Ed’s Daily Notes for January 31st   13 comments

Bloomberg: Google Sales Top Estimates as Retail Ads Bolster Results

Google Inc. (GOOG) posted fourth-quarter sales that topped estimates as retailers spent more on advertising during the holidays, making up for lower ad prices.

Revenue, excluding sales passed on to partners, rose 11 percent to $13.6 billion, while profit excluding certain items was $12.01 a share, the company said in a statement yesterday. Analysts on average had projected sales of $13.4 billion and profit of $12.25, according to estimates compiled by Bloomberg.

Even though Google missed on the bottom line, you have to weigh that against increased revenue (which beat estimates), as well as the fact Google is selling Motorola, which weighed on their bottom line. In that light, it was a good earnings report.

CNBC: Amazon may hike Prime cost, earnings disappoint

Bad news for Amazon shareholders, as well as customers:

Amazon.com posted quarterly results Thursday that fell short of expectations and handed in a weak revenue outlook.

Additionally, Amazon said during its conference call it may increase the cost of its popular Amazon Prime subscription by $20 to $40 due to higher fuel and other shipping costs.

…In December, Amazon said that its Prime service had a “record-setting holiday season.” According to the company, more than 1 million people signed up in the third week of December alone. Prime members get free two-day shipping on eligible items, free streaming of 150,000-plus movies and TV episodes, and free e-book borrowing from a library of more than 475,000 titles.

The world’s largest Internet retailer posted earnings of 51 cents a share on sales of $25.59 billion, versus expectations for 66 cents a share on sales of $26.06 billion, according to a consensus estimate from Thomson Reuters.

In addition, the company posted current-quarter sales guidance of between $18.2 billion and $19.9 billion, missing expectations for $19.67 billion.

The company said international sales gained just 13 percent, lower than Wall Street forecasts for around 14 percent to 15 percent.

An across-the-board miss, combined with lower guidance, is a recipe for share price disaster. Maybe now Amazon will get a reasonable valuation? Do you think their previous trailing P/E of 1,460 and PEG ratio above 4 were a tad optimistic?

That said, I will add AMZN to my watchlist now. It is still a good company, just absurdly overpriced.

Bloomberg: Microsoft Said to Be Preparing to Make Satya Nadella CEO

I didn’t see any of this coming:

Microsoft Corp. (MSFT)’s board is preparing to make Satya Nadella, the company’s enterprise and cloud chief, chief executive officer and is discussing replacing Bill Gates as chairman, according to people with knowledge of the process.

One person the board is considering to take the place of co-founder Gates as chairman is Microsoft lead independent director John Thompson, said the people, who asked not to be identified because the process is private. Even if Gates steps down as chairman, he may be more involved in the company, said two people familiar with the matter, particularly in areas like product development.

…Microsoft has only had two CEOs — Gates and Ballmer — in its history. In turning to Nadella, the company would get an enterprise-technology veteran who joined Microsoft in 1992 and has had leadership roles in cloud services, server software, Internet search and business applications.

As president of Microsoft’s server business, Nadella boosted revenue to $20.3 billion in the fiscal year through June, up from $16.6 billion when he took over in 2011. That unit became cloud and enterprise when Ballmer overhauled Microsoft’s structure in July to focus the company on devices and services.

I can’t say I know enough about Nadella to say whether he will or won’t be a good CEO. As a shareholder, I will take a “wait and see” approach.

However, I like the choice of John Thompson as the new chairman of the board:

If Thompson, 64, takes over as chairman, Microsoft would have a more than 40-year technology executive in the role. Thompson was a longtime International Business Machines Corp. executive before joining technology-security company Symantec Corp. (SYMC) in 1999. He took the company from $600 million to $6 billion in sales over a decade-long tenure, before stepping down in 2009. Thompson currently runs Virtual Instruments Inc., a San Jose, California-based maker of software that tracks application and hardware performance.

Thompson joined Microsoft’s board in 2012 and has asked tough questions of top executives including Ballmer, people familiar with the situation have said. That helped to create an environment that sped Ballmer’s decision to retire by this August, the people have said.

I would rate MSFT as a “hold” right now. For people looking for a safe dividend-paying stock for a retirement portfolio, I would rate MSFT as one of the best.

The Daily Caller: Government shuts down 11-year-old’s cupcake business

The government has pulled the plug on an 11-year-old Illinois baker’s oven.

A day after a local newspaper ran a story about the young and ambitious Chloe Stirling, who operated a cupcake business out of her parents’ kitchen, the local health department came calling.

“They called and said they were shutting us down,” Heather Stirling, Chloe’s mother, told the St. Louis Post-Dispatch.

Read the entire article. But the money quote is from the government bureaucrat:

When reporters approached Amy Yeager, a health department spokeswoman, about the county’s decision to shut down Chloe’s business, she said that she was doing it for the sake of the public.

“The rules are the rules. It’s for the protection of the public health,” Yeager said, according to the Post-Dispatch. “The guidelines apply to everyone.”

“People will react how they choose to react,” she added. “But it is our job.”

So Amy Yeager, your job is to ruin the aspirations of a young girl? God forbid 11 year old Chloe Stirling should show an inkling of self-motivation and entrepreneurial‎ skill, instead of goose-stepping in line like we expect everyone to do.

Amy, if you want to know why I generally question the effectiveness of ANY government-run programs, it is mindless and soul-less bureaucrats such as yourself. I pray there is a special place in Hell for people like you, right alongside Nazi soldiers who ran concentration camps.

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Posted January 31, 2014 by edmcgon in Editorial/opinion, News, Politics, Stocks, Technology

13 responses to “Ed’s Daily Notes for January 31st

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  1. I understand that government shutting down the cupcake business started by an 11 year old looks really bad. It looks like a mean old government bullying a sweet little kid. However, as Amy said, the rules are rules..laws are laws. DofH has to regulate those rules equally to people of all age. If the girl wants to continue her bupcake business, she can rent a commercial kitchen and bake her cupcakes there. Any body who wants to sell prepared food items MUST use a commercial kitchen to prepare that food. Forget the government, even private businesses like grocery stores won’t sell your food unless it is prepared in a commercial kitchen.

    • Laws are laws Ted. So if an 11 year old slaps another 11 year old, that’s assault, and they should go to prison for it, right?

      • Not even a close comparison Ed.

        If little Chloe accidentally cross contaminated her frosting with salmonella because her folks made chicken for dinner and sent half a dozen people to the hosptital what would be your position? Or if her red velvet cupcakes sent someone into anaphylactic shock because they had trace amounts of peanut due to the family making homemade pad thai for dinner the night she mixed up her latest batch? These rules, that you apparently despise, when applied evenly protect people.

        Now could they allow her to label her cupcakes as not adhering to health and sanitation guidelines? Maybe but where do you then draw the line? Is it ok for an 11 year old but not an 18 year old?

        Robb

      • I agree..not even a close comparison. With what you are saying, are you implying that if a 12 year old stabs his 9 year friend during a fight, then no one should do anything??

      • Robb/Ted,
        The rules we apply to adults do not apply to children. Otherwise, there would be no such thing as “juvenile courts”.

        I would also remind you that there were no reports of anyone actually being harmed by this kid’s cupcakes. You talk about a lot of worst case scenarios that never happened. All this is, is a case of an overeager bureaucrat enforcing rules that didn’t need to be enforced. “An extra kitchen is required”?

        Robb,
        For your peanut allergy example, why would anyone with a severe peanut allergy EVER eat food from another family’s kitchen? They certainly shouldn’t eat food made by a kid. Some common sense should apply to your own medical conditions. What if a diabetic ate a cupcake? Where should we draw the line on stupid government regulations, and begin to require some common sense from people?

  2. Ed you are in desperate need of a little perspective if you are truly comparing requiring a small business to abide by the same rules all other similar businesses need to and the Nazi concentration camps.

    Robb

    • Robb,
      We are talking about a good kid, not Jamie Dimon! We are also talking about a mindless soulless bureaucrat, who can’t tell the difference between an 11 year old running a tiny cupcake operation, and an adult running a restaurant. I think you may need to reconsider your own perspective on this, because this is the same kind of bureaucrat who follows orders without any consideration to what they are doing.

      • Ed,
        I truly feel sorry for you if in your mind you can actually relate the enforcement of a health code regulation with the systematic torture and murder of an entire people.

        Robb

      • Ed,

        I think calling the Dept of Health representative soullless might be a reach. She is paid to do a job just like everyone else and must do her job appropriately. For all you know she could have been directed by people much higher up who she has to listen to, and shut down the kids kitchen despite the fact she didn’t see any harm in what the child was doing. A lot of scenarios at play here possibly, but the food industry regulation is probably one of the better things the gov does. Also the quote from the family saying the Dept of Health stated they ust either buy a baker or build a separate kitchen does not seem to the whole story. My guess is they were informed of their options in writing which would have included either starting an appropriate bakery business, buy/building a kitchen, or renting certified commercial space. Also the article states that these were demands. I think the journalist should have stated they are requirements for each business, not demands.

        And I’d agree with Robb here that associating this with a Nazi soldier does not seem entirely appropriate.

      • I relate it because it is exactly the same kind of person, with the always ready excuse of “just following orders”. Admittedly, bullying an 11 year old girl isn’t in the same class of evil as marching people to their deaths, but mindless adherence to rules, as well as orders, is the same kind of sin, even if the end result is vastly different.

      • So she should not follow orders, possibly lose her job or face disciplinary action including demotion just so the girl can make cupcakes? Seems a tad irrational. I wouldn’t call “just following orders” an excuse. When you are paid salary and benefits by someone else that is exactly what you are supposed to do. Granted certain situations might call for not following orders, but I believe those instances where applicable likely have far greater social and moral implications.

  3. Sold my Toyota that was purchased on Jim Jubaks recommendation to take advantage of Abe’s attempt to spur inflation. Jubak has some real macro insights but his stock recommendations have been consistently terrible! His fund, of which I own the minimum just to get his blog, was actually negative last year.

    • Jeff,
      I’ve actually been thinking about removing JUBAX as a benchmark for my monthly portfolio summaries. At the very least, I will probably add the Nasdaq, since I do have a lot of tech stocks.

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