Friday, September 25, 2009

A123 Board Conflicts

A123 (AONE) came out of the blocks and wowed the market. Well it got a lot of press attention. Trying to understand the company I took a quick look at the board of directors and found this director of interest; Mark M. Little Ph. D. Senior Vice President and Director Global Research General Electric Company. (GE) Given GE’s size and a new IPO’s constant need for capital it will be interesting to watch how the deals to share research and benefits are made. Let A123 make the mistakes and then GE comes in on the right deal. The corporate governance issues are enormous.

Thursday, September 24, 2009

American Greetings Claims Leadership -- No Info On Technology

American Greetings Corporation (AM) announced better results and shocked investors into a 20% increase in value. Who knew that the greeting card industry would be a place to create wealth? Take a close look at some of the comments.

Chief Executive Officer Zev Weiss thinks that expanding their use of technology for both traditional greeting cards as well as on-line applications including Facebook and the iPhone is paying off. But no financial information is provided to back up these huge comments. So how would an investor separate fact from fiction.

They do slip in the technology risks under corporate risk factors pointing out that

“Risks pertaining specifically to AG Interactive include the viability of online advertising, subscriptions as revenue generators, the ability to adapt to rapidly changing social media, and the ability to gain a leadership position in the digital photo sharing space.”

They may have crunched out a quarter or two with better financials. But given the way they talk about their business it does not sound like they know which markets to pursue.

Wednesday, September 23, 2009

General Mills Pop's Past Consensus

General Mills (GIS) popped and wowed the market by beating analyst consensus. Great start for Q1. Such a great start that you have to wonder if they banked a few things to make the year look good after they gave up on last years results. Here is what you have to stay focused on. Overall sales are up 1%. Margins are up dramatically but they had to increase marketing spend by 16%. They must defend this increase as competitors will identify target rich opportunities and come after them.

Intuit Swallows MINT and says No Problem.

Intuit (INTU) continues to bang the drum. Intuit issues a press release re-affirming guidance on the day of investor presentations. This is a perfect text book example of institutionalized stock promotion. Nothing new to say. Investors all taking a day off to hear presentations that should not change your mind because there is nothing new to say. I suppose the good news is that there is no bad news; which is more than some companies can say.

Here is the issue. They are buying for some $175 million. When you acquire there are always integration issues if not the outright risk that you have made the wrong acquisition. Intuit needs to explain how well its all going to everyone no just those at an investor conference.

Tuesday, September 22, 2009

Carnival Cruise Creates More Questions

Carnival Cruise Lines (CUK) made a big splash with better than expected results but a soft forecast/guidance adjustment. The press release dealt with a few high level metrics but really did not discuss any fundamental business issues.

For instance with consumer spending expected to be lacklustre where is the booking revenue coming from. There was no real discussion about product offerings, market segmentation, competition or fundamental drivers of business activity. Fuel costs will always be a major cost component much as they are for airlines. No discussion was offered.

Investors need a management team that will explain and discuss the whole business and not just the front-end glitzy portion.

Monday, September 21, 2009

Bank of America Snags Charles Holliday of Du Pont. Why?

Bank of America (BAC) announced the appointment of Charles Holliday Chairman of Du Pont (DD) to Bank of America’s board. Sounds like Bank of America got a good man at a difficult time. What’s in it for Charles Holliday? Bank of America is in danger of being declared a criminal organization. The SEC cannot get judges to bless agreements and are required to go to trial with proper rules of evidence. There will be much to do for new board members. Much of it will be messy legal issues and not strategic business issues that you would expect a board to deal with.

When you finish being confused about Charles Holliday’s rationale start thinking about why Du Pont would be OK with this. The amount of time he will spend away from Du Pont business without any tangible benefit to Du Pont will be enormous.