Daily Archives: June 10, 2007

Apple (AAPL) May Join Studios for VOD, Phone Companies Cower

Apple (AAPL) is getting close to a deal that would allow consumers to rent films from major studios through a video on demand service. Unlike Apple’s current iPod video service, the content would not be for sales. It would be downloaded to a computer and then could be moved to a device like an iPhone. But, the feature-length video would be protected by digital rights management software, unlike most music downloads, and the rental would be for a fixed time, perhaps 30 days.

While the new arrangement could make things a little uncomfortable for new technologies like the Amazon (AMZN) Unbox and even cable VOD providers like Comcast (CMCSA), the real losers are likely to be Verizon (VZ) and AT&T (T). An FT report on the service said the price would be a low as $2.99 per film and quoted a studio executive as saying the service would “compete against cable companies and anyone else offering VOD into the home”.

Cable can probably weather some VOD competition. It already has the poll position on top of the TV. Its digital TV products are available in tens of millions of homes. The number of consumers buying bundled television, broadband, and VoIP packages is rising rapidly. Cable can offer VOD with internet connectivity and phone service. VOD becomes part of a larger service.

One of the last visitors to the consumer living room is the phone company. Verizon and AT&T are spending huge sums, $23 billion in the case of VZ, to put down fiber-to-the home so that the firms can offer services like live television and VOD. The last thing they need is one more strong competitor to vie for that business.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: June 10, 2007 – 11:34 pm in Uncategorized

Google (GOOG), Microsoft (MSFT), And Apple (AAPL): Threats To Privacy?

A group based in London which calls itself Privacy International has taken unto itself the job of rating how well major websites protect the privacy of their users.

For starters, the sample is quite odd. It includes major internet properties like Google (GOOG), Yahoo! (YHOO), and AOL. But, also mixed in are sites like Reunion.com and Bebo. The list is also a mix of e-commerce sites including Amazon (AMZN), search sites, and online news.

The ranking takes into account items such as whether a company has a department which handles privacy compliance, whether information is collected with or without the users consent, and whether firms invest in privacy measures like data encrytption.

The survey does not highlight whether any of the companies mentioned break privacy laws or hand the data out to entities that should not have it. That would seem to be important, by maybe it misses the point.

It is not surprising that large companies that own huge websites take the brunt of the criticism here. Google makes the list of prime offenders. So do AOL, Apple (AAPL), Yahoo!, and Windows Live.

The really good guys on the list include Wikipedia and BBC, both non-profits.

Privacy International is also a non-profit, but that may simply be a coincidence. The list does present a strong match between the companies that it rates as great offenders and firms that do well financially. But, perhaps that is being too cynical.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: June 10, 2007 – 12:52 pm in Uncategorized

TD Ameritrade (AMTD): Better Off On Its Own?

:With the furious round of speculation and talk of TD Ameritrade (AMTD) being sold, the issue of how the company is doing on its own seems to have been lost in the noise.

The company’s shares are actually in no better shape now, at $21, than they were during April 2006.

But, it is hard to argue with the company’s recent financial success. In the quarter ending March 31, AMTD had net revenue of $525 million, up from $497 million in the same quarter in the previous year. Operating income was $225 million, up from $203 million. The company’s purchase of TD Waterhouse in early 2006 appears to have gone well.

Total client trades per day were about 254,000, about flat with the same quarter in the previous year. Whether trading activity can be put at the company’s feet is hard to say, but it may be as much a by-product of general market activity as anything else.

Two hedge funds, SAC Capital and Jana partners, have picked up 8% of TD Ameritrade’s shares. They want the company sold to either E*Trade (ETFC) or Schwab (SCHW), presumably at a premium. But, with the shares up well over 15% in the last month, that may be a problem.

The two hedge funds may the assumption that putting AMTD together with another large discount broker will create cost savings and "economies of scale." In theory, that is right, But there is the matter of the overused but real concept of "execution risk". Selling one large discount broker to another only yields better results if the marriage works. That is hardly assured here.

SAC and Jana like the idea of an acquisition of AMTD, but, it is only an idea. For a purchaser, it is also a potential burden, a weight that may not be worth much of a premium.

Douglas A. McIntyre can be reached at douglasamcintyre@247walst.com. He does not own securities in companies that he writes about.

Posted on: June 10, 2007 – 9:47 am in Uncategorized

Occidental Petroleum (OXY): Can A CEO Be Worth

Ray Irani, the head of Occidental Petroleum (OXY) made $270 million from exercising stock options last year, putting his compensation for gains on options higher than any other CEO in America.

While the amount appears to be obscene, Irani did preside over a company where the revenue has gone from $11.5 billion in 2004 to $18.2 billion last year. Operating income has almost doubled during that time to $8.1 billion. The stock is up almst 55% over the last two years, but was doing no better than the S&P when measured from June 2005 to January 2007. That means that, for shareholders, 2006 was not a terribly good year.

Irani and his board would argue that his compensation is based on the body of his work and that over the long haul, he has done a very good job.

But, that point of view sets aside two important considerations. The first is that OXY has really done no better than a company like Exxon. In other words, being in the oil business is good no matter who runs the company. And, there is the matter of the weak performance of the company’s shares last year.

Whether right or wrong, the investing public remains cynical about the way that management at large companies is paid. In an industry where the tide is rising, it may even make more sense to pay CEOs less. Their jobs are easier and they have fewer challenges and problems to solve.

On that basis Irani made way, way too much money.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: June 10, 2007 – 9:06 am in Uncategorized

A Win For Sony-Ericsson, A Lose for Motorola (MOT)?

China awarded truly huge contracts for expandind it wireless GSM service. Ericsson (ERIC) was awarded $1 billion contract for infrastructure equipment, and Sony-Ericsson the $600 million deal for handsets.

Since Motorola (MOT) makes both infrastructure and handset equipment, the announcement would seem to be rough news for the already embattled company.

Maybe the Chinese just did not want a bunch of old RAZRs.

Douglas A. McIntyre

Posted on: June 10, 2007 – 8:52 am in Uncategorized