Bear Case Scenario for Rackspace Hosting $RAX, $IBM, $HTHIY, $ACN, $INFY, $WIT

Rackspace Hosting (Nasdaq:RAX) will be revealing earnings very soon. Follow this Bear Case Scenario as you ponder management comments.

The business is capital-intensive. Small capex pricing changes have huge impact on earnings.  The model is almost olde school regulated utility.

It’s all about the cloud. But what is the cloud. Will the model show itself soon so that we can execute. Risks in uncertainty. Why take them.

George Gutowski writes from a caveat emptor perspective.

Amazon Artistic Noise as it Reaches Higher Highes. Beware the Hype $AMZN $BID

Amazon (Nasdaq:AMZN) punches its way into new territory. Technical traders are all chanting go-go-go. But when a stock is charting new territory it sure helps to put out some fundamental news bit that makes it look like amazon will continue to take over the world.

So today the story circulates about Amazon taking over the staid art world and becoming an on-line auction house supposedly competing with Christie’s (LON:CTG) and Sotheby’s (NYSE:BID)  and such. Through some uber big numbers out there and investors will take the stroke and bid up the shares.

But really lets take a look at Amazons disruptive powers. Amazon can sell a $40 hard bound book more effectively than traditional bookstores. Readers get same product at cheaper price and better convenience. OK Got that.

Traditional auction houses have networks of specialist well versed in art. Trained and experienced. They know where the buyers are. It’s the ultimate data base fueled by old school shoulder rubbing networking. Same cocktail parties see and be seen. Make a splash. Galleries will nurture new talent. Can you imagine Amazon having an opinion on a piece of art. Art is like venture capital. Back the right artist and make lots of money.

So far Amazon has no game. When you buy and sell art in the seven figures no one cares if your platform is cloud based. It’s about the art. So Amazon may have some back room technologies which they can license  to galleries but that’s about it. Oh by the way. Amazon collects data; a lot of data. Some art collectors do not want data collected on them. Know what I mean. Amazon may just be the kiss of death that keeps away cheque books.

So boys and girls its hype today. This is not a fundamental change for Amazon. but it just might get you to buy a little bit more for what you think is a good new reason.

George Gutowski writes from a caveat emptor perspective.

Salesforce is the Biggest Cloud But Cash Drops $CRM #salesforce

Image representing Salesforce as depicted in C...

Image via CrunchBase has become the first enterprise cloud computing company to reach a $2.0 billion annual revenue run rate,” said Marc Benioff, Chairman and CEO. “We are delighted to see our revenue growth rate continue to accelerate.”

The earnings release starts with a very frothy quote from uber-promoter Marc Benioff  leader of Tribe Salesforce (NYSE:CRM)

This is important for why Marc? An investment is there to create shareholder wealth. Being big is not always profitable. Me thinks that with your stock at your 52 week high you are looking to create a breakout and manage your options. Puffy statements tend to vaporize and then the stock drops when the substance cannot back it up.

A lot of investors would become more comfortable if Marc Benioff could focus on the business fundamentals instead of interesting sound bits.

Speaking of fundamentals serious investors should notice a decreasing cash position. Here is the snip from the earnings release:  

Cash: Cash generated from operations for the fiscal first quarter was $140 million, a decrease of 3% on a year-over-year basis. Total cash, cash equivalents and marketable securities finished the year at approximately $1.5 billion, a decrease of approximately $379 million from the prior year.”

If you beat the drum and focus investors on record high revenues, a balanced management discussion would also explain why cash is a negative story and what is being done about 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.


Salesforce Cash Yield Issues

Image representing Salesforce as depicted in C...

Image via CrunchBase

Salesforce (CRM) now has almost 20% of its $14 Billion market cap in cash and near cash items. No dividend in sight. They are starting to categorize the cash investments in long-term assets but do not provide any substantive description of how the assets are deployed. If you are becoming a financial institution you need to disclose in the same manner as financial institutions. What is the cash yielding?

Disclosure: No position in any stocks mentioned in this post.