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PM: Algeria will buy Djezzy, 'no matter obstacles'
AP - Sun Oct 31, 11:30AM CDT
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ALGIERS, Algeria (AP) — Algeria's APS news agency is reporting that the prime minister has vowed to buy Djezzy, the subsidiary of Egyptian telecom giant Orascom, "no matter the obstacles."
The report quotes Ahmed Ouyahia as saying Algeria will deal only with Orascom. The two parties are in a dispute over back taxes: Algerian authorities say Djezzy owes about $230 million.
Orascom plans to merge with Russia's VimpelCom Ltd., and uncertainty over Djezzy's fate has thrown a kink into the deal, which would create the world's fifth-largest mobile telecommunication service provider.
The news agency reported that Ouyahia, speaking Sunday to lawmakers, said "the Algerian state will definitely acquire Djezzy and will only deal with the party that is the cosignatory on the contract."
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Fewer AC gamblers but spending up on hotels, food
WAYNE PARRY - AP - Sun Oct 31, 4:33PM CDT
FILE - This Sept. 2, 2010 file photo shows people walking along the boardwalk in Atlantic City, N.J. (AP Photo/Matt Rourke, file)
ATLANTIC CITY, N.J. (AP) — Finally, some good news after four years of slumping revenues: Even though fewer people are coming to the nation's second-largest gambling resort, they're spending more cash on things that don't involve gambling.
Spending on hotel rooms, meals, concerts and nightclubs has increased even as the gambling take has dropped for Atlantic City's 11 casinos, where the number of total visitors fell from 34,534,000 in 2006 to 30,381,000 last year.
The amount of money gamblers have lost at slot machines and card and roulette tables is down 23 percent since 2007, according to a study by Gaming Industry Observer, a publication by Spectrum Gaming Group, an Atlantic City-area casino consulting firm. But gamblers' spending on hotel rooms is up 21 percent and food and drink is up 6 percent.
Herney Nisimblat, a Darien, Conn., retiree, said a promotion linked to the HBO series "Boardwalk Empire" drew him to Resorts Atlantic City for a $19.20 straight-razor shave, just like the ones that real-life Prohibition-era political and rackets boss Enoch "Nucky" Johnson used to get.
"To me, it brought back nostalgia," said Nisimblat. "I come from Colombia, and my father used to get that when I was a kid. I remember watching him get a shave. It was like a dream to get one myself. I wish I could do it every day."
A former marketing director with Colgate-Palmolive, the 69-year-old Nisimblat comes to Atlantic City every other month, and not just to gamble.
"I'm retired, so now is the time to spend the money I've been saving my whole life," he said. "I love to go out and have a good time. I love the Boardwalk, I love to go shopping, to go to a nice restaurant, and to the casinos. Whatever they're offering, I'll do."
People like Nisimblat are a silver lining in an otherwise dark, cloudy sky in Atlantic City. They're making some casinos rethink their entire way of measuring success, with the bottom line no longer solely relying on slot machines and table games.
Atlantic City has been saying for years that it needs to focus less on day-tripping senior citizens who come to play slots for a few hours, cash in their free buffet coupons, then ride the bus back home. Instead, casino executives say, the city needs to become a destination resort where top concerts, gourmet restaurants, shopping and spas attract more upscale customers willing to pay cash for their fun.
The change in thinking started around 2007, a few months after the Philadelphia suburbs got their first slots parlor. There are now 10 in Pennsylvania, and the beating they have put on Atlantic City by stealing many of the resort's best customers is profound.
That competition ramped up just as the economy tanked: a devastating one-two punch for a resort that for decades had most of the eastern United States to itself in terms of gambling customers.
Atlantic City feels it still has a big advantage in that most of its neighboring competitors lack hotel rooms, fancy restaurants and entertainment.
"We're still the second-biggest gaming market in the country, but when you lose a billion dollars of revenue that's not coming back, you have to change your business model," said Don Marrandino, eastern division president of Harrah's Entertainment Inc., which owns four casinos here. "That's what we're doing."
His company is doing particularly well in phasing out comps — the Holy Grail for some gamblers who make their decisions on where to play based solely on who's offering a free room, an on-the-house dinner or show tickets. At Harrah's, comped hotel rooms as part of overall room revenue went from 86 percent in 2007 to 59 percent this spring.
For the entire city, comped rooms fell from 65 percent to 60 percent during that four-year span.
Surprisingly, even some of the most struggling hotels did better in attracting more cash customers. The Atlantic City Hilton, which hasn't made mortgage payments for a year and a half, is the subject of a court battle over whether it should be taken over by a receiver.
Its gambling revenues the past four years are down 44 percent, but its hotel revenue is up 24 percent. Similarly troubled Resorts Atlantic City, which last year handed over the keys to its lenders after it, too, stopped making mortgage payments, saw its gambling revenue plunge by 39 percent. But its hotel revenue was up 4 percent.
The pace is picking up so far this year, according to the Spectrum study. In the second quarter of 2010, hotel revenue in Atlantic City was up 25 percent from the second quarter of 2009, to $54 million. Individual casinos posted even better numbers: Harrah's Resort Atlantic City was up 57 percent, the Showboat Casino Hotel up 56 percent, and the Hilton, up 51 percent.
Non-gambling revenue accounts for just over half of Las Vegas' take. From July 2007 to 2009, it fell about 1 percent on total revenue of about $22 billion.
In Connecticut, the Mohegan Tribal Gaming Authority, which operates the Mohegan Sun casino hotel, reported that hotel revenue last year was $39.6 million, down from $47.3 million in 2007. Food and drink brought in $93.1 million last year, down from $102 million in 2007. Retail and entertainment revenues were $122.7 million last year, down from $133.1 million in 2007.
According to the old saying, there's no such thing as a free lunch, and that's becoming more true at Atlantic City casinos, where free meals are down 29 percent and free drinks are down 16 percent since 2007.
Yet people line up in the hallways to pay $20 apiece to party at what was once the most unlikely place: an indoor swimming pool at Harrah's. Since it opened in 2007, The Pool at Harrah's has become one of the hottest nightspots on the East Coast.
The average pool customer spends an extra $50 aside from the cover charge, Marrandino said. Bottle service runs from $300 to well over $1,000.
"The pool is an incredible success; 99 percent of the business there is cash," Marrandino said. "The clubs, pools, spas are cash cows, worth millions of dollars."
He says these non-gambling revenues must be looked at along with the money casinos take in from gamblers to get a more accurate perception of a casino's true health.
Eight of Atlantic City's 11 casinos turned an operating profit in the first half of this year, even though most saw that profit level decrease. As a whole, the 11 casinos saw their gross operating profit fall by 23 percent to $262.7 million, as net revenues fell 6.7 percent to $1.77 billion, compared with the first half of 2009.
___
Associated Press writers Oskar Garcia in Las Vegas and Stephen Singer in Hartford, Conn., contributed to this story.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Apple sues Motorola over smart phone patent
AP - Sun Oct 31, 12:58PM CDT
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NEW YORK (AP) — Apple is suing Motorola for infringing on patents related to its smart phones.
Apple Inc. said in a filing on Friday that Motorola's Droid, Cliq, BackFlip and other phones violate its patents related to the iPhone's touch screen and user interface.
Apple says it wants Motorola Inc. to stop using the patents and is seeking an unspecified amount of damages as well as its attorneys' fees and costs.
The lawsuit was filed in a federal district court in Wisconsin on Friday.
The suit comes after Motorola sued Apple earlier this month over patent infringement.
Motorola was the second-largest phone maker in 2006, due to the popularity of its Razr clamshell phone, but it was surpassed by others when smart phones became popular.
Meanwhile, Apple Inc.'s iPhones have surged in popularity. The company sold 14.1 million on them in June through September.
Now, Motorola is the seventh-largest phone maker in the world. In North America it's outstripped by Apple Inc. and Research In Motion Ltd., the maker of the BlackBerry. Motorola's recent smartphones such as the "Droid" line of phones run on Google Inc.'s Android software.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Broadcasters keep upper hand in TV disputes
RYAN NAKASHIMA - AP - Sun Oct 31, 8:02PM CDT
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LOS ANGELES (AP) — A recent spate of TV blackouts and the lack of government intervention suggests that broadcasters have the upper hand over TV signal providers when it comes to negotiating fees, at least until Congress decides to act.
New York-area cable TV operator Cablevision Systems Corp. tested the limits of government intervention in October, calling early and often for the Federal Communications Commission to step in and force News Corp.'s Fox to keep providing its broadcast signal while it pressed for arbitration in a fee dispute.
Fox declined and the FCC did little more than suggest mediation if both parties were willing to participate. When the two sides couldn't reach a deal, Fox blacked out its signals to 3 million Cablevision subscribers for 15 days, through two games of baseball's World Series. On Saturday, Cablevision finally accepted terms it said were "unfair" for the sake of its customers.
Ultimately, the FCC said that its hands were tied.
"Under the present system, the FCC has very few tools with which to protect consumers' interests," FCC Chairman Julius Genachowski said in a letter to Sen. John Kerry, D-Mass., in a letter Kerry's office released Friday. "Current law does not give the agency the tools necessary to prevent service disruptions."
Some analysts said Cablevision's move was mainly intended to draw the government out. Its battle had the support of other cable and satellite TV signal operators through such groups as the American Television Alliance, which counts Dish Network Corp. and DirecTV Inc. among its members.
Fox said in a statement Sunday that "this entire dispute was solely about Cablevision's misguided efforts to effect regulatory change to their benefit." Cablevision did not respond to a request for comment.
But the distributors are also competing with one another, rather than presenting a united front.
Dish Network announced Friday that it had settled its dispute with Fox, two days before Fox broadcast signals could have been blacked out to some of its 14.3 million subscribers. That would have made its service more attractive to Cablevision customers still stuck without Fox, and hurt Cablevision's position as the lone holdout.
It gave in just one day later.
Battles between TV signal providers and broadcasters have been raging for years and the latest dispute wasn't the longest.
In 2005, about 75,000 Cable One Inc. subscribers in Missouri, Louisiana and Texas went without signals from local NBC and ABC affiliate stations owned by Nexstar Broadcasting Group Inc. for almost the entire year.
In March, Cablevision also attempted a high-profile negotiating strategy and its customers lost their ABC station in New York in the hours leading up to the Oscars. Viewers missed the first 15 minutes of the awards show before Cablevision and The Walt Disney Co. reached a tentative deal.
The law at the center of the debates is the Cable Television Consumer Protection and Competition Act of 1992.
It allows broadcasters like Fox, ABC, CBS and NBC to choose between forcing a TV signal distributor like Cablevision to carry its local TV station, thus boosting its audience, or bargaining for the best rate it can for so-called "retransmission consent."
Because broadcasters bought the rights to such high-demand programming like football, baseball and the Oscars, they have chosen to bargain and have recently been pressing for higher fees.
The law heavily favors broadcasters in such negotiations because they have the ability to black out signals and subscribers are hard to win back if they switch TV signal providers.
David Bank, an analyst with RBC Capital Markets, said it was in the best interests of the FCC to keep the balance tipped in broadcasters' favor. The FCC regulates the airwaves and it has authority over what broadcasters can send out over them. There are rules over obscenity and local content that don't apply to pay cable channels, which escape the FCC's grasp.
"That's what the FCC really cares about: minority voices on air, localism, childhood early education initiatives, obscenity," Bank said. If the balance of power were shifted to distributors, media giants could pull back from the broadcast model and move to an all-cable channel lineup. TV stations might disappear and the FCC would "lose the ability to regulate all that," Bank said.
The American Cable Association, a grouping of smaller cable operators representing 7.6 million subscribers, argued Sunday that the fight to change an 18-year-old law wasn't over and it said it remains within the FCC's powers to adopt regulations to prevent signal blackouts now. "Despite these deals being done, retransmission consent needs to change," its president Matthew Polka, said Sunday.
Both Genachowski and Sen. Kerry called for reforms of the current system. Genachowski, an appointee of President Barack Obama, said in his letter that "the current system relegates television viewers to pawns between companies battling over retransmission fees." Sen. Kerry called the existing regime "broken."
"Media interests have every right to play hardball," Sen. Kerry said in a statement Sunday. "But I believe it's incumbent upon those of us in public policy to see if there's a way to help protect consumers and avoid the now regularly scheduled, frequent games of high-stakes chicken that leave consumers in the crossfire."
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Chavez orders takeover of Venezuelan steel maker
CHRISTOPHER TOOTHAKER - AP - Sun Oct 31, 7:35PM CDT
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CARACAS, Venezuela (AP) — President Hugo Chavez ordered the expropriation of Venezuela's largest privately owned steel producer Sunday, the latest in a series of takeovers that has raised concerns among business leaders.
The president said the seizure of Siderurgica del Turbio SA, or Sidetur, is part of his strategy to transform Venezuela into a socialist state.
"I'm announcing the expropriation of Sidetur," Chavez said during his weekly television and radio program, "Hello, President."
He ordered soldiers to guard the company's seven plants and urged employees to cooperate with officials rather than protest the takeover.
Sidetur, a subsidiary of Siderurgica de Venezuela SA, or Sivensa, produces 40 percent of the rebar used for construction in the country.
Founded in 1948, it produces 835,000 metric tons of steel a year, including beams, angles and flats that are sold domestically and exported to nations in Latin America, Africa, Asia and Europe.
Telephone calls to Sidetur's offices in Caracas went unanswered late Sunday.
Chavez has expropriated dozens of privately owned companies since he took office in 1999.
Last week, he ordered the takeover of the Venezuelan subsidiary of U.S.-based glass container manufacturer Owens-Illinois Inc. Earlier this month, he announced plans to expropriate Agroislena CA, a leading farm supply business.
Business leaders say the seizures are scaring off investors and could keep Venezuela from emerging from a lingering recession that began last year.
"The only investment here is for maintenance: Businessmen investing so their businesses stay afloat, not for expansion," said Jose Guerra, a former Central Bank official who now teaches economics at the Central University of Venezuela in Caracas.
Venezuela's gross domestic product shrank 3.5 percent in the first half of this year after contracting 3.3 percent for all of 2009.
Chavez has said the government will pay fair compensation for the businesses.
Earlier in the day before Chavez's announcement, opposition politician Julio Borges said expropriations are hurting jobs and accused Chavez of steering Venezuela toward Cuba-style communism.
"We urge the government to stop this expropriation policy," Borges said. "The government is now attacking the large businesses because later it will be easier for him to attack the small- and medium-size businesses."
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
China manufacturing data lifts stocks as Fed looms
PAN PYLAS - AP - 1 min ago
FILE - In this Sept. 30, 2010 file photo, traders gather at a post on the floor of the New York Stock Exchange, in New York. (AP Photo/Richard Drew, file)
LONDON (AP) — World stock markets rose modestly Monday following a fairly strong Chinese manufacturing survey — but trading was subdued as investors waited to see how much additional monetary easing the Federal Reserve might deliver at its meeting later this week.
In Europe, the FTSE 100 index of leading British shares was up 27.69 points, or 0.5 percent, at 5,702.85 while Germany's DAX rose 8.69 points, or 0.1 percent, to 6,610.06. The CAC-40 in France was less than a point higher at 3,833.90.
Wall Street was poised for a modest advance at the open later, with Dow futures up 59 points, or 0.5 percent, at 11,125 and the broader Standard & Poor's 500 futures 6.8 points, or 0.6 percent, ahead at 1,186.50.
"With that Fed meeting looming large, it seems unlikely that anyone is going to be willing to make any serious commitment in either direction over the next couple of days," said Ben Critchley, sales trader at IG Index.
This intensely busy week for markets started off with a solid Chinese survey, which showed the manufacturing sector growing as spending on infrastructure spurred orders for new equipment.
The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers index, or PMI, rose to 54.7 in October from 53.8 September and 51.7 in August. Monthly readings have stayed above 50, the benchmark for expansion, for 20 straight months.
The survey failed to excite investors too much given the scale of potential of top-tier economic news this week — the key release later Monday will be the Institute for Supply Management's monthly survey into the U.S. manufacturing sector.
As well as meetings of the European Central Bank, the Bank of England and the Bank of Japan, investors will have to digest the outcome of Tuesday's Congressional elections in the U.S. The week culminates with the monthly U.S. nonfarm payrolls data for October, which often set the stock market tone for a week or two after their release.
Still, all those events are likely to play second fiddle to the Fed's expected announcement on Wednesday that it is ease monetary policy further given subdued U.S. inflation levels and elevated unemployment.
Though figures last week showed the U.S. economy grew at a slightly faster than anticipated annualized rate of 2 percent in the third quarter, it's still not enough to bring down unemployment, which is hovering near 10 percent to the frustration of the Obama administration.
If opinion polls are correct, then President Barack Obama will have to work with a Republican-dominated House of Representatives at the very least — many think that's a recipe for policy inaction over the coming two years before the next presidential elections, meaning that the Fed will have to play an even more crucial role in sustaining the U.S. economy.
"The burden to stimulate the U.S. economy currently falls heavily on the Fed with U.S. politics in a state of paralysis heading into the mid-term elections," said Lee Hardman, an analyst at the Bank of Tokyo-Mitsubishi UFJ.
The Fed is expected to announce that it is to enact another round of quantitative easing, whereby it buys more financial assets to increase the supply of money in the economy and drive down rates on mortgages, corporate loans and other debt in the ultimate hope of boosting economic activity and supporting prices.
The question is how much it is planning to splash out on this, with most analysts expecting the central bank to announce monthly purchases of around $100 billion a month over the next six months.
Anything more than that could well hurt the dollar even more — though the prospect of more dollars in the financial system has been a boon to stocks over the last few weeks, the dollar has tanked.
By late morning London time, the euro was 0.1 percent lower on the day at $1.3953 while the dollar was 0.2 percent ahead at 80.44 yen, having earlier fallen to a fresh 15-year low of 80.25 yen.
Earlier, most Asian markets advanced, with Chinese shares rebounding on the back of the strong manufacturing data — the benchmark Shanghai Composite Index climbed 2.5 percent, or 75.19 points, to 3,054.02 while the Shenzhen Composite Index of China's smaller, second market jumped 2.9 percent to 1,341.84.
Hong Kong's Hang Seng index jumped 2.4 percent to 23,652.94 and South Korea's Kospi rose 1.7 percent to 1,914.74. Australia's S&P/ASX 200 gained 0.8 percent to 4,698.50.
Japan's benchmark Nikkei 225 stock average bucked the trend, falling 0.5 percent to close at 9,154.72 as the yen's continued rise against the dollar sapped confidence in the country's potential to export its way to growth.
Benchmark crude for December delivery was up 71 cents at $82.14 a barrel in electronic trading on the New York Mercantile Exchange.
___
Associated Press Writer Pamela Sampson in Bangkok contributed to this report.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Oil rises to near $82 as China manufacturing grows
AP - 15 mins ago
BANGKOK (AP) — Oil prices rose to near $82 a barrel Monday in Asia as regional stock markets jumped on news that growth in Chinese manufacturing picked up pace in October.
Benchmark crude for December delivery was up 41 cents at $81.84 a barrel at late afternoon Bangkok time in electronic trading on the New York Mercantile Exchange. The contract fell 75 cents to settle at $81.43 on Friday.
The pickup in Chinese manufacturing suggests that China's economic recovery remains on track, bolstering expectations that its demand for crude will offset weakness in advanced economies.
The figures boosted Asian stock markets which were mostly higher Monday.
Crude has been stuck in a range of about $80 to $83 a barrel for the past week, as traders and investors wait for the Federal Reserve to say what it will do to stimulate the U.S. economy.
Expectations the Fed will Wednesday announce a Treasury bond buying program to pump money into the ailing economy were reinforced by lackluster third quarter U.S. growth figures released last week.
In other energy trading on the Nymex, heating oil was up 1 cent to $2.25 a gallon. Gasoline dropped 2 cents to $2.06 a gallon and natural gas added 9 cents to $4.12 per 1,000 cubic feet.
Brent crude was up 10 cents at $83.25 a barrel on the ICE futures exchange in London.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Chinese manufacturing gains speed in October
ELAINE KURTENBACH - AP - 16 mins ago
SHANGHAI (AP) — Chinese manufacturing accelerated in October with spending on infrastructure projects spurring a jump in new equipment orders even as export demand remained subdued, surveys showed Monday.
The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers index, or PMI, rose to 54.7 in October from 53.8 September and 51.7 in August. Monthly readings have stayed above 50, the benchmark for expansion, for 20 straight months, it said.
China's economic growth slowed to 9.6 percent in July-September over a year earlier, down from the previous quarter's 10.3 percent. But the survey, an indicator of future trends, suggests the economy is on track for continued stable growth, the federation said in a notice on its website.
The improved manufacturing figures propelled Asian stock markets higher with the Shanghai Composite up 2 percent and South Korea's Kospi ahead by 1. percent.
The federation said relatively robust reading for October showed strong growth in new orders for equipment, including transportation and general equipment thanks to strong stimulus spending.
China's spending on new projects rose 24.5 percent in the first nine months of the year to 13.9 trillion yuan ($2.1 trillion), more than twice the amount of total investment in new projects in the same periods of 2007-2008.
A push to build more "affordable housing" in line with government policy, and other moves to crack down on hoarding of land prompted many developers to begin construction in the third quarter.
The jump in spending prompted the central bank to raise key interest rates last week to help counter inflation.
A competing index, the HSBC China Manufacturing PMI — a seasonally adjusted index designed to measure the performance of the manufacturing economy — rose to a six month high of 54.8 in October from 52.9 in September.
Total new orders outpaced new export orders, suggesting the expansion is mainly in the domestic market, it said.
The logistics federation's report said that industries with growing manufacturing activity in October included non-ferrous metals, printing, metal products and paper making, the federation said.
The survey's measure for new export orders remained flat, reflecting weakness in overseas economies.
"The long term may carry greater liquidity risks, with financial risks linked to huge loans coming due for U.S. banks," it said.
The surveys also warned of risks from surging prices for key raw materials, such as coal, cotton, grain, steel and rubber.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
China defends Africa, US investment amid tensions
JOE McDONALD - AP - Sun Oct 31, 11:46PM CDT
BEIJING (AP) — China defended its growing global commercial presence as a source of jobs in Africa and the United States amid tension over control of resources and Zambia's arrest of two Chinese managers who shot miners during a pay dispute.
Chinese companies invested $56.5 billion abroad last year and hired 438,000 workers, many of them in developing countries, Cabinet officials said at a news conference Monday.
"Chinese investors have brought not only capital and technology but also job opportunities and tax revenue," said a deputy commerce minister, Chen Jian.
Governments in Africa, Latin America and elsewhere have welcomed Chinese investment in mining and other industries. But in some economies, the Chinese presence has sparked tensions over control of oil, gas and other resources and complaints that local communities get too little of the economic rewards.
Beijing is encouraging Chinese companies, flush with cash from the country's economic boom, to expand abroad to diversify an economy driven by exports and investment. Investment has largely targeted oil, gas and mining but is expanding to manufacturing, real estate and other sectors.
In Zambia, two Chinese mine bosses were charged with attempted murder last month after shooting miners during a pay dispute. Chinese companies have invested nearly $3 billion in Zambia, a major copper producer, according to the Zambian government.
"Of course we have noticed some improper or bad behavior by some individual companies or people from China, but that is not the mainstream," Chen said.
Chen made no mention of Zambia or other specific incidents but said Chinese enterprises in Africa have built 60,000 kilometers of roads and 70 million square meters (700 million square feet) of housing since 2000.
"Chinese companies have built hospitals and schools and helped with personnel training," he said. "We have injected new vigor and vitality into local development."
Last year's outbound investment by Chinese companies was up from just $2.8 billion in 2003, according to Chen Lin, a Commerce Ministry official at the news conference.
In the United States, some proposed Chinese investments in oil and technology companies have spurred complaints about possible national security risks.
Chinese companies have shifted strategy, buying minority stakes in U.S. assets to reduce possible opposition. In 2005, state-owned Chinese oil company CNOOC Ltd. withdrew a bid to acquire Unocal Corp. after critics said the deal might threaten national security. Last month, CNOOC agreed to buy a one-third interest in a Texas oil and gas field in a deal worth up to $2.16 billion that prompted little public comment.
In Australia, some proposed Chinese investments in mining companies prompted objections from some lawmakers to what they deemed possible control of national assets by foreign state-owned companies.
Before last month's CNOOC deal, Chinese companies had invested $900 million in the United States, Chen said. He said state-owned China Ocean Shipping Group helped to preserve 9,000 jobs at the port of Boston by expanding operations there beginning in 2002. The port says ships operated by COSCO and its partners accounted for more than 50 percent of its traffic last year.
"We also hope the U.S. can further improve the investment environment and attract more Chinese companies so we can further promote our bilateral trade relations," Chen said.
___
Chinese Ministry of Commerce (in Chinese): www.mofcom.gov.cn
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Myanmar junta accused of slowing down Internet
AP - Mon Nov 01, 1:21AM CDT
YANGON, Myanmar (AP) — Myanmar authorities appear to be deliberately slowing down the Internet ahead of this weekend's election to make it more difficult for journalists to get images and news out of the country, rights groups said Monday.
The highly secretive military junta has not announced any Internet slowdown but analysts say it fits a pattern of new restrictions put in place ahead of Sunday's vote, including tighter controls over the movement of aid agencies and the suspension of a visa-on-arrival system for travelers. Other measures include barring entry to foreign journalists and outside observers.
The poll will be Myanmar's first elections in 20 years, but critics have widely dismissed it as designed to ensure the military retains power with a civilian facade.
The junta aggressively censors the Internet, routinely blocking politically sensitive websites. During a crackdown on pro-democracy protesters in 2007, the junta completely cut access to the Internet and shuttered many cybercafes.
"I'm not surprised to hear that the Internet is grinding to a halt," said David Mathieson, a Myanmar researcher with New York-based Human Rights Watch.
"It's a slow squeeze," Mathieson said. "They're slowing everything right down so the potential for negative information to come out is greatly reduced."
Hotels and travel agents that rely on the Internet for business say the slowdown started a week ago and many are advising travelers that Internet connections cannot be guaranteed for at least a week.
"The situation with the Internet connection is not stable. We don't know exactly how long it will last. We hope it will be better after this weekend," said a worker on the reservation desk at Yangon's upscale, colonial-era Strand Hotel. She spoke on condition of anonymity for fear of drawing unwanted attention from authorities.
The slowdown has been mentioned in Myanmar's tightly controlled media, none of which have blamed the government.
The "7 Day News" weekly reported in its Oct. 28 issue that the problem appeared to stem from a hacker attack and was affecting all Internet service providers.
The Committee to Protect Journalists issued a statement over the weekend that put Myanmar at the top of its list of the "10 Worst Countries to be a Blogger."
"It does appear that the authorities are deliberately slowing down Internet connections to make it more difficult for journalists to file images and video over the Internet ahead of the upcoming elections," the statement said.
___
Associated Press writer Jocelyn Gecker in Bangkok contributed to this report.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Malaysia, Australia hope for trade pact by 2011
SEAN YOONG - AP - Mon Nov 01, 1:31AM CDT
Australian Prime Minister Julia Gillard, right, inspects a guard of honor during a welcoming ceremony at Malaysian Prime Minister Najib Razak's office in Putrajaya, outside Kuala Lumpur, Malaysia,...
PUTRAJAYA, Malaysia (AP) — Malaysia and Australia expressed confidence Monday in completing a free trade deal next year while the Southeast Asian nation said it needed more information before taking a stance on Canberra's proposal to set up a regional detention center in East Timor to process refugees.
Australian Prime Minister Julia Gillard, who arrived Sunday night for a visit lasting less than 24 hours, said both countries have "a shared commitment" to successfully completing bilateral free trade talks.
She met with Deputy Prime Minister Muhyiddin Yassin in place of Prime Minister Najib Razak who is ill with suspected chicken pox and has had to cancel all appointments.
Gillard also called for a center to be set up in East Timor to process refugees and asylum seekers, mostly from Afghanistan and Sri Lanka, who in the past have used Malaysia as transit point before embarking on a long sea voyage to Australia. Canberra is seeking better policing in Malaysia to control the flow of refugees.
Muhyiddin said Malaysia needs more information before coming up with an official stance on the processing center. "We need to see how the mechanism can work," he said.
In July, East Timor's parliament rejected the proposed detention center but the country's leaders have said they are open to dialogue with the Australian government. Gillard has used her Asian tour to try to win support for the proposal.
Noting that Malaysia is Australia's third largest trade partner among Southeast Asian countries, Gillard said she and Muhyiddin discussed the prospect of concluding the free trade agreement.
"We will be continuing (the talks) with a view to the free trade agreement being concluded next year," she told a joint news conference.
Malaysia already has a free trade pact with New Zealand, which came into force on Aug. 1. It expects to seal one with India next year.
Muhyiddin told the news conference that bilateral trade with Australia jumped 20.5 percent to $7 billion in January through August this year from $5.4 billion in the same period last year.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Cowherds discovering that ticks are for the birds
ERIC NAKI - AP - Mon Nov 01, 2:18AM CDT
In this Thursday, Oct. 7, 2010 picture, a red-billed oxpecker collects fur from a donkey to build a nest inside an enclosure at the Mokopane Biodiversity Conservation Centre in Mokopane, South...
MOKOPANE, South Africa (AP) — South African cowherds are discovering that when it comes to debugging their cattle, nature knows best.
Generations of cattle owners who dipped their livestock in pesticides ended up killing not only the ticks that feast on them, but also the red-billed oxpeckers that eat the ticks. Now environmentalists want to cut out the pesticides, hand the job back to the birds, and in the process save them from extinction.
"We are repairing the damage done 100 years ago and (putting) nature the way it should be," says Arnaud Le Roux, whose Endangered Wildlife Trust is overseeing Operation Oxpecker.
The birds are being collected at a research facility in the north of the country and will be distributed to cattle farmers and private game park owners nationwide.
The Mpongo Game Park in southeastern South Africa has received 20 birds, and Mtshutshisi Nomlenze is delighted.
"These birds are good. We don't have to dip the cattle anymore ... The dip is very expensive," said Nomlenze, who tends his employers' cattle and his own animals.
The 64-year-old told The Associated Press he remembers seeing oxpeckers as a young man, but they disappeared as he grew older.
The bird is famous for its bright red bill, yellow-ringed eyes and voracious appetite for ticks. An oxpecker can eat 13,000 of them in a day, and the meals are everywhere — on antelope, horses, cattle, buffalo, rhino, lion, elephant and leopard. The ticks carry a host of illnesses including red water disease, a common killer of cattle, but are harmless to oxpeckers.
The spectacle of animals grazing peacefully while birds peck away at them undisturbed is a familiar one in South Africa. The birds also clean wounds, warn animals of lurking predators or advancing storms, and besides food, they get bits of fur to pad their nests.
Le Roux says the reintroduction of oxpeckers is gaining momentum. In areas where they are being distributed, farmers are encouraged to stop using pesticide dips — or at least the more toxic varieties — and let the birds do the job.
Peter Oberem received birds three years ago and says he has seen a sharp drop in ticks at his game farm in northern South Africa.
"We had calls from game farmers from as far away as 50 kilometers (30 miles) thanking us for bringing the birds," he said.
Oberem also works for a dip manufacturer, AfriVet, which has an oxpecker as its logo and sells dips that birds can safely ingest.
"We distributed leaflets and explained the importance of the birds to the farmers. We went around teaching them which dips to use to avoid killing the birds. The farmers here are very, very happy," says Oberem.
Sandile Naki, 18, roamed his village hunting oxpeckers with a slingshot when he was younger. Now he's a preservationist.
"Conservation people asked us to take care of these birds and report when we see their eggs," says Sandile.
Seniors at a high school in Timbavati Game reserve in northern South Africa are also helping by educating schoolmates and villages not to interfere with oxpeckers and their eggs, Le Roux said.
"I am looking forward to the day when these birds are back in the wild without us having to distribute them in this way. That day I'll be sleeping nicely," he says.
___
On the Net:
Endangered Wildlife Trust: http://www.ewt.org.za
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Iraqi MPs get handsome pay for little work
BARBARA SURK - AP - 2 hrs 58 mins ago
FILE - In this June 14, 2010 file photo a member of the Iraqi Parliament makes a phone call before a session of Iraqi Parliament in Baghdad, Iraq. Iraqi lawmakers have collected their $90,000...
BAGHDAD (AP) — Iraqi lawmakers have collected their $90,000 stipend, they're raking in $22,500 a month in salaries and allowances, and they're spending free nights in Baghdad's finest hotel — and they've only worked about 20 minutes this year, without passing a single law.
As the parliament prepares to hold what will be only its second session since the inconclusive election in March, lawmakers' lavish salaries and privileges are deepening resentment among Iraqis struggling to make ends meet and frustrated with the political deadlock.
The Shiite religious leadership — always tuned into sentiment among the Iraqi religious majority — has warned politicians against living the high life while ordinary people lack basic services, such as electricity and water.
In contrast, a mid-level government employee makes around $600 a month.
In a mosque sermon Friday, an aide to Iraq's top Shiite cleric urged parliament to lower their salaries when they next meet.
"It's reasonable to request the lawmakers' salaries do not reach a lavish level," Ahmed al-Safi said. "This is a very important issue ... I do not know why they keep turning a blind eye to it."
Since June, when the lawmakers first met for 20 minutes, Iraq's second elected parliament since the 2003 overthrow of Saddam Hussein's regime has failed to convene. Sharp divisions among political blocs have prevented the formation of a new government, and not a single law has been debated, much less passed.
Still, the 325 lawmakers collect their cash and perks.
"Iraqi politics has turned into business," said Wael Abdul-Latif, an independent Shiite politician and former lawmaker from Iraq's second largest city of Basra. "Many of the lawmakers would not even have bothered to run for the parliament" if salaries were not so high, he said.
The lawmakers' June meeting consisted of a Quranic reading, the playing of the national anthem and the swearing-in of new members. It produced one decision: to leave the session open but unattended — a technicality to allow more time to choose a new leadership since the election failed to give any party a ruling majority.
After the session, lawmakers collected the $90,000 stipend they are allotted for their four-year term to cover personal expenses.
Lawmakers are preparing to hold a second session, likely in the coming week, only because the Supreme Court last week ordered them to return to work.
Meanwhile, Iraqis who voted in large numbers in hope of strengthening their nascent democracy after years of authoritarian rule, war and sectarian violence have grown bitter at the politicians they chose to represent their interests.
"Instead of working hard and doing a good job, they are enjoying a paid vacation," said Jalal Mohammed, a retired clerk for the administrative council in the southern city of Basra. "I think the parliament members should only be paid if they do something useful for their country."
An Iraqi lawmaker's basic monthly salary is $10,000 — just $4,500 short of that of rank-and-file members of the U.S. Congress. In addition, Iraqi MPs get a $12,500 monthly allowance for housing and security arrangements, for a combined total of $22,500.
Lawmakers pay only six percent of their $10,000 base salary in taxes. They also get to spend nights free at Baghdad's Rasheed Hotel in the relatively safe environment of the Green Zone, regardless of whether parliament is in session. They collect a $600 per diem when traveling inside or out of Iraq.
Once out of office, they get 80 percent of their salary monthly for life, and for eight years they can keep the diplomatic passports that they — and often their families — are issued.
In contrast, a high school teacher or a doctor in a public hospital each earns about $650 a month. A Baghdad taxi driver can make up to $700 in a good month. In the government — Iraq's biggest employer — a mid-level employee's basic salary rarely exceeds $600.
Lawmakers justify high salaries and benefits saying they risk their lives participating in the political process.
"We are exposed to violent incidents in our houses, on the streets, and even in the parliament," said Sheik Haidar al-Jorani, a Basra lawmaker with the prime minister's State of Law party. He said he had to repair his family home in Basra after it was damaged by a nearby bomb blast.
Moving around the country safely and frequent trips abroad cost money, as do the formal receptions and parties lawmakers are expected to hold, he added.
But many Iraqis feel parliament members just want their posts out of greed, not an urge to serve the country.
The disconnect in pay makes lower-level government employees feel justified in taking bribes, said Judge Raheem Hassan al-Uqailee, president of the independent Commission of Integrity, which fights government corruption.
The absence of a law regulating salaries leaves lawmakers to determine their own paychecks, he said. "We consider this legalized corruption."
Aliyah Nisayef, an MP who sits on the legislature's 13-member Anti-Corruption Committee, said she and a group of other lawmakers tried several times during the previous parliament to pass a law cutting salaries and perks.
Resistance was so fierce that not only did the bill fail to pass, but lawmakers who supported it received death threats, Nisayef said.
"Corruption is an epidemic," Nisayef said. "We are no match for them." She would not detail her own salary, but noted some lawmakers give large amounts to charity.
Recently, the Iraqi press reported that Prime Minister Nouri al-Maliki awarded cabinet ministers with plots of land in prime Baghdad districts. Far from criticizing him for the blatant patronage, lawmakers publicly demanded the premier put them on the distribution list.
"How can we hold others accountable if we as legislators have no integrity?" Nisayef said.
___
Associated Press Writers Sameer N. Yacoub and Sinan Salaheddin contributed to this report.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
TNT Post 3Q profit falls 24 percent
AP - 2 hrs 57 mins ago
AMSTERDAM (AP) — TNT NV, the Dutch-based postal and express delivery company, reported a fall in third-quarter earnings Monday as margins were squeezed by higher costs.
The company said its net profit was euro75 million ($105 million), down from euro99 million. Revenues rose 11 percent to euro2.77 billion.
CEO Peter Bakker cited a "general recovery of activity levels held back by a difficult pricing environment," and said plans to split express and mail operations are on track for January.
The company's accounting showed rising materials, salary and external contractor costs.
TNT's express arm showed a rise in volumes and stable margins, with operating income of euro78 million, up 12 percent, TNT said.
The mail arm, larger in terms of sales, has seen falling margins due to changes in European law allowing competition in mail delivery, and as more people use e-mail and other ways of transmitting messages electronically. Higher pension costs also hurt profits.
The mail arm's operating income was down 31 percent to euro78 million.
The mail arm is also locked in a dispute with its unions over plans for 11,000 job cuts. Unions had initially voted to accept job cuts in exchange for salary raises for the remaining workers but were shocked at the size of the company's plans.
At issue are 4,500 forced layoffs. Last week unions rejected a management proposal to reduce that number to 3,100 and said they would strike by Nov. 8 if a deal is not reached.
TNT employs 117,000 people, including 78,200 at its express arm and 37,800 at its mail arm.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Ryanair 1H profits rise 17 pct as fares rise 12 pc
AP - Mon Nov 01, 2:54AM CDT
DUBLIN (AP) — Ryanair says its first-half net profit has risen 17 percent to euro451.9 million ($628 million) as the budget airline raises its average ticket prices and grows its business along the Mediterranean.
The airline said Monday its average fare rose 12 percent to euro44 ($61) versus the same April-September period a year ago as increased operations in Spain, Portugal and Malta paid off. The fare figure excludes Ryanair's industry-leading practice of adding hefty extra charges for luggage and credit-card use.
Sales rose 23 percent to euro2.18 billion ($3 billion), the number of passengers rose 10 percent to 40.1 million, and Ryanair's cash reserves rose 7.5 percent to euro3.03 billion ($4.2 billion).
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Euro rises vs US dollar
AP - Mon Nov 01, 2:58AM CDT
BERLIN (AP) — The euro is higher against the U.S. dollar to start the week as traders await a raft of news from Washington.
The 16-nation euro rose to $1.3969 in morning European trading Monday, up from $1.3897 late Friday in New York.
The British pound is up slightly to $1.6052 from $1.6021 on Friday, while the dollar nudged up to buy 80.50 Japanese yen from 80.49 in New York.
In addition to this week's American midterm elections, traders are looking ahead to the Federal Open Market Committee's midweek meeting for details on possible new stimulus measures, and unemployment statistics from Washington on Friday.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Emirates airline 1st-half profit soars to $925M
ADAM SCHRECK - AP - 3 mins ago
DUBAI, United Arab Emirates (AP) — Emirates, the Mideast's biggest airline, more than quadrupled its fiscal first-half profit to $925 million as it packed more passengers and cargo onto fuller planes.
The Dubai state-run airline, an increasingly potent long-haul carrier, said Monday the gains reflect a "positive shift" in an airline industry that has struggled with weak demand amid the economic downturn.
Emirates said it carried 15.5 million passengers in the six months through September. While some of the growth came as the fast-growing airline added planes and routes, Emirates also filled more seats, averaging occupancy of 81.2 percent — a first-half record.
Its chairman and CEO, Sheik Ahmed bin Saeed Al Maktoum, called the results "incredibly robust." He said Emirates is committed to growing further and has the resources to do so.
"Our healthy financial position enables us to successfully meet all of our financial commitments and raise financing for future aircraft deliveries," Sheik Ahmed said in a statement. "Our strong position today is reflective of our ability to adapt, returning us to a vigorous period of growth."
Emirates posted a 19.4 percent jump in passenger traffic during the first half, based on the standard industry metric of revenue passenger kilometers flown.
The carrier ranks as the world's busiest hauler of international passengers according to that measure. That puts it just ahead of German carrier Lufthansa, according to the International Air Transport Association, which counts business partners Air France and KLM as separate airlines.
Emirates continued to incorporate new planes into its fleet, taking delivery of five double-decker Airbus A380s and one Boeing 777 during the half, helping drive capacity up 13.9 percent.
More planes are on the way. Emirates expects to receive two more by the end of March, and added 62 additional aircraft to its already weighty order book in the first part of this year. It operates more 777s than any other airline, and has the world's largest order — a whopping 90 planes — for the A380.
Emirates launched passenger routes to Amsterdam, Prague, Madrid and Dakar, Senegal, as well as freighter flights to Almaty, Kazakstan during the first half. It also said it began flying cargo to Bagram, the main U.S. air base in Afghanistan.
Cargo operations also increased during the first half, jumping 23.7 percent to 897,000 metric tonnes (989,000 tons).
Emirates earned $205 million in the first half of last year.
The carrier benefits from Dubai's location as a hub between Europe, Africa and Asia. Its critics accuse it of receiving unfair subsidies from the government — charges its management repeatedly deny.
The airline did not make executives available for interview Monday.
Its earnings were released just days after a parcel bomb shipped from Yemen and bound for the U.S. was discovered at Dubai's main airport, Emirates' home base. That package, part of a FedEx shipment, arrived in Dubai after traveling on two passenger planes operated by its Gulf rival Qatar Airways.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Ryanair 1H profits rise 17 pct as fares rise 12 pc
SHAWN POGATCHNIK - AP - 2 hrs 8 mins ago
DUBLIN (AP) — Ryanair said Monday its first-half net profit rose 17 percent to €451.9 million ($628 million) as the budget airline raised its ticket prices and grew its business in the Mediterranean.
The airline said its average fare rose 12 percent to €44 ($61) from the same April-September period a year ago as increased operations in Spain, Portugal and Malta paid off. The fare figure excludes Ryanair's industry-leading practice of adding hefty extra charges for luggage and credit-card use.
Sales rose 23 percent to €2.18 billion ($3 billion), the number of passengers rose 10 percent to 40.1 million, and Ryanair's cash reserves rose 7.5 percent to €3.03 billion ($4.2 billion).
The airline cautioned that it expects to suffer net losses in the October-March period of €50 million to €70 million, reflecting reduced business on routes dependent on summer tourist traffic. Ryanair, which previously guided second-half losses of up to €100 million, tries to offset winter losses by shifting aircraft seasonally to operations in Spain.
Chief executive Michael O'Leary said Ryanair's earnings would have been even better if not for European authorities.
About 9,400 Ryanair flights were canceled in April and May because of European restrictions amid volcanic ash fears. More than 2,000 other Ryanair flights have been canceled and 12,000 delayed this summer by air-traffic control strikes in France, Belgium and Spain.
O'Leary said the European Union must reform its laws permitting air-traffic controllers to strike. He said the controllers' unions and European governments should be required to pay compensation to stranded passengers, not airlines.
"These highly paid protected bureaucrats have now disrupted more passengers than the Icelandic volcano and still the EU sits idly by and does nothing," O'Leary said.
Ryanair also greatly reduced its total cost for spring's ash-related losses. The airline initially said it would lose €50 million from lost business and EU-ordered compensation payments to stranded customers, but on Monday said its total loss might not exceed €32 million. It attributed this to the airline's lower-than-expected payouts on customers' claims for hotel and meal bills.
O'Leary's deputy chief executive, Michael Cawley, told Irish broadcasters RTE that Ryanair still expects to take over its Irish rival, Aer Lingus — whenever the cash-strapped government drops its opposition to a merger.
"Our appetite for acquiring Aer Lingus is well known," Cawley said. "But we're not going to make another offer unless the government approaches us on a voluntary basis to offer their shares to us."
Ryanair immediately pounced on Aer Lingus when the government floated the national airline on the Irish and British stock markets in 2006. But other major shareholders, chiefly the government and employee-controlled trusts, refused Ryanair's offer, and European Union regulators in 2007 ruled that a merger would create an effective Irish monopoly in short-haul air travel.
Ryanair today retains a 30 percent stake in Aer Lingus, while the government holds 25 percent. Last week Britain's Office of Fair Trading announced an investigation into whether Ryanair's status as the top shareholder influences Aer Lingus policies. Cawley said Ryanair is "puzzled and baffled" by the British investigation.
___
Online:
Ryanair earnings, http://bit.ly/d3evab
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Nissan shows tiny electric concept vehicle
YURI KAGEYAMA - AP - 9 mins ago
In this artist rendering released by Nissan Motor Co., a two-seater electric vehicle called "Nissan New Mobility CONCEPT," resembling a go-cart the Japanese automaker unveiled to the media during...
YOKOHAMA, Japan (AP) — Nissan showed a two-seater electric vehicle resembling a go-cart Monday that isn't ready for sale but spotlights the Japanese automaker's ambitions to be the leader in zero-emission cars.
Nissan Motor Co. is planning to produce 250,000 electric vehicles a year, starting with the Leaf electric car set for delivery in Japan and the U.S. in December, and next year in Europe.
Its alliance partner Renault SA of France is planning to produce another 250,000 electric vehicles a year.
The two companies together will produce 500,000 batteries for EVs a year, said Nissan, which makes batteries with Japanese electronics maker NEC Corp.
"We don't want EVs to be a niche product," Corporate Vice President Hideaki Watanabe told reporters at the company's headquarters southwest of Tokyo.
He said Nissan boasts 18 years of development experience in lithium-ion batteries, which will power the Leaf, and the company developed its first electric vehicle in 1947. Lithium-ion batteries are common in devices like laptops but will be relatively new for autos.
Then Watanabe zipped around — smoothly and silently as is characteristic of electric vehicles — Nissan's showroom in the tiny electric vehicle called "Nissan New Mobility CONCEPT."
It has a range of a 100 kilometers (62 miles), and maximum speed of 75 kilometers (47 miles) per hour. The EV system was developed by Renault, but the car's design was by Nissan.
Some analysts are skeptical about the practicality of electric vehicles, noting they will make up only a tiny fraction of the overall auto market for some years to come.
Watanabe did not give a price for the concept car. He said uses were still being studied, such as amusement parks and Yokohama city's green mobility projects.
Nissan said it is setting up charging stations for electric vehicles, and forging partnerships with governments and companies, now climbing to more than 80 around the world from 30 last year in an effort to make the move to electric successful.
"That shows how interest in zero-emissions is growing," said Watanabe.
Nissan dealers in Japan will be equipped with battery rechargers with the goal of having 2 million chargers, and an additional 5,000 that recharge quicker, around Japan by 2020, according to the manufacturer of the March subcompact and Infiniti luxury models.
Nissan has set up a company to recycle used EV batteries to reuse and repackage, as well as reselling for back-up and storage.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Why the economy's growth isn't easing unemployment
PAUL WISEMAN - AP - 48 mins ago
WASHINGTON — An economy growing 2 percent a year might be tolerable in normal times. Today, it's a near-disaster.
A growth rate of 5 percent or higher is needed to put a major dent in the nation's 9.6 percent unemployment rate. Two reasons why that's unlikely well into next year and maybe beyond:
— Construction — both residential and commercial — collapsed last year. And it isn't expected to regain its strength for years. Typically after recessions end, construction booms and powers a new economic expansion.
— The recession that began in December 2007, after the housing bubble burst, became the Great Recession once the financial crisis erupted in September 2008. Economic recoveries that follow a financial crisis are typically long-lasting. Banks usually take years to resume lending normally.
"To really get 'Morning in America' and get people feeling like jobs are really coming back, I would want to see something close to 5 percent" annual economic growth, says economist Josh Bivens of the Economic Policy Institute, referring to the iconic 1984 Reagan re-election ad.
That isn't likely to happen soon. Macroeconomic Advisers doesn't expect the labor market to recover all the lost jobs until at least 2013. Other economists say it could be 2018 or longer.
The government reported Friday that the nation's gross domestic product, the broadest measure of goods and services produced, grew at an annual rate of 2 percent from July through September. GDP had risen at an annual rate of 1.7 percent in the second quarter.
Economists say it takes GDP growth of 3 percent a year just to keep the unemployment rate from rising as more Americans reach working age and immigrants enter the country. It would take 2 additional percentage points of growth for a year to reduce the unemployment rate by 1 point.
Recoveries from deep recessions are usually robust. Once the recession of 1981-82 finally ended, the economy boomed in 1983 and 1984. During one stretch, GDP grew at an annual rate of 8 percent or more for four straight quarters. The economy generated 3.5 million jobs in 1983 and 3.9 million in 1984. The unemployment rate fell by a third in just two years, from 10.8 percent to 7.2 percent.
By contrast, since the Great Recession officially ended in June 2009, the economy has lost a net 439,000 jobs. The unemployment rate was 9.5 percent in June last year. Now, it's 9.6 percent.
The 1981-82 recession started largely because former Federal Reserve Chairman Paul Volcker raised short-term interest rates as high as 20 percent in 1980 to purge double-digit inflation from the economy. Restarting the economic engine was simple: Volcker cut short-term rates in half within a year.
Low rates worked their magic and fired up the housing market. That created jobs for construction workers, expanded the market for building materials and spurred consumer demand for appliances and furniture. Emboldened, businesses borrowed, invested and hired.
But cutting interest rates is no longer an option. The financial crisis was so severe in the fall of 2008 that the Fed slashed short-term rates to zero by December to prevent another depression.
Long-term rates have fallen sharply, too. Today, consumers and businesses are unable or unwilling to take on more debt, and many banks are reluctant to lend. Bank lending has dropped in five of the past six quarters.
And the housing market, normally a driver of job growth, is still reeling. The National Association of Home Builders expects builders to put up 605,000 houses and apartments this year. That's down more than 70 percent from the 2.1 million in 2005 at the peak of the housing boom.
"We can hope for strong growth, but it is not happening," says economist Joel Naroff of Naroff Economic Advisors. "A robust recovery was never possible because the problems in the housing and financial sectors were not going to disappear overnight."
Weakness in the financial system slowed recoveries from the previous two recessions as well. The 1990-91 recession was caused by a credit crunch that followed the collapse of the savings and loan industry and of commercial banks in Texas and New England. The recovery that followed remained erratic until 1996.
A stock market collapse, caused by the bursting of a technology bubble, triggered a mild recession in 2001. That recovery started even more slowly than the 2009-2010 version. And it didn't replace all the jobs that had been lost for nearly four years.
The 2008 financial crisis was the most destructive of all, which helps explain why the economy has remained so weak since the recession ended.
"These last three recessions are associated with financial market distress, which kept traditional levers from working," Bivens says.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Allied Irish shareholders debate sale of M&T stake
AP - 43 mins ago
DUBLIN (AP) — Shareholders of Allied Irish Banks are debating whether to sell their 22.4 percent stake in New York's M&T Bank.
Monday's extraordinary general meeting is expected to approve the M&T sale through a public offering at $77.50 (euro55.75) a share.
Analysts estimate the deal would net Allied Irish euro900 million ($1.25 billion).
Allied Irish is trying to drum up euro10.4 billion ($14.5 billion) to meet regulators' end-of-year requirements. It's expected to fall billions short and face nationalization by Ireland's government, which has an 18.6 percent stake.
Allied Irish sold Bank Zachodni of Poland to Spain's Banc Santander in a September deal netting the Dublin bank euro2.5 billion. It plans a euro5.4 billion sale of new shares expected to be acquired primarily by the government.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Humana's 3rd-quarter earnings rise 30 percent
AP - 35 mins ago
Related Stocks
HUM - Humana Inc.
Sym Last Chg Pct
HUM 58.29 +0.45 +0.78%
UNH 36.05 -0.20 -0.55%
NEW YORK (AP) — Humana Inc.'s third-quarter net income climbed 30 percent partly on higher than expected medicals claims as Medicare Advantage enrollment rose.
The health insurer also boosted its full-year earnings guidance on Monday.
Humana is the second largest provider of Medicare Advantage plans, trailing only UnitedHealth Group Inc.
Humana earned $393.2 million, or $2.32 per share, for the three months ended Sept. 30. That's up from $301.5 million, or $1.78 per share, a year earlier.
Revenue rose 9 percent to $8.42 billion.
Analyst forecast earnings of $1.66 per share on revenue of $8.46 billion.
Humana now expects 2010 earnings between $6.40 and $6.50 per share. Analysts predict $6.42 per share.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Dutch watchdog investigates mortgage rates
AP - 26 mins ago
AMSTERDAM (AP) — The Netherlands' market regulator NMa has started an investigation of banking margins on mortgages, which have been fatter than in neighboring countries since mid-2009.
NMa director Pieter Kalbfleisch says there could be explanations other than price-fixing, but his agency would investigate due to "public commotion."
The Dutch mortgage market is dominated by three large players: Rabobank, a cooperative, ING NV, which survived the financial crisis with a state bailout, and ABN Amro, which was nationalized as its previous owner was on the brink of insolvency.
Banks' profit margins have increased by about 0.33 of a percentage point to 0.96 percent since July 2009, the NMa says. The Dutch have euro590 billion ($825 billion) in outstanding mortgage debt.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Stock futures climb ahead of manufacturing report
STEPHEN BERNARD - AP - 6 mins ago
FILE - In this file photo taken Oct. 27, 2010, traders Michael Urkonis, left, and Jonathan Corpina work on the floor of the New York Stock Exchange. (AP Photo/Richard Drew, file)
NEW YORK (AP) — Stock futures rose Monday as traders were hopeful a report on manufacturing activity in the U.S. would mirror similar data from China that showed the sector expanded there last month.
Futures also climbed ahead of midterm elections and the Federal Reserve's meeting this week where the central bank is expected to announce a new economic stimulus program.
Economists polled by Thomson Reuters expect the Institute for Supply Management's manufacturing index slipped to 54 in October from 54.4 a month earlier. Even with the slight slowdown, any reading above 50 indicates the sector is expanding. Manufacturing has shown the most consistent growth during the year as a recovery remains sluggish.
A strong report on manufacturing out of China sent shares in that country sharply higher Monday. Growth accelerated in China as spending on infrastructure led to an increase in orders for new equipment.
Ahead of the opening bell, Dow Jones industrial average futures rose 49, or 0.4 percent, to 11,115. Standard & Poor's 500 index futures rose 6.50, or 0.6 percent, to 1,186.20, while Nasdaq 100 index futures rose 8.00, or 0.4 percent, to 2,130.00.
Hong Kong's Hang Seng index rose 2.4 percent, while the Shanghai Composite Index climbed 2.5 percent.
Any movement tied to Monday's manufacturing report could be fleeting though as traders quickly turn their attention to Tuesday's midterm elections and the Fed's meeting, which wraps up Wednesday.
Traders have been betting that Republicans will take control of at least the House of Representatives. That could slow President Barack Obama's agenda, which many analysts have said is not favorable to businesses.
Investors have also been assuming the Fed will launch a new Treasury-buying program to help stimulate the economy. Stocks rose for much of October because investors expect the Fed will announce as early as Wednesday that it plans to buy government debt to drive interest rates lower in an effort to spark spending and lending.
Only in the last few days has the market rally trailed off amid questions about exactly how much the Fed will spend to buy bonds. The Dow rose 3.1 percent in October, including a 0.1 percent drop last week.
Lower interest rates weaken returns on debt, which would make stocks and commodities more attractive investments since their potential return would be significantly higher.
Bond prices traded in a narrow range Monday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was unchanged at 2.60 percent compared with late Friday.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Manufacturing survey likely to show growth
AP - 12 mins ago
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F - Ford Motor Credit Company
Sym Last Chg Pct
F 14.13 -0.09 -0.63%
MTLQQ 0.2800 -0.0150 -5.08%
WASHINGTON (AP) — The manufacturing sector likely grew in October for the 15th straight month, but at the slowest pace in almost a year.
Economists expect that the Institute for Supply Management's index of manufacturing activity will drop to 54, according to a survey from Thomson Reuters, from 54.4 in September. Any reading above 50 indicates the sector is growing. The ISM will issue the report at 10 a.m. Monday.
Auto makers and other manufacturers led the economy out of the recession, as companies replenished their stockpiles of goods, which had been cut to the bone during the recession. But for manufacturers to keep boosting output, consumers will have to spend more.
That would encourage companies to keep buying goods, even after their inventories are rebuilt.
The economy grew by a weak 2 percent annual rate in the third quarter, the government said Friday. Inventory provided about 1.4 percentage points of that growth. That support from inventories won't likely last much longer.
Still, consumers did increase their spending by 2.6 percent in the July-September quarter, the fastest pace in almost four years.
The ISM's manufacturing index rose to 60.4 in April, the highest level since June 2004. The index had bottomed out at 32.5 in December 2008, the lowest since June 1980.
The ISM surveys purchasing managers at about 350 companies around the country to compile the index.
Auto makers have recently reported healthy growth. Ford Motor Co. said on Tuesday that it made $1.7 billion in profit in the third quarter, a jump of 70 percent from a year earlier. The company has said it will add 500 new workers at a plant in Chicago that makes the Ford Explorer SUV, its first major hiring in years.
General Motors Co. has said it will add a new small car to its Cadillac lineup. It plans to spend $190 million to upgrade a factory in Michigan to build the car, and will add 600 jobs.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
GE to Order 'Tens of Thousands' of Electric Vehicles
General Electric (NYSE: GE) will order "tens of thousands" of electric-powered vehicles in about a week, CEO Jeffrey Immelt said.
At a speech in London yesterday, Immelt said the company will place the "largest order in history" in the next week, although he did not confirm an exact figure or manufacturer.
Under the initiative, about half of GE's sales force would drive electric cars, leading to estimates that the company could purchase up to 23,000 vehicles -- a total that a single manufacturer would probably struggle to meet.
Several automakers are getting ready to sell EVs over the next 18 months. These include Nissan's (OTC BB: NSANY.PK) Leaf, Chevy's Volt, and Ford's (NYSE: F) Transit Connect delivery van and Focus.
Any boost in EV sales would add to GE's bottom line as it expands its clean-energy technology, including car chargers, said Gary Sheffer, a GE spokesman.
In September, GE and Better Place announced a partnership to accelerate the global deployment of an EV infrastructure, with one goal being to convert corporate fleets to electric vehicles. The partnership leverages GE's technology portfolio, smart-grid expertise, and WattStation electric-vehicle charger with Better Place's EV services and infrastructure solutions.
GE is investing $10 billion over the next five years in clean energy across its business lines, including power-transmission software and smart-grid technologies.
Is Ensco a Cash Machine?
By Seth Jayson (TMF Bent) | More Articles
October 31, 2010 | Comments (0)
Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.
Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash-flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company or merely disguised a cash gusher with a pretty headline.
Calling all cash flows
When you're trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow (FCF) once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That brings us to Ensco (NYSE: ESV), whose recent revenue and earnings follow.
Source: Capital IQ, a division of Standard & Poor's. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.
Over the past 12 months, Ensco burned $111.5 million in cash on net income of $655.3 million. That means it went through all its revenue and more. That doesn't sound so great. Still, it always pays to compare that figure with those of sector and industry peers and competitors, to see how your company stacks up.
Company
TTM Revenue
TTM FCF
TTM FCF Margin
Ensco $1,764 ($112) (6.3%)
Transocean (NYSE: RIG) $10,663 $2,946 27.6%
Noble (NYSE: NE) $3,104 $573 18.5%
Hercules Offshore (Nasdaq: HERO) $662 $18 2.7%
Source: Capital IQ, a division of Standard & Poor's. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. TTM = trailing 12 months.
All cash is not equal
Unfortunately, the cash-flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure the cash comes from high-quality sources. Those sources need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement, such as major capital expenditures.
For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses, such as depreciation, is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; it's good to see, but it's ordinary in recessionary times, and you can increase collections only so much.
So how does the cash flow at Ensco look? Take a peek at the following chart, which flags questionable cash-flow sources with a red bar.
Source: Capital IQ, a division of Standard & Poor's. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.
When I say "questionable cash-flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among other things. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.
With questionable cash flows amounting to only 0.2% of operating cash flow, Ensco's cash flows look clean. Within the questionable cash-flow figure plotted in the TTM period above, stock-based compensation and related tax benefits provided the biggest boost, at 5.5% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed all of cash from operations, and more besides.
A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.
8 Hardware Stocks Near 52-Week Highs
I love bargain stocks, especially when they're hitting 52-week lows. Still, it can be instructive to also look at stocks that are riding high.
For one thing, they can make good sell candidates. More optimistically, we may be able to find a few companies that can continue their upward climbs.
In this series, I'll be searching industry by industry for stocks reaching 52-week highs. That way, we'll be able to make a few quick comparisons among semi-related companies.
There are 24 industry groups as defined by the Global Industry Classification Standard (GICS). Technology hardware and equipment is one of them.
Below are the top eight companies in this space, by market cap, that are within spitting distance of their 52-week highs.
Company
Recent Price
52-Week Low
52-Week High
P/E Ratio (Trailing)
Apple (Nasdaq: AAPL) $305.24
$185.60
$319.00
20.0
Tyco International $38.84
$32.90
$40.61
17.4
NetApp (Nasdaq: NTAP) $51.90
$26.90
$52.71
38.4
Juniper Networks (NYSE: JNPR) $32.02
$22.30
$32.84
38.1
Xerox (NYSE: XRX) $11.60
$7.32
$11.73
23.2
Tyco Electronics (NYSE: TEL) $31.71
$21.00
$32.98
16.1
Agilent Technologies (NYSE: A) $34.90
$24.60
$37.43
29.1
Amphenol (NYSE: APH) $50.04
$37.80
$50.44
19.1
Sources: Capital IQ, a division of Standard & Poor's; and Yahoo! Finance.
I've asked recently whether Apple is a bubble. The short answer is that I don't believe it is. Its earnings and potential growth are tempting me to jump in, even at these seemingly stratospheric prices.
The long answer is … well, just read my article.
Or, check out the list of hardware stocks near 52-week lows.
How Expensive Is Autoliv by the Numbers?
By Anand Chokkavelu, CFA | More Articles
October 31, 2010 | Comments (0)
Numbers can lie -- yet they're the best first step in determining whether a stock is a buy. In this series, we use some carefully chosen metrics to size up a stock's true value based on the following clues:
•The current price multiples.
•The consistency of past earnings and cash flow.
•The amount of growth we can expect.
Let's see what those numbers can tell us about how cheap auto safety systems maker Autoliv (NYSE: ALV) might be.
The current price multiples
First, we'll look at most investors' favorite metric: the price-to-earnings ratio. It divides the company's share price by its earnings per share (EPS). The lower the P/E, the better.
Then we'll take things up a notch with a more advanced metric: enterprise value to unlevered free cash flow. This tool divides the company's enterprise value (basically, its market cap plus its debt, minus its cash) by its unlevered free cash flow (its free cash flow, adding back the interest payments on its debt). As with the P/E, the lower this number is, the better.
Analysts argue about which is more important -- earnings or cash flow. Who cares? A good buy ideally has low multiples on both.
Autoliv has a P/E ratio of 16.9 and an EV/FCF ratio of 10.1 over the trailing 12 months. If we stretch and compare current valuations with the five-year averages for earnings and free cash flow, we see that Autoliv has a P/E ratio of 24.4 and a five-year EV/FCF ratio of 16.6.
A one-year ratio of less than 10 for both metrics is ideal. For a five-year metric, less than 20 is ideal.
Autoliv has a mixed performance in hitting the ideal targets, but let's see how it stacks up against some of its competitors and industry mates.
Company
1-Year P/E
1-Year EV/FCF
5-Year P/E
5-Year EV/FCF
Autoliv 16.9
10.1
24.4
16.6
TRW Automotive Holdings (NYSE: TRW) 8.6
6.9
641.9
18.7
BorgWarner (NYSE: BWA) 26.9
29.7
39.7
36.3
Tenneco (NYSE: TEN) 35.0
14.6
NM
27.5
Source: Capital IQ, a division of Standard & Poor's; NM = not meaningful.
Numerically, we've seen how Autoliv‘s valuation rates on both an absolute and relative basis. Next, let's examine …
The consistency of past earnings and cash flow
An ideal company will be consistently strong in its earnings and cash-flow generation.
In the past five years, Autoliv's net-income margin has ranged from -1.9% to 5.6%. In that same time frame, unlevered free cash flow margin has ranged from 4.8% to 10.0%.
How do those figures compare with those of the company's peers? See for yourself:
Source: Capital IQ, a division of Standard & Poor's; margin ranges are combined.
In addition, over the past five years, Autoliv has tallied up four years of positive earnings and five years of positive free cash flow.
Next, let's figure out …
How much growth we can expect
Analysts tend to comically overstate their five-year growth estimates. If you accept them at face value, you will overpay for stocks. But even though you should definitely take the analysts' prognostications with a grain of salt, they can still provide a useful starting point when compared with similar numbers from a company's closest rivals.
Let's start by seeing what this company's done over the past five years. In that time period, Autoliv has put up past EPS growth rates of 2.8%. Meanwhile, Wall Street's analysts expect future growth rates of 105.9%.
Here's how Autoliv compares with its peers for trailing five-year growth:
Source: Capital IQ, a division of Standard & Poor's; EPS growth shown.
And here's how it measures up with regard to the growth analysts expect over the next five years:
Source: Capital IQ, a division of Standard & Poor's; estimates for EPS growth.
The bottom line
The pile of numbers we've plowed through has shown us how cheap shares of Autoliv are trading, how consistent its performance has been, and what kind of growth profile it has -- both on an absolute and a relative basis.
The more consistent a company's performance has been and the more growth we can expect, the more we should be willing to pay. We've gone well beyond looking at a 16.9 P/E ratio.
Autoliv's profitability has been stable except for one year. Don't be enamored with the analysts estimate of 105.9% growth going forward -- that's off a temporarily low base of earnings. Autoliv is trading at reasonable multiples, but this is definitely a company that requires some deeper digging before you can get comfortable.
Will NetApp Blow It Next Quarter?
By Seth Jayson (TMF Bent) | More Articles
October 31, 2010 | Comments (0)
There's no foolproof way to know the future for NetApp (Nasdaq: NTAP) or any other company. However, certain clues may help you see potential stumbles before they happen -- and before your stock craters as a result. Rest assured: Even if you're not monitoring these metrics, short-sellers are.
A cloudy crystal ball
I often use accounts receivable (AR) and days sales outstanding (DSO) to judge a company's current health and future prospects. Doing so is an important step in separating the pretenders from the market's best stocks. Alone, AR (the amount of money owed the company) and DSO (days' worth of sales owed to the company) don't tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.
Sometimes, problems with AR or DSO simply indicate a change in the business -- such as an acquisition -- or lax collections. However, if AR grows more quickly than revenue, or DSO balloons, you might be looking at a desperate company that's trying to boost sales by giving its customers overly generous payment terms. Or the company could have sprinted to book a load of sales at the end of the quarter, the way used-car dealers on the 29th of the month. Sometimes, companies do both.
Why might an upstanding company like NetApp do this? For the same reason any other company might: to make the numbers. Investors don't like revenue shortfalls, and employees don't like reporting them to their superiors.
Is NetApp sending any potential warning signs? Take a look at the following chart, which plots revenue growth against AR growth, and DSO:
Source: Capital IQ, a division of Standard & Poor's. Data is current as of last fully reported fiscal quarter. FQ = fiscal quarter.
The standard way to calculate DSO uses average accounts receivable. I prefer to look at end-of-quarter (EOQ) receivables, but I've plotted both above.
Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars (DSO) indicates a trend worth worrying about. As another reality check, it's reasonable to consider what a normal DSO figure might look like in this space.
Company
LFQ Revenue
DSO
NetApp $1,138 34
EMC (NYSE: EMC) $4,212 45
Xyratex (Nasdaq: XRTX) $430 51
Quantum (NYSE: QTM) $163 58
Source: Capital IQ, a division of Standard & Poor's. DSO calculated from average AR. Data is current as of last fully reported fiscal quarter. LFQ = last fiscal quarter. Dollar figures in millions.
Differences in business models can generate variations in DSO, so don't take this as the final word -- just consider it a way to add some context to the numbers. But let's get back to our original question: Will NetApp miss its numbers in the next quarter or two?
I don't think so. AR and DSO look healthy. For the last fully reported fiscal quarter, NetApp's year-over-year revenue grew by 35.8%, and its AR grew by 12.3%. That looks OK. End-of-quarter DSO decreased by 23.2% from the prior-year quarter and by 18.6% versus the most recent quarter. Still, I'm no fortuneteller, and these are just numbers. Investors putting their money on the line always need to dig into the filings for the root causes and draw their own conclusions.
6 Transportation Stocks Near 52-Week Highs
I love bargain stocks, especially when they're hitting 52-week lows. Still, it can be instructive to also look at stocks that are riding high.
For one thing, they can make good sell candidates. More optimistically, we may be able to find a few companies that can continue their upward climbs.
In this series, I'll be searching industry by industry for stocks reaching 52-week highs. That way, we'll be able to make a few quick comparisons among semi-related companies.
There are 24 industry groups as defined by the Global Industry Classification Standard (GICS). Transportation is one of them.
Below are the top six companies in this space, by market cap, that are within spitting distance of their 52-week highs.
Company
Recent Price
52-Week Low
52-Week High
P/E Ratio (Trailing)
UPS (NYSE: UPS) $69.32
$53.20
$70.89
22.4
Union Pacific (NYSE: UNP) $87.19
$54.20
$88.06
17.0
Canadian National Railway (NYSE: CNI) $64.23
$47.26
$67.99
15.0
FedEx (NYSE: FDX) $88.83
$69.78
$97.75
20.0
CSX (NYSE: CSX) $61.24
$41.80
$62.14
16.5
Norfolk Southern (NYSE: NSC) $61.97
$45.90
$63.18
18.6
Sources: Capital IQ, a division of Standard & Poor's; and Yahoo! Finance.
We have archrivals UPS and FedEx and four railroads represented on this list.
Which is better? UPS or FedEx? David Gardner makes the case for FedEx; Joe Magyer makes the case for UPS.
As for the railroads, Canadian National Railway looks the cheapest on a P/E-ratio basis, but Norfolk Southern looks the cheapest on a price-to-tangible-book-ratio basis. Christopher Barker follows the space and notes some interesting points in his breakdown of CSX's recent earnings. He also reveals the most efficient railroad.
Is Estee Lauder Expensive by the Numbers?
By Anand Chokkavelu, CFA | More Articles
October 31, 2010 | Comments (0)
Numbers can lie -- yet they're the best first step in determining whether a stock is a buy. In this series, we use some carefully chosen metrics to size up a stock's true value based on the following clues:
•The current price multiples.
•The consistency of past earnings and cash flow.
•The amount of growth we can expect.
Let's see what those numbers can tell us about how cheap Estee Lauder (NYSE: EL) might be.
The current price multiples
First, we'll look at most investors' favorite metric: the price-to-earnings ratio. It divides the company's share price by its earnings per share (EPS). The lower the P/E, the better.
Then we'll take things up a notch with a more advanced metric: enterprise value to unlevered free cash flow. This tool divides the company's enterprise value (basically, its market cap plus its debt, minus its cash) by its unlevered free cash flow (its free cash flow, adding back the interest payments on its debt). As with the P/E, the lower this number is, the better.
Analysts argue about which is more important -- earnings or cash flow. Who cares? A good buy ideally has low multiples on both.
Estee Lauder has a P/E ratio of 27.1 and an EV/FCF ratio of 17.5 over the trailing 12 months. If we stretch and compare current valuations with the five-year averages for earnings and free cash flow, we see that Estee Lauder has a P/E ratio of 34.8 and a five-year EV/FCF ratio of 27.0.
A one-year ratio of less than 10 for both metrics is ideal. For a five-year metric, less than 20 is ideal.
Estee Lauder is 0-for-4 on hitting the ideal targets, but let's see how it stacks up against some of its competitors and industry mates.
Company
1-Year P/E
1-Year EV/FCF
5-Year P/E
5-Year EV/FCF
Estee Lauder 27.1
17.5
34.8
27.0
Avon Products (NYSE: AVP) 23.2
24.1
24.1
29.8
Elizabeth Arden (Nasdaq: RDEN) 28.8
8.8
27.2
16.9
Revlon (NYSE: REV) 13.8
11.0
NM
40.1
Source: Capital IQ, a division of Standard & Poor's; NM = not meaningful.
Numerically, we've seen how Estee Lauder‘s valuation rates on both an absolute and relative basis. Next, let's examine …
The consistency of past earnings and cash flow
An ideal company will be consistently strong in its earnings and cash flow generation.
In the past five years, Estee Lauder's net-income margin has ranged from 3.0% to 6.4%. In that same time frame, the unlevered free cash flow margin has ranged from 4.7% to 9.6%.
How do those figures compare with those of the company's peers? See for yourself:
Source: Capital IQ, a division of Standard & Poor's; margin ranges are combined.
In addition, over the past five years, Estee Lauder has tallied up five years of positive earnings and five years of positive free cash flow.
Next, let’s figure out…
How much growth we can expect
Analysts tend to comically overstate their five-year growth estimates. If you accept them at face value, you will overpay for stocks. But even though you should definitely take the analysts' prognostications with a grain of salt, they can still provide a useful starting point when compared with similar numbers from a company's closest rivals.
Let's start by seeing what this company's done over the past five years. In that time period, Estee Lauder has put up past EPS growth rates of 5.9%. Meanwhile, Wall Street's analysts expect future growth rates of 15.3%.
Here's how Estee Lauder compares with its peers for trailing five-year growth (Revlon's growth isn't meaningful because of losses):
Source: Capital IQ, a division of Standard & Poor's; EPS growth shown.
And here's how it measures up with regard to the growth analysts expect over the next five years (no estimates for Revlon):
Source: Capital IQ, a division of Standard & Poor's; estimates for EPS growth.
The bottom line
The pile of numbers we've plowed through has shown us how cheap shares of Estee Lauder are trading, how consistent its performance has been, and what kind of growth profile it has -- both on an absolute and a relative basis.
The more consistent a company's performance has been and the more growth we can expect, the more we should be willing to pay. We've gone well beyond looking at a 27.1 P/E ratio.
Kinect Preorders on Amazon Jump to $250
By Wolfgang Gruener, Conceivably Tech
How much would you pay to get your hands on Microsoft's (Nasdaq: MSFT) Kinect motion sensor on the day it becomes available?
It turns out that Kinect may be selling well, as the regular stock of the standalone Kinect appears to be sold out online at Best Buy (NYSE: BBY) and Amazon.com (Nasdaq: AMZN). According to analysts, Microsoft began mass-producing Kinect back in August and ramped the volume to 2 million units in September, which is in line with previous reports that Microsoft expects to sell about 4 million units this Christmas season.
The numbers suggest that there should be enough supply to sell a Kinect device to everyone who wants (and can afford) one. So it is somewhat surprising that Amazon itself does not list the Kinect as available anymore. Instead, the interested buyer is forwarded to a list of sellers who are, at the time of this writing, offering the standalone Kinect device, which has a suggested retail price of $150, for prices between $250 and $280.
I don't quite expect an online-auction frenzy after Kinect is released, given the potential supply, and we may not see Kinect selling for thousands of dollars (anyone remember the $15,000 PS3?) in online auctions, but a price of $280 is certainly a sign of confidence, even if one has to wonder whether a $300 4GB Xbox 360/Kinect bundle isn't the better choice: Keep the Kinect for yourself and give the Xbox 360 away as a Christmas present.
In fact, it is reasonable to assume that there will be far fewer Kinect standalone units available than bundles as the high price of Kinect will, conceivably, drive buyers toward a bundle purchase. At $150, Kinect is perceived to be substantially more expensive than, for example, Sony's (NYSE: SNE) $99 Move controller bundle. While Microsoft may be criticized for the high price, it could be a well-calculated gamble that may turn into an example of business brilliance: Many buyers could, in fact, perceive the 4 GB bundle for "just" $300 as the better deal -- or upgrade from an old Xbox 360 to a new 250 GB version for $400 and get the 250 GB console for only $250.
While we do not know Microsoft's exact production numbers of each SKU, we are taking an educated guess that Microsoft is making a business decision here and will be shipping more Xbox 360/Kinect bundles than standalone units. Your best chance to get a Kinect sensor at launch may be the purchase of a 4 GB or 250 GB bundle. If you haven't preordered a Kinect sensor but want the device on the first day of availability, you may want to budget at least $300 for a bundle (or shell out $250 or the standalone device).
Amazon's best-seller list indicates that interest in the Kinect sensor alone has faded, which is conclusive because of the lack of availability, as the device is ranked at No. 138 in the video-games section. The 250 GB Kinect bundle is listed at No. 10, the 4 GB bundle at No. 41, and the standalone 250 GB Xbox 360 console at No. 46.
That trend, by the way, is exactly the opposite of what we are seeing with Sony's PS3 Move controller -- which has launched already and may not be directly comparable as a result: There is more interest in standalone devices than a PS3/Move bundle. The 160 PS3 is the most popular PS3 product at position No. 22, followed by the PS3 Move controller bundle for $99 at position No. 26. The PS3 Move 320 GB console bundle is at No. 40.
Could that be a sign that the success of the Move controller (apparently there have been 2.5 million units sold) did not translate into many more PS3 sales? Possibly. Could the current trend be a sign that Kinect will sell quite a number of Xbox 360 consoles? We think so.
In fact, we believe that this could turn into the best Christmas season for Microsoft yet, and it has a good shot at outselling the PS3 and especially the Nintendo (OTC BB: NTDOY.PK) Wii, which has dominated Christmas sales in 2007, 2008, and 2009.
7 Utility Stocks Near 52-Week Highs
I love bargain stocks, especially when they're hitting 52-week lows. Still, it can be instructive to also look at stocks that are riding high.
For one thing, they can make good sell candidates. More optimistically, we may be able to find a few companies that can continue their upward climbs.
In this series, I'll be searching industry by industry for stocks reaching 52-week highs. That way, we'll be able to make a few quick comparisons among semi-related companies.
There are 24 industry groups as defined by the Global Industry Classification Standard (GICS). Utilities is one of them.
Below are the top seven companies in this space, by market cap, that are within spitting distance of their 52-week highs.
Company
Recent Price
52-Week Low
52-Week High
P/E Ratio (Trailing)
Southern (NYSE: SO) $38.18
$30.90
$38.62
15.3
Dominion Resources (NYSE: D) $44.46
$34.00
$45.12
10.0
Duke Energy (NYSE: DUK) $17.77
$15.50
$18.08
34.9
NextEra Energy (NYSE: NEE) $54.85
$45.30
$56.57
12.3
PG&E (NYSE: PCG) $47.67
$35.00
$48.34
15.5
American Electric Power (NYSE: AEP) $36.46
$28.20
$37.16
15.1
Public Service Enterprise Group (NYSE: PEG) $33.33
$29.00
$34.93
10.9
Sources: Capital IQ, a division of Standard & Poor's; and Yahoo! Finance.
Stop me if you've seen a couple of these companies before. Duke and Public Service also showed up on my list of utilities near 52-week lows.
You're unlikely to find the next home run dividend stock in this group, but there are some nice dividend yields here. None of these seven pays a yield less than 3%. You'll still have to do some due diligence, though, to make sure the dividends are sustainable.
How Expensive Is Lions Gate Entertainment by the Numbers?
By Anand Chokkavelu, CFA | More Articles
October 31, 2010 | Comments (0)
Numbers can lie -- yet they're the best first step in determining whether a stock is a buy. In this series, we use some carefully chosen metrics to size up a stock's true value based on the following clues:
•The current price multiples.
•The consistency of past earnings and cash flow.
•The amount of growth we can expect.
Let's see what those numbers can tell us about how cheap Lions Gate Entertainment (NYSE: LGF) might be.
The current price multiples
First, we'll look at most investors' favorite metric: the price-to-earnings ratio. It divides the company's share price by its earnings per share (EPS). The lower the P/E, the better.
Then we'll take things up a notch with a more advanced metric: enterprise value to unlevered free cash flow. This tool divides the company's enterprise value (basically, its market cap plus its debt, minus its cash) by its unlevered free cash flow (its free cash flow, adding back the interest payments on its debt). As with the P/E, the lower this number is, the better.
Analysts argue about which is more important -- earnings or cash flow. Who cares? A good buy ideally has low multiples on both.
Lions Gate Entertainment has a negative P/E ratio and an EV/FCF ratio of 469.7 over the trailing 12 months. If we stretch and compare current valuations with the five-year averages for earnings and free cash flow, we see that Lions Gate Entertainment has a negative P/E ratio and a five-year EV/FCF ratio of 460.7.
A one-year ratio of less than 10 for both metrics is ideal. For a five-year metric, less than 20 is ideal.
Lions Gate Entertainment is 0-for-4 on hitting the ideal targets, but let's see how it stacks up against some of its competitors and industry mates.
Company
1-Year P/E
1-Year EV/FCF
5-Year P/E
5-Year EV/FCF
Lions Gate Entertainment NM
469.7
NM
460.7
Walt Disney (NYSE: DIS) 16.6
18.5
17.3
18.1
DreamWorks Animation SKG (Nasdaq: DWA) 25.7
NM
22.0
31.9
Time Warner (NYSE: TWX) 13.8
13.3
51.4
8.3
Source: Capital IQ, a division of Standard & Poor's; NM = not meaningful.
Numerically, we've seen how Lions Gate Entertainment's valuation rates on both an absolute and relative basis. Next, let's examine …
The consistency of past earnings and cash flow
An ideal company will be consistently strong in its earnings and cash-flow generation.
In the past five years, Lions Gate Entertainment's net income margin has ranged from -9.4% to 2.6%. In that same time frame, the unlevered free cash flow margin has ranged from -6.0% to 9.0%.
How do those figures compare with those of the company's peers? See for yourself:
Source: Capital IQ, a division of Standard & Poor's; margin ranges are combined.
In addition, over the past five years, Lions Gate Entertainment has tallied up one year of positive earnings and four years of positive free cash flow.
Next, let's figure out …
How much growth we can expect
Analysts tend to comically overstate their five-year growth estimates. If you accept them at face value, you will overpay for stocks. But even though you should definitely take the analysts' prognostications with a grain of salt, they can still provide a useful starting point when compared with similar numbers from a company's closest rivals.
Let's start by seeing what this company's done over the past five years. In that time period, Lions Gate Entertainment has put up past EPS growth rates that haven't been meaningful (because of losses). Meanwhile, Wall Street's analysts expect future growth rates of 6.9%.
Here's how Lions Gate Entertainment compares with its peers for trailing five-year growth:
Source: Capital IQ, a division of Standard & Poor's; EPS growth shown.
And here's how it measures up with regard to the growth analysts expect over the next five years:
Source: Capital IQ, a division of Standard & Poor's; estimates for EPS growth.
The bottom line
The pile of numbers we've plowed through has shown us how cheap shares of Lions Gate Entertainment are trading, how consistent its performance has been, and what kind of growth profile it has -- both on an absolute and a relative basis.
The more consistent a company's performance has been and the more growth we can expect, the more we should be willing to pay. We've gone well beyond looking at a negative P/E ratio.
Lions Gate Entertainment has been pretty spotty on its earnings and cash flows. Margins and past growth solidify this bleak picture. By the numbers, Disney is the most consistent of the competitors.
How Cheap Is Ross by the Numbers?
By Anand Chokkavelu, CFA | More Articles
October 31, 2010 | Comments (0)
Numbers can lie -- yet they're the best first step in determining whether a stock is a buy. In this series, we use some carefully chosen metrics to size up a stock's true value based on the following clues:
•The current price multiples.
•The consistency of past earnings and cash flow.
•The amount of growth we can expect.
Let's see what those numbers can tell us about how cheap Ross Stores (Nasdaq: ROST) might be.
The current price multiples
First, we'll look at most investors' favorite metric: the price-to-earnings ratio. It divides the company's share price by its earnings per share (EPS). The lower the P/E, the better.
Then we'll take things up a notch with a more advanced metric: enterprise value to unlevered free cash flow. This tool divides the company's enterprise value (basically, its market cap plus its debt, minus its cash) by its unlevered free cash flow (its free cash flow, adding back the interest payments on its debt). As with the P/E, the lower this number is, the better.
Analysts argue about which is more important -- earnings or cash flow. Who cares? A good buy ideally has low multiples on both.
Ross has a P/E ratio of 13.4 and an EV/FCF ratio of 10.2 over the trailing 12 months. If we stretch and compare current valuations with the five-year averages for earnings and free cash flow, we see that Ross has a P/E ratio of 21.3 and a five-year EV/FCF ratio of 16.7.
A one-year ratio of less than 10 for both metrics is ideal. For a five-year metric, less than 20 is ideal.
Ross has a mixed performance in hitting the ideal targets, but let's see how it stacks up against some of its competitors and industry mates.
Company
1-Year P/E
1-Year EV/FCF
5-Year P/E
5-Year EV/FCF
Ross 13.4
10.2
21.3
16.7
TJX (NYSE: TJX) 13.0
10.3
19.2
16.4
Tuesday Morning (Nasdaq: TUES) 20.0
11.6
2.7
8.9
Kohl's (NYSE: KSS) 15.1
13.3
16.1
17.8
Source: Capital IQ, a division of Standard & Poor's; NM = not meaningful.
Numerically, we've seen how Ross‘s valuation rates on both an absolute and relative basis. Next, let's examine …
The consistency of past earnings and cash flow
An ideal company will be consistently strong in its earnings and cash flow generation.
In the past five years, Ross's net-income margin has ranged from 4.0% to 6.9%. In that same time frame, unlevered free cash flow margin has ranged from 2.8% to 8.2%.
How do those figures compare with those of the company's peers? See for yourself:
Source: Capital IQ, a division of Standard & Poor's; margin ranges are combined.
In addition, over the past five years, Ross has tallied up five years of positive earnings and five years of positive free cash flow.
Next, let's figure out …
How much growth we can expect
Analysts tend to comically overstate their five-year growth estimates. If you accept them at face value, you will overpay for stocks. But even though you should definitely take the analysts' prognostications with a grain of salt, they can still provide a useful starting point when compared with similar numbers from a company's closest rivals.
Let's start by seeing what this company's done over the past five years. In that time period, Ross has put up past EPS growth rates of 28.1%. Meanwhile, Wall Street's analysts expect future growth rates of 14.2%.
Here's how Ross compares with its peers for trailing five-year growth (Tuesday Morning's growth rate isn't meaningful):
Source: Capital IQ, a division of Standard & Poor's; EPS growth shown.
And here's how it measures up with regard to the growth analysts expect over the next five years (estimates not available for Tuesday Morning):
Source: Capital IQ, a division of Standard & Poor's; estimates for EPS growth.
The bottom line
The pile of numbers we've plowed through has shown us how cheap shares of Ross are trading, how consistent its performance has been, and what kind of growth profile it has -- both on an absolute and a relative basis.
The more consistent a company's performance has been and the more growth we can expect, the more we should be willing to pay. We've gone well beyond looking at a 13.4 P/E ratio.
Will Neutral Tandem Fall Short Next Quarter?
By Seth Jayson (TMF Bent) | More Articles
October 31, 2010 | Comments (0)
There's no foolproof way to know the future for Neutral Tandem (Nasdaq: TNDM) or any other company. However, certain clues may help you see potential stumbles before they happen -- and before your stock craters as a result. Rest assured: Even if you're not monitoring these metrics, short-sellers are.
A cloudy crystal ball
I often use accounts receivable (AR) and days sales outstanding (DSO) to judge a company's current health and future prospects. Doing so is an important step in separating the pretenders from the market's best stocks. Alone, AR (the amount of money owed the company) and DSO (days' worth of sales owed to the company) don't tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.
Sometimes, problems with AR or DSO simply indicate a change in the business -- such as an acquisition -- or lax collections. However, if AR grows more quickly than revenue, or DSO balloons, you might be looking at a desperate company that's trying to boost sales by giving its customers overly generous payment terms. Or the company could have sprinted to book a load of sales at the end of the quarter, the way used-car dealers on the 29th of the month. Sometimes, companies do both.
Why might an upstanding company like Neutral Tandem do this? For the same reason any other company might: to make the numbers. Investors don't like revenue shortfalls, and employees don't like reporting them to their superiors.
Is Neutral Tandem sending any potential warning signs? Take a look at the following chart, which plots revenue growth against AR growth, and DSO:
Source: Capital IQ, a division of Standard & Poor's. Data is current as of last fully reported fiscal quarter. FQ = fiscal quarter.
The standard way to calculate DSO uses average accounts receivable. I prefer to look at end-of-quarter (EOQ) receivables, but I've plotted both above.
Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars (DSO) indicates a trend worth worrying about. As another reality check, it's reasonable to consider what a normal DSO figure might look like in this space.
Company
LFQ Revenue
DSO
Neutral Tandem $45 44
Level 3 Communications (Nasdaq: LVLT) $908 31
Qwest Communications International (NYSE: Q) $2,930 39
Verizon Communications (NYSE: VZ) $26,773 41
Source: Capital IQ, a division of Standard & Poor's. DSO calculated from average AR. Data is current as of last fully reported fiscal quarter. LFQ = last fiscal quarter. Dollar figures in millions.
Differences in business models can generate variations in DSO, so don't take this as the final word -- just consider it a way to add some context to the numbers. But let's get back to our original question: Will Neutral Tandem miss its numbers in the next quarter or two?
I don't think so. AR and DSO look healthy. For the last fully reported fiscal quarter, Neutral Tandem's year-over-year revenue grew by 8.5%, and its AR dropped by 5.1%. That looks OK. End-of-quarter DSO decreased by 12.6% from the prior-year quarter, and it rose by 4.8% versus the most recent quarter. Still, I'm no fortune teller, and these are just numbers. Investors putting their money on the line always need to dig into the filings for the root causes and draw their own conclusions.
How Expensive Is Cablevision by the Numbers?
Numbers can lie -- yet they're the best first step in determining whether a stock is a buy. In this series, we use some carefully chosen metrics to size up a stock's true value based on the following clues:
•The current price multiples.
•The consistency of past earnings and cash flow.
•The amount of growth we can expect.
Let's see what those numbers can tell us about how cheap Cablevision Systems (NYSE: CVC) might be.
The current price multiples
First, we'll look at most investors' favorite metric: the price-to-earnings ratio. It divides the company's share price by its earnings per share (EPS). The lower the P/E, the better.
Then we'll take things up a notch with a more advanced metric: enterprise value to unlevered free cash flow. This tool divides the company's enterprise value (basically, its market cap plus its debt, minus its cash) by its unlevered free cash flow (its free cash flow, adding back the interest payments on its debt). As with the P/E, the lower this number is, the better.
Analysts argue about which is more important -- earnings or cash flow. Who cares? A good buy ideally has low multiples on both.
Cablevision has a P/E ratio of 25.8 and an EV/FCF ratio of 15.1 over the trailing 12 months. If we stretch and compare current valuations with the five-year averages for earnings and free cash flow, we see that Cablevision has a P/E ratio of 141.1 and a five-year EV/FCF ratio of 20.5.
A one-year ratio of less than 10 for both metrics is ideal. For a five-year metric, less than 20 is ideal.
Cablevision is 0-for-4 on hitting the ideal targets, but let's see how it stacks up against some of its competitors and industry mates.
Company
1-Year P/E
1-Year EV/FCF
5-Year P/E
5-Year EV/FCF
Cablevision 25.8
15.1
141.1
20.5
Comcast (Nasdaq: CMCSA) 14.7
11.5
20.0
16.4
Time Warner Cable (NYSE: TWC) 17.8
13.8
NM
20.3
DirecTV (Nasdaq: DTV) 25.8
14.5
27.8
24.7
Source: Capital IQ, a division of Standard & Poor's; NM = not meaningful.
Numerically, we've seen how Cablevision's valuation rates on both an absolute and relative basis. Next, let's examine …
The consistency of past earnings and cash flow
An ideal company will be consistently strong in its earnings and cash-flow generation.
In the past five years, Cablevision;s net income margin has ranged from -2.6% to 3.9%. In that same time frame, the unlevered free cash flow margin has ranged from 12.2% to 16.1%.
How do those figures compare with those of the company's peers? See for yourself:
Source: Capital IQ, a division of Standard & Poor's; margin ranges are combined.
In addition, over the past five years, Cablevision has tallied up two years of positive earnings and five years of positive free cash flow.
Next, let's figure out …
How much growth we can expect
Analysts tend to comically overstate their five-year growth estimates. If you accept them at face value, you will overpay for stocks. But even though you should definitely take the analysts' prognostications with a grain of salt, they can still provide a useful starting point when compared with similar numbers from a company's closest rivals.
Let's start by seeing what this company's done over the past five years. In that time period, Cablevision has put up past EPS growth rates that aren't meaningful. Meanwhile, Wall Street's analysts expect future growth rates of 19.9%.
Here's how it measures up with regard to the growth analysts expect over the next five years:
Source: Capital IQ, a division of Standard & Poor's; EPS growth shown.
And here's how it measures up with regard to the growth analysts expect over the next five years:
Source: Capital IQ, a division of Standard & Poor's; estimates for EPS growth.
The bottom line
The pile of numbers we've plowed through has shown us how cheap shares of Cablevision are trading, how consistent its performance has been, and what kind of growth profile it has -- both on an absolute and a relative basis.
The more consistent a company's performance has been and the more growth we can expect, the more we should be willing to pay. We've gone well beyond looking at a 25.8 P/E ratio.
None of the numbers make Cablevision look too compelling. Comcast's probably look the best, but those are rather uninspiring, too.
Windows Phone 7 Commercial Is Too Complex, Really
I am wondering if Microsoft (Nasdaq: MSFT) will ever be capable of wrapping a simple message into a simple commercial. The first Windows Phone 7 (WP7) commercial is an example of Microsoft's intent to pack too many images into a single commercial that ultimately blur the message the company wants to send. There are 28 different scenes in 60 seconds -- some connected, some open-ended. Some are simple. Most are too complex to process in just a few seconds. But if you take the time to watch Really several times, you may view the commercial as a piece of art.
Watching Microsoft's commercials could be a waste of time, and trying to understand them is frequently very difficult. Remember Bill Gates' Shoe Circus commercial with Jerry Seinfeld? On the surface, it was a silly, incoherent communication. However, the commercial carried a very subtle and intelligent tone that ridiculed Apple (Nasdaq: AAPL). To get the message, most of us may have to watch the commercial several times and take the time to think about every scene to understand it. (Another example is here.)
The latest Really commercial that intros WP7 is extremely complex as well. Since I enjoy watching these commercials, I spent a few hours watching, re-watching, and analyzing the ad, and it is clear that there is a lot brainwork in this 1-minute-long skit about wasting time on your cell phone. However, ironically, just like we are wasting time and missing life by focusing on your phones, Microsoft may have missed the goal with this commercial by focusing too much on the downsides of today's smartphones.
The structure
Really is vertically divided into four parts, each about 15 seconds long. The horizontal structure consists of the topics (1) street life, (2) personal relationships, (3) professional life, (4) vacation and leisure time, and (5) personal well-being. Each 15-second part displays a certain number of examples of life with a smartphone in rapid succession.
Part 1
The first part serves as introduction, with somewhat silly messages about vacations -- a woman missing the spectacular lantern floating in Hawaii (this may already raise questions marks, as virtually everyone I talked to wondered what those "strange lights in the sky" were) or a geek on a beach not noticing the pretty girls around him. We are also introduced to the street theme with people drinking coffee and focusing on their phone rather than their break. Personal care (shower, workout) lacks because of the smartphone as well. There are eight examples in 15 seconds (three in street life, two in leisure time, two in personal care, and one in professional life), some of which are just too short to understand. The part ends with the first "Really?" note, when a masseuse forgets she has a patient.
Part 2
The next 15 seconds complete the purpose of showing examples of smartphone use and the "cause" portion of the commercial. There is a clear climactic intent as the music gets faster and the messages turn from silly to negative. Personal relationships are introduced as a dad forgets that he is out with his daughter playing in a park. In a following bedroom scene, we also learn that smartphones may keep you from having sex. Smartphones make you miss out on fun activities, such as the excitement of a roller coaster, and ignore the world around you as you don't even notice that hot coffee (the coffee theme appears to be especially important in this commercial, as it repeats three times) is spilling over your hand. Seven messages in 15 seconds conclude with another "Really?" when a smartphone falls into a urinal and his owner picks it up. The second part has two street-life scenes, three leisure-time scenes, and two examples that relate to personal relationships. The personal relationships introduce drama and turn the topic from funny to angry. So far, we have seen 15 messages in 30 seconds.
Part 3
This is where the "effect" part of the story begins. In eight messages, we see people suffering because of neglect on the job; we see people missing their wedding; we see a family of four on their phones missing dinner time and essential communication; and we see a father missing out on quality time and playing baseball with his son. A woman falls down the stairs at the opera, a guy in a roller coaster misses the thrill of a downhill section, and people bump into each other as they ignore the life that happens around them. There are another eight messages (23 total so far).
Part 4
After 45 seconds, we see the sharp conclusion with a climactic peak, as the previous pre-sex scene, another coffee-spill example, and the father-son-baseball scene are recalled. The commercial breaks with the son throwing the baseball at his father's head, reaching the most angry and negative point in the commercial at 48 seconds. The scene is followed by a perceived question mark and is cooled down by a mother ignoring her toddler. The final message, a dinner scene between a man and woman, brings the resolution and the only positive scene as the man actually packs away his phone and focuses on his obvious date. While the guy may have lost out already by pulling out his phone, the message is that WP7 keeps you connected but brings you back to what matters so you don't miss out on life.
Open questions
OK, so I get it. I think. But did this really require 60 seconds to communicate? Are 28 individual messages in 60 seconds really necessary to explain that smartphones keep us from living life? Many scenes have way too much detail to process in a second or two. It took me a while to notice that the dinner-table scene shows that three members of the family of four are on their phones and not just two. I am still wondering what that strange mirror in the bedroom scene is or if it is a window that is rather awkwardly placed next to the bathroom. The scenes are too short to recognize subtle messages, such as the fact that all people on smartphones have a serious and concentrated expression on their face, while there is a decidedly more friendly tone around them (this changes in the second part of the commercial, where many people get angry).
The commercial plays on cliches of smartphone users today and attempts to be funny by exaggerating scenes. Typical causes of aggravation from using phones are clearly left out, such as people texting and emailing on their phones while driving. The strong exaggeration may have the effect that you either see yourself as one of those people and the entire message is diluted as a result. Strangely enough, it appears that the commercial is squarely aimed at people who already use smartphones but are concerned about the impact the devices have on their life. There is a very negative tone of bad smartphones today -- smartphones that need a savior. However, it seems that we actually enjoy the features of smartphones.
Microsoft was criticized for making the WP7 too similar to already available smartphone platforms. Steve Ballmer recently said that WP7 is different -- and this commercial surely plays this tune. But do we really want something different that essentially does the same thing?
One last note: What's up with those BlackBerrys? Did anyone notice that most of the smartphones in the commercial are BlackBerrys? I was not able to find a single iPhone. Could it be that Microsoft chose to leave iPhones out because of the high loyalty rate among iPhone users?
What Shorts Might Be Watching at Siemens
By Seth Jayson (TMF Bent) | More Articles
October 31, 2010 | Comments (1)
There's no foolproof way to know the future for Siemens (NYSE: SI) or any other company. However, certain clues may help you see potential stumbles before they happen -- and before your stock craters as a result. Rest assured: Even if you're not monitoring these metrics, short-sellers are.
A cloudy crystal ball
I often use accounts receivable (AR) and days sales outstanding (DSO) to judge a company's current health and future prospects. Doing so is an important step in separating the pretenders from the market's best stocks. Alone, AR (the amount of money owed the company) and DSO (days' worth of sales owed to the company) don't tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.
Sometimes, problems with AR or DSO simply indicate a change in the business -- such as an acquisition -- or lax collections. However, if AR grows more quickly than revenue, or DSO balloons, you might be looking at a desperate company that's trying to boost sales by giving its customers overly generous payment terms. Or the company could have sprinted to book a load of sales at the end of the quarter, the way used-car dealers on the 29th of the month. Sometimes, companies do both.
Why might an upstanding company like Siemens do this? For the same reason any other company might: to make the numbers. Investors don't like revenue shortfalls, and employees don't like reporting them to their superiors.
Is Siemens sending any potential warning signs? Take a look at the following chart, which plots revenue growth against AR growth, and DSO:
Source: Capital IQ, a division of Standard & Poor's. Data is current as of last fully reported fiscal quarter. FQ = fiscal quarter.
The standard way to calculate DSO uses average accounts receivable. I prefer to look at end-of-quarter (EOQ) receivables, but I've plotted both above.
Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars (DSO) indicates a trend worth worrying about. As another reality check, it's reasonable to consider what a normal DSO figure might look like in this space.
Company
LFQ Revenue
DSO
Siemens $23,540 71
ABB Ltd (NYSE: ABB) $7,573 111
General Electric (NYSE: GE) $35,888 69
AO Smith (NYSE: AOS) $559 69
Source: Capital IQ, a division of Standard & Poor's. DSO calculated from average AR. Data is current as of last fully reported fiscal quarter. LFQ = last fiscal quarter. Dollar figures in millions.
Differences in business models can generate variations in DSO, so don't take this as the final word -- just consider it a way to add some context to the numbers. But let's get back to our original question: Will Siemens miss its numbers in the next quarter or two?
I don't think so. AR and DSO look healthy. For the last fully reported fiscal quarter, Siemens' year-over-year revenue grew by 4.5%, and its AR grew by 4.4%. That looks OK. End-of-quarter DSO decreased by 0.1% from the prior-year quarter and by 0.1% versus the most recent quarter. Still, I'm no fortune teller, and these are just numbers. Investors putting their money on the line always need to dig into the filings for the root causes and draw their own conclusions.