Best line about the Blockbuster (BBI) and Circuit City plan? “Seven years ago this would have been a novel idea”…beautiful..
Disclosure (“none” means no position):None
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Upgrades
Smithfield Foods (SFD)- BB&T Capital Mkts Hold » Buy
Eaton (ETN)- Oppenheimer Underperform » Perform
Freeport-McMoRan (FCX)- HSBC Securities Neutral » Overweight
Arcelor Mittal (MT)- Citigroup Hold » Buy
RehabCare (RHB)- Stifel Nicolaus Hold » Buy
Massey Energy (MEE)- JP Morgan Neutral » Overweight
Downgrades
Aqua America (WTR)- Hilliard Lyons Buy » Long-term Buy
Crocs (CROX)- Wedbush Morgan Strong Buy » Hold
Crocs (CROX)- DA Davidson Buy » Neutral
Radiant Systems (RADS)- Wedbush Morgan Buy » Hold
Manitowoc (MTW)- Sterne Agee Buy » Hold
Pride Intl (PDE)- Deutsche Securities Buy » Hold
CoBiz (COBZ)- Keefe Bruyette Outperform » Mkt Perform
Hercules Offshore (HERO)- Deutsche Securities Buy » Hold
Manitowoc (MTW)- Banc of America Sec Buy » Neutral
Affymetrix (AFFX)- Cowen & Co Outperform » Neutral
Affymetrix (AFFX)- Leerink Swann Outperform » Mkt Perform
Novatel Wireless (NVTL)- Morgan Joseph Buy » Hold
Telefonos de Mex (TMX)- JP Morgan Neutral » Underweight
Conexant (CNXT)- Oppenheimer Outperform » Perform
Novatel Wireless (NVTL)- Oppenheimer Outperform » Perform
Affymetrix (AFFX)- Bear Stearns Outperform » Underperform
VCG Holding (VCGH)- Merriman Curhan Ford Buy » Neutral
Blockbuster (BBI)- JP Morgan Overweight » Neutral
Emulex (ELX)- Citigroup Buy » Sell
EMC Corp (EMC)- Citigroup Buy » Hold
Noble Corp (NE)- Deutsche Securities Buy » Hold
Rowan Cos (RDC)- Deutsche Securities Buy » Hold
Diamond Offshore (DO)- Deutsche Securities Buy » Hold
Ensco (ESV)- Deutsche Securities Buy » Sell
Transocean (RIG)- Deutsche Securities Hold » Sell
Bill Barrett (BBG)- Lehman Brothers Overweight » Equal-weight
Concho Resources (CXO)- Lehman Brothers Overweight » Equal-weight
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Upgrades
Smithfield Foods (SFD)- BB&T Capital Mkts Hold » Buy
Eaton (ETN)- Oppenheimer Underperform » Perform
Freeport-McMoRan (FCX)- HSBC Securities Neutral » Overweight
Arcelor Mittal (MT)- Citigroup Hold » Buy
RehabCare (RHB)- Stifel Nicolaus Hold » Buy
Massey Energy (MEE)- JP Morgan Neutral » Overweight
Downgrades
Aqua America (WTR)- Hilliard Lyons Buy » Long-term Buy
Crocs (CROX)- Wedbush Morgan Strong Buy » Hold
Crocs (CROX)- DA Davidson Buy » Neutral
Radiant Systems (RADS)- Wedbush Morgan Buy » Hold
Manitowoc (MTW)- Sterne Agee Buy » Hold
Pride Intl (PDE)- Deutsche Securities Buy » Hold
CoBiz (COBZ)- Keefe Bruyette Outperform » Mkt Perform
Hercules Offshore (HERO)- Deutsche Securities Buy » Hold
Manitowoc (MTW)- Banc of America Sec Buy » Neutral
Affymetrix (AFFX)- Cowen & Co Outperform » Neutral
Affymetrix (AFFX)- Leerink Swann Outperform » Mkt Perform
Novatel Wireless (NVTL)- Morgan Joseph Buy » Hold
Telefonos de Mex (TMX)- JP Morgan Neutral » Underweight
Conexant (CNXT)- Oppenheimer Outperform » Perform
Novatel Wireless (NVTL)- Oppenheimer Outperform » Perform
Affymetrix (AFFX)- Bear Stearns Outperform » Underperform
VCG Holding (VCGH)- Merriman Curhan Ford Buy » Neutral
Blockbuster (BBI)- JP Morgan Overweight » Neutral
Emulex (ELX)- Citigroup Buy » Sell
EMC Corp (EMC)- Citigroup Buy » Hold
Noble Corp (NE)- Deutsche Securities Buy » Hold
Rowan Cos (RDC)- Deutsche Securities Buy » Hold
Diamond Offshore (DO)- Deutsche Securities Buy » Hold
Ensco (ESV)- Deutsche Securities Buy » Sell
Transocean (RIG)- Deutsche Securities Hold » Sell
Bill Barrett (BBG)- Lehman Brothers Overweight » Equal-weight
Concho Resources (CXO)- Lehman Brothers Overweight » Equal-weight
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Loyal reader, More Blockbuster and Circuit City
– Jeff has decided to try his hand at blogging. Check him out here
– More doubters
– And more
– And finally
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Loyal reader, More Blockbuster and Circuit City
– Jeff has decided to try his hand at blogging. Check him out here
– More doubters
– And more
– And finally
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
When this was first emailed to me I thought the emailer was being a smart a#@. Turns out it is true. How? Why? Haven’t shareholders suffered enough? Why does management hate them so much?
Blockbuster (BBI) said it made a $1 to $1.3 billion cash offer in a Feb. 17 letter to Circuit City (CC) Chief Executive Philip Schoonover. They decided to go public with the offer Monday after Circuit City did not provide access to its books. (Read the letter.)
Circuit City said today of Blockbuster they had “reservations as to their ability to finance the offer.” Considering that as of January Blockbuster only had $184 million in cash on the books, they are only $1 to $1.12 billion short of the stated goal.
In the letter Blockbuster CEO Jim Keyes said, “Given current debt market conditions, we believe most of the cash necessary would be generated through the issuance of additional Blockbuster equity, most probably in a rights offering to our existing shareholders. We believe they, and the market, will recognize the merits of this transaction and we are confident that we can raise the required equity. The borrowing capacity of the combined business would provide the remaining cash proceeds.”
They’ll have to essentially dilute shareholders to the max and then raid the credit line CC set up in February to fund the deal since banks are not loaning money for deals that make sense much less one that means a struggling retailer barely making a profit buying one that isn’t.
The larger issue is, what is Blockbuster trying to become? They have a valuable franchise in video if they would just realize the video store concept is officially dead. Adding more brick and mortar locations, diluting shareholders and maxing out the credit line to acquire another problem is a huge mistake.
Keyes said “The combination of Blockbuster and Circuit City will result in an $18 billion retail enterprise uniquely positioned for the convergence of media content and electronic devices. We would seek to differentiate products in both Blockbuster and Circuit City stores by offering exclusive content and content-enabled devices. Both companies would benefit from complementary products, marketing, management strengths, technology and distribution and the resulting synergies would significantly improve consolidated financial performance.”
He has mentioned this vision before but it has yet to be rolled out in Blockbuster locations, why bet the farm on a wholly unproven concept? He talks about “differentiating products” in both locations. That is confusing because I was not aware of any similarities currently. Let’s also be real honest here. Using the term “management’s strengths” and either Blockbuster or Circuit City in the same sentence is laughable unless it is preceded by “lack of”.
Now, were RadioShack (RSK) to make a run a CC, that would make sense. Borders (BGP) and Barnes and Noble (BKS) does. This doesn’t on any level.
Maybe Keyes is officially throwing on the towel in the war with Netflix (NFLX) and has decided to try a new direction?
Circuit City shareholders should jump at the price because they won’t see $6 to $8 a share anytime soon, this will destroy Blockbuster holders…
Disclosure (“none” means no position):Long BGP, None
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Blockbuster may finally be trying to compete with Netflix (NFLX).
Blockbuster (BBI), is finally it seems working on a set-top device for streaming films directly to TV sets. This comes months after a similar announcement from Netflix (NFLX) LG Electronics at CES and word they may embed the technology in Micrsoft’s (MSFT) Xbox consoles. The device is expected to utilize Blockbuster’s access to Movielink’s 6,000 strong Movie catalog just as soon as the content is migrated to Blockbuster.com (sometime before June).
Does this make shares a buy? No.
In March Blockbuster announced that for fiscal 2008, it expects to deliver adjusted EBITDA in the range of $290-$310 million, which corresponds to GAAP financial measures of operating income (EBIT) in the range of $113-$133 million and net income in the range of $5-$25 million. Even at the high end of the range that equates to EPS of only $.13 cents a share which means shares currently trade at 25 times the top end of estimates and 108 times the low end. Either way, too expensive.
Here is the thing. The box top game is a race. The first out with an affordable offering wins. This isn’t something I envision people swapping in and out of. The set-top they buy initially will be the one they use for quite some time. I am still mystified at the apparent blase’ attitude by Blockbuster with this.
From mail rentals, to online rental, and now the box set they have consistently been behind the competition. This is the right move to make, they just should have made it maybe in May last year?
Disclosure (“none” means no position):None
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Phones, Xbox, Oil, Guilt
– I had no idea this number was so low..
– Were is Blockbuster (BBI)?
– The answer here is easy. LET THEM DRILL
– He has been the most vocal former Fed Head ever…….me think he doth protest too much.
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Phones, Xbox, Oil, Guilt
– I had no idea this number was so low..
– Were is Blockbuster (BBI)?
– The answer here is easy. LET THEM DRILL
– He has been the most vocal former Fed Head ever…….me think he doth protest too much.
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Blockbuster (BBI) reported results for Q4 and the full year today and we have more proof that they cannot close or sell the video stores fast enough.
The Numbers:
Total revenues increased 3.6% to $1.57 billion for the fourth quarter of 2007 from $1.51 billion for the fourth quarter of 2006. For the fourth quarter of 2007, net income was $38.1 million, or $0.18 per diluted share, an improvement of $29.8 million as compared with net income of $8.3 million, or $0.04 per diluted share, for the fourth quarter of 2006.
Great right? Like I always say, read the headline and then look closer for the real story.
Domestic same-store and by-mail revenues increased 6.1% reflecting an 11.7% increase in same-store merchandise sales and 5.3% growth in same-store and by-mail rental revenues. Good right? What happens if we take away the by-mail (Netflix (NFLX) type rentals)?
Domestic same-store revenues, excluding by-mail subscription revenues, decreased only 0.9% reflecting a 490 basis point improvement, as compared to the fourth quarter of 2006.
Bottom line, the company is still seeing lower sales at its video stores, a trend that has been happening quarter after quarter. Now, even this number is worse than it seems.
Blockbuster had a net loss of 500 stores during the year, 6% of the total. Retailers do not close performing stores, these 500 were under-performing locations meaning that the “same store” metric would have been far worse had they been included.
Since last summer I have been begging Blockbuster to increase the rate of store closures and todays results only go to show that would work. The company posted improved results with 6% fewer stores and the stores that remain, are still a drag on earnings.
The faster they are disposed of, shareholders may begin to actually see a future. Time is running out though as video downloads are proliferating and the next battleground is there, past even the current DVD by mail model. Netflix acknowledges this and is currently moving their business there.
If Blockbuster is still in a video store battle, all hope is lost.
Disclosure (“none” means no position):None
Upgrades
Imperial Oil (IMO )- BMO Capital Markets Market Perform » Outperform
GSI Group (GSIG)- BMO Capital Markets Underperform » Market Perform Illinois Tool (ITW)- UBS Neutral » Buy
Parker-Hannifin (PH)- UBS Sell » Neutral
Teck Cominco (TCK)- RBC Capital Mkts Sector Perform » Outperform
Nalco (NLC)- Credit Suisse Underperform » Neutral
Plexus (PLXS)- Credit Suisse Neutral » Outperform
Maxwell Tech (MXWL)- JMP Securities Mkt Underperform » Mkt Perform
Sotheby’s (BID)- JMP Securities Mkt Perform » Mkt Outperform
Blockbuster (BBI)- JP Morgan Neutral » Overweight
Varian (VARI)- UBS Neutral » Buy
Downgrades
Petro-Canada (PCZ)- BMO Capital Markets Outperform » Market Perform
Kenneth Cole (KCP)- Sterne Agee Hold » Sell
Gehl (GEHL)- BMO Capital Markets Outperform » Market Perform
Quicksilver Resrcs (KWK)- CapitalOne southcoast Add » Neutral
Provident Bank (PBKS)- Sandler O’Neill Hold » Sell
Lexington (LXP)- Stifel Nicolaus Buy » Hold
Boyd Gaming (BYD)- KeyBanc Capital Mkts Hold » Underweight
TRW Automotive (TRW)- JP Morgan Overweight » Neutral
Lear (LEA)- JP Morgan Overweight » Neutral
Borg Warner (BWA )- JP Morgan Overweight » Neutral
Forest Labs (FRX)- Friedman Billings Outperform » Mkt Perform
First Potomac Realty (FPO)- Wachovia Mkt Perform » Underperform
RF Micro Device (RFMD)- Jefferies & Co Buy » Hold
Seagate Tech (STX)- Citigroup Buy » Hold
Western Digital (WDC)- Citigroup Buy » Hold
EnerNOC (ENOC)- Jefferies & Co Buy » Hold
SourceForge (LNUX)- MDB Capital Group Buy » Neutral
Netflix (NFLX) updated expected results this mornings and for shareholders, the news was very good indeed.
Revised First Quarter-2008 Guidance:
— Ending subscribers of 8.16 million to 8.26 million, up from 7.85 million to 8.05 million
— Revenue of $324 million to $328 million, from $323 million to $328 million
— GAAP Net Income of $10 million to $14 million, from $9 million to $14 million
— GAAP EPS of $0.15 to $0.22 per diluted share, from $0.13 to $0.21 per diluted share
Revised Full Year 2008 Guidance:
— Ending subscribers of 8.9 million to 9.5 million, up from 8.4 million to 8.9 million
— Revenue of $1.345 billion to $1.385 billion, up from $1.3 billion to $1.35 billion
— GAAP Net Income of $75 million to $83 million, unchanged from prior guidance
— GAAP EPS of $1.18 to $1.30 per diluted share, up from $1.12 to $1.24 per diluted share
When you compare this to the $100 million loss expected at Blockbuster (BBI) for the year with no real plans to alter its path, can we call it?
It is all about convenience, making a special trip to the video store no longer qualifies. It used to be convenient but technology has made it an “extra trip” in already packed schedules.
Disclosure (“none” means no position):None
Q4 international sales for Harley Davidson (HOG) were up 17% and the company now has its sights set on blowing past that number.
India’s commerce ministry has now agreed to recognize European engine emission standards for motorcycle engines exceeding 800 cubic centimeters, a standard Harley’s bikes already comply with. The door is now open to sell their bikes in one of the world’s most populous countries.
One hang up, a 60% tariff a various other taxes that cause the price of the bike to double. Harley is seeking a reduction in the tariff to 10%, a level comparable to other imported items in the country. They report having “regular contact” with government regulators on the subject.
Harley spokesperson Bob Klein said “this is step one”. Already entering the Chinese market and with sales in Latin America and Europe very strong, HOG has proven its brand will sell very well outside the US.
While neither the China or India ventures will contribute meaningfully in the near term baring a blockbuster move, the groundwork is being set for explosive results down the road. Results, it should be noted that will continue to be strong for decades given the populations of both countries.
Disclosure (“none” means no position):Long HOG
Blockbuster (BBI) has spent the better part of the past year “talking” about an online video strategy. Meanwhile Netflix (NFLX), has just gone out and done it.
Rumors are that Netflix will announces this week a collaboration with Microsoft (MSFT) to distribute videos through its Xbox. For the moment we will ignore the possible blow to Apple (APPL) this will be.
Blockbuster, still clinging to the video store business model will soon disappear with this news. The ONLY prayer they will have would be to go to Apple hat in hand and beg to be rescued. Perhaps Apple would want the stores Blockbuster currently has, at least they could make money off of them. Most likely Apple would tell them to politely “go away”.
The bottom line for Blockbuster is that they held fast to an outdated business model for too long while the competition not only innovated, but took its model to the next level.
What to do if you are a Blockbuster shareholder?
1- Sell and lick your wounds
2- Pray
Blockbuster’s plight could be reversed in a few easy steps. But, considering I have been saying the same thing since last spring and management is still determined to follow the current downward path, let’s not bet on it. What to do?
1- CLOSE THE STORES: A few strategically placed locations could be spared but the overwhelming vast majority of them need to be shuttered. They are a drain on resources.
2- Call Sony (SNE): If Microsoft is going to distribute Netflix’s offerings, perhaps sony could do the same for Blockbuster.
3- Call Steve Jobs: Blockbustre rentals through itunes?
4- CLOSE THE STORES (just in case we missed it the first time)
Now, unfortunately, all of these moves will only serve to stop the inevitable irrelevance of the business. If Blockbuster ever plans to actually compete with NetFlix, innovation is what they need.
Wouldn’t it be nice to walk up to one of a thousand kiosks, insert a memory card and download a movie for rental on it that I could then plug into my computer or TV to watch? Surely these locations would be stunningly cheaper than a store? If my local supermarket can give me a card to track my purchases and send me related coupons, surely Blockbuster could produce cards to track and bill purchases, just swipe the card and download the movie, easy. Perhaps place the information on the stick?
One step and done?
The point is that by sticking to an 1980’s business model the company now stands on the precipice of extinction. Here is hoping for those who still own shares that they recognize this soon..
Disclosure (“none” means no position): None
Here are the week’s top stories at Value Investing News
Although Sherwin has performed well, the market hasn’t rewarded it – and here’s why that troublesome trend is going to continue.
Business Wire Canada Opening Reception: A Conversation with Warren Buffett
Excerpt: “Noven Pharmaceuticals (Nasdaq: NOVN) recently made significant changes to its board of directors and senior management. The company hired a new CFO, accepted the resignation of its long time Chairman and CEO Robert C. Strauss, and appointed Wayne P. Yetter as its new Chairman. We applaud these actions and believe a tremendous amount of value will come from the changes.”
Some poor choices under Greenblatt’s Magic Formula screen. Lists some criteria for determining a good Magic Formula stock from a bad one.
According to Benjamin Graham (1894-1976), investors should make market fluctuations their friends, rather than get carried away by the market sentiment. Investors should not try to time the market, as the stock market movement is always unpredictable. In this article, we will look into some key elements of Graham’s investing philosophy.
Value investing may be rewarding in the long term, but can be painful in the short term. Can that be avoided? And is now the wrong time for value?
It looks like Berkshire Hathaway added Kraft, Trane, Sanofi Aventis, and more.
Crafty Buffett submits an SEC filing on Valentine’s Day announcing his love for Kraft.
At under 8 P/E and 17% earnings yield, the largest egg producer in the U.S. looks like a bargain. But what lies beneath the shell that makes this a risky stock?
A quick search on Amazon.com for the term “Value Investing” turned up 2,970 books. At the top of the list, the usual suspects appear:
The maverick hedge fund manager delegates and controls stock selection.
Despite near term challenges related to concerns over it’s blockbuster anemia drugs, Amgen’s huge R&D budget, deep pipeline, and the bright outlook for biotechnology make it an attractive buy for any portfolio.
Investment guru Warren Buffet had once said: “Price is what you pay, value is what you get.” As bears refuse to give up the grip on markets, investors are resorting to value investing. Value investing essentially means buying companies whose stock prices appear cheap when viewed against its fundamental intrinsic value.
Fortune asked 13 money managers about the current downturn, and what they’re buying (or not buying) now. Including : John Neff , Leon Cooperman, Michael Steinhardt, Whitney Tilson …etc.
The hate e-mail can stop!! This blog has been investing real money in the magic formula for over 2 years. 2007’s results and results since inception are now posted!
In part two of the chat, Curtis Jensen, Third Avenue Management’s co-chief investment officer, talks the fund firm’s focus on analyzing the balance sheet, as well as a couple of financial stocks that have recently been in the news.
“What you have is a collection of brands and assets”.. Whitney Tilson
After great reviews, many in the value investing forum requested a second interview with William Spetrino Jr. The people requested it and we have delivered.
After an interview with the Financial Post, Warren Buffett, chairman of Berkshire Hathaway Inc., yesterday answered questions from some of Bay Street’s top investor relations professionals. He shared more on his views on the markets, politics and the economy.
Whitney Tilson on retailers, Sears Holdings, C …