Friday, June 11, 2010

Dell -- Does Michael Dell Have Credibility

Dell (DELL) announced a complicated legal liability that will destroy shareholder wealth. Michael Dell has cost the shareholder potentially some $100 million. Thanks a lot Mike Dell. The problems revolve over poor and inadequate disclosure.

What is surprising is the continued support of the Board of Director’s. Former Senator Sam Nunn who used to represent the state of Georgia reaffirmed the board’s support with this statement:

“The independent directors of the Board have affirmed that Michael Dell will continue to lead the company as its Chairman and CEO, and he continues to have our complete confidence and support,”

Senator Nunn is the presiding independent director supposedly looking out for the interests of shareholders.

No mention of any changes in governance or disclosure policy. So if someone costs you
$100 million shouldn’t you change something. Ross Perot sits on this board. How happy can he be? Usually he is not shy? Wonder if Mike and Ross are having a drink and sorting things out.

Oh by the way the next time Michael Dell says something to we believe him.

Disclosure: No position in any stocks mentioned in this post.

Thursday, June 10, 2010

Del Montes Extra Cherry Dividend

Del Monte Foods (DLM) reported a very encouraging Q4 and year end. They increased the dividend some 80% and announced a three year stock buy back equal to 10% of their current market cap. They soft shoed the fact that they have decreased their cash position by $100 million mainly as a result of repayment of long term debt. They claim to be growing the top line. But they have not explained if it is increased market share, pricing power or some combination of both.

The dividend increase is a catch up. 80% sounds like a lot but it’s just a few pennies per share.

Investors need to be careful about the “Pigs Lipstick”

Disclosure: No position in any stocks mentioned in this post.

Wednesday, June 09, 2010

Microsoft -- Financial Engineering Cynicism

Microsoft (MSFT) announced some financial engineering with a convertible debenture issue. Interest rate to be negotiated at closing. Due in 2013 which is just around the corner, Microsoft says it will buy up enough shares to prevent dilution if as and when. Proceeds to repay existing debt.

Microsoft has a “AAA” rating which was just recently affirmed by S&P. Do we believe them?

Why the short term? The deal has more financial engineering than anything else. Microsoft is saying we are strong enough to bet against our shareholders, except the debenture owners of this particular issue. So do a few select institutions have a guaranteed ride? Must be nice.

If you believe interest rates are rising why not borrow long at a fixed rate and leverage the growing spreads. Perhaps that is the next deal?

Disclosure: No position in any stocks mentioned in this post.

Tuesday, June 08, 2010

Cascade -- Excludes FX -- Too Simplistic

Cascade Corp (CASC) announced improved Q1 earnings, revenues and better metrics all around. They have a very curious habit of specifically excluding the effect of foreign exchange when reporting numbers. The presentation is overly simplistic and unfortunately conclusions may prove to be inaccurate.

Q1 sales are reported at $94 million. North American sales are $45 million. Therefore 50% of revenues are outside of North America. The Canadian numbers are subject to foreign exchange fluctuations so even the North American numbers are not pure US$.

This could be the case of management being just too provincial to run a global business.

Disclosure: No position in any stocks mentioned in this post.