Filed under: Google (GOOG), Microsoft (MSFT), Apple Inc (AAPL)

Microsoft Corp. (NASDAQ: MSFT) today reported outstanding third quarter results that handily beat Wall Street expectations.

Net income was $4.29 billion, or 45 cents a share, compared with $3.48 billion, or 35 cents, a year earlier, Sales surged 27 percent to $13.8 billion. Analysts had expected profit of 39 cents and sales of $12.57 billion, according to Thomson Financial. Shares soared over 9% in after-market trading.

Of course, the world’s largest software maker, which until now was in Wall Street’s dog house, couldn’t have been more pleased. “This fiscal year is off to an outstanding start with the fastest revenue growth of any first quarter since 1999,” said CFO Chris Liddell, in the earnings release. “Operating income growth of over 30% also reflects our ability to translate revenue into profits while making strategic investments for the future.”

So does this mean that Wall Street is now going to get off Microsoft CEO Steve Ballmer’s back about the billions the company is spending to catch up to Google Inc. (NASDAQ: GOOG)? Not very likely. One quarter does not make a trend even with its recent deal with Facebook.

But there is plenty for investors to like in the quarter. Vista sales seemed strong and the company hasn’t been aggressively cutting xBox prices which has helped profitability, RCM Capital Management’s Walter Price told Bloomberg News.

There is one perplexing side to the strong tech results this earnings side. If consumers are so worried about the future, how come they are willing to buy things like the xBox, Vista and Apple Inc.’s (NASDAQ: APPL) iPhone. Aren’t they worried about housing, energy costs and life in general? Maybe they are so focused on their tech toys that they don’t care about the rest of the world. Who knows.

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Filed under: Earnings reports, Anheuser-Busch Cos (BUD)

Anheuser-Busch (NYSE: BUD)’s third quarter earnings of 95 cents a share beat analyst expectations of 92.5 cents, with U.S. sales by volume up 2% over 2006, same quarter. International sales grew a hefty 8.2%, and equity partner brands Grupo Modelo and Tsingtao, were also up 7.6%. Overall, the company poured 45 million gallons in the period.

Net sales reached $4.6 billion, up 7.6% over 2006. The jump is attributed to both increased volume (2%) and better pricing (3.1%).

BUD has overcome a slow first quarter to show a year/year increase in earnings of 5.7% for the first three quarters, with diluted EPS also up 9.2% to $2.49. It also held its share of the U.S. beer market, estimated at 48.8% vs. 48.7% a year ago.

The company announced shareholders will receive a 33 cent dividend.

Not all is frothy, though, according to analysts surveyed by Reuters. They point to an ongoing weakness in core brands Budweiser and Bud Light that was somewhat obscured by the strong performance of equity partner brands.

BUD also announced forthcoming price hikes for its beers in the fourth quarter of this year and early 2008. Combined with the threat posed by the recent partnering of Molson Coors (NYSE: TAP) and SABMiller (OTC: SBMRY) in the U.S. market, these earnings, while pleasing, will leave many investors still skeptical.

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Filed under: Products and services, Consumer experience, Media World

Nine Inch Nails front man Trent Reznor is taking his own dislike of the record industry and the new standard by Radiohead to the next level by releasing a collaboration album with Saul Williams for free on the internet, according to NME. The album, The Inevitable Rise and Liberation of Niggy Tardust, will be released on a special site for the album on November 1 and cost fans zilch. Billboard notes that a $5 donation for the album will be optional, but allows the consumer to get a “higher quality digital format” while either purchase will be free of Digital Rights Management technology.

The impact of this album may not be as influential or large as the Radiohead release a couple of weeks ago, but the effects are clearly starting to ripple through the music industry. Reznor states on the Nine Inch Nails website that the goal was to “improve upon [Radiohead’s] idea” and “benefit the consumer,” which is obvious from the obvious free choice. Reznor is also careful to mention that their situation is different from Radiohead’s because “Saul Williams is not a household name” and they need fan support.

In the new era of digital music that is dawning, fan and consumer support will obviously be vital. If artists are willing to keep album prices down, then the success of this “revolution” will be insured. Unfortunately, it looks like no matter how many large acts get involved the work will be for the less known artists to make the new model work. In the end, the novelty of such moves will wear off, but if the labels can find a middle ground, the fans may embrace that method as well.

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As noted, given the current choppy/consolidating market conditions, adding a few defensive plays is a prudent strategy. Humana Inc. (NYSE: HUM) is an insurer worth an evaluation.

Humana’s Medicare and Medicare prescription business, 50-state presence, likely substantial membership growth, and cost controls make it an “insurance company of significance.” Another major positive: the currently underserved Medicare population, and an expanding Medicare demographic, the latter courtesy of the U.S. baby boom generation’s retirement. HUM closed Thursday up $3.43 to $76.93.

The qualifiers? Competition on HUM’s commercial business side is a hurdle, but overall, the risk/return for this stock is favorable.

[Note: Technical analysis agnostics stop reading here; all others continue.]

Technically, Humana’s chart looks strong. The stock did straddle its 50-day moving average this summer, but has since remained solidly above it, while also clearing $65-$68 resistance. With a new 52-week high recently in place and a P/E of 21, HUM is not cheap, but it’s a reasonable price to pay for this safety-and-growth hybrid.

Stock Analysis: Humana is a low-risk stock. Investors with an investment horizon longer than 1 year should be rewarded from HUM’s shares. A preferred entry price if one were to buy would be below $75, if the market presents that opportunity. Sell / Stop Loss: $47.

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Filed under: Law, Marketing and advertising, AT and T (T), Sprint Nextel Corp (S), Vonage Holdings (VG)

Vonage Holdings Corp. (NYSE: VG) continues to pay big bucks to settle patent infringement cases.

The Internet phone company today settled its long-running dispute with Verizon Communications Inc. (NYSE: VZ). In March, a jury awarded Verzion $58 million and issued an injunction that basically would have forced Vonage out of business. That decision was upheld by the U.S. Court of Appeals for the Federal Circuit.

Vonage will pay Verizon up to $117.5 million, depending on the outcome of pending appeals, the Holmdel, NJ-based company said in a statement. It will also give $2.5 million to charity. This settlement isn’t surprising. Patent litigation is really expensive and takes forever to wind its way through the courts which is why companies are eager to settle these cases before trial.

Earlier this month, Vonage settled a patent dispute with Sprint Nextel Corp. (NYSE: S) for $80 million. It faces a separate legal action from AT&T Inc. (NYSE: T). With all of these huge companies wanting a piece of it, it’s a wonder that Vonage is still standing.

Absent the patent issues, Vonage’s future remains bleak. It competes to offer what is basically a commodity service against much larger rivals. Once these patent cases are settled, my suspicion is that one of them will try to snap up Vonage while the stock continues to trade well-under its $17 IPO price. It closed today at $1.53.

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Filed under: Apple Inc (AAPL), Sony Corp ADR (SNE), Media World

Sony BMG (a merger between Sony Corporation (NYSE: SNE) and Germany’s Bertelsmann) posted a $8 million loss in sales during the company’s fiscal second quarter, which ended on September 30, in a report by Billboard today. Sales in the second quarter totaled $851 million, which was down from $948 million during the same period of 2006. Nonetheless, Billboard notes that the $8 million loss is lower than that year’s $39 million drop.

Sony BMG attributes the drop “to the declining of the physical music market and to fewer major artist release in this year as compared to last year.” The $8 million drop is also compared with the 2005 second quarter results, which were $60 million lost and revenues of $936 million. Clearly some gain has been made in lowering the drop, but in comparison to the large revenue gap between 2006 and 2007, the loss seems pale.

In the record industry, Sony BMG has traditionally ranked second to Universal Music Group, amounting to about 25-30% of the market. The company has also reportedly signed on with Universal to create the new Total Music, which hopes to compete with Apple Inc. (NASDAQ: AAPL)’s iTunes Store, but as a subscription-based service. Unfortunately, Universal Music’s second quarter earnings have not been announced, so any correlation between the two largest music companies and the decision to create Total Music cannot fully be assessed.

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Filed under: Money and Finance Today, Goldman Sachs Group (GS), Rich in America, Initial public offerings

Pzena Investment Management (NYSE: PZN) got its start in 1995 — and has been quite busy since then. These days the firm manages about $30.6 billion.

In fact, today the company hit the public markets in a successful IPO. Pzena priced its offering at $18, which was at the top of its $16-$18 range. The underwriters include tier-1 firms Goldman Sachs (NYSE: GS) and UBS Investment Bank (NYSE: UBS).

Pzena’s investment approach is on the value side. What’s more, the firm is a big believer in providing high-end services. Then again, the clientele tends to be fairly affluent.

Continue reading Pzena cashes in on the IPO comeback

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Filed under: Google (GOOG), Microsoft (MSFT), Apple Inc (AAPL)

Microsoft Corp. (NASDAQ: MSFT) today reported outstanding third quarter results that handily beat Wall Street expectations.

Net income was $4.29 billion, or 45 cents a share, compared with $3.48 billion, or 35 cents, a year earlier, Sales surged 27 percent to $13.8 billion. Analysts had expected profit of 39 cents and sales of $12.57 billion, according to Thomson Financial. Shares soared over 9% in after-market trading.

Of course, the world’s largest software maker, which until now was in Wall Street’s dog house, couldn’t have been more pleased. “This fiscal year is off to an outstanding start with the fastest revenue growth of any first quarter since 1999,” said CFO Chris Liddell, in the earnings release. “Operating income growth of over 30% also reflects our ability to translate revenue into profits while making strategic investments for the future.”

So does this mean that Wall Street is now going to get off Microsoft CEO Steve Ballmer’s back about the billions the company is spending to catch up to Google Inc. (NASDAQ: GOOG)? Not very likely. One quarter does not make a trend even with its recent deal with Facebook.

But there is plenty for investors to like in the quarter. Vista sales seemed strong and the company hasn’t been aggressively cutting xBox prices which has helped profitability, RCM Capital Management’s Walter Price told Bloomberg News.

There is one perplexing side to the strong tech results this earnings side. If consumers are so worried about the future, how come they are willing to buy things like the xBox, Vista and Apple Inc.’s (NASDAQ: APPL) iPhone. Aren’t they worried about housing, energy costs and life in general? Maybe they are so focused on their tech toys that they don’t care about the rest of the world. Who knows.

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Filed under: Earnings reports, Bad news, Competitive strategy, Avery Dennison Corp (AVY)

Label maker and retail information specialist Avery Dennison Corporation (NYSE: AVY) touted its recent $1.34 billion acquisition of Paxar as an example of competitive synergies and cost-saving efficiencies. Well, that remains to be seen. Avery Dennison used its Paxar acquisition, and related costs of integration, to explain just about everything in its recent 3Q 2007 earnings release.

Net sales increased 19% to $1.68 billion, the entire increase due to Paxar acquisition. EPS would have been $0.99 except for costs related to Paxar acquisition. So EPS was actually $0.58. Avery will eventually realize $115-$125 million in cost savings from Paxar acquisition but hasn’t realized anything yet. CEO Dean Scarborough stated Avery Dennison is trying to “find operational efficiencies” and is “on track to achieve targeted cost synergies,” but can’t find the efficiencies just yet and apparently missed the synergistic target due to the fact that the company is “experiencing some current headwinds.” Wonder if his speech writer gets paid by the cliche?

Avery Dennison used some creative financing to acquire Paxar and needs to show some bang for its billion bucks, soon. In the pressure-sensitive label segment, sales were up 5%, but organic growth accounted for just 1%. In the retail information services segment, Avery posted 136% sales increase, 135% of which was due to Paxar acquisition and 1% due to organic growth. The office and consumer products segment reported a 5% decline in sales. CEO Scarborough blamed the decline on a slow back-to-school season, whatever that might mean.

Investors should not look for clarity in next quarter’s earnings reports either. The company is already hedging its FY 2007 to exclude Paxar integration costs. The stock closed on Oct. 24 at $57.95, down $1.35.

Visit AOL Money & Finance for more earnings coverage

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Filed under: Microsoft (MSFT), Research in Motion (RIMM), Nortel Networks (NT), Stocks to Buy

My recent Investing in Ontario post took a look at the Royal Bank of Canada (NYSE: RY), Manulife Financial Corp. (NYSE: MFC), and Toronto-Dominion Bank (NYSE: TD); three public companies examined by the Motley Fool this past summer.

However, Ontario is more than just Canada’s financial center. Its abundance of resources and location on Great Lakes have made Ontario a manufacturing powerhouse, including steel production and automobile manufacturing in southern Ontario, and mining and forestry in the north. Toronto is Canada’s film and media center, as well as an important tourism destination. Niagara Falls is one of world’s most popular tourist destinations. Other Ontario companies the Motley Fool liked include Research in Motion Ltd. (NASDAQ: RIMM), Nortel Networks Corp. (NYSE: NT), and IMAX Corp. (NASDAQ: IMAX).

Research in Motion (RIM), Canada’s largest public company, is well know for its BlackBerry smart phones, but it also provides software development tools and produces radio-based modems used in portable devices. The consensus recommendation of analysts surveyed by Thomson Financial is to buy RIM, and has been since April. RIM met analysts’ earnings per share estimate when it reported second quarter FY2008 earnings in early October, and Wall Street expects EPS of 62 cents in the third quarter, double the 31 cents actual from a year ago. RIM has a five-year EPS growth rate of 73.5%, easily beating the S&P 500 and the technology sector average. RIM’s share price has been climbing since a share split in August, to reach a 52-week high of $128.36 on Tuesday; it opened today at $124.75. Also this week, RIM announced plans to sell the BlackBerry in China, and introduced Facebook for the BlackBerry as well. For more on Microsoft Corp.’s (NASDAQ: MSFT) challenge to RIM and other RIM-related news, see Bloggingstocks’ RIM coverage.

Continue reading Investing in Ontario: Research in Motion (RIMM), Nortel Networks (NT), and IMAX (IMAX)

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