alternatives are bailouts."

The question bedeviling policy makers is which homeowners should be eligible for the deal. "We don't know who's getting foreclosed," another analyst said, adding that the danger is anyone who doesn't want to pay the higher rate may line up to have their interest rate frozen.

Although some lending institutions like Countrywide may lose money on the deal due to the frozen rates, market watchers all said the deal is necessary, although maybe still not enough. "I don't know how much it helps them," the first analyst said. "If [Paulson]'s just talking about freezing floating-rate mortgages, that's not the whole problem."

Countrywide in particular stands to benefit, a third analyst said. "They're going to need to sell some of these mortgages on their balance sheets in the next year or two," he said.

Calabasas, Calif.-based Countrywide's stock (NYSE: CFC) lost 14 cents, or 1.29%, for a $10.68 close Monday.

Philadelphia-based Sovereign Bancorp Inc., the parent company of Sovereign Bank, and Seattle-based Washington Mutual Inc. are two other financials market watchers say will be helped if and when the deal comes through.

Sovereign stock (NYSE: SOV) fell 13 cents, or 1.10%, to close at $11.64 Monday.

Washington mutual (NYSE: WM) gained 12 cents, or 0.62%, for a $19.62 close.

Santa Fe, N.M.-based lender Thornburg Mortgage Inc. (NYSE: TMA) lost a penny, or 0.09%, to close at $10.65.

And San Francisco-based Luminent Mortgage Capital Inc. (NYSE: LUM) surged to $1.18, a gain of 15 cents, or 14.56%, on the day.

Overall, stock markets closed down Monday. The Dow Jones Industrial Average slipped 57.15 points, or 0.43%, for a 13,314.57 close.

The Nasdaq fell 23.83 points, or 0.90%, to 2,637.13.

And the Standard & Poor's 500 dropped 8.72 points, or 0.59%, to 1,472.42 on Monday.

New player in video games

Santa Monica, Calif.-based video game developer Activision, Inc. and French media conglomerate Vivendi SA hit the start button on a new company called Activision Blizzard Sunday. The deal is valued at around $18.9 billion, and Vivendi will hold a 52% share of the new venture.

Vivendi's Blizzard Games is best known for its "World of Warcraft" online subscription-based game as well as its "Crash Bandicoot" game. Activision is the publisher of the wildly popular "Guitar Hero" as well as the World War II game "Call of Duty" and the "Tony Hawk" series of skateboarding games. Frustrated rockers and bloodthirsty barbarians unite!

The deal is expected to be completed by the end of the first half of 2008 and will create a company bigger than industry leader Electronic Arts Inc. Activision Blizzard will combine the success of Activision's console-based games with Vivendi's Blizzard's online position, which is especially big in Asia.

"By combining leaders in mass-market entertainment and subscription-based online games, Activision Blizzard will be the only publisher with leading market positions across all categories of the rapidly growing interactive entertainment software industry and reach the broadest possible audiences," Activision chairman and chief executive officer Robert Kotick said in a statement Sunday. "By joining forces with Vivendi Games, we will become the immediate leader in the highly profitable online games business and gain a large footprint in the rapidly growing Asian markets, including China and Korea, while maintaining our leading operating performance across North America and Europe."

The merger with Activision did little to quell media speculation over the breakup of Vivendi.

The deal is expected to have wider effects in the video game industry, as speculation turned to a possible takeover of video game maker Ubisoft Entertainment by EA.

Activision stock (Nasdaq: ATVI) surged on the deal, gaining $2.82, or 12.73%, to close at $24.97.

Investors dumped stock in Redwood City, Calif.-based EA, which closed at $55.13, a loss of $1.06, or 1.89%.

Agrium, UAP come together

Calgary, Alta.-based agricultural products firm Agrium announced the acquisition of Greeley, Colo.-based agricultural products firm UAP. The deal is valued at $39 per share, or around $2.65 billion. The deal represents a 30% premium on the average of UAP's closing stock price for the previous 20 trading days.

The deal is expected to close in 2008.

"We believe the transaction will enable Agrium to capitalize on the strong outlook for agriculture markets and will allow us to deliver value to both our shareholders and our customers," said Agrium president and CEO Mike Wilson in a Monday statement. "It increases the scale and size of our business, further enhances stability of our earnings profile and strengthens Agrium's ability to serve and grow its customer base. A key factor to our success will be drawing from the extensive experience of employees from both organizations."

Agrium stock (NYSE: AGU) shot up on the news, gaining $3.14, or 5.43%, to close at $60.98.

Stock in UAP (Nasdaq: UAPH) soared even higher, closing at $38.28, a gain of $8.37, or 27.98%, on Monday.

VeriFone takes a dive

Monday was not a good day to be a stockholder in VeriFone Holdings Inc. The San Jose, Calif.-based electronic payment equipment company announced that it was going to have to restate earnings for the first three quarters in a big way.

How big? Try $30 million big. That's the amount the company said it overstated its profits by for the first three quarters of 2007, or 80% of their total profits.

In the statement, VeriFone said the misstatements came from accounting mistakes in "valuation of in-transit inventory and allocation of manufacturing and distribution overhead to inventory, each of which affects VeriFone's reported costs of net revenues."

And those stockholders for whom it was a bad day? A lot of them got out.

Shares in VeriFone (NYSE: PAY) took a bath, losing $22, or 45.80%, to close at $26.03 on Monday.

E*Trade deal doesn't look better

Investors clearly weren't thrilled last week with New York-based online financial institution E*Trade Financial Corp.'s $2.55 billion bailout by the hedge fund Citadel.

The view of the deal didn't change much after investors had a weekend to mull it over.

Stock in E*Trade (Nasdaq: ETFC) crumbled a further 49 cents, or 10.65%, to $4.11 on Monday.

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