Friday, May 25, 2007

Dell Grasps Wal-Mart

Dell (NasdaqGS:DELL) will now sell computers through Wal-Mart (NYSE:WMT) Dell is proving to be a one trick pony whose day is over. Computer purchases are usually important decisions requiring substantial sales support. Wal-Mart does not have the skill or desire to be a knowledgeable sales support specialist. You do not go to Wal-Mart with questions. Their consumer electronics area has not done well in the past. Adding yesterdays star will not change this deficiency.

Dell made its bones by developing the new paradigm for PC distribution. It has been by passed by companies offering better products. Dell does not have a better product and probably will not come up with one. Tinkering with its distribution does not address the fundamental problem.

I fear for Dell
. It will make a few deals with large retailers and increase costs by attempting to customize for each retail chain. Then when customers look at Dell product right beside the competition and buy the better product Dell will realize how deep a hole they really are in.

Thursday, May 24, 2007

CN & CP Track Blocades

Canadian National (NYSE:CNI) and CP Rail (NYSE:CP) are facing a vexing problem. On June 29 many Aboriginal Bands are threatening to block rail lines that run through their lands. If enough lines are blocked the traffic disruptions will be significant.

Both rail companies have already had more than their fair share of problems resulting from union and labour difficulties with adverse consequences for investors. Many rail company customers are still experiencing logistical problems as their supply chains were broken.

Militant aboriginal leaders may be using the railways as a propaganda tool. Significant rail disruptions will cause a drop in public support among the general public for Aboriginal issues. In the meantime rail customers and investors will suffer as operations are threatened. Everyone claims support for early resolution but the problem continues to fester.

My personal take is that rail blockades will appear sporadically over the summer causing rail traffic disruptions. Desperate customers will conclude that railways are not sufficiently reliable and turn to trucking solutions. Not enough trucks you say. Why then are the teamsters actively lobbying congress to restrict Mexican trucks from entering the United States? Check out Manzanillo as a transportation hub.

A socio-political problem may just leech away much needed cargo from hardworking railroaders. Sorry life is tough all over!

Wednesday, May 23, 2007

Alcan Blows Off Alcoa

Alcan (NYSE:AL) has rejected Alcoa's (NYSE:AA) marriage proposal. There are claims that on the advice of high powered advisers the dowry is insufficient. In this instance the Alcan board made the correct move and wants to up the ante. In rejecting Alcoa's offer they included a rationale such as Alcoa having a fundamentally different approach to creating shareholder value. This is more of a corporate culture issue and should not be a significant factor in this deliberation.

The offer was bizarre in that Alcoa apparently had been having discussions which were sort of real but not official enough to warrant being considered a take-over. Sounds like it was more a corporate version of pestering. Closer to a awkward high school boy who cannot figure out how to ask a girl out for a date.

Alcoa's shareholders should be disturbed that their management group could not step up to the bat properly. Alcan's board even commented on the manner of Alcoa's behaviour. This may trigger some legal action as ego's and reputations are bruised.

In any event Alcoa's executives now have something to prove. They could not snare Alcan. What can they do? The industry grows and consolidates. Does Alcoa have a good seat for the future?

Tuesday, May 22, 2007

Dell Lenovo Acer Scramble For Relevancy

Dell (NASDAQGS:DELL) continues to stumble along and there is no sign of their return to world beater status. Lenovo (LNVGY.PK) and ACER (2353.TW) have exchanged the number 3 and number 4 positions.

While the respective press releases will spin the relative merits of the position changes the Asian boardrooms cannot be happy. They are not interested in lower tier status.

Everyone is showing up on everyone else's home turf with a cheap product designed to inflict financial pain first and meet end user requirements second.

If Dell continues to fail at crafting a compelling reason for continued investment watch for either Lenovo or Acer to take-over Dell. Enormous synergies and stopping the pain of hyper competitive price competition will make a great deal of sense for all involved.

Dell's stock is not really catching fire and the jury is still out on too many issues. Watch Dell's cash generation (if you can guess at the numbers). As cash generation slows panic will set in and the vultures will circle.

Monday, May 21, 2007

Hologic Swallows Cytyc

Hologic (NASDAQ:HOLX) swallows Cytyc (NASDAQ:CYTC) for cash and shares. As this comment was composed the market had dropped 10% for Hologic and Cytyc was surging almost 20%. At the same time management is promising the acquisition will be slightly accretive in the first year following the merger. This probably means they will try to swallow all the tough write offs and expenses this year.

Management has also made some very big statements about how lovely everything will be. No anticipated layoffs at the operating level. Savings in marketing and logistics and increased international efforts. Smooth sailing all the way through.

Here are some realities about sales and marketing to the medical business. Just because you are merging will probably not impress the medical field. These guys get sued a lot and errors and omissions insurance is a really big thing. So when the sales person breezes in with the next new and wonderful product or service change some practitioners actually want to talk to a lawyer.

Also when something is working well why change. Change is risk without additional benefits. Corporate synergies are boardroom concepts that do not always play out in hospitals and imaging facilities.

Management is also making a big thing about international growth. Currently the combined entity generates approximately 15% of revenues from international. They are laying claim to an expanded presence in up to 125 countries. This has to mean underdeveloped countries which traditionally do not have significant money for health care. When under developed countries do spend on health care, women's issues are not given a high priority.

Hologic sees the play as a market dominance move. Not one word about the strength of R&D and what the future holds. Today's drum beats too loudly and drowns out anything about tomorrow.