Filed under: Earnings reports, Dell (DELL), Technology

Dell (NASDAQ: DELL) rolled out its Q3 numbers after the bell this afternoon, and they were in-line with expectations. The analyst crowd had pegged Dell with a $0.35 EPS for the Q3 period, and the company saw an actual of $0.34 for the quarter, missing consensus estimates by a penny. Will the market punish it after hours? So far, yes — Dell shares are down to $26.29 in after-hours trading after completing the trading day at $28.14.

Dell’s Q3 revenues were $15.6 billion, up 9% from the year-ago quarter, with operating income at $829 million (up 13% year over year). In addition, the world’s second-largest computer maker saw $1 billion in cash from its operations, along with growing its business in the Americas 7%. By contrast, Dell’s international operations grew much larger than that: EMEA business grew 14% while the Asia Pacific region saw 18% growth gains.

Dell has spent $103 million YTD on acquisitions, which include Silverback, Zing, ASAP, EqualLogic and Everdream. Dell, in other words, is trying to make up for lost ground using a string of smaller acquisitions. This was not the company’s strategy about 24 months ago, but times have changed. If you’d like to see all the details currently being presented in the Q3 conference call, visit this link (PDF download).

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Filed under: Bad news, Rumors, Products and services

The record loss in credits markets since August is dampening plans by music companies EMI and Warner Music Group Corp. (NYSE: WMG) to refinance debts and provide dividends to shareholders, while “reinvesting in core operations.” The company’s plans come at a time when the music industry is dealing with sharp declines in CD sales and the continued problems in the face of widespread digital growth, according to the Financial Times. Unfortunately, neither company is rumored to be pressing ahead with the plans. WMG stock has fallen nearly $20 in the past year according to the same report, a trend that could certainly welcome a boost.

These rumors come at a time when similar rumors have been announced that EMI wants to cut funding to trade groups like the Recording Industry of America, which work against piracy, and issue that the industry has been dealing with for a number of years. This plan hopes to benefit from the back catalogs of major artists and the potential future catalogs those artists will produce. The Financial Times notes “the steady revenues generated by music publishing have become increasingly prized by investors at a time when the future of the more glamorous recorded music business is uncertain.” The major reason cited for that uncertainty is the industry’s inability to create digital sales to replace missing CD sales.

In the end, the credit problems these companies face only indicate that new business models are needed. Luckily EMI seems to be leading some kind of change in the current model, after dropping the use of anti-piracy software in media files last April. If major retailers start to cut back on space allotted to CDs, which is another prediction the Financial Times quotes, the industry could face even more setbacks. Frankly, an expedited move toward the digital market is needed to offset a number of these problems, but that is going to take a major wake up call and changes in the credit market may serve as a needed rough shake.

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Filed under: Other issues, Good news, Consumer experience

“You’ll be swell, you’ll be great.
Gonna have the whole world on a plate.
Startin’ here, startin now’,
Honey, everything’s coming up roses.”
-Ethel Merman, “Everything’s Coming Up Roses”

The late Ethel Merman, the First Lady of Broadway, would be proud.

Broadway theater owner/producers and the stagehands’ union have reached a tentative agreement, ending a costly, 19-day strike which had kept more than two dozen shows dark in the most-represented, live, dramatic performance district in the world. Details of the tentative contract were not disclosed, The Associated Press reported.

Continue reading Everything’s coming up roses for Broadway

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Filed under: Apple Inc (AAPL), General Mills (GIS), Options

Apple, Inc. (NASDAQ: AAPL) recently up $3.90 to $184.17:

Steve Jobs is expected to introduce the Apple 3G iPhone with pricing in early 2008. Macworld will be held January 14-18 in San Francisco. COMDEX will be held January 7-10 in Las Vegas. AAPL December option implied volatility was at 40, January was at 50. AAPL’s 26-week average option implied volatility was 45 according to Track Data, suggesting larger price risk in January.

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

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Filed under: Deals, Rumors, Microsoft (MSFT), Yahoo! (YHOO)

Microsoft Corp. (NASDAQ: MSFT) has long been rumored to be looking at a purchase of Yahoo! Inc. (NASDAQ: YHOO). The rumors of a Microsoft-Yahoo combination have had an on again/off again status for years, and renewed chatter seemed to crop up every time Yahoo! was in the market’s doghouse or when competitor Google, Inc. (NASDAQ: GOOG) reported a solid quarter. Since Google has nearly always reported solid quarters in its entire history as a publicly-traded company, Microsoft-Yahoo chatter has been bandied in the press quite regularly.

Would Microsoft really use billions of its cash and take on debt to buy a company that basically replicates much of what it already does in terms of online product offerings? That would be a stupid financial mistake. If Microsoft wanted to buy Yahoo! simply to combine the internet search offerings of both companies in an effort to try and make a killing off internet advertising as Google currently does, that makes sense. However, the payoff would take quite a while and Google’s market-leading internet search market share shows no signs of ceding anything to the competition.

Former Wall Street guru Henry Blodget recently went down the rode of plausibility on a combined Microsoft-Yahoo that brings up some good points and some interesting cautionary notes on why a combined Micro-hoo (ha!) would be disastrous for Yahoo!. In a nutshell, Blodget says that Microsoft would never allow a combined Micro-hoo to challenge the Windows and Office franchises that currently supply almost all of Microsoft’s revenue base.

His argument, though, is that such a stance is precisely what would be needed to fend of Google’s march into the online productivity world with its Docs & Spreadsheets offering as well as Google being “hell bent” on destroying Microsoft’s Windows and Office monopolies. It’s interesting that Blodget does not even mention Google’s cash cow (online advertising), or what Micro-hoo could do to compete better in that arena.

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Filed under: Law, Newspapers

Yesterday I wrote about a new SEC rule that will make it easier for corporate managers to reject shareholder efforts to put their own board nominees on the ballot.

The decision is a disaster for corporate governance in America, and the Wall Street Journal’s headline today pretty much sums it up: “Cox, in Denying Proxy Access, Puts His SEC Legacy on the Line.”(subscription required). Christopher Cox is the Chairman of the SEC.

The Journal adds that “The tensions over proxy access may tarnish Mr. Cox’s image as a self-proclaimed investor advocate. It also reopens concerns he had so far deflected: that he would roll back shareholder rights in favor of business interests, as well as questions about the effectiveness of his consensus-based approach to rule making.”

The argument against broader proxy access is pretty lame: Business groups argue that this will allow corporations to prevent special interest groups like labor unions or GreenPeace from hijacking public companies to further their own interests. That would be a valid point except that special-interest groups rarely gain enough shareholder support to win board seats — If they do get the number of votes needed to get on the board, then it isn’t really a special interest: most shareholders support it!

What this will really do is make it easier for incompetent or just plain bad directors to insulate themselves and management from accountability. That’s wrong and it’s bad for business.

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Filed under: Top Picks 2007, Bargain stocks, Chasing Value, Amer Home Mtge Investment (AHM), Stocks to Buy, Newcastle Investment (NCT)

You read that correctly, Newcastle Investment Corp (NYSE: NCT) a REIT, is currently paying around $2.88 per share dividend, that equates to a yield of 21.9% based on yesterday’s closing price of $13.15 according to AOL Money & Finance data. We all know the “truism” that if something sounds to good to be true… it usually is. So why am I crazy enough to even consider such a thing? Believe me, I have been asking myself that question over the last five months or so that I have been watching this stock.

Newcastle first came to my attention through a Smart Money story written by James B. Stewart many months ago. He was discussing three stocks that he thought were worth the risk and had bought into all three. One of them was the now bankrupt American Home Mortgage (AHM) — need I say more? The second was NCT and the third escapes my memory. Bankruptcy tends to put a damper on my investment psyche, so I left this idea alone until last month when NCT popped up on my radar screen again.

I do not remember what I was reading at the time but I started to take a closer look and found that NCT was very well diversified into all classes of real estate, with only 10% of the portfolio being in residential properties. Looking at some of the traditional metrics: the P/E is around 10, the P/S 1.3, the P/B 0.74 and the PEG ratio is listed at 0.15. All these numbers are SCREAMING VALUE very loudly. So what’s the problem?

Continue reading Chasing Value: Newcastle’s 21.9% yield too good to be true?

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