Filed under: Deals, Rumors, Management, Competitive strategy, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO)

I often visualize big business by utilizing my own metaphor of navel warfare. I may be the only guy on the planet to do this, but I don’t think so. The exercise helps me in assessing the strengths and weaknesses of the companies I’m considering. It also helps me in putting intra-corporate affairs into perspective.

In my view, Microsoft Corp. (NASDAQ: MSFT) has been like a swift and smooth-running state-of-the-art aircraft carrier. It’s well outfitted for its task, able to strike at a moment’s notice. It has a well-seasoned and knowledgeable crew. Yahoo! Inc. (NASDAQ: YHOO) has been similar to an aging destroyer group that has been at a loss for an effective admiral. Would you care to guess what I call Google in this scenario? Most of you probably already know. Google Inc. (NASDAQ: GOOG) is like a battle ready nuclear submarine, running deep, cold, and nearly silent, with the ability to effectively engage in battle from a very long distance away.

My point in bringing up this metaphor is simple. I believe that a union between Microsoft and Yahoo! is a timely and appropriate thing. At this point in the game, they really do need each other. They have strengths that are diverse yet compatible. Personally I couldn’t have thought of a better move for Microsoft to make at this time. I believe that is why Microsoft came out with such a blockbuster offer for Yahoo!. This isn’t the kind of thing you want to announce only to let it get bandied about before anything really happens. Strike at dawn in full force and don’t let up until you have what you came for.

How does Google fit into the Microsoft-Yahoo! buyout scenario? Honestly folks, it really doesn’t. I’d bet my next paycheck that the reaction at Google to Microsoft’s offer for Yahoo! was expressed with excitement similar to when the mail carrier arrives. Google plots its own course, pretty much irrespective of what the “competition” is doing. That’s why it’s so successful. That’s how Google does things.

Be ready for Google to take another unexpected turn, stepping into something you never would have thought it might do. I still say it’s getting ready to enter into government contracts for information handling services. There also are whispers swirling around regarding Google and the provision of original Internet content. I wouldn’t yet call them rumors; it’s just something I think I heard.

I’ll sum things up with one more reference to my navel battle metaphor: Never look for Google to launch counter-measures in reaction to a perceived attack. It has been my observation that, without question, Google always goes straight to launching its own torpedoes.

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Filed under: Earnings reports, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Exxon Mobil (XOM), Halliburton (HAL), Sony Corp ADR (SNE), Boeing Co (BA), United Parcel’B’ (UPS), U.S. Steel (X), Dow Chemical (DOW), Valero Energy (VLO), JetBlue Airways (JBLU), Burlington Northern Santa Fe (BNI), Raytheon Company (RTN)

The earnings crunch is in full swing, and here are a few of the highlights of this past week’s earnings coverage from BloggingStocks:

• Airgas Inc. (NYSE: ARG) beat expectations and raised its guidance.
• Boeing Co. (NYSE: BA) beat estimates and said the 787 Dreamliner was on schedule.
• Burlington Northern Santa Fe Corp. (NYSE: BNI) fourth-quarter profits fell on rising fuel costs.
• Crane Co. (NYSE: CR) beat expectations and raised its guidance.
• Dow Chemical Co. (NYSE: DOW) profits fell due to rising costs of raw materials.
• Exxon Mobil Corp. (NYSE: XOM) posted the largest annual and quarterly profit ever by a U.S. company.
• Halliburton Co. (NYSE: HAL) beat earnings expectations due to strong international growth.
• Honda Motor Co. (NYSE: HMC) posted record earnings for the third quarter on demand for fuel efficiency.
• JetBlue Airways Corp. (NASDAQ: JBLU) posted a narrower-than-expected loss.
• Nissan Motor Co. (NASDAQ: NSANY) posted strong results due in part to U.S. sales of the Rogue.
• Occidental Petroleum Corp. (NYSE: OXY) fourth-quarter profit surged, leading to its best yearly results ever.
• Paraexel International Corp. (NASDAQ: PRXL) beat estimates and offered revised guidance.
• Ratheon Co. (NYSE: RTN) posted strong fourth-quarter results and offered optimistic guidance.
• RightNow Technologies Inc. (NASDAQ: RNOW) posted a loss, though revenues were up.
• Sony Corp. (NYSE: SNE) posted solid results on TV sales and the game division’s return to the black.
• Stanley Works (NYSE: SWK) posted solid results despite the housing slump due to strength overseas.
• United Parcel Service Inc. (NYSE: UPS) met earnings estimates due to a pension-related charge.
• US Steel Corp. (NYSE: X) fourth-quarter and full-year profits declined on acquisition costs and job cuts.
• Valero Energy Corp. (NYSE: VLO) beat expectations despite a profit decline of 49%.

For additional BloggingStocks earnings highlights, see Yahoo!, Google, Amazon, Countrywide, Merck, UBS and others and McDonald’s, Kraft, P&G, Verizon, MasterCard, 3M and others.

Also, in the wake of earnings reports from Yahoo! (NASDAQ: YHOO) and Google (NASDAQ: GOOG), Microsoft Corp. (NASDAQ: MSFT) made a move for Yahoo! Rumor has Google going after AOL in response. Meanwhile, Timothy Sykes has some advice for buying stocks ahead of earnings reports.

Upcoming results to watch for include Archer Daniels Midland (NYSE: ADM), Yum Brands (NYSE: YUM), Walt Disney (NYSE: DIS), Cisco Systems (NASDAQ: CSCO), Time Warner (NYSE: TWX), and PepsiCo. (NYSE: PEP).

Visit AOL Money & Finance for more earnings coverage.

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Filed under: Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Apple Inc (AAPL), Intel (INTC), S and P 500, NASDAQ

The market spent much of Friday running numbers on what a Microsoft Corp. (NASDAQ: MSFT) buy-out of Yahoo! Inc. (NASDAQ: YHOO) might yield in terms of competition in the online ad market. What may have been missed is that the S&P 500 had its worst January since 1990 according to Reuters.

The S&P fell about 4%, but the figure for the Nasdaq Composite was much worse. It dropped 8%. Some off the most important stocks in the index had breathtaking falls. Apple Inc. (NASDAQ: AAPL) fell-off about 30%. Intel Corp. (NASDAQ: INTC) fell 15%. Google Inc. (NASDAQ: GOOG) moved down 25%. With their huge market caps, these stocks get tremendous weight in the index.

What this tells the market is that Wall Street is deeply mistrustful about any recovery in the economy. Tech helped keep U.S. stocks from an awful year in 2007. They are now extremely unlikely to reprise that role in 2008. That does not leave any sector to help the market through a tough period. The economic slowdown has already touched most industries.

If the past is prelude, the stock market is in for a bone-jarring drop in 2008. A day of M&A news is just a distraction.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Law, Merrill Lynch (MER)

Massachusetts Secretary of State William Galvin is suing Merrill Lynch (NYSE: MER), accusing the firm of defrauding the city of Springfield, home of Homer Simpson, with subprime investments.

Merrill Lynch has already taken the unusual step of agreeing to buy back $13.9 million in subprime debt from the municipality at its original value after deciding that brokers had not been authorized by the city to buy the debt in the first place.

Merrill says it’s puzzled by the suit, but Massachusetts is arguing that it told Merill to invest in “instruments that yielded more than Merrill’s money market account as long as the products were triple-A rated by the major credit-rating agencies.” It says that Merrill didn’t warn Springfield about the risks of the CDOs.

Springfield officials — and the secretary of state — should take a look at the chart above. The idea that they could earn above-average returns with no risk defies the most basic principles of investing.

Maybe the lawsuit does have merit — I have no idea. It appears that Springfield may have been misled about what it was getting itself into. But the fact is, Merrill lost big on subprime too because everyone forgot about the handy-dandy chart above: if it sounds too good to be true …

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Filed under: Deals, Competitive strategy, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Employees

With the announcement of Microsoft (NASDAQ: MSFT)’s $44.6 billion bid for Yahoo! (NASDAQ: YHOO), the real courting process is about to begin.

As I predicted back in July 2007, this “affair” had to happen if Microsoft was ever going to be serious in challenging Google (NASDAQ: GOOG)’s reign in the lucrative search engine world. Looking at October 2007 data from comScore — the independent scorekeeper in the search world — Google was actually widening its dominance. Explain please!

There were 55.3 billion search queries worldwide during the month of October. Google handled 42.4 billion of these queries, while 2.1 billion were directed to Microsoft and Yahoo! handled 10.8 billion — or a total of one-quarter of Google searches. Worldwide growth was 56% year-over-year for the industry, while Google’s annual growth alone was 81%. The message: Google was taking market share at the expense of Microsoft and Yahoo!. Coupled with its recent disappointing guidance for 2008, Yahoo! had no choice but to hook up with Microsoft, and the opportunity for Microsoft was now. That’s all well and good, but now what happens?

Yahoo! is headquartered in Sunnyvale, Calif., just south of San Francisco, while Microsoft is 1,000 miles north in the Seattle area. The 1,000 miles is also the gap in their respective corporate cultures. Microsoft will do almost anything now to retain the key, strategic Yahoo! employees. Culturally, Microsoft versus Yahoo! is like the stiff-upper-lipped British “gentleman” meeting a reformed 1960s hippie. Microsoft I know would disagree, but visit both campuses and the differences are rather pronounced.

Yahoo! already announced the head-count reduction of 1,000 people from its 11,000-person workforce, and Microsoft mentioned a $1 billion worth of “synergies” once the transaction closes. “Synergies” in Silicon Valley means more head-count reductions. But more importantly, key Yahoo personnel not scheduled for layoffs will begin to feel suspicious. Will key positions be in Sunnyvale or in Redmond, Washington? Will my new boss wear a Microsoft hat rather than a Yahoo! hat? Will I be able to park my bike here on campus for free? Will the coffee remain free? Can I still create to my heart’s content?

These are the types of questions that run through the brilliant minds of technology geeks. Microsoft will not close the Yahoo! transaction for about six months. The ensuing six to nine months will tell the tale if Microsoft is capable of absorbing such a large acquisition. The Microsoft acquisition of aQuantive went smoothly — so far — as aQuantive is only five miles away and key senior managers were kept in place. This Yahoo! purchase is about eight times larger, but Yahoo! was also a direct competitor to Microsoft. aQuantive was a totally new technology for Microsoft, so they had to retain the key players.

Microsoft has yet to detail what “synergies” really means. Who stays and who goes? What about Yahoo! CEO and co-founder Jerry Yang — what’s his REAL new role going to entail? Right now, Jerry must be kept happy.

Large acquisitions rarely go without major disruptions and surprises. The biggest surprise here may be Yahoo! employees “taking it easy” these next three to six months. The attitude of “we now have a deep pocketed parent” may permeate, and Yahoo!’s senior management will be more focused on the acquisition process than the business building process.

The real opportunity here may be for Google. Google may prove to be the biggest winner of all in this proposed deal. More on why this move is to Google’s advantage in my next article … stay tuned.

Georges Yared writes about finding great growth stocks today in GameOn Investing.

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Filed under: Deals, Rumors, Management, Competitive strategy, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO)

I often visualize big business by utilizing my own metaphor of navel warfare. I may be the only guy on the planet to do this, but I don’t think so. The exercise helps me in assessing the strengths and weaknesses of the companies I’m considering. It also helps me in putting intra-corporate affairs into perspective.

In my view, Microsoft Corp. (NASDAQ: MSFT) has been like a swift and smooth-running state-of-the-art aircraft carrier. It’s well outfitted for its task, able to strike at a moment’s notice. It has a well-seasoned and knowledgeable crew. Yahoo! Inc. (NASDAQ: YHOO) has been similar to an aging destroyer group that has been at a loss for an effective admiral. Would you care to guess what I call Google in this scenario? Most of you probably already know. Google Inc. (NASDAQ: GOOG) is like a battle ready nuclear submarine, running deep, cold, and nearly silent, with the ability to effectively engage in battle from a very long distance away.

Continue reading Microsoft, Yahoo!, and Google: Let the war games continue

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Filed under: Earnings reports, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Amazon.com (AMZN), Countrywide Financial (CFC), Monster Worldwide (MNST), Merck and Co (MRK), Allegheny Technologies (ATI), Lilly (Eli) (LLY), EMC Corp (EMC), Symantec Corp (SYMC)

The earnings crunch is in full swing, and here are a few of the highlights of this past week’s earnings coverage from BloggingStocks:

• Allegheny Technologies Inc. (NYSE: ATI) posted lower fourth-quarter profits but record full-year sales.
• Amazon.com Inc. (NASDAQ: AMZN) posted strong results and offered bullish guidance (see transcript).
• Concur Technologies Inc. (NASDAQ: CNQR) revenue soared and it offered revised guidance.
• Countrywide Financial Corp. (NYSE: CFC) posted a bigger-than-expected loss for the fourth-quarter.
• Eli Lilly & Co. (NYSE: LLY) beat earnings expectations but fell short of revenue estimates.
• EMC Corp. (NYSE: EMC) beat estimates but shares were dragged down by VMware results.
• Google Inc. (NASDAQ: GOOG) shocked investors and missed earnings expectations (see transcript).
• Intuitive Surgical Inc. (NASDAQ: ISRG) beat estimates as revenue soared.
• Lazard Ltd. (NYSE: LAZ) sidestepped the subprime mess and fourth-quarter earnings soared.
• MBIA Inc. (NYSE: MBI) reported a $2.3 million loss due to mortgage write downs.
• Merck & Co. (NYSE: MRK) posted a $1.6 million loss and lowered its full-year guidance.
• Monster Worldwide Inc. (NASDAQ: MNST) posted strong results despite weakness in North America.
• ScanSource Inc. (NASDAQ: SCSC) beat earnings estimates but matched revenue forecasts.
• Somanetics Corp. (NASDAQ: SMTS) beat estimates and offered revised guidance.
• Symantec Corp. (NASDAQ: SYMC) beat expectations on revenue growth from overseas.
• UBS (NYSE: UBS) reported a record loss for the fourth quarter due to the subprime crisis.
• VMware Inc. (NYSE: VMW) missed revenue forecasts, sending shares tumbling.
• Yahoo! Inc. (NASDAQ: YHOO) posted unimpressive results, but beat earnings expectations (see transcript).

For additional BloggingStocks earnings highlights, see Exxon, Boeing, Halliburton, Sony, UPS, Honda, and others and McDonald’s, Kraft, P&G, Verizon, MasterCard, 3M, and others.

Also, in the wake of Yahoo!’s and Google’s reports, Microsoft Corp. (NASDAQ: MSFT) made a move for Yahoo! Rumor has Google going after AOL in response. Meanwhile, Timothy Sykes has some advice for buying stocks ahead of earnings reports.

Upcoming results to watch for include Archer Daniels Midland (NYSE: ADM), Yum Brands (NYSE: YUM), Walt Disney (NYSE: DIS), Cisco Systems (NASDAQ: CSCO), Time Warner (NYSE: TWX), and PepsiCo. (NYSE: PEP).

Visit AOL Money & Finance for more earnings coverage.

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Filed under: Mutual funds

Claymore Securities Inc. has announced plans to shut down 11 of its 37 exchange-traded funds. According to the Wall Street Journal (subscription required), “The board of directors for the Claymore funds voted on the move this week following a recommendation from the firm’s ETF business group amid lagging investor interest for the products.”

According to Claymore’s press release, the funds being closed include Claymore/BIR Leaders 50 ETF, Claymore/BIR Leaders Mid-Cap Value ETF, Claymore/BIR Leaders Small-Cap Core ETF, Claymore/Robeco Boston Partners Large-Cap Value ETF, Claymore/LGA Green ETF, Claymore/KLD Sudan Free Large-Cap Core ETF, Claymore/Clear Mid-Cap Growth Index ETF, Claymore/Zacks Growth & Income Index ETF, Claymore/IndexIQ Small-Cap Value ETF, Claymore/Robeco Developed World Equity ETF and the Claymore/Clear Global Vaccine Index ETF.

This may be an early sign of a coming shakeout in the fast-growing ETF industry. A lot of ETFs that have been created don’t serve any real purpose and their small-size can make the expense ratios hefty — the single most important factor to look at when considering any fund.

There’s a huge selection of ETFs to choose from but, for most investors, total market index funds are the cheapest, least complicated option — and that makes them the best choice.

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Filed under: Management, Crocs Inc (CROX)

Someone had to pay for the extremely disappointing downturn in the stock of Heelys Inc. (NASDAQ: HLYS), the children’s shoe company that builds wheels into its footwear. The company’s CEO was pushed out on Friday.

The stock has fallen from a 52-week high of $40.09. The shares now change hands just above $6.

After a huge run in revenue that moved from $21 million in 2004 to $188 million in 2006, more recently sales have fallen off to $50 million after hitting $75 million in the June quarter.

Like other specialty shoe companies, including Crocs Inc. (NASDAQ: CROX), Heelys has not been able to follow its first big hit with other items.

Changing CEOs is not going to alter that.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Bad news, Industry, Rants and raves, Competitive strategy, China, Politics, Recession

Someone might want to explain this to me because it defies nearly all palatable logic that I can apply to it. I read earlier this week that China carries a large debt portfolio and that about 70% of it is American debt. Additionally, China is buying up American debt at break-neck speed, while possibly neglecting their own populace in order to do so.

As I was taught, there are two potentially profitable reasons to buy debt obligations. The first (and best) reason is because there is a reasonable expectation that the debt will be repaid, supported by documentation, collateral security, and research. The second reason is because there is an expectation that the debtor shall default, resulting in the expeditious seizure of pledged security assets that are desired.

I’ve become aware of an unsettling third scenario regarding the value of buying debt. You can easily use it to buy control of the debtor’s assets through their weakness.

Continue reading American debt and the Great Chinese Mind-Bender

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