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Commentary on The Capital Markets- Category [Company Specific]

Some of you remember my articles a while back on Sprint; I was convinced the company was a good buy and stuck my neck out when everyone else thought they were swirling the bowl.

I proved to be right, but then a disrupting force came in through M&A -- and I got out.  I was asked at the time what I thought about the combination and my answer was simple: I lack enough information to analyze the situation post-merger, and I have no reasonable expectation of being able to regain that analytical capacity -- therefore, I'm out.

The stock continued to rise for a bit, but now it is in an all-on collapse, hitting $3.11 today down from over $8 a year ago.

So what do you do now?

You stay away for the same reason I argue you wanted out before.

I don't like the internals, I don't like the technicals, I really don't like the firm's debt position against it's free cash or its debt:equity ratio (which is in the stratosphere) and I question the book value.  Oh, and that negative levered free cash flow bothers me too.

It would have been an interesting short if you could get visibility into the combination at the time of the acquisition but there was no good way to do that, and at this price shorting it is folly.  But buying it here is basically buying a long-dated option on the company being taken out, and that's already happened -- which means that it's more-likely to find itself as a written-off piece of the acquirer, much like Nokia's spin-and-sell to Microsoft was.  If you're tempted then buy some cheap CALLs instead, but do it with money you'd otherwise spend on booze and call it a purchase intended to be "for your health" (because it kept you out of the bar.)

Short form: Stay away.

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Now this is rich...

Citing “security reasons,” the Pakistani government plans to prevent its citizens from accessing BlackBerry’s suite of secure messaging services by December 1, according to a report fromReuters.

“[The Pakistan Telecommunication Authority] has issued directions to local mobile phone operators to close BlackBerry Enterprise Services from Nov. 30 on security reasons,” said an unnamed Pakistani official to the publication.

Uh huh.

The truth is, as BlackBerry explains, that Pakistan demanded a back door into the firm's BES services -- and BlackBerry refused.

Pakistan wouldn't have asked if they could have broken in without BlackBerry's help, by the way.

In light of this admission and public position, backed up by acts instead of rhetoric, which company would you like to buy your phone and mobile management service from?  Psst... don't read this article... smiley

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Someone gets it....

Online retailer Amazon.com celebrated its 20th birthday with Amazon Prime Day, a blowout sale for Prime members. For one day only, on July 15, the $99 membership—which includes unlimited free two-day shipping and streaming access to movies and original series—would give lucky customers access to steals “better than Black Friday,” according to a press release from Amazon.

The numbers proved Amazon’s promise true, surpassing the unofficial retail holiday in total sales, and nary an overly enthusiastic consumer was trampled. The Verge reports that Amazon sold more than 35,000 Lord of the Ring blu-ray sets, 28,000 rubbermaid dishware sets, and 1,200 TVs.

All crap, for the most part.

Rubbermaid dishware sets?  Really?

The problem with this so-called model is that Amazon thinks it can "kill" traditional retail.  Sure it can.  Exactly how, for items you've never seen before?

Never mind that the so-called "cost advantage" is disappearing fast, and in many cases is actually negative now for Amazon.  That is, the items (including the sales tax they are increasingly forced to collect) are more expensive than what you can obtain locally -- particularly from firms like WalMart (love 'em or hate 'em.)

Amazon can't "up its game" to turn itself into WalMart; it has no operating margin to do so without winding up bankrupt.

Therein lies the problem; Bezos has had a walk on water pass from Wall Street for two decades, but the fact of the matter is that when it comes to providing actual value the company is losing -- badly -- to the good old big-box competitor.

It couldn't happen to nicer people.

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Apple has made a lot of hay over the years claiming they have "no interest" in selling your personal information, which is one of their arguments in the war with Google (which makes no such claim and in fact their entire business is centered around learning as much as it can about you so it can monetize that.)

Well......

In a patent application filed today, Apple proposes a new e-commerce system that uses a mobile phone to deliver targeted ads to users based on what they can actually afford. This new patent comes on the heels of another recent in-development project for creating and tracking ads — and the Apple users who look at them — based on social media content that goes viral.

In other words Apple intends to find ways to get access to your credit card and bank accounts and then use that information in real time to display ads that you "can afford."

Note the definition of "afford" in the cited article -- your credit card has enough balance available!

Really folks?  You want to buy products from a company that is patenting a "method" to inquire in real time the balance from your credit accounts and figure out what you can buy then try to cajole you into purchasing those items?

Are you insane?

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This is the other one (Intel) I wrote on last night; the table is right in the front!

Operating income down 25%, revenue down 5%, and the reason for the "beat" (and flat EPS) instead of an all-on disaster report is a more than two thirds decrease in the tax rate.

Why did I put up the little ticker last night that was all of a couple of lines?  Because I didn't have to actually analyze anything or even get out a calculator; the table is right there on the second page of the report!

This report is an all-on disaster and documents an ongoing collapse; the firm had a 5% revenue shortfall but five times that in operating income.

The "client computing group" (that's PCs, folks) saw a revenue decrease against last year approaching 40%.

That's not a decrease or a "slowdown" it's an all-on collapse!

And by the way, so-called "cloud" and other "data center" processor revenue was flat as was "internet of things" while software and services were down 25% (the latter, however, is an immaterial part of Intel's business.)

Intel owns the data center business; nobody else is a material competitor in that segment, period.  The so-called "cloud" and data center business is dead folks; there is zero net growth, literally, in that line of business which means that everyone else in this space is not actually expanding anything, they're all playing financial games rather than adding to capacity and growing their businesses.

Cloud-Amazon-cloud-Salesforce-cloud-Rackspace-cloud-cloud-cloud-cloud-cloud horse****!  No chip sales increase, no growth in that industry period.

Finally, this is the chip company that powers technology in the world and is buying back stock to the tune of more than half a billion dollars while its operating results deteriorate at five times the rate that sales decrease!

And this is good for a market that is up 15 SPX handles (and an NDX up 53?!)

The bottom line:

The tech "business" at its core on a global basis is literally disintegrating; there has been zero growth over the last 12 months at the cloud and enterprise level and an actual collapse at the "client" machine (e.g. PC) level.

You got a warning of a couple of quarters before it all went to hell in 2008.

Now you have another one in that one of the "highest of the high flyers" is "rewarded" with a 15% ramp when it's literally burning debt-issued cash in the furnace while the company that powers virtually every single cloud, data center and other enterprise computing device on the planet, including all the content delivery devices of that first firm has failed to show a single dollar of growth in the enterprise and cloud segment over the previous 12 months and at the same time "client" (consumer) CPU revenue has collapsed by 40%.

Nobody has said a damn thing about either of those facts on bubblevision this morning.

Just as nobody said a damn thing in 2007 and early 2008 on the TeeVee either.

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