Friday, September 15, 2006

Capital One Marketing Cost Spiral

Capital One Financial Corporation (NYSE: COF) 2006 Q2 marketing expenses increased $79.7 million to $356.7 million from $277.0 million in the Q2 2005. This is a huge increase. No real info on the split between deposits and loan acquisition costs. The stock has suffered. But what signs may be found that the worst is behind? If the economy worsens and you have to spend radically more money to find and retain customers the prognosis becomes poor. Management does not seem to be covering these issues.

Adobe's New Liability Category

Adobe Systems (Nasdaq:ADBE) reported financial results for Q3 ending Sep 1. While the conference call (transcripts available courtesy of Seeking Alpha) focused on earnings you have to wonder about the new liability category entitled accrued restructuring. Appearing in both short and long term liabilities the obligation now amounts to just under $37 million. Not insignificant when you realize this amount exceeds 10% of the first nine months of net income. Restructuring costs are notoriously notorious. Is this the Trojan horse? Will this one bite Adobe and burn shareholder values? Management has conveniently avoided substantive explanations. The closest that Randy Furr the EVP and CFO came to it was this comment at the beginning “ Before I review our Q3 financial results, I would like to point out that we are not providing combined year-ago Adobe and Macromedia results for comparison purposes. As we previously stated, Adobe and Macromedia reported the results on different fiscal quarters, which limits our ability to provide accurate comparisons. Therefore, today we will compare our Q3 fiscal 2006 financial results to our Q2 fiscal 2006 results, as well as with pre-acquisition Adobe only results for Q3 in fiscal 2005”. None of the analysts picked up on this either. What outs and backdoors will this provide.

Thursday, September 14, 2006

Estee Lauder's Wrist Slap

Estee Lauder (NYSE:EL) announced marginally reduced bonuses for William and Leonard Lauder. (The two big guys at Estee) The reduced bonuses amount to a mild slap on the wrist for seriously declining performance. Do they own so much stock that the Board cannot objectively provide the necessary direction. When the tide is rising all looks well. Will corporate governance issues slip as Estee has performance problems.

Wednesday, September 13, 2006

Gamestop Weasel Sentence

Gamestop (NYSE:GME) had an interesting weasel sentence in their last quarters earnings release. “Note that guidance does not include merger costs related to the business combination, which we project could range from $0.03 to $0.04 per diluted share for fiscal 2006.” This immediately followed a statement “that guidance includes projected stock-based compensation expenses of $0.17 per diluted share for fiscal 2006.” Many companies like to leave an out and blame performance on un-anticipated merger costs. This usually covers a wide range of sins.

Tuesday, September 12, 2006

Seagate Leadership Shuffle

Seagate Technology (NYSE: STX) shuffles executive appointments without any real public comment about its leadership strategy. Seagate recently announced that its Chief Operating Officer, Dave Wickersham, has assumed the additional role of company President and will continue to report directly to Chief Executive Officer, Bill Watkins. Previously, Watkins who is also a Director on the company’s board held the position of president. Sounds like the power structure has not changed so why bother. Then again there is the subject of why the CEO is just a board member.

Monday, September 11, 2006

HP Board Continues?

Hewlett Packard (NYSE:HPQ) board met for several hours on Sunday. They issued a no statement press release and indicated that they will continue meeting on Monday. The legal community is abuzz with the concept of "pretexting" as a potential justification for electronic surveillance. Some claim there is justification under securities law. Others claim there is no justification under criminal law. Investors should conclude there is no justification for this kind of damaging leadership. You now have the beginnings of paralysis in ther executive suite. Watch for blizzards of class action on any stumbles. Even if they beat this legally do you trust these guys with the future?

Weekend Follies (Sep 9-10)

The following companies release information at odd-ball hours over the weekend when investors are typically not looking at their screens. Basically they are sneaking news out and hoping to call it disclosure. The culprits are: Hewlett Packard (NYSE:HPQ), Zapata Corp (NYSE:ZAP), Omega Protein Corporation (NYSE:OME), ADVENTRX Pharmaceuticals (AMEX:ANX),