Filed under: Products and services, Law, Rants and raves, Competitive strategy, Exxon Mobil (XOM), Scandals, Politics, Oil, Headline news

As I fully expected, I’ve received a fair amount of comments on a recent blog post in which I proudly took a stance in favor of Exxon’s court backed demand that the government of Hugo Chavez immediately ante up for the oil infrastructure which the country he leads has stolen from Exxon Mobil Corp. (NYSE: XOM). Most of the commentary was lucid and well thought out on both sides of the argument, but one particular commenter really piqued my sense of intrigue.

The comment I’m referring to was an assertion that what the Chavez government has done by seizing the Cerro-Negro oil development is legal. For the purpose of this rebuttal, and because I am near totally ignorant of international law, I’m going to assume that comment was correct. Now, here comes the Devil’s Advocate:

I believe that the United States government should immediately and completely nationalize all physical assets of Petr

Share This

Filed under: Products and services, Competitive strategy, Motorola (MOT)

After Motorola, Inc. (NYSE: MOT) said it was considering options to spin off or sell its money-losing wireless handset division a few weeks ago, the company’s new CEO, Greg Brown, said that the company is “fully committed” to the mobile device business. Okay — which is it? Brown went on: “Motorola is fully committed to the mobile devices business and I am fully committed to mobile devices.” Fully committed to keeping it in-house or selling it off? One has to wonder.

Motorola’s brand in the cellphone business is a very good one, although that division’s profit troubles and sales numbers have been really horrid in the last 12 months. Still, unless the company could easily be worth more to shareholders if split up (i.e., Carl Icahn), then refocusing efforts in its handset division should be a top priority. Motorola was once on top of the world with the RAZR. There is no reason it can’t be there again.

It’s hard to believe that Motorola’s brand recognition in the ultra-competitive handset business is tarnished. It’s just the sales and profit that’s lacking. So, within the fast pace that the handset business works in, Brown’s test will be to fix those problems and get Motorola’s nameplate again at the top of the sales charts. The market may give him all of 2008 to do so, but many investors, unfortunately, want instant gratification after former CEO Ed Zander’s results.

Share This

Filed under: Earnings reports, Forecasts, Bad news, Management, Consumer experience, Competitive strategy, Ford Motor (F)

Shares of Visteon Corp. (NYSE: VC) are slipping in morning trading after the company posted a larger fourth-quarter loss and announced it would continue its restructuring plan.

The auto parts supplier reported a wider fourth-quarter loss of $43 million, hurt by restructuring costs and write-downs. Included in the company’s loss was $30 million related to non-cash asset impairments and $32 million related to restructuring expenses.

However, the company’s loss per share of 33 cents managed to beat analysts’ estimates for a much larger quarterly loss of 55 cents per share. Visteon’s revenue also saw a small increase of only 2% $2.86 billion from $2.81 billion in the same period of last year.

Smaller sales to Ford Motor Co. (NYSE: F), the company’s former parent, also put pressure on Visteon gains during 2007. Lower North American production volume brought a decline of 14% to $4.1 billion in the company’s sales to Ford. Meanwhile, product sales to other customers saw a growth of 11% to $6.6 billion, which is 61% of total product sales. Thus, Visteon posted a loss of $372 million, or $2.87 per share for 2007, with revenue coming in at $11.27 billion.

Looking ahead, the auto parts supplier announced it restructuring plan remains on track. Visteon, which has started its restructuring plan three years ago, expects to fix, sell or close eight facilities this year to reduce costs on climate controls, interiors and electronics. Back in January, Visteon also revealed plans to close the doors of a fuel tank assembly plant in Concordia, Missouri, during the third quarter.

For 2008, the company doesn’t show too much optimism and expects to see lower output for its key customer programs in North America and Europe. Visteon anticipates 2008 earnings figures to range from a loss of $25 million to a profit of $25 million, on revenue of about $9.7 billion. Free cash flow is also expected to come in under negative values in a range between $350 million and $250 million.

Visteon had a pretty difficult past year and it looks like its shares are not poised for a rebound. Traders are sharing the company’s pessimism over its further gains and pushed shares of the stock down 0.7% in early morning trading.

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

Share This

Filed under: Earnings reports, Competitive strategy, Comcast Cl’A’ (CMCSA), Verizon Communications (VZ)

Back in August, I labeled Comcast Corp. (NASDAQ: CMCSA) as a ’slacker stock,’ “which like its human equivalent spends his days sitting on the coach playing video games in his underwear and whining about his lot in life.” Now, the world’s largest cable company, which has dropped more than 30% this year, has finally grown up.

The Philadelphia-based company reported that net income soared 54% to $602 million, or 20 cents per share, beating the 17 cent consensus estimate of analysts surveyed by Bloomberg News. Sales surged 14% to $8.01 billion, also beating analysts’ expectations. As if that wasn’t enough, Comcast also announced a $6.9 billion stock buyback and said it would begin paying its first dividend in almost 10 years. The company’s guidance also was strong. Particularly noteworthy was the expected decline of capital expenditures as a percentage of revenue to 18%. Revenue and operating cash flow is expected to grow 8% to 10% with free cash flow jumping 20% to $2.3 billion.

Comcast seems to be listening to the complaints of shareholders who are concerned about the company’s poor stock performance. Whether this will make Chieftain Capital Management, which last month called for the ouster of CEO Brian Roberts, remains to be seen. One quarter is not a trend.

My wife and I are not sure whether we am sticking with the company’s triple play deal that expires at the end of the month or switch to Verizon Communications Inc. (NYSE: VZ)’s FiOS. I bet I am not alone. It will be interesting to see if the company’s churn rate starts to increase in the coming months.

Share This

Filed under: Earnings reports, Competitive strategy, Ford Motor (F), General Motors (GM), Employees

General Motors Corp. (NYSE: GM), which today reported an auto industry record loss of $38.7 billion in 2007, is offering its unionized workforce of 74,000 a buyout package. The automaker, along with rivals Ford Motor Co. (NYSE: F) and Chrysler LLC which have offered similar deals, better hope that too many workers don’t take it up on its offer.

There is going to be a steep learning curve for even the brightest of newly hired GM employees who under a new UAW contract receive half of the old wage of $28 per hour. Moreover, the last thing that Chief Executive Rick Wagoner wants is for GM’s assembly lines to be staffed by inexperienced or overworked employees. The results of that could be disastrous.

Many workers, though, are going to take GM’s offer and who can blame them. Workers with 10 or more years service can opt for a one-time payment of $140,000 to leave the company and those with less service could take a $70,000 pay out. These employees may be able to squeeze even more money out of the automaker in the coming months by being hired back as consultants at wages that are much higher than they are getting now.

But I doubt that GM and the rest of the U.S. auto industry can grow its business through cutting costs alone. At a time when global competition is becoming brutal, The Big 3 can’t afford to lose too many workers who know how to build cars that people want at prices they can afford.

Share This

Filed under: International markets, Rants and raves, Competitive strategy, China, Alcoa Inc (AA), BHP Billiton Ltd ADR (BHP), Rio Tinto plc ADS (RTP), Comfort Zone Investing, Commodities, Aluminum Corp of China ADS (ACH)

In one of my recent posts on stock pricing, I received a comment from one of our more acerbic readers, who asks some good questions once he simmers down. He wonders why investors have not bid up the share price of Alcoa Inc. (NYSE: AA):

• “How come nobody has the hots for ALCOA? It is very cheap. . . There is mining stock merger-mania yet nobody is buying ALCOA in anticipation of it occurring to ALCOA as well. Are we gonna wait until it is too late?”

First of all, I should remind everyone that the price of a stock on any given day is a myth. It is worse than a myth, it is just a fleeting moment in time. I would call it semi-arbitrary most of the time.

Alcoa closed yesterday at $34.06, having a trailing P/E ratio of 11.5. That falls between its 52 week low of $26.69 and its high of $48.77. Also worthy of note, Alcoa has a yield of 2% which is about 10% higher than your average S&P stock. This seems positive.

Perhaps my friend is on to something. Alcoa is off its high considerably and has a lower P/E and higher yield then any of the indices. But its ROE of 15 and ROIC of 11 are all too average, not exceptional — and these are important considerations. The P/B of 1.89 also seems average but the P/S of 1.03 looks very appealing.

An investment in a stock is based on future earnings and the metrics that we use to anticipate them. In examining Aloca prospects for this year I found that analysts believe 2008 earnings will be less than they were in 2006 and perhaps the same as last year. Speculation about 2009 is higher, but it is speculation.

It seems that in making a bid for Alcan last year and buying a portion of Rio Tinto plc ADS (NYSE: RTP) this year, Alcoa is trying to buy its way into some growth because on its own it is having difficulty finding any. That is not to say that the company is not valuable, but the value is very well established. Hopes for a rally may rely on the futures price of aluminum more than expanded operations.

In comparing Alcoa, which I have considered buying periodically, to one of my favorites, the Aluminum Company of China (NYSE: ACH) (often referred to as Chalco), I found it wanting. ACH has a lower P/E of 10 and higher yield by 10% of 2.2%, a P/S of 0.35, an ROE or 30 and a ROIC of 21 and better growth prospects in the largest new market, China.

As I remind investors, AA and ACH share prices are based on future prospects and ACH wins that discussion very easily. Given that the P/S is less than half and the ROE and ROIC are double that of Alcoa, there is no contest. Alcoa knows this all too well and has actually teamed up with Chalco in acquiring a portion of Rio Tinto and helping them hold off hostile bidders BHP Billiton Ltd ADR (NYSE: BHP).

If I were to guess how Alcoa (the stock) does this year, I think it just keeps on coasting along with the price of aluminum until some new catalyst triggers some buying. That could be a major merger or acquisition, a buyout, a huge increase in the demand side if construction spending in North America picks up, or entering a new related business with better growth prospects.

All said, Alcoa should be on your watch list because even without a major catalyst it is still building equity, just slower than others, and if the price stays depressed at current levels, by next fall it could very well be a steal and you will get to it first.

Sheldon Liber is the CEO of a small private investment company and the design and research principal for an architecture & planning firm. To find potential opportunities and verify his track record, read Chasing Value or Serious Money. Disclosure: I own shares of ACH.

Share This

Filed under: Earnings reports, Management, Consumer experience, Competitive strategy

Shares of insurance broker Marsh & McLennan Inc. (NYSE: MMC) are trading slightly higher this morning, despite missing earnings estimates and posting a 62% decline in its fourth-quarter profit.

The company said its profit dropped to $85 million, or 16 cents per share during the fourth quarter, hurt by weak earnings results from its risk and insurance services business. These numbers are down from $226 million, or 40 cents per share, in the same period a year ago.

Included in the company’s earnings numbers were discontinued operations and one-time costs. Excluding that, Marsh & McLennan posted earnings of 26 cents a share. Analysts, on average, expected the company to show earnings of 31 cents per share, according to Thomson Financial.

Marsh & McLennan replaced Michael Cherkasky, its chief executive officer, last month, blaming him for being unable to regain lost clients and revenue. Cherkasky was also blamed for spending more on bonuses for brokers. The insurance broker hired a new CEO, Brian Duperreault, whose mission is to increase the company’s sales, as lower commercial insurance rates bring smaller deals commissions. Duperreault also announced his crucial target aims to raise profitability at the company’s Marsh and Kroll units.

One analyst at Morgan Stanley, William Wilt, shows optimism on the company’s evolution under Duperreault leadership, and said that he believes “investors will probably be willing to look beyond any negative operational news and place a greater value on an expectation for higher future earnings power.” Wilt also lifted his rating on the stock to Overweight.

Marsh & McLennan had a pretty difficult year when it saw its shares losing ground for most of 2007. During that period, the company’s income from continuing operations slipped to $538 million, or $0.99 per share, down from $632 million, or $1.14 per share in 2006. Consolidated revenue for the full year also gained only 8% to $11.4 billion from $10.5 billion in the previous year.

For now, it looks like Wilt may be correct in his assessment. Traders have overlooked the profit news, and instead pushed shares of the stock up 1.7% in early morning trading.

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

Share This

Filed under: Consumer experience, Competitive strategy, Nokia Corp. (NOK), Research in Motion (RIMM), Palm Inc (PALM)

Research-In-Motion (NASDAQ:RIMM) sells one of the most popular smartphones in the world. The Blackberry does well because it allows business people to have an easy system that makes their e-mail portable. The software and hardware make the product an absolute necessity for many professionals.

All of that is well and good until the Blackberry systems fail. Yesterday, RIM’s system was down. That took away all of the reasons for owning the device, at least for a day. It also gave competition from companies like Nokia (NYSE:NOK) and Palm (NASDAQ:PALM) a little foot in the door to convince business users that the Blackberry may not be the most reliable device on the market.

With customers who want 24-hour service, having the system down is monumentally frustrating. Similar problems have happened before. But if RIMM can’t improve reliability, it leaves itself vulnerable to a host of customer defections.

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

Share This

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

Yahoo!’s (NASDAQ: YHOO) board of directors officially rejected Microsoft”s (NASDAQ: MSFT) already generous bid of $44.6 billion for the company. Not a surprise, and Microsoft will actually pay up for the deal to occur. Microsoft has to and they are now over a barrel. Let’s explore why.

Microsoft spent over $6 billion last year to acquire the best company in the on-line digital advertising/marketing space, aQuantive. To monetize this acquisition and effectively, or least try to compete with Google (NASDAQ: GOOG), Microsoft needs a much bigger platform in the search engine sector. No question, even with all of its might and brand name recognition, the best Microsoft could muster is a 3.9% market share for its MSN versus Google’s massive 76%. Yahoo! has 15% share and combined with MSN, the share rises to just under 20%. Still a small player versus Google but a viable one.

Microsoft allegedly bid for Yahoo! last year for $40. Although never confirmed by the various parties, but the leak-the-news network pretty much had it in tow. Otherwise, why would Yahoo! reject $31 per share offer, a good 60% higher than its recent stock market price of $19.18? Because Yahoo! knows full well that Microsoft needs Yahoo! very, very badly.

On its own merits, Yahoo! is a broken story. Momentum is gone and senior management is adequate at best. Investors know it, too. At each turn, Google is knocking the heck out of Yahoo! and Microsoft as well. Microsoft knows it cannot build it, it must be acquired. No other viable option. Period.

Yahoo!, however, for a broken story is sitting in the cat bird seat–at least for the moment. The smoke screen of combining with AOL or partnering up with Google are neither an acceptable option nor a long term viable strategy. The stakes in the search engine/digital advertising/marketing game are enormous. Let’s put this into perspective. In less than ten years of existence and less than four years as a public company, Google is on track to achieve $16-17 billion of revenues this year. No other company in American corporate history has achieved this kind of hyper-growth. Take a minimum of 30% growth for the next five years and Google’s revenues will be at a staggering $55-60 billion. The profitability is also at a stunning rate of 35% plus.

Microsoft will swallow its pride and some of its own current market cap and pay up for Yahoo!. Microsoft began this movie and now they must finish it. In the meantime, Yahoo! personnel are and will continue to be distracted and as I wrote before, Google can pick up even more market share these next 18 months before Microsoft has a clear strategy with the eventual Yahoo! acquisition.

Georges Yared writes about great growth stocks today in GameOn Investing.

Share This

Filed under: Products and services, Consumer experience, Competitive strategy, FedEx Corp (FDX), United Parcel’B’ (UPS), UAL Corp (UAUA), Small business

With airline traffic steadily increasing, more and more of us are faced with the same question; How in the world am I going to fit all these things in our luggage? Maybe it is time to start thinking outside of the box, and instead of packing all our things, maybe we should just start to consider sending our belongs ahead of time and stop worrying about packing all of our things?

As I read Joe Brancatelli’s (portfolio.com) article discussing airline baggage, I could not help think back to December when my girlfriend had her bags lost for over a week on a trip from Europe back to the states for Christmas. Inside this luggage we had all her clothes, as well as all of my family’s Christmas presents. Since she was flying into the states on Christmas Eve, and the airline lost her bags for a week, we had no presents to give out on Christmas, and by the time they showed up, on New Years Eve, the Christmas magic was pretty much lost.

As we examined last week, airline delays last year were near an all time high, but as I mentioned in my article, the one thing that bothers me more than being late, is arriving without my luggage. While lost baggage rates stayed pretty steady last year, with 9 out of 1,000 passengers filing lost baggage claims, there are other reasons why we may should consider shipping instead of packing in the future.

For one, you have to worry about paying fees for having luggage in excess of airline guidelines. Returning to Europe after Christmas I felt the pain of that rule. I won’t mention the airline name, but let’s just say that they had a 50 pound per bag rule, which I think is probably pretty uniform these days with major airlines. We had 4 bags total, with two bags being over the limit. The result? $125 fee! I was definitely kicking myself for loading up on English books while I was home (which I still have yet to open)!

The point? For $125 I probably could have just shipped the extra baggage and had a much greater possibility of the articles actually making to my place on time. Not only will shipping your baggage ahead of time possibly save you money, it also has the added beauty of freeing you from having to lug all those heavy bags around with you as you travel.

On some airlines not only do you face the chance of extra fees for overweight bags, but you also have to deal with fees for taking more than two check-in bags. If you travel airlines that permit more than two check-ins, consider yourself lucky. Soon, passengers that are allowed two check-in bags may be part of the lucky crowd. Last week, United Airlines, UAL Corp (NASDAQ: UAUA) went so far as to lower the number of bags you are allowed to check from two down to one. Now, if you want to check a second bag, be ready to add $25 onto the cost of your flight. I have to say, United is definitely in my “no fly” zone from now on.

OK, so enough about the reasons why we should considering shipping our luggage, what are our options?

There are the usual names, FedEx Corp. (NYSE: FDX) and United Parcel Service (NYSE: UPS), which offer affordable pricing and a solid reputation for their services. But if you want something a little more personal, Mr. Brancatelli also points out that there are several new companies that specialize just in shipping luggage. These include Luggage Forward, Sports Express, Luggage Concierge, and The Luggage Club.

While FedEx and UPS typically come with a smaller price tag, some traveler prefer to use the luggage specialists because they feel they have a more personal connection with someone from the company when they need assistance. Brancatelli cites the case of airline traveler Andy Abramson, who is a fan of Luggage Forward, and states that they make it very easy for him in the event of last minute itinerary changes.

I, personally, have never shipped my luggage. I have lost luggage several times, and definitely fell victim to fees for over packing my luggage, which I have usually just taken in stride, and promised myself that I would be more careful the next time i packed up my things. But, for sure, the next time I get ready to take a trip I know I will definitely be looking into all my options.

What about you, our readers? Are you a frequent flier? Have you had bad experiences with your luggage in the past, and will you start to consider shipping in lieu of lugging your bags on your upcoming flights?

~ Here is another good article on traveling by Mr. Brancatelli, “What I Learned on the Road This Year” ~

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.

Share This