Saturday, July 11, 2009

Google Adsense May Need SEC Regulation

Google (GOOG) and its all powerful search engine adsense program may be a regulatory Trojan Horse. A good friend was checking out my site and notices a Google Ad and gives it a click. The ad is promising something like 450% returns, if, you do as they say. Somehow these financial fairy tales still resonate with gullible investors.

Google needs to think. Regulators need to think. The algorithms driving these ad’s may inadvertently enable criminal activity. The black box nature allows predators to pick off investors who are the most vulnerable.

Google I am sure will claim that they are screening the ads. But if I was Google’s lawyer I would be reviewing the process that allows a promise of 450% returns to be offered in a programmed manner to probable viewers who have fit a predictive model of Google’s construct. That must be accomplice style behaviour.

If I was a SEC regulator looking to avoid tomorrows financial mess I would investigate how Google is actually running this program. Can you imagine, Google will need to explain the algorithm to someone outside. That’s just too juicy.

There can be no doubt that the Google which says “do no evil” did not wake up in the morning and say lets screw Western Civilization. But they seem to be leaving the back door open and helping drive the get away car without realizing it.

Thanks Bob.

Friday, July 10, 2009

Twitter Not Proftable Go Figure

Twitter is not profitable say media elites. Allen & Co. A major venture capital power house is hosting a no media media conference at the posh location of Sun Valley. Major business news outlets all are reporting that the participants on a panel moderated by media writer Ken Auletta of The New Yorker magazine predict Twitter will face major challenges when they finally try to generate revenue. Mr. Auletta confirmed the tenor of the Twitter talk afterward.

What was not confirmed is how the established elites plan on making money right now.
Two of the panel participants, veteran media executive Barry Diller who is CEO of InterActiveCorp (IAC) and cable television magnate John Malone, chairman of Liberty Media Corp. (LCAPA), reiterated their skepticism about Twitter's moneymaking potential in separate interviews. Secret code for we do not want to over pay like we have done in the past.

So the two chief media honcho’s go to a no media media conference and manage to get themselves interviewed about how something they do not own is not profitable. Hmmm

Rio Tinto Mistakes In China

Rio Tinto (RTP) claims that it is surprised by allegations from Chinese authorities that key executives were involved in stealing state secrets. The business media paint China as a big bad government arresting innocent people. The reality is that a lot of hard ball meetings have been held behind closed doors. We do not truly know what went on.

Rio Tinto and employees want to characterize themselves as small and relatively powerless. The Chinese are not stupid. The Chinese are subtle and astute. Rio Tinto did in fact have the power of a sovereign state, acted tough and probably did not think their way through the relationship.

Being shareholder driven they are influenced by quarterly EPS. Being a commodities firm they are all too familiar with price fluctuations. They probably acted for the here and now. Long term stable relationships are usually the most profitable and risk less. Rio Tinto has not been successful with the China Card. What ever they were negotiating is now kinked.

The advantage definitely goes to other parties who were competing with them for markets, influence and relationship.

Thursday, July 09, 2009

Alcoa Alcoa Alcoa 49% Drop In Commodity Prices

Alcoa (AA) finally reported and kicked off earnings season. The market seems relieved that its not as bad as feared. But I am just a simple guy looking at some operating basics. This is what I see. Klaus Kleinfeld, Alcoa President and CEO reports revenues of $4.2 billion, up 2% from 1Q09, but down 41% from 2Q08 on economic downturn and 49% drop in metal price. OK then you scrutinize the balance sheet that they provided and you see customer receivables down just 14% and inventories down just 23%. Seems like they are struggling (understandable but you have to point it out). Clients are stretching them out.

3Com Pats Itself On The Back

3Com (COMS) Reports Q4 results and year end claiming revenues are up, profits are up and cash flow are up. Bob Mao, 3Com’s chief executive officer reports that he is pleased with the quarter and the year. To quote him “We had a very good year, delivering on all three of our key goals: revenue growth, operating margin improvement and positive cash generation from operations. We have a clear, articulated strategy that we are successfully implementing.”

OK Bob so you have a clear articulated strategy. When you read your quote it talks about business school stuff. Not what you did to get there. The press release is management just patting themselves on the back. The board should not be accepting this skimpy report as adequate. Investors are disappointed by the lack of insight provided into the company’s affairs.

Wednesday, July 08, 2009

Pepsi Bottling Tax Position Entices PepsiCo-Perhaps

Pepsi Bottling Group (PBG) announced results which can make an analyst crazy. Top-line growth was down. (It was almost like listening to the Post Office revenues down by 1% but still here.) But because of the tax man, bottom line growth was very impressive and you would at first glance be impressed. The problem with this tax return is that there is no explanation as to why and if it will continue. But it clearly is the most critical variable in this earnings release.

You may think you should bonus the tax guy’s but you are not sure why. Given that the biggest shareholder, who most certainly has the best insight, is make an unsolicited offer you have to wonder what PepsiCo (PEP) understands about the taxes and if their offer is fairly valued.

Tuesday, July 07, 2009

Boeing Buys Out Vought/Problem Child

Boeing (BA) buys another facility from Vought. The headlines from Boeings press release claim that this will give them more control over production. This follows on the heels of another purchase from Vought that also supposedly allowed more control.

What is clear is that Boeing does not understand how to handle the sub-contractor culture and craves more control. Supposedly this means that companies with multi-million contracts are not meeting spec’s on the 787 Dreamliner. Strange most companies with multi-million dollar contracts and their corporate reputations on the line turn themselves inside out to satisfy the customer.

Pundits point to the increasing fixed cost that Boeing is adding. This is very true as the program seems to be consuming enormous amounts of capital just before it’s supposed first flight. What is most likely happening is that the contractors are not producing within the cost parameters. Boeing probably strong-armed the costs down and the suppliers had to do something to stay afloat. Boeing does not like the quality it is receiving otherwise it would not crave more control.

What will probably not see the light of day is what the increased control will cost Boeing in terms of margins. The advance that was forgiven looks like a loan loss when it really should have been an increase in materials and direct cost inputs.
How much more needs to be brought under control; purchased? Boeing probably is not entirely certain.

Monday, July 06, 2009

Regis Corporation Messy Hair Problem

Regis Corporation (RGS) announced Q4 results and a new stock offering. Based in Minneapolis the company operates globally cutting everyone’s hair including investors. Sales and revenues are dropping as the worldwide downturn affects everyone’s pocket book. The hair-care business is not recession proof.

The company is heavily indebted so raising equity is a must. Investors should have seen this one coming. No announcement of who is underwriting or advising on the deal. So some may conclude that the lenders have taken matters into their own hands and told Regis what the deal will be and did not bother to pay an investment banker millions of dollars to convey the message.

The release included much top line information but nothing about bottom line results. They are trying to change the equity structure so per share data will change radically which is an oblique way of saying shareholders are being diluted.

Which explains why the share price is falling like a stone; 20% at time of post. As recently as May 28 the company was paying a dividend. The investors are being sheared. The board is declaring dividends which usually means everything is OK. The intellectual dishonesty is appalling because you do not look lovely darling.

Sunday, July 05, 2009

Confession Season Commences

Earnings Season Preview. Regular readers know that I research press releases and other forms of financial communication. In the past finding CEO’s who were effusive about their company’s prospects was not difficult to locate. Everyone saw a golden future. The press releases where dripping with hyperbole. We have just passed the six month mark. Many call this earnings cycle as confession season. Adjustments are to be made to annual guidance. My sense of the corporate mood is that most will report less than encouraging news. CEO’s do not have a reason to stick their necks out and go positive. Remember it’s a herd even for CEO’s. They all watch one another. The trick will be to see who issues overly negative reports in the light of positive results.

Bing vs Google Yahoo Does OK

Checking out Bing, which is owned by Microsoft (MSFT) of course,as a financial search engine. Being a self confessed financial news junkie I am a voracious consumer of financial/business information always looking for those nuggets of insight. I performed my own little experiment by searching for several large cap companies on Bing and seeing if any results point you toward MSN Money. The search results failed to push you toward their cousin product; at least not in the all important top 10.

This is still early days for Bing and I am sure they have some more tricks up their sleeve. But if you are looking for people with money, active investors fit the definition and have disposable income. Hopefully they do not spend frivolously but they do spend.

Just to compare I searched Google (GOOG) for the same companies and they also failed to push to Google Finance. Maybe both Bing and Google assume the investing world already knows about MSN Money and Google Finance.

Except that in both searches Yahoo Finance (YHOO)did reasonable well. But everyone says Yahoo is having trouble. Not in this category it seems. Perhaps it will be carved out as a stand alone unit.