Archive for October, 2008

Electronic Arts (ERTS) Q2-09 September 2008 Earnings Call Notes

October 30th, 2008 No comments

-Revenue $1.126B vs. $1.08B est. EPS -6c vs. -6c est. Guidance for FY2009 $5-5.3B vs. $5.04B est. EPS $1.20 vs. $1.42 est. (15% miss)
-6% layoff of workforce
-$6.47 net cash per share
-Seeing slowdown in retail during October, so they are cautious on the short-term
-Madden 09 sold 4.5M (flat y/y), NCAA 1.5M (up 5%), PGA Tour 1.5M, NHL 09 (up 85%), Fifa 09 (up 30% first few weeks), Spore 2M in 3 weeks
-Harry Potter moved to FY2010 due to movie delay (13c). Recent weeks big move in FX reduces EPS 12c. Continued weakness in catalog sales and macro issues in October forces them to reduce guidance by 30c total
-In October, consumer and retailers are being more cautious
-800K (250K in North America, 70% conversion) on Warhammer Online
-Better: Fifa, Rockband Worse: catalog
-17% of sales were catalog vs. 19% last year

Categories: News

Visa (V) Q4-2008 September 2008 Earnings Call Notes

October 29th, 2008 No comments

-Revenue $1.7B, 58c EPS vs. $1.68B, 56c est.
-2009 Guidance: revenue on low end of 11-15% range, operating margin mid to high 40s, EPS 20% or more, Capex $300-350M
-Q4 payment volume growth 15% (19% last quarter), total cards 12% (14%), payment transactions 14% (15%), processed transactions 11% (13%), service fees 8% (13%), data processing fees 18% (20%), international transaction fees 45% (44%)
-Debit is now 53% of payments
-All disputes with major competitors now resolved
-Further slowdown in U.S. (10%) and cross-border volumes. Debit low-to-mid double digits. Credit got weaker through September
-Additional moderation from September to October. U.S. credit volume +1-2% in September turned NEGATIVE first few weeks of October. Debit still low double-digits
-Cross border volumes high single digits at end of September from double digits earlier
-Q3-Q4 next year might have single digit growth
-FCF will be higher than $1.7B
-Seeing shift to non-discretionary purchases. More credit worthy are driving purchases
-53% of debit spend is non-discretionary. >40% overall. Last recession it was 30%

Categories: News

Microsoft (MSFT) Q1-2009 Earnings Call Notes

October 23rd, 2008 No comments

-Revenue of $15.06B vs. $14.78B est., up 9%. EPS 48c vs. 47c est. December quarter guidance of $17.3-17.8B in revenue, EPS of 51-53c vs. $17.96B and 55c est. FY2009 guidance of $64.9-66.4B, EPS $2.00-2.10 vs. $66.51B and $2.11 est.
-Purchased $6B of stock and paid out $1B in dividends during the quarter
-10-12% unit growth in PCs driven by netbooks and emerging markets. Traditional PC units were several points lower than expected
-sold 2.2m 360 consoles, up 20% y/y
-Business Division Server and Tools up 19%, Client up 2%, Online Services up 15%
-Macroeconomic environment clearly weakened throughout the quarter. Experienced deterioration in the spending environment over the last few weeks which continued into October
-Estimate mature PCs as flat to low single digit growth with netbooks adding 8 points to the growth. Seeing continued double-digit growth across emerging markets
-Windows OEM license units up 8% due to inventory reductions, revenue however down 1% y/y as ASP declined due to shift to netbooks and emerging markets
-Entertainment and Devices, down 6% to $1.8 billion due to the comp of Halo 3 last year. Operating income was up 7%
-Xbox Live has over 14 million members

Categories: News

Chipotle Mexican Grill (CMG) Q3-2008 Earnings Call Notes

October 23rd, 2008 No comments

-Revenue $340.5M, up 18.9%. Comp-sales up 3.1%
-Operating margin 21.4%, down 160bps
-EPS 59c, down 4.8%
-Opened 20 restaurants in the quarter
-Approved $100M stock buyback, 7.5% of outstanding shares
-Grappling with challenges of rising food, energy, and transportation costs
-searching for a new ad agency
-macro operating environment will remain difficult in the coming year
-annual pricing agreements for rice, corn, and soy renewed at significantly higher levels than a year ago
-Planning a price increase of 6% in fourth quarter
-Will open 135-145 new restaurants next year
-Q4 comps are still positive, but very low single digits. July was pretty healthy, but September to October continued at a lower level
-They think earnings growth in 2009, but 25% not do-able
-See mid-single digit food inflation in 2009

Categories: News (AMZN) Q3-2008 Earnings Call Notes

October 22nd, 2008 No comments

-Revenue $4.26B vs. $4.27B est. EPS 27c vs. 25c est. December quarter revenue guidance of $6-7B vs. $7.05B est. Operating income guidance of $145-305M (-46% to 13% growth). 2008 revenue guidance of $18.46-19.46B vs. $19.52B est. Operating income guidance of $716-876M (9-34% growth)
-Revenue growth of 31% y/y or 28% F/X adjusted, operating income up 26% y/y
-FCF TTM of $970M, up 21% y/y
-59% of revenue is media. 38% electronics. 3% other
-North America up 29% in revenue. International up 33%, 28% f/x adjusted
-new version of Kindle won’t come out till next year at the earliest
-experienced slower rates of growth at the end of the third quarter due to the financial market disruptions
-operate in a very competitive environment, we are well positioned due to our low prices
-deceleration of growth in purchase items over $1000
-Prices of books longer-term are cheaper on Kindle $9.99 vs. $25. Hope to sell many more units and make less per unit
-Amazon has changed so much since 2001. We are the low-cost provider with free shipping now, more product categories
-Low prices, free shipping, selection, and speedy delivery drive demand
-Kindle book buying has been additive. Customers buys 1.6Xs what they spent before on physical books and continue to buy physical books
-Going to be especially prudent with capex given environment

Categories: News

Walmart Customers Not Doing so Well

October 21st, 2008 No comments

Eduardo Castro-Wright, president of U.S. operations, had some interesting comments today:

A “disturbing” trend, Castro-Wright said Wal-Mart for the first time is seeing a paycheck-related spike in sales of baby formula, suggesting consumers are rushing to buy such necessities as soon as they have the cash.

He said credit used as a form of payment at Wal-Mart is falling and that the decline is expected to reach into the double digits this year. Many consumers have “maxed out. Credit card limits don’t allow them to use credit.”

As the economy worsens, Wal-Mart’s customers have increasingly shown signs of living paycheck to paycheck. Wal-Mart’s sales typically surge around pay periods at the beginning and middle of the month. Castro-Wright said that spike has become more pronounced as consumers’ budgets become more stressed.

Categories: News

Apple (AAPL) Q3-08 Earnings Call Notes

October 21st, 2008 No comments

-Revenue $7.9B vs $8.05B est. EPS $1.26 vs. $1.11 est. Q4 guidance is revenue $9-10B vs. $10.57B est. EPS $1.06-$1.35 vs. $1.65 est. (27% miss at mid-point)
-Adjusted non-GAAP sales is $11.68B (with iphones not deferred) and $2.44B of adjusted net income
-Operating margin 18.3%, gross margin 34.7%
-International was 41% of revenue
-2.611M Mac sold, 21% unit growth and 17% revenue growth
-11.052M iPods sold, 8% unit growth y/y and 3% revenue growth
-6.9M iPhones vs. 1.119M a year ago
-Gross margin was better than expected due to lower component pricing
-October is a “foggy month”. December guidance has a lot of prudence built-in. Visibility is limited given economic environment
-They brought out Special Guest Steve Jobs to sell the new Non-GAAP numbers just for this call (he’s usually not on the earnings calls). He’s so good at this and can sell ice to eskimos
-We have the best customers in the world. They may post-pone purchases in tough times
-We have $25B in cash and zero debt. We can invest our way through the down-turn
-When asked about stock buy-backs, they are very comfortable with cash position (basically no)
-Mac Education K-12 sales down 7% y/y. California down 28% y/y.
-Customers delaying purchases due to the portable transition. Saw considerable rebound in sales post the refresh
-For iPod, during the final weeks of September to early weeks October, sales went from +7% y/y to flat
-Won’t make a $500 computer that is a piece of junk (no Mac netbook)
-Apple TV is still a hobby. The category will continue to be a hobby in 2009 due to economic conditions
-Have significant backlog on the new Macs, but it is hard to forecast trajectory of demand
-Software is the differentiating technology of the phone product category. Extremely comfortable with iPhone product strategy and approach it as a software platform (Could mean no cheaper iPhone SKU)
-1/2 of iPod sell-through occurs in December
-Mac inventory 3-4 weeks (below normal), iPod 4-6 weeks (normal), and iPhone in 44 countries less then 6 weeks, no data on remaining 7 countries

-Macs a bit light, iPhone number was amazing, and iPods in-line. Guidance is very bad, however people may not care and focus on the new non-GAAP iPhone driven revenue and EPS numbers
-Management is worried about Mac and iPod visibility in current economic environment and built a lot of prudence in the guidance

Categories: News

Julian Robertson Portfolio Analysis

October 17th, 2008 No comments

Julian Robertson is one smart cookie. You don’t become a billionaire hedge-fund legend for being lucky. In this recent CNBC interview, he gave out some of his current ideas.

He gave out 3 types of trades and I will analyze the macro implications of each bucket.

-He is going long the best-of-breed companies that have pricing power, strong competitive positions, and will gain market-share as the 2nd and 3rd tier firms die off in the coming severe recession.

Short copper
-He is shorting the economy as copper is a basic building block for everything: infrastructure growth in housing, construction, and technology.

Curve Steepeners
-He is hedging himself from the rampant inflation that will come in the next few years due to the government interventions, expanding money supply, and printing money.

He still is one smart cookie indeed.

Categories: News

Buffett Calling a Bottom, However He is Sometimes a Few Months Off

October 17th, 2008 No comments

Lots of news today on Warren Buffett buying American stocks for his personal portfolio from CNBC and this editorial he wrote for the New York Times. He has done this before in 1974, 1999, etc., where he tells people publicly in his witty way now is the time to buy or sell.

Buffett is almost always right, but let me clarify… in the slightly longer-term. He is usually a few month off from the exact top or bottom. For example, he went negative on the market in November 1999. The market topped out in March of 2000. He started selling his Petrochina (PTR) stake in mid-July of 2007. Petrochina rallied for a 3 more months another 66% from his initial sell and peaked on October 31, 2007.

His best call was October 1974, where he pretty much nailed the exact bottom in his an interview with Forbes. When asked about what he felt about the stock market he said, “Like an oversexed guy in a whorehouse,” he shot back. “This is the time to start investing.”

Categories: Articles

Google (GOOG) Q3-2008 Earnings Call Notes

October 16th, 2008 No comments

-Revenue $4.04B ex-TAC vs. $4.06B est. EPS $4.92 vs. $4.76 est., a 3.4% beat
-Revenue up 31% y/y and 3% q/q. International 51% of revenue
-Had good quarter as marketing budgets squeezed, companies want measurable results
-Consumer budget squeezed, people use the web to shop and research for bargains
-Will keep a close eye on costs given what we read in the papers
-We are realistic about the macro-economic climate
-Home/auto finance and real estate were the weak verticals
-20,000 full time employees, 500 new net hires. 1/2 of them engineering
-FCF $1.73B, up 61% y/y
-They totally avoided the business linearity by month question
-So much uncertainty in the financial markets and press, very very hard for us to give you sense of what will happen for Christmas and next 12 months. Don’t know what is going to happen

Categories: News