Forex Investment

Viruses, zombie attacks, phishing, identity theft: The Internet continues to be a dangerous place, rife with underworld cybercriminals who keep coming up with new and more clever tricks.

It’s a constant battle to keep the bad guys out, as most any computer security firm can tell you.

Take McAfee, () one of the leading security outfits. Its global “threat center” tracks and ranks the severity of such threats and how they impact the Internet, businesses and home users’ systems.

McAfee puts the current threat level at “elevated” or orange alert.

It’s McAfee’s job with its cadre of lab engineers and researchers to come to the rescue by blocking viruses and other attacks and preventing disruptions through a host of ever-growing software and service programs.

“They are the security guard and the bouncer of the Internet,” said analyst Daniel Ives of Friedman Billings Ramsey.

Its Own House

Ironically, for a company that deals in trust, McAfee has been trying to restore trust in its own ranks.

A widespread accounting and stock-options investigation by the Securities and Exchange Commission last year uncovered alleged improprieties at McAfee, resulting in a management shake-up and an agreement to pay a $50 million fine.

Analysts give kudos to the company for making swift changes and to the new chief executive, Dave De-Walt, who has been on the job since April, for helping to restore trust in the firm.

He formerly was chief executive of Documentum, an enterprise content management software firm acquired by EMC () in December 2003. At information storage giant EMC, DeWalt was executive vice president.

“He has a lot of credibility on the Street and with customers,” Ives said. “He has taken the baton and begun to run with it.”

DeWalt, who was traveling in Asia and unavailable for comment, hired new executive vice presidents to oversee human resources and marketing and a new senior VP of North American sales. He has been streamlining certain functions such as customer support and putting more sales emphasis on larger deals.

DeWalt’s significant experience in enterprise software is a big positive for the firm, says Todd Weller, analyst with Stifel Nicolaus. The reason: The consumer market isn’t expected to offer as much growth as the corporate side.

“The consumer market for McAfee and (chief rival) Symantec () had its great growth days several years ago,” Weller said. “Growth (in consumer) is still respectable, but the key growth opportunity is to execute better in the corporate security market.”

Signs of success in the corporate security market have been evident over the past few quarters, even before DeWalt came onboard, he says.

In the second quarter, McAfee closed 11 corporate-size deals valued at more than $1 million, up from four in the same period last year.

Overall revenue in the quarter rose 13% to $314 million. Earnings jumped 37% to 41 cents a share.

Even the consumer business did well, growing 19% to $132 million, thanks in part to strong personal computer shipments.

If the security business has gone hand-in-hand with the rise of the Internet, as many say, McAfee has been working at it longer than most. It was founded in 1989, at the dawn of the Internet age.

“They’ve built out a product set that has more breadth than the competitors,” analyst Rob Owens of Pacific Crest Securities said.

In the past 12 to 15 months, Owens says McAfee has taken the technology lead over Symantec, which has suffered from some company-specific problems. One snag: the integration of storage firm Veritas Software, which it bought two years ago for $10.5 billion.

“Symantec is still working to ensure its merger with Veritas turns into something positive,” Weller said.

Symantec’s earnings in the fiscal year ending in March were virtually flat from last year. Its June quarter was marred by weak cash flow. Management forecast a softer than expected September quarter.

“McAfee’s bookings are growing faster than Symantec’s, so it is stealing share,” said Owens.

One of McAfee’s most successful new product launches in the past year has been its total protection suite, known as “TOPS,” which targets both consumers and corporations.

But McAfee might not benefit from Symantec’s woes too much longer. Though he wrote Symantec still has “some heavy lifting to do” before its North American sales get back on track, Ives told clients in a recent note that Symantec “is in the midst of a major turnaround.”

A strong product cycle and refocused sales force should boost Symantec’s performance late this year and next year, he said. Meanwhile, Symantec taking advantage of a weak stock market recently announced a $2 billion share buyback program.

Buyback Program

Analysts expect McAfee to resume and expand a share buyback program once the options investigation is fully concluded. Ives expects it to wrap up by year end.

Still, cuts in corporate security budgets could impact McAfee’s business and those of other security firms, some say.

“The biggest concern I have is if the spending environment changes,” Weller said. “Financial companies account for about 15% of all IT spending. So if that slows or translates into a broader economic slowdown, that’s an issue for McAfee and others.”

For now, analysts polled by Thomson Financial figure McAfee still has earnings power. They expect earnings to rise 21% this year over last to $1.68 a share and move up 9% next year.

U.S prosecutors are seeking permission from a Chicago court to seize almost $17 million USin assets belonging to Conrad Black andtwo former Hollinger executives.

In documents filedMonday in Chicago, U.S. prosecutors claim Black, Peter Atkinson and Jack Boultbee illegally profited from the Hollinger non-compete swindle to the tune of $16.9 million USdollars. They’re asking the court to force the men to givethe moneyback. Conrad Black, seen leaving court on Aug. 1, could lose his Palm Beach, Fla. home if U.S. prosecutors successfully seize almost $17 million of his and his associates’ assets.
(Jerry Lai/Associated Press)

Black, once the head of the Hollinger newspaper empire that stretched around the world, was convicted of three counts of fraud. Boultbee, Atkinson and former Hollinger International general counsel Mark Kipnis were also convicted of three counts of fraud involving the same transactions.

Thecourt filing argues that non-compete funds belonging to Hollinger shareholders went to Black and that Black spent the money on jewelry for his wife and to make improvements on their homes in New York and Palm Beach.

Prosecutors say some or all of the money used to buy or improve these assets are “criminal proceeds” from the Hollinger fraud.

This means Black couldlose his lavish oceanside mansion in Palm Beach, Fla., andthe money he was to have received from the sale of an apartment in New York.

It could even affect Black’s wife, Barbara Amiel Black, whomay have to give up the 26-carat diamond ring he gave herand an antique brooch.

Black was acquitted of nine of the 13 counts against him.

But prosecutors say it doesn’t matter if the illegal money comingled with legitimate money it all becomes forfeitable.

The prosecutors’ filing argues “courts have repeatedly recognized that a forfeiture judgment can and should include the proceeds of the entire scheme, regardless of whether the jury has acquitted the defendants of some counts within that scheme.”

Black’s legal team is preparing appeals of the four counts on which he was convicted. With files from the Canadian Press

Are business-to-business Internet services back?

B2B Internet HOLDRs () seems to make that case as it gained 21.1% for the month through Sept. 13, according to Lipper data.

But its sterling performance doesn’t show that it tracks only four stocks and as such is more volatile.

During the Internet boom, “B2B” was hot. But since then, most of the companies were bought out or went bankrupt.

The stocks in the exchange traded fund are CheckFree Corporation, () Ariba Inc., () Internet Capital Group () and VerticalNet. ()

During the course of the year the ETF’s share closing price has been as high as 2.39 and as low as 1.82.

At the end of July when the major market indexes all took a tumble, B2B Internet HOLDRs went with them but the fall was much worse.

Finding A Bottom

Going into July 19, the ETF was at 2.32. By the end of the day it had dropped on extremely heavy volume to 1.94 before settling at 2.00.

By Aug. 1, it had bottomed out at 1.84. The total loss was 14.8% on the year.

By contrast, the S&P 500 had lost 5.6% between its peak July 19 and Aug. 1 and gained 3.3% for the year, despite the late-July swoon.

When B2B Internet came back, it nearly reached its old price level, gapping up from 1.84 to 2.20 on Aug. 2. After that, it made relatively steady gains going into September. The ETF closed at 2.24 Thursday.

CheckFree is the best-performing stock of the group. It started the year at about 40 and closed Thursday at 46.36, a 16% gain.

It gapped up Aug. 2 in the wake of the announcement that Fiserv () would buy it for $4.4 billion, and has traded between 44 and 47 since then.

CheckFree has an IBD Composite Rating of 93 and a Relative Strength Rating of 85.

Back And Forth

Ariba has been a volatile stock, breaking through its 10-week moving average a number of times over the past several months.

It has traded between 7.50 and 11.08 since the start of the year. Earnings growth has been inconsistent, ranging from 1,000% in the third quarter of 2005 to -33% in the third quarter of this year.

The stock has a Relative Price Strength of 74 and closed Thursday at 9.75. It has shown some upside in the wake of narrowing its third-quarter losses.

Internet Capital Group, like Ariba, has broken through its moving average line several times and is nearly flat for the year, closing Thursday at 10.89. It began the year at 10.26.

Its IBD SmartSelect Composite Rating is 43, in part reflecting third-quarter sales that were 22% lower than a year before.

VerticalNet started the year at 5.36 and stayed on a steady slide until it bottomed out in April and May.

BEIJING (XFN-ASIA) - The central bank has set the yuan central parity rate at 7.7453 to the dollar, according to the China Foreign Exchange Trading System.

The rate, published on the official Chinamoney website (www.chinamoney.com.cn), compares with the midpoint of 7.7472 set in the previous trading day.

The People’s Bank of China (PBoC) started setting a daily central parity rate on Jan 4, 2006.

On July 21, 2005, China freed the yuan from its long-standing peg to the dollar in favor of a trade-weighted basket of currencies, and allowed the local unit to appreciate by 2.1 pct.

The PBoC allows a trading band of 0.3 pct on either side of the central parity rate.

zachary.wei@xfn.com

For more information and to contact AFX: www.afxnews.com and www.afxpress.com

Earnings season gets underwayforCanada’s big banks on Thursday, but investors and analysts are likely to be more interested in how much exposure the banks have to fallout from the troubled U.S. subprime mortgage market.

Bank Q3 earnings per share
Bank Q3 ‘07 (avg. forecast) Q3 ‘06 (actual)
TD Bank $1.36 $1.21
Royal Bank $1.03 $0.91
BMO $1.38 $1.30
Scotiabank $1.00 $0.88
CIBC $1.94 $1.70
National Bank $1.35 $1.25
Source: Thomson Financial

Of the big six banks, only CIBC has revealed the specifics. Last week, it announced it wouldtake a $290-million hit ($190 million after tax) to its third-quarter earnings from two types of U.S. mortgage-related securities collateralized debt obligations (CDOs) and residential mortgage-backed securities (RMBS) inits structured credit business.

That exposure was far less thansomerumours that had been circulating in the market.

CIBC also pre-announced that its Q3 profits would be about $2.30 a share handily beating analysts’ forecasts, which last week called for earnings per share of about$1.92, on average.CIBC formally releases its Q3 results on Aug. 30.

The other banks are widely expected to report minimal direct exposure to the U.S. subprime mess.

Bank stocks led the market down last week, as the worry over the deteriorating U.S. mortgage market sparked turmoil in the credit market.

Bank stockshave recovered this week as the U.S. Federal Reserve cut its discount rate by half a percentage point and calm appeared to return to the credit market.

But the share prices of all six banks are still down year-to-date, while the broader S&P/TSX composite index was up about 4.5 per cent so far this year.

The banks are expected to report higher Q3 earnings and analysts expect several to boost their dividends.

“We have reduced several [earnings per share] forecasts but still expect average growth of 10 per cent in [the 2007 fiscal year] and six per cent in[2008],” said Desjardins Securities analyst Michael Goldberg.

TD is the first bank to report earnings. It releases its report and outlook on Thursday. Royal Bank follows on Friday. BMO and Scotiabank report on Tuesday, while CIBC and National Bank wind things up on Thursday.