MasterCard Spending Plus, which tracks retail sales, says that consumer electronics products are moving off the shelves of stores but women’s apparel is not. A Wall Street Journal analysis of the data for the first two weeks of November shows that purchases of electronics rose 8.1%. Purchase or women’s apparel was down 3.3% and purchase of luxury goods was off 9.2%.

Retail sales were so weak last year that a number of stores were forced to close in early in 2009 and the industry made tens of thousands of layoffs. It appears that another downsizing is likely.

The trend in the MasterCard survey my favor Best Buy (NASDAQ:BBY) and Amazon (NASDAQ:AMZN), but it will hurt a number of large stores which sell more general merchandise and do not cater to the consumer electronics trade. Macy’s (NYSE:M) is probably near the top of this list along with Nordstrom (NYSE:JWN).

The difference between the shopping patterns of late 2008 and late 2009 is that retailers may end up being divided into “haves” and “have nots.” Last year’s results bloodied most firms in the business. This year, the consumer may be willing to spend a few hundred dollars on the hottest video game. But, his purchases may end there. He will buy himself a Microsoft (NASDAQ:MSFT)  Xbox and get his wife a bunch of flowers. That dress will have to wait until 2010.

Douglas A. McIntyre

Updated throughout the day.

Hershey (NYSE:HSY) and Nestle may enter the bidding for Cadbury (NYSE:CBY) (various)

Microsoft (NASDAQ:MSFT) may pay content companies to block their content from Google (NASDAQ:GOOG) News and use Redmond as their distribution outlet.  (FT)

Colgate (NYSE:CL) may be the next consumer products takeover target. (24/7)

Jamie Dimon, CEO of JPMorgan (NYSE:JPM) may be the next Treasury Secretary (TheStreet)

“Black Friday” retail sales may be misleading if they are strong.  (Reuters)

Barclays (NYSE:BCS) may sell its private equity arm  (ThisIsMoney)

A new version of the Apple (NASDAQ:AAPL) iPod touch set for spring release may include a camera. (Apple Insider)

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Douglas A. McIntyre

News Corp (NYSE:NWS) has made a great deal of the fact that Google (NASDAQ:GOOG) News gets a major benefit by running headlines from News Corp properties including The Wall Street Journal and Fox. Google does not sell advertising on its Google News pages and links on they service send millions of visitors to media outlets everyday, so it is hard to figure the News Corp objection. Rupert Murdoch, head of News Corp, wants to charge for all the content at his company’s websites, but in the meantime the Google traffic would seem to be valuable.

News Corp is working on a partnership with Microsoft (NASDAQ:MSFT) to have News Corp content indexed at its Bing search engine. Microsoft may even pay for this content, although the FT story which first brought up the potential transaction does not make that clear.

Microsoft is also apparently in discussions with other large media companies to create deals similar to the one it is discussing with News Corp.

Microsoft will have to pay content providers a substantial sum to block Google’s access to indexing and displaying their headlines. Google News is by far the largest news aggregation site on the internet and some online content sites get more than 25% of their traffic from the service. Content firms may be able to block Google’s access to their stories, but it is not clear at all that Microsoft can pay them for the lost traffic.

Any system set up by Microsoft to give a traffic platform for publishers is bound to be extremely complex. It is not at all clear how it would pay content providers and whether compensation would be based on traffic or come metric of content quality. Bing has a 9% share of the search market in the US and Google has 65%. The difference makes it impossible for Microsoft to match Google’s news traffic flow.

Many publishers are not willing to give up their Google News traffic. That may give a content company like The New York Times (NYSE:NYT) an advantage over The Wall Street Journal, if the Times keeps its relationship with Google and the traffic that comes with it and WSJ.com does not.

Google still holds the key to the online content kingdom. No content company can thrive without traffic, and the more the better.

Douglas A. McIntyre

Reuters:   The dollar may keep rising as investors close out bets on oil and the currency.

Reuters:   Black Friday deals may not signal a retail comeback.

Reuters:   Kraft (NYSE:KFT) is weighing a higher Cadbury bid as competition from Hershey (NYSE:HSY) and Nestle may emerge.

Reuters:   A group of economists raised their estimates for US growth next year.

Reuters:   Microsoft (NASDAQ:MSFT) and News Corp (NASDAQ:NWS) are working on a distribution deal that would take News Corp’s news sites off Google (NASDAQ:GOOG).

Reuters:   A Fed official said the mortgage-related asset purchase program should be extended.

Reuters:   Chieftain Capital may break into two firms.

Reuters:   JPMorgan (NYSE:JPM), Goldman Sachs (NYSE:GS), and Morgan Stanley (NYSE:MS) may outsource some back office operations to India which would bring hundreds of millions of dollars in sales to Wipro (NYSE:WIT), Infsys (NASDAQ:INFY) and Tata Consultancy. More US financial firms may move operations as they pay TARP funds.

Reuters:   Japan is leaning toward buying F-35 fighters from Lockheed Martin (NYSE:LMT).

WSJ:   Investors are backing away from risk as the year ends.

WSJ:   Italy’s Eni will buy oil stake in Uganda.

WSJ:   Reliance Industries made a $12 billion bid to take control of LyondellBasell

WSJ:   Nissan may produce its electric cars in China.

WSJ:   eBay’s (NASDAQ:EBAY) search feature was down on Saturday.

WSJ:   Existing home sales are up but that has not helped the US housing market much.

WSJ:   Banks are playing a dangerous game by using short term debt to fund loans.

WSJ:   Chrysler is offering 10% financing and $5,000 cash back on 2010 models.

WSJ:   Government payments on debt are based on interest rates that are likely to rise and by 2019 debt service could be $700 billion a year.

FT:   Microsoft and News Corp are talking about a web deal to counter Google News.

FT:   Coca-Cola (NYSE:KO) will work to triple sales in China within a decade.

Bloomberg:   The dollar may not bottom until next year.

Douglas A. McIntyre

Apple (NASDAQ:AAPL) is counting on its relationship with China Unicom (NASDAQ:CHU) to drive iPhone sales in a nation which already has over 500 million mobile subscribers. The head of Unicom said he expects the iPhone to take 10% of China’s 3G users by the end of 2012 when the company forecasts there will be 240 million 3G customers nationwide.

The explosion of iPhone subscribers in China should cause millions of visits to the Apple App store as software programmers begin to write Chinese language software for the iPhone. Last month the store hit two billion app downloads worldwide since its inception.

There are close to two million unlocked iPhones in China. These will be the source of Apple App piracy which could affect the revenue of applications for the handset as seriously nearly unchecked piracy has undercut Microsoft’s (NASDAQ:MSFT) Windows revenue in the world’s most populous nation.

The Apple App store is expected to bring in $1 million in revenue this year in China and $10 million next year. This is small compared to the estimated $200 million in sales that the App store does each month worldwide, according to AdMob. But, Unicom has only sold a few thousand iPhones so far. China App store downloads should be in the tens of millions once the iPhone has been on the commercial market for a year.

Appke is up against the Chinese disregard for intellectual property. iPodNN reports, “Regionally the largest ratio of pirated apps, over 37 percent, is said to be found in China.” Windows suffers from similar problems. The situation got somewhat better once Microsoft pushed the Chinese government to do more to take legal action against people who sold illegitimate versions of its operating system.

The Chinese Apple App store certainly has the potential to reach download levels similar to those in the US within the next two or three years. But, piracy could completely upset that and, if history is any indication, the Chinese government will not do much to prevent it.

Douglas A. McIntyre

Microsoft (NASDAQ:MSFT) CEO Steve Ballmer told attendees at the company’s annual shareholder meeting that Windows 7 sales were astonishingly high. According to a Wall Street Journal account of the gathering, “Microsoft Corp. has sold twice as many copies of Windows 7 in its first few weeks than any previous version of the operating system,” Ballmer said.

The news means that one of Microsoft’s five major operating units may do well and next year. That leaves four to go.

In the quarter than ended on September 30, revenue from Microsoft’s Window’s division fell from $4.3 billion in 2008 to $2.6 billion. The success of Windows 7 may will help rebuild sales in the unit.

The real threat to Microsoft’s recovery is revenue in its business division which Microsoft Office. That operation is under pressure from current competitors including Oracle (NASDAQ:ORCL), SAP (NYSE:SAP), and Salesforce.com (NYSE:CRM). Google (NASDAQ:GOOG) and IBM (NYSE:IBM) are also moving to take business from Redmond.

Ballmer is pointing to the early success of Windows 7 and the joint venture he has set up with Yahoo! (NASDAQ:YHOO) in search as the key to the “turnaround” of the world’s largest software firm. But, some of his largest operation as still under heavy fire which he may not be able to counter.

For more information on Microsoft see the 24/7 Wall St. 500

Douglas A. McIntyre

Reuters:   The Senate is near its first vote on healthcare.

Reuters:   Dell (NASDAQ:DELL) is betting on corporate spending for its recovery.

Reuters:   Time Warner’s (NYSE:TWX) AOL showed that the worst is not over for media job cuts.

Reuters:   China cyber-spying against the US will probably grow.

Reuters:   Oprah will end her talk show in September 2011.

WSJ:   Large shareholders are asking Goldman Sachs (NYSE:GS) to cut bonuses.

Reuters:   GE (NYSE:GE) and Vivendi are $1 billion apart on the value of NBCU.

Reuters:   Ferrero may want the Cadbury gum and candy unit.

Reuters:   The bank bill is delayed in the House and the Senate is divided over the legislation.

Reuters:   The Fed sees little risk in inflation in a weak economy.

Reuters:   Chrysler may close another 100 dealerships.

Reuters:   PricewaterhouseCoopers says corporate accounting fraud is rising around the world.

WSJ:   Gap’s (NYSE:GPS) profits rose 25%.

WSJ:   Microsoft (NASDAQ:MSFT) says Windows 7 is selling well.

WSJ:   VW’s board approved its merger with Porsche.

WSJ:   The chairman of GM is pushing for higher quality cars.

WSJ:   Google (NASDAQ:GOOG) announced plans for its Chrome operating system.

WSJ:   The Administration’s estimate of stimulus job gains is being attacked.

WSJ:   GE (NYSE:GE) is focusing on industrial and infrastructure businesses.

WSJ:   Retailers are cutting prices on the Palm (NASDAQ:PALM) Pixi.

WSJ:   China Mobile (NASDAQ:CHL) is counting on 3G for growth.

WSJ:   Sony (NASDAQ:SNE) will focus more on moving its businesses online.

WSJ:   More homeowners are falling behind in mortgage payments.

WSJ:   Private equity firm Carlyle will put money into three Chinese high growth firms.

WSJ:   The EU is speeding up an antitrust investigation into the McGraw-Hill (NYSE:MHP) S&P group.

WSJ:   Harbinger cut its stock holdings in The New York Times (NYSE:NYT).

WSJ:   A joint venture between BHP Billiton (NYSE:BHP) and Rio Tinto (NYSE:RTP) makes a merger more likely.

WSJ:   Dell (NASDAQ:DELL) is falling behind rivals in sales.

WSJ:   Sears (NASDAQ:SHLD) cut its losses with cost controls.

NYT:   An FHA effort to prop up mortgages is putting taxpayers at risk.

NYT:   Private equity firms are trying to raise money in China.

NYT:   Geithner hope to end the TARP program.

NYT:   The Treasury will auction off some of the warrants it received as part of the bank bailout

NYT:   The OECD was cautious on its forecast for the global economy.

NYT:   France may issue $52 billion in bonds.

NYT:   JPMorgan (NYSE:JPM) will buy the part of its British banking partner that it does not own.

FT:   US short-term interest rates are turning negative as banks move toward safer investments.

FT:   Many retailers are pushing smartphone products for the holidays.

FT:   The difference in the value that GE and Vivendi put on NBCU could kill a merger with Comcast (NASDAQ:CMCSA).

Bloomberg:   Morgan Stanley (NYSE:MS) says China stocks could rise 30% on liquidity and valuations.

You can join our open email distribution list to hear more news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, key analyst calls, and more.

Douglas A. McIntyre

Dell Inc. (NASDAQ: DELL) reported earnings of $0.17 EPS as a headline, but the clean number is $0.23 EPS on a non-GAAP basis and $12.9 billion in revenues.  Thomson Reuters had estimates pegged at $0.28 for non-GAAP EPS and $13.18 billion in revenues.

Dell had previously noted that it did not expect the commercial refresh and upgrade cycle to come into play until 2010.  Michael Dell noted, “We are seeing improvement in overall underlying IT demand that is continuing into the fourth quarter. The same is true with momentum in Dell’s business, specifically in our Large Enterprise and SMB segments. The launch of Windows 7 is being very well received by SMBs and consumers, and we’ll see the benefits of that more fully in our fiscal Q4.”  Unfortunately, that is where the decent to good news stops and is nowhere near good enough for the show-me attitude of investors now.

The company’s guidance at the last earnings date was for seasonal demand increases and sees revenue improving sequentially.  Shipments were flat sequentially, but -5% from a year ago; revenue was a 1% gain sequentially but -15% from last year.  Gross margin was 17.3% and cash flow from operations was $801 million (under closer to $1 billion we were expecting).  While much of the issues might not all be Dell’s fault, this is a huge disappointment compared to what we have seen from other tech giants.

Dell was under pressure partly with the market, but that Bank of America Merrill Lynch downgrade for Intel Corp. (NASDAQ: INTC) and major chip stocks was not enough to offset Microsoft’s (NASDAQ: MSFT) Steve Ballmer’s noting that Windows 7 was the best operating system sales ever this soon into the cycle.  Unfortunately it is just too soon to have any real feel for how the smartphones in China will add to the company.

Dell’s 50-day moving average today was $15.51, and for whatever it is worth tomorrow is options expiration date.  We had recorded an open interest of 85,000 options contracts in the open interest for tomorrow’s NOV09 CALL OPTIONS in the 5 closest strike prices, but that shouldn’t be enough to rock the boat too much.

The only impressive notion we had was that Goldman Sachs picked up coverage earlier this week with a “Buy” rating and a $19.00 target, and it has a history of making the right calls ahead of earnings.  Unfortunately, that looks like a skunk call or at least egg on the face.

Dell shares closed down 1.2% at $15.87 and the 52-week trading range is $7.84 to $17.26.  In the after-hours, shares are trading down close to $14.60. Ouch. Big disappointment here.  And a bad call from Goldman Sachs.

JON C. OGG

The management at Sony (NYSE:SNE) looks more and more like “The Gang That Couldn’t Shot Straight.” Its TV screen business is losing money. Most months, sales of the PS3 fall behind those of the Microsoft (NYSE:MSFT) Xbox 360 and Nintendo Wii.

Sony appears to have a promising new product in its Daily Edition Reader, the company’s e-reader offering. The device puts it into competition with market leader Amazon (NASDAQ:AMZN) and its popular Kindle, but Sony still have the consumer electronics brand power to give it a reasonable change to be a force in the e-book industry.

It would be nice if Sony could get its product out for the holidays.

The Wall Street Journal suggested that readers who look at the Sony e-reader section of SonyStyle.com will find that the product can be preordered but will not ship until some time between December 18 and January 8 and even then “actual delivery date cannot be guaranteed.”

Sony has a history of disappointing investors which may be caused by its history of disappointing customers. The battle for e-reader market share will not be entirely won or lost this holiday, but the efforts by Amazon and Barnes & Noble (NYSE:BKS) to gain customers during the high point of the annual retail season  are already considerable. The Kindle is being promoted on the home page of Amazon.com and the Barnes & Noble “Nook” is the featured product at the barnesandnoble.com site.

Research firm Forrester recently raised its forecast of holiday e-reader sales to three million from two million. Sony is risking what could be as many as a few hundred thousand sales by not being able to guarantee shipment of its product before Christmas.

This holiday might have offered Sony a chance to improve its reputation which is now one of being a consumer electronics “also ran”. Instead, it will only add to its own history of disappointing customers.

Get more on Sony and Amazon at the 24/7 Wall St. 500

Douglas A. Mcintyre

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Executive Producer: Philip MacDonald

The most charitable thing that can be said about Vikram Pandit, the CEO of Citigroup (NYSE:C) since December 11. 2007, is that he was in the wrong place at the wrong time. The bank’s stock is down 90% since his first day as chief executive. The shares of other large international banks were battered by the credit crisis, but JP Morgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) have gained most of their value back during the two-year period. Bank of America (NYSE:BAC), the most hapless of all the large financial firms, has even performed better than Citi in the market.

The time bombs of mortgage-backed securities were already sitting on the Citi balance sheet when Pandit was given his job. He can claim to be blameless for the cause of most of the firm’s severe problems and in that he would be right. What history will remember Pandit for, as much as his bad luck for being at Citi as the markets fell apart is how little he did to improve the bank’s fortunes. Most of Citi’s restructuring was forced on the company by the government. The firm has done some modest joint venture work in its private client and wealth management business by selling some of these parts of Citi to Morgan Stanley (NYSE:MS). Citi plans a public offering of it Primerica division.

But, the firm remains a nearly unmanageable monolith with 350,000 employees and 200 million customers. Many of its businesses bear no relationship to one another. Citi is no better off than it was the day Sandy Weill created it. The economy is just worse now.

Pandit did have a chance to completely alter Citi and perhaps in the process do something extraordinary for the company’s shareholders. Citi’s Institutional Clients Group is an investment bank tucked inside its parent. It should be valued more on the basis that Goldman Sachs (NYSE:GS) or Morgan Stanley are. That will not happen until it is an independent business.

Citi owns Banamex, the largest bank in Mexico. It is nearly impossible to make a case that a large financial firm in a developing country which has only modest economic prospects is valuable long-term investment.

Citi’s credit card business would probably be worth more to investors as a separate business. Capital One (NYSE:COF), which is in the same sector of the financial industry, has done much better in the market than Citi has during the two years since Pandit took over.
It is not always true, but in general more nimble companies can navigate a disaster better than firms which are highly complex collections of assets. That may be the lesson of GE’s (NYSE:GE) performance during the recession. The same may hold true for Microsoft (NASDAQ:MSFT) which has at least five major businesses, some of them with almost no relationship to the company’s massive operating system and business software operations.

The Personnel and Compensation Committee of the Board of Directors of Citigroup Inc. had a meeting last week. They determined that Vikram Pandit will be paid a base salary of $1 next year and will get no “stock salary” for the period. He may have suggested the compensation as a gesture to Citi’s battered shareholders. It is not much of a token. Those shareholders would rather have Pandit take home $50 million and see Citi’s stock back where it was on December 11, 2007

Douglas A. McIntyre