Filed under: Products and services, Competitive strategy, Amazon.com (AMZN)

Amazon.com (NASDAQ: AMZN) will start selling Blu-ray movie titles this month for quite a discount — some for as low as $13.95, according to sources. This pricing moves comes as many customers have opted to stick with the older DVD standard and its $10 to $15 discs instead of the $30 Blu-ray discs — and $300 players. To most consumers, the marginal improvement is just not worth it.

But now that Blu-ray has a huge upper hand against format competitor HD DVD, this recent price cut by Amazon.com might go a long way toward getting Blu-ray into the hands of consumers who were previously afraid of buying either high-definition format while waiting to see which one would become the standard.

Blu-ray players still aren’t nearly as affordable as standard DVD players, and the job of hardware manufacturers will now be to get the price to a reasonable level (like $150) and entice customers to pony up for a new Blu-ray player. Once Blu-ray titles hit the $17.99 mark and players hit $150, expect Blu-ray to begin growing. Nothing moves consumers over the edge like price — nothing. Until then, those $13.99 DVD titles and $60 up-converting DVD players will do most customers just fine.

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Filed under: Before the bell, Forecasts, Bad news, Products and services, Consumer experience, Competitive strategy, Toll Brothers (TOL), Housing

Luxury homebuilder Toll Brothers Inc. (NYSE: TOL) said that it was still looking for the light at the end of the tunnel when it reported preliminary first quarter earnings, which marked the seventh straight quarter of declining revenues.

During the quarter, the company had a 22% drop in revenues from the same period last year. The company is getting hit from a couple of different angles including falling home prices. On top of that, the average number of canceled home orders has also been on the rise. Finally, the company reported that the number of signed contracts dropped 46% from the same period last year.

Across the nation, Toll is seeing weak conditions in most areas, and expects the current challenges to continue for some time. The company compared the current situation to that of the Titanic, “things don’t turn on a dime”. Interesting comparison for the company. When companies start to compare their industry to the fate of the Titanic, you really have to begin to wonder just how bad things have gotten, or are about to get. It definitely doesn’t paint a pretty picture if you ask me.

Shares of the stock are down about 1% this morning in the premarket. The company is due to report complete first quarter numbers on February 27.

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

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Filed under: Earnings reports, Good news, Competitive strategy

One good thing to come out of the softening economy is that working adults might return to school in more massive than average numbers to brush up on the latest in-demand job skills. DeVry Incorporated (NYSE: DV) is well put to provide convenient, inexpensive, job-related educational opportunities. In its most recent quarter, DeVry’s student enrollment grew 10%, it opened two new physical campuses and beefed up its accounting and finance programs.

Revenues for 2Q 2008, announced January 24, increased 16% to $237.7 million, but operating income increased 115% to $46.9 million, while net income increased 118% to $35.8 million, and diluted EPS increased 113% to $0.49.

At a cost of $27.5 million in cash, DeVry recently acquired Advanced Academics, Inc., which provides K-12 on the web educational opportunieis for the growing cyber-home school segment. DeVry’s student loan program is in good shape, a claim not all for-profit educational companies can make.

The stock gained 3.6% on January 31 to close at $55.19, but gave up half that gain on February 1 to shut down 1.5% at $54.35, before regaining that decline on February 4 to close at $55.11, up 1.4%. Investors may wish to investigate the for-profit educational sector for possible attractive growth candidates.

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

Wal-Mart Stores, Inc. (NYSE: WMT) will be soon requiring audits from the global food production facilities that make the plethora of house and private-label brands sold in its retail stores. Wal-Mart announced that it would become the first grocery retailer in the U.S. to adopt the ‘Global Food Safety Initiative’ standards on food safety for its own private brand products. Brands such as Great Value and Sam’s Choice are included in that group.

After a disastrous 2007 that saw tainted food recalls from spinach to peanut butter, consumers are still wary of food safety even if a high-profile recall isn’t in the works. Many people I’ve spoken with recently have even started to seek out organic alternatives after losing trust in many of the processed food manufacturers due to so many current safety recalls.

What Wal-Mart must do here is market its position as the sole adopter of this standard in each grocery section of every store. The world’s largest retailer has a bad habit of embarking on important initiatives that have great value to the consumer, but falling flat on marketing those initiatives to the consumer. It could go a long way towards winning even more customer loyalty if Wal-Mart will just get the word out this time. In addition to private-label brands, Wal-Mart said that it would also require suppliers to be certified by programs under the umbrella of the Global Food Safety Initiative.

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Filed under: Earnings reports, Forecasts, Competitive strategy, India, China, Toyota Motor Corp. (TM), Tata Mtrs Ltd (TTM)

Toyota’s (NYSE: TM) net grew 7.5% in the last quarter, but it indicated that it may not be quite so fortunate in the current period.

According to Reuters, the improvement was due to “speedy sales growth in China, Russia and other emerging markets.” The large car company said it was still worried about the US economy.

The figures from the Japanese company show the difficulties that all of the global automotive firms face now. They are seeing double-digit sales increases in emerging markets, but in their largest market, the US, sales could be extremely poor this year.

Even that analysis masks the real long-term threat to Toyota’s growth. In most emerging markets, there are already large automotive firms. Those include Shanghai Automotive in China and Tata Motors (NYSE: TTM) in India. These companies are not going to let huge overseas operators simply come into their countries and take massive pieces of the market.

The US economy might be the short-term enemy to Toyota, but competition in emerging markets is apt to be its challenge for the next decade.

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

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Filed under: Management, Consumer experience, Competitive strategy, Starbucks (SBUX), Employees, Ideal Stocks for 2008

Howard Schultz is back in charge of Starbucks (NASDAQ: SBUX), and as expected lowered expectations for the current fiscal year. He took the opportunity with the mediocre December quarterly results to tamp down expectations and won’t even issue guidance. A very smart and predictable move by the founder and visionary of Starbucks. This is a tough environment for Starbucks as well as many other retail concepts. Let’s face it, theme concepts are competing for the consumers’ shrinking wallet and need to stick to their core values and competitive advantages. Well, Howard, please read this and I think it might help your efforts.

Dear Howard,

I personally love Starbucks as a consumer of fine coffee and have purchased its products from probably 250 different Starbucks stores around the world. To today Howard, your Minnetonka, Minnesota, store should serve as your model for the other 11,000+ store. The manager of the Minnetonka store is Mario Macaruso and if enthusiasm and commitment could be bottled–Mario’s is worth a billion.. His partners at the store are fabulous. Andrea Breen, a single mother of 3 growing and time-consuming children, has an attitude that makes each customer feel special. Patty McGarrigle superbly handles every complicated drink order like a pro and always with a smile. When they are not busy with customers, they are looking for ways to make the store cleaner or more organized. They represent the type of partners each Starbucks store should strive for.

Then there is Amber. This past Sunday morning I went in to get my normal cup of coffee. Amber enthusiastically asked me if I wanted to buy a pound of coffee beans because she wants her store to win the contest and have you, Howard, visit them. Being Sunday morning, I was in a bit of a fog when I asked her, “what?” She stated this week all Starbucks stores are going to promote packages of coffee beans to the customers and the store that sells the most pounds of beans versus the same week last year will be paid a visit by you, Howard.

Well, I couldn’t pass up the chance to buy a pound. So I did, as did the three customers in line behind me. Amber was terrific and excited as heck. She really wants you to visit the Minnetonka store!

Manager Mario Macaruso, as I said, has superb partners. The beauty Howard is this type of commitment and passion to the Starbucks concept cannot be faked or forced. Mario, Patty, Andrea and Amber should hear from you and more importantly, you should hear from them. They represent every thing that built Starbucks to be the most successful coffee chain in the world.

Howard, as you fine tune the concept by closing under performing stores, slowing down overall US store growth and trimming back the menu of non-coffee products, keep in mind these partners. Solicit their input because they get it done right and they get it done everyday. .After all, it comes down to daily execution.

Howard, you will take Starbucks to higher levels of excellence over the next two to three quarters. Wall Street is backing off and giving you the space and time you need to right the course of the ship. The ship came off course, but only by a tiny bit. In this quest for excellence, listen to your dedicated and committed partners like the four I mentioned. They are what makes Starbucks one of the greatest American success stories for the past decade and the next decade.

Georges Yared writes about finding great growth stocks this day in GameOn Investing

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Filed under: Deals, Competitive strategy, Microsoft (MSFT), Yahoo! (YHOO), Viacom (VIA)

Yahoo, Inc. (NASDAQ: YHOO), which is going to have an interesting week after last week’s unsolicited bid by Microsoft Corp. (NASDAQ: MSFT), is outsourcing its on the web music business. Instead of operating its own music download service (which apparently has not been very profitable), the company will give that chore to Rhapsody America, operated by RealNetworks, Inc. (NASDAQ: RNWK) and Viacom, Inc. (NYSE: VIA).

Yahoo! will migrate customers of its in-house music subscription service to Rhapsody in the coming months. With RealNetworks and potential Yahoo! owner Microsoft being bitter enemies, it will be interesting to see if this partnership lasts should Microsoft succeed in taking ownership of Yahoo for $44.6 billion.

Does Yahoo! have the chops to do much outside the email, search and display advertising arenas? It has not seen growing profit despite being the world’s largest internet property (until recently), but shedding itself of assets like its online music business is in line with the company’s current turns as it concentrates on core businesses and trying to be everything to everyone — and making money from just a few pieces of its business.

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

Google (NASDAQ: GOOG) does not much like the fact that Microsoft (NASDAQ: MSFT) is making a bid for world wide web portal firm Yahoo! (NASDAQ: YHOO). So the world’s largest search company has decided to begin a PR campaign to get the government to kill the deal.

In a blog post, Google Senior Vice President David Drummond asks whether Microsoft could “now attempt to exert the same sort of inappropriate and illegal influence over the World wide web that it did with the Computer,” according to The Wall Street Journal (subscription required). Microsoft immediately took the other side of the argument by saying that Google dominates the global search market. A buy of Yahoo! wouldn’t knock Google out of the No.1 spot.

The bickering over the matter probably makes tiny difference. Google is so powerful now in internet search that Microsoft may not make much progress there even by owning Yahoo!. There will be all sorts of integration problems if its bid goes through. Google probably will keep gaining search share in the meantime. The government knows all of that. There’s little reason for it to oppose the deal.

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

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

I often visualize large business by utilizing my own metaphor of naval 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 capability to effectively engage in battle from a very long distance away.

My point in bringing up this metaphor is easy. 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’ve strengths that are diverse yet compatible. Personally I couldn’t have thought of a superior move for Microsoft to make at this time. I believe that’s 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 naval 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: Bad news, Industry, Rants and raves, Competitive strategy, China, Politics, Recession

Someone might want to explain this to me because it defies almost all palatable logic that I have the ability to apply to it. I read earlier this week that China carries a massive 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’s a reasonable expectation that the debt will be repaid, supported by documentation, collateral security, and research. The second reason is because there’s 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.

We have the ability to probably assume that the Chinese have heard rumors that American banks are writing off billions of dollars in debt-related losses. I’m guessing that it’s no secret around the globe that American debt might currently be a sucker’s bet. So are we to assume that Chinese financiers are ill-informed of the facts or shall we believe that they are just stupid? Is it simply a matter of Chinese bankers having a special talent for choosing safe debts to invest in? Should we think that the Chinese believe in us, or is this simply a matter of China’s cheap buy of global political power. I’m thinking that the latter explanation is the case.

To take the matter one step further, what happens if there’s wholesale default on the treasury securities China has invested in? You must believe that our government is certainly facing that possibility. If the debts are owed by our government, does that mean China could have the sheriff evict our president from the White Home in the event of default? Yeah, laugh now if you want to. Then stop and consider it again.

I fail to grasp the concept well, unless it’s as obvious as it appears to be. In which case it would seem that China is knitting itself a big catch-22. Why would you buy a position into financial stresses you helped create? Why would you purchase debt obligations as, by default, you thwart the ability to repay? It seems all too obvious to me that China has designs on the very soil you’ll be buried in. The only problem is, in the process of taking control of American assets, they’ll handily destroy the concepts of free enterprise and capitalism that have been essential in their rise toward dominance.

There’s a bit of ironic justice beginning to show through the clouds now, and I’m desperate to see how it’ll all play out. China’s day of reckoning may be closer than you think. In the face of a very limp dollar, which actually makes us more competitive in the world markets, China is experiencing the need to raise the wholesale prices on their goods for export. Suffice it to say, this could play out well for us by breathing a bit of life into American light manufacturing, but only if it creates steady jobs that pay the labor force more than $12 per hour.

The single biggest problem we get when we invite communist governments to play the games of capitalism is that we always have to disturb the fun to explain to them the probable outcomes. Generally, by the time they figure things out for themselves, it’s already too late for them to put things into good order. Then we spend the next twelve or so years bailing them out of the messes they got themselves into. It’s sort of like cutting our own throat with the knife they intend to sell to us.

The only new angle to the situation this time is that China and several other countries that hold no regard for free democratic society are now holding the mortgage to the farm. How long will it be before Congress no longer has the clout to cease them from calling that note due and payable? Will China then be buying our manufacturing base out from under us, financed by our own debt? My easy advice to you is this: Don’t ever think it can’t happen.

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