05/02/14 - 05:55 PM EDT
In my world, when companies attack a critic, in an effort to discredit, it often means one thing: It's an effort to make people look over here, not there. So when I read Herbalife's press release from Thursday aimed at pre-responding to a Herbalife event sponsored by Bill Ackman, I couldn't help but think about the classic crisis PR ploy of discrediting the critic. Here's the paragraph in question: "As for the event's new moderator, Robert Fitzpatrick, a self-proclaimed expert in multi-level marketing, he is a known critic of the industry, and a consultant to Mr. Ackman and three-time convicted felon and perpetrator of fraud Barry Minkow. Herbalife believes Mr. Fitzpatrick's involvement is further evidence that this 'documentary' is merely another biased attack on our company." Ah, the old "guilt by association" trick!READ FULL POST
05/02/14 - 02:05 PM EDT
I learned firsthand about the power of this thing called the "cloud" back in 2009 when I co-ran a small independent research firm. As I wrote on CNBC.com Thursday, we needed encryption and we were using a cumbersome EMC product for our small group of a few dozen clients. It was a powerful product, but the clients hated it because they had to install something on their computer. We hated it because between licenses and service costs, it was way too expensive and overkill for our small business. It was also technologically cumbersome. Then I started searching for alternatives and I found WatchDox, a private company that did exactly what we needed at a fraction of the cost with none of the headaches. Our clients loved it, too. That was when the light bulb went off in my head about this thing called "the cloud"......READ FULL POST
05/01/14 - 10:34 AM EDT
What makes this earnings season different than others? Everybody had a free pass to blame the weather.Everybody didn't use it.Chipotle didn't. Buffalo Wild Wings didn't. As Buffalo Wild Wings CEO Sally Smith said on her company's earnings call, "We usually keep our comments about weather to a pretty much minimum because weather happens every year." She's right, but the worst winter in recent memory did have an impact; and the only company I've seen quantify it is Sally Beauty.READ FULL POST
04/30/14 - 01:59 PM EDT
One of the great veteran forensic analysts, Ted O'Glove, is out with a piece on The Motley Fool suggesting that it's time to start thinking about breaking up Berkshire Hathaway.For those of you who don't know O'Glove, a quick backgrounder: He's best known as the author of Quality of Earnings, long considered a must-have in the library for for serious investors. He wrote it in 1987. Earlier he was best known for co-authoring the Quality of Earnings Report with Bob Olstein, who now runs Olstein Funds.At 80, a few years younger than Berkshire CEO Warren Buffett, O'Glove can spot a fad, and a good investment, a mile away. He can read the footnotes better than anybodyHe's a huge fan of Berkshire and Buffett, which is why his piece is so interesting.READ FULL POST
04/30/14 - 10:35 AM EDT
Well before Twitter went public with a market value of $14 billion, I remember going on CNBC with others shaking our heads at what at the time was believed to be a ridiculously high $10 billion valuation.The value was extrapolated from the trading of its private shares on the secondary market and the reported dollar amounts of latest rounds of venture financing.At the time, there was chatter whether Twitter could or should be acquired. Early on, Google was always pegged as a likely choice -- until it started Google Plus. Then Apple's name would surface, as would every cash-rich company out there.Then came Twitter's IPO last November at $26, or $14 billion, with the stock getting bid as high as $73, or a ridiculous $40 billion.It's now around $21 billion, likely on its way much lower.In the end, I blame this not on Twitter but on Wall Street. Twitter's mistake, I would argue, was going public.READ FULL POST
04/29/14 - 12:31 PM EDT
When Oracle execs rang the opening bell of the New York Stock Exchange today, the banner behind them read, "Engineered for the Cloud." A few hours later the company was planning to host something it calls "The Oracle Cloud Forum."But roll back the clock to an analysts' day in October 2009 and Oracle CEO Larry Ellison, nobody's fool, wasn't waxing so philosophically about "the cloud."After being somewhat sarcastic about the brewing euphoria over the word "cloud," he said:"...As far as the Cloud, I make jokes about Cloud computing because obviously Cloud computing is something totally different really. Does it use Intel microprocessors? Those aren't new. Does it use memory from Samsung? That's not new. Does it use Cisco networking? That's not new. Does it use Linux and Solaris and Oracle and MySQL? None of those are new."READ FULL POST
04/29/14 - 06:30 AM EDT
Multi-level marketer Herbalife's decision to kill its dividend and instead use the money to buy back more shares is both brilliant and high risk.It's brilliant from the perspective that it will likely shake out marginal investors who might be quick to sell on the first sign of negative news. Instead, Herbalife will have more firepower to help squeeze earnings per share higher while supporting its stock in the face of news that normally might have shaken it.At the same time, by getting rid of the dividend, Herbalife risks getting kicked out of index and other mutual funds that only hold dividend-paying stocks.Here's where it gets tricky (and risky): Herbalife CEO Michael Johnson said in a press release that he believes the decision to increase buybacks "reflects our continued commitment to creating long-term value for our shareholders."That may be. Trouble is, there is no shortage of companies whose CEOs said the same thing, only to buy high and see their stocks go lower.READ FULL POST
04/25/14 - 09:30 AM EDT
With Relational Investors taking a 9.08% stake in Clean Harbors, it would be absurd to keep it on the Watch List, where it has been red-flagged. (Activism and takeovers are always one way to make the red flags irrelevant.)Clean Harbors would appear to be the perfect activist stock. One mistake after another, or, as I wrote in my original piece when I red-flagged Clean Harbors last November, it's a comedy of errors.The company itself recognizes the problems. From its last earnings call, CEO Alan McKim:"...We're launching a broad strategic review of our operating structure, with a focus on how to better drive organic growth and improve our return on invested capital. We also have initiated a cost reduction program and are taking $75 million in additional costs out of the business and bringing our cost structure more in line with our current revenue profile. We are targeting areas ranging from our non-billable headcount, office consolidation, maintenance and logistics, with the goal of significantly reducing our overall expenses."READ FULL POST
04/17/14 - 10:14 AM EDT
With Chipotle's CMG same-store sales up an astonishing 13.5% during some of the worst winter months in recent or even distant memory: Think twice when you see any company from this point on in this earnings cycle blame the weather.Remember: If there were to ever be an earnings cycle retailers and restaurant operators use to blame the weather, it's this one. Even Chipotle, in the risk factors in the fine print of its earnings release, says that "the potential effects of inclement weather" could impact results.Reality: If the weather's not hurting Chipotle, then why is everybody else likely to gripe about it? Because this quarter it's a free pass. And for some companies, like truckers, railroads and airlines, it's real.But truth be told, consumers and even businesses often defer, and don't cancel, their purchases.READ FULL POST
04/17/14 - 07:39 AM EDT
The analysts finally appear to have lost their patience with IBM. As my pal @firstadopter on Twitter was first to point out: "MULTIPLE questions from $IBM analysts 'I'm confused' 'I don't understand' 'Sorry to re-visit' FCF/Net income/EPS guidance MAKES NO SENSE." At first I thought he was exaggerating, but the transcript doesn't lie. Let's start with confused. Barclays analyst Ben Reitzes gives us a twofer, given that he said both "confused" and "I don't understand": "I think investors are focused on this, so I'm going to just try to clarify it on the free cash flow side. What I'm really confused about is that the charge was about $100 million lower than I thought, then we have the tax rate impact and the accelerated buyback, which is probably more than I think you guys probably modeled in January. With all that, you could have almost $1 billion taken out of the net income the Street had and still guide to $18. And I wanted to know on cash flow, you said in your 10-K that you would grow cash flow by $1 billion year over year, and we just took out almost $1 billion of the net income versus where we were in January. I actually don't understand how we get to the free cash flow numbers previously guided in that -- taking it in that light. If you could just explain it that way, that would be really great. Thanks a lot."READ FULL POST
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