Filed under: Deals, Rumors, Products and services, Apple Inc (AAPL), Marketing and advertising, Activision Inc (ATVI)

Just as Apple Inc. (NASDAQ: AAPL) releases its new iPhone 3G to consumers today, the deal for Activision Blizzard, Inc. (NASDAQ: ATVID) has been finalized and rumors emerged that the combined game maker could create a digital music store to service its series of Guitar Hero games and challenge iTunes. The Financial Times reported Thursday that the company has a new service in the works as part of a “natural evolution” of the series and looks at Guitar Hero to become a “credible alternative to iTunes” via a majority ownership by Vivendi, which also owns the Universal Music Group.

The development of an on the web music store from the makers of Guitar Hero and World of Warcraft would be a profitable development for music publishers and investors, since downloadable content rakes in more money than simply offering music on game discs, according to a follow-up by Billboard on Friday. Part of this is due to continued spin-off games, especially the Guitar Hero franchise which saw Guitar Hero: Aerosmith and Guitar Hero: On Tour released in June. The fourth game in the main series is also due this fall and a Metallica-based game for next year.

Unfortunately, while any new music based digital store might offer a viable and intriguing challenge to Apple’s iTunes Store, to date it still remains the industry leader despite previous attempts to dethrone it. No matter how much the music industry and other retailers dislike iTunes and Apple’s hold on music and other downloadable media, the company still manages to maintain positive consumer relationships. This was made obvious this day by the commotion over the new iPhone, which saw another price drop and technological advance.

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Filed under: Forecasts, Products and services, Consumer experience, Wal-Mart (WMT), Costco Wholesale (COST), Economic data, Nordstrom, Inc (JWN)

Some of the country’s largest retail chains had good June sales, benefitting from consumers looking for a place to spend their tax rebates, but this was not the case for higher-priced department stores. Retailers offering big discounts were among the privileges ones as consumers chose to stay away from high prices.

Consumers spent on the basics, looking for bargains, boosting sales at some companies like Wal-Mart (NYSE: WMT), but resulting in losses for the others like Nordstrom (NYSE: JWN) and American Eagle (NYSE: AEO). This confirmed that retailers will face further weak demand even during the back-to-school shopping season, and more deep discounts will be needed.

As June is considered a key month for sales, merchants were hoping for a “stimulus” effect from tax rebates, despite worries tied to soaring gasoline and food costs. However, only companies offering cheaper gas like Wal-Mart, Costco (NASDAQ: COST) and BJ’s Wholesale Club (NYSE: BJ) saw their dreams accomplished. Thus, Wal-Mart came with June sales growth of 4.3%, Costco reported a 9% increase in June same-store sales, while BJ’s Wholesale saw a growth of 16.5%.

Making some comments on this unpleasant situation, retail consultant Kurt Barnard believes department stores are the only ones responsible for these negative results.

“They treat the consumer to the same things they’ve treated them to in past months and years. That’s particularly unfortunate because in a down economy, consumers must be given an incentive to break through the barrier that dictates ‘Don’t spend” Barnard said in an article in today’s Chicago Tribune.

For now it looks like any hope of a swift rebound in consumer spending is not going to happen. With the market dealing with factors such as the slumping economy and anxious consumers, it just does not seem likely that we are going to see a market wide pick up in retail sales over the rest of this year, especially in the higher-end retail stores.

Consumers are definitely expressing their concerns on the overall economy through their shopping habits. Discount and bargain retailers should continue to see their sales stay moderately level, but the more specialty high-end retailers are definitely going to have their work cut out for them.

How have your shopping habits been modified over the past year? Do you continue to do your shopping in the same locations, or have you, like many others, started looking more for the bargains out there when you head to the stores?

Eliza Popescu is a financial writer for the on the web investment advisory service Investor’s Observer.

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Filed under: Products and services, Toyota Motor Corp. (TM)

Toyota Motor Corp. (NYSE: TM), responding to U.S. demand for its Prius hybrid vehicle, will start making the small sedan in the U.S. The decision comes on the back of a weak U.S. dollar — which makes exports more pricey — and also reflects the fact that the U.S. is the biggest market for the 45 MPG vehicle.

It will take until 2010 for the Prius to be built in U.S. factories owned by Toyota. In a strange twist of irony, the Mississippi plant that will build the Prius was slated to make Highlander SUVs. Except for the hybrid version of that midsize SUV, consumers continue to shun nearly anything with a V6 or bigger in the face of “not-going-anywhere” $5/gallon gasoline.

With the U.S. making up over 60% of global demand for the Prius, Toyota has a winner here — but it needs to spread the wealth into other passenger car products as well. If Toyota can get its hybrid technology inexpensive in such staples as the Camry and Highlander, it will have a winning place in U.S. sales, even more than it commands now. The Prius is a great first step — but more need to come. Consumers are mad about gas prices and fickle about which future vehicles they’ll drive — play to them.

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Filed under: Deals, Products and services, Marketing and advertising, Anheuser-Busch Cos (BUD)

InBev, the Belgian brewer, today hiked its unsolicited bid for Anheuser-Busch Cos. (NYSE: BUD) by a whopping $5 a share, making it all but certain that the King of Beers will sell — unless members of the board of directors have spent too much time sampling their own product.

The $50 billion offer represents a substantial premium over where Anheuser-Busch has recently traded. InBev clearly wants to avoid the hostile takeover it’s threatened. It has vowed to keep its U.S. operations based in the company’s hometown of St. Louis. The average drinker of Budweiser probably won’t notice a difference in the taste of their favorite brew, which might or might not be a good thing depending on one’s beer snobbery.

Shareholders, including Warren Buffett, are ready to head to the exits. The stock, which is up 17% this year, is trading up in pre-market trading. The company has tiny choice but to take the bid. No other logical buyers exist and I would be surprised if private equity players would be willing to top InBev’s offer.

About the only potential losers in this acquisition may be media companies.

Advertising salesmen are probably all holding their breaths wondering whether the new owners of Anheuser-Busch will turn off the money spigot that has made Budweiser one of the most iconic brands in the world. Envision a weekend baseball game without a Bud commercial? You have to wonder whether InBev will be as enthused to spend large bucks on the Super Bowl as well.

Politicians might lament that Anheuser-Busch is no longer U.S. owned. Then again neither is Miller. BloggingStocks writer Carol Vinzant did an exhaustive piece yesterday listing about two dozen American icons owned abroad.

I guess beer drinkers will have to stick to craft brewers if they want to support U.S. beer makers. That may be short-sighted though. Thanks to free trade, the world has become more global and there’s nothing we have the ability to do to change it.

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Filed under: Major movement, Bad news, Market matters, Bank of America (BAC), Federal Natl Mtge (FNM), Washington Mutual (WM), Headline news, Housing, Cramer on BloggingStocks, MBIA Inc (MBI)

TheStreet.com’s Jim Cramer states Fannie and Freddie aren’t the true culprits here.

The blowhards and bluff artists and the Gang of Four — Ambac (NYSE: ABK) (Cramer’s Take), MBIA (NYSE: MBI) (Cramer’s Take), MGIC (NYSE: MTG) (Cramer’s Take) and PMI (NYSE: PMI) (Cramer’s Take) — truly have blood on their hands for this moment. So do the ratings agencies, the mortgage insurers and the salespeople who packaged undocumented loans and pushed buying homes with no money down.

The whole apparatus stinks and we’re now seeing the unwinding, but I think that the false assurances created by the Gang of Four and their insistence to not worry made everyone way too complacent. Their glib promises as well as the incredibly lax work of the ratings agencies, S&P and Moody’s, enabled the whole edifice to be propped up.

And once it was clear to them that they needed more capital, they selected to forgo the window and attack the shorts. Had they raised the capital they needed and had the ratings agencies stated they can’t bless any more of this junk, we might have never been in this spot.

But we are there. The massive problems that everyone has from Fannie Mae (NYSE: FNM) (Cramer’s Take) to Freddie Mac (NYSE: FRE) (Cramer’s Take) to Bank of America (NYSE: BAC) (Cramer’s Take) to Washington Mutual (NYSE: WM) (Cramer’s Take), frankly, aren’t the defaults. The default rate for FNM mortgages is amazingly low, around 1%.

But it is the personal insurance behind those mortgages — made by PMI and MGIC — that might not hold up, and that’s the layer of help that granted Fannie and Freddie to be so thinly capitalized. We saw the same thing happen throughout Wall Street and with many banks. The insurance may not hold up, so the reserves are therefore way too low.

A few months ago, we were fretting that the collapse of these monolines could put everything in jeopardy. Somehow, because they haven’t “collapsed” per se, we thought we had skated by this issue. We haven’t. The unwinding of these two companies and the reserves that must be boosted — because they can’t be counted on — is behind a lot of these capital raises and behind the lack of belief in anything any financial states.

Today, as we ponder the unthinkable, the nationalization of Fannie and Freddie, we’ve to recognize that it ISN’T the default rates that are doing it. It is the lack of a small amount of capital relative to the massive amount of guarantees, almost all of which aren’t even an issue except the last three years of them.

And it is those guarantees that are being stressed, because the personal mortgage insurance that Fannie/Freddie insist upon to make their loan that they securitize “less likely to default,” is being obliterated as surely as MTG and PMI’s stocks are being obliterated.

The point here’s an absurd one: the value guys are really right. These companies aren’t really insolvent, they just need capital badly and have to wipe out the common stockholders to get it.

The real absurdity: If the feds stood behind the debt of Fannie and Freddie specifically in return for, say, $100 billion in capital, you’d have two companies in which you’d love to invest. But, ironically, they wouldn’t have a stock to do so, because there is no way that the government would give those companies 100 billion and let the common-stock holders share in the spoils.

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RELATED LINKS:
Capital Fears Sink Fannie, Freddie
Cramer: Fannie and Freddie, Game Over
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com’s sites and serves as an adviser to the company’s CEO. At the time of publication, Cramer had no positions in the stocks mentioned.

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Filed under: Before the bell, Earnings reports, Deals, General Electric (GE), Market matters, Citigroup Inc. (C), Federal Natl Mtge (FNM), Dow Chemical (DOW), Economic data, Oil, Housing

U.S. stock futures were lower Friday morning after General Electric (NYSE: GE) reported its flat quarterly profits and as concerns remain over the problems at government sponsored mortgage companies Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Some economic data is also on tap, but barring any breaking announcements, it seems stocks will drop at the start of trading, especially if oil continues its way up.

On Thursday, U.S. stocks managed to post gains. What might have given a big push to stocks, a large multi-billion takeover of Rohm and Haas by Dow Chemical, was offset somewhat by concerns over the solvency of Fannie Mae and Freddie Mac and another surge in oil prices. The Dow industrials ended 81 points higher, or 0.73%, the S&P 500 rose 8 points, or 0.7%, and the Nasdaq Composite added 22 points, or 1.03%.

Oil concerns might very well continue today as crude oil rose for a third day, to within $1 of a record, on supply concerns rising from a possible strike on Brazil oil platforms coupled with further unrest in the Middle East and Nigeria. Oil already soared $5.60 Thursday, or 4.1%, to settle at $141.65 a barrel. This day, crude oil for August delivery rose as much as $3.45, or 2.4%, to $145.10 a barrel on the New York Mercantile Exchange

On the economic front, May trade balance is due out at 8:30 a.m. EDT. At the same time, import and export prices in June will be released.
The University of Michigan also is due to release at 10:00 a.m. a preliminary reading on consumer sentiment in July.

In corporate news, first GE’s earnings. The industrial conglomerate states its profit fell 6% in the second quarter, but excluding charges, it was flat at 54 cents per share, meeting analyst estimates. Total revenue has risen to $46.89 billion from $42.38 billion a year earlier. And after it stated it would spin off its consumer and industrial businesses, already today GE said it would sell its consumer finance arm in Japan to Shinsei Bank. GE shares are up 1.6% in premarket trading.

Also, the Fannie Mae-Freddie Mac saga continues. The two have plunged (again) in current days due to fears about the companies’ viability. Now it was reported that the government might be forced to rescue the two sponsored mortgage buyers. But shares continue to plunge and in premarket action FNM shares are down over 17% and FRE shares down over 18% at 7:18 a.m.

And finally, GE isn’t the only one selling assets these days. Citigroup (NYSE: C) will sell its German retail banking operation to France’s Credit Mutuel for $7.7 billion in cash. Citi shares are down 1.6% in premarket trading.

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Filed under: Bad news, Federal Natl Mtge (FNM), Housing

Shareholders in Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) might end up with nothing, totally nothing. The quasi-government agencies may be taken over by the Feds and the US tax papers will cover their losses.

According to The New York Times, “A conservatorship or other rescue operation would be the second time in four months that the Bush administration has stepped in to engineer a rescue to prevent the financial system from collapsing.” The other time was with Bear Stearns. The financial health of each company has been hurt badly by mortgage foreclosures.

Because securities in the two firms are held by financial institutions worldwide, the bail-out could be seen as a rescue of much of the financial world.

The pattern among banks, brokerage firms, insurance companies, mortgage lenders, and banks is now becoming familiar. Investors who put money into institutions which they thought were “safe” are faced with losing a massive part of their investments.

For the millions of people who purchased these shares for their retirement funds, a few extra years at the office might be their only recourse.

Douglas A. McIntyre is an editor at 247wallst.com.

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