Friday, September 21, 2007

Nike Posts 51% Earnings. Is that really Good?

Nike (NKE) posts a 51% increase in earnings on the basis of excellent increases in off shore sales and a one time free pass from the taxman . Europe, Asia, even places that supposedly do not have money managed to buy lots of Nike product. US numbers are stuck in the muck. The US market is much too large for that problem to continue. From the conference call transcript available on I did not really hear anything that would fix that.

So the question becomes is Nike a successful American brand who leveraged international trade opportunities? Or is Nike a global brand and US sports culture is tone deaf to international trends?

Nike does not get Soccer like Adidas and other firms (By the way its called football outside of North America). They have decided to punt out hockey equipment because it does not meet their growth needs. Hockey is played in countries or regions that have cold and ice. Why did management not understand that point at the outset?

Hence the challenge of a global sports wear and equipment brand. Local issues are very important. Just look at cars around the world. They are not all the same. If they cannot get US sales to fire up then we need to rethink the overall global brand.

In the meantime why is the sum total of accounts receivable and inventories equal to the quarters revenues. The turns are too slow. Will Nike have a nice US Christmas? Cash and equivalents are up $1.1 billion to $2.8 billion. Thats approximately 10% of the market cap represented by cash. The stock is near its 52 week high. If Nike wants to take the stock up after this announcement then take a page from MacDonald's playbook and boost the dividend.

Thursday, September 20, 2007

Cellphone Class Action Northern Style

A potentially large class action has been certified against BCE (BCE) Rogers Communications (RCI) and Telus (TU). BCE is supposedly in the final throes of being taken public by a group led by Teachers Private Capital and Madison Dearborn.

Apparently these three companies have been continuing to charge a system access fee in addition to the normal monthly charges. After interest the charges could amount to approximately $20 Billion or somewhere in the range of $600 to $700 per subscriber.

The system access fee used to be a tax imposed by the Canadian Federal Government. In 1986 the tax was no longer to be charged separately but was to be incorporated into charges from the cell phone companies. The cell phone companies just continued to charge a system access fee which no longer existed and have been enjoying a huge free cash flow.

No other cell phone companies charge a separate system access fee in this manner. By making it look as if this is a separate tax the cell phone companies have been able to give the appearance of lowering monthly rates and then pocketing the system access fee.

Apparently the issue has been festering for the past ten years. But now that the class action has been certified the cell phone companies must hand over records. As an interim measure they will surely mount their own court challenges to dismiss.

Watch for this one to slowly grow in stature and eventually become an important consideration. Wow $700 back on my cell phone bill where do I sign up?

Wednesday, September 19, 2007

AOL Busts A Move

Have you heard the news; AOL is moving to New York New York. This way they are closer to the advertising world. (read Time Warner TWX) Usually with a major headquarters move the cost and relocation issues are tres important. So far not a word from AOL or Time Warner. If the move will be major then the costs should reflect major. If the costs are not substantial is this really a significant move.

The more important story should be the deal they made with Hewlett Packard (HPQ)where new computer purchasers will open up on a specially branded AOL home page. If you are in the advertising business this sounds like a bigger deal. But then again who did they displace.

My brand new HP that I purchased this past April used to open up on a Yahoo (YHOO) page with lots of HP stuff. If this is such a positive for AOL why is it now not a negative for Yahoo.

Methinks AOL is going through the rinse cycle and will enter the fast spin cycle shortly as they attempt to wring out the unnecessary moisture out of the mix. Time to clean out the lint trap before a dryer fire breaks out.

Tuesday, September 18, 2007

Bernanke PR Syndrome

About Stocks ( BAC / TMA / MER / NCC / HOV / BZH / DHI / MDC / RYL / TOL / SPF / PHM / DHOM / CTX / KBH / PHHM / MSO )

Bernanke not only blinked he jolted and surprised the market with the 50 50 approach. The Fed Reserve Chairman needs to be respected and he was clearly having a PR problem. So like any politician he bought his constituency with their own money. Everyone will remember yesterdays profits at least until... well for a little while anyway.

While the rate needed to come down some it does not stop the defaults. If you are behind 90 days, your mortgage is on the arrears list and you are staring at power of sale action. This move will probably not roll back the existing problems. Therefore the existing sub prime securitized debt that was poorly structured is still a terrible deal. The sub prime financings will no longer generate big fees for Wall Street or originating brokers.

The key indicators will be if housing starts and resales pick up. These indicators were driven in part by buyers who did not have adequate incomes or adequate equity. The rate cut does nothing to alleviate this issue.

Bernanke got the monkey off his back. Now everyone has to stop whinning.Can the market really make this work?

Sunday, September 16, 2007

ABN Amro Board Wimps Out!

ABN Amro's (ABN) board will not recommend either of the two rival takeover bids the Dutch bank has received. The Barclays (BCS) bid fits better with ABN's old corporate strategy, while the one from a consortium led by Royal Bank of Scotland PLC (LON:RBS) is worth more, but is risky, the company's managing board and supervisory board said in a statement Sunday.

However ABN Amro Holding NV Chief Executive Officer Rijkman Groenink said Barclays Plc's bid for the largest Dutch lender probably won't succeed, as its price trails an offer led by Royal Bank of Scotland Group Plc. He was being quoted by Bloomberg from a media interview.

Barclays' cash-and-stock bid comes to 59.6 billion euros ($83 billion) based on Sept. 14 valuations, while the mostly stock offer from the Royal Bank group is valued at 71.6 billion euros. The acceptance periods for both offers end the first week of October.

It is disappointing that the board of a major international money center bank cannot make a firm determination. They have been managing this enormous financial beast called an international bank but they cannot provide the investors with a recommendation.

Here is the moment of truth. The bank is to be sold and will be changed forever and the board cannot come up with a sensible comment. The board which represents the investors in case anyone has forgotten has access to everything in this deal. In addition to information flow which should be superior to anything else on the street they have access to the best advice; lawyers, accountants, investment bankers and even regulators must have shown their hand in some way. The fees they have paid are enormous and then they wimp out. Can we have our money back please.

Then the CEO goes on network TV and starts making predictions as if this is a sporting match.

The major issue for the market is a question of redeployment of capital. Both offers are majorly based on share exchanges. The first year there will be excuses of financial indigestion.

I would think twice about relying on members of the ABN board in the future. They were not strong enough to achieve clarity.