Foxconn Apple’s Achilles Heel? $AAPL

iPhone 5 Mockups (Photo credit: methodshop.com)

Apple (Nasdaq:AAPL) hype machine has scored another touch down as it whips up mass hysteria for the i5 smart phone. (Yes I will buy one soon I just don’t do line ups). But what about supply chain issues? More to the point what’s up with the riots at Foxconn. We have all heard of labour disputes and picket line violence. The rumble involved some 2,000 employees at the dormitories. This may be the largest incident of employee on employee violence in modern history.

No word on what sparked the rumble. sociologists have long validated the theory of biting rats and crowded living conditions. News reports indicate the police were able to restore order. In China this means they cracked more than just a few heads.

For all the sainted glory that is Apple’s they do rely on Foxconn to crank out the units. As do many other western branded products. If this becomes a continuing problem Apple will experience something called supply interruption. Nothing in the iPhone and iPad experience relates to supply interruption. customers will wait in line overnight to get the latest unit. But they do not want to know the store is backordered because of a riot in a factory.

The PR promotion machine cannot fix that one. Apple needs to extricate itself completely.

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

Cyberonics Red Flag Issues Black Swans Hatching $CYBX

Cyberonics (Nasdaq:CYBX) posted fancy numbers year ending July 31 and the stock traded up. Here are a few issues investors should concern themselves with:

1. While reporting just over $8 million in profits for Q4 they wrote off $2.5 million on an epilepsy treatment technology. Management claims ever-increasing revenues on other products.
2. Cuts of 15% of their head count are supposed to generate a $12 million savings.
3. Share repurchase of one million shares approved. They execute 640,000 shares between November 2011 and July 27, 2012. In the past six months insiders sold (dumped) just over 422 thousand shares. A whopping 52% of their holdings.
4. Perhaps most importantly the company’s cost of goods sold were 9% as of their april numbers. Industry median is 41%.  Whatz up with that?

A few red flags need some attention.

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

DST struggles stumbles and staggers forward. Which way is forward? $DST $STT

English: A view from the Member’s Gallery inside the NYSE (Photo credit: Wikipedia)

DST (NYSE: DST) has posted weaker core profits every quarter over the past year and a half, though revenue has generally improved.  DST reported Q2 earnings more than doubled as revenue improved and a gain on the sale of a private-company investment boosted results.
Despite this adjusted earnings slipped. So whats it gonna take?

The palace guard is changing. Stephen C. Hooley, is a company insider who was appointed to its board last month. Mr. Hooley has served as DST’s president and operating chief since 2009. He previously served as president and CEO of Boston Financial Data Services, DST’s joint venture with State Street Corp. Many on the board are resigning. The former king who had an executive compensation package of some four times comparables will also be put out to pasture. So we have to rebuild the board quickly.

The company has huge debt which exceeds its net worth and earnings/revenue metrics are crawling along. So the question becomes what does the new old boy have in mind to create some shareholder wealth.

Need some communication here and rather soon if you need to ask. The normal debate is will the plan work or not. Right now no one can identify a plan. This is not how a stock increases in value.

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

 

Ford Canada Caves $F General Motors and Chrysler Still Negotiating $GM

Ford Canada (NYSE:F) settles with Canadian Auto Workers. Brinkmanship continues with General Motors Canada (NYSE:GM) and Chrysler Canada. Lots of sound and fury in the media. But whats really in the contracts? The march to increased productivity will continue.

Big Lots Big Troubles Big Whoop $BIG

Big Lots store, Murrieta CA. Was a former Pic ‘n’ Save store. (Photo credit: Wikipedia)

Big Lots (NYSE:BIG) seems to have served up a big plateful of big trouble. Have we said big yet? Two quarters in a row with negative earnings announcements. Class action lawsuits pile up. But lets look for the value. Lets see if we can find a buy ugly sell pretty investment scenario. Value investors need to hold their nose when doing research. But what will create investor wealth. Management pretty killed it and declared we have no more good ideas when they announced they were going after the food stamps market.

Someone must have crafted a power point deck showing food stamp recipients are growing rapidly and we need to capture the market before someone else does. Welfare is growing. But selling to welfare and creating shareholder wealth is not possible. Imagine if you became a really good brand in the welfare market; how could you expand price margins when dealing with either the poorest or laziest segment of the economy.

The product life cycle is a crash and burn special. But enough with the fundamentals which do stink. Big Lots terminated the recently hired EVP of Merchandising and brought back John Martin. an executive who previously covered  the role from 2003 until 2011. The CFO and COO have also been let go. Two internal executives, Timothy Johnson and Lisa Bachmann, found themselves promoted to fill those roles. That’s a lot of turmoil in the executive suite. But I’m glad Big Lots replaced those executives because they now have no more excuses. Management will be top-notch and no more mistakes will be made. Such a relief I tell you.

George Gutowski writes from a caveat emptor perspective. follow him on twitter.com/financialskepti

Ford Will Be Sacrificial Canadian Lamb $F $GM #auto #CAW

Image via CrunchBase

Canadian Auto Workers are negotiating for their new contract. 5 days to go and the sabres are rattling. They may select one of the big three in Canada for strike action. My prediction is Ford (NYSE:F).

Why?

General Motors (NYSE:GM) is still weak after their bail out and building plants in China. The big plant on Oshawa is on borrowed time and probably will close in a few years. In the meantime the Oshawa Works are a shadow of their former glorious past.  GM is looking for reasons to padlock the place.

Chrysler is controlled by Fiat (LSE:F) which is run by the Agnelli family. The Agnelli family would just sip proseco and act like there was nothing wrong. Picket lines mean nothing. The Canadian Auto Workers would not know how to fight someone like the Italian Kennedy family.

lSo it would be Ford. Large presence. Public shareholders who would take pain. Just enough non government bailout fat to be abused. Like a shark to fresh red meat. Some unionists see the possibility for leverage.

But here are the problems. Managements are very aware of cost structures and the ease of moving offshore. So if its strike first be prepared for a long one with an eventual closure in favour of a right to work state or even something in an underdeveloped country that cannot spell mandatory union dues. Also Canadian foreign exchange advantages have long dried up. Canadian labour is very expensive.

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

Related articles

• Canadian auto strike would hit US quickly (sfgate.com)
• CAW: Prepare For A Strike (huffingtonpost.com)
• Canada auto union offers wage cuts, weighs strike (sfgate.com)

Boston Scientific Still Taking Drugs $BSX

Boston Scientific (Photo credit: Wikipedia)

Boston Scientific (NYSE:BSX) is fighting against an atrocious economy, product recalls and everyone’s all time favourite high debt levels. The economy well what can you say. Product recalls – isn’t that normal in this industry? Why wasn’t it budgeted for. High debt levels are usually dealt with in one spectacular manner. Divestitures of assets and or lines of businesses. What can we sell quickly to some unsuspecting schmuk and pull a lot of cash out of it.

Oh lets not forget that ever popular strategy “cost cutting” BSX has cut costs which usually means whacking people. Total operating expenses dropped from around 40% to 26% which is huge. However some point out that managers can now include more in cost of goods sold which allows you to hide hide hide.

Then there is the ever treacherous good will valuations. Now understandably this is not a real estate company with bricks and mortar. Drugs are intellectual property which always has a certain level of goodwill attached.  On July 26, CEO Hank Kucheman revised goodwill estimates downward by over $3 Billion.

Some say these are non cash accounting tricks. Others say this is destruction of shareholder wealth. You buys your ticket and takes your chances.

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

 

Marsh McLennan Aggressive Accounting $MMC

MMC (Photo credit: Wikipedia)

Marsh McLennan (NYSE:MMC) has announced that  J. Michael Bischoff,  is now CFO of the insurance brokerage effective Sep 4. CEO Brian Duperreault said in a press release . “His extensive experience and demonstrated ability to create shareholder value are important assets,”. One would expect that in executives of publicly traded companies.

GMI Ratings governance awarded an AGR score of 27 as of August, indicating that it has higher accounting and governance risk than 73% of companies. In 2011 they eliminated hundreds of positions and entered into a stock buy back which of course is designed to make EPS look much better.

MMC has been on an acquisitions kick and has racked up lots of estimated value but not tangible values. This opens Pandora’s box to potential write downs and write-offs which will destroy shareholder wealth not create it.

Iceberg straight ahead.

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

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

 

Japan Airline Limited $JAL prepares to remove cash from investors pockets.

English: Japan Airlines logo (Photo credit: Wikipedia)

Dealbook from the New York Times (NYSE:NYT) announced that Japan Airlines is seriously planning and I’m told this is serious to go public very soon. It will be the largest IPO after Facebook which may not count anymore. You see people actually use Japan Airlines. I mean with the geisha girl branding and seaweed snacks its strong very strong. White guys will buy this. White women probably not.

Stories about retail investors lining up hmm. Whats this retail investors getting into something good not possible but reported as such. K lets review the baseline. Previously bankrupt Japanese airline bought by private investors to make a quick flip. What did they change? Japanese government  put in some tax things and major competitors upset because it’s not fair. Cost of oil still high. The fact that no airline has  consistently covered its cost of capital is a factor at least for me.

But lets all forget about that one and go IPO. Japan is not where its been happening. The airline corporate needs to go Reg FD and stop with the stupid promote. New York Times should be ashamed of itself for even one drumbeat.

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

Related articles

• JAL to Raise $8.5 Billion in I.P.O. (dealbook.nytimes.com)
• Japan Airlines to list again on Tokyo exchange (seattlepi.com)
• Japan Airlines Initial Share Sale Priced at Top of Range – Bloomberg (bloomberg.com)
• Japan Airlines to list again on Tokyo exchange (miamiherald.com)