Googles Tax Problem; Uncle Sams Opportunity; Thank You Europe $GOOG, $YHOO, $FB, $TWIT

Google (Nasdaq:GOOG) is being hunted down by european tax collectors controlled by austerity starved politicians. Google and other American companies are seen as fat cows. Minimal local political consequences to extracting a few pounds of flesh.

Google rolls up the revenues to Google Ireland and then shunts the cash off to an affiliate in Bermuda. Pretty clever except UK, France and Germany feel they are not getting their fair share.

Come back to USA. Huge amounts of corporate cash are parked off shore. Corporations do not want to pay US income taxes on funds earned elsewhere. Not a bad argument if local taxes had been paid. But if the funds are in Bermuda and Ireland no one has paid something substantial.

So far the argument has been a classic push. Competing governments have not been able to break the logjam. Several corporations have huge off shore cash reserves with no immediate plans to deploy.

US politicians are under increasing pressure to resolve the issue. The uninformed electorate sees big buck off shore held by uber-large entities and joins the local Occupy Wall Street movement. End of electorates analysis. One person one vote does not equal sound financial/economic thought.

Corporations to be frank are motivated by stupid tax rules. Most of the key executives are  domiciled in the US and would probably prefer to see capital returned to US and then move globally without restrictions.

Congress will most likely mandate local state taxes be paid on internet transactions. Politicians also would love to be able to say they forced the repatriation of billions from overseas back to US. This will appease the Occupy crowds.

Watch for tax treaties between  the US and major European governments (EU as well) which will disadvantage off shore cash.

Investors after the initial sticker shock of increased tax rates will see cash coming into play more easily. Demands for effective economic deployment will grow. Investors did not buy to hold cash they can do that on their own.

George Gutowski writes from a caveat emptor perspective.

Google Achilles Heel; European Income Taxes; Not so Good for Google $GOOG $YHOO $FB $TWIT

Google (Nasdaq:GOOG) pays next to no income taxes on European revenues. UK, France and Germany all have Google in their sights. Google currently designates units in those countries as providing marketing and support services to Google Ireland which in turn transfers most of its turnover to an affiliate in Bermuda.

The structure is legally sound for now. except the guys who make the laws no longer like it. Google is advertising for sales and marketing staff in UK, France and Germany. So if the sale becomes local because of the local sales and distribution arms taxes will become local as well.

European governments are all fighting austerity and other financial issues. Quite frankly they have no political choice but to increase tax revenues. Google is a fat cow which will be slaughtered as quickly as possible. The UK, France and Germany constitute and will always constitute the overwhelming bulk of Google European revenue.

While Google is currently in the tax mans sniper scope. Yahoo (Nasdaq:YHOO), Facebook (Nasdaq:FB) and Twitter (To be announced) who all will depend on European revenues will be treated in the same fashion.

Big increases coming to global income tax rates which means negative pressure on EPS and potential dividend rates.

Death and taxes are inevitable. Google is not on its death-bed so it must be taxes.

George Gutowski writes from a caveat emptor perspective.

Apple Investors and Heroin Addicts. Whats the Difference? $AAPL

Investors interested in Apple (Nasdaq:AAPL) are seeing a behavioural economic clash. Traditionally Apple has titillated the markets with stunning announcements. New and very sexy products. Increasing market share. Wildly increasing cash balances. Apple mentions in media were at orgasmically high rates. Frenzy frenzy frenzy. Normally associated with smaller names but this was Apple. Safety oriented pension plans were big investors.

Investors were hooked on the frenetic energy of constantly improving news which made the metrics look damn fine. Investors became anchored: emotionally, psychologically, addictively to the feed back loop. Buy more because more good news is coming. You’ll see.

Apple is a highly successful business not a perpetual money-making machine. Competition found its feet. Unsustainable metrics collapsed. The huge cash position is now being used to woo back the investor with dividends, huge share buy backs sometimes financed by debt (which currently is cheap)

But when you analyze the media and investment commentary there is one common unifying theme. It is the lament of a heavy drug user who is finding the drug losing its potency. Traders relying on a long Apple short something else now have to think for a living. Some seem to be incapable of thinking.

Apple has dropped obviously. They still have enormous cash positions and enormous abilities to raise debt at very cheap levels. The products while facing more competition are still in high demand. The applications eco-system is still enormously tilted in favour of Apple.

Apple is considered the new Sony. Sony never had the enormous cash position that Apple enjoys. Apple has not lost its ability to innovate. It does have more effective competition.

Apple does have one enormous advantage over Google and Android driven offerings. They have not pissed off the Chinese with search engine politics. The Chinese market is huge. Even if it does slow down it will still be huge. Samsung will always be treated with suspicion in China. Apple is the only entity which can bridge the cultural divide and create shareholders wealth.

Apple is relying on financial engineering for now. Investors are being enticed with dividend yield and share buy backs. Hard core Apple investors   traders do not understand how to deal with a dividend stock. The dividend stabilizes and allows you to become patient. Get paid while you wait.

Heroin addicts looking for the next rush are not anchored in the same fashion. Therefore we will have a rotation within the shareholder base.

George Gutowski writes from a caveat emptor perspective.

Microsoft’s Uber Strategic Dell Move Blocks Google. Chrome is Dead $GOOG $MSFT $DELL

Microsoft (Nasdaq:MSFT) just kicked in $2 Billion into the Dell privatization deal and does not even get a board seat. Whats up with that. Firstly the $2 billion is one months excess cash flow. So it’s not big coin. Secondly it is a very small fraction of Microsoft’s overall cash position. Again so it’s not big coin. The investment is a subordinated debenture so they have mitigated some risk.

Here is the big win for Microsoft. Dell stays Windows. Google with Chrome could have done the deal but was blocked out if they knew about it at all in the early stages.

What about Microsoft’s relationship with Lenovo and Acer. For all we know Lenovo and Acer may be holding a piece of the deal. In any event Google relationship with the Chinese market is so bad Microsoft has safely concluded they will not go for Chrome. Dell will not go for Chrome. The remaining market for Chrome is not big enough.

Chrome is dead. It only cost $2 Billion and who knows it might yield a return.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti or maybe follow his evil twin who is writing a Wall Street Murder Thriller at twitter@georgegutowski

Google Scream Danger Danger Street Really Surprised $GOOG

Google (Nasdaq:GOOG) in a rare move issued a chilling statement that most analysts had it wrong. Google’s real numbers are coming out Tuesday.

It appears that most analysts have not adjusted their estimates to reflect the pending $2.35-billion sale of the Motorola Home business. It is no secret. So whats up with the analysts.

Under US Accounting Rules the business must be shown separately. Most analysts are including the numbers.

So where is the fail. The sale is an announced deal. The accounting rules should be well understood but clearly are not. Management rarely speaks to the street about its earnings. But this time it could see the train wreck coming and felt compelled to yell danger danger.

The sell side analysts as a herd missed the point. So before they stampeded off the cliff management issued a public service announcement warning of the carnage. Management was under no obligation to do so.

The sell side analysts missed the point and shame on them. The conference call will be hilarious as everyone tippy toes around the mass incompetence.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti or maybe follow his evil twin who is writing a Wall Street Murder Thriller at twitter@georgegutowski

Best Buy Best Suited to Best Takeover $BBY $GOOG $MSFT $AAPL

Image via CrunchBase

Best Buy (NYSE:BBY) continues to lurch forward and attempt to revitalize itself. New C level officers are in place. They have decided to ramp up on-line activities. (Hey that sounds fresh) They have dwindling cash resources which is disturbing.

Do we smell a take-over. Because we do smell something.

Best Buy leading retail problem is consumers doing physical browsing and then placing on-line orders somewhere else. OK so they have a tremendous strength that they cannot leverage. In the mean time Google, Apple, Samsung and Microsoft (think games and maybe phones) all have a vested interest in selling hardware and devices. Best Buy still generates huge foot traffic and satisfies any tactile pre-purchase needs.

As a mass market retailer Best Buy has its faults which are well documented in the market place. But to someone wishing to dominate distribution channels Best Buy offers some near monopolistic advantages.

So like someone should buy them, feature their own products and kick competitors in the groin area.

Market cap of around $5 Billion and dropping. An expensive dividend yield of 4.45% and an approximately short interest position of around 10% of public float, the under 5 trailing PE ratio has got to make an acquisition look good.

Maybe go the private equity route and disguise any anti-trust issues through the chop-house process but the bits and pieces will give strategic advantage to key players. Given the huge cash balances of some tech players this is entirely doable.

Remember its a double play gambit. Enhance your own product line and torpedo some or all your competitors.

Count down?

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti

Related articles

• Best Buy Travel Bias Influences New Hire for President $BBY $GOOG $EBAY $MOT $EXPE (financialskeptic.wordpress.com)
• Best Buy Sticks with a Homey for CEO. Not exactly the Big Bold Bet. $BBY $AMZN $DJTRET $RTH (financialskeptic.wordpress.com)

Google Diagnosis = Manic Depressive The Revenue Model is Broken. $GOOG $RRD $YHOO

Old RR Donnelley printing building. (Photo credit: clarkmaxwell)

Google (Nasdaq:GOOG) had an accident that was not its fault. R.R. Donnelley (Nasdaq:RRD)filed with the SEC before all was ready. Not Google’s fault. RR Donnelley has much explaining to do. Much talk around the water cooler about that. Trading suspended and markets became inefficient except for the lucky few. hope RR Donnelley has lots of insurance.

Onto the fundamentals. Google news is bad. Surprisingly bad. Google has a fundamental problem. It’s all about the desk top computer in whatever form. It’s not strong on mobile devices which is where the market is clearly headed. Wonder if Yahoo (Nasdaq:YHOO) which now has a distinct Google DNA graft will understand that.

Here is the manic-depressive bi-polar factor:

Q3 average cost advertisers paid Google per click fell 15% Y/O/Y, and fell 3% from the prior quarter. Not good this means you have no pricing power and your advertiser customers are beating you up. Now do the flip and ponder this point.

Paid clicks increased 33% from a year earlier and were up 6% from the Q2. This is the insanity. you are generating more demand activity but you cannot charge more for it. Supply demand logic is not working.

Has Google lost control over its business model? Who cares about the RR Donnelley thing, it does not matter.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti

Yahoo new CFO, new COO and new other stuff. Which one will misfire? $YHOO $GOOG

Image via CrunchBase

Yahoo (Nasdaq:YHOO) is drafting hard and fast. New chief operating officer De Castro from Google (Nasdaq:GOOG). They in turn will spawn new hires at lower levels as the deck gets shuffled.

The new hires were to be expected. Yahoo has to rejuvenate or die. Marissa Mayer was obviously only the beginning. But as sports fans know all too well when a team rebuilds not every draft, not every trade works out. There will be surprises.

The question will be what does Yahoo do about the duds. How fast do they fix.

In the meantime the market is liking it. The short position dropped by some 26%. Yahoo is no longer the stock you love to hate. The uptick-downtick is 2.7. The dividend is far away as everyone has a very attractive stock option plan. so it`s all about swinging for the fences.

As we all know Babe Ruth struck out a whole lot and so will these guys even if they are Babe Ruth.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti

Best Buy Travel Bias Influences New Hire for President $BBY $GOOG $EBAY $MOT $EXPE

Image via CrunchBase

Best Buy (NYSE:BBY) finished up some outstanding business and hired a new President of the e-commerce and on-line divisions. Scott Durchslag former president of online travel company Expedia (Nasdaq:EXPE). He is also a former partner at McKinsey & Co. and has previously served as Skype’s chief operating officer prior to its sale by EBay (Nasdaq:EBAY) as well as a vice president at Motorola Inc. which partly has been swallowed by Google (Nasdaq:GOOG). Resume looks good.

But here is the bias to be concerned over. Hubert Joly the current President, CEO and Director is also from the online travel business. CW Travel Holdings long based in Minneapolis is also a major player in the travel business.  While corporations need to make sure the fit in the executive suite works you need to be concerned about too much background commonality.

The next question becomes: What do you do with the big boxes? The online guys will need big money to spend and the bricks and mortar environment is clearly not cutting it.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti

Related articles

• Best Buy Sticks with a Homey for CEO. Not exactly the Big Bold Bet. $BBY $AMZN $DJTRET $RTH (financialskeptic.wordpress.com)
• Best Buy hires former Expedia, Skype executive Durchslag; may cut online prices to compete with Amazon (bizjournals.com)
• Best Buy Hires E-Commerce President (allthingsd.com)

Apple Not Today Skip Hype & Fury $AAPL $T $V $GOOG $MSFT

Apple Inc. (Photo credit: marcopako )

OK Today Apple (Nasdaq:AAPL) will make the big announcement that everyone knows is coming. The 5 will come out. We all expect something very cool. We all know they probably have something more in reserve but this should be very compelling. Traders want to take positions based on this announcement. How many times do you think you can make money on major news when Apple is a master of new product enhancements and announcements.

Everyone is suddenly discovering that the new device will drive profits for many years to come. What you did not know that? So any stock price activity will be very frothy and if you like that black box high frequency approach go ahead. There is an off-chance the stock will disappoint; after all how often can a super juiced announcement work. Statistically we know they will stumble somewhere.

Apple needs huge drivers to maintain earnings. So if the 5 is huge that’s what they need. If the PE is pushed out it will be hard to justify on more than just hype about the future. So the bottom line for the skeptics is to watch the announcement; closely. But it is not enough to make a fundamental buy or sell decision.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter @financialskepti