August 5th, 2010 | Categories: Earnings Notes

Activision reported Q2 EPS of 6c and revenue of $683 million. Analysts were expecting EPS of 5c and revenue of $719.8 million. Q3 guidance was for EPS of 8c and revenue of $725 million; the consensus was for EPS of 12c and revenue of $912 million. For the full year guidance was for EPS of 72c and revenue of $4.4 billion; the street estimate was for EPS of 75c and revenue $4.55 billion.

On the conference call the company blamed weakness in the casual and music (Guitar Hero) games businesses. Moreover, their new release slate of Blur and Singularity performed below their expectations. Overall revenue suffered a $20 million hit due to currency. Management also decided to push out the release date of True Crime Hong Kong to 2011 from the 2010 holiday season.

World of Warcraft players remained steady at 11.5 million in number. They hired 60 people out of 5000 applications received for the openings at Infinity Ward. Note that the top 45 people at Infinity Ward had resigned and sued the company for breach of contract and unpaid royalties.

In terms of new intellectual property, management emphasized they are making “two enormous investments” in new games created by Bungie and Blizzard respectively.

The stock traded down 6.4% to $11.00 in after-hours trading.

August 4th, 2010 | Categories: Earnings Notes

Garmin reported Q2 EPS of 85c and revenue of $729 million (+9% y/y). Analysts were expecting EPS of 73c and revenue of $676.8 million. The company gave 2010 revenue guidance of $2.8-3.0 billion and EPS of $2.75-3.15. The street consensus was for revenue of $2.88 billion and EPS of $2.91.

On the conference call, management said they expect 2010 unit volumes for the PND market to be -5% overall with Europe -9%, North America -7%, and Asia/Latin American growth offsetting developed market weakness. The T-mobile phone is selling “below their plan.” The company is also evaluating a number of acquisition opportunities.

Garmin traded down 1.12% to $29.02 during market hours trading today.

August 3rd, 2010 | Categories: Earnings Notes

Mastercard reported Q2 EPS of $3.49 and revenue of $1.37 billion (+6.7% y/y). Analysts were expecting EPS of $3.33 and revenue of $1.38 billion. Pricing contributed 4% to net revenue growth.

The company on the conference call guided to tempering top line growth in the second-half of 2010 due to tougher comparables, uncertainty on the pace of recovery in the United States, and the roll-off of the debit card contracts.

In the U.S., consumers are likely to remain cautious as the pace of growth decelerated from April to June. Management also commented on business trends in the month of July; U.S. credit card processing volume was flat compared to +1% in Q2. On the flip side, rest of the world and especially Asia remained strong compared to Q1 and Q2 growth rates.

Mastercard traded down 0.79% to $200.91 during market hours trading today.

August 2nd, 2010 | Categories: Earnings Notes

VeriSign reported Q2 EPS ex-items of 24c and revenue of $169 million from continuing operations. Analysts were expecting EPS of 24c and revenue of $166.5 million.

On the conference call the company gave 2010 guidance of 8-11% naming services growth, revenue of $665-685 million, non-GAAP gross margin of 77-80%, and non-GAAP operation margin of 40-41%. The street expected 2010 revenue of $769.7 million, but it is likely the number is not comparable due to the recent divestiture of the authentication business to Symantec for $1.28 billion in cash.

On July 27th, the Board authorized a share buy-back of up to $1.5 billion. The company bought $230 million of stock during the quarter. The company also instituted a 7% price increase on July 1st ($6.86 to $7.34 for .coms). 7.9 million new domain names were registered in Q2 representing growth of 13% y/y. The average duration of a registration is 1.17 years.

The stock traded up 2.86% to $28.80 in after-hours trading.

July 29th, 2010 | Categories: Earnings Notes

Coinstar reported Q2 EPS of 39c and revenue of $342.4 million. Analysts were expecting EPS of 33c and revenue of $381.5 million. The revenue shortfall came from the Redbox DVD rental kiosk business, which came in at $271.9 million and 43.9% y/y growth, which was a deceleration from the 70.1% y/y growth in the previous quarter. Operating margins improved to 8.6% from 5.8% q/q.

Q3 guidance was for revenue of $370-390 million and EPS of 46-52c; the consensus was for revenue of $402.7 million and EPS of 60c. Full 2010 guidance was revenue of $1.425-1.505 billion, EPS of $1.88-2.00, and FCF of $80-100 million; the consensus was for revenue of $1.57 billion and EPS of $1.88.

The company on the conference call blamed the DVD slowdown on the 28-day delay on new releases’ agreements with Warner Bros., Universal, and Fox. Management expects the growth to improve in the second half of the year. Moreover, they are actively working on new product line launches. It is widely rumored that videogames are next on the list.

Coinstar is also launching Blu-Ray rentals priced 50% higher at $1.50 a night. They expect Blu-rays to eventually reach 10% of total DVD inventory.

The stock traded down 7.5% to $44.49 in after-hours trading.

Updated CSTR model

July 18th, 2010 | Categories: Learnings

-at 23 started a travel agency, he lost everything. “always bolster your business with plenty of capital”

-at 34 sold second startup, Morris Air, to Southwest Airlines where he was fired after five months “always be your own boss”

-at 39 founded JetBlue. He was ousted by his board

-in 2008 he started Azul. Raised $235 million and invested $13 million of his own money

-”All of us have failures. What matters isn’t what happens to you in life. What really matters is how you react to it

-how to succeed in airline business: “Have the best product. Have the lowest cost. And kill’em with frequency”

-Neeleman makes $200,000 a year with no stock options

-Herb Kelleher “Don’t think about shareholders. Think about crew members. The crew will take care of the customers. The customers will take care of the shareholders”

-”When things are going south, communication should increase” his mistake in dealing with JetBlue’s board

-He owns 15% of Azul but has voting control, so board can’t oust him. “I’ve set it up so I can’t get sucker-punched again”

-”The stock price doesn’t lie” regarding JetBlue -40% in three years

July 16th, 2010 | Categories: Blog

Games: $1.1 billion (-6%)
Hardware: $401.7 million (+5%%)
Software: $531.3 million (-15%%)
Accessories: $169.6 million (+6%)

HARDWARE SALES
DS: 510,700
Xbox 360: 451,700
Wii: 422,500
PlayStation 3: 304,800
PSP: 121,000

TOP 10 GAMES (by SKU)
Title / Platform / Publisher / Release Date / Units sold
1. Red Dead Redemption / 360 / Take-Two Interactive/ May-10 / 582,900
2. Super Mario Galaxy 2 / Wii / Nintendo / May-10 / 548,400
3. Red Dead Redemption / PS3 / Take-Two Interactive/ May-10 / 380,300
4. New Super Mario Bros. / Wii / Nintendo / Nov-09 / 200,900
5. Just Dance / Wii / Ubisoft / Nov-09 / 174,800
6. Wii Fit Plus (with Balance Board) / Wii / Nintendo / Oct-09 /
7.Toy Story 3 / DS / Disney Interactive Studios / Jun-10
8. UFC 2010: Undisputed / 360 / THQ / May-10
9. Lego Harry Potter: Years 1-4 / Wii / Warner Bros. / Jun-10
10. UFC 2010: Undisputed / PS3 / THQ / May-10

July 3rd, 2010 | Categories: Learnings

-communicate effectively on day one. Sent a letter to the troops, to the commanders. And you just echo it and re-echo it in every forum, in every communications opportunity you have
-learn and adapt, tell the truth
-best leaders? foundational level of sheer physical fitness, soldiering is still an outdoor sport. A certain degree of mental toughness, integrity, sheer professional expertise (technical and tactical competence), but what separates the stars. judgement - hugely important
-Ulysses Grant vastly under-rated. Great book by Jean Edwards Smith, Grant. Bruce Catton, Grant Takes Command. He just had sheer determination

July 3rd, 2010 | Categories: Learnings

“..the importance of writing. I’ve explained that it’s integral to learning, that to write well you have to read well, and that to read well you have to think hard. Thinking hard is how we learn” - Douglas Brown

July 3rd, 2010 | Categories: Learnings

How has your study of Jobs and Apple helped you in your job as a venture capitalist?

Extraordinary, rare companies like Apple in those first two or three years have some common traits. The individuals will be different, the businesses will be different, the decade will be different, but the purpose, the drive, the sense of mission, the intelligence of the founders, those will be common. If you have been around the start of success, it’s far easier to recognize it again.