02/03/14 - 08:46 AM EST
Last week I wrote a piece headlined, "Why ADT is Appalling." What's more appalling is the company's response, which was inserted at the end of the story after it was published -- almost immediately after I heard from the company.Here's the question I asked, via email:"I'm working on a piece about how ADT's stock has fallen in the wake of its earnings miss -- and its comments that it has "implemented actions" to "regain subscriber traction.""But this is the same company spent money buying back billions of dollars in stock at prices well above its current price in a share repurchase program that was instituted after Corvex disclosed a 5% stake."Corvex then went on the board -- and then got bought out at a high price just before this bad news hit."The obvious question: Why was Corvex given special treatment, and as a board member what did they know prior to selling?"READ FULL POST
01/30/14 - 04:27 PM EST
(This story has been updated from 1:09 PM EST with ADT's response to my media inquiry) Earnings disappointments come a dime-a-dozen, but ADT's ADT is a standout. The company said its customer growth in its fiscal first quarter, ended Dec. 27, didn't meet its expectations and that it has "implemented actions, including improvements in our dealer channel and lead generation process, to regain subscriber traction in the future."Here's the problem: Over the past year, rather than investing more cash in its business than it otherwise might have, ADT has spent billions buying back shares at prices well above where the stock now trades -- with the distortion even greater in the wake of today's earnings miss.That highlights a problem with buybacks, in general: They're often designed to give a short-term pop in the stock to assuage antsy investors. They're also often the tool of first resort when activists land on a company's doorstep, which was the case with ADT. And, as is the case with ADT, the result can often be short-term gain for long-term pain.READ FULL POST
01/30/14 - 08:56 AM EST
The post-close plunge in Neustar's shares is the result of a bidding process gone awry. As I pointed out in my October piece headlined, 'Why Neustar Could Fall,' the company is in the process of a bidding battle for the database that makes it possible for you take your phone number with you if you move or change carriers. For the first time since Neustar started managing the database in 1997, the portability contract, as it's called, is up for grabs. Originally, a decision was expected last September. It was then, without explanation, pushed off until around Jan. 20. Then, as I mentioned in a piece last week, rival in the bidding process, Telcordia Telecommunications, cried foul....READ FULL POST
01/29/14 - 11:58 AM EST
No surprise department: In the wake of yesterday's piece here wondering whether the Feds have launched a criminal investigation of Stericycle SRCL, analysts were out in lockstep defending the company. My story revolved around a belching incinerator in Utah, which handles all medical waste from the West Coast. Here is a smattering of comments: CSFB "Materiality Is Minimal. We estimate that less than 10% of SRCL volumes are incinerated and this is only one out of eight incinerators, so volume is immaterial. We would also note that part of the volumes that go to incinerators do so in order to keep the facility at 100% capacity. SRCL has the option of redirecting some waste to autoclaving and other disposal alternatives if need be.....READ FULL POST
01/28/14 - 10:42 AM EST
Sometimes the best clues to what is really going on in a company can be found in local news media in a company's hometown. Or in towns they operate in.The latter is the case with Stericycle (SRCL), the medical waste disposal company.Of particular note: Controversy surrounding its waste disposal incinerator in the community of North Salt Lake, Utah, which is the only medical waste incinerator between the Pacific Ocean and Utah and one of a dozen or so in the country.Based on many local media stories, including this one in the Deseret News, Stericycle's Utah incinerator seems to have a problem: According to Utah press, it repeatedly belches toxic fumes, which has not gone over well with the housing subdivision that borders the plant.READ FULL POST
01/27/14 - 05:13 PM EST
One of the oldest 'not so secret' worst-kept secrets was that Apple always lowballed guidance so it could blow through expectations. But that was supposed to have changed in January. As I wrote at the time, CFO Peter Oppenheimer said at the time: 'In recent years, our guidance reflected a conservative point estimate or results every quarter that we had reasonable confidence in achieving. Going forward, we plan to provide a range of guidance that reflects our belief of what we are likely to achieve. While we cannot forecast with complete accuracy, we believe we are likely to report within the range of guidance we provide.' Why point that out now? Because with Apple's punk guidance, people are again suggesting Apple is up to its old tricks.READ FULL POST
01/24/14 - 11:39 AM EST
The battle over Neustar NSR just took a new, juicy twist.To refresh your memory: As I wrote in October, in a piece headlined, 'Why Neustar Could Fall,' Neustar NSR controls the contract of the database that makes it possible for you take your phone number with you if you move or change carriers.For the first time ever, the contract has been put up for bid. This is a big chunk of Neustar's revenue. Originally a decision by the Federal Communications Commission was expected last fall. Then it was pushed back to a timeframe expected to be just about now -- or at some point in January. Now hear this: According to FCC disclosures, it appears that earlier this week, with a decision either imminent or already made, Nuestar CEO Lisa Hook called FCC Chairman Tom Wheeler. The call appears to be about a heavily redacted letter Neustar sent to the FCC last week. That didn't go over well with Telcordia Technologies, which is believed to be the chief rival in the bidding.READ FULL POST
01/24/14 - 07:26 AM EST
Easy come, easy go. So goes the story of Intuitive Surgical, whose shares leapt higher Jan. 14 after the company issued sharply higher fourth-quarter guidance. Actual headline results, reported Thursday, were in line with expectations but...the trouble, which has caused the stock to slump, was below the headlines. Notably, the gross margin on product sales tumbled to 69.5% from 73% a year earlier. At the same time, inventories skyrocketed -- not a good combo. CFO Marshall Mohr blamed the lower margin on "expensing certain system production costs in light of lower system unit production." Equally troubling, procedures are expected to "stabilize" in 2014 growing 9% to 12% but down from 16% in 2013.READ FULL POST
01/23/14 - 02:08 PM EST
The asterisk is for the obvious "so far." When news broke this morning that Massachusetts Sen. Ed Markey was calling on the SEC and FTC to investigate Herbalife HLF, my first thought: This is significant. Second: Will state attorney generals follow? Third: Man, that stock action is interesting. The first two are self-explanatory. Let me explain the third -- and consider the source: I did the documentary Selling the American Dream for CNBC. With the stock taking an 11%-12% hit, and trading down to levels it hasn't seen since November, I have three thoughts: 1. This shows what weak hands are in the stock; in other words, investors who have piggybacked on the reputations of investors like Carl Icahn and George Soros and veteran food industry CEO Bill Stiritz....READ FULL POST
01/23/14 - 11:50 AM EST
David Einhorn wrote something interesting in his quarterly investor letter: 'The parabolic rise of a growing number of market-leading story stocks created a challenging environment for value investors. Speculators have momentarily accepted the ruse that, for these visionary companies, profitability would be a mistake. Eventually, the market will remember that having a disruptive product that customers will happily buy if sold near cost is not the same as having a valuable business.' And therein lies the story of this market and the story of so many companies that, based on the numbers, may look as if they're perched on a precarious ledge, but based on their stocks, appear to be anything but.READ FULL POST
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