Friday, January 19, 2007

Citigroup Dividend Announcement Strategy

Citigroup (NYSE:C) announces dividends payable 35 days in the future. Many publicly traded companies do this. I have just been waiting for a big one to make the point. In an age when billions of dollars of payments and settlements are made on a daily basis many companies announce dividends that are payable well into the future. Citigroup certainly has the wherewithal to effect instantaneous settlement if it so chooses.

Share prices will now reflect declared but unpaid dividends. Trading before the ex dividend date is problematic. The question becomes does the stock price reflect all the market data (good and bad) or is it propped up by the short-term dividend consideration. Once the dividend is paid does the market look at bad news previously announced and considers it fully discounted.

Governance Kudo’s to Citigroup as they did declare the dividend after the earnings were released as opposed to companies who declare dividends well before earnings are actually released.

The obvious and easy solution to implement is once a dividend is declared the record date should be the same date and the payment date is five business days thereafter. Shareholders who are dividend oriented receive the funds sooner. Frothy traders have an incredibly small window to muck around with.

Thursday, January 18, 2007

Harley Davidson's Ticking Time Bomb

Harley Davidson Inc (NYSE:HOG) announced some great Q4 news. Revenues are up 11.9%. Net Income is up 9.7% indicating some corporate friction eating the 2.2% differential. There is no question that the client base loves them and that the employees and dealers are more than engaged. But…

Post Retirement benefits show up on the balance sheet at approximately $210 million. This is triple last years comparable of approximately $61 million. Many companies carry the ticking time bomb and HOG needs to start addressing (funding) the problem. As it now stands these deferred problems would eat approximately one quarter of earnings.

In the meantime the dividend has been increased and a share repurchase program is well underway. (The Q4 repurchase levels clocked in at approximately $151 million). Corporate liquidity has tightened as a very significant portion of finance debt has moved into the current category.

The open road beckons but if this continues HOG will have to pull over for unforeseen maintenance.

Wednesday, January 17, 2007

Ericsson or Motorola?

LM Ericsson Telephone (NASDAQ:ERIC) reported excellent results proving that compelling products motivate the consumer to buy. In an almost mirror image report when compared to Motorola (NYSE:MOT), Ericsson reported sales and unit growth at double the global market growth rate. Most importantly they have improved their margins.

Shareholders have been rewarded with 144% increase in pre-tax income. On this basis the company believes it has outperformed the market during the quarter, gaining around 1% of market share sequentially, to achieve a global market share of approximately 9% during Q4.

“Our target is to become one of the top three players in the industry, and the momentum we established in 2006 makes this an achievable ambition," said Miles Flint, President of Sony Ericsson.

Leaving aside the iphone issue, which has many features that may be replicated in other formats, the question of consolidation rears its head. If Ericsson develops positive momentum will Motorola recover and become a more robust competitor? Probably not. Watch for Motorola to stealth abandon certain segments and fight for what they perceive to be key markets.

The tipping point may have already been achieved as Ericsson has increasing margins and strength in Asia Pacific, Latin America and Europe. Motorola has problems in these markets and experienced adverse geographical product mix.

Tuesday, January 16, 2007

LG Philips Out of Options

LG.Philips LCD (NYSE:LPL) released disappointing results for Q4. Sales were up 11% but net income down approximately 50% from Q3 and comparable last Q4. Management was shuffled in Dec. (Always an excellent sign of disappointing results). New management is making promises about improvements but losses for two more quarters are widely accepted as inevitable.

Never mind about the existing products. The industry always travels the highway to hell by rapidly commoditizing anything they become involved in. LG has lost this round. It is time to move on to the next significant product or enhancement. What is in the lab? Not much. Therefore acquisition is the only way. The stock trades near its 52 week low. Q4 EBITDA is up 89% from Q3. Some are critical that they are not adequately investing. Cash and equivalents have doubled. Long-term debt is down 3%. The signs point to cash acquisitions. Short list candidates please report to

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South Korea
Phone: 82 2 3777 1114
Fax: 82 2 3777 3400

Monday, January 15, 2007

Executive Compensation Question for PCAOB

Senior level executive compensation has become problematic and controversial. Many exit packages become cause celebre due to their size. Essentially this means that the investing public at large is not truly aware of the cost of the golden parachute. Annual proxy statements may outline the mechanics of the various compensation formulae. Anecdotal evidence would suggest dissatisfaction with the technique.

Assuming that transparency allows for better investing decisions why not elevate the disclosure to true foot note status with an actual real number quarterly calculation indicating what the cost would be if someone is bought out of his or her contract for whatever reason.

This would allow the investor to monitor what they are actually paying. The contingent liability would be identified. Naturally it would also potentially focus scrutiny and debate on the value proposition of any particular arrangement. Clarity would be greatly served.