Japanese Airbag Maker Goes Bust; Pandora CEO Sings the Blues; ‘Pharma Bro’ Goes on Trial

Deflated…

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Japanese airbag maker, Takata Corp has filed for bankruptcy.  In the United States. Sure  companies file for bankruptcy almost everyday. But what makes this one unique is that Takata has the dubious distinction of issuing the largest auto-industry recall. Ever. With over 40 million vehicles in the U.S. possessing the potentially deadly airbags, some 125 million vehicles have been and will be recalled by 2019. It’s also the largest bankruptcy of a Japanese manufacturer, and one that finds itself staring down the wrong end of billions of dollars worth of losses over recalls that lasted the better part of a decade. From paying settlements to individuals who were harmed, to paying car makers, including Honda, BMW and Toyota – to name just a few – Takata’s fiscal trouble will take years to reverse. It seems that Takata’s faulty products were the cause for at least 16 deaths – that we know of. Fortunately a Chinese company had the good sense to swoop in and acquire Takata for a whopping $1.6 billion. Although, that is apparently a thorn in the side of the Japanese, since selling off to foreigners is something the country would rather like to avoid. Incidentally, the Chinese company that bought Takata is called Key Safety Systems and is based right here in the U.S. Go figure.

Cue the goodbye music…

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Looks like the music’s gone for Pandora CEO and Co-founder Tim Westergren. His departure may – or may not – have something to do with Sirius XM’x recent purchase of a $480 million, 16% stake in Pandora. But rumor has it that investors are bummed because they wanted Sirius to buy up the whole operation. If you recall, and it’s okay if you don’t, Howard Stern makes his radio home at Sirius. Not that this has anything to do with Westergren’s exit either. To add insult to injury, shares jumped a little on the news of Westergren’s impending departure, signaling that investors are stoked about his exit.  That itty bitty jump must have been especially welcome since Pandora’s stock has been down over 35% this year.  After all, Pandora is staring at some fierce competition from Spotify, Apple and JZ’s Tidal, to name just a few. As of yet, no replacement has been named so if you’re looking to throw your hat into the ring, now might be your chance.

What a pill…

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The time has come for everyone’s least favorite Pharma bro’ to head to court. And thus Monday begins with Martin Shkreli finding himself in a Brooklyn Fraud courthouse instead of a beach mansion in the Hamptons. But considering he raised the price of a life-saving drug by 5000%, he might very well go down as the least sympathetic defendant to ever sit in that courtroom. And just so ya’ know, being an a–hole isn’t crime and it’s not the reason why pharma-gazillionaire Shkreli is sitting in a courtroom on this fine summer day.  Rather ‘Pharma bro’ is on trial because prosecutors charged him with “widespread fraudulent conduct” and running a ponzi-like scheme that had him lying to investors while working at a hedge fund and his drug company.  Fun-fact: Shkreli was banned from Twitter back in January after harassing a female journalist who wrote an op-ed criticizing Donald Trump. Oh, the irony.

George Soros, Golden Boy; Home Run for Home Depot; Pandora’s Streaming Away From Profits

Just because George Soros is doing it…

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George Soros just put a whole lotta money in gold. Lucky for him. However, the non-George Soroses of the world are supposed to take note, because, after all, he is, “The Man Who Broke the Bank of England.” And also because, since his net worth according to Forbes is $25 billion, he knows a things or two. Or a billion. In any case, according to a very recent regulatory filing that folks like him have to file (it’s called a 13F, and you are welcome that I am sparing you the boring details), Mr. Soros has sold off about 37% of his stock holdings. He then whipped out $387 million to buy lots of gold, including picking up a hefty 19 million shares in Barrick Gold, the world’s largest gold producer. It seems Mr. Soros is a more than a bit freaked out by the state of the global economy, and especially the slowdown in China. He feels the fiscal climate is reminiscent to him of 2007 – 2008 period just before the fiscal crash we are all still trying to forget. Not everyone agrees with Soros and his decision for his Soros Fund Management, but hey, he is the one who, back in 1992, bet against the British pound and made $1 billion off that bet – in a single day. I bet he’s real popular there. Anyway, it’s no secret that gold has always been a strong performer on Wall Street, as well as other places, mind you. The precious metal is up 21% for the year. But, just so ya’ know,  Soros still has plenty of other cash in plenty of other places. Like eBay and Apple. And Yahoo. And Gap…well, you see where I’m going with this. In fact, he’s got $80 million invested NOT in gold. In case you’re wondering what stocks he did ditch, some of those include Alibaba Group and Pfizer. Also, TripAdvisor and Expedia are out of his portfolio. Though, he did keep airline United Continental Holdings. Go figure.

Home improvement…

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As the warm weather brutalized plenty of retail outfits lately, (sorry, Macy’s, Nordstrom), Mother Nature knocked it out of the park for Home Depot. In turn, Home Depot warmed our hearts by boosting its sales and profit forecasts after regaling us with the news of its better-than-expected earnings, courtesy of Mother Nature. And as we all know, Wall Street loves nothing better than better-than-expected earnings. Except when investors feel that shares have hit their potential, for the moment anyway, which explains why shares of the home improvement chain were a wee bit down today. But no worries. A good housing market and fabulous weather added some $250 million in sales for Home Depot in the quarter, with February being the sweetest month, fiscally speaking. For the year, Home Depot is up about 20%, posting a profit of $1.8 billion a $1.44 per share. That was a 14% boost over last year, not to mention that it trumped analysts predictions of $1.36 per share. The company also saw $22.76 billion in sales, again stomping on predictions of $22.39 billion. The earnings also showed that consumers are actually spending their hard-earned cash, as opposed to hoarding it under mattresses (okay, banks too), unlike what was previously thought because of the generally poor performance in the retail sector. Spending money is good for the economy and now economists aren’t so worried anymore because they realize where all that hard-earned cash went. For the full year the retailer thinks it’ll pull down $6.27 per share for the year. And Spring has hardly sprung!

Closing the box…

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Pandora Media has had better years. Even better decades. Founded in 2000, the company had its IPO in 2011 and has about 80 million active users. While it was amongst the first crop of music streamers, the company’s stock is now down about 40% for the last twelve months, having never caught the same momentum as some of its competitors, including Apple and Spotify. Enter activist investor/Carl Icahn protégé Keith Meister, who feels that the time has come for Pandora to put itself on the market. Keith Meister’s Corvex Management has some very strong feelings about how much better – and profitable – Pandora can be and seeing as how he’s got 22.7 million shares, giving him an almost 10% stake in the company, he’s entitled to more than just his opinion on the matter. As the largest shareholder in the company, Meister wrote in a recent letter how he has “become increasingly concerned that the company may be pursuing a costly and uncertain business plan, without a thorough evaluation of all shareholder value-maximizing alternatives.” Basically, he’s wondering if the folks in charge, namely CEO and co-founder Tim Westergren, knows what they’re doing. Wall Street certainly seemed to be agreeing with Meister, as it sent the stock up today as much as 7% at one point.

Wal-Mart Misses Profits, But Who Can Blame Them?; Spotify-ing Starbucks; Urban Outfitter’s Un-Trendy Quarter

Wager on this…

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Image courtesy of digitalrt/FreeDigitalPhotos.net

Wal-mart took a hit on its first quarter earnings but would it be really fair to blame the world’s largest retailer? After all, that miss had a lot to do with the fact that Wal-Mart threw $1 billion towards raising employee wages and training programs.  Some might even call that profit miss noble. While Wal-Mart expects this initiative to actually lift sales in the long term, I bet management is hoping for a really short long term. Another reason not to completely blame Wal-Mart for its earnings miss is that recent Commerce Department report detailing how spending is down because would-be consumers are actually choosing to save money and pay down their debt. Of course, we also mustn’t forget to blame the strong dollar, which rumor has it, was responsible for eating a few cents per share off of Wal-Mart’s earnings, as well. The giant retailer pulled down revenue of $114 billion when analysts expected $116 billion. Even though that figure is down just .1% from last year, considering it’s Wal-Mart, that number is not as small as it seems. Analysts were hoping to see $1.05 per share earned, however, Wal-Mart only managed to score $1.03 per share on $3.34 billion. I suppose that figure sounds impressive – anything with the word “billion” usually does – except for the fact that it was a 7% drop from the $3.6 billion and the $1.11 per share it took in last year.

Deal of the day…

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Image courtesy of bplanet/FreeDigitalPhotos.net

CD’s are out and barista’s are in at Starbucks as the coffee chain teams up with streaming music provider Spotify. In what just might become remembered as one of the more creative business collaborations to come along in a long time, Starbucks employees – some 150,000 of them –  will be getting an unusual job perk: premium subscriptions to Spotify. The baristas will get to hone their deejaying skills by making playlists for the stores from the Starbucks music that has been wafting through the coffeehouses, together with the smell of espresso beans, for the last twenty years. So where’s does the money part come in? Starbuck’s promotes Spotify’s premium service, which can be yours for $9.99 per month. (the company already has 60 million users), while the playlists from Starbucks’ 7,000 locales will be conveniently accessible to those premium subscribers from Starbucks’ own mobile app. Then, as an added bonus, Spotify users can earn “stars” from the Starbucks reward program, of which there are 10 million members. I mean, can it get any better, well, for Starbucks and Spotify anyway?

Passe?

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

There’s nothing trendy about lousy earnings. Urban Outfitters and Anthropologie can attest to that as the apparel companies took a hit in their latest earnings report. In fact, it was Anthropologie’s worst quarter in more than two years as sales of the brand were only up by a paltry 1%. Sales for the company, as a whole, were only up 3.8% at over $311 million. Even though same store sales were up 4%, analysts predicted growth of 5.3%. So that was nothing short of disappointment at its peak. Revenue was also up, but only by 8% to $740 million. But it was the company’s net income that had everybody aghast. Urban Outfitters took a 12.5% beating on its profits coming in at $32.8 million and earning just 25 cents per share. Analysts were pulling for 30 cents per share on revenue of $758 million. Fiscal rumor has it that the clothing company can’t seem to get a fashionable leg up on the faster fashion companies of H&M, Zara and Forever 21. Whatever the reason, here’s wishing them a better second fiscal quarter.

Get Your Wal-Mart Game On, GM Was Slow On the Fix and Arrrgh!!! Take That Pirates

Attention Gamers…

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Image courtesy of Salvatore Vuono/FreeDigitalPhotos.net

If you’ve already saved the princess, won the kart race and completed your Call of Duty, then you’re in luck. Because the economy has been playing games with their declining sales, Wal-Mart started looking for ways to boost and reboot their revenue. Now you’ll be able to take your played-out video games you have sprawled out all over your floor and – assuming they’re in good condition – trade them in at Wal-Mart for some always handy store credit. Yes, you read that right. Wal-Mart is upping its gaming game. They had been offering this sort of thing online but now you can do it stores. The fun begins March 26.

GM’s attempt to apologize?

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Image courtesy of bigjom/FreeDigitalPhotos.net

In her first press conference following GM’s epic debacle, GM CEO Mary Barra said she is sorry for “everything that has happened.” While it was nice (and expected) that she apologized, and nobody doubts the sincerity of GM or Ms. Barra, it did leave many feeling that the apology was nothing short of meaningless. That’s because GM admitted to knowing about their faulty ignition switches – that were responsible for twelve deaths – for the last eleven years and then dragged their heels to fix the problem. Among the questions she did and didn’t answer, she also introduced a “global vehicle safety position”, or as you and I would say, a safety czar in hopes of avoiding future dangers. Too bad they didn’t think of this sooner.

Ahoy downloader…

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Image courtesy of Grant Cochrane/FreeDigitalPhotos.net

Thanks to online streaming and smart phones, music lovers are more law-abiding. Sweden’s music industry’s IFPI reported that 90% of Spotify subscribers stole less. Go you! “The big success for piracy was the accessibility it gave,” said Carl Vernersson, from the Swedish artist rep company At Night Management. Yep. Going to the record store and paying for it was becoming soooo annoying. Stealing/illegally downloading was just soooo much easier. In the comfort of your own home/dorm room/coffee house, you could just rip off musicians while still wearing your pjs. And yes, that does make you a klepto if you did just that. Services like Deezer and Spotify jumped 51% this year surpassing the $1 billion mark. But downloading still continues to be the favorite way to PURCHASE music.