Thursday, June 21, 2012

Oracle CEO Larry Ellison Buying Hawaiian Island Lanai

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Larry Ellison reaches deal to buy 98 percent of the sixth-largest island, Lanai.

MarketWatch is reporting: The 141-square mile island near Maui is currently home to just 3,200 people and two resorts but the current owner, real estate firm Castle & Cooke, said Ellison is planning significant investments to bring in more tourism and jobs, the AP said. He is buying roughly 98% of the island and while the cost was not released, it has previously been reported that the asking price was between $500 million and $600 million.

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Sunday, June 10, 2012 (CRM) Acquires Buddy Media

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* Buddy Media, the world's leading social media marketing platform, enables the world's top brands and advertisers, including Ford, Hewlett Packard, L'Oreal and Mattel, to connect with more than a billion customers on Facebook, Google, LinkedIn, Twitter, YouTube and more

* Combining market leaders Salesforce Radian6 and Buddy Media, the Salesforce Marketing Cloud immediately will become the platform of choice for brands to listen, engage, gain insight, publish, advertise and measure social marketing programs

SAN FRANCISCO, June 4, 2012 /PRNewswire/ -- [NYSE: CRM], the enterprise cloud computing ( company, today announced that it has entered into a definitive agreement to acquire Buddy Media, the world's leading social media marketing platform, for approximately $689 million payable in cash and equity. The transaction is expected to be completed during's fiscal third quarter ending October 31, 2012, and is subject to customary closing conditions.

Salesforce Acquires Buddy Media What does the acquisition of Buddy Media by Salesforce mean to your marketing strategy? Allen Bonde explains that this reinforces a focus on user-generated content and interaction, building rich social experiences and accounting for a changing landscape.

Comments on the News

* " now has the number one players in social listening and marketing – Radian6 and Buddy Media," said Marc Benioff, chairman and CEO, "With CMOs surpassing CIOs in spend on technology within the next five years, our Marketing Cloud leadership will allow us to capitalize on this massive opportunity."

* "Social media has caused the biggest transformation in marketing since the Mad Men era, causing CMOs to completely re-think their strategies," said Marcel LeBrun, SVP of Salesforce Radian6. "By bringing together market leaders Radian6 and Buddy Media, we are doubling down on the Salesforce Marketing Cloud to provide CMOs with the ability to manage the entire social marketing lifecycle."

* "Buddy Media's mission is to eliminate the current state of anarchy in social marketing," said Michael Lazerow, co-founder and CEO, Buddy Media. "With the Salesforce Marketing Cloud, marketers will be able to unify their efforts to better organize their teams, optimize their social programs and deliver real business results." Signs Definitive Agreement to Acquire Buddy Media

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Friday, June 8, 2012

Big Tech Assets Rise, Apple Surges to $151 Billion

The Largest USA Tech Companies have reported aggregate total assets of $888 billion, which is the highest in the 5 quarters reviewed and an all-time high. This is a net increase of +$25 billion and +3% from the prior quarter. Apple led the way with a strong +$12 billion increase, followed by Microsoft (+$6 billion), Google (+$5 billion), and Qualcomm (+$4 billion). The only decreases were reported by Amazon (-$5 billion) and IBM (-$1 billion).

The $100 Billion Club: For the latest quarter reported, Apple continues #1 and largest at $150.9 billion. HP continues in second at $127.7 billion, followed by #3 Microsoft at $118.0 billion. IBM dropped to #4 at $115.3 billion. Next is #5 Cisco at $91.2 billion. The next group are #6 Google at $77.1 billion, which surpassed now #7 Oracle ($74.4 billion). Intel continues at #8 ($71.8 billion) followed by #9 Qualcomm ($41.5 billion). Amazon is last and #10 at $20.3 billion. I have included Amazon because of the Kindle Fire, streaming, cloud services, and the resulting competition with others listed.

The Largest USA Tech Companies have reported an average capital to assets ratio of 54.89%, a +1.39% increase from the prior quarter. The net increase was led by Amazon (+5%) and Apple (+3%). Only Google reported a decrease and this was negligible (-0.12%). For the latest quarters reported, Google continues leading with the strongest capital of 80%, followed by Qualcomm at 77%. Apple is #3 at 68%, followed closely by Intel at 65%. Next are OracleMicrosoft, and Cisco at 58%, 58%, and 56%, respectively. Amazon is 8th at 36%, followed by HP (33%) and finally IBM (18%).

Status Updated through HP quarterly financial results reported 5-23-12

Largest USA Tech Companies Earnings Slip, Apple Dominates

Big Tech Market Cap: Apple Larger Than Microsoft and IBM Combined!

Big Tech Profits Increase: Qualcomm, Apple, Google Lead Surge

Sunday, June 3, 2012

HP Reports Solid Earnings, Restructuring, Layoffs, Goodwill Charge

HP ($HPQ) reported QE April 2012 financial results on May 23.

CEO Meg Whitman had a really busy day with both earnings and restructuring announcements. Since last summer, this is actually (and sadly) par for the course with HP as restructuring is announced, amended, and then reorganized. HP valiantly attempts to redefine itself. The Gist: quarterly earnings were amazingly solid for HP and a new multi-year restructuring plan is now in effect. In addition, HP recently launched new laptops, workstations, and printers which were showcased in Shanghai, China.

HP quarterly net income was $1.59 billion, resulting in a surprisingly solid earnings per share of $0.98 Non-GAAP and $0.80 GAAP. This is not only very good, but almost a miracle on Planet HP. Analysts estimates were $0.91 Non-GAAP and HP's outlook was $0.88 to $0.91. The HP GAAP outlook was $0.68 to $0.71. Well done (for this quarter)! CEO Whitman stated, "We are making progress in our multi-year effort to make HP simpler, more efficient and better for customers, employees, and shareholders. This quarter we exceeded our previously provided outlook and are executing against our strategy, but we still have a lot of work to do."

Now to the Life Gets Tough portion of this earnings review. The restructuring includes an 8% workforce reduction or 27,000 employees "exiting" HP by FYE October 2014. The overall annualized savings of the restructuring is ultimately projected to be $3.0 to $3.5 billion. "HP expects to use the savings to boost investment in innovation around its three areas of strategic focus: cloud, big data and security, as well as in other segments that offer attractive growth potential".

However, there are expenses associated with all of this new restructuring and redefining. The restructuring charges in the next 2 quarters are expected to be $1.7 billion and apparently $1.0 billion of this will be charged-off this next quarter. That leaves about $700 million for the quarter after that. Okay, that gets us through FYE October 2012. In the next 2 subsequent fiscal years, through FYE October 2014, another $1.8 billion in restructuring charges is projected.

Oh yes, there's more! This is a good one. You remember HP acquired Compaq in 2002? And of course you realize Compaq isn't what Compaq used to be back in the good old days? Younger people might even ask: What is a Compaq and what does it do? There is some goodwill, a premium on the acquisition of Compaq, sitting on HP's books. "HP has commenced an asset impairment analysis to determine the current value of the Compaq trade name acquired in 2002. Based on the preliminary results of that analysis, HP expects to record an impairment charge of up to approximately $1.2 billion that will be included in its GAAP financial results for its third fiscal quarter. There will be no cash impact associated with the impairment charge."

To summarize, GAAP net income and earnings per share is going to take a hit in the near-term until these anticipated "annualized savings" kick in. Get ready. Non-GAAP EPS will fare much better. Ultimately, the restructuring theory is thus: long-term good with short-term and intermediate-term pain on deck.

HP Summary QE April 2012 (GAAP) Financial performance was stronger than projected QoQ and dropped YoY as expected. Total revenues increased QoQ and decreased YoY. Earnings per share, cash flow per share, operating income, net income, gross margin, operating margin, and net margin all were up QoQ but down YoY. Debt continues high at $30.1B and 23.5% of total assets. The outlook for QE July is encouraging for Non-GAAP but GAAP will taking a beating and be near break-even. Financial position continues as acceptable, with adequate capital, adequate liquidity, but high debt.

HP Income Statement QE April 2012 (GAAP) HP reported total revenues of $30.69 billion, net income of $1.59 billion, and earnings per share of $.80. From the prior quarter QE January 2012, these were +2%, +9%, and +10%, respectively. From the prior year QE April 2011, these were -3%, -31%, and -24%, respectively. Gross margin, operating margin, and net margin were up QoQ but down YoY at 23.3%, 7.2%, and 5.2%, respectively. Cash flow from operations of $1.24 was up QoQ and down YoY. The operating expense ratio of 16.1% is just above the historical average (16.1%).

HP Balance Sheet QE April 2012 (GAAP) HP's total assets increased to $127.7 billion. This is below the all-time high of $129.5 billion for the QE October 2011. The capital to assets ratio of 32.7% is adequate and above recent multi-year lows. The current ratio of 38.9% is just above the prior quarter multi-year low (38.5%). The return on assets of +4.12% is yet another multi-year low and dismal. Total debt of $30.1 billion is lower and 23.6% of total assets. This is just below the prior quarter multi-year high (24.4%) and any further increases would be of concern.

HP Outlook (GAAP & Non-GAAP) QE July 2012 For the third quarter of fiscal 2012, HP estimates non-GAAP diluted EPS to be in the range of $0.94 to $0.97 and GAAP diluted EPS to be in the range of $0.00 to $0.03. Third quarter fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.94 per share, related primarily to the amortization and impairment of purchased intangible assets, restructuring charges, and acquisition-related charges.

SalesForce (CRM) Reports 6th Consecutive Operating Loss, Loss per Share -$0.14

SalesForce ($CRM) reported QE April 2012 financial results on May 17.

The quarterly CRM sales pitch and revival conference call has concluded. Frankly, CEO Mark Benioff's fervor was at a lower level and that familiar fever pitch has been a part of the charm of past earnings calls, though a disconnect from GAAP reality. SalesForce reported a 6th consecutive GAAP operating loss, a 4th consecutive GAAP net loss, and a current GAAP loss per share of -$0.14 for the QE April 2012. SalesForce touts "better" Non-GAAP financial results (see explanation below), which exclude significant expenses. Please note Apple and Microsoft report only GAAP results and don't even bother with Non-GAAP data. Unless otherwise noted, results below are GAAP. Cutting through the hype, the SalesForce GAAP earnings (loss) per share performance is thus:

SalesForce did beat their guidance for a GAAP loss per share of -$0.19 to -$0.18, at a current -$0.14. If you utilize the Mark Benioff Financial Reporting Method and take out some hefty expenses, including his, you can get to a Non-GAAP earnings per share of +$0.37, which beat their guidance of +$0.33 to +$0.34.

The Benioff Method: "The company's non-GAAP results exclude the effects of $81 million in stock-based compensation expense, $21 million in amortization of purchased intangibles, and $5 million in net non-cash interest expense related to the company's convertible senior notes. Non-GAAP EPS calculations are based on approximately 146 million diluted shares outstanding during the quarter, including approximately 4 million shares associated with the company's convertible senior notes. GAAP EPS calculations are based on a basic share count of approximately 138 million shares". In other words, Benioff prefers to exclude his and others stock compensation when he tells you how much money SalesForce is making. If he included these material costs, he'd have to spin a much more complex tale and we would all end up very confused.

The Case of the Missing Customer Count: I'm still waiting for one of Benioff's analyst disciples to ask about this: "Your Eminence, you've stopped touting the number of customers and related quarterly increase therein since the quarter ended October 2011. Exactly how many customers does SalesForce have?" Benioff has moved on to touting Non-GAAP "unbilled deferred revenue", instead of customer count (this guy is good!): "Unbilled deferred revenue was approximately $2.7 billion as of April 30, 2012 and $2.2 billion as of January 31, 2012. Unbilled deferred revenue represents future billings under our non-cancelable subscription agreements that have not been invoiced and, accordingly, are not recorded in deferred revenue".

Yes, even a jaded auditor, analyst, and malcontent such as myself has a heart (ok, maybe it's the size of a BB) and because Mr. Benioff seemed not quite so enthusiastic, I will show some compassion. I have noted in previous posts that I think Benioff is a cloud visionary and evangelist plus a consummate promoter. (Now for the disclaimer) But translating this to financial performance to maximize shareholder wealth (ours, not his) is not really part of his divine dispensation. Shareholders, other than him and his team, are bothersome in his grander revelation.

The gist of CEO Benioff's spiel is ever-increasing revenues, integration of Facebook (how many times did he say Facebook in this latest earnings call?) and Twitter into his platform, beating Oracle, promoting his tent revivals (conferences), and a general 'onwards and upwards forevermore' tone, including ultimately $10B annual revenues. Benioff’s enthusiasm and entertainment talent is contagious, you cheer for him and hope he can fulfill his vision, but realize you are not ultimately part of the benefits of that vision if you are an outside shareholder. (CRM) Outlook QE July 2012 Revenue for the company's second fiscal quarter is projected to be in the range of $724 million to $728 million, an increase of 33% year-over-year. GAAP net loss per share is expected to be in the range of ($0.10) to ($0.09), while diluted non-GAAP EPS is expected to be in the range of $0.38 to $0.39. (CRM) Income Statement QE April 2012 (GAAP) (CRM) reported total revenues of $695.5 million, a net loss of -$19.5 million, and a loss per share of -$0.14. From the prior QE January 2012, these were +10%, -378%, and -367%, respectively. From the prior year QE April 2011, these were +38%, -3775%, and -140%, respectively. Gross margin of 78.2% was flat QoQ, decreased YoY, and is below the historical average of 79.6%. Both the operating (-3.2%) and net (-2.8%) margins deteriorated QoQ and YoY to multi-year, if not all-time, lows. Cash flow from operations of $1.54 dipped below the prior quarter multi-year, if not all-time, high of $1.76. The operating expense ratio of 81.4% continues extremely high and well above the historical average of 75.5%. Subscriptions and Support continue at 94% of total revenues. (CRM) Balance Sheet QE April 2012 (GAAP)’s (CRM) total assets decreased slightly to $4.156 billion, from the prior quarter record $4.164 billion. The capital to assets ratio increased to 43.5%. The current ratio is a less liquid 38%, but  does not include $947 million in noncurrent marketable securities. (CRM) is liquid with reasonable capital. The return on assets peaked in QE October 2009 at 5.13% and has declined for 10 consecutive quarters to the current, dismal -1.14%. The $1.66 billion cash, cash equivalents, and marketable securities (current and noncurrent), are 40% of total assets. The accumulating net losses plus these lower-yielding liquid assets are pulling down the ROA.

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