Money for Nothing (I want my Google TV)

No, the Internet Giant is not changing the vibe of the Dire Straits rock classic, but it is intent on being a new force in Television. At Google's (GOOG) I/O Conference today, the company announced its foray into the small screen world with Google TV. An eco-system of Internet enabled Television and Set-top boxes running the Android operating system and Chrome web browser.

Now, unlike previous Google announcements or releases, which many times reduce themselves to the happy-go-lucky whims and musings of the techie elite, i.e. lack any foundations in the business realm, this one is different.

With Android taking a strong position in the smartphone race, adding handsets and carriers every calendar quarter, and Chrome becoming the fastest growing browser on the Internet today, Google's in a position to bring partners on board with compelling offerings. Add to that, Google's ability to target advertising, and its willingness to share the honey pot, it's no wonder some big names jumped into Google TV. Sharing the stage with Google today were Sony (SNE), Intel (INTC), Adobe (ADBE), Logitech (LOGI), Dish Network (DISH) & Best Buy (BBY).

What Google TV is trying to be, is a solution to a problem that has plagued the Television world since the invention of the TV Guide. Program interfaces are and have always been atrocious, to a point where some cable system guides are almost unusable. When guides were only in print, hard to ask for much from a little magazine, but in the digital age to still be having this software problem is a black eye for the technology staples that make up the Cable & Satellite Industry.

Cell Phone interfaces had much the same problem, because there never was a need to innovate, and customers just accepted that using a phone was awful. It took Apple's (AAPL) iPhone to showcase what couple be possible when something is designed with the user in mind. And from that Phoenix, have risen many clones and competitors, the best of which arguably is Google's Android. By porting Android into Integrated Televisions from Sony and set top boxes from Dish and Logitech, all running on Intel's Atom line of processors, the goal is to move TV forward for the new Internet & Application age of today. Apple's iTunes-linking set top product AppleTV has been largely overshadowed at the company by the innovation and successes within the iPhone and iPad businesses, which has opened up a first-mover advantage and opportunity here for Google.

With Android being the platform for Google TV, the App Marketplace is also available and its library of 50,000 applications. Granted going from tiny cell screen to HDTV will likely require a majority of those apps to be re-written, but that base of developers is a key for the platform to gain traction, it'll also help if Sony sells a boat load of TVs.

A few key tidbits of the Google TV system include:
-> Ability to search across television guides and the Internet for television shows and films. This includes PVR functionality for future programming.

-> Ability to have television and the web in picture in picture mode, allowing Sports fans to look up box scores as the game is in progress.

-> Inclusion of popular social networking applications like Twitter or Facebook streams for currently watched programming.

-> Android devices can be used as remote controls.

-> On the fly Closed Caption Translation using Google's Translate engines.

Gizmodo has had coverage of the entire presentation here. (Link)

All in all an announcement is plenty of potential, a reasonable time line to market and a step in the right direction for the future of Television technology. Oh, and for Google investors, an advertising opportunity in that tiny sliver of the market, Television.

Disclosure: Author is long GOOG, AAPL

Electronics a tough sell yet Best Buy stands by forecast

Oh to be a Electronics Retailer during a recession, roughly as sought-after a profession as 'Big 3 personal flight crew', after that first trip to Washington. But Best Buy (BBY) is holding on in the midst of turbulence while its main competitor has all but bowed out. With Circuit City Stores (CCTYQ) trading OTC and trying to stay afloat, BBY would seem to be serving for the match. If only customers would come to the stores and buy that is.

With profits down 77% year over year in the latest quarter it appears on the surface Best Buy is facing some troubles of its own. But the company is being run effectively despite consumer spending reports that are on record as the worst since the early 30s.

So to the numbers: Quarterly profits of $0.13/share ($0.35/share excluding special items) were better than expected. Analysts had the numbers pinned at $0.24/share excluding special items. Revenue also topped expectations at $11.5Billion vs. $11Billion estimated. For retailers the all important same-store-sales metric was watched closely and Best Buy numbers fell about 6% for stores open longer than 1 year. Now in this environment, a 6% drop has to be put in perspective and seen as a slight positive. Overseas sales rose slightly, fueled by growth in mobile phones. So, somewhere, somethings, have people buying. Nonetheless Best Buy is taking a cost cutting approach to share price appreciation, offering buyouts to thousands of employees and slowing store growth in North America and China. Best Buy hopes to cut capital costs by 50% over next year. Certainly ambitious!

For those workers who don't accept the buyouts, there will certainly be job cuts ahead at Best Buy Corporate. The outlook is much brighter for shareholders though, as cost cuts will certainly help profitability in a tough 2009 and the fact that Best Buy kept its lowered profit forecast in tact over the Christmas helped matters as well.

The company expects to meet its range of $2.30-$2.90 (a wide range to be sure for the year through February) and falls in line with analyst estimates of $2.47 for the year. The positives in this report propelled shares higher by $2.50 at the end, and the Fed rate-cut fueled shares to close higher by 18% ($4.21/share). This also notched the BBY P/E ratio to near 9, which is reasonable in most respects but perhaps not in this climate.

Nonetheless, the retailer should trade in a P/E range of high single-low double digits going into 2009, so while today's rise (and its recent climb from $17) makes Best Buy a less attractive on a valuation basis, the competitive landscape clearly leans heavily towards BBY, making it an attractive hold for when America rises from the consumer spending blues.

Those on the fence, it will likely be available for the mid 20s soon, which makes it a steal for the next year and a half.

Disclosure: Author is long BBY

Wal-Mart Optimistic on Economy as others slash outlooks

The clout and reputation of Wal-Mart (WMT) precedes it even in the most trying consumer and economic times. Not only is WMT the only component of the Dow to be in positive territory for the year it is one of those American bedrock companies that span the nation and its shopping consciousness.

With Wal-Mart reporting an almost 10% rise in year over year profit for the quarter it is becoming crystal clear that even a tight-wallet shopper needs the inexpensive wares provided by his or hers neighbourhood Sam's mega-store. Now not totally economy-proof, Wal-Mart was forced to make some forecasting concessions itself, however nothing in the drastic realm of Electronics retailer Best-Buy (BBY) from just a day ago.

Wal-Mart for the quarter earned $0.80/share ($0.77/share excluding items) compared to analyst expectations of $0.76/share. In the upcoming quarter Wal-Mart forecasts called for profit from $1.03-$1.07 per share, which came slightly below analysts average estimates of $1.11. However CEO Lee Scott's recorded comments of being "optimistic for the holidays" leads Investors to believe that the company banks on its pricing power and essential shopping wares as a way to flatten out the economic downturn.

Of course it is true that people will still have to buy all sorts of things! The positive for Wal-Mart is that it sells just about everything. As Best-Buy's economic comments put a damper on the future of electronic consumer spending, citing a "seismic" downturn of the consumer, no such epic troubles seem ahead for Wal-Mart stores across the country and abroad. Granted in trying times, shoppers on a whole may stall big-ticket item purchases but Wal-Mart's base of essential needs products and cost-effective middle-wares will likely attract shoppers who scale back from more boutique retailers.

While Wal-Mart may seem like one of those boring stocks, in this type of market boring is productive. A dividend yield of about 2% is sombering as other attractive companies being taken down by the stock market sell-off sit at yields in excess of 5-6%. The fact remains that Wal-Mart has been steady all year and will likely continue to be steady in the year to come.

View the full WMT chart at Wikinvest

Call it boring all you want, but in the down-turns its the tortoise that continues on less scathed.

Disclosure: Author is long BBY, holds no position in WMT

Apple eyes Successful Holiday Season with new Mac Notebooks

As per the norm, rumor-mills were ablaze with blurry photos, leaked specs and incredulous claims about Apple's (AAPL) upcoming surprises in the computer space. Just about a month after it refreshed its iPod line for the school and holiday seasons the Mac maker returns to the stage to unveil an entire new line of laptops, with enough bells and whistles and marketing glam to gleam into the eyes of affluent America regardless of those pesky "economic headaches".

Will it be enough to satisfy Investors and bring ever-increasing tight-wallet parents out of the woodwork and into Best Buy (BBY) or Apple retail stores?

The run-down of new products, in short prose will follow, as they'll cleverly be splashed across technology publications all day and likely all week. The important thing however is that Apple is using the rumored "Brick" design process to make cases for the entire laptop line. A process that is able to carve an aluminum case for each laptop out of a block of metal, saving all excess to be reused in the process at later stages, this is in fact not a wasteful process at all. Apple getting high environmental marks for its latest products is also a change for the company over the course of the last couple years. The new laptops also now have glass track-pads without individual buttons. A new feature of today's laptop line is that the glass track-pad acts as a button and introduce more multi-touch capabilities including 4 finger actions. Not to mention the innovation of having its Pro line of laptops driven by not 1 but 2 graphics cards, that can be turned on and off for better battery performance or better hardcore video performance.

But without further delay:
-> MacBook: Original White Model price drop to $999. Apple just barely entering the sub-$1000 market, it may not be enough to convince analysts but the $999 price point is nonetheless an actractive one for the core Apple market demographic and engaging those further beyond it.
-> Aluminum MacBook: In 2 configurations at $1299 and $1599
-> Refreshed MacBook Air: In 2 configurations with spec bumps at $1799 and $2499
-> Aluminum MacBook Pro: Multiple configurations for 15" and 17" models: 15" models in 2 configurations at $1999 and $2499
-> Apple also introduced a new 24" Display for $899

So, now that the current round of rumors may be put to rest, what does the future and the holiday season hold for Apple. By all accounts of the crowd at the notebook event, the reactions to the new laptops was very positive. Will the $999 MacBook continue to be a best-seller or will Apple have to dive deeper into netbook price territory?

It is my belief that Apple's brand has for years developed a premium stigma to it and that the design prowess of the company can not be underestimated. While other computer makers may struggle with economic conditions, putting pressure on margins, Apple's pressure is offset by its current target demographic, which mainly consists of youths with disposable cash and many parents of that youth segment. Apple made big points in its presentation today about its growth in the retail segment of the US and its market share gains across college campuses. This will resonate in the years to come as well as the short term. Of all those feeling the pressure of an economic slowdown the last truly feeling the pinch will be the more affluent and wealthy of which Apple demands a significant amount of technology/gadget attention with its iconic product line of iPods, iPhones and Macs.

That is not to say Apple shares wont feel the pressure, in fact Apple suffered as large a drop as any large tech company over the past month as fear of consumer spending shortages spread throughout markets. With Apple the volatility comes with the secrecy and the cult-like following. But markets, as forward-looking as they are generally aren't wrong for very long.

Apple is expected to reveal quarterly results on October 21st following a quarter mixed in terms of news coverage, events and economic activity. While it is a big back to school season for Apple at this time of year, analysts and Investors are fearful that the economic uncertainty facing the US could have had a significant impact on casual spending. Apple has proven to be recession-proof in the past but the company will have to prove itself again with results, and prove itself yet again with guidance that doesn't scare off the institutional buyers.

Till results are revealed, Analysts, Investors and Fan-Boys have a brand new slate of Apple laptops to go and check out at Apple stores all across the country.

Disclosure: Author owns AAPL.

Apple rides Strong Mac Computer Sales to earnings beat

Mac, iPod and iPhone maker Apple (AAPL) reported a very strong quarter for the 3 months ended March. The sheer numbers were staggering: $1.16/share in profit on $7.5Billion in revenues. This compares with analyst expectations of $1.06/share profits on $6.9Billion in revenue.

Apple beat on both the top and bottom line but Investors aren't yet sure where to go given guidance and a wavering US economy. Apple showed its ability to grow in tougher economic times due to their innovative products, brand value and successful retail integration. A year ago Apple earned $0.87, which represents year-over-year 33% growth on an EPS basis.

The big deal here, over 50% growth in Mac sales to almost 2.3Million units in the quarter. The quarter also included flat iPod unit sales of 10.6Million and rather strong iPhone sales of 1.7Million units. Margins were good for the company, albeit lower year-over-year, as memory prices continued to hit lows. The company guided for earnings of $1.00/share for the next quarter amid reassurances component costs will continue to be favourable.

News on the iPhone front? All those shortages we've been hearing about that led to speculation of an upcoming 3G model sooner as opposed to later? Seemed to be just that, shortages, due to higher than expected demand. Of course unlocking is a big deal and while the company is using the unlocking argument to peg worldwide demand, the sheer percentage of iPhones being bought to be unlocked has to be very high. While no numbers are given by the company, some outside analysis and reports have pegged unlocked devices as high as 30% of units.

The focus for analysts for this quarter were Macs and iPhones, and according to the earnings report, growth rates for both revenue streams are very high. Mac sales of almost 2.3Million units is very strong, coming close to the record sales number posted by the company for the previous Holiday quarter. Sales growth rates in all regions are strong and once again sales of Macs in Apple's retail stores, 50% of the time, went to first time Mac buyers. That old faithful Halo Effect at work once again.

On the iPhone front, the company has added some complications to revenue going forward due to accounting issues. The company will not recognize any revenue from new iPhone sales from after the iPhone 2.0 Software upgrade announcement until the software is delivered. Essentially meaning next quarter numbers for the company will include ZERO dollars in new iPhone revenue since the company expects to release the software near the end of June. Revenue that is deferred from previous iPhones sales will be included (as of the latest quarter deferred revenue stood at $1.9Billion). This will put some pressure on margins and the top line numbers when doing comparisons, but will add an additional bump to the following several quarters. The company will recognize this gap window on an adjusted basis for the remaining 2 years as with normal iPhone purchases. The company reiterated its internal goal of selling 10Million units in 2008 and their strategy of being in Asia this year.

On the retail side, Apple continues to be the best revenue per square foot retailer in the world. The company plans to open several high profile stores in the remainder of the year, and its "Store within a Store" concept and increased presence at Best Buy (BBY) stores has grown to 400 locations, with plans to expand into 600 as the end of the summer.

When all is said and done, it is another fantastic quarter for the Electronics maker. Analysts and traders are still trying to figure out where to go from here considering Apple's stock has grown from $120 to $160 in the past few weeks. However, without a shadow of a doubt, this company is continuing to grow, and grow dramatically, has some very exciting events and products in the pipeline, and has the potential to significantly expand market share in the Computer and Cellphone business segments. All signs that can be used to justify further share price gains throughout the year.

Oh and the company added about $1Billion in sheer cash, putting its war chest at about $19.5Billion. Not too shabby a rainy day fund I'd say.

Disclosure: Author owns AAPL

Update: April 24, 2008

Best Buy beats expectations, Outlook optimistic

Electronics retailer Best Buy (BBY) was in Wall Street's cross-hairs this morning and certainly had a tough act to follow. After the April Fools day 400 point rally in the Dow Jones, Best Buy was set to report its quarterly numbers and they turned out to be no joke indeed. In a start to the year pegged with Recession and Consumer Spending worries Best Buy reported profits of $1.71/share or $737Million.

That compared to last year's $1.55/share and $763Million. The big share repurchase program helped the numbers compare favourable year over year. Yes profit was down fractionally, but analysts were expecting even lower results with forecasts of $1.65/share earnings. Revenue came in above expectations also ($13.42Billion v $13.19Billion expected). Just goes to show that the consumer isn't dead just yet!

While 2008 may prove to be challenging in a tightening US economy, Best Buy provided some optimistic guidance numbers that pleases the analysts on Wall Street. The company gave a range of $3.25 to $3.40 per share in earnings on $43Billion to $44Billion in revenues. Analysts expected $3.31 on $43Billion in revenue. Not bad considering management basically came out and said that the year was as turbulent as any other they've ever seen. So anytime a company predicts a hard year but maintains almost 20% growth investors need to stand up and take notice. Especially when that company's shares currently price at a Forward P/E of just over 13. Meaning that the Price to Earnings Growth number stands at a tiny 0.66.

All those metrics point to Best Buy being a potential steal at these levels, and in fact Standard & Poors makes note that Best Buy is among the list of most undervalued growth names. However as all things in this marketplace, there's a downside. If the US economy declines further, devaluing the US dollar--in the face of quick-rising essential commodities, ala Oil--Best Buy, like most retailers will feel the shoppers cash-pinch. And with Best Buy essentially selling Non-Essentials, this type of economic outlook is management's worst fear.

At the end of the day though, if there's an electronics retailer to own it is the one that is wiping the floor with it's main competitor, namely Circuit City (CC), which has reported quarter after quarter of losses.

Disclosure: Author owns BBY

Buyers flock into the Markets as Fed Cuts Rates by 50 Basis Points

The moment the markets were waiting for arrived at last. The Federal Reserve Interest Rate decision. A decision that swung markets heavily into Bullish territory as Interest Rates were cut by a full half percentage point. The Dow finished higher by 336 points while the Nasdaq and S&P were higher by 70 and 43 points respectively. All accounting for gains of over 2.5%.

The morning was highlighted by positive earnings and guidance from Electronics Retailer Best Buy (BBY) and Investment Bank Lehman Brothers (LEH). Best Buy posted earnings of $0.50/share versus the expected $0.44/share and beat the top line Revenue expectations of $8.45Billion by posting a monster number of $8.75Billion. Best buy even strengthened and tightened its outlook for the full year giving the market something to cheer about.

Lehman Brothers admitted that losses from Mortgaged related investments hit earnings but it compensated by posting dramatic tradings gains which more than offset those losses. As such Lehman lifted the entire banking and investment banking industries pushing stock higher broadly, and lifting its own shares 10% in the process. With the Fed's announcement of the 50 basis point rate cut, stocks immediately flew higher and continued to rally towards the end of the day. The biggest investment banks, which report earnings in the near future used the Lehman numbers to push even higher.

Goldman Sachs (GS) made back $13 to break the $200 share price barrier, a gain of almost 7%, while Morgan Stanley (MS) gained almost 6%. Financials came back strong on the news as not only did the Fed cut the interest rate by .5% but also cut the discount rate by another .5%. This was seen as a tremendous positive on the financial sector and investors piled back into these stocks.

Apple (AAPL) made it official this morning that the iPhone was coming to the UK. It announced a partnership with O2 to be the exclusive carrier of iPhone in Britain. Shares were up slightly on the news but drifted with the market before taking off following the rate cut announcement.

While investors were cautious approaching the Fed meeting, there's reason to cheer and smile now! However, the drastic 50 basis point cut should be viewed with still some caution, as once the news sinks in will investors be reading too much into the actions of the Fed and their long term economic effects? Its hard to say at this juncture because the main goal here was to alleviate the pressure from the credit collapse and get people talking economic strength again and not recession. I for one think that having a 50 basis point cut splashed across front page newspapers all across the US will spur optimism and a renewed faith in economic well-being. This is the best thing the Fed could hope for, and its a lot better for the average Joe to be discussing strength rather than a possible oncoming recession.

With the Fed pointing the market in the right direction its time to look at Technology for the holidays and the upcoming earnings seasons. October will be a month worth watching as major names in Tech report earnings and give guidance for their holiday expectations. The guidance game will be one to watch intensely and if Best Buy has given any indication today its that it'll be a holiday filled with shoppers.

Disclosure: Author is long AAPL, BBY, GS