Akamai Pre-Guidance Analyst Support

Akamai (AKAM) boosts guidance in a press release issued Dec 7, 2009 at 0630 ET. Akamai is also holding an investor day today and in the press release promised to explain in the presentations the how and why’s of their guidance increase. But if you are unable to attend, just pay attention to the analysts who will figure it out for you. The stock jumped on the open on Monday.

But look at Friday the stock jumped quite nicely on the basis of two analysts issuing very bullish reports one business day in advance of the investor day. How come these two guys are so smart?

Citi Investment Research analyst Mark Mahaney upgraded Akamai to buy from Hold. Oppenheimer analyst Srinivas Anatha boosted Akamai to outperform from perform. They both identify internet video quality and rich mobile data as key drivers. Go figure this is not new news. Wonder if they are attending today’s Financial Analyst Day at The Renaissance Boston Waterfront Hotel in Boston, Massachusetts, If they are how hard are they working at understanding the numbers. Now what about the other analysts? Their employers want to know if they are chopped liver or what?

Del Monte -- Debt Restructuring Looms Large

Del Monte Foods (DLM) reported improved earnings and watched its stock sell off anyway. Go figure the market is manic depressive. Or is it? The company used an interested term to describe its increase in revenues and I quote “fiscal 2009 pricing actions net of elasticity”. Yep right there in the first bullet point. So they increased their prices yet they start talking about net elasticity in demand. This means management is waiting for the other shoe to drop.

The other shoe to drop will influence their ability to refinance their debt which they admit needs to be done in F10. Their debt is approximately equal to 50% of their market cap when the stock is trading near its 52 week high. Hmmm. They already are making noises about the big million dollar fees they know they have to pay. Watch how price elasticity affects debt negotiations.

Investors should take note that the pet food division creates more profits than the people food division; despite the fact that the people food division has more revenues and therefore more expenses and resources. So the extra financial cherry is in the pet food. Expect corporate communication to be very positive but the gains will go to debt repayment and not shareholder wealth.

Goldman Sachs & Backdoor Governance

Goldman Sachs Group (GS) continues to have a most capitalistic problem. Their employees make too much money. They currently are in discussions with major investors to prove that their compensation is in line. The investors are motivated by legal storm clouds that are compelling them to investigate. This is probably the worst case scenario of corporate governance through the back door. Some kind of deal needs to be worked out so that the big funds get the cover they need. Otherwise the stock becomes too hot to hold and everyone heads for the exit doors. Many of these investors actually trade with Goldman or use their services so it’s rather hypocritical that they are scrutinizing Goldman in this fashion.

Here are a few things Goldman can do.

1. Increase their dividend. The yield is abysmally low at these levels. If they are a bank holding company they will need to raise capital just like the other bankers. Investors will be rewarded.
2. Declare special dividends when results are good. The capital Goldman uses is rented they will need to pay for it. Otherwise why not just poach the good guys and set them up in their own shops.
3. Stop calling it a bonus and embrace an accounting term that covers risk such as profit sharing. These guys are not true employees like most wage slaves. They are entrepreneurs and they are there for the big score.

Guess? Inc -- Cash Is For What?

Guess?, Inc (GES) reported results and watched the stock pop off it’s bottom. Imagine an apparel brand that is doing well in this economy. I guess people buy fancy jeans to make themselves feel good. The stock is still near its 52 week low. Guess claims to have increased their cash position which now stands at 10% of its market cap. That’s with the stock at the bottom of its trading range.

A couple of things to worry about. For nine months their cost of product sales is up approximately 2.5%. This fact alone should make investors worry. SG&A expenses are down by approximately 1%. They did not differentiate where the reductions were. But if you throttle back the marketing costs you lose marketplace momentum. Investors have no way to determine just what Guess is doing.

They conclude by sending a dividend signal. No change in dividends despite increases in cash. Therefore cash is earmarked for activities other than shareholder wealth creation.