27 February, 2008

Apple Sends Out Invites for iPhone SDK Event March 6th

The long wait seems over for Apple iPhone fans. The Software Development Kit (SDK) for the iPhone and iPod Touch is just around the corner. MacRumors (Link) shows a copy of the invite Apple (AAPL) has sent to various press and bloggers detailing iPhone Software and its future.

The SDK was known to be coming but the caveat here is that there is also mention of various Enterprise tools coming as well. The rumors swirling around delays of the SDK can now be put to rest as Apple readies its campus for the Press Event.

On the heels of a refresh of the popular MacBook and MacBook Pros, this announcement will be happily accepted by Apple Investors.

Disclosure: Author is long AAPL

25 February, 2008

Stocks Rise to Start Week on Financial Optimism

Wall Street indices were headed higher to end the day Monday as bond insurers Ambac Financial (ABK) and MBIA (MBI) received affirmations of their ratings by Standard & Poor's. Having the credit crisis cripple bullish attitudes in the last few months today seemed like a sigh of relief more than anything. The next few weeks will be more telling if the major Financial firms can truly side step the lackluster "American Consumer"

MBIA rose almost 20%, while Ambac rose 15%. Other stocks making news today were Genentech (DNA) as it saw its Avastin breast cancer drug approved for further treatments by the FDA and Take Two Interactive (TTWO), makers of the Grand Theft Auto series of video games, which received a buyout offer of $2Billion by Electronic Arts (ERTS). Share of Take-Two jumped over 50% on the offer, which the company rejected based on future potential valuation.

19 February, 2008

Hewlett-Packard Quarterly Earnings Give New Shine to Tech Stocks

Hewlett-Packard (HPQ) had the world of Technology on its shoulders as the market closed Tuesday reporting its final 2007 numbers and gaving guidance for 2008. The all important US technology outlook was in many minds, yet HPQ delivered very well globally. Bullish guidance led by International sales gains powered the stock after-hours to its own set of gains.

Talk of US consumers being weaker, has been well known now from every other previously reporting Tech company but HP's claim that there is strong global marketplace out there gave Technology Traders some hope of continued growth going forward. PC shipments rose 23%, Servers and Storage 9% and the old faithful Printer business rose 4%. For total numbers, the company increased profits from $1.55Billion (55 cents a share) to $2.13Billion (80 cents a share). Driving this increase, was obviously the growth in shipments, but also favourable pricing on components and thus widening margins. The margin metric was one of the keys spurring after-hours buying of the stock.

Looking at HP's successes, one had to analyze what this means for technology. It's clear the marketplace is strong globally, even with weakening in the US, and as such it is the companies with big International operations that will be in the strongest positions. HP affirmed this and let Investors know that International Operations account for 69% of sales, meaning they'll whether those US economic blues much better than most.

Disclosure: Author does not own HPQ

Economy Problems, What Problems? Wal-Mart's Solid Earnings

On a trading day spurred by earnings reports and a spike in Energy prices, Wal-Mart (WMT) took center stage yet again. Wal-Mart reported earnings, and the numbers were well received on Wall Street. Even if US sales growth was only about 6% the rest of Wal-Mart's International Empire gave Investors plenty to smile about and bid up.

The results, an overall increase in profit of 4% and sales of 8%, not headline grabbing by themselves, but with as vast a global footprint as Wal-Mart, impressive nonetheless. The increasing International focus was crucial, making up 25% of income. The giant retailer produced income of $1.02/share, which was inline with analyst estimates even if top line revenue came in slightly below ($106.27Billion v $106.9Billion). Although company executives were less than enthralled at the economic proposition for consumers in the US, providing profit guidance for 2008 within the range of analysts certainly put some of the worst fears at ease.

Net sales in its International operations were the key drivers of growth with an 18% spike in sales. The highlight of these International successes came from its British grocer Asda. Asda exceeded virtually all forecasts for 2007 and showed the strong diversity, especially abroad of the Wal-Mart ever-extending reach. Seems like no matter what the economic picture is, low prices will attract consumers. Wal-Mart seems to be getting back to this core motto, which is something seen very favourably by Investors.

For the year, the US operations still weigh heavily on the bottom line as US sales in 2007 accounted for $240Billion while International sales were only $90Billion. However the shift in focus and growth will be on the International stage and Wal-Mart is too big of a player to let itself be handcuffed by weakening economic metrics at home.

Say what you will about boring old Wal-Mart as a stock, but it has held up and is relatively at the same point it was a year ago, while still paying out 22 cents a quarter. It isn't too bad, but the yield at under 2% certainly has room to grow. Yes it is a Market Place Behemoth, a retailer with a 200Billion market cap, but if there's something safe to own, with great International potential upside, Wal-Mart would be a safe bet.

Disclosure: Author does not own WMT

14 February, 2008

Diageo Increases Brand Awareness and Sales, Proves Alcohol Sells despite Economy

The world largest alcohol distributor, Diageo (DEO) reported stellar 2nd half of last year earnings and revenue numbers. The maker of Smirnoff Vodka and Johnnie Walker Scotch showed results of $1.9Billion in profit and reiterated full year guidance despite what is seen as uneven economic conditions in its largest market, the US.

The numbers overall represented 9% growth and guidance kept the company on pace for a further 9% in organic growth throughout 2008. Sales were up over 6% to $8.4Billion. North American results spoke for themselves for the company, 8% growth, on strong sales of Johnnie Walker, Smirnoff and Captain Morgan. Despite the weakening US economy, Diageo put the pedal to the metal in advertising, increasing spending in that area. This clearly worked, creating far more brand awareness than in previous periods. Diageo is also trying to expand its line-up of liquor offerings, after deciding not to go after Absolut Vodka, the company purchased a 50% stake in Ketel Vodka.

The real successes came Internationally, with growth rates of 20% and 16% for profits and revenue respectively. Investors were very satisfied with the quarter and the guidance, sending shares up 4% on the day. The company is by far the world leader in Alcohol and this is another chance to snap up shares relatively cheaply. A P/E ratio in the mid to high teens for this Industry leader is more than fair and with a dividend yield approaching 4% it screams Buy, especially when considering the strong International and Emerging Markets push that Diageo is undertaking.

The fact of the matter is, Alcohol sells despite economic downturns or slowdowns. When it comes to safe havens, the gurus of Investing always talk about the Consumer stocks that will never go away, but Alcohol is and has proven once again it is one of the strongest selling consumables on the planet. And that is something worth Investing in.

Disclosure: Author owns DEO

13 February, 2008

Rise in Retail Sales Causes Market Rally

The Dow Jones closed up almost 180 points and the Nasdaq added over 50 points on a day where optimism ruled The Street. January retail sales data posted a 0.3% rise after the December metric declined. Analysts expected a further decline in January also.

Leading the way was Technology and Energy stocks. Traders are weighing the recent market weakness in the Tech sector and trying to time the "bottom" in Growth-Tech. The situation in Venezuela is putting pressue on Energy and led to Oil rising to $93. The country said that it would not sell Exxon Mobil (XOM), America's Largest Company.

05 February, 2008

Service sector reports Contraction, Ignites Recession fears

Markets around North America tumbled Tuesday as an unexpected hit in the Services sector drove stocks to a large sell-off. The Dow, Nasdaq and S&P were all off about 3% while the Canadian TSX slid over 2.5%. Investors re-kindled recession fears on the news of a contracting indicator of service sector strength, and on that basis sold off stocks broadly.

The research metric for the service sector, which includes various business types, from retail to banking to dining, is measured by an index from the Institute for Supply Management. It read below 50, signifying a contraction. For the Bulls out there, contraction is a scary word in this scenario as it means No-Growth, and No-Growth is what sells off stocks these days.

The full effects of the Federal Reserve's rate cuts have not yet been seen in these metrics so economists are hopeful for a return to growth reading next month. Until then, the Recession word will be on more minds once again.

NYSE Euronext (NYX) was under immense selling pressure today, falling 14% on its quarterly earnings report. The exchange reported $0.59/share in earnings versus $0.29/share a year ago. These numbers including now the combination of Euronext's European trading operations were roughly in line with expectations. The company said its on track to secure more cost savings over the next 2 years as more synergies with Euronext are realized. This would equate to as much as $250Million by 2010. With full year profits for 2007 hitting over $600Million, you can see these cost savings will be significant drivers of profit growth in the future.

There is concern that NYX is losing share of its own market trading to Nasdaq and that it must drive deeply into the ever expanding, and more lucrative futures and options trading markets. Priority number 1 for the company these days is multi-faceted. It must stem the tide of market share loss, even though it is producing record trading volume levels of its own, while also looking for strategic investments. With Nymex (NMX) being the target of a Chicago Mercantile Exchange (CME) offer of $11Billion, the pressure is on for NYSE to look to consolidate more worldwide trading houses.

Disclosure: Author is long NYX

01 February, 2008

Microsoft shows $44Billion, eyes Yahoo, to take on Google

On the morning of a rare Google (GOOG) earnings miss, the world's largest software company, Microsoft (MSFT), is taking full advantage of the negativity and swinging its own news story. The Seattle company disclosed to the public that it has offered $31/share ($44Billion) to purchase Yahoo! (YHOO). This combined Microsoft Internet division would be a stronger second place competitor to Google's search and advertising dominance.

Google reportedly owns about 60% of search share and almost 70% of search advertising dollars, with competitors, mainly Yahoo and Microsoft, claiming the remaining scraps. Mind you those scraps, can amount to plenty in a business sector expected to expand from $40Billion to $80Billion in value in the coming years. The scope, breadth and quality of advertising is increasing on the Internet as its ease of use, ease of tracking, and ROI effectiveness become clearler to companies all over the world. While still a small piece of the overall advertising pie, the Internet provides the most complete customer profile available for any form of advertising.

Now this is a point of contention, the whole privacy issue, but the fact remains that most things on the Internet can be tracked, and the more advertisers and advertising platforms know about their users, the more effective the ads can be. Google knows this very well, hence their dominant position! Microsoft and Yahoo know this as well but they've failed to make any strides on their own. Perhaps the combined division can put a dent in Google's cash-hording fortress. (At last check Google as a business is still extremely young and has almost $20Billion in the bank)

Let's hope the deal goes through, for Yahoo investors sake anyway. The stock has been beaten up of late falling to its lowest level in several years at $18 and change per share. Microsoft's offer represents an over 60% premium from Yahoo's closing price yesterday. But before we tout this as the resurrgence of Microsoft's Internet division (A business line that is still bleeding losses year after year), lets expand on thier strategy and ambitions here.

First, its clear Microsoft wants to be in the Internet Advertising space, and be successful at it. It's the future of advertising and its extremely lucrative and high margin. Secondly, Yahoo's the only big player with a decent following and even a shot at dethroning Google. It makes sense right, to just combine 2nd and 3rd place, and eventually maybe they'll cause a stir. Unfortunately the gold medalist here right now is the behemoth known as Google. And unless Google's been mysteriously taking Human Growth Hormone they wont topple themselves off the podium anytime soon.

There's plenty of problems I see with this deal, and not even first on my list is the sheer smell of desperation on Microsoft's part to completely over pay to get this deal done. Yes it's true, they tried to talk to Yahoo a year ago and were told to go home. So they came back, with thicker pockets and the attitude of "No, is unacceptable". Granted this deal would still have to pass through all sorts of regulatory hurdles but that shouldn't cause too much of a delay. The biggest problem is SYNERGY. I would imagine lots of Yahooligans are going to be out of work, unfortunately. Do you think corporate cultures easily come together. Not a chance. It takes long, hard work to make even the simpliest teams fit together, let alone putting a company like Yahoo, with over 11,000 employees, inside of Microsoft.

Interestingly enough, it wasn't too long ago that Microsoft head Steve Balmer was talking up a storm on how Microsoft's strategy will be to make smaller niche acquitions and develope integrated web services and all that jazz. Now it seems this is a complete shift in the opposite direction. The thing you know about Microsoft though, is that when they smell blood, and trust me, Yahoo is bleeding mercilessly, they go for the kill. In the end Yahoo shareholders must be smiling because they have just been bailed out of a 50% decline in their company stock.

Now there's been big time deals that have completely blown up when firms weren't in the same industry. AOL-Time Warner come to mind perhaps? But even within the same industry, it doesn't always work. Diamler-Chrysler? Can you say disaster? Now I'm optimistic that if Yahoo accepts, and it most likely will, there will be better times ahead for both companies in the Internet space. Micrsoft's platform for advertising has failed to excite anyone, and Yahoo's Panama Ad Center was seen to be its saviour once. Perhaps together they can work out the kinks and actually leverage all those millions of unused hotmail and yahoo mail accounts. Yahoo still is a giant Internet portal with lots of user traffic, and with that comes great potential. The key is Clear Focus and Strategy and perhaps that's something that Microsoft can bring to the table for a scrambling Yahoo and its convulated Internet vision. How long this will take to integrate and fulfill? Not even the experts know that, but trust me, it will not be soon.

On the upside, we know Microsoft is loaded and extremely patient when it comes to new initiatives. They can lose money for years to try and make a footprint. Let's just hope for Microsoft shareholders, that this isn't looked back on in history as a major stumble in its quest for the Internet. Microsoft's Ad platform has a long way to go but perhaps with Yahoo's profitable help they can get on track and mount a serious offensive on the next phase of the Internet business.

Disclosure: Author is long GOOG