Stocks

Microsoft’s First Quarterly Loss Facts

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A lot of media have been leading with the headline that Microsoft reported its first ever quarterly loss. This is completely true, and yet, Microsoft didn’t actually lose any money during the quarter. So, what really happened. If the world of accounting had been better known to Mark Twain, he might have altered his famous quote to suggest that there are, “Lies, damn lies, and accounting.” Accounting is one of those things that seems like it should be straightforward enough. The popular notion is that companies and their lawyers and accountants deliberately obfuscate the truth about their company’s finances. That isn’t entirely untrue, but it is also true that accounting for a large corporation is not simple. Writing Down Goodwill One of the most subjective, and yet, completely legit, parts of corporate accounting is something known as goodwill. Essentially, the idea is that when you purchase a company, you are buying not just the tangible assets and liabilities of the company, but also the “good will” that exists toward that company. The acquiring company gets to count this so-called goodwill as an asset on its balance sheet. Although goodwill is a completely recognized, after all, a company is worth more …

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2012 Economic Recovery?

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It’s July 1st, and that means that the second quarter just ended. Recent economic data suggest that the housing market might finally be improving a little bit. Recent jobs data suggests that the labor market is at least holding its own, even though it isn’t strong enough to be lowering unemployment yet. How companies report their second quarter earnings will go a long way toward showing whether or not the economy will finally move forward faster than a snail in 2012. Economy Improving? Here is what to look for. Companies should report earnings that are pretty much in line with how well they did in the first quarter since there were no real up or down catalysts in the second quarter. However, what you really want to be looking for is the guidance that companies are giving for the next quarter and the rest of the year. If companies feel good about the rest of the year, that means that they are more likely to spend, or at least not cut. That additional economic activity is what this economy really needs to kick it over this hump because consumers are tapped out. A solid third quarter with rising expectations heading …

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Stock Market Greece Recovery

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The stock market is attempting to stage a recovery now that worries about Greece defaulting and abandoning the Euro have taken a back seat. Recent elections gave the political parties that favor adhering to the conditions of Greece’s bailout the majority of seats and a solid chance at putting together a coalition government. However, Greece isn’t the only issue out there. Recent employment numbers have not been stellar and few companies are issuing what would be called “enthusiastic” guidance for the coming year. The result is an odd stutter-step market that today (June 18) gave us a mixed day with the Dow slightly down and the S&P 500 slightly up. In the long run, the last few months of market action have been good. Runs in the straight up direction seldom end well. This period of consolidation even had some new outlets using the term correction, which is enough to scare off the faintest of heart investors that are often the cause of so much volatility. For long-term investors the fundamentals today are no different than they were a few months ago. The economy is growing, but slowly. Europe is being held together, but barely.

Facebook IPO Securities Fraud?

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We talked recently about the Facebook IPO flop. Now, things are starting to maybe look a little bit worse. According to several news websites, including the Wall Street Journal, there may have been some forbidden communications between Facebook, its major bankers, and subsequently, between those banks and their clients. It seems that during the Facebook IPO roadshow, Facebook disclosed, in more detail than in their amended S-1 filed with the SEC, that their earnings were rapidly declining due to the fact that a large part of their user base was shifting to accessing the Facebook service via mobile devices instead of online. The difficulty is that there is no room on most smartphones to put up the ads that populate the right side of the screen on a full desktop computer or laptop computer. As such, Facebook generates almost no revenue from mobile users. If more users access Facebook without generating revenue that is a double whammy. More users equals more expense, but not more revenue. None of this necessarily adds up to trouble for Facebook, other than those disclosures made in private. All material information must be disclosed publicly both about a publicly traded stocks and those about to …

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Facebook Flop or Not?

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Facebook went public on Friday. After months of build up, there were some issues with trading, and finally, no big pop in stock price. This has led some media pundits to conclude that Facebook’s IPO was a flop. But was it really? Facebook IPO Trading Facebook’s IPO was not necessarily typical. However, there was little typical about it before it even began. There was the sheer size of the offering, making the Facebook IPO one of the largest of all time. Then, there was the intense media interest, which, believe it or not, is not typical of initial public offerings. The idea that Facebook’s IPO was a flop revolves around the concept that its stock price did not rise on its first day of trading. Indeed, there was ample evidence that Facebook’s underwriters were forced to step in and prop up the share price to keep it above the $38 offering price. Whether this is a flop or not depends on whose shoes you are in, and how much you care about what normally happens. Facebook IPO Pricing In the days leading up to the IPO, there was some concern that the price for Facebook stock was too high. After …

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Facebook IPO 2012

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After years of speculation, rumor and guesses as to whether Facebook stock is a good investment at all, the company has finally announced plans to go public. Facebook will trade on the NASDAQ under the ticker symbol FB following its IPO. Like many other technology IPOs of late, this offering will leave CEO and founder Mark Zuckerberg in iron-fisted control of the company. He’ll control approximately 57 percent of the voting power in the company after it goes public, leaving shareholder lawsuits as the only chance for investor control. The company indicated and initial public offering range of $28 to $35 per share. This would value the company somewhere between $77 billion and $96 billion dollars, which is close to many technology pundit’s wishes of a $100 billion valuation. Regardless, of where within that range it prices, Facebook will be the internet IPO ever. With a $100 billion valuation, Facebook would be close in market value to long established technology companies such as Amazon and Cisco. The IPO would raise something in the $11 to $13 billion dollar range, although the company will only get half of that. Investors in the company are cashing in a big pot of chips …

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Apple Earnings Good or Bad?

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Apple reports earnings on April 24. This report is actually for earnings from the 2nd quarter of Apple’s fiscal year, even though corporations on a calendar year are reporting first quarter earnings right now. (Several tech companies reported earnings last week.) After a rough week for the company in the headlines, these earnings will likely be used as a gauge for the short-term future of Apple stock. Recently, Apple has been the subject of legal action from the Justice Department regarding alleged price-fixing for ebooks. Although this makes up a tiny portion of Apple’s revenue, it is a major key in how the Apple store works. If there is a problem with this model for books, there could conceivably be issues in other markets as well. What is not in doubt is that Apple will continue to dominate the tablet computer market and that its prolific iPhone will continue to be a huge player in the smartphone market. There is little doubt among analysts that things in the marketplace look good for Apple in both the short and long-term. In fact, the only real question about Apple stock these days seems to be whether the company’s shares have risen too …

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Tech Earnings Week

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This past week featured the earnings release of several major technology companies, coming closely on the heels of major earnings announcements from other tech companies, including Google and Apple. IBM Earnings First up, IBM reported revenue of $24.7 billion leading to earnings of $2.78 per share. The consensus estimates from analysts were a bit higher for revenue, but a bit lower for earnings per share. The company did raise its full-year earnings guidance, but it wasn’t enough. Investor reaction wasn’t pretty with shares dropping 2.4 percent the following day, and continuing down. The technology giant closed on Tuesday before reporting earnings at 207.31 and closed Friday at just 199.55. IBM’s results have also been blamed for the general downward direction of the markets for the end of the week. Still, IBM has a long history of boosting its share prices, primarily by buying back enormous amount of stock each year. Intel Earnings Intel’s earnings didn’t make investors any happier. The stock has had a pretty good run-up as of late, so anything other than a gangbusters quarter was likely to lead to a poor reaction. Intel shares got it. The stock closed before earnings on Tuesday at 28.48, but finished …

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Apple Stock Paying Dividends

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Apple (AAPL) announced that after years of building up a massive pile of cash with its record earnings that it will begin to return some of that money to shareholders. Apple will pay a quarterly dividend of $2.65 per share starting in July. It will also repurchase up to $10 billion in stock over the next three years. So, what does this Apple announcement mean for the stock and for the company? Apple Dividend At first blush, Apple’s announced quarterly dividend seems very large. But, how much is Apple’s dividend? It works out to $10.60 per year. That’s higher than most companies pay out in dividends. However, remember that Apple’s stock price is much higher than most companies. The stock currently trades around $600 per share. That makes the dividend approximately 1.8 percent, which, while respectable, is nothing to write home about. Why did Apple announce a dividend now? There are several reasons that Apple has finally decided to start paying a quarterly dividend after refusing to do so for years. First, and foremost, is that Steve Jobs is no longer around. Apple’s iconic CEO had the street cred to tell people, “No dividend,” no matter how high the companies cash balance got without …

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Dow 13,000 What Does It Mean?

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As always, the mainstream media perked up about the stock market and investing world when the Dow Jones Industrial Average passed the made-f0r-headlines 13,000 level. The guys that write news story headlines love round numbers, maybe because everyone else does too. But, just like our infatuation with round number birthdays, such as turning 40, there is no real difference between Dow 12,956 and Dow 13,000, just like there is no real difference between being 39 and being 40 years old. Is Dow 13,000 Meaningful? The 13,000 number is purely psychological, but it does provide an opportunity to take a look at how the stock market and the economy are doing lately. First, and foremost, most storied correctly noted that this is the first time the Dow has managed to gain the 13 K level since 2008. That is significant for two reasons. One, 2008 basically marks the beginning of the stock market crash caused by the bursting of the housing bubble and the subsequent financial crisis, all of which triggered what has become known as The Great Recession. Two, it means that maybe some investors should be seeing a recovery in their portfolios. It is tempting to draw the conclusion that …

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