Saturday, March 13, 2010

Google - China -- Dig Two Graves

Google (Goog) may shut down it's China search engine according to the Financial Times of London. Informed rumor has it that talks are not going well. China publicly warned Google to follow the law on Friday. Google is used to re-inventing the world not following old laws that they did not believe in. Beijing is used to respect and authority. You respect they have the authority.

In the dig two graves scenario we have the two coffins. Google does not know how to deal with governments. Right know it's a mega cap bad boy. Remember Microsoft (MSFT) under the Clinton administration. Things can change and Microsoft has a more nuanced approach to government relations. Now.

Google does not get it.

In the second coffin we have Beijing throwing a reactionary hissy fit.They probably have a partial agenda of helping out Chinese search engines (What's that big one again? Baidu (BIDU) with the Yahoo YHOO) hook up?)

The problem with the Beijing coffin will be the fall out with other businesses.

How will other businesses looking to do business in China react?

If you just want to export something and it's "Wham bang thank you Madam" Who cares. If you are looking to operate in China then it could be a problem.It will become political and social, as westernized liberal thinking communities become suspicious and start retaliating. Even non liberal communities will start having doubts.

Remember the Rio Tinto executives are still unresolved.

The cyber attacks are still un-resolved. And we think the Chinese will do something about the Yuan when it's not in their best interests as Beijing sees them.

Buckle up Google.

Friday, March 12, 2010

Amazon -- Canadian Evil?

Amazon (AMZN) is in a cultural business battle in Canada. They have proposed a huge distribution facility which needs to be approved by the Federal Government. Amazon is big and will have a huge impact. The publishers have stayed officially quiet. Why annoy Amazon? The main Canadian competitor Chapters/Indigo which is also publicly traded on Toronto (IDG) has a virtual monopoly and has frequently been thought of as a Trojan Horse for Barnes & Noble (BKS).

The battle is faux. The cost in the industry relates around the physical nature of books. Paper is big heavy and expensive. Amazon may accelerate the creative destruction of anachronistic small book stores who cannot sustain an old school bricks and mortar business model.

The old school book sellers are not traditional supporters of the Steve Harper Conservatives. So think evil and do not be surprised by the probable outcome. If Amazon is denied in Canada what Canadian business will have trouble in the US of A.

Thursday, March 11, 2010

West Marine -- Late Audit -- CFO to Blame??

West Marine (WMAR) sunk investor perceptions and announced delays in finalizing the audit and therefore confirming their year end numbers. Geoff Eisenberg, West Marine’s CEO, stated: “While we are working to finalize our audit, we are pleased to say that, as previously reported, we had a year that exceeded our budgeted expectations and we want to thank and reward our Associates for their dedication and hard work that made this possible.”

They claim to be working through the final audit items with a new accounting firm whom they did not name at this time.

Year end was Jan 2, 2010. We are in mid March and you still cannot get a final sign off. Come on guy’s. Is the CFO to fault?

Wednesday, March 10, 2010

Brown Forman Take a Stiff Drink

Brown-Forman (BFA; BFB) headlines its earnings release with “Underlying Operating Income 10% and Increases EPS 8% for the First Nine Months of Fiscal 2010” Lets take a closer look at how they got there.

In Q3 sales are up 10% and cost of sales are only up 2%. Normally that’s huge for any business. But excise taxes grew 17%. No information is provided about the where and the how. We all know governments apply excise taxes. But they do not even seem to consider a marketing program that manages into low excise jurisdictions and minimize high excise jurisdictions.

Think about it. There are tax exiles everywhere.

SGA grew 16%. Investors are not happy with this is the era of cut backs and efficiencies. Net Income for the quarter is down some 13%. Becoming depressed. Cash is down, accounts receivable are up and accounts payable also grew. Short term borrowings are down dramatically but at the expense of other fundamentals.

They are buying back their shares to make the EPS look good. You can only do that for so long.

Tuesday, March 09, 2010

Bank of Nova Scotia -- Pulled Punch?

Bank of Nova Scotia (BNS) announced Q1 earnings of just under $1 Billion. You have to wonder what are they holding back. There is lots of political back lash when a Canadian bank announces earnings over $1 Billion so by keeping this under the radar are the executives just staying comfortable and setting up future earnings. The stock is trading at its 52 week high and needs something to get it into the new range. To days earnings in an improving economy did not do the trick. Therefore how are the numbers massaged?

Sunday, March 07, 2010

McDonalds Respects Tim Horton's

McDonald’s (MCD) respects or fears Tim Horton’s (THI). Traditionally at this time of year Canadian Coffee shop Tim Horton’s has a roll up the rim to rim contest. You buy a coffee, roll up the card board rim and see if you get a prize. Usually another coffer or donut. Sometimes serious cash prizes and cars. During this time frame Tim Horton’s gets lot’s of buzz in its markets. McDonald’s has countered with free coffee for the exact same time. Basically a small scale price war in the coffee category.

The idea for both is to get customers accustomed to coming in and buying something regularly. The idea for McDonald's’s is to slap down this competitor before it becomes a strategic threat. In the meantime free coffee at McDonald's’s. Watch for more skirmishes. Hopefully the competitive strategy will have a better thought process than just free coffee.

When your only substantive response is price it does not create confidence.