Friday, June 29, 2007

Apple May Not Morph From Hype To Earnings

Apple (NASDAQ:AAPL) will finally release the new iphone. Some stores already have huge line ups for this evenings release. Apple has created such expectations with the hype it now has two significant problems. Firstly marketing and branding. Secondly financial. Let me explain.

In the marketing/branding context consider this law of physics. To each action there is an equal and opposite reaction. Because the Apple hype has become a pop culture event of its own there will be an equal and opposite pop culture reaction which may not be adhering to the intended Apple script.

The entire early adopter frenzy may look slavish and mindless in its cult like frenzy. The entire alternative culture (Those who prefer to independently think on their own) will blow back shortly. I predict the tipping point will appear on youTube shortly after the iphone sales start with someone purchasing an iphone and then destroying it in some creative and angry fashion.

Just as the Tribe of Apple will think it is very cool to own an iphone. The Tribe of Not Apple will think its more cool to have not been manipulated and not own the iphone. The ongoing marketing will be very tough and the iphone may become another Apple cult product with a small market share.

The second problem is financial. Will the iphone sales/hype result in something of value for the shareholders? The July 25 Apple earnings announcement will be very interesting as the finance guys attempt to explain why the hype has not converted into tangible results.

Apple shares rose north of $100 late April on their way to the current levels of around $120. RSI peaked close to 100 in early May and has declined rapidly to 50 while the stock price is appreciating. Buckle up the roller coaster is going for that big and exciting dip.

Thursday, June 28, 2007

Microsoft Bulks Up on Business Development Talent

Microsoft (NASDAQ:MSFT) issued a very late in the day press release announcing that Katherine Styponias will join the Media & Entertainment Group as general manager, where she will lead the business development team working with major content suppliers. Styponias joins Microsoft from Prudential Equity Group LLC, where she served as senior vice president and the senior cable, entertainment and satellite equity analyst.

Styponias is widely recognized as an expert in analyzing media industry trends and companies. She was named in The Wall Street Journal's "Best on the Street" poll for earnings-estimate accuracy and stock picking in the entertainment category. She was also recognized in Institutional Investor magazine's All-America Research Team poll and was named the No. 1 earnings estimator for the media sector in the Analysts Awards for 2004.

Microsoft has been criticized for missing some big deals and not paying mega bucks for hot properties. In a few years the do not overpay approach may prove to be beneficial to the shareholder.

Individuals at this level are hired for their Rolodex and the business development responsibility makes a great deal of sense. The question becomes should this function have been staffed several years ago.

The signal from Styponias is to short the sell side where she excelled and go long with the cash rich buy side. Now if we can only find a few good revolutionary acquisitions for about $100 million before they get too hot.

Wednesday, June 27, 2007

Wells Fargo New CEO Reminds Investors How Good It Is!

Wells Fargo (NYSE:WFC) announced that John Stumpf will now become both the president and CEO. He replaces Dick Kovacevich, who continues as chairman but relinquishes the CEO role. Well OK I guess.

With any changing of the guard you would expect some comment or announcement about future plans. Or maybe you can at least say something about current activities and how well or not well they are doing.

Or like most companies you can just announce the change and leave it at that.

Wells Fargo announces the change and then throws in a very promotional investor fact set about how well they have done over the past. The fact set goes back twenty years and every single metric is very attractive. Total Stock Return (TSR) is 21% compared to S&P of 12%. Thats pretty good beating the S&P like that. Net income grew 17% but diluted EPS lagged with a 13% growth rate. Hmmm.

The message is clearly stay the course with our management. The past year has garnered criticism and the stock has traded in a very narrow range. The dividend yield is approximately 3.2%. Does management feel anxiety about the stock price? The fact set is clearly designed to keep the long term investor engaged. Nothing wrong with that.

Methinks management is worried. Long range radar must have some blips on it. Watch for an increased PR/IR effort to put Wells Fargo into a long term everything is fine perspective. What this really means is short term some bad news probably will bubble to the surface.

Tuesday, June 26, 2007

Adidas vs Nike

Adidas (other is launching a massive ad campaign designed to coincide with the arrival of soccer super star David Beckham in Los Angeles. Market pundits are dismissing Adidas pointing to Nike's (NYSE:NKE) huge market share particularly with the urban youth who can barely afford to pay for Nike products.

Adidas gets soccer. Nike does not
. Beckham globally is probably capable of moving more product than Tiger Woods or any other Nike celebrity endorser. Soccer is exploding, other sports are just growing.

If investors truly have a global viewpoint consider this: Soccer is bigger than any North American spawned sport. The money that star soccer players receive make elite American athletes look like paupers.

The last generation of immigrants are more prone to be soccer oriented rather than basketball, baseball or football. North America even has the cultural phenomenon of soccer mom.

It will not happen over night but Nike is vulnerable to Adidas best card.
When the trend starts to tip Nike will find itself in the back seat and probably not know what to do.

By the way if you are looking for something without sub prime mortgage risk and peak oil geopolitical risks look at these two and make some money.

Monday, June 25, 2007

Thomson Learning Teaches Market Reality. Is Blackstone Listening?

The Thomson Corporation (NYSE:TOC)experienced serious push back from debt markets as they attempted to sell Thomson Learning to private equity. The leverage side of the deal ie the lenders and potential bond holders demaded stronger terms and pretty well got them. Apparently the lenders realized that its a new day and they are more in the drivers seat than the deal makers who desperately need to rent the very large sums of money.

At the same time Blackstone's (NYSE:BX) IPO goes ballistic because some investors believe the party will last forever. The financial press makes much of many other similar hedge funds watching very closely. KKR is even taking notes according to some sources. Although there was an end of day weakness just before the close.

Market thinking is somewhat delusional and contradictory. If the leverage side of the market becomes increasingly skittish making liquidity more expensive and questionable than the entire deal flow will shrink quickly and the new Blackstone investor will be looking a little sick.

Strange that a deal for a Learning Systems company will start teaching the market a few fundamentals.