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Investment News Briefs Wednesday, July 29, 2009

Money Morning Staff — Wed, 29 Jul 2009 14:45:07 +0000

Goldman Goes to Defends Energy Trading; Consumer Confidence Falls on Job Worries; Home Price Erosion Continues to Slow; Congress Works to Ban Incentive Pay, Give Shareholders a Voice on Bonuses; IBM Expands Its Data-Crunching Business;

Goldman Sachs Group Inc. (NYSE: GS) representatives are yesterday (Tuesday) defended their commodities trading business on Capitol Hill, where regulators may set limits on speculators in the sector. The Commodity Futures Trading Commission (CFTC) said that the energy trading community may have played a major role in the volatility of energy prices over the last few years, and may need to expand its oversight of the practice. “The American people are tired of excessive speculation and bubble economies caused by Wall Street greed,” Senator Bernard Sanders, an independent from Vermont, said at the hearing, according to The New York Times. “They are tired of hedge fund managers and firms like Goldman Sachs making a fortune betting that the subprime mortgage market will continue to get worse or that more companies will go bankrupt.”

Consumer confidence in the United States continues to wane: The Conference Board’s confidence index fell to 46.6 this month following a 49.3 reading in June. The key factor affecting confidence is unemployment. “Folks are still concerned about their jobs,” Mark Vitner, a senior economist at Wells Fargo Securities LLC told Bloomberg News.

Month-to-month U.S. home prices in May grew 0.5% in May, the first increase in nearly three years according to the Standard & Poor’s/Case-Shiller Home Price Indicies. Year-on-year prices continue to decline on the 20-city index, falling 17.1%. “The pace of descent in home price values appears to be slowing,” said David M. Blitzer, chairman of the Index Committee at S&P in a prepared statement. “While many indicators are showing signs of life in the U.S. housing market, we should remember that on a year-over-year basis home prices are still down about 17% on average across all metro areas, so we likely do have a way to go before we see sustained home price appreciation.”

In a move that should appease public outrage over Wall Street pay, the U.S. House Financial Services Committee approved legislation that would enable regulators to ban incentive pay at banks and give shareholders a vote on bonuses, Bloomberg News reported. The bill, adopted 40-28 yesterday (Tuesday),would allow agencies such as the Securities and Exchange Commission (SEC) to prohibit compensation that encourages financial companies to take “inappropriate risks.” The House of Representatives and Senate must pass the bill before U.S. President Barack Obama signs it into law. The House could vote as soon as Friday.

International Business Machines Corp. (NYSE: IBM) acquired Chicago-based predictive analytics firm SPSS Inc. (Nasdaq: SPSS) for $1.2 billion in cash, or $50 per share. The deal was valued at 40% above SPSS’ closing price of $35.09 on Monday. SPSS’ shares soared on the news yesterday (Tuesday), closing at $49.45, up 40.92% or $14.36. The worldwide market for business analytics software will swell to $25 billion this year, growing 4% over 2008, IBM said, citing Interactive Data Corp. (NYSE: IDC) information.

Viacom Inc. (NYSE: VIA) suffered a 32% drop in its second quarter bottom line, citing a challenging global economy. The media giant’s profit fell to $277 million, or 46 cents a share on revenue of $3.29 million for the quarter ended June 30. That compares to a net income of $406 million, or 64 cents a share on revenue of $3.85 billion in the same period last year. The company was encouraged that its premium movie channel, Epix, coming this fall, will appear in the lineup for subscribers of Verizon Communications Inc.’s (NYSE: VZ) FiOS television service. “While we view this as an encouraging sign, we note that Verizon FiOS has a very limited base of TV subscribers,” Spencer Wang said in a Reuters report. “We continue to believe securing distribution from larger operators [such as major cable companies] will be challenging.”

Source: Investment News Briefs Wednesday, July 29, 2009

Google Fires Shot Across Microsoft’s Bow with New Operating System

Bob Blandeburgo — Thu, 09 Jul 2009 18:05:24 +0000

Google Inc. (Nasdaq: GOOG), not satisfied owning the search engine market, yesterday (Wednesday) revealed it is going to assault Microsoft Corp. (Nasdaq: MSFT) on the turf it has dominated for two decades: the operating system (OS).

In a blog posting, the Mountain View, Calif.-based company introduced the Google Chrome Operating System, which shares the same name as the web browser it introduced in September. Google expects the OS to be available in the second half of 2010, and it initially will run onnetbooks, or low-cost laptops designed for Internet access. The company is working with multiple manufacturers such as Acer Inc., Hewlett-Packard Co. (NYSE: HPQ) and Toshiba Corp. to bring Chrome OS-backed netbooks to the market, Google said.

No. 1 computer seller H-P told the Dow Jones Newswires that it is “studying” the Chrome OS.

“We want to assess the capability it may have for the computer and communications industries,” said H-P spokeswoman Marlene Somsak.

Dell Inc. (Nasdaq: DELL) is also giving consideration to Chrome OS.

Analysts were mixed on the news.

“There is a possibility that the new OS can break the paradigm Microsoft and Intel created over the past 20 years,” aid Yukihiko Shimada, a computer analyst at Mitsubishi UFJ Securities Co. told Bloomberg News. “There is plenty of business opportunity for Google in this market.”

However, FBR Capital Markets Corp. (Nasdaq: FCBM) analyst David Hilal said Google could capture some share on the netbook front, but could find it tough to get beyond that.

“I really don’t picture Google going upstream to laptop or PC market,” he said in an interview with MarketWatch.com. “They may try, but that is a much tougher row to hoe.”

Comparing the Chrome OS to its Chrome web browser, Google said it is “going back to the basics and completely redesigning the underlying security architecture of the OS so that users don’t have to deal with viruses, malware and security updates. It should just work.”

The move represents a natural progression for Google, which for years has been experimenting in applications beyond its search. Its most successful experiment is undoubtedly Gmail, which earlier this week left its beta phase after five years. Since Gmail’s inception, the company produced Google Apps, which gives users a central location for calendar, word processing and spreadsheet applications-all of which are compatible with Microsoft Office applications.

Google Apps, a prime example of cloud computing, allows for a more consistent collaboration between users: Instead of emailing attachments, the document will be on a central server where anyone with permission can access edit it within the web browser from any computer.

Chrome OS will utilize the same “cloud” that Google Apps is using. For app developers, “the web is the platform,” Google said. This will give Chrome OS a competitive advantage over the top three operating systems on the market right now (Windows, MacOS and Linux) because any app that runs in the Chrome OS will also run on the others.

“We hear a lot from our users and their message is clear-computers need to get better,” Google said. Whether Google can make an impact on the quality of computers is an entirely different issue. It faces a steep uphill battle against not only Microsoft, but also Apple Inc. (Nasdaq:AAPL), which is slowly eroding Microsoft’s commanding lead in the OS market.

Last November, Microsoft’s Windows OS market share dropped to 89.6%according to market research firm Net Applications. That marked the first time the OS held less than a 90% share of the market. In May, that share was down to 87.8%, while Apple’s MacOS was up to 9.8% from November’s 8.9%.

The news of a Google OS could ice its relationship with Apple, where Google Chief Executive Officer Eric Schmidt has a seat on the board of directors. The two companies have already been competing on the mobile phone front with Google’s Android OS competing with Apple’s iPhone.

In November 2007, when Google announced it would develop the OS for a line of T-Mobile USA Inc. phones, some analysts were surprised that Schmidt would remain on the board of operations at both companies.

In May, The New York Times reported the Federal Trade Commission launched an inquiry into the close ties of the two boards. And now with the Chrome OS news, respected tech site CNET is calling for Schmidt to step down from Apple’s board.

When Chrome OS is released, it will mark the third major front in its war with Microsoft. The other two are cloud applications and search.

Microsoft is attempting to chip away at Google’s ubiquitous search engine with its newly launched Bing search engine. To a lesser extent, Google competes with Microsoft with its Chrome web browser (which has 1.8% of the market share in May versus Microsoft Internet Explorer’s 65.5%) and on the mobile phone front, pitting its Android OS against Windows Mobile.

Chrome OS, an open source project that will have its code readily available for anyone to see-will be free, Google spokesman Eitan Bencuya told Money Morning in an e-mail. This strategy removes an important barrier for many and will likely serve as a funnel to Google’s other products and lucrative ads.

Microsoft is set to debut its latest version of Windows, Windows 7 on October 22. Market research firm International Data Corp. (NYSE: IDC) expects Windows 7 to become the dominant OS by 2012.
Shares of Google were boosted 1.48% by the news yesterday, closing at $402.49, up $5.86.

Hot Stocks: Google Fires Shot Across Microsoft’s Bow with New Operating System

Hot Stocks: Microsoft’s Windows 7 Will Win Big Despite a Slow Start

Bob Blandeburgo — Tue, 07 Jul 2009 16:30:07 +0000

Microsoft Corp.’s (Nasdaq: MSFT) soon-to-debut operating system – Windows 7 is one of the company’s fastest, most stable versions of Windows yet, and a pre-release version is generating an overwhelmingly positive buzz.

Market-research firm International Data Corp. (NYSE: IDC) estimates that 78% of enterprise users will have Windows 7 desktops, marking the first time a Microsoft operating system has achieved such dominance since Windows XP, which was released in October 2001.

Current plans call for Windows 7 to be released in late October. Upgrades will range in price from $119 to $219, while new purchases will range from $199 to $319, according to the latest available information.

The product is an important one for the software giant. Back in April,when Microsoft announced the first year-over-year revenue decline in the company’s 23-year history as a public company, the mere confirmation that it was on track to deliver Windows 7 during its 2010 fiscal year was enough to send the firm’s stock up 4% in after-hours trading – even with the lackluster results.

Corporate interest in Windows 7 is strong, according to Bill Veghte, Microsoft’s senior vice president for the Windows business, who said that more than 10,000 companies are evaluating the Windows 7 release candidate, a pre-release version that closely resembles the finished product.

Numbers that large are usually seen only after the company releases the final version to PC manufacturers, Veghte said at a recent UBS AG (NYSE: UBS) Global Technology & Services Conference.

Where Microsoft may find the going a bit rougher is in the consumer market, where the adoption of Windows 7 may be slow due to a predecessor product that created so much ill will that even the mention of its name is enough to make PC users clench their fists in remembered frustration.That predecessor product was Windows Vista.

Before Vista’s release, numerous PC makers affixed small “Designed for Windows XP/Windows Vista Capable” stickers to their products in an effort to assure reluctant consumers they could buy a PC today and upgrade to Vista when it was released. Since then, a lawsuit has been filed in a Seattle federal district court alleging that Microsoft lowered the system requirements to enable a computer to be “Vista Capable” – a change that was allegedly aimed at maintaining sales of current XP-based machines.

The lawsuit brought to light private e-mails exchanged between executives from Microsoft and the PC companies that demonstrated widespread worries about the “Windows Vista Capable” program. One Microsoft executive — Vice President Mike Nash — revealed he purchased a laptop with the “Vista Capable” sticker and was disappointed when he couldn’t run all the features of Vista due to varying tiers of system requirements for the six versions of the operating system.

“I personally got burned,” Nash wrote of his Vista experience. “I now have a $2,100 e-mail machine.”

A resolution in the lawsuit has yet to be reached, but since Vista’s January 2007 release, Microsoft has also been forced to fight it out in the court of public opinion. Last year, the company launched “The Mojave Experiment,” a survey in which a group of consumers who had received poor testimonials on Vista were shown “Windows Mojave,” a supposed new operating system from Microsoft that actually was Vista.

While the Mojave Experiment showed the users actually enjoyed Vista once they used it, the survey itself came under fire in the blogosphere for not presenting a real-world test to the group. For instance, it didn’t take them through an installation of Vista, which was one of the primary criticisms.

The Mojave Experiment “is not about saying Vista is perfect, or that all these people fell in love with it,” Ben Carlson, chief strategy officer for marketing firm. Bradley and Montgomery, told The New York Times. Instead, the experiment was meant to show “what people have heard about Vista is different from the reality.”

When Windows 7 is released on Oct. 22, Microsoft won’t be giving it away to burned Vista users, but does hope to make amends with recession-friendly upgrade prices for anyone who pre-orders the operating system between now and July 11. Users buying new PCs with Vista preinstalled will be issued a voucher for a free copy of Windows 7 now through January 2010.

Just as word of mouth hurt Vista, it will be word of mouth that may ultimately help Windows 7.

“Some would argue that Windows 7 is the first Windows release that we’ve ever done that actually consumes less resources than its predecessor,” Veghte said. Users running the Windows 7 release candidate have found this to be true.

The challenge for Microsoft: Convince end-users and IT professionals that this is true.

Hot Stocks: Microsoft’s Windows 7 Will Win Big Despite a Slow Start