Filed under: Deals, Rants and raves, Competitive strategy, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Headline news

The BIG news this morning about Microsofts (NASDAQ: MSFT) offer to buy Yahoo Inc. (NASDAQ: YHOO) for $44.6 billion has been thoroughly covered all over the media including numerous posts on our site, so I’ll not pile on or repeat what you can find elsewhere.

Short and sweet: My view is the perfect timing of the offer, not the offer itself, is the news. Microsoft has been rumored to be chasing Yahoo for quite some time and apparently from the substantial offer it made this day (60% over yesterdays closing price) money has not been the issue. Obviously Steve Balmer and friends are willing to pay up — way up!

The timing of the offer hits Google Inc. (NASDAQ: GOOG) when they are down - way down! Google has lost a third of its value over the last month and it has lost its momentum going forward. The stock is down substantially today although the company reported solid growth. That’s a significant change in the playing field. Balmer, a very aggressive businessman has decided to make his move now, potentially stealing the momentum on Wall Street.

Two points:

1) MSFT has to do this deal now because there is an outside chance that Google’s market share might go down just enough to make the combined MSFT / YHOO market share equal or bigger to them. If that were to happen the anti-trust machine might swing into action again, so the time is now while the combined company could claim to be the good guys still lagging GOOG by 5% to 6% in market share, improving competition and not thwarting it.

2) MSFT, by making a bold move against Google, now is a real threat because Google has been spending billions to build other revenue streams — so far unsuccessfully. Revenue streams that are substantial and running on all cylinders at MSFT. Consider that GOOG has been adding free software to dilute MSFT unsuccessfully. GOOG can’t make a dent in Vista but MSFT can weaken GOOG search and advertising plenty by adding Yahoo.

Sheldon Liber is the CEO of a small private investment company and the design and research principal for an architecture & planning firm. He owns shares of ISRG. To find potential opportunities and verify my track record read Chasing Value or Serious Money. Disclosure: I do not own shares of GOOG or MSFT.

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Filed under: Earnings reports, Forecasts, Good news, Launches, Competitive strategy, Japan

Despite a troubled U.S. economy, a stronger yen and increased credit costs in the US., it looks like Japanese automakers are still benefiting from a booming automobile demand. After Honda Motor Ltd. (NYSE: HMC) announced early this week its profit rose 38.1% in the third-quarter, now it is Nissan Motor Co. (NASDAQ: NSANY)’s turn to prove its efficiency.

Japan’s second-biggest automaker reported this morning its third-quarter profit rose 26.6% to 132.22 billion yen ($1.24 billion), helped by higher sales in Asia. The company had posted a profit of 104.46 billion yen during the same period of last year. The company’s results also show a respectable 18.2% jump in revenue to 2.770 trillion yen ($26.03 billion), following strong sales of the Rogue crossover automobile in the U.S.

Even though Nissan’s earnings numbers matched analysts’ predictions, the company is still showing some concerns over its further gains. The automaker said that its bottom line could be affected by lower American consumer spending. A weaker dollar also could dampen Nissan’s earnings by reducing the value of its foreign revenue.

Nissan saw a rise in its revenue after the company launched several new cars, including the Rogue SUV in the U.S. and the Qashqai crossover in Europe. Along with the U.S.; the Middle East, China and Russia brought the company strong sales that more than offset the impact of weaker domestic sales. Thus, the automaker counted 898,000 cars soled worldwide during the third-quarter, which is a 13% growth from the same period a year earlier. The U.S only saw a 28% growth in revenue, which totals 255,000 cars.

Nissan’s alliance with Renault was quite positive for the company as it brought record global sales of 6.62 million during the last year, which is a 4.2% increase from 2006. The company’s efforts to stimulate the domestic market also showed good results. Its new GT-R high-performance sports automobile, which costs about $70,000, brought 4,000 orders for the automobile since its launch late last year.

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

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Filed under: Consumer experience, Competitive strategy, Penney (J.C.) (JCP), Polo Ralph Lauren’A’ (RL)

Today’s Wall Street Journal has an article about the cost-cutting measures going on retailer, JC Penney (NYSE: JCP). The article, essentially an interview with CEO and Chairman, Myron “Mike” Ullman III, details Ullman’s changing of gears, from aggressive store expansion and on the web growth to scaling back in the face of a looming recession.

The CEO is expected to announce this day plans to merge the buying and marketing operations for store and on the internet sales, slicing as many as 200 jobs.

In the article, Ullman states he might scale back store expansion over the next two years.

Getting more of the consumer’s wallet

Ullman states, “Half of the families in the U.S. shopped with us at least once last year. But we only get 7% of their spending. So, our biggest opportunity in the downturn is to make each visit they make to our store, Internet or catalog more productive by offering more innovation.”

Expanding product lines

Ullman says that Penny’s is still planning to launch its much vaunted new product line, American Living, with Polo Ralph Lauren (NYSE: RL). “We think it’s a billion-dollar idea…American Living is J.C. Penney.’”

Ullman has been the conductor of a growing retail orchestra. While 2007 was a tough year for the retailer, JC Penny has turned its stores around, its product assortment has been refreshed, and Ullman seems to have a handle on where the consumer and market is going.

2008 should prove to be a pivotal year for this retailer.

Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

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Filed under: Earnings reports, Good news, Competitive strategy

The separation of the company into a consumer products company, Alberto-Culver Company (NYSE: ACV), and a beauty supply distribution company, Sally Beauty Holdings Inc. (NYSE: SBH), is complete. Most of its restructuring costs are behind it. The company has shut excess production facilities, instituted a more efficient inventory management system, and introduced a more favorable product mix favoring higher-profit margin items. As a result, the revamped Alberto-Culver Company returned to profitability in 1Q2008.

Net sales increased 14% to $400 million. Earnings from continuing operations increased a whopping 60% to $48.3 million. 1Q2008 net earnings were $30.9 million, much better than 1Q2007 net loss of $5.9 million. Most importantly, there were actually EPS of $0.29, a far cry from zero EPS in 1Q2007. Given the good 1Q2008 results, Alberto-Culver upped its dividend payout 18% to $0.065 per share. The stock shut recently at $26.76, up $0.86 or 3.32%.

Patient value investors might want to take a look at Sally Beauty Holdings Inc., the spin off company. The stock has struggled recently. It currently trades at just over $8 per share but has a lot of room for growth potential.

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Filed under: Consumer experience, Competitive strategy, eBay (EBAY)

In one of the largest customer-oriented changes I’ve seen on eBay, Inc. (NASDAQ: EBAY) in quite some time, the world’s largest on the internet auction house will no longer allow negative or neutral “customer feedback” ratings to be left by auction sellers on the accounts of auction buyers.

The thinking goes like this: a buyer may be afraid of leaving negative feedback on an auction for fear of the seller retaliating by leaving negative feedback themselves.

Envision this: you buy an item from an eBay seller and that package arrives with a product significantly different than what was advertised. You fulfilled your end of the bargain; the seller has not. If you leave negative feedback for the transaction, the seller may come back at you with an inappropriate feedback rating. Thus, both parties may not leave feedback at all — and that’s not what builds trust in the eBay community, right?

The changes won’t happen until this coming Might, and current feedback ratings for both buyers and sellers will be based on a 12-month rolling average instead of a “lifetime” rating, which seems more appropriate. Perhaps changes like these — which seem to come as a response to customer demand — will help stem the tide of nastiness some eBay customers have had recently about the auction company.

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Filed under: Bad news, Competitive strategy, Circuit City Stores (CC)

Although Circuit City Stores, Inc. (NYSE: CC) reported a horrible December in terms of sales and profits, the second-largest consumer electronics retailer in the U.S. was one of the top three on the web consumer electronics retailers in December, trailing leader Ideal Buy, Inc. (NYSE: BBY), but ahead of online auction giant eBay, Inc. (NASDAQ: EBAY).

Nielsen ratings figures put one-of-a-kind web visitors like this: Best Purchase at 23.99 million, and Circuit City at 19.61 million. Figures for eBay weren’t available (as some separate categories have to be measured together), but the real news was that Circuit City’s December 2007 website traffic growth increased more than 20% from 2006’s level. Best Buy’s December 2007 visitor count rose only 9%.

Why couldn’t Circuit City capitalize on such an impressive amount of very special holiday retail traffic? The failure of the retailer to make any sales gains this past holiday season just seems endemic of multiple failures and problems the company has at this time. While we wait on Circuit City CEO Phil Schoonover to be sacked from the corner office, perhaps a lingering, potential sale of the company will force the issue and Circuit City can get back to business. Profitable business, that is.

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Filed under: Competitive strategy, Wal-Mart (WMT)

Wal-Mart Stores, Inc. (NYSE: WMT) was an early proponent of the tracking technology known as RFID years ago, but seems to have lost patience with vendors that are taking too long to equip their merchandise pallets with the inventory tracking and shrinkage tags. As opposed to bar codes, a reader can track a package or pallet with an RFID chip without scanning anything; a two-way radio chip is used instead.

2008 is now here, and the world’s largest retailer has apparently grown quite frustrated with the slowness some vendors have displayed in adopting the new technology. It will, as such, be charging suppliers $2.00 for each pallet that does not contain an RFID tag as of yesterday. This only applies (so far) to its Sam’s Warehouse distribution center in Texas.

Wal-Mart is making it clear that the $2.00 surcharge some suppliers will see is quite a bit more than the estimated $0.20 per RFID tag per pallet. With an estimated 15,000 suppliers still not complying with Wal-Mart’s three year-old RFID mandate, company will probably be forcing the hand of slow-to-adopt vendors and suppliers this year as it ramps up to have all products tagged with RFID in all 22 nationwide distribution centers in the U.S. by 2010. Until then, it can make a nice side of change with these non-compliance fines. Perhaps an analyst will ask how much the company has made on the next Wal-Mart quarterly results conference call.

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Filed under: Competitive strategy, Dell (DELL)

Dell, Inc. (NASDAQ: DELL) will be closing all 140 “Dell Direct” retail kiosks in malls and shipping centers across the U.S. within a matter of days to more acutely focus sales in high-volume retailers like Ideal Buy, Inc. (NYSE: BBY) and Wal-Mart Stores, Inc. (NYSE: WMT). This is a good move, as I’ve always wondered if the point of Dell’s mall kiosks was just a branding and mind share technique more than a sales channel.

Dell’s kiosks employees will be given a severance package and outplacement assistance as the world’s second-largest Computer maker closes down these shops by perhaps this weekend. The kiosks have been around since 2002 as a way for Dell customers to get a feel for its products before calling or ordering on the Dell website.

In a sense, these Dell Direct kiosks were what the computer maker needed in a bigger ways years ago — the ability for retail consumers to “look and feel” its products before buying sight unseen from a website. Hewlett-Packard Corp. (NYSE: HPQ) leapfrogged past Dell in 2007 as the world’s largest personal maker squarely on the back of strong consumer retail sales, and especially in the laptop Personal computer segment where consumers like to see the product in person before buying. Good move, Dell — but this retail shift should have come at the end of 2006 instead. Better late than never, eh?

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Filed under: Earnings reports, Consumer experience, Competitive strategy, Marketing and advertising, Procter and Gamble (PG)

Consumer products maker Procter & Gamble Co. (NYSE: PG) reported this morning a rise of 14% in its fiscal second-quarter profit, helped by higher sales and cost-cutting measures.

Strength in emerging markets that offset slower growth in North America and Western Europe made the company’s quarterly profit rise up to $3.27 billion, or 98 cents per share. P&G had reported a profit of $2.86 billion, or 84 cents per share, in the same period a year ago. Analysts, on average, expected Procter & Gamble show earnings of 97 cents per share.

The company’s results also show a 9% jump in revenue to $21.58 billion, up from $19.73 billion a year earlier. P&G stated its increase in revenue reflects double-digit sales gains in such products as Head & Shoulders hair-care line and Duracell batteries. Analysts had forecast $21.25 billion in revenue, according to Thomson Financial.

Based on its strong earnings numbers, Procter & Gamble also lifted its full year earnings outlook. The company now anticipates earnings between $3.46 to $3.50 per share, compared with its previous forecast for earnings of $3.46 to $3.49. For the third-quarter, P&G also predicted earnings between 79 cents per share and 81 cents per share. Analysts had forecast quarterly profit of 83 cents per share and fiscal 2008 earnings of $3.49 per share.

As one of its competitive strategies, Procter & Gamble plans to split its coffee business into an independent company later this year. P&G said in its press release it believes “the transaction will be good for the coffee business as the business will get greater priority and attention as a standalone company.”

Folgers Coffee Co. , which had sales of $1.6 billion last year, will be headquartered along with P&G in Cincinnati. The company prefers a split-off transaction than a spin-off one for Folgers because in such a situation its shareholders wouldn’t have to pay any taxes. A split-off also will bring lower annual earnings dilution.

Regardless of the strong fourth quarter, I’d anticipate some selling in the stock today as a result of its earnings outlook. Wall Street has definitely been weary of an economic slowdown, so any forward looking statements that don’t exceed Wall Street estimates are going to result in some selling. By forecasting 79 to 81 cents earnings per share for its third quarter (as opposed to the 83 cents Wall Street had been expecting), Wall Street might pounce on the stock, despite the company’s strong second quarter results.

The market is looking for a weak open this morning, as concerns over the slowing American economy have resurfaced yet again. Yesterday’s 50 basis point cut by the Federal Reserve does not appear to be having the immediate impact that many traders had been hoping to see. Perhaps the market had already priced in a possible 50 basis point cut and were actually hoping to see another 75 basis point cut.

PG looks to be set to open the day down a little under 1% according to premarket indications.

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

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Filed under: Earnings reports, Forecasts, Competitive strategy, Marketing and advertising, Toyota Motor Corp. (TM)

Despite a shaky economy where recession concerns deepen everyday, car demand is booming for at least one major auto maker. It looks like even in a recession people continue to need vehicles, and the good times are rolling for car maker Honda Motor Ltd. (NYSE: HMC), which reported that its profit rose 38.1% in the third-quarter. For this period, Japan’s second-biggest automakers counted strong sales for its fuel-efficient models in the U.S., Europe and Asia.

Honda’s third quarter profit climbed to 200 billion yen ($1.87 billion), compared with 144.8 billion yen in the same period last year year. Cost-cutting also made the automaker post a record gain in its earnings numbers during the fiscal third quarter.

One of Honda’s best competitive advantages is its strong reputation for providing more fuel-efficient vehicles. Thus, the recent surge in oil prices helped Honda’s sales to jump 10% to 3.045 trillion yen ($28.52 billion).

Analysts saw the company’s quarterly earnings as “spectacular,” but there are still some concerns about Honda’s future gains. One analyst at Credit Suisse, Koji Endo, expressed worries about the auto maker’s fiscal year that starts in April, citing a weak U.S. dollar.

A strong yen also could dampen Honda’s earnings by reducing the value of overseas earnings. According to the Japanese automaker, the dollar is expected to trade at 105 yen in the January-March period, which Endo sees as “tough even for Honda.”

On the other hand, the analyst believes North American car sales will continue to gain moderate growth, even during a subprime mortgage crisis.

Looking ahead, Honda expects a rise for its global sales. The company now expects a profit of 690 billion yen ($6.46 billion) for the fiscal year ending March 31, which is up 16.5% from fiscal 2006. For its sales number, the automaker forecasts an increase of 9.6% from the previous year, but it cut its fiscal year sales outlook to 12.150 trillion yen ($113.82 billion) from an earlier 12.300 trillion yen.

For the next year, Honda intends to create a new hybrid model that runs on gas and electricity, and its sales are expected to reach 200,000 automobiles a year. The company’s strategy based more on hybrid offerings should help Honda to face strong competition from rivals such as Toyota Motor Corp. (NYSE: TM). Honda also expects its sales will grow in South America, and it is planning to expand its production in Brazil and Argentina.

Honda shares are rising 2.9% in early morning trading.

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

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