Media & Technology 19 Sep 2011 09:09 am

Netflix CEO Gets Humble. Qwikster is Born

by Sean Hackbarth

Qwikster
Netflix CEO Reed Hastings explains that the company’s decision to separate its DVD and video streaming services is because the DVD business will become Qwikster. Hastings writes that his company “realized that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently.”

Customers who get get DVDs in the mail will soon receive separate bills from the Netflix-owned subsidiary.

On the company’s weblog, Hastings goes on to admit he did a poor job communicating recent changes to his customers:

When Netflix is evolving rapidly, however, I need to be extra-communicative. This is the key thing I got wrong.

In hindsight, I slid into arrogance based upon past success. We have done very well for a long time by steadily improving our service, without doing much CEO communication. Inside Netflix I say, “Actions speak louder than words,” and we should just keep improving our service.

But now I see that given the huge changes we have been recently making, I should have personally given a full justification to our members of why we are separating DVD and streaming, and charging for both. It wouldn’t have changed the price increase, but it would have been the right thing to do.

This is an interesting business strategy. Consumers want more on-demand, “right now!” content, and Netflix is choosing to deliver bits over atoms, while not being held back by the latter.

Netflix Separates DVD and Streaming Services”

Technology 16 Sep 2011 09:03 am

RIM Takes Earnings Hit

by Sean Hackbarth

BlackBerry smartphones
Disappointing sales (only 200,000) of the PlayBook and tough competition with Android phones in the consumer market resulted in lower than expect earnings for RIM:

RIM said Thursday that its net income was $419 million, or 80 cents per share, in the three months ended Aug. 27. That’s down from $796.7 million, or $1.46 per share, a year ago. Analysts expected 90 cents per share, according to a survey by FactSet.

The company, based in Waterloo, Ontario, said revenue fell 15 percent to $4.2 billion.

Shares hit a fresh new five-year low, falling $5.74, or 19.4 percent, to $23.80 in after-hours trading. RIM’s stock has lost more than half its value this year.

“Phone Rivalry Drives Down RIM Earnings

Finance 15 Sep 2011 09:02 am

Unauthorized Trades Cost UBS $2 Billion

by Sean Hackbarth

UBS office in Zurich
Hey CEOs, keep an eye on your employees or billions could go POOF like they did at UBS:

UBS AG, Switzerland’s biggest bank, said it may be unprofitable in the third quarter after a $2 billion loss from unauthorized trading at its investment bank.

London police arrested Kweku Adoboli, a UBS employee, in connection with the loss, according to a person with knowledge of the matter who declined to be identified. City of London police and UBS declined to identify the man.

UBS management aims to “get to the bottom of the matter as quickly as possible, and will spare no effort to establish exactly what has happened,” the bank’s group executive board, led by Chief Executive Officer Oswald Gruebel, said in a memo to employees today. “While the news is distressing, it will not change the fundamental strength of our firm.”

Trading desks aren’t like the “good old days” anymore.

UBS Has $2 Billion Trading Loss; Man Arrested in London”

[Picture via twicepix.]

Food & Shopping 13 Sep 2011 08:50 am

Free Money from Whole Foods

by Sean Hackbarth

Whole Foods
Whole Foods, the organic grocer, teamed up with Living Social in a nationwide campaign. Giving away $10 per customer is one way to get people into a store nicknamed “Whole Paycheck.”

The deal is scheduled to run on Tuesday and is available to existing LivingSocial subscribers and anyone who registers for the service.

LivingSocial has agreed a cap of one million vouchers. Once purchased, buyers use a code to convert the voucher into a gift card in Whole Foods stores.

The daily deal business has grown into a multibillion dollar a year industry since Groupon started in late 2008. The two sector leaders have been expanding into different categories as they prepare for big initial public offerings, possibly later this year.

Food 08 Apr 2008 05:11 am

Free Starbucks Coffee Today

by Sean Hackbarth

Starbucks

At noon at participating Starbucks you’ll be able to get a sample of their new Pike Place coffee. It’s part of Starbuck’s plan to get people excited about their coffee again and liven up sales.

How does it taste? A Chicago Starbucks ran out of coffee and started selling Pike Place early. The Chicago Tribune’s Monica Eng gave us a review:

So here’s the scoop: Pike Place delivers a pretty great cup of joe. It’s got a light fruity and nutty aroma, a smooth feel on the tongue but nice body and no wimpy finish. This lighter roast (clearly a response to widespread complaints about Starbucks’s penchant for over-roasting) allows a broader spectrum of flavors and aromatics to emerge, things that can sometimes be burnt away in a darker roast. Starbucks might not like this, but it kind of reminds me of Dunkin’ Donuts’ house coffee.

“Starbucks’ New Pike Place Roast Drips Out Early in Gold Coast” [via Starbucks Gossip]

Banking & Economy & Private Equity 07 Apr 2008 03:35 pm

TPG Investing $5 Billion in Washington Mutual

by Sean Hackbarth

Washington Mutual Logo

A private equity firm has gotten into the act of shoring up a firm hit by the housing crisis. Texas Pacific Group, TPG will inject $5 billion into Washington Mutual (WM):

Washington Mutual, the country’s largest savings and loan, is poised to receive a $5 billion investment from TPG, a big buyout firm, and several other investors, people briefed on the situation said Monday.

Details of the transaction are still being sorted out, but a deal could be announced as early as Tuesday.

The injection of capital will help Washington Mutual shore up its balance sheet, which has been hurt badly by a drumbeat of losses amid the current housing crisis. Federal banking regulators have stepped up scrutiny of the big mortgage lender, concerned that its financial health was deteriorating.

But some Wall Street analysts said Monday that it remained unclear whether the new investment, more than half of its $9 billion market value on Friday, would be enough to ensure the 119-year old institution remains independent.

Private equity groups don’t invest unless they expect big paydays. Their investment puts them in a position to take the company private to later take it public or reap big profits from a WaMu buyout.

In getting out of this burst bubble firms and capital will be reallocated. Like Bear Sterns companies will dies and others will be transformed. The changes will be painful, but their needed to get the economy back on a more sound foundation.

“$5 Billion Said to Be Near for WaMu

[Cross-posted on The American Mind.]

Economy & Government 29 Mar 2008 08:58 pm

Paulson Calls for Regulatory Reform

by Sean Hackbarth

Henry Paulson

In light of the recent turmoil in the housing and financial markets Treasury Secretary Henry Paulson will release a proposal for revamping the regulatory agencies monitoring the U.S. financial system:

Mr. Paulson’s plan will include merging some agencies, such as the Securities and Exchange Commission with the Commodity Futures Trading Commission, while broadening the authority of others, such as the Federal Reserve, which appears to be a winner under the proposal. Mr. Paulson is expected to recommend that the central bank play a greater role as a “market stability regulator,” with broader authority over all financial market participants.

Mr. Paulson is also expected to call for the Office of Thrift Supervision, which regulates federal thrifts, to be phased out within two years and merged with the Office of the Comptroller of the Currency, which regulates national banks. One reason is that there is very little difference these days between federal thrifts and national banks.

The Treasury plan has been in the works since last year but has taken on greater prominence since the onset of the housing crisis and ensuing credit crunch. Critics have blamed lax regulation at both the state and federal level for exacerbating the crisis.

This proposal is merely a step towards changes. The Democratic Congress has ideas of their own.

“Sweeping Changes in Paulson Plan

Mergers and Acquisitions 09 Oct 2007 12:58 pm

Miller, Coors Join Forces

by Sean Hackbarth

Beer

Miller and Coors will merge their North American brewing operations:

Miller Brewing Co. and Coors Brewing Co., the nation’s second- and third-largest brewers, are combining their operations, creating a bigger challenger to Anheuser-Busch Cos. – but also raising the possibility of future job cuts at Miller’s Milwaukee headquarters.

For now, longtime Coors executive Leo Kiely will be running the newly merged operations of Miller Brewing and Coors Brewing.

But Miller President Tom Long is Kiely’s heir apparent, and Miller owner SABMiller Plc will be picking the MillerCoors chief when Kiely retires – perhaps within a few years.

Those facts emerged from this morning’s Webcast presentation to analysts about the agreement to combine Miller and Coors.

A decision hasn’t been made yet on where the MillerCoors headquarters will be located once the merger is completed in 2008. None of Miller’s six breweries, or the two breweries operated by Coors, will be closed as the result of the merger, said Pete Marino, Miller spokesman.

But administrative jobs in Milwaukee, and at the Coors offices in Golden, Colo., will be analyzed as the merged company looks to reduce costs, he said.

“It’s safe to assume there will be some reductions,” Marino said. But it’s too early to estimate the extent of those job cuts, and where they will occur, he said. MillerCoors will maintain a presence in both Milwaukee and Golden, Marino said.

Miller has 1,700 employees in Milwaukee, with 800 employees in the corporate offices and 900 brewery workers.

Miller itself is the result of the merger of South African Breweries and Miller Brewing while Coors is the mashup of Molson and Coors.

A changing alcohol market means new business arrangements are needed. The Milwaukee Journal Sentinel story notes that this new company hopes to be in a better position to compete with wine and spirits makers as well as Anheuser-Busch, the world’s largest beer maker.

We now have a truly pressing question: the names of the baseball stadiums in Denver and Milwaukee. I propose the Colorado Rockies play in CoorsMiller Field while the Brewers get MillerCoors Field.

Miller, Coors to Combine U.S. Operations”

Travel 29 Aug 2007 01:58 pm

Q&A with SkyBus CEO

by Sean Hackbarth

Skybus logo

Popular Science interviews SkyBus CEO Bill Diffenderffer. Some may see SkyBus’ strategy of offering cheap plane tickets but charging for everything to be nickle-and-diming the customer. Diffenderffer counters:

Q: Your business model also requires passengers to pay for any extras—drinks, blankets—piecemeal. Will consumers go for that?
A: They were paying for it before! Those were never free. Why should you be made to pay for all those sodas and blankets that other people use that you don’t?

Q: You’re even charging for checked luggage, $5 a bag.
A: If you don’t check a bag, why should you pay for those who do? We make our prices very clear, so we’ve had very few complaints. If you pay $80 for a Skybus flight instead of $180 for the competitor’s flight, and you pay $5 for a bag and $2 for a soda, that’s $87 versus $180. America can do that much math.

Flying à la Carte: Q&A with Skybus’s CEO” [via Instapundit]

Airlines & Private Equity 14 Aug 2007 10:33 am

Midwest Airlines Goes Private

by Sean Hackbarth

Midwest Airlines logo

The private equity boom hit Milwaukee. For fans of an independent Midwest Airlines (MEH) this is a good thing. TPG Capital agreed to pay Midwest shareholders $16/share cash to take the airline private.

An interesting wrinkle is Northwest Airlines, the number two carrier out of Milwaukee’s Mitchell International Airport is putting in some money. Rick Esenberg observes, “AirTran had argued that they would actually increase service to Milwaukee by making it a second hub. Northwest must have believed it.” Or else why did get in the deal? That somewhat disparages the theory going around that Air Tran would reduce service to and from Milwaukee.

TPG/NWA won for a simple reason: they offered something better than Air Tran. The Orlando-based airline offered $15.75/share in a combination of cash and stock. TPG/NWA went with all cash. Cash’s liquidity is less risky than Air Tran’s stock. That’s understandable. The only airline to consistently earn a profit since the airline depression following the Sep. 11 attacks has been Southwest. Few think Air Tran is on par with the king of lost-cost flying.

The question now is what will be Midwest’s path to continued profitability? The Milwaukee Journal Sentinel reports TPG will let Midwest continue with its current plan of moderate growth including adding more seats to its signature two-by-two configuration. How that fits with TPG thinking there’s a market for higher-end travel I don’t know. The industry trend is towards low-cost with added bonuses. JetBlue offers all passengers satellite tv and radio, and Southwest offers its quirky style. We all know about JetBlue’s basic problems of getting people on and off their planes so the market may want an airline with a higher price that better ensures passengers get where they want to go. If so Midwest is in a good position. TPG is banking on it.

“What’s in the Cards?”

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