Market Talk

(Newswires’ telecom reporter Roger Cheng penned the following.)

T-Mobile USA is in a load of trouble.

The fourth-largest U.S. wireless carrier by subscriber base has apparently hit a wall with growth. The first quarter is usually a rough one for the national carriers, as customers in recent years have shifted away from pricier contracts and toward less expensive prepaid services. But T-Mobile saw its growth on both ends falter, suggesting it is having trouble keeping pace at all levels of the wireless business.

In the first quarter, T-Mobile USA lost 118,000 net contract customers, consistent with recent losses, but a reversal of the 160,000 additions seen a year ago. The real concern stems from the prepaid side. It only added 41,000 customers, down 92% from the fourth quarter and 83% from a year ago. The startling drop in prepaid customers — at a time when the other prepaid providers showed impressive growth — illustrates the brutal competitive environment. With T-Mobile USA at the short end of it.

Even Sprint Nextel Corp., which can’t reverse the loss of its most lucrative contract customers, can point to the prepaid side with success. The company purchased Virgin Mobile USA to double down on the low end, and the strategy appears to be working. Verizon Wireless saw its own contract customer business declined, but has expanded its wholesale business to offset the slowdown, while AT&T Inc. has used emerging devices as another source of growth.
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- Palm’s headed toward a fork in the road as there’s a growing belief that its future contains only two paths: acquisition or insolvency, Jon Stokes writes at ars technica.

- Bronte Capital blogger John Hempton says BofA engaged in some shady accounting engineering during the boom, similar to Repo 105. But BofA defends its accounting procedures. “Efforts to manage the size of our balance sheet are routine and appropriate, and we believe our actions are consistent with all applicable accounting and legal requirements,” BofA tells ProPublica. It all sounds strikingly similar to what Ernst & Young recently said about Lehman, DealBook notes.

- “With all eyes on financial institutions, sovereign defaults, state bankruptcies and pension shortfalls, I’ll humbly submit reason #11 to be wary of this scary bull – unforeseen systemic risk emanating from quant models gone awry,” Todd Harrison says. “This is the first time in history 10-year interest rate swap spreads turned negative…I would venture to guess it wasn’t ‘modeled’ that way by the quant geeks.”

- GE shares up 24% this year and 80% over last 12 months. That’s noteworthy, especially since GE underperformed the broader market during much of the 2000s, Bespoke notes. “Is GE finally ready to lose the ‘dead money’ label?”

- New home sales hit a record low last month and months of supply rose to 9.2 months. “Obviously this is another extremely weak report,” Calculated Risk says.

- Blogosphere loves Sprint Nextel’s (S) new 4G phone – Evo. Engadget says it’s a “breathtaking” device. “Evo 4G is the best Android phone out there. It may even be the best phone, period,” Gizmodo adds.

- “The administration may be distancing itself from the Volcker Rules, but the same is not true of all Senators,” Simon Johnson says.

- Will Apple’s (AAPL) iPad live up to the hype? Kara Swisher discusses on WSJ’s Digits show.

- Bank of America (BAC) says it will make principal forgiveness a priority for certain subprime mortgages.

- Starbucks (SBUX) to offer its first-ever cash dividend and announced it will boost its stock-buyback plans.

Palm struggling to find its way.

So much for all the hype surrounding Palm last year.

The smart-phone maker dealt a big blow to investors today, slashing revenue guidance way below analysts’ expectations and acknowledging its devices aren’t selling as well as it expected. Shares plunged.

From WSJ:

Palm rolled out its new Pre and Pixi phones last year in an attempt to regain ground lost to Apple Inc.’s iPhone and Research In Motion Inc.’s BlackBerry. While the phones have won praise from reviewers, sales have stalled amid tough competition, heavy marketing support for more popular phones by the top two U.S. wireless carriers, and a dearth of “apps,” the third-party programs and games that have driven much of the appetite for smart phones.

The company said Thursday wireless carriers are ordering fewer of the phones than expected and are deferring orders they have made to future periods. As a result, Palm said its revenue for the fiscal year ending in May will be “well below” the $1.6 billion to $1.8 billion it had forecast. The company’s shares dropped about 15%.

“Driving broad consumer adoption of Palm products is taking longer than we anticipated,” Chief Executive Jon Rubinstein said in a release.

Palm shares plunged $1.56, or19%, to $6.53, and is now trading at levels last seen in April 2009. The stock had a huge run-up last summer amid potential that the Pre could become an iPhone killer. Looks like those expectations may’ve been a bit premature.

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- It’s no coincidence the biggest banks are on pace to pay record bonuses. “How hard is it for any finance firm to make risk free money when they can borrow form the Federal Reserve at zero, and lend that same cash to the Treasury (by buying bonds) at 3%?” Barry Ritholtz ponders.

- Editor & Publisher finds a buyer, although editor Greg Mitchell is out of a job.

- Obama’s bank tax may prevent firms from over-expanding and taking on too much risk yet again. “It will be better than doing nothing at all,” Greg Mankiw says. James Kwak says the tax “isn’t nearly big enough.”

- The bank tax doesn’t create an incentive to lend. Or maybe it doesn’t have any effect on lending.

- Mark Thoma wonders if the bank tax will create a moral hazard problem. “The proposed financial crisis responsibility fee is a good first step, but much more is needed to try to prevent the next crisis, and to reduce the impact if a crisis hits despite our best efforts to prevent it,” he says.

- The market’s reaction to reports from Intel (INTC) and JPMorgan (JPM) suggest earnings season has gotten off to a slow start for stocks.

- Stocks are dropping and the news isn’t half-bad. Chad Brand says the markets have priced in good news.

- WSJ’s coverage of the Haiti earthquake.

- Sprint Nextel (S) and Verizon Wireless respond to surging text-message donations for Haiti victims.

- BofA says late payments on credit-card loans fell to lowest level in about a year.

- Gordon Gekko prepping to make his long-awaited return.

Newswires’ Roger Cheng reports:

The wireless carrier and its handset vendor partner finally confirmed yesterday the launch date and price for its much ballyhooed Pre, and as expected, it will launch on June 6 for $199. What’s missing is how they get to that price.

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