Tesla Banks a Profit. Finally; Twitter’s Getting Rid of Employees Despite a Beat; Latest IPO Fails to Wow Wall Street

Booyah!

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Tesla’s CEO Elon Musk is super-pleased with himself after his electric car company posted a quarterly profit for the second time since the company went public. The first time that happened was waaaaay back in 2013. And Musk is banking on the fact that he can pull it off again next quarter. The news was particularly welcome to Musk since he is eager to merge Tesla with his other company, SolarCity. Except investors aren’t as enthusiastic about the prospect or presumably the $2.6 billion cost of the merger. But come November 17 Musk is going to find out if shareholders will have a change of heart and are willing to embrace the move when a vote takes place. In any case, Tesla’s profit came in at a very lofty $21.9 million with a record $2.3 billion in revenue. That would be a 145% increase over last year’s same quarter revenue. Yes you read that right.  The company also scored 14 cents per share when analysts only expected 4 cents. Add that to the fact that last year the stock lost 58 cents per share and we’ve quite a nice comeback story. So what made this quarter different from all other quarters? Ramped up production of Tesla’s Models S sedans and Model X Crossovers. With Musk urging employees to move the vehicles with all their heart and soul, a 92% increase was seen on deliveries of 25,185 cars. But it wasn’t just the current crop of cars that contributed to Tesla’s winning quarter. Apparently, 373, 000 people already pre-ordered the $35,000 Model 3, which won’t even hit the streets until 2017.

Boohoo…

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Twitter announced its third quarter results and yet again, failed to impress anybody. One of the more significant highlights, or rather lowlights, is the company’s decision to lose about 9% of its workforce, or roughly three hundred employees, out of over 3,800 worldwide. That number could go higher but the ultimate goal is to help the company reorganize sales, partnerships and marketing efforts. And who doesn’t like to reorganize, right? The social media company did manage to pull down revenues of $616 million, beating estimates of $605.5 million. Some might consider that an impressive achievement. Except it’s not, since it marked Twitter’s ninth straight quarter of declining growth. And while the company also earned 13 cents per share, once again beating estimates of just 9 cents, growth of monthly active users stayed relatively flat, despite all kinds of exciting new changes.  In the meantime, both Disney and Salesforce.com have passed on potentially acquiring Twitter, as CEO Jack Dorsey said that he’s done talking about reports of possible acquisitions.

That’s NYSE…

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Chinese company ZTO Express made its big Wall Street debut today but failed to dazzle the Street. Unlike the Chinese IPO darling of 2014, Alibaba, ZTO dished out over 72 million shares for $19.50 a pop, only to open today for the first time on the New York Stock Exchange at $18.40. The stock later slid even lower to $17.70. But considering that the company’s original range fell between $16.50  – $18.50, its slide isn’t exactly tragic. Just disappointing. In any case, ZTO still managed to raise $1.4 billion and the company plans to use $720 million of that to purchase more trucks, land, facilities and equipment. In other words, big expansion plans are in the works. As a package delivery company, it handled close to 21 billion parcels just in 2015. It should come as no surprise, however, that ZTO’s main business deals with delivering shipments for Alibaba. In fact, Alibaba accounted for 75% of ZTO’s business in the first half of the year.  You might be wondering why Chinese companies like to list on stock exchanges in the United States. Well, for one, there are currently about 800 companies lined up in China who have filed applications to list on indexes on the country’s indexes.  It’s a considerably slower process and some feel it’s less reliable. Besides, given the volatility of the Chinese economy, raising money in U.S. dollars as opposed to a weaker Chinese currency only sweetens the pot for plenty of companies.

Mylan CEO Using New Math; End for Land’s End CEO; Mousy Talk on Twitter

Miss-stated…

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Let’s give it up for Mylan CEO Heather Bresch for providing us with some fiscal humor today. In case you missed it, she told Congress last week that poor little Mylan only makes $50 on each EpiPen 2 pack for which it charges $600. But the darndest thing happened. It seems that, for some strange reason, when Mylan calculated its sales and profit figures to present to Congress, the pharmaceutical company applied a statutory U.S. tax rate of 37.5%. Which is so weird because Mylan re-domiciled in the Netherlands in order to pay less taxes. In fact, last year Mylan paid a rate of 7.4%. And that’s even weirder because at that rate, Mylan’s profits come in closer to $160 per pack. The company sells over 4 million packs a year. If that’s not a $240 million arithmetic discrepancy, then I don’t know what is. Several members of Congress had strong opinions on Ms. Bresch’s capacity for honesty and presumably, math.  Representative Buddy Carter (R-GA), who as luck would have it is also a pharmacist in real life, called Mylan’s creative pricing a “shell game.” Shares of Mylan dropped a smudge.  Oh well.

Vattene!

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After less than two years on the job, Lands’ End CEO Federica Marchionni is out effective immediately. The now-ex CEO, who held posts at Dolce and Gabbana and Ferrari, just couldn’t seem to bring a luxurious vibe to a very middle America brand. Go figure. To be fair, the Wisconsin-based company is giving her credit for helping Lands’ End sow the seeds towards becoming a global lifestyle brand.  Which is incredibly heart-warming.  She probably didn’t help her cause when she interviewed Gloria Steinem for the company’s Spring catalog. At first she ticked off the anti-abortionists just for featuring the iconic yet controversial figure. After all, the company does sell a lot of uniforms to Catholic schools.  I’m pretty sure there’s a joke in there, but I’m not inclined to look for it. Then she managed to tick off the pro-choicers when she apologized to the anti-abortion activists for writing about Steinem in the first place. You can’t win, I tell you.  In the end, however, it did all come down to money, and Ms. Marchionni didn’t really make any for the company. Lands’ End sales were down 7% last year while shares were down 33% for the year. To add insult to fiscal injury, shares are down again today 11%, perhaps because the company now finds itself looking for its third CEO in just over two years.

Tweet tweet, squeak squeak…

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Could Twitter be going to the rodents? That might not be such a bad thing if word on the street – Wall Street, that is – is true.  Rumor has it that Disney is making a play for the social media company along with Google and Salesforce. Shares have been going up on the news since Friday and those shares need all the help they can get as Twitter continues its struggle to increase revenue. But the House of Mouse rumblings seem to have the most traction with talk that the company is currently working on a potential bid for Twitter. Interestingly enough, Twitter CEO Jack Dorsey sits on the Disney board so an acquisition isn’t so far-fetched. And since Disney’s biggest biz, cable television, has been losing ground to online streaming services, Disney Chief Bob Iger has been investing heavily in tech, thereby making a Twitter acquisition a very logical move. Twitter itself is looking to evolve into a bona fide media company, already offering live streaming NFL Thursday Night Football and the Presidential debates that air tonight. That focus will fit in nicely at Disney. Twitter’s hoping an acquisition deal will put the company’s value at a meaty $30 billion.  And who doesn’t like the sound of $30 billion?

Twitter’s Attempts to Tweet Out Terror; Wal-Mart Boffo Earnings; EPA Calls Out Harley-Davidson

Tweet this…

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Looks like ISIS is going to have to find itself a new social media platform as Twitter pats itself on the back today after announcing it suspended 235,000 terrorist-related accounts in the last six months. That figure was about double over the previous period and the social media company went to great lengths getting bigger teams to review reports of flagged content on the site on a round the-clock-basis. Better spam detection and language capabilities also helped with the endeavor as the amount of time between content getting flagged and shutting down that content has gone down. But the great effort only really came about after Twitter took a lot of heat for allowing terrorist-related content to gain a big foothold on ISIS’s preferred site. Even the director of the FBI said how “Twitter was a devil on their shoulder” back in 2015. ISIS could have given courses on how to optimize media engagement as the terror organization regularly used Twitter to spread propaganda, recruit fellow murderers, raise funds for their evil ways and publicize its horrific actions. But to be fair, Twitter does have a policy in place prohibiting the promotion of violence and terrorism.  In any case, while Twitter concedes there’s no real “magic algorithm,”  to finding and shutting down terrorist activities on its site, there has been a noticeable drop on Twitter of all things ISIS and other terror-related organizations.

What bad retail landscape?

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It’s good to be Wal-Mart as the largest retailer in all the land posted better than expected results with revenue of $121 billion and a $3.8 billion profit for the second quarter, adding $1.21 per share. Analysts predicted shares would only gain $1.02. That profit was a very welcome 9% increase over last year’s $3.5 billion second quarter profit while the revenue figure beat projections by about $2 billion. If Macy’s Kohl’s and Target are left scratching their heads after their disappointing earnings, perhaps they should take a page or two from Wal-Mart’s playbook. The company made a major push in its e-commerce division, which always helps matters when you’re competing with the likes of Amazon.  Wal-Mart also increased its full year earnings outlook to $4.15- $4.35, up from $4.00 – $4.30. In addition to lower gas prices and warm weather, Wal-Mart brass attribute its great earnings to the boost they gave to employee wages which they think led to better customer experiences. Maybe it did. Maybe it didn’t. But there’s no denying the  company experienced stronger than expected sales growth.

Exhaust-ed…

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Look out VW. There’s a new emissions offender in town. This time the dubious distinction goes to iconic motorcycle maker, Harley-Davidson, who has to pay a $12 million penalty and another $3 million to fund a clean-air project.  The U.S. claims the company violated air pollution laws through its “super-tuner” devices.  These devices, while improving engine performance, also caused the exhaust levels for those engines to increase well beyond what they were allowed. Then there were some 12,682 bikes that were also found to be short of regulatory requirements. Even though Harley-Davidson graciously disagrees with the EPA’s findings, it settled if only to avoid a long-drawn out and very expensive legal battle. As part of the settlement, Harley-Davidson doesn’t even have to admit wrongdoing. After all, who likes to admit when they’re wrong, eh? In any case, the company will cease selling the devices by August 23 and will have to buy back and destroy the devices from the dealerships. Naturally, shares of Harley-Davidson did take an 8% hit following the news of its own emissions scandal, but they recovered relatively quickly. Sort of.

Sweet Beat for Mondelez; Coca Cola’s Earnings Still Have Some Fizz Left; Twitter Needs a Growth Spurt

Ore-oh well…

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Last time Mondelez came up on this blog, it was because it made a $26 billion offer to buy Hershey Co. That deal would have created the biggest confection company. Ever. Except that Hershey Co. rejected the offer. In any case, the company still managed to beat estimates, cranking out earnings with a few ups and downs. Ultimately, Mondelez pulled down a profit of $464 million with 29 cents added per share. Unfortunately, the company also reported that sales fell a whopping 18% to just $6.3 billion. Some of those falling sales are being blamed on the strong U.S. dollar and that’s especially troublesome for Mondelez since most of its revenue is generated outside of the U.S. If you recall, Mondelez makes some of our country’s most beloved snacks including Oreos, Ritz Crackers and Trident gum. But Mondelez really would have liked to add Hershey Co. to its collection since 90% of Hershey’s revenue comes from the U.S. and the deal would have significantly increased Mondelez’s much-needed U.S. exposure. Instead, Mondelez CEO Irene Rosenfeld is going to attempt to trim $3 billion in expenses. The company also plans to bring its Milka brand of chocolate to China, a market where Hershey has struggled to make a dent and, in fact, lost money on the endeavor.

Fizzle out…

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Speaking of things sweet and highly caloric, Coca Cola also reported earnings with lower than expected quarterly revenue. This time China and Latin America are the culprits. Well, partly anyway. Apparently, consumer tastes in China are switching gears from soda to more healthful choices, especially premium water. And who doesn’t like their water premium, right? Latin America is making problems for Coca Cola all because of high levels of inflation in some regions there. On the bright side, revenue in North America picked up by 2%. Too bad that’s about the only place it picked up. And it’s not just Coca Cola that’s feeling the health burn. PepsiCo is also struggling to get consumers to re-embrace it’s fizzier offerings. Coca Cola’s net income came in at $3.45 billion, up 11% from last year’s $3.12 billion.  The beverage company took in $11.5 billion in revenue with 60 cents added per share. Analysts expected $11.6 billion in revenue but 58 cents per share. However, last year at this time, Coca Cola raked in $12.16 billion, a bummer no matter how you slice it. But Coca Cola’s CEO Muhtar Kent isn’t worried and feels that his beloved soda drinkers are still out there. They’re just not drinking as much as he would like them too. The fact is, the total volume of soda consumption in the U.S. declined by 1.5% in 2015, and by .9% in 2014. Which means Mr. Kent better figure out a way to get more soda drinkers or get his current ones to kick back some more.

Grow-tesque…

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On the heels of yet another celeb controversy on its site, this time over the cyber-abuse of Ghostbusters actress, Leslie Jones, Twitter announced its latest earnings.  And no, the results did not help lift the waning spirits of investors. Apparently CEO and Co-Founder Jack Dorsey has yet to pull the rabbit out of the hat as growth was so slow it was practically backwards at a paltry 1%. Revenue came in at $602 million, which was just 20% higher than last year at this time. At least shares picked 13 cents a pop, even though analysts predicted shares would only gain a dime. Expectations, however, were for $608 million in revenue, so nobody was particularly impressed by the three cent beat. Not shockingly, the stock took a nasty fall on the news, diving as much as 14% at one point during the day, and losing as much as $1.7 billion of its market value. That leaves its current market value at $11 billion, despite its $18 billion valuation. But we’re supposed to get excited for Twitter because its got some big plans for video that its hoping will actually reverse its negative fiscal tide. Videos are Twitter’s number one ad format and so it made deals with the NFL, NBA, NHL and MLB. Of course deals with the DNC and RNC are also in place since U.S. politics has turned into a veritable sporting event. But even with all that entertainment on the platform, it’s not crazy to hope for a miracle for the one-time Wall Street darling.

Ralph Lauren’s Man with a Plan; Voila! French Rogue Trader Gets Last Laugh…Almost;Ya-Who Will Get the Winning Bid?

 

Plan of attack…

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Ralph Lauren will bite the very preppy bullet and start cutting jobs, closing stores and cashing out on some real estate as the retailer tries to climb out of a dismal fiscal year. Out of its 15,000 full-time employees, 1,000 of them will soon be getting their walking papers so the company can restructure itself and go from nine management layers to six. Spearheading these new changes are CEO Stefan Larrson, who is the person responsible for lifting Gap Inc.’s Old Navy out of its own retail funk awhile back. And Larsson’s got his work cut out for him. The retailer posted sales losses for every quarter of fiscal 2016, resulting in a full year sales decline of 3% and a 30% decline in shares in the last twelve months. Part of Larsson’s plan to lift Ralph Lauren out of its misery is to speed things up. Literally. It currently takes well over a year for a design to hit shelves ,which accounts for improperly forecasting supply and demand. Instead, Larsson will shorten that turnaround, as he feels that nine months is a perfectly reasonable amount of time for designs to reach stores. Unfortunately, 50 of those stores will be closing. But at least there will be over 440 other stores from which to purchase those expedited designs. Phew. While this restructuring will cost Ralph Lauren a whopping $400 million, not to mention an additional $150 million in inventory reduction, this new plan will also help the retailer save $220 million a year and Ralph Lauren needs every million it can get.

Wait a minute…

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Societe General Bank’s very own rogue trader, Jerome Kerviel, just got his day in court. Even though his poor trading skills cost the French bank billion in euros, and got him convicted of fraud and breach of trust in the process, the trader still managed to win a wrongful dismissal case against his former employer. What was, in fact, wrongful, was that SocGen waited too long between the time it discovered Kerviel’s misdeeds and the time it booted him from the firm. French labor code allows companies a grand total of two months to sanction those who have been found guilty of misconduct. Kerviel, however, was dismissed in 2008, many many months after the time, in 2007, when it was discovered that he went rogue and lost 4.9 billion euros. The Labor Court has now ordered SocGen to pay Kerviel 450,000 euros, which is roughly equivalent to $510,000. SocGen’s lawyer, Arnaud Chalut, called the ruling “scandalous,” presumably in French, and plans to appeal the decision. Kerviel, however, is not in the clear just yet and neither is his $510,000. France’s highest court already ruled that the three years of jail time to which Kerviel was sentenced was justified. But the court didn’t feel that he should be liable for the whole 4.9 billion euros. So the bank has brought a civil suit against Kerviel, which begins next week, to determine exactly how much he should pay back to SocGen.

Bid adieu…

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Verizon is on the prowl for some internet business and it is honing in on Yahoo. The telecom giant is said to be bidding $3 billion for the privilege of owning Yahoo’s core internet biz, however, Verizon is not the only company looking to scoop up that entity. AT&T is said to be licking its chops at the opportunity, in addition to private equity firm TPG , Advent International and Vista Equity Partners, to name but a few. Experts were thinking that bids would come in between $4 billion and $8 billion. But then some bidders lost interest after Yahoo CEO Marissa Mayer made a presentation last month showing how Yahoo’s online ad biz is headed south, losing digital advertising ground to Facebook, Google and even Twitter. Yahoo, however, might just prove to be the perfect fit for Verizon, which already picked up AOL last year for $4.4 billion. Together with AOL, the two companies attract over one billion users every month. There is probably going to be one more bidding cycle before any deals are reached and it’s still anybody’s guess where Yahoo will land. But if I were a betting man…well, I’m not.

Get Your Resume Ready – The List of Highest Paying Companies is Out; Online Lending Risks Exposed; Home Sales Spring Forward

Benefits and all…

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Glassdoor just put out its latest list of companies that are better than yours. This time you get to hear the list of highest paying companies in America for 2016. In order to even be considered for the list, companies had to have at least 50 salary reports on Glassdoor. The top spot goes to Chicago-based business consulting firm A.T. Kearney who pays its employees a median salary of $167,534. Strategy&, another consulting firm, ranked number two while tech firm Juniper Networks took the number three spot. With the exception of Visa, which came in at number 11, no other financial firms made the list of twenty five companies. Instead consulting firms and tech companies dominated the list. Consulting firms are all about contacts, connections and a ” who you know”culture. Other “barriers of entry” include a good reputation and specialized skills and knowledge. Which explains why they are willing to shell out big bucks for sky-high salaries. Tech companies, however, value”what you know” that leads to a “war for talent” in that industry. Incidentally, there’s a big shortage of skilled workers in tech. Just saying. As for other notable companies who made the list, Google weighed in at number 5, Facebook ranked twelfth and Twitter appeared at number 13.

Borrower’s remorse…

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Online payday loans might seem like a great idea to many, but have actually turned into a major nightmare after borrowers were hit hard with major bank fees and account closures. The Consumer Financial Protection Bureau conducted a study – its third in the industry – and found that about half of the borrowers who took out these high-interest loans had to eat a $185 bank penalty for overdraft and non-sufficient funds fees.  In case you were wondering, that high-interest rate is 300% – 500% on an unsecured loan.  Ironically, and tragically, I might add, this type of loan is favored by low-income consumers who use the method to pay off expenses in between paychecks. The penalties were incurred when the online lenders submitted repayment requests to the borrower’s bank. But if the accounts were low, and they usually were, the borrower got slapped with heavy fees. Online lenders would make repeated debit attempts on borrowers accounts, adding their own fees on top of the bank fees incurred. For the first unsuccessful debit repayment, the online lender would hit the borrower with a $97 penalty. A second unsuccessful debit repayment resulted in a $50 penalty. If multiple requests were made in a single day, the borrower would have to eat another $39. As a result, 23% of borrowers in the study had their accounts closed at the end of the 18 month period of the study. Fortunately, new regulations are on the horizon. It’s just too bad that no one is discussing the possibility of any retroactive recourse for the credit-scarred borrowers.

Home run…

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Existing home sales are up for March, according to the National Association of Realtors and Wall Street is rejoicing since February’s 7% decrease still induces cringing . Economists only predicted that sales would go up around 4% at an annual rate of 5.28 million, but instead they were up over 5% at an annual rate of 5.33 million homes. No doubt a healthy labor market and low mortgage rates contributed to those lovely figures and analysts feel secure in saying that it signals a strong start to the spring selling season. The median sale price of a home is sitting at $222,700, a 5.7% increase over last year at this time. Sales are up in all four of the country’s regions, with a big 11% boost in the Northeast. Unfortunately, sales at both the low and high ends weren’t as impressive, with a big shortage plaguing the low-end. The homes that sold in March sat on the market for an average of 47 days as opposed to February’s home sales that sat on the market for an average of 59 days.  Approximately 30% of the homes sold in March were purchased by first-time homebuyers while mortgage applications rose to their highest levels in nine weeks.

 

Walmart Bums Out Wall Street; Puma Deals a Mighty Blow to Yeezy; Is IBM Back in the Game?

Fall-mart…

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Walmart announced earnings and, in the process, managed to put a damper on Wall Street’s day. The company posted .6% growth and while nobody argues that growth is bad , the company still missed expectations of 1% growth. It’s now expected that Walmart will post a very boring flat line to illustrate its net sales even though previous forecasts called for 3% to 4% growth. Profits for Walmart fell almost 8% to $4.57 billion and posted revenues of $129.7 billion. While that may seem like a nice beefy number, analysts still expected $131 billion in revenue. The numbers weren’t helped by Walmart’s decision to close 269 stores worldwide, including 154 just in the United States. Then there were those wage increases and investments into its digital commerce that ate a bit into those profits. But Walmart is banking on the fact that those investments will yield big returns, even if it does mean a little wait. After all, if it’s gonna compete with Amazon, it’s gotta put in the time and money. Of course, mother-nature gets some of the blame too, seeing as how warm weather put a crimp in sales of cold weather merchandise. But don’t rule out the strong dollar, which also deserves plenty of the blame. At least shares are up over 6% in the last three months and the retailer is raising its dividend by 4 cents to generous $2 per share. Woohoo.

Swift karma…

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Puma had a very good quarter and much of the credit for that can go to Rihanna. Yes, that Rihanna. As the brand’s creative director, the pop star is helping shape the female future, as Puma refers to this endeavor. The company had higher than expected sales growth for its fourth quarter, just as Rihanna launched her first full goth-inspred line for the athletic apparel retailer. Back in the fall, RiRi’s remake of Puma’s classic suede kicks sold out within hours of going on sale. Puma’s profits were up 2.6% to 10.9 million euros, easily beating forecasts of 6.5 million euros. Sales rose 11.5% to 979 million euros when analysts expected just 839 million euros in sales. And maybe Kanye West should take to Twitter to hit up his sister-in-law, Kylie Jenner, for some cash, instead of Facebook CEO Mark Zuckerberg. She’s been named as the company’s brand ambassador, contrary to his hopes that she would be on his Team Yeezy Adidas line.

Have patients…

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IBM. Remember that name? The company just whipped out $2.6 billion for its latest acquisition, Truven Health Analytics. Under CEO Ginny Rometty, IBM has so far spent $4 billion in acquisitions in the last 12 months but this latest one is IBM’s biggest purchase in three years. Wall Street reacted kindly by giving shares of IBM their biggest jump since 2013, and sending them all the way up to $134. That’s especially reassuring for IBM since it posted 15 straight quarters of declining sales. Truven was acquired since IBM brass thought it would fit nicely into its Watson Health biz unit. FYI, Watson is IBM’s fabulous collection of artificial intelligence technologies that does all kinds of super fun stuff like taking data apart to analyze it, interpret it and see if any patterns can be predicted.  With this acquisition, IBM will have health info on 300 million patients and employ 5,000 people worldwide.

 

 

 

Jumping the Twitter Ship; Coffee, Tea or Nukes? Air Iran Might Be Headed Our Way; McD’s CEO Really Does Deserve a Break Today

And then there were six…

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Twitter just got a whole lot lighter – except not in a good way. Four top executives are jumping ship from the social networking site, in addition to a top member over at Twitter-owned Vine. The news was tweeted (naturally) last night when Twitter CEO Jack Dorsey posted that all five people had “chosen” to leave and “will be taking some well-deserved time off.” That’s awfully sweet but it still begs the question as to why those folks chose to leave in the first place – especially because those four executive departures constituted 40% of Twitter’s top brass. Don’t bother looking up any job postings for the newly vacated positions. Dorsey seems to have at least one of them filled, apparently by a high-profile executive in the media industry. No word yet on the other positions but rumor has it they’ve also been filled. Not that any of this is news to those at Twitter. When Jack Dorsey returned to the top spot he did, after all, say that the board will eventually have to be replaced. Incidentally, upon Dorsey’s return, shares of Twitter have fallen about 50%.  Shares are now hovering below the IPO price as the company continues to struggle to find ways to attract more users.

Blackout dates…

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Because nothing says romantic vacation getaway like hopping on a plane to Tehran, Iran is on a mission – not even a nuclear one! – to boost tourism and get back in the good graces of just about every country in the western hemisphere. Iranian President Hassan Rouhani is in Europe this week and just might strike (no pun intended) a deal with Airbus to purchase some 500 aircraft so that you can book your next vacay to the radically ruled country. Rumor has it that Boeing might also supply Iran with some aircraft too, and it would mean that it’d be the first time in 36 years – ever since that pesky Islamic revolution – that travelers could hop on a direct flight to a country that’s hostile to United States citizens. Looks like British Airways is itching to be among the first of the commercial airlines to start taxiing on an Iranian tarmac. Apparently, some analysts are expecting a bona fide economic boom – I SAID ECONOMIC! – to occur in Iran now that sanctions have been lifted in exchange for shelving its nuke fantasies.  And because banking sanctions have also been lifted, Iran will even be able to pay for the aircraft. And so much more…

Comeback kid…

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Attention naysayers: McDonald’s CEO Steve Easterbrook’s turnaround plan seems to actually be working. How ’bout that. McDonald’s served up some tasty earnings with a special boost from its all-day breakfast offerings.  A big show of gratitude also goes to China where, as it turns out, diners continued to opt for the Golden Arches’ fast-food fare despite the nasty food safety scandal that erupted during the summer of 2014. Same store sales took a 5.7% jump and wouldn’t you know it, shares jumped on the news, especially because, after two years of little to no growth, the company finally experienced that wonderful sensation, posting its best quarter in four years. McDonald’s pulled down a profit of $1.21 billion, an almost 10% increase, while adding $1.28 per share. That’s a nice little smack down to analysts’ estimates of just $1.23 per share. And while a strong dollar did send revenue a bit south to $6.34 billion, it was still above and beyond expectations of $6.22 billion. The only bummer in the earnings was in France, where terrorist attacks have kept too many would-be McDonald’s patrons from enjoying the cuisine.

Icahn: A Man of Letters; IBM Looks to Weather Some Storms; Twitter Has Yet to Impress

Icahn. Therefore I am…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Carl Icahn took time out of his busy schedule of haranguing Congress and ousting CEO’s to write yet another letter, this time on his website, to insurance company AIG. Icahn now owns a sizable chink of the company, though exactly how much remains a mystery. He only tells us that it is very “large.” I, for one, believe him, just cause it’d be kind of weird to make something like that up. Besides, he usually goes big. In his advice letter to AIG, the activist investor writes, “There is no more need for procrastination.” He wants AIG split up into three separate divisions because he’s not digging the company’s “Systemically Important Financial Institution” status, or SIFI if you’re feeling funky.  If you find that term a bit too clunky, then, by all means, refer to it by its other more user-friendly term, “Too Big To Fail,” as in the 2008 fiscal crisis and the HBO movie of the same name (that starred Bill Pullman  as JP Morgan Chase’s Jamie Dimon and Ed Asner as Warren Buffet). Icahn believes that when a company gets SIFI status it’s bad. It’s like a tax. A tax of a bunch of regulators breathing down your fiscal back with heavy breaths of federal oversight. Companies that don’t get saddled with that status are more valuable to shareholders, in Mr. Icahn’s not-so-humble opinion. Icahn wants to divide AIG into a property and casualty coverage division, a life insurance division, and a mortgage backing division. Then he wants to throw in some cuts and have AIG buy back some stock. After that, he feels AIG will start trading closer to its book value at about $100 a share. Right now the stock is trading at just under $64 and trades for less than 80% of its book value (which, by the way measures assets minus liabilities). As for AIG CEO Peter Hancock, well, Icahn will probably find a way to kick him out of AIG if he doesn’t take his advice.

Super duper…

Image courtesy of  Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Today’s big shopper is IBM, who is getting set to acquire The Weather Co.’s digital assets. In case you were wondering (because I know you were), those digital assets are its websites and apps. The channel, however, stays put, as it doesn’t really fit into IBM’s master plan. That master plan involves IBM beefing up its Watson Internet of Things Unit, its artificial intelligence unit that puts the super in supercomputer. The data supplied by the deal will give Watson the ability to create accurate forecasts – is that an oxymoron? – and will be able to provide commercial clients, from airlines to insurance companies, and beyond, very precise information. While the exact terms of the purchase have yet to be disclosed, the deal is rumored to be valued at around $2 billion. Naturally, shares of IBM took a little ride on the uptown train because of the super news.

These are the not quite the Moments…

Image courtesy of bplanet/FreeDigitalPhotos.net

Image courtesy of bplanet/FreeDigitalPhotos.net

Twitter is down 13% for the year and another 11% just today, and yet the micro-blogging site still beat the street. The social media company pulled down $569 million in revenue adding ten cents per share. Analysts predicted that Twitter would score closer to $560 million and add only a nickel per share. In terms of last year at this time, Twitter was up 58%. But here’s where things start to go south. The company revised its fourth quarter profit outlook between $695 million and $710 million. That seems like a whole lot of cash except that analysts were expecting numbers closer to $740 million. Then we turn to growth. There wasn’t that much of it.  Twitter only managed to add about 4 million new active monthly users. A very unimpressive 11% increase over the same time last year. Analysts, however, are still optimistic that launches, including the much-hyped Moments, and its increasing ad revenues will help turn the company’s fiscal tide.

Fall-Mart; Twitter Fires, Twitter Hires; Feeling Spent

Execu-llent…

Image courtesy of Sira Anamwong/FreeDigitalPhotos.net

Image courtesy of Sira Anamwong/FreeDigitalPhotos.net

Even though Twitter announced yesterday that it is shedding 8% of its workforce, today the social media company announced that its adding someone new to that very same workforce. Enter Omid Kordestani who is jumping the Google ship in order to bring his fiscal talents over to embattled Twitter.  Omid will assume Jack Dorsey’s old title of executive chairman, which he dropped last week when he, once again, assumed the title of CEO. Omid Kordestani comes to Twitter from not-at-all embattled Google Inc. where he not only left the post of Chief Business Officer, but also $115 million in equity awards. That’s according to a regulatory finding, anyway. Omid, who was apparently employee number 11 at Google, and affectionately called Google’s “business founder” by Larry Page, left the company in 2009, but returned in 2014, only to head on off into the Twitter sunset.  Even though Omid Kordestani started his Twitter account back in 2012, his most recent tweet about his new post, was only his eleventh time using the platform. His lack of tweeting is, presumably, about to change.

Not “fine” by me…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Wal-Mart might be the mother-of-all retailers but, as they say, the bigger they are, the harder they fall, especially on Wall Street. And unfortunately, a big company like Wal-Mart has a nasty little way of taking the Dow Jones Industrial Average with it.  This particular fall was, unfortunately, rather epic. Wal-Mart took a $20 billion hit because it’s predicting a very disappointing forecast. The world’s largest retailer doesn’t expect to experience growth for fiscal 2016 (which ends in February, btw). Investors loathe bad forecasts. Well, who doesn’t? This bad forecast gave way to Wal-Mart’s biggest stock drop in 15 years and shaved 9% off the value of its shares. Of course, the strong dollar gets part of the blame as it’s hurting sales abroad. But then there’s the investment the company is putting into its e-commerce. Wal-Mart is looking to plunk down $900 million next year, and over a billion dollars the following year to beef its tech efforts. All that cash is going to gouge those much relished profits. Also eating into those profits are wage increases that the company is giving out to thousands of employees. But what really got Wall Street in a fit was when Wal-Mart CEO Doug McMillion told CNBC interviewers that Wal-Mart will do “fine” during the holiday season. And that one word means anything but to investors.

Save it for later, will ya?

Image courtesy of  FrameAngel/FreeDigitalPhotos.net

Image courtesy of FrameAngel/FreeDigitalPhotos.net

Retailers aren’t exactly giddy these days as more Americans decided to save up all that money from low gas costs instead of spending it. As a result, retail spending only experienced a .1% gain in September even though analysts predicted gains from .2% to .6%. Since consumer spending accounts for 70% of the economy, that .1% gain is nothing but brutal fiscal news. In fact, seven out of thirteen retail categories experienced declines. Ironically enough, gas stations took a 3.2% hit because…can you guess? Lower prices at the pump. Hence, they couldn’t pull in all that cash like they did in the past. What isn’t ironic, just annoying and mildly disconcerting, is that this .1% was the biggest drop since January and represented no change from August. So get out there and spend!