Morning Update

"Keep your eyes on the stars, and your feet on the ground." - Theodore Roosevelt

Morning News of Note:

• CMCSA TWX CVC: Heard on the Street... Cable Companies Call Up New Growth Story As Satellites Grab TV Business, Phone Services Promise Potential; Investors Envision Heady Margins When cable companies, starting today with Comcast Corp., begin reporting second-quarter earnings, all eyes will be on their fledgling telephone businesses, which investors are hoping will power the industry's next growth surge and push up share prices. The results likely will be good, especially from Time Warner Inc.'s cable business and Cablevision Systems Corp., which are attracting tens of thousands of land-line phone subscribers with offers of unlimited service for less than $40 a month. Comcast, the country's largest cable operator, is getting off to a slower start. Nevertheless, it is likely to get a boost from the strong numbers expected to be posted by other cable companies, which will show the potential of the business. (Full Story) WSJ
• CEO UCL: Cnooc to Withdraw Its Unocal Bid Move Would Clear Way For Chevron to Seal Deal; Political Pressure Too Great Chinese oil company Cnooc Ltd. is expected to pull out of the running for Unocal Corp. by this morning, according to a person familiar with the matter, ending a politically charged $18.5 billion attempt to assume control of the ninth-largest U.S. oil producer. This person said there was a very slim chance that decision would be reversed at the last moment, but as of late last night, there was the "strong" expectation that the Beijing oil company would remove itself from its six-week long pursuit before the markets opened Tuesday. (Full Story) WSJ
• GM F: GM, Ford to Pull Back On Price War Auto Firms' Strategies Shift From Discounts, Rebates To Lower Sticker Rates Battered by profit declines, General Motors Corp. and Ford Motor Co. are pulling back from the discount wars with new pricing strategies that emphasize lower sticker prices instead of big incentives. GM last week signaled that it won't extend its popular "employee discounts for everyone" promotion through August. In its place, GM said yesterday that it planned to lower sticker prices on 30 models for the 2006 model year. Separately, Ford cut prices on some 2006 models, including the high-volume Ford Explorer sport-utility vehicle. (Full Story) WSJ
• SHLD: Its Stock Up, Sears Searches for Recovery One of the most popular stocks among the hedge fund set is the new Sears Holdings, the discount retailer created in the merger with Kmart. Sears shares have risen sharply since the $11 billion merger was announced last fall on hopes that Edward S. Lampert, the company's chairman, would quickly take advantage of the combined companies' valuable real estate and sell other noncore assets. (Full Story) NY Times
• JUPM: Bloomberg TV profiles Jupitermedia in its Up & Comer segment (22.77 ) Co says its announcement this morning to sell its Search Engine Strategies trade shows and the ClickZ.com network of web sites demonstrates its goal to focus on the imaging side of its business. Co will use the money to pay off a bridge loan. Co says there are a lot of potential acquisition candidates in the image space. Co more likely to use debt and take advantage of low rates to make deals, rather than dilute shareholder value. Co says it competes with Getty Images (GYI), but is much broader than them.

Market Comments: The market opens higher this morning, after a relatively weak close yesterday (the market was basically flat for the day). Several companies reported strong earnings this morning (EMR, CMCSA, RIG, etc.), as corporate earnings continue to come in ahead of expectations. Also, we got another benign inflation report this am, as the PCE core deflator came in unchanged.

long CMCSK, EMR, JUPM, SHLD