Friday, November 13, 2009

Blockbuster -- Prepare for Shrapnel

Blockbuster (BBI) gives every appearance of dead man walking. The latest earnings release celebrates their refinancing which was done at loan shark rates. Can they make the vig regularly. In the first nine months they could not break $2 Billion. The arithmetic is all wrong. So when it explodes what kind of financial shrapnel should we expect?

1. Commercial leases in thousands of locations will go dark. Other locations will stagger along. This may prove to be a battle of financial cripples. Busted commercial real estate investors arguing with a busted tenant. There will be comical moments.
2. Back blast into the movie business. Who will control the stock of titles in the inventory that suddenly go on deep discount. Watch for pilferage and larger than usual amounts of theft.
3. Will the movie producers cut off Blockbuster. As you slide down the slippery slope of bankruptcy you start to delay payments. Will your key suppliers cut you off and put you out of your misery?

Thursday, November 12, 2009

Wal-Mart Reaches Outer Limit of Discount Model

Wal-Mart (WMT) issues lower guidance and the question becomes can they continue to cut costs and make money. President and Chief Executive Mike Duke is quoted as saying they are gaining market share everywhere in the world. Hey Duke if you have that kind of market power when will you make some money?

The management mind set seems to be on auto pilot. Cut Cut Cut. That’s OK when you are trying to get market share but eventually the model is no longer practical; you are just stealing from yourself. When you get into the value added business Wal-Mart has no clue

BCE Waiting For The Next Act

BCE (BCE) reported excellent results. Net earnings applicable to common shares of $558 million, up $310 million year-over-year. The dividend yield is well over 5% which traditionally signals high valuation. The dividend is declared but essentially unchanged. So while there is good news the board is not yet prepared to send the dividend signal. We all know they are re-structuring and re-building so read the results carefully it’s never a straight line.

The interesting perspective is that BCE owns a large hunk of CTV. Currently there is an ad war between cable and local stations about dubious access fees. BCE has a financial interest in both sides of the quirky

Weight Watchers Financial Info Diet

Weight Watchers (WTW) issued a diet adjusted earnings release. They let you know what the Q3 earnings are; adjusted the guidance for Q4 and therefore the year and really did not address any operating or financial issue. If you were looking to invest you would not be attracted. If you are an investor you would wonder why there is so little information and ask yourself “What does that mean?” Next question would have to be “Why is management not proud of itself?”

David Kirchhoff, President and Chief Executive Officer of the Company concluded his very brief remarks by stating “we are continuing to pursue and invest in multiple initiatives to drive long-term growth in our business."

Still adrift in a life boat waiting to be rescued.

Wednesday, November 11, 2009

3Com Options Folly

3Com (COMS) is being acquired by Hewlett-Packard (HP) .Check out the spike in options. If the trading records are not subject to subpoena followed by serious investigative questioning of the account holders within the next business day than we know the SEC is still asleep. The institutions that hold the accounts are best advised to self police and freeze the account. How obvious can the thief be? Who is driving the get away car.

Citigroup -- Too Big or Just Wrong Risk

Citigroup (C) now has incredibly senior but retired officers saying I’m sorry I did it. Probably not returning any compensation but they are sorry. Everyone seems to be jumping on the too big to fail is too big to exist bandwagon. But consider this. Financial institutions are the aircraft carriers of your economy. If America wants to maintain economic dominance they cannot afford to have small puny aircraft carriers. Other countries will aid and abet their financial institutions and give them the size and therefore the clout to dominate.

It’s not a size issue it’s a risk issue.

Tuesday, November 10, 2009

Oracle -- Political Problems In Europe

Oracle (ORCL) and Sun Micro (JAVA) seem to have regulatory difficulty with the European Community. The two supposedly US based companies are causing concern in Brussels. Oracle has retorted that the issues that are concerning the Europeans are not concerning Washington DC regulators. So what’s the problem?

This smells of politics and power grabs. The Europeans want to increase their stature and become more of a factor. SAP (SAP)which is European based constantly knocks heads with Oracle. By throwing some sticks and stones at Oracle the European regulator is protecting their home team. SAP lasts quarterly report showed some operating difficulties. They need to slow the competition down somewhat.

Monday, November 09, 2009

Boots & Coots Income Tax on Fire

Boots & Coots (WEL) which specializes in putting out well fires called in it’s own fire alarm. Income tax flared out of control. Read this snip

“For the quarter ended September 30, 2009, the effective income tax rate was 65.6% of pre-tax income compared to 23.3% of pre-tax income in the quarter ended September 30, 2008. The effective tax rate for the 2009 nine month period was 44.1% of pre-tax income compared to 19.2% for the same period in 2008. The Company’s estimated annual effective tax rate reflects, among other items, our best estimates of operating results across various tax jurisdictions. A change in the mix of forecasted annual pretax income across these various jurisdictions had a significant negative impact on the Company’s effective tax rate.”

What do you mean 65.2%? Do you not have a tax accountant on staff? Where are your auditor’s? At least bonus the money to someone. Management needs some serious help right now.

Sunday, November 08, 2009

Berkshire Hathaway Interesting Tidbits

Berkshire Hathaway (BRK.A;BRK.B) piloted by Warren Buffet released results on Friday and had a few interesting tidbits. They claim to release on Friday after market close so as to allow investors and media the weekend to digest. The likelihood of Warren Buffet surprising the market with unanticipated news in their earnings is fairly low.
They also come right out and say the press release is inadequate so read the 10Q. The link is provided. This should stimulate debate with the regulatory crowd as to the real role of the press release. Strangely enough they own Business Wire which specializes in distributing press releases.

They own a few businesses such as See’s and a few jewellers. While I am sure they are profitable at this stage in the game you have to ask why are they there. At this level of capital what are they truly contributing?

The Buffalo News continues to be perplexing, even if the cost structure allows decent profits we all know that print media is suffering. Warren Buffet is not the tech guru to come up with the solution to solve that problem.

Life/Health premiums continued to grow. No comment was provided about the potential for impact from reformed Health Care on a political level. Also under car insurance there is liability for health care and no comments are provided as to what will happen if health care reform comes into play. Warren you must be looking at some of the scenario’s and seeing what that does to the money.

Netjets has too many jets by their own admission. They also caution that politically as Wall Street keeps getting bashed the whole private jet thing will continue to go negative. But then they say they expect improvements in 2010. To be sure. But as any airline will tell you jets are matters of technology. Clients will want the newer better stuff which are more cost effective. So are we looking at write downs now and then maybe capital expenditures in the future? Buy and hold does not work in this asset category.

And oh please note. No apparent conference call has been scheduled.