Filed under: Management, Industry, Competitive strategy, Apple Inc (AAPL), Starbucks (SBUX), McDonald’s (MCD)

Over the course of the year, Starbucks (NASDAQ: SBUX) shares fell from $36.61 to $20.60, near their 52-week low. The company’s revenue is still growing about 20% year-over-year. It might be hard to believe that such a strong financial performance wouldn’t command a higher price.

But, the Starbucks management team has done an unusually poor job of convincing Wall Street that its plans for the next year are apt to yield stronger same-store growth, especially in the U.S. The company talks about eventually having 40,000 stores worldwide, but has yet to give a convincing explanation of how it will get there.

The big knock against the coffee chain is that it has too many stores in the U.S. That would lead most analysts to believe that the stores actually compete with one another for business. And, with the large McDonald’s (NYSE: MCD) push into premium coffee, Starbucks is trying to get market share in a field that is becoming more crowded.

Investors are also not convinced that current additions of exclusive music releases sold only in its stores and a relationship with Apple (NASDAQ: AAPL) iTunes will bring in more customers.

More than anything else, Starbucks currently suffers from being less than open about its business. How is the new deal with Apple going? How are same-store sales running during the holidays? What’s the firm doing about the rising price of milk, which is an ingredient in many of the company’s drinks?

Wall Street hates lack of news. It often takes silence as a sign of poor performance. Until management steps forward with a cogent plan for improving the company’s domestic sales and some information about how new initiatives are doing, it can anticipate its share price to drift lower.

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

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Filed under: Bad news, Industry, Consumer experience, Competitive strategy, Google (GOOG), Yahoo! (YHOO)

Yahoo! (NASDAQ: YHOO) has had several opportunities to “fix” itself recently. One was its new Panama search technology. Shareholders were eager to see it work as a better competitor to Google (NASDAQ: GOOG). So far, it has barely moved the needle.

Some analysts hoped that the company’s new management would cut costs to improve margins. A figure of 20% of the staff has been recommended. But, if anyone at Yahoo! has been pushed out beyond a few management types, no one knows about it.

Yahoo!’s hopes now appear to ride on the back of better targeting for on the web display ads. Delivering marketing messages based on the user’s behavior is the “next massive thing” for internet advertising. Unfortunately, other web portals and Google have their own ad-serving and behavior-targeting products.

What the problem boils down to is that the market still tends to value Yahoo! on its ability to get consumers to use it to search the web. Yahoo!’s piece of the search market is a proxy for its success or failure.

The new comScore search engine figures for November are out, and Yahoo!’s piece of that market fell .4% to 22.4% from October. It may not seem a lot, but at this rate, it would not be many months before Yahoo!’s share of market falls below 20%.

Yahoo! stock is having trouble holding $24. In late October, things seemed more promising and Wall Street believed the company would do something significant to change its business for the superior. The stock traded at $33.99.

It won’t be back there again soon.

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

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Filed under: Major movement, Earnings reports, Good news, Competitive strategy

Human habitat designer Herman Miller, Inc. (Nasdaq: MLHR) recorded second quarter (2Q) fiscal year (FY) 2008 profits that beat the Street by $0.13 per share, enough to push the stock up to $32.96, up from a $28.42 close on December 19th. In short, all the incoming money numbers are up, and all the outgoing money numbers are down, just the way investors enjoy it. Sales are up 1.4% to $505.9 million, while orders are up considerably more, 8.2% to $572.5 million. The backlog of orders also increased 7% to $346.5 million, so the company is looking towards at least several more highly profitable quarters based on current numbers.

Despite a rather soft economy in the U.S., orders increased 9%. International orders increased 12.7%. Herman Miller is still in the midst of a restructuring plan that, while obviously working, still entails significant expenditures: $5.2 million in 2Q FY2008. The company is very cognizant of the need to control costs and keep a lid on operating expenses, which declined almost 22% in 2Q. The only bump in the road is that the company took on $200 million in additional debt to pay for $200 million in stock repurchases.

Other big news is that Herman Miller recently concurred to acquire Brandrud Furniture Inc., a healthcare furnishing company. This move will grant Herman Miller to expand its healthcare products offerings. Management forecasts 3Q FY2008 sales to be in the $475-$500 million range, or EPS of $0.55-$0.62, surpassing the company’s 2007 total revenue of $1.92 billion.

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Filed under: Other issues, Deals, Competitive strategy, Stocks to Buy

Amsterdam-based Royal Philips Electronics will purchase Respironics for $5.2 billion or about $66 per share, Philips announced Friday in a statement.

Respironics, Inc. (NASDAQ: RESP) shares surged more than 20% on the news, gaining $12.23 to $65.34. Koninklijke Philips Electronics NV (ADR) (NYSE: PHG) shares declined 80 cents to $43.35 in Friday afternoon trading.

Philips stated the acquisition significantly strengthens Philips Healthcare, will provide a strategic platform for further growth, and also leverages the acquisitions of Lifeline and Raytel.

Pennsylvania-based Respironics manufactures masks and ventilators for use in patients homes for the treatment of breathing disorders.
With the deal Philips has allocated more $26 billion to acquisitions and buybacks since 2005, and the company has also noted that will have as much as $26 billion more available for acquisitions, deals, and buybacks for the next three years, Bloomberg News reported.

In addition to medical services and other businesses, conglomerate Philips competes with General Electric Company (NYSE: GE) and Siemens AG (ADR) (NYSE: SI) in the lighting/light bulb sector, a feverishly competitive sector given the near-global push by nations to replace incandescent bulbs with more-efficient fluorescent bulbs.

Stock Analysis: It looks like another smart purchase by Philips, which earlier this year bought Genlyte to gain greater access to the North American lighting market. Still, the proof regarding today’s deal will be whether Respironics can add to PHG’s earnings per share in a year or two.

Reviewed in this space in October 2007 when the stock was around $40, Philips is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 1 year should be rewarded from Philips’ shares. Sell/Stop Loss if you were to purchase shares in this company: $26.

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Filed under: Competitive strategy, Marketing and advertising

Berkshire Hathaway (NYSE: BRK.A) vice chairman Charlie Munger once stated that “It’s a finite and very competitive world. All large aggregations of capital eventually find it hell on earth to grow and thus find a lower rate of return … The one thing we’ve always guaranteed is that the future will be a lot worse than the past.”

An apparel company with a red hot product line and booming growth would appear to be a prime target for Munger’s wisdom, and the wolves appear to be circling around Lululemon’s (NASDAQ: LULU) high-margin business.

According to the Globe & Mail, companies including Roots, La Senza, Nike and, most recently, Calvin Klein, are all trying their hand at high-performance yoga clothing. The piece quotes Robert Gibson, head of research at Octagon Capital Corp.: “Look out, Lululemon. Everyone is getting into the act.” Lululemon’s success “has made everyone realize there’s money to be made in ‘performance’ clothing. Anyone who can will get into the act. … More competition isn’t a good thing.”

Whether Lululemon has the chops to stay ahead of very savvy, well-funded competitors remains to be seen. But this is probably the biggest risk factor that the company’s shareholders need to be on the lookout for.

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Filed under: Major movement, From the boards, Press releases, Management, Insiders, Competitive strategy

After a rocky 2007, Marsh & Mclennan Companies (NYSE: MMC), the world’s largest insurance broker, is looking to shake things up for 2008, and for starters the company has announced it will be replacing its CEO, Michael Cherkasky.

At the begin of 2007, MMC was trading at $31.00 a share, and had dropped 19.7% through last night’s closing of $24.89. With the price pressure that the stock has been under this year, it really is not too surprising that the company is looking for new leadership. Cherkasky is the second huge shake up on the company’s board this month. Earlier this month, Dan Glaser was appointed as chairman and chief executive of the company, replacing Brain Storm who left the position back in September.

2008 could prove to bring in even more changes for the struggling company. Analysts are already speculating that whoever is chosen to replace Cherkasky will be forced to deal with the possibility of breaking up the company.

A possible breakup would seem to make sense for the company, which seems to be struggling in its attempts to succeed at performing as both an insurance brokerage as well as a consulting firm. According to Robert Haines with CreditSights Inc., “they’re still a hodgepodge of businesses pushed together.”

Whoever comes in to take control is definitely going to have their hands full, that’s for sure. Goldman Sachs analyst Thomas Cholnoky said in a note that the company was still a long way away from turning things around. He points to softening prices and weak operating margins as the two main problems facing the company’s future.

Cherkasky will continue to hold the CEO position for the time being, and will remain on the job until the company is able to find a replacement.

Shares of MMC stock have moved higher on today’s news, trading up 3.6% to $25.79, up $0.90.

Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the on the web investment advisory service Investor’s Observer.

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Filed under: Competitive strategy, Scandals, Business of sports, Headline news

Could there be any worse fate for an Olympic level athlete than to be stripped of their statistics and medals? Yes, there could be worse things. Just ask former Olympic track star Marion Jones which is worse, losing your medals or being forced to tell your mother you have to sell her home.

Are these professional quality athletes really so stupid as to believe that if they get pinched for using banned performance enhancing drugs they’ll get away with just a slap on the wrist? I don’t think it’s that easy. I’m sure that Marion Jones knew what she was doing was seriously wrong and I feel certain that she knew if she got busted, the truth would come with a very high price. Now, amid all the investigations and scandal, she’s finding out just how high priced skirting the truth can really be.

For her misdeeds, Marion Jones has been required to forfeit all five of her medals from the 2000 summer Olympics and has been told to repay approximately $700,000 of her prize money. All of her standings and statistics beginning at September 1, 2000, shall be red-lined in the record books and her medals from other competitions have been taken away also.

From this day forward, Marion Jones shall probably have no true rest. Such a wide swath of investigation has been opened, that the investigative leads may never cease. Through the investigation of a ring of steroid users and providers with which she was associated, it has also been shown that Marion Jones had at the very least casual ties with a high-stakes check and money laundering scheme. Let us not forget also that she’s allegedly guilty of making false statements to federal investigators.

I wonder if her days of ill-gotten glory were worth the gut-wrenching misery that she must be suffering right about now. It’s the obligation of every one of us to impress today’s budding athletes with the seriousness of cheating at every level, and Marion Jones serves as prime example to instruct that lesson. Unfortunately, I think that the pervasive attitude in sports these days is the mantra that Marion Jones fell prey to: You do what you need to in order to win and it’s only wrong if they catch you. Instruct your children that it’s wrong to cheat. Integrity keeps you healthy and lets you sleep at night. In my record book that’s a win.

The bad news is that for each professional athlete who gets nailed for using banned performance enhancing substances, there are probably 30 others who will get away with it uncontested. To them all I have to say is:

I guess you’re not the bad ass you think you’re, schmuck.

Be sure to check out other .

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Filed under: Earnings reports, Competitive strategy, Best Purchase (BBY), Circuit City Stores (CC)

When Ideal Purchase (NYSE: BBY) blew through analyst estimates earlier this week and made a larger-than-expected profit, many industry watchers probably wondered what Best Purchase is doing right that fellow retailer Circuit City (NYSE: CC) is doing wrong. Now we know: Circuit City saw sales plummeted 3.1% as Peter reported this morning in another quarterly loss as it continued losing market share to its much bigger rival.

Ideal Purchase is probably not only taking market share away from Wal-Mart — the world’s largest retailer — but it’s stomping Circuit City into the ground as well. Circuit City CEO Phil Schoonover said his company’s poor performance in its most recent quarter was due to the fact management “underestimated the financial impact from the disruption of our transformation work.” What else is the company transforming? From a slightly-bad retailer to a totally inept one?

I’m not so sure how Schoonover has kept his job with three consecutive quarterly disappointments, but perhaps 2008 will see a brighter future for the retailer. Ideal Purchase has its success formula pretty much down perfect, and the immense challenge Circuit City will face should be quite formidable next year.

But, there may be signs of things to come. Take this: Best Buy’s quarterly report this week stated sales surged on flat-panel televisions (hopefully, profitable sales), which Circuit City continues to state — every quarter — that flat-panel television pricing depression is contributing to its financial woes. How can these types of sales be diametrically opposed at the two retailers? Something’s fishy there.

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Filed under: Earnings reports, Forecasts, Bad news, Competitive strategy, Analyst initiations, Technology

Shares of Jabil Circuit Inc. (NYSE: JBL) have been plunging in today’s session after the company issued second-quarter guidance below analysts’ expectations last night, despite posting an increase for its first-quarter profit .

The electronics manufacturing service provider reported growth of 50% for its first-quarter profit, which climbed up to $62 million or 30 cents per share. The quarter’s results were helped by strong sales in the networking and storage markets.

Excluding special items, the company showed profit in line with the 36 cents analysts had forecast. The company posted a 5% jump in sales during the quarter and reported revenue of $3.37 billion, slightly above analysts’ predictions of $3.3 billion.

Looking ahead, the company expects second-quarter results below analysts’ expectations as it plans to restructure its business. Jabil expects reporting second quarter results somewhere between a loss of 3 cents per share and a profit of 1 cent per share. Analysts estimates called for earnings of $1.50 per share.

Shares have been taking a beating today, with sellers pushing the stock down over 21%, or $3.98, all the way to $14.44.

Despite the company’s guidance, some analysts aren’t too pessimistic over Jabil’s future profit. One analyst at Robert W. Baird & Co., Reik Read, believes that Jabil’s restructuring program should help its growth and margins and maintained his “Outperform” rating and $20 price target on the stock.

Let’s watch the market to see its reactions to the company’s reports and forecast. So far it doesn’t look too encouraging.

Eliza Popescu is a financial writer for the on the internet investment advisory service Investor’s Observer.

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Filed under: Products and services, Consumer experience, Competitive strategy, Apple Inc (AAPL), Marketing and advertising

The long-running Apple Inc. (NASDAQ: AAPL) fan site Think Secret is being shut down after almost three years of litigation and a confidential settlement. Nicholas Ciarelli, a 22- year-old Harvard student has been running the site since he was thirteen years old.

Think Secret’s claim to fame was publishing top-secret information about upcoming Apple products before it was supposed to be made public. Apple unveils new products each January at its Macworld conference, and the race is always on in December to scoop Steve Jobs on his company’s offerings.

And Think Secret apparently did an excellent job of tipping everyone off on Apple’s secret plans. Apple filed suit to try to get the names of Ciarelli’s sources.

At one point it seemed as if Ciarelli had the upper hand in the litigation. Apple filed suit on the basis that ThinkSecret was publishing trade secrets about Apple’s strategic plans. Ciarelli’s attorney, Terry Gross, filed a motion to dismiss the suit, citing First Amendment rights. Apple essentially stopped litigating at that point.But on Thursday, Think Secret published the following brief press release: Apple and Think Secret have settled their lawsuit, reaching an agreement that results in a positive solution for both sides. As part of the confidential settlement, no sources were revealed and Think Secret will no longer be published. Nick Ciarelli, Think Secret’s publisher, stated “I’m pleased to have reached this amicable settlement, and will now be able to move forward with my college studies and broader journalistic pursuits.”

So the saga ends with the site being shut down. Ciarelli states it was time anyway, as he would rather pursue other interests. But it’s really not clear who won this case. Ciarelli states he’s “very satisfied” with the settlement, but no one knows for sure if he received any money from Apple.

Forensic accountant Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations through her company, Sequence Inc. Forensic Accounting.

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