Monthly ArchiveFebruary 2007



Around the Web & Uncategorized 20 Feb 2007 07:40 am

Quick Links: 02-20-2007

  • Charter Communications (CHTR) is making this guy go through customer service hell.
  • JetBlue’s (JBLU) CEO is trying to make it up for putting customers through hell.
  • After pulling its video off YouTube Viacom (VIA) is about to make a deal to put it on newcomer Joost.

Media 19 Feb 2007 07:30 pm

XM and Sirius Announce Merger

XM, Sirius logos

Sure, the markets were closed for Presidents Day but that didn’t stop XM (XMSR) and Sirius (SIRI) from announcing they are combining to become the king of satellite radio (which still doesn’t rise to the level of Sirius’ Howard Stern being the “King of All Media”).

Sports fans won’t have to make that agonizing decision of whether they want a service with for the NFL and NASCAR on Sirius or Major League Baseball and college sports on XM. Women won’t have to fret over choosing between Martha Stewart on Sirius or Oprah on XM.

Blogging Stocks’ Jonathan Berr sees this as Sirius winning the satellite wars. Sirius is paying a premium to XM shareholders and Mel Karmazin will be running the unified company.

Ultimately the two companies have to hope the money spent competing against each other can go to finding a place in the new media world where iPods and broadband cell phones appear to be the choice for mobile listeners. That will be the new company’s argument to regulators who will scrutinize this deal more now that Democrats control Congress. It will be a challenge when FCC chairman Kevin Martin it wouldn’t be kosher for there to be only one satellite radio company. (What if one went under? Neither of them are making any money.) Also, expect Congressional hearings since Republican Sen. Arlen Specter when the GOP controlled the Senate felt it was crucial to waste time bringing in cable company and NFL execs to testify about the NFL Network.

The companies will have to make sure potential subscribers understand the merger won’t affect them if they buy new satellite radios. The smart thing would be to simply broadcast the same signals across both companies’ satellite networks with one system eventually taking over (if the technology permits). I can see quite a few people deciding to wait for the merger to succeed (or fail) because they think one set of radios won’t work.

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[Graphic via hypebot.]

Economy 16 Feb 2007 07:36 am

They “Heart” Bernanke

Ben Bernanke Pop Art

Fed Chairman Ben Bernanke is starting to get the same love as Alan Greenspan. When he talks like he did before the House of Representatives that inflation wasn’t a threat to the economy stocks soared to an all-time high.

Congress is also giving the Fed Chairman some of that love which may play into his goal of pushing the central bank toward inflation targeting:

Several common themes have emerged from the hearings. First, Mr Bernanke’s decision to halt rate rises in the summer of 2006 has earned him political capital as a Fed chairman who considers seriously the dual mandate to put equal weight on employment and inflation, and not inflict harm lightly on the real economy.

Mr Bunning, who opposed Mr Bernanke’s confirmation, said: “The Federal Open Market Committee did the right thing by stopping the increases in the Fed funds rates after the June 2006 Fed meeting. By holding rates constant, you have done the right thing ever since.”

Second, his modest, plain-speaking manner, which stands in sharp contrast to that of Alan Greenspan, the previous chairman, is going down well with Congress.

Melvin Watt, a Democratic congressman, said: “I happened to like your predecessor. Problem was I didn’t understand a damned thing he ever said – so you are a breath of fresh air.”

Third, Mr Bernanke is showing a surprising degree of political savvy, positioning himself shrewdly in the debates of the moment, which hinge on inequality and middle-class economic anxiety, and moving to meet a desire for greater public accountability at the Fed.

All this could help Mr Bernanke change the way the Fed operates, above all the adoption of a flexible inflation target with a specified inflation goal but one that would not be achieved over a fixed timeframe. Conventional wisdom has it that the Democratic victory last November and the broader mood of economic populism in the air make this an uphill struggle.

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Technology 14 Feb 2007 11:14 pm

Wii Have a Winner

Woman with Wiimote

During the Christmas shopping season it was understandable to have trouble finding a Nintendo Wii. It was brand new, had a cult gamer following, looks fun to play, and even the best companies have trouble making enough product to meet huge early demand. We’re now a few months after the Wii’s debut and people are still having trouble finding the machine.

First, Faisal Laljee at SeekingAlpha:

I visited no less than 6 stores on Monday night – EB Games, GameStop (GME), Best Buy (BBY) and Target (TGT). None of them had the Wii in stock. I spoke to one of the employees at GameStop and he told me that they get Wii shipments from time to time, but the units sell within minutes. Talk about demand.

Next, Eric Savitz at Barrons.com:

I was looking for an excuse to rant about my Nintendo Wii shopping experiences and now I have one. In that note I just mentioned from Citigroup’s Bill Sims about a walk-through of a Best Buy (BBY) store in Orlando, the analyst mentions that due to huge demand for the Nintendo Wii, the retailer is “struggling to keep them in stock.”

Yeah, I’ll say.

He found one for an inflated price on Craig’s List.

In contrast Laljee said a GameStop employee informed him Playstation 3 machines were “stacked up in the back.” Don’t feel too sorry for Sony they’re getting record pre-orders in the U.K. Let’s see if they can deliver.

Retail 13 Feb 2007 11:00 am

Wal-Mart Finally Displays Error Page for Firefox Users

It took a few days but Wal-Mart (WMT) finally put up a page letting non-Internet Explorer users know their beta movie download service doesn’t work with their browser. This post got lost in the queue but I wanted to let Firefox users who haven’t bothered with the movie download service to know they still shouldn’t bother.

Wal-Mart unsupported browser page

Previous coverage:

Technology 13 Feb 2007 07:39 am

In North Carolina Google Acts Like Everyone Else

Google logo

When we think of Google (GOOG) we think of super-fast web searches, internet advertising, and a business culture that views itself as different from the rest of the industry. What’s happening in North Carolina takes some luster off the benevolent image of the “Do no evil” company. Nicholas Carr has put together two link-filled posts that detail Google’s work with state and local officials to get land and tax breaks for building a facility employing 200 people. After reading them Google looks like any other company only a stock market and technology darling.

Private Equity 12 Feb 2007 07:41 am

Fortress IPO Zooms Higher

Fortress logo

The private equity/hedge fund player Fortress Investment Group (FIG) gave life to the IPO markets Friday with shares almost doubling.

Will we see more hedge funds hit the U.S. stock markets? With Fortress’ good start the answer is yes. Just don’t expect a flood of them:

But experts noted that only the most established hedge funds, with multiple trading strategies and a history of trading success will tap the public markets.

“No one is going to be interested in doing an IPO for a $500 million firm,” said John Van, chief operating officer of Greenwich Alternative Investments, a hedge fund research firm. “A company would have to have billions of dollars for an IPO to make sense.”

Hedge funds like public markets because their capital source is more stable. Stockholders can buy and sell their shares on the open market instead of pulling their money out of the fund once a quarter.

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Banking & Real Estate 08 Feb 2007 08:24 pm

What Do You Think HSBC Stands For?

House on fire

The Big Picture has fun at HSBC’s (HBC) expense by asking what the four letters stand for. There are plenty of funny ones in the comments. Here are four of mine:

  • Hey Sub-prime Brings Crying
  • Hot Scene Becomes Cool
  • Heady Schlock Becomes Crutch
  • Here Smart Bank Clunks

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Around the Web 08 Feb 2007 07:40 pm

Best of the Carnival of the Capitalists

Pouring through this week’s Carnival of the Capitalists hosted by Mighty Bargain Hunter here are the posts you need to read:

  • Those interested in retail stocks will like Nellie Lide’s “Shopping Trends for 2007.”
  • Photon Courier lets us know that ethanol can’t be moved via pipeline which means plenty of business for railroads.
  • Many people think more money will make them happier. Free Money Finance offers an easy solution: spend less by budgeting.

Private Equity 07 Feb 2007 08:49 pm

Private Equity Firms Getting Attention They Don’t Want

Black body

With names like Blackstone, KKR, Carlyle Group, and Texas Pacific private equity firms are the black bodies of the financial world. Just by looking at their names you don’t know what business they’re in. You don’t know what they do, what makes them powerful and feared. They radiate dark energy while allowing few to know the source or the means of its production. About the only entity more nebulous is the hedge fund, but with Fortress soon to go public they don’t mind as much attention.

Private equity firms would just like to raise billions, buy companies, pay off the debt, and sell the companies without the distractions from newspapers, interest groups, and–yes–weblogs. Unfortunately for them when they amass huge sums of money and buy anything from Australia’s Qantas to the Minneapolis Star Tribune to Burger King you’re going to get noticed. Even more attention will be drawn to the industry if Bain Capital founder Mitt Romney stakes a firm claim to the 2008 GOP Presidential nomination.

Some in the U.K. are in a tizzy (is that a British term?) over three private equity firms buying the J Sainsbury supermarket chain. It’s brought into the open the voracious appetites of these financial powerhouses. In Davos, Switzerland at the recent World Economic Forum Phillip Jennings of the UNI global union wailed, “They are like a global vacuum cleaner hoovering up assets at any price, anywhere, any time and we want to bring them out of the shadows.” Critics complain about the firm’s modus operandi: borrowing lots of money to buy companies, either selling off pieces or using the company’s cashflow to pay off the debt, then selling the company to someone else (like another private equity firm as in the case of Network Solutions) or taking it public. What they ignore is Professor Christoph Zott’s view that “taking a company private can shield it from the short-term pressures of public markets.” A private company missing its quarterly earnings expectations doesn’t risk massive investor panic.

In the U.S. there’s a similar unease with private equity firms:

As private equity moves further into the public spotlight, investors are also starting to express wariness over buyouts.

Shareholders of Clear Channel are set to face off with the company’s board next month over the proposed $26.7 billion buyout of the radio station owner – one of the biggest buyout deals announced last year.

“Shareholders are more aware on a whole range of issues affecting the capital markets today than they have been in the past and the new force of private equity is one of them,” said Eleanor Bloxham, president of the Value Alliance, a group that advises companies on corporate governance.

Private equity players say the industry’s negative reputation isn’t justified and attribute it to a lack of public understanding. They argue that in many cases companies can execute better in private hands, when they don’t have to focus on delivering quarterly results to Wall Street.

In addition, they say that shareholders benefit since they receive a premium on their stock when a deal closes. And unlike in the past – when private equity firms were viewed as corporate raiders intent on stripping firms – now more public companies are welcoming private equity.

“By and large, most of the private equity transactions have been friendly,” said Mitchell Hollin, a partner at private equity firm LLR. “Public boards always have the ability to say ‘no.’ It’s really their decision to say ‘yes’ that has allowed for these successful transactions.”

Some firms are looking at building consolidated online marketing companies. If they do they could give them a little business immediately by improving their industry’s reputation.

One company that turned off from private equity is Morgan Stanley who is trying to raise $6 billion for a new fund. They were tired of Goldman Sachs having all the fun.

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