Filed under: Competitive strategy, Google (GOOG), Microsoft (MSFT), Marketing and advertising

Microsoft Corp.’s (NASDAQ: MSFT) struggle in the internet search business has not been entirely its own fault, or has it? Innovation and first-mover advantage have been all with Google, Inc. (NASDAQ: GOOG) in recent years, as the company has put the proverbial icing on the search cake with its unobtrusive and workable advertising model that just seems to resonate with consumers.

Microsoft even responded to Google’s growing dominance this year by launching the “Microsoft Search and Win” initiative that gave searchers rewards for using Microsoft’s search engine. Is that move desperate for a company wanting to improve its position in the search marketplace or some type of experimental gimmick? The jury is still out on that one.

Microsoft also wants to get into the business of tailored search, which gives custom answers to searchers based on many factors and supplies niche information about entertainment, news and other items that are unique results for each searcher. The only thing is that Google is already there with its personalized search results and this is quickly not becoming a product differentiator for Ole’ Softie.

But, hold the presses: Satya Nadella, corporate VP of search at Microsoft, has a feeling that Microsoft can turn its organic 70 million search visitors into more by offering a more complete set of services and tools every time they visit Microsoft’s search properly. But, that area is fragmented in my estimation. MSN Search and Live.com are two brands, and customers could be confused. Google has one brand. Although Microsoft caught up to some of the core services Google is offering, that does not mean Microsoft can overtake the leader. In fact, if Microsoft wants to be neck-and-neck with Google when it comes to internet search, it may be the toughest battle the company has ever faced.

Read | Permalink | Email this | Linking Blogs | Comments

Share This

Filed under: Google (GOOG), Ford Motor (F), Citigroup Inc. (C), Money and Finance Today

Permalink | Email this | Linking Blogs | Comments

Share This

Filed under: Before the bell, Google (GOOG), Apple Inc (AAPL), Starbucks (SBUX), PepsiCo (PEP), Ford Motor (F), General Motors (GM), XM Satellite Radio (XMSR), Sirius Satellite Radio (SIRI)

Before the bell: Futures slip ahead of economic data, after Greenspan warns

The blogosphere is abuzz over Apple Inc.’s (NASDAQ: AAPL) iPhone. The company had said that hacked phones will not work following yesterday’s software update. Guess what? The company didn’t lie and depending on which unlocking program was used, certain modified phones no longer worked after they installed the software update. Many are furious. Is this going to be a PR nightmare? Will Apple fans actually speak out against the company?

According to Detroit News, Ford (NYSE: F) may seek even deeper cost cuts from the United Auto Workers union than those that the union agreed with General Motors (NYSE: GM) as these cuts it may not be enough for Ford, which is in worse financial shape than GM.

A college student, Ahmed Abdellatif Sherif Mohamed, who made a video showing how to detonate explosives using a remote-controlled toy and uploaded it to Google Inc.’s (NASDAQ: GOOG) YouTube is facing a terrorism-related charge. No doubt, debates will ensue on YouTube’s responsibilities and controls of such videos.

Starbucks Corp (NASDAQ: SBUX) and PepsiCo Inc (NYSE: PEP) said yesterday they were expanding their bottled coffee business into countries outside North America, including a first into China. No financial terms were disclosed or what other countries they are targeting, except that they could include those that do not yet have Starbucks stores.

Sirius (NASDAQ: SIRI) and XM (NASDAQ: XMSR) shares are declining in premarket action this morning after FCC Chairman discusses the proposed merger, saying there is a “higher burden” to examine the transaction carefully.

Permalink | Email this | Linking Blogs | Comments

Share This

Filed under: Bad news, Housing

The New York Times has an article this morning about the recent housing data showing home sales and prices fell sharply once again in August. This only re-enforces what most of us have already accepted … the housing crisis is still a long way from being over.

During the month of August, new home sales dropped to the their slowest pace in the past seven years. Not really too surprising as this news seems to be the same every month lately. Sales of new homes dropped to an annual rate of 795,000 units. Prices on new homes were down a pretty remarkable 7.5% from the same period last year to “only” $225,700 as credit concerns and rising inventories continue to weigh down the market.

The drop in home prices is the steepest monthly decline the market has seen all the way back to December 1970 (before I was even born). With the current data continuing to prove what many of us already fear (things are getting worse), one has to really wonder just how bad things are going to get before they are able to stabilize and rebound.

Continue reading More weakness in home sales and prices

Read | Permalink | Email this | Comments

Share This

Filed under: International markets, Other issues, Deals, Private equity, Define investing, Economic data

BusinessWeek reports that the value of private equity deals tumbled 68% from the second quarter to the third as a liquidity crisis slashed the availibility of credit that makes such deals possible. While the absence of deals from the business headlines has been obvious, the extent of the damage is now clear.

The statistics are startling. Worldwide, there were just three buyouts of $1 billion or more during September, 10% of the 30 such deals reported in May. The trend was global, although it was most severe in the U.S. Global M&A in the third quarter slowed to $992.1 billion, down 43%, from $1.7 trillion a year earlier. The third quarter this year was still 24% higher than the volume of $799.5 billion during the third quarter of 2006. U.S. deal volume in fell nearly 50% during the third quarter, to $308 billion, down from $606 billion in the second quarter. But U.S. deal volume for the quarter was up 13%, from $274.1 billion a year earlier.

What’s next? If the credit markets can find a way to reprice risk that’s acceptable to private equity firms, acquisition targets, and investors in private equity loans then the deal business could revive. The recent closing of KKR’s acquisition of First Data suggests that this is possible. Most likely, only the most conservatively structured deals will make it through this tighter credit sieve.

That means deal volume will not return to where it was and that investment banks — which have invested so heavily in serving private equity firms — will need to find new ways to make money.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Read | Permalink | Email this | Comments

Share This

Filed under: Economic data, TXU Corp (TXU), First Data (FDC)

First Data, the first of the large PE deals seeking financing following the meltdown of the credit markets, placed $9.4 billion in loans yesterday. Supposedly, the amount of debt sold was nearly double the $5 billion banks targeted.

Also, Oaktree Capital Management, BlackRock and Eaton Vance are forming funds to buy up some of this debt. The 400 bps banks have had to add on to yields are beginning to pique investor’s interest.

What should also begin to be seen is that the amount of debt that needs to be placed should start coming down. News reports cite as much as $330 to $370 billion in loans need to be placed. However, this number seemed to grow as the credit-market meltdown fears hit the markets. Prior to the panic hitting a crescendo, $200 billion in leveraged loans and some $75 to $100 billion of high yield bonds were the target that needed to be sold.

However, take away First Data and TXU Corporation (NYSE: TXU), the two large deals being financed, and add to that Harman International Industries Incorporated (NYSE: HAR) and Sallie Mae that look like they might not get financed, and this number drops rather quickly. Plus add all the smaller deals that are not household names that will not get done and next thing you know this problem is being resolved.

Once again, free markets are correcting the problem that they created.

Permalink | Email this | Comments

Share This

Filed under: Launches, Consumer experience, CBS Corp ‘B’ (CBS)

The management at CBS (NYSE: CBS) has caught onto something that should have been obvious. Most internet users don’t watch full-length video on their PCs. It could be the small screen size or lack of remote control.

Part of the success of YouTube may be that the typical video on that site runs just a few minutes. It captures attention and keeps it, often until before the viewer gets bored. CBS is trying to adapt its video model to the reality that shorter clips appear to be watched much more often.

CBS will launch CBS EyeLab, a production operation that will put together short clips from a number of it shows and distribute them to a wide variety of websites According to The Wall Street Journal “CBS says the EyeLab-produced clips will both entertain viewers and serve a marketing purpose.”

Everyone already knew that most internet videos, especially on sites like YouTube, are watched by teenagers and young adults. People in this age group have the attention span of a house pet, so catering to their inability to stay focused for long is a brilliant idea. Especially since CBS is controlled by an owner who is past 80.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Read | Permalink | Email this | Comments

Share This

Filed under: Before the bell, Management, Amazon.com (AMZN), Options

Amazon (NASDAQ: AMZN) closed at $93.38.

• AMZN overall option implied volatility of 45 is above its 26-week average of 39 according to Track Data, suggesting larger price risks.
• www.Amazon.com operates retail websites.

Borders Groups (NYSE: BGP) recently closed at $13.10.

• Dow Jones reported: “Spencer Capital Management LLC, which holds a 7.9% stake in BGP, said Thursday that it has asked the book retailer to add a person designated by Spencer to its Board.”
• BGP over all option implied volatitliy of 48 is above its 26-week average of 37 according to Track Data, suggesting larger price risk.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Permalink | Email this | Comments

Share This

Filed under: Other issues, Rumors, Management, Bear Stearns Cos (BSC)

In his excellent blog The Big Picture, market commentator Barry Ritholz gave a powerful slap to the report that Warren Buffett is in talks with Bear Stearns (NYSE: BSC) to buy a share of the company. Using language a bit saltier than we use here at family friendly BloggingStocks, Ritholz made it clear that the idea that Buffett would get involved with Bear Stearns is pure bull . . . well, let’s just say that bears use the woods for certain purposes and leave it at that.

So why is Ritholz so suspicious? First, he points out that Buffett once had a horrible time running Salomon Brothers and is not likely to voluntarily climb back into the trading (and Wall Street ego) pit. Second, the value of Bear Stearns is very much up in the air, which hardly fits Buffett’s investment profile. (Ritholz argues that much of Bear Stearns’ recent income, weak as it is, is really an accounting trick based on the reduced value of its own debt.) And third, Buffett has been critical of the fancy financial footwork that Bear Stearns and other firms have engaged in, once calling derivatives “financial weapons of mass destruction.” All of this makes Buffett a very unlikely investor in Bear Stearns.

Why, then, the rumor? Follow the money. On Thursday, Bear Stearns suddenly sold $2.5 billion worth of 10-year notes. The sale came a day after the report in The New York Times of the rumored Buffett interest. According to a report on TheStreet.com, quoted by Ritholz, the sale “comes just a day after Bear shares surged nearly 8% on rumors that the Wall Street firm was near a deal to bring in a big outside investor. One report said Bear has been talking with billionaire value investor Warren Buffett. On Thursday, Bear Stearns took advantage of that momentum and some strong demand in the corporate bond market to raise some money.”

Quite a coincidence, no? Makes you wonder who started the rumor. But whatever the source, let it serve as a reminder to be careful in the presence of bears of all kinds.

Read | Permalink | Email this | Comments

Share This

Filed under: Newspapers, Magazines, Yahoo! (YHOO), Cisco Systems (CSCO), Ford Motor (F)

MAJOR PAPERS:

• It was revealed yesterday that Terra Firma is among the potential bidders for Ford Motor Company’s (NYSE: F) Jaguar and Land Rover brands, reported the Financial Times.
• There is a 40% to 45% risk that a recession will be triggered by the housing market downturn in the U.S., the CEO of Freddie Mac (NYSE: FRE) warned, the Financial Times reported.

OTHER PAPERS:

• From BusinessWeek’s “Inside Wall Street” column:
• Investors looking for fast growth in the $110 billion business-enterprise telecom market are betting on Time Warner Telecom (NASDAQ: TWTC), which offers broadband connections for data, high-speed Web access, local voice, and long-distance service.
• Plum Creek Timber (NYSE: PCL) is flying high despite the housing slump and market decline driven by the subprime mortgage crisis.
• Universal Electronics Inc (NASDAQ: UEIC), which makes the remote controls for TVs and other appliances, has caught the Street’s eye.

WEBSITES:

• Unstrung.com reported that Cisco Systems Inc (NASDAQ: CSCO) is close to buying a WiMax base station company, according to sources, and one possible target is Alvarion (NASDAQ: ALVR).
• Yahoo! (NASDAQ: YHOO) is reportedly going to reduce the amount of money and effort it spends on premium services related to music, games, TV, and movies, reported TechCrunch.com.

Permalink | Email this | Comments

Share This