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

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

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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

 

Google Extends Portfolio of Brands. Frommer strategically smart because they were tactically inept. $GOOG $YHOO $MSFT

google_logo (Photo credit: keso)

Google (Nasdaq:GOOG) is extending its portfolio of brands. Does that mean Google is fresh out of ideas and needs to acquire some external energy source to drive revenues. Yeah probably. Travel is one of the most researched purchases. Even before the internet consumers checked things out very closely.

Travel vendors advertise extensively and traditionally are one of the top three advertisers. The other two being automotive and consumer electronics. So Google is smart to pick up good assets in this category. What  it also means is that Google has no game when it comes to developing compelling applications so they are forced to use enormous cash resources to buy up what they cannot develop internally.

Strategically they also want to capture the properties before Yahoo (Nasdaq:YHOO) and Bing (Nasdaq:MSFT) pick them up and set up viable beach heads.

Strategically smart because they were tactically inept.

George Gutowski writes from a caveat emptor perspective.

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Microsoft Challenges Apple in Tablets. Is This Real? Grand Strategy vs Product Tactics $AAPL $MSFT $YHOO $GOOG

Image via CrunchBase

Microsoft (Nasdaq:MSFT) seems to be challenging Apple (Nasdaq:AAPL) in the Tablet market space. Apple with its uber cool iPad and seemingly unassailable market dominance does not look like the weak sissy in the school yard that everyone can punch out whenever they want.

So what does Microsoft see that they can take down and create some shareholder wealth. The contrast is more about the strategic battle than any specific shoot out on product features. Apple has its fabled eco-system of developers who feed into the iPad value proposition. Much momentum comes from this without any overt moves from Apple. Others just feed into it. Apple can be expected to constantly release new and improved offerings and thereby maximize revenue over and over and over.

Microsoft on the other hand is supposedly moving closer to Yahoo (Nasdaq: YHOO) and reportedly will take over their search engine and create a mash-up with Bing. (BTW you have to love the pictures on Bing). So with the obvious exception of Google (Nasdaq:GOOG) they will become very strong in search. Apple as cool as the iPad is, does not rely on Safari to the same extent. Search revenues for Apple are low to the point of being strategically non-existent. As we all know it’s all about search revenues. Investors do not really care how slick the iPad is. What we do care about is how many search dollars are generated.

As best can be determined from the rumours about Apple nothing major is coming from Safari. Despite the huge cash position of Apple not much R&D dollar has been allocated to turning Safari into something stronger.

We all glibly talk about the post PC environment where it’s all hand-held and mobile. Microsoft needs to get a large piece of that to maintain a strong hold on devices to make sure they are well entrenched after Google. Microsoft thrived because everyone put their browser in. Now with iPad and Apple in a near monopoly position they need to be throwing some competitive punches.

Will they blow away Apple in the next year or two. No. Can they make Apple change its offering and maybe pull a punch or two, certainly. The strategic battle is about tipping points and leverage. So when you look at the Microsoft product it will not be primarily about customer experience. It will be about what can Microsoft do to make Apple changed.

The battle is in the back room strategy sessions. The noise will be in the consumer market place as we all slavishly expect new offerings.

One day Apples trajectory will bend. Nothing goes in a straight line forever. This could be the beginnings of change.

George Gutowski writes from a caveat emptor perspective.

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Apple Declares Golden Apple Dividend But it’s Not a Dividend Stock $AAPL

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The long-awaited dividend announcement came down from the Apple Tree. Apple (Nasdaq:AAPL) will skim a little bit of cash and line the pockets of investors. The dividend yield at the currently stratospheric price point is just under 2%. If you are a true dividend oriented investor this will not turn your head. Yield hounds who must surely know rising interest rates and probably inflation are just around the corner will not be truly impressed with a 2% yield.

Coupled with the cash dividend will be a share buy back to fund employee share purchase plans. A nice touch of financial engineering. Can you blame them everyone else is doing it? This allows them the flexibility of manufacturing EPS.

The market is applauding for now. But this is not the Golden Apple as everyone contemplates. True dividend paying stocks return capital to their shareholders in a defined and systemic manner.   Dividend levels while not contractual obligations become matters of trust. When dividends are reduced or cancelled share values erode deeply reflecting the drastically eroded business model. Dividend payout ratios are usually established in advance. Apple has done of these things. The dividend is being justified as something that will not erode the pile of cash that Apple has accumulated. No one is looking at dividend coverage ratio’s and assessing business risk. So therefore Apple is still not a dividend stock.

You would not set your stock selection screens for a 2% dividend  yield and then hit the buy button.

Microsoft (Nasdaq:MSFT) with 50% of Apple’s market cap has a dividend yield of approximately 2.5%. Microsoft’s cash balance is around $52 Billion. Yet Microsoft is starting to be viewed as a senior with an established cash flow base from its Office Product and enterprises services. There is real pressure on Microsoft to act more like a utility and pay up. Microsoft has made a few acquisitions and is probably glad the Yahoo thing (Nasdaq:YHOO) didn’t real work.

Apple has had to eat its own babies to develop new compelling products. Microsoft has eaten the neighbours children several times over and can point to a more entrenched product line. Apple is one marketing failure away from disturbing their slavish clientale. Microsoft can launch Vista and shrug off the problem.

The real comparison is IBM (NYSE:IBM) Big Blue currently has a dividend of under 1.5%. The market cap is just behind Microsoft and the cash balances are nowhere near what Apple or Microsoft have to offer. In short they are a dividend stock. The CFO   needs to watch earnings and cash flow to ensure he can cover the dividend. Apple simply is not in that category.

Which is why Apple has Golden Apples but not Golden Dividends.

George Gutowski writes from a caveat emptor perspective.

$GOOG fathered advertising duopoly. Gouge customers the new normal $MSFT $YHOO $AOL #onlineads

Image via Wikipedia

Microsoft (Nasdaq:MSFT), Yahoo (Nasdaq:YHOO) and AOL (NYSE:AOL) have all banded together to sell ads on each others sites to compete against, wait for it, Google (Nasdaq:GOOG) While there may be some selling efficiencies we now have officially created a duopoly.

Duopolies are very price inefficient. A lot of me too-ism develops. Cost conscious advertisers will not see a notable difference in offerings. Everyone settles in for a nice game of gouge the customer. Look for more but useless government inquiries into online advertising costs.

Advertisers will need to revolt. Major advertisers will need to form venture capital pools to buy into the next Facebook, Twitter or whatever. That way they can control their spends and develop strategic positions.

Disclosure: George Gutowski writes from a caveat emptor perspective. It’s all about the Black Swans. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

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Microsoft $MSFT Bings Baidu $BIDU Is Reg FD a Factor #RegFD

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Baidu (Nasdaq:BIDU) announces English language search will now be Bing(ed) and not Google(d). No comment from Microsoft (Nasdaq:MSFT). Google just hangs its head in shame. In some ways they are relieved the announcement was made and now it’s over. Terrible having to wait for the other shoe to drop.

Now if it was a really big deal for Google to lose the relationship, it must be a really big deal for Microsoft to pick up this particular set of marbles. Both Baidu and Microsoft trade on Nasdaq and must play be SEC rules. Something called Reg FD comes to mind.

For Microsoft to not announce anything (at the time of writing there was narry a corporate peep) you need to justify that the development is not material. Even for Microsoft with its huge mega cap status a major China announcement is huge. By declining to comment Microsoft is keeping the details in a black box and investors will be guessing and second guessing ramifications.

It is interesting that Baidu took the effort to announce. So who gets the better of the deal? Read revenue sharing. Is this a work in progress. Just so many questions to ask. It will be like watching newly weds. You know, honeymoon then when the children come along how will they turn out. We can have a really great conversation about nature vs nurture. Microsoft DNA intertwined with Baidu DNA.

In the meantime Google (Nasdaq:GOOG) is hiring lobbyists by the dozen as it learns about the FTC and other agencies.

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

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Einhorn vs Ballmer The Art of Corporate Bitch Slap

David Einhorn President of Greenlight Capital is growing desperate. He is touted to be a long-term holder of Microsoft (Nasdaq:MSFT) . Many a simplistic analyst overlays Steve Ballmer‘s ten-year tenure as CEO with a ten-year stock chart showing no capital growth. David Einhorn as he dabbles with buying into the New York Met’s is trying to talk up Microsoft stock from the outside.

Greenlight is a long-short hedge fund that seems to have had a very good run. The problem is to continue serving up excellent results. So trying to displace Steve Ballmer seems like the best course of action to David Einhorn. Continuing to hold the stock and publicly criticizing the leadership is schizophrenic.

It is very easy to find fault and fire someone. But who does David Einhorn suggest replace Steve Ballmer? A public execution at David Einhorn’s behest would traumatized Microsoft and create more harm then good. CEO’s set courses of action which cannot be changed over night. That’s probably why the New York Mets look attractive. The roster is very small. Just hire a few good players and away you go. Simple isn’t it. Just look at the fantasy leagues and how well sports fans are doing.

David may soon find out that running an operating company such as Microsoft is much more complicated than the fantasy of a professional sports franchise.

Disclosure: “George Gutowski” writes from a “Caveat Emptor Perspective” I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

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Will AT&T Challenge Microsoft Skype Marriage $T $MSFT #skype

Image via Wikipedia

Microsoft (Nasdaq:MSFT) has become a major surprise player in the telephony market. Microsoft by passes a lot of legacy issues that traditional Bell companies are still struggling with. Has Microsoft become a global monopoly that troubles AT&T (NYSE:T) and perhaps even Carlos Slim.

What is to stop AT&T from demanding anti-trust action. Remember the European Union does not have soft fuzzy feelings for Microsoft so what is to stop them from soul sapping investigations.

Just a thought but when you make such a large move other large players see their vested interests being threatened and will move to protect themselves. investors need to get past the noise and see how the other players see it.

Disclosure: “George Gutowski” writes from a “Caveat Emptor Perspective” I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

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