It almost seemed unfathomable that Apple could miss on a product delivery, but there have really not been any new products outside of a refresh cycle in two years. That elusive “one day, maybe, hopefully” Apple TV is expected to be the next big thing to drive Apple’s growth engine by many analysts on Wall Street. The problem is that no one has seen the thing work and no one really knows what the specs are going to be. And what about Apple’s price premium for a television?

A problem for Apple is that it has to have noticed that Sony has lost money on its television unit for about nine years now. The market is already more than crowded in the flat panel TV space, and Apple is not known for being excited about “me-too” products nor for losing money. So what can Apple do that is different, and how fast can it do it? Imagine this, if you go buy a new PS4 or Xbox One for all of the convergence of media, games, web, TV, music, and customized media: are you going to go out and plunk down the extra cash to buy another television set at a high above-market price premium just because Apple made it? Here are the summarized features of the Xbox One.

Apple has so far been trumped by Microsoft in stock performance in 2013. Microsoft shares are up about 23% so far in 2013 at a time when PC sales have been weak, while Apple shares are down about 16% so far in 2013. Amazingly, Sony shares are up almost 100% for its ADRs so far in 2013 as Sony is considering a major restructuring caused in part due to activist investor pressure.

It is almost hard to imagine that an Apple product might be in trouble even before it launches. Maybe the market isn’t telling you that directly, but the market is definitely telling you something. If Apple does have one feature we would love to see, it is that elusive trend in 3D: how about 3D TV without glasses for your living room?

It seems hard to believe, but that 3D TV without glasses from Toshiba was first seen three years ago.

Microsoft wants the media and the consumer electronics consumer to believe that the Xbox One cannot be rivaled by any entertainment platform made by any company anywhere in the world:

From the biggest blockbuster games to the most popular TV shows to the best of the Web, Xbox One does it all. But this is just the beginning. Thanks to the power of the cloud, Xbox One will keep getting better, with more games, TV, movies, music, and apps launching all the time.

In and of itself, there is nothing particularly compelling from this outline of features to indicate why people who have moved their gaming activity to smartphones and tablets might return to the Xbox. Xbox One does have the ability to integrate a number of media sources at once. However, in the eyes of the public, that may not be enough to bring people back to a hardware platform that has existed, with some improvements, for more than a decade.

Sony’s new forecast for the future of its game division was close to pessimistic. Sony finds itself needing to defend its corporate structure after years of dismal results. The Japanese company has come under pressure to spin out its studio. Unfortunately, based on management’s new assessment of its other businesses, the studio may be the only part of Sony that has much value.

As part of a presentation about Sony’s future plans, executives said that as its PlayStation 4 (PS4) rolls out for the holidays:

Sony will target sales of 1 trillion yen and operating income margin of 2% in the game business in FY14. Going forward, Sony aims to significantly expand its business model around PS4, to transition the business to further growth in the fiscal year ending March 31, 2016 (“FY15”) and beyond.

The margin is atrocious, and it hardly makes Sony’s efforts in game consoles worthwhile at all.

Sony and Microsoft find themselves coming at the video game business from different points on the compass. The Japanese company has decided that, finally, it must tell investors the truth about its problems as it goes through wrenching changes, probably brought on from outside. Microsoft, on the other hand, can maintain what may be an illusion, at least for the time being. The world’s largest software company can still conquer the world beyond the PC it says, if only it can throw enough software and hardware at the problem. So far, that has not worked with new initiatives, which range from the Surface tablet to its Windows mobile partnership with Nokia Corp. (NYSE: NOK). But Steve Ballmer and Bill Gates have their game faces on. That will only last if Xbox One sales are remarkable.

Sony also cuts targets for smartphones and camera sales. (Reuters)

A complex Irish tax loophole helps Apple Inc. (NASDAQ: AAPL) save billions in taxes. (Reuters)

Merck & Co. Inc. (NYSE: MRK) sets a $5 billion share buyback through Goldman Sachs Group Inc. (NYSE: GS). (Reuters)

Sprint Nextel Corp. (NYSE: S) raises its offer for Clearwire Corp. (NASDAQ: CLWR), but many investors think the new sum is inadequate. (Reuters)

Jamie Dimon has a stronger position at J.P. Morgan Chase & Co. (NYSE: JPM) now that he will keep both the CEO and chairman jobs. (WSJ)

Prosecutors may use the Racketeer Influenced and Corrupt Organizations Act (RICO) to charge SAC Capital Advisors. (WSJ)

Ford Motor Co. (NYSE: F) will increase production by 200,000 vehicles this year. (WSJ)

ESPN, which is majority owned by Walt Disney Co. (NYSE: DIS), begins a series of large layoffs. (WSJ)

Phone companies start to sell subscriber data to marketers. (WSJ)

Vodafone Group PLC (NASDAQ: VOD) says it will use a dividend from Verizon Wireless to expand its main businesses in Europe. (WSJ)

Renault and Nissan aggressively invest to increase market share in India. (WSJ)

J.C. Penney Co. Inc.’s (NYSE: JCP) $2.25 billion loan, backed by real estate, will show how much leverage such assets hold. (WSJ)

The new Microsoft Corp. (NASDAQ: MSFT) Xbox will face rising competition from online games. (NYT)

The Bank of Japan decides not to increase its monetary easing plans. (FT)

Japan’s trade deficit rises as high-priced imports offset the effects of a weaker yen. (FT)

Rumors surface that Sony may spin out its entertainment unit. (Bloomberg)

New features include a voice control guide, enabling Skype video calls while watching television, snap mode to move in between multiple programs at once with Explorer running side by side. This will allow you to switch to games and music instantly, or to movies.

As far as how the video game functionality is changing, that comes with a new video game hand controller that was said to be designed by gamers for gamers and a new Kinect feature with advanced camera and reading functions. The company’s SmartGlass aims to tie in other hardware devices, enabling your tablet to be a remote control.

What is obvious is that this new Xbox One from Microsoft is aimed at being the first true convergence device from the company at the launch. The Xbox 360 was added to and grown on multiple times. Even if that ends up being the case here for Xbox One, this at least looks like Microsoft’s convergence device has arrived.

More details will be available after the 11:00 AM Pacific Time.

NBC News says of the new Xbox launch:

On the eve of Microsoft’s planned Xbox reveal, the company has finally ended its long silent streak to say that the new console will actually be unveiled in two stages.

Speaking on the latest Major Nelson podcast, Microsoft’s interactive entertainment chief of staff Aaron Greenberg said that his company will roll out its next-generation video game hardware in two steps — first at a special event held tomorrow at the Redmond, Wash., Microsoft campus, and then at a more game-centric event during the Electronic Entertainment Expo (E3) in June.

“We have so much goodness that there’s no way we could have packed it all into one event,” Greenberg said.

“The best way I can describe it is: We’re really going to tell one story across two events,” he added. “So we’re going to start on the 21st [of May]; and really that’s about revealing the next Xbox platform and our vision for the future of games, the future of entertainment.”

If sales are poor, Greenberg will be out of work by the end of the year.

Near the top of the business headlines is the battle that Congress has started to wage with Apple Inc. (NASDAQ: AAPL) over the taxes it pays. By some measures, the company barely pays taxes at all. Among the evaluations of the Apple showdown with Capital Hill, one comes from CNN Money:

Apple executives are set to defend the company’s tax practices and call for corporate tax reform on Capitol Hill Tuesday amid harsh criticism following a Senate investigation.

A report released Monday by Senators John McCain, R-Arizona, and Carl Levin, D-Michigan, charged that Apple “has used a complex web of offshore entities — including three foreign subsidiaries the company claims are not tax resident in any nation — to avoid paying billions of dollars in U.S. income taxes.”

The report says Apple relies on a number of unusual accounting tactics along with a handful of subsidiaries in Ireland — where it has negotiated a tax rate of less than 2% — to reduce its tax bill. The U.S. corporate tax rate stands at 35%.

And The Wall Street Journal says on findings about Apple’s tax practices:

Apple used technicalities in Irish and American tax law to pay little or no corporate taxes on at least $74 billion over the past four years, according to the Senate panel’s findings. The investigation found no evidence that Apple did anything illegal. Aides to the subcommittee said they have never seen a company use a subsidiary that didn’t owe corporate income taxes to any country.

Apple didn’t dispute that entities it set up didn’t pay corporate taxes but denied they were designed to avoid taxes. The company said it pays local taxes on overseas earnings and U.S. taxes on investment income generated at its Irish subsidiaries.

Goldman’s S&P 500 Target

The sentiment about the value of stocks continues to be relentlessly positive. None other than the powerful investment bank Goldman Sachs Group Inc. (NYSE: GS) has increased its target for the S&P 500. According to MarketWatch:

The Standard & Poor’s 500 index will rise 5% from current levels to reach 1,750 by the end of this year, said Goldman Sachs in a research note dated May 20. A team of strategists led by David J. Kostin, chief U.S. equity strategist, said the index will “advance by 9% to 1,900 in 2014, and climb by 10% to 2,100 in 2015.” The 2013 return implies a year-end price/earnings ratio of 15 times, which is a one mutiple-point premium to Goldman’s fair-value estimate. Improved economic growth, rising dividends — Goldman expects those dividends to gain 30% between 2013 and 2015 — and potentially low sustained interest rates are all contributors to the higher S&P 500 forecasts. If interest rates stay low despite better growth then upside to those S&P 500 targets could be bigger than they are currently forecasting, said Kostin.

New Xbox Unveiled

Microsoft Corp.’s (NASDAQ: MSFT) most important product announcement since Windows 8 will happen today as it releases details about its next generation Xbox. The hype already has begun. NBC News says of the new Xbox launch:

On the eve of Microsoft’s planned Xbox reveal, the company has finally ended its long silent streak to say that the new console will actually be unveiled in two stages.

Speaking on the latest Major Nelson podcast, Microsoft’s interactive entertainment chief of staff Aaron Greenberg said that his company will roll out its next-generation video game hardware in two steps — first at a special event held tomorrow at the Redmond, Wash., Microsoft campus, and then at a more game-centric event during the Electronic Entertainment Expo (E3) in June.

“We have so much goodness that there’s no way we could have packed it all into one event,” Greenberg said.

“The best way I can describe it is: We’re really going to tell one story across two events,” he added. “So we’re going to start on the 21st [of May]; and really that’s about revealing the next Xbox platform and our vision for the future of games, the future of entertainment.”

If sales are poor, Greenberg will be out of work by the end of the year.

Douglas A. McIntyre

Apple’s stock price by itself shows how investors have devalued the company and its products. A month ago, its share price was down 40% from its 52-week high. BrandZ would argue that the drop does not matter. The research firm’s methodology is such that Apple’s troubles could be swept under a rug:

It is the only study to combine measures of brand equity based on interviews with over two million consumers globally about thousands of global ‘consumer facing’ and business-to-business brands with a rigorous analysis of the financial and business performance of each company (using data from Bloomberg and Kantar Worldpanel) to separate the value that brand plays in driving business revenue and market capitalization. Consumer perception of a brand is a key input in determining brand value because brands are a combination of business performance, product delivery, clarity of positioning, and leadership. The ranking takes into account regional variations since, even for truly global brands, measures of brand contribution might differ substantially across countries

However, that explanation is inadequate. Apple’s brand valuation was higher by 1% year-over-year in the current study, which makes the BrandZ number even more questionable.

The most useful contrast among the top brands in the study, at least as far as how odd the results are, is that Google Inc.’s (NASDAQ: GOOG) brand value was only up 5% to $133.7 billion. Google’s success over the past year, in contrast to Apple’s, would argue powerfully for a much better increase.

As for the balance of the top 10: International Business Machines Corp. (NYSE: IBM) ranked third with a valuation of $112.5 (down 3%). It was followed by McDonald’s Corp. (NYSE: MCD) at $90.3 billion (down 5%), Coca-Cola Co. (NYSE: KO) at $70.4 billion (up 6%), AT&T Inc. (NYSE: T) up 10% to $75.5 billion, Microsoft Corp. (NASDAQ: MSFT) down 9% to $69.8 billion, Marlboro down 6% to $69.4 billion, Visa Inc. (NYSE: V) up 46% to $56.1 billion, and China Mobile Ltd. (NYSE: CHL) up 18% to $55.4 billion.

The valuations are not meant to track stock price alone, or a foundation of value based in financial results. However, the values at least should not be entirely offset by these things. As such, Visa’s revenue last year was up from $9.2 billion to $10.4 billion, and net income fell from $3.7 billion to $2.1 billion. These results are well less than spectacular, and might even be counted as mediocre. How do they justify a 46% increase in the value of the Visa brand?

BrandZ is free to use its own complex valuation model — it is the company’s survey, after all. But when the valuations do not true up at all to the real world, all the results have to be taken with a great deal of skepticism.

In a blog post about the eighth year anniversary, the “YouTube” Team bragged:

Today, more than 100 hours of video are uploaded to YouTube every minute. That’s more than four days of video uploaded each minute! Every month, more than 1 billion people come to YouTube to access news, answer questions and have a little fun. That’s almost one out of every two people on the Internet.

Movie and TV studios are not adding content at anywhere near that rate. The figure only proves that short clips from people who have no interest in premium video remain the biggest part of the site’s inventory, and the part that is growing fastest.

YouTube’s numbers are hugely impressive. Google video sites, made up almost exclusively of YouTube, had 153.9 million unique visitors in March, according to research firm comScore. No other sites where even close. Yahoo! Inc. (NASDAQ: YHOO) had the largest figure among the portals with 50.3 million visitors in March. Another contrast is that visitors to YouTube watched an average of 1,202.6 minutes in March. For Yahoo! the comparable number was 59.1 minutes.

YouTube’s advantage among its competitors ends with size. The video content at Yahoo!, AOL Inc. (NYSE: AOL) and Microsoft Corp. (NASDAQ: MSFT) is almost all professionally produced. Advertisers are happy to run marketing messages next to or in this content. YouTube has some movie trailers on its home page. It also has content there that includes “How to Disappoint Your Parents in 61 Seconds” and “The Disgusting Little Things That People Do.” Among those things is watching disgusting videos on YouTube.

Happy birthday.

Yahoo! Inc.’s (NASDAQ: YHOO) board approves a $1.1 billion cash deal for Tumblr. (Reuters)

Chesapeake Energy Corp. (NYSE: CHK) appoints an executive from competitor Anadarko Petroleum Corp. (NYSE: APC) to be its new CEO. (Reuters)

The European Union says that Chinese companies ZTE and Huawei have violated trade practices. (Reuters)

The Boeing Co. (NYSE: BA) 787 Dreamliner has a number of problems beyond its batteries. (WSJ)

Increases in credit availability help China’s real estate prices rise. (WSJ)

The new Microsoft Corp. (NASDAQ: MSFT) Xbox will have features to help it compete with smartphones in the game industry. (WSJ)

Storm Sandy should help the earnings of Home Depot Inc. (NYSE: HD) and Lowe’s Companies Inc. (NYSE: LOW). (WSJ)

“Star Trek into Darkness” grosses $70.8 million in North America over the weekend. (WSJ)

The Chinese military once again engineers hacks of U.S. companies. (NYT)

SAC Advisors chief Steve Cohan receives a subpoena to testify in an insider trading probe, but he may plead the Fifth Amendment. (NYT)

The European Union probably will set plans to catch tax evaders as a means to bring in money for struggling governments. (Bloomberg)

The Xbox is expected to have the minimum features any new product in the industry would have. Among these are broadband connections which support HD movie downloads and streaming, and multiplayer gaming that allows users to compete across the world.

The critical feature will be the extent to which the console supports free games which world on smartphones and tablets. And, whether the Xbox platform can be migrated to an owners portable devices without any fee. In a game world, where many new products are free, offering a lot of free features could be Microsoft’s path to a successful product.