Goldman asks: Is sovereign strain Europe’s subprime? Probably not. (via FTAlphaville)
Here come the Toyota class action lawsuits (LA Times)
Fred Wilson’s Thoughts On Google Buzz
Sen.Tim Johnson trying to eliminate proposed fiduciary standard for retail brokers (Bloomberg)
“The most serious wave of commercial real estate difficulties is just now beginning” (Congressional Oversight Panel via FT Alphaville)
Leading indicator: Global trade levels grew by 8.5 percent in third quarter of 2009, led by US (Capgemini Index)
(UK) Survey: SMEs laid off more staff than they expected in second half of 2009 and could lose even more (ACCA)
Gordon Brown tells FT the world’s leading economies are close to agreeing on global bank tax (via FTAlphaville)
Technorati Tags: (GOOG), big banks, brokers, Google, sovereign-debt, Toyota, unemployment
Google, Apple gain smartphone share at expense of Palm, RIM and Microsoft (comScore)
TALF losses from CMBS could exceed $500m for US Treasury in the worst case scenario (GAO via FT Alphaville)
Assets of the largest 1,000 banks in the world grew by 6.8% in FY 2008/2009 to a record $96.4 trillion (IFSL)
Hulu Surpasses 1 Billion Monthly Video Streams for First Time (comScore)
Toyota still has great strengths, not least financial, but it has lost something precious and may never get it back (The Economist)
“Whether Bank of America’s conduct rises to the level of fraud, rather than mere stupidity … is the real question in the case” (NYTimes)
Why Some Homeowners Hope For Foreclosure (NPR)
“Berkshire “downgrade underscores the innate risk of the financial industry,” – Stifel Nicolaus
Technorati Tags: (bac), (GOOG), (PALM), (RIMM), AAPL, Apple, Bank-of-America, berkshire-hathaway, big banks, CMBS, financial-industry, foreclosures, Google, Hulu, Microsoft, MSFT, Palm Inc., RIM, smartphone, TALF, Toyota, Twitter, video
Technology Research Group, which takes a forensic accounting approach to research, has lowered its ratings on technology leaders Apple (AAPL) and Google (GOOG) following announcement of their quarterly results. TRG cites concerns about high valuation, accounting changes and earnings management. We are pleased to offer complimentary downloads from the Alacra Store of TRG’s latest reports on Apple and Google.
Selected Excerpts:
- Apple (AAPL) warrants a sizeable premium. Whether a 30 plus earnings multiple can be justified is the more relevant question. Recent developments leave us less confident. We are moving to a “Sell” rating and establishing a $197 price objective (assumes a multiple of 25 times EPS estimate). This is not a short sell recommendation. It refers to protecting profits and managing downside risk only.
- Over the last two quarters in particular, a few operational and earnings quality-related irregularities surfaced. Given the appreciation in Apple’s stock over the past year and a pricey valuation, we believe the safe play is to protect profits. Should these issues stabilize, we would reconsider our rating.
- There may be more to (Apple’s) sales backlog reduction than just accounting changes. The severity of the revision stands out. Compared to deferrals reduction (vs. F1Q09), the adjustment to F1Q10 revenue was disproportionately larger than restatements of historical quarters (FY07-FY09).
- We wouldn’t categorize (Google’s) earnings management as egregious, but there are some serious concerns. R&D expenses declined 15% Y/Y in the fourth quarter (in basis points as a % of revenue). For the year, the ratio of R&D to sales was down only 6% (12.02% vs. 12.82% in 2008). Actions in the fourth quarter were not a matter of circumstance. They were deliberately planned.
- Risk/reward is far less favorable than it used to be. We believe protecting profits is the safe play. We are moving to a “Sell” rating and establishing a $536 price target (assumes 23 times 2010 EPS estimate). Please note this is not a short sale recommendation. Stepping in front of a sell-side and institutional favorite would be a risky endeavor at this time. Things can change. We’ll be watching.
These research reports on Apple and Google have been made available for complimentary download from the Alacra store for 30 days by special arrangement with Technology Research Group, an Alacra content partner. After 30 days, the reports will revert to their regular Alacra Store price of $25 each)
For additional free research reports from the Alacra Store click here
Visit Alacra Pulse for latest analyst comment on Apple and Google.
Technorati Tags: (GOOG), AAPL, Apple, free research, Google
Forrester Research’s Thomas Husson sees 2010 as “a key transition year at the start of the mobile decade — not only will we start moving toward more mainstream mobile services audiences but a strategic shift will also take place.”
Companies of all shapes and sizes as well as governments and local authorities will start integrating mobile into their overall approach, rather than simply launching a few mobile initiatives, he writes..
Husson expects new application stores and mobile payment solutions, significant innovation in the mobile social and location spaces and another round of interest in mobile TV for the FIFA World Cup.
“The mobile Internet will be bigger than you think,” Husson writes. “The support of Flash and the improvement in mobile technologies like HTML5 will start to reduce the advantages that creating an appoffers over a mobile Web site — unless you need to integrate strongly with core handset functionalities, such as GPS, the camera, or the address book, or you need to use the free push notification that Apple (AAPL) provides, or you want to differentiate via content accessible offline. In more mobile-savvy countries, such as the Nordics and the Netherlands, mobile hype will focus more on Web apps that leverage mobile browsing technologies. Forrester forecasts that the mobile Internet will reach 22% of European mobile users by the end of 2010. This will create an opportunity for brands to reach more consumers at lower costs.”
“One big question will remain: Will fragmentation be reduced? Unfortunately, the answer is no: It is here to stay,” in Husson’s view. “Google’s (GOOG) Android will gain traction but will also be a fragmented platform.”
For details see 2010 Mobile Trends (Premium)
Technorati Tags: (GOOG), AAPL, Apple, Google, mobile internet
(guest post by Barry Graubart, author of the Content Matters blog)
Yesterday’s announcement by Google (NASD: GOOG) of the Nexus One phone dominated the Twittersphere. But, how will the smart phone (or superphone) wars shake out? It’s too early to tell, but here’s how I read it:
For now, the iPhone provides the better user experience. It offers proven technology, a vast app store and still has the cache of a status symbol. The Nexus One will appeal to early adopters along with those who’ve held off on buying the iPhone because they didn’t want to use AT&T. To some extent, it will be the audience who at least considered buying a Palm Pre last year.
In the coming months, things will get interesting. Apple’s edge in Apps will diminish, as successful app developers will launch Android versions for this growing base of users. In terms of features, I’d expect Apple and Google to leapfrog one another in coming releases, which should benefit users of either platform. Apple may finally have to embrace (and license) Flash and offer removable batteries, for example.
The differences in their business model will also be a differentiator. While the iPhone is clearly aimed at the top end of the market, Google phones will hit all price points. Rather than having the carriers subsidize the cost of the phones, Google actually is sharing revenue with the carriers, which incents them to push out Google products for the masses. This makes a lot of sense. As Google has stated, their business is not focused on making money from hardware (or software). Their goal is ubiquity. Google wants to be the dominant player in mobile advertising and this helps them achieve that.
So who are the big winners and losers?
Google’s clearly a winner, as they have a very compelling strategy to extend their advertising dominance to the mobile platform. The carriers such as T-Mobile, Verizon (NYSE: VZ) and Vodafone (NASD: VOD) are also winners in the short-term, though in the long-term, ceding control of the user experience to Google and having Google sell unlocked phones will weaken their position. Manufacturer HTC, nearly lost in the shuffle, is clearly a winner as well.
Consumers are probably the biggest winner, both for the fact that competition in the smartphone market will make all the offerings better (and cheaper over time) but also in the weakening of the mobile carriers. That said, the carriers will still hold some clout. As smartphones drive bandwidth usage, I’d expect to see tiered data plans, which will raise fees for active users.
The biggest loser in this might be RIM (NASD: RIMM). The iPhone has made only slight inroads in the corporate market, but a viable Google platform will provide developers an opportunity to build enterprise solutions, challenging RIM’s dominance in that space. Meanwhile, Verizon, which has been the most active Blackberry partner, will support the Nexus One phone by spring.
Another loser is Microsoft, whose Windows Mobile platform is rapidly becoming irrelevant. Just as in search, where Bing/Yahoo is struggling to remain significant, Microsoft may find itself on the outside looking in as the mobile ad market emerges. I think they have to do something big here and I’d suggest they strongly consider making a run at acquiring RIM.
Despite the burst of hype around the release of the Pre, Palm (NASD:PALM) remains a bit player. I can’t see a compelling reason for anyone to buy a Palm Pre at this point, which hurts both them and Sprint.
Another winner: Twitter, whose servers held up under this volume of Tweets with nary a fail whale in site. This is a good warmup for the Apple Table announcement to come January 27.
What do the experts have to say? Here are some comments, courtesy of Alacra Pulse:
Forrester’s Charles Golvin sums it up with three bullets:
- Google has taken responsibility for driving Android innovation
- Google will be an influential phone retailer…in the future
- Those awaiting another iPhone-like revolution are in for disappointment.
Interpret’s Michael Gartenberg notes that Google’s decision to sell its own Google-branded phones is “a sea change in terms of Google now owning the customer, making the carrier a little bit less relevant to the conversation and maintaining more control over the hardware and software experience because they realize they’re competing with players like Apple and the iPhone”
Sanford Bernstein’s Jeff Lindsay adds that Google “perceives mobile as the next major opportunity” and “It is too big a risk to drive the strategy through their partners. They want more say and more control.”
Via AllThingsD, BarCap’s Doug Anmuth offers the first projection on Nexus One sales: In a note to clients this morning, Barclays Capital analyst Doug Anmuth hazards a guess: 5 – 6 million units sold in 2010, based on distribution through T-Mobile at launch and Verizon Wireless (VZ) by spring. And, according to Anmuth, it should allow Google (GOOG) to book incremental revenue of $2.6 billion–$3.2 billion.
Canaccord Adams’ Peter Misek sees the Nexus One driving a rift between Google and the carriers
“At stake is the ownership of the mobile internet and customers who will increasingly use it. Handset makers, on the other hand, feel they may empower a very potent competitor by continuing to use Android.”
Gartner’s Nick Jones sees direct sales of the Nexus One to consumers as but a first step for Google: “So will it stop at Nexus? I guess not… perhaps we’ll see Chrome OS netbooks on the shelves in the future as well”
Technorati Tags: (GOOG), AAPL, Apple, Google, iPhone, mobile, Nexus One, RIM
As Research in Motion (RIM) rallies in the wake of strong quarterly results, it is worth noting the prevalence of Blackberry devices on this list from comScore: looks like 51 percent of potential smartphone purchasers surveyed plan to buy a Blackberry device in the next three months. This compares with 20% for Apple’s (AAPL) iPhones, 17 percent for Google (GOOG) Android-based devices and a puny 3 percent for Palm (PLM) devices. This helps to explain why RIM’s results impressed, while Palm’s disappointed.
The focus of the comScore report is how Android is shaking up the smartphone market. “Although Android’s share of the smartphone market is relatively small, it has quickly doubled in the past year to 3.5 percent in October 2009. Understanding the mobile media behavior of Android users highlights why operators and media companies might embrace the platform and fuel its growth.”
An analysis of mobile media consumption on smartphones revealed that users of both Apple and Android-supported devices were more likely to engage with mobile media than an average smartphone user.
Users of the Apple iPhone were most likely to consume mobile media, with 94 percent of users doing so in September 2009, while 92 percent of Android device users, predominantly T-Mobile G1 users, engaged in mobile media activities, 12 percentage points higher than an average smartphone user.
Apple and Android users were equally likely to engage with news via their browser and nearly identical in their mobile application engagement. Email was the only major activity in which iPhone users (87 percent) were far more likely to participate than Android users (63 percent). Overall, these data suggest that Android users will behave more like iPhone users than other smartphone users.
For more analyst comment on RIM, see Alacra Pulse.
Technorati Tags: (GOOG), (PALM), AAPL, Android, Apple, Google, iPhone, mobile-phone, Palm Inc., Research in Motion, RIM, smartphone
Mary Meeker and the mobile technology research team at Morgan Stanley today release a massive new Mobile Internet Report that supports much of the hype about the future of the sector.
It includes analysis of expected winners and losers from the forecast trends.
“Near term, Apple (AAPL) is driving the platform change to mobile computing and leading in user experience. Its mobile ecosystem (iPhone + iTouch + iTunes + accessories + services) market share and impact should surprise on the upside for at least the next 1-2 years. Longer term, Google (GOOG) Android’s open operating system (combined with clever device manufacturers), emerging markets competition, and carrier limitations may pose challenges to Apple’s market share upside. RIM (RIM) may maintain the enterprise lead, thanks to its installed base, but the long- term outlook is challenging.”
…after years in the backwater of global mobile development, US companies like Apple, Facebook, Google, and Amazon.com are the innovation pacesetters.
Key points:
Morgan Stanley has made the full report available free of charge here.
Technorati Tags: (GOOG), AAPL, Amazon, Android, Apple, Facebook, Google, Mary-Meeker, mobile, mobile internet, morgan-stanley, RIM
Yahoo! (YHOO) and Microsoft (MSFT) are certainly pulling out all the stops to put the best face on the merger of their search activities. Yahoo! CEO Carol Bartz gushes that “everything’s just going to get a whole lot better” and that “this deal will make the difference between a great Yahoo! search experience and an awesome one.” Maybe that’s to make up for the promised boatloads of cash Yahoo! is not getting.
She also features in a dull video extolling the virtues of the deal. Microsoft’ CEO Steve Ballmer’s version is slightly more interesting thanks to the live background. Both appear at a special website set up to tout the venture www.choicevalueinnovation.com, thought it’s hard to see how the deal advances any of these goals.
A quick scan of Alacra StreetPulse finds that most analysts greeted the deal with a yawn:
Mark May of Needham & Co says the deal is a clear negative for Yahoo because: 1) There’s no upfront payment;. 2) The minimum guarantee is only for 18 month of the 120 month deal;. 3) The deal requires regulatory approval and management expects closing in early 2010;. 4) Management doesn’t expect to see the full benefits of the deal until 24 month after regulatory approval, which could mean not until 2012;.
The deal, which lets the two companies share revenue from ads sold next to results generated by Microsoft’s Bing search engine, may disappoint some investors because it doesn’t include an immediate payment to Yahoo - Jeff Lindsay , Sanford C. Bernstein & Co.
BusinessInsider’s Henry Blodgett sees trouble ahead for Yahoo!:
- The deal is significantly worse than expected for Yahoo, as the company will get no money upfront.
- The deal is positive for Microsoft, but largely because Microsoft was nowhere in search without it. Saving the upfront payment is also a help.
- Ironically, the deal will likely be positive for Google, which will now likely benefit from months of purgatory as Microsoft and Yahoo work to clear regulatory scrutiny and then go through the massive challenge of trying to integrate their sales forces and technology. Google itself will also now be able to argue persuasively that there is a big, viable (if discombobulated) competitor in the market.
Conceptually, the idea of Microsoft and Yahoo combining forces is smart. Neither alone has enough share of the search market to be a “must buy,” and search relevance and pricing improves with scale. Both companies would likely just continue to lose share ad infinitum without a deal, so they have little to lose by working together. And Yahoo will gain some cost savings, at least for a while.
That said, we think the structure of the deal could end up being a disaster.
Rebecca Jennings, Forrester Research’s principal London analyst is more positive: “This deal should allow Yahoo! to give up its drive to to beat Google, and concentrate on the elements it does do better , display media and social media , devolving the competition and the significant investment involved off to Microsoft.”
Likewise, The Economist: “The combination, which was announced on Wednesday July 29th, is not as far-reaching as originally envisaged. But it is likely to create a serious rival to Google, the online giant that dominates both of these markets.”
(Logos courtesy The Economist)
Technorati Tags: (GOOG), (YHOO), Credit Research, Google, Microsoft, MSFT, Yahoo
This guest post by Barry Graubart originally appeared on the Content Matters blog.
It’s hardly news that the economy is having a big impact on online advertising and the overall technology market. But online companies which provide consumers with strong value are poised to survive and even thrive in this economy.
That’s one key takeaway from a massive, 147-slide deck recently posted by Morgan Stanley Internet analyst Mary Meeker, entitled “Economy + Internet Trends“.
Meeker examines the impact of the current economic environment on Content and Internet companies. Whether you agree with her analysis, there’s plenty of data there for you to chew on.
The first 20 or so slides provide some interesting views into how the economy got here; nothing new but some useful charts and perspectives on what’s similar and what’s different from past recessions. The economy has pushed ecommerce growth to negative (starting Q3, 2008) after consistent 20% annual growth rates from 2001-2007. The technology sector’s five flat or down sequential quarters matches 2001, but the outlook this time is worse.
Key spending sectors of the S&P500 have taken a huge hit – financial services, industrials, consumer discretionary, materials, information technology, telecom and energy. Even utilities, health care and consumer staples stocks are down 30-40% from their pre-recession peak.
Then she digs into the slides that are of greatest interest to those of us in the content and technology space. The trends she highlights include:
Online advertising: ad spend is closely tied to GDP growth. On top of that, right now we’re in a very difficult period as the disruption caused by social media, video and VOIP is not yet translating into significant revenues Online CPMs are a fraction of offline CPMs. Meanwhile, doing a regression analysis, she shows how a flat GDP in 2009 could lead to a 4% drop in ad spend.
One bright note is that in difficult times, consumers spend more time, rather than less, on the Internet. It’s “a cheap/efficient/transparent thrill!” as she describes it. The Internet is becoming a necessity. Broadband Internet was the last thing to be cut in consumer survey (even after personal care, toiletries & cosmetics).
At the same time, undermonetized social media, video and VOIP creates an opportunity for marketers to capitalize on low CPMs.
Looking ahead five years, Meeker projects the online consumption mix will be what she describes as consumer-enhanced professional content: anchored with first class professional content; augmented with first class user-generated content that’s ranked/reviewed/’edited’, supplemented by all-comers user-generated content that’s ranked/reviewed, all presented in a holistic/widgeted way.
Or, as she describes it, a “clean combo of WSJ.com+bbc.co.uk + digg + techmeme + youtube + nytimes.com + allthingsd.com + facebook + twitter”
Meeker drills in to online advertising, noting that Google’s share has increased from less than 50% in Q4 2005 to 67% in Q4 of 2008. Search advertising continues to show growth and is taking budget from other forms of advertising, most notably print magazines, direct mail and newspapers.
There is still a huge advertising opportunity – today, online advertising spend is $288 per home vs. $818 per home for newspapers. While CPM’s and CPC’s may be under near-term price pressure, if targeting/ROI continues to improve (as she believes they should), there should be long-term upside.
Meeker remains bullish on the ecommerce space. While some items, such as computer equipment, event tickets, books, music and videos have seen huge adoption rates on the Web, overall US online ecommerce penetration remains only around 4-6%, though it continues to rise.
Amazon should continue to show growth as it has become the web’s most effective commerce search engine and continues to provide new technologies for its users, such as the Kindle and mobile apps for research and purchasing.
Another strong trend for Meeker is the positive growth in mobile. New mobile products, from iPhones to the Kindle to Netbooks are driving incredible growth. The enablers for this growth are:
1. broadband and wireless infrastructure; the cloud
2. Hardware: small, fast and cheap storage, touch screens, GPS and more
3. Software – browser-based tools, widgets
4. Communications tools – messaging, social media, cameras, VOIP
5. Digital content – music, video, news, search, shopping, weather, maps and more
She notes that Google Voice provides Unified Communication for consumers – one phone # + VOIP + Voicemail Transcription + SMS. That’s a pretty big game changer.
We are undergoing the greatest media transformation in history and Meeker asks “Where is the great creative” to drive it?
In closing, she reiterates her believe that companies with cogent business models that provide consumer value (Amazon, iTunes, etc) should survive and even thrive in this economy, noting “consumers need value more than they’ve needed it in a long time”.
Technorati Tags: advertising, Amazon, Google, internet, Mary-Meeker, morgan-stanley, online-advertising, social-media
Google’s (NASDAQ: GOOG) better-than-expected third quarter earnings have drawn mostly favorable commentary from analysts, though many are lowering their price targets to reflect the impact of a slowing economy.
Henry Blodget at Silicon Alley Insider says that barring a major stock market boom–Google is not likely to zoom higher.
“At $380, on annualized Q3 free cash flow, Google is trading at a perfectly reasonable 15X cash flow. That’s a fine multiple for a company of this size and quality, and, finally, it should limit the stock’s downside. But unless you think that revenue will reaccelerate, the economy won’t affect Google, or CAPEX spending will continue to decline, it’s hard to see why the stock will charge immediately higher from here.”
But here’s some good news: in the mid-$300s (or–even better–lower), at 15X cash flow, it should finally make a good long-term investment again.
Street Insider quotes Piper Jaffray analyst Gene Munster as saying the company is benefiting from the “Wal-Mart” effect that consumers will be searching more for bargains in a tough economy, following similar comments by Google economist Hal Varian.
The bottom line is the “Wal-Mart” effect in combination with our research which suggests advertisers are shifting from non measurable (display) to measurable (search) advertising, leads us to believe Google is positioned to resist the economic slowdown over the next year.
Lex in the Financial Times thinks it is inconceivable that a company reliant on advertising revenues will be able to pass through a mighty downturn without sharing any of the pain suffered by its customers. “Yet by refusing to give any form of forward guidance, or even to divulge more than the bare essentials of financial information, Google ducked this question.”
But for all that infuriating uncertainty, the group takes almost two-thirds of the market for search inquiries and challengers remain distant. On a reasonable 17 times consensus forward earnings, investors can more than afford to give Google the benefit of the doubt.
Jefferies analyst Youssef Squali told the Associated Press the company’s revenue “has shown remarkable resilience so far.” Furthermore, management’s new focus on cost containment led to earnings per share that comfortably beat estimates. The analyst reiterated a “Buy” rating on Google but lowered his target price to $551 from $600. UBS analyst Ben Schachter, meanwhile, boosted his price target to $540 from $525 and also kept a “Buy” rating, saying the company’s results showed discipline.
Think Panmure today reiterated its Accumulate rating but lowered its price target from $550 to $450. “Google reported a solid Q3: net revenue was slightly below our forecast, while management’s focus on cost containment drove earnings out performance.
We remain bullish on Google’s long-term prospects; however, we do not think the company will be immune to the weakening macro environment.
CanaccordAdams sees Google’s results as positive: “Management has shown a willingness to adjust its
stance on hiring and spend to lever the existing business to increase cash flow.”
We keep our BUY rating and $650 price target.
Doug McIntyre at 24/7Wall Street says the fact that big advertisers are moving to Google search indicates the strength of small business spending:
The hidden economy of tiny enterprises must be doing substantially better than some government numbers would tell.
Technorati Tags: (GOOG), Google, information-technology, search
