• Senate Democratic leaders late yesterday (Thursday) abandoned plans for an overhaul of the nation’s $2.4 trillion healthcare system before Congress recesses in August – dealing U.S. President Barack Obama a major political blow. The decision was delivered by U.S. Senate Majority Leader Harry Reid, D-Nev., who said that “it’s better to have a product based on quality and thoughtfulness rather than try to jam something through.” The decision to reject President Obama’s ambitious timetable – he wanted a vote on the plan before Congress adjourned – had been anticipated for weeks. Sen. Reid’s comments mirrored those of Republicans, who feared the implications of a quick vote on such a politically charged issue.

• Sagging worldwide PC and server sales resulted in a 17% revenue decline and a 29% drop in Microsoft Corp.’s (Nasdaq: MSFT)fourth quarter ended June 30. The company reported a net income of $3.05 billion, or 34 cents per share on revenue of $13.1 billion, compared to a net income of $4.29 billion, or 46 cents per share on revenue of $15.83 in the same quarter last year. For the year, the software giant posted a net income of $14.56 billion, or $1.63 a share on revenue of $58.43 billion, compared to a net income of $17.68 billion, or $1.90 per share on revenue of $60.42 billion in the same quarter last year.

• Initial unemployment benefit claims in the United States grew by 30,000 to 554,000 for the week ended July 18, according to the Department of Labor. However, the less volatile four-week moving average shrank, falling by 19,000 to 566,000. “The numbers have come down but they still have a ways to go down before the bleeding of jobs is over,” said Andrew Gretzinger, a senior economist at MFC Global Investment Management in a Bloomberg News interview. “The labor market is still weak and is going to remain that for some time to come.”

• Deutsche Bank AG (NYSE: DB) has raised its target for Apple Inc. (Nasdaq: AAPL) from $150 to $225 following its strong second quarter showing and impressive iPhone sales. Apple moved 5.2 million units of its lucrative iPhone, exceeding Deutsche’s projection of 5 million. Deutsche estimates iPhone margins to be roughly 60%. Another reason for Deutsche’s optimism regarding Apple is it expects the iPhone’s international reach to expand from 18 to 80 countries by the end of the September quarter, with a possible partnership with China Unicom Limited (NYSE ADR:CHU) as early as this fall, representing the iPhone’s debut in the emerging market.

• Existing home sales in June rose by 3.6% to a 4.89 million annual rate from a revised 4.72 million in May, when the number rose by 2.4% according to the National Association of Realtors. “Housing may no longer be the weakest link,” said Joel Naroff, president and chief economist at Naroff Economic Advisors Inc. “Demand has clawed itself back to where it was a year ago, a very nice signal that the market has not only hit bottom but is making its way back.” In another sign the housing market may be on the upswing, rates on fixed-rate mortgages increased this week to 5.20%, up from 5.14% last week, Freddie Mac (NYSE: FRE) Vice President and Chief Economist Frank Nothaft said in a prepared statement.

• Increasing landline cancellations and heavy iPhone subsidies contributed to a 15% drop in profit for AT&T Inc. (NYSE: T). The company reported a net income of $3.2 billion, or 54 cents a share on revenue of $30.73 billion for the quarter ended June 30. That compares to a net income of $3.8 billion, or 64 cents a share on revenue of $30.86 in the same quarter last year. The company did benefit from the new iPhone model released last month, activating 2.4 million accounts for the smartphone in the United States.

• Rising customer traffic and operating income could not helpMcDonald’s Corp.’s (NYSE: MCD) profit, which fell 8.1% in the second quarter due to currency fluctuations, the company said. The fast-food chain posted a net income of $1.09 billion, or 98 cents a share on revenue of $5.65 billion for the quarter ended June 30. That compares to a net income of $1.19 billion, or $1.04 a share on revenue of $6.08 billion in the same period last year.

• 3M Co. (NYSE: MMM) suffered an 18% drop in its profit, but beat expectations due to stronger demand for electronic healthcare products in its second quarter ended June 30.  The conglomerate posted a profit of $783 million, or $1.12 a share on revenue of $5.7 billion, compared to a net income of $945 million, or $1.33 a share on revenue of $6.7 billion in the same quarter last year.

Source: Investment News Briefs Friday, July 24, 2009

– thanks chiefly to three key factors. Indeed, executives said that Apple:

• Is gaining market share in its computer business, while PC rivals are losing ground.
• Once again obliterated forecasts in its iPhone business.
• And continues to see growth in its company-operated retail unit – at a time when many retailers are literally running on fumes.

Apple said earnings zoomed 15% in its fiscal third quarter – the best non-holiday quarter in the company’s history – at a time when virtually every other major electronics manufacturer is looking at slumping sales and market-share performance.

Apple’s business “continues to hold up really well in this tough economy,” Shaw Wu, an analyst at Kaufman Bros., told Bloomberg News.

Take computers. Apple’s computer business is defying trends in the category. Overall, industry PC shipments slumped between 3% and 5% during the April-June quarter. And market leaders Hewlett-Packard Co. (NYSE: HPQ) and Dell Inc. (Nasdaq: DELL) showed declines in PC sales of 19% and 27% respectively in their last reported quarters.

But Apple said that computer sales grew 4% following its June price cuts on some of its popular laptops. The company also said it sold 2.6 million Macs in the just-finished quarter, a jump of 18% from the quarter that ended in late March. One key: About half of the consumers who purchased Macs in one of the company-run Apple retail stores had never before owned an Apple computer, the company said.

While Apple’s Mac platform has made modest gains on Microsoft Corp.’s (Nasdaq: MSFT) Windows in the first half of the year, Apple seems just fine with not being the best-selling player in the market.

“Our goal is not to build the most computers; it’s to build the best,” Cook told analysts in the conference call. “At this point, we don’t see a way to build a great product for this $399, $499 [price point],” referring to the rise in popularity of sub-$500 netbooks, which are smaller, lightweight laptop PCs that are designed primarily for navigating the Internet.

Sales of the company’s popular iPhone continue to defy analyst estimates: Apple moved more 5.2 million iPhones in its third quarter ended June 30, more than sevenfold of last year’s 717,000. There are two driving forces behind the huge jump: The release of the iPhone 3GS in June, and the simultaneous price cut of the 8-gigabyte 3G model to $99.

In the quarterly conference call Tuesday, Apple execs would not break down sales of each model, citing competitive reasons. However, the 3GS model, which sold more than 1 million units in its first weekend, remains in short supply and Apple is “working very hard” to fill demand, Chief Operating Officer Tim Cook told investors.

In the midst of a global downturn, the performance of Apple’s company-operated retail chain is enough to make rivals turn green. Even in the face of Microsoft opening stores this fall near Apple’s retail locations and tightening consumer spending, Apple is seeing modest sales growth at its 258 stores, six of which were opened in the last quarter. Retail sales rose to $1.47 billion in the quarter, compared to $1.44 billion in the same quarter last year.

Apple remains on track to open 25 stores in its fiscal year ending September 30, Chief Financial Officer Peter Oppenheimer said.

Apple easily exceeded Wall Street’s expectations for its third quarter, reporting a net income of $1.23 billion, or $1.35 a share, on revenue of $8.34 billion. That compares to a net income of $1.07 billion, or $1.19 a share, on revenue of $7.46 billion in the same quarter last year.

Analysts were expecting earnings of $1.17 a share on revenue of $8.20 billion.

Looking ahead, Apple’s forecast is for earnings of $1.18 to $1.23 per share on revenue of $8.7 billion to $8.9 billion. The company’s guidance is conservative when matched up with Wall Street’s average earnings estimate of $1.30 per share on $9.05 billion in sales.

Much has been made of Apple’s huge cash reserves, now at $31.1 billion. “Our investment priority for the cash continues to be preservation of capital, which has served us well in the current environment,” said Oppenheimer, who added that in the current quarter Apple did make a $500 million payment to Toshiba Corp. for the manufacturing of the flash memory that is found in many of Apple’s products, including the iPhone.

While acquisitions made by Apple are rare, if it does make any, it will likely be for a small company that can easily be integrated into its existing projects.

Although Apple has long been one of Wall Street’s high-tech darlings, analysts continue to warm to the company’s current game plan, and are upgrading its stock – a potentially bullish development for existing shareholders, or for investors considering a move into Apple shares.

Canaccord Capital Corp. said Apple’s decision to add video functionality to the iPod lineup is “very positive” as it expands its market into the low-end camcorder area, according to bloggingstocks.com. Canaccord also views the launch of the iPhone 3GS in all countries by the end of this year as another strong potential catalyst for Apple sales and profits.

Canaccord boosted its rating on Apple’s shares to “Buy” from “Hold.” It also raised its target price from $150 to $200.

Shares of Apple climbed 3.45% yesterday (Wednesday), or $5.23 to close at $156.74.

Source: Hot Stocks: Three Reasons Apple is Bucking the Recession

Jobs, who has been on a leave of absence since January and is expected to return at the end of this month, reportedly traveled to Tennessee in April to undergo a liver transplant, The Wall Street Journal reported Saturday morning. “Steve continues to look forward to returning at the end of June, and there’s nothing further to day,” Apple spokeswoman Katie Cotton told The Journal.

Apple’s lack of disclosure – specifically that Jobs had a liver transplant – raises questions about how much should be disclosed about a CEO of a publicly traded company.

“In the interests of transparency, I think it would be necessary for them to disclose something as serious as a liver transplant,” Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware said in an interview with Bloomberg News. “Investors want to know if he’s healthy and if he can continue to run the company.”

There are no laws requiring executives at public companies to disclose the state of their health, but proponents of such legislation are out there.

“The SEC lacks specific guidelines regarding executive health disclosures,” Dr. Perryman, assistant professor of management in the Neely School of Business at Texas Christian University told Newswire Business News. “This leaves companies to decide what does and does not constitute material information.”

Jobs, 53, first disclosed his health issues in an open letter on January 5, in which Jobs’ doctors blamed his much talked about weight loss on a hormonal imbalance. The following week, Apple disclosed in an SEC filing that Jobs’ health-related issues “are more complex” than first thought.

Demonstrating how important investors believe Jobs is to Apple’s operations, the company’s shares closed at $78.20 on January 20, a 52-week low that was down from $94.58 just 15 days earlier. However, shares for Apple are now in the 130s, and they have outpaced the Standard & Poor’s 500 Index by six times since Jobs began his leave.

Since then, Apple’s stock has rebounded thanks to key product releases, such as a more affordable notebook computers and Friday’s release of the third iteration of its popular iPhone, the 3GS. In that time, Chief Operating Officer Tim Cook has been running the company’s day-to-day operations.

Cook, 48, oversaw Apple in 2004 when Jobs was diagnosed and successfully treated for pancreatic cancer. He was named COO in 2005, and is a likely candidate to succeed Jobs when the time comes.

Strong Sales of New iPhone Offset News of Apple CEO Steve Jobs’ Liver Transplant

In spite of tough economic times, smartphone sales represented 23% of all mobile phone sales in the fourth quarter of 2008, up from just 12% a year earlier, according to market research firm The NPD Group Inc. Another firm, Gartner Inc. (NYSE: IT), says smartphone sales will increase 25% even as the overall mobile phone sector contracts.

Some of the millions of jobless Americans are turning to smartphones as a tool in their job searches, as a means to enhance communication with potential employers.

“I don’t know if it’s really an expectation, but if another job candidate returns an e-mail message eight hours later, and you get back immediately with a message that says ‘Sent from my iPhone,’ I think it has to be a check box in your favor,” jobseeker Helene Rude told The New York Times.

While Apple Inc.’s (Nasdaq: AAPL) iPhone typically gets all the headlines, it is Research in Motion Ltd.’s (Nasdaq: RIMM) line of BlackBerry phones that commands 55% of the market share versus Apple’s 20%, according to market research firm International Data Corp.

The key factors in RIM’s success are market penetration, choice of models, price and, most recently, enticing promotions such as buy one, get one free. BlackBerry phones are on all U.S. carriers, and range in price from $30 to $250. Apple’s two iPhone models, the 3G and 3G S, will cost any user who signs a new contract $99 and $199, respectively.

Smartphones are proving to be profitable, as well. Canada-based RIM last week announced a net income of $643 million, or $1.12 per share diluted on revenues of $3.4 billion. That compares to a net income of $482.5 million, or 84 cents per share diluted on revenue of $2.2 billion in the same period a year ago. Approximately 81% of RIM’s revenue came from sales of BlackBerry devices.

Few smartphones are limited to one carrier. Among them are the iPhone, which can be used only on AT&T Mobility LLC’s network, and Palm Inc.’s (Nasdaq: PALM) newly launched Pre, available only through Sprint Nextel Corp. (NYSE: S).

Apple’s recent price drop on its 8 gigabyte iPhone 3G model to $99 will be interesting to watch, as it will put the company’s wildly popular App Store in the hands of more consumers, who are being bombarded by a series of “there’s an app for that” TV commercials.

Other smartphone makers are playing catch-up in the app department, which will not only be an important factor in consumers’ purchase decisions, but another revenue stream for smartphone makers and their wireless carrier partners.

Apple Chief Executive Officer Steve Jobs told The Wall Street Journalthat his company’s App Store generated $1 million a day in its first month.

Apple’s App Store launched in July last year, followed by Google Inc.’s (Nasdaq: GOOG) Android Market (for HTC Corp.’s G1 phone) in October, BlackBerry App World in April and finally, Palm App Catalog, still in its infancy after its debut with the June 6 launch of the Pre.

Source: Research in Motion Still Leading the Smartphone Pack

For investors, this could be a good time to get in early on the potential windfall. Currently trading at slightly more than $24.00, AT&T (NYQ: T) is hovering near the bottom of its 52-week range of $20.90 – $40.70.

If Apple does in fact introduce a new iPhone, it could be faster and cheaper than current offerings, or create a new low-priced niche that matches the performance of its current 3G model.

Regardless, the impact could only be good for AT&T, which is the exclusive U.S. network provider for the iPhone.

The latest buzz about a new iPhone originated from United Arab Emirates mobile carrier Etisalat. When it announced on February 4, 2009 that it will begin selling the iPhone 3G on February 15. A report on the contract also mentioned a new iPhone slated for June.

The source of the June iPhone release remained murky, but analysts have been saying that a new iPhone may hit the streets this summer. The investor play here would be a long bet that the rumors are in fact true, and that history would repeat itself when it comes to Apple’s iPhone being the best friend of AT&T shareholders.

Going back to January 2007, when Steve Jobs introduced the iPhone to the world, AT&T saw a tsunami of subscriptions.

AT&T had said it that it signed up 146,000 new subscribers in the first two days it offered the iPhone. About 40% of subscribers who purchased an iPhone were new AT&T customers, according to the company. AT&T executives also said at the time that “store traffic above historical levels.”

The profitable relationship continues…

In its Q4 and full-year 2008 earnings, AT&T reported that quarterly net income was down 23.3% year-on-year, with $2.4 billion in 2008 compared with $3.1 billion in 2007.

Wired voice-service revenue dropped from $9.8 billion in Q4 2007 to $8.8 billion in Q4 2008 – a decline 10.3%.

However, full-year net income was up. It increased 7.7%, from $11.95 billion in 2007 to $12.87 billion in 2008.

The company said the increase was largely attributable to wireless revenue, which shot up 13.5%, from $10.2 billion in Q4 2007 to $11.5 billion in Q4 2008. AT&T reported one million additional subscribers in Q4, resulting in a total of 77 million – an increase of 7 million in 2008.

The growth was directly related to iPhone sales. AT&T activated 4.3 million iPhones in the second half of 2008.

Apple’s iPhone played a major role in the 51.2% growth in wireless-data revenues in Q4. According to AT&T’s press release, “wireless integrated devices in service more than doubled over the past year.”

While analysts argued over whether or not those numbers met expectations, the bigger theme here is that a new iPhone could increase AT&T’s revenues in 2009. One way or another, that has to give the stock a jolt barring any unforeseen debacles in these crazy times.

American Idol — the talent show turned cultural icon — is more than just entertainment. The show is also a crash course in mobile media. In the 2008 season, the show generated 78 million text messages from viewers voting for their favorite singer. Even more startling: 22% of voters claim they first learned to text message by voting for their American Idol, according to a poll conducted by the network.

Mobile phones have come a long way from their humble beginnings. Now your phone has become an entire media platform. The possibilities are endless…

The iPhone Changes the Game

With the staggering growth of content available on mobile phones, it’s no surprise that the mobile advertising industry is picking up steam. The first step was paid content. Mobile users could text certain numbers to download ringtones and other content for a small fee. Now we’re seeing advertisers take advantage of the new capabilities of smart phones like the iPhone, the BlackBerry Storm and the T-Mobile G1.

Back in 2007, the new iPhone got off to a rocky start. AT&T (NYSE:T) — the iPhone’s exclusive carrier — announced the disappointing data right after the release. Customers activated only 146,000 iPhones during the first weekend, much less than the 500,000 activations predicted by giddy Wall Street analysts.

Since then, we’ve seen a newer, cheaper, faster iPhone hit the market — this time on a 3G network. And AT&T has finally managed to favorably work the iPhone into its rotation — even with the hefty kickbacks it sends to Apple for its trendy multimedia device. Yes, AT&T has sunk some serious dough into this affair, including $450 million on 3G network upgrades, according to Forbes. These expensive improvements were a major factor in the 23% year-to-year decline in the company’s net income last quarter…

But the 3G iPhone is finally beginning to bear fruit. AT&T has so far activated 4.3 million of the second-gen touch-screen phones— 1.9 million of them in the fourth quarter, according to Forbes. This more than doubles last year’s activation numbers — and nearly doubles Verizon’s activation data for the new BlackBerry Storm.

Believe it or not, the iPhone has changed something… it has changed the way we consume media. AT&T’s wireless division CEO says it best: “The success of our iPhone 3G launch has driven wireless growth and helped redefine the wireless data space.” As these mobile devices become increasingly ever-present, there’s no doubt that advertisers and developers will find new ways to capitalize on this growing media consumption.

Source: The iPhone Helps Mobile Marketing Mature

We saw her arrive… She drove a black Suburban of some sort, with enough chrome to make a Detroit drug dealer blush.

She and her husband are young… probably in their late twenties. He’s apparently a builder in Georgia. Of course, homebuilding in Georgia died about two years ago… But even though their income must be down, their spending hasn’t changed.

This young couple isn’t the only one out here sporting an iPhone and a blingy black Suburban. What’s going on here?

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Me? I don’t have an iPhone… Or a blingy Suburban… But I probably have one thing these conspicuous consumers don’t: The house I live in is fully paid for.

I handle my money differently. I could buy an iPhone or a Suburban tomorrow. I wouldn’t need a penny of debt to do it. But I won’t… Why? Because I know those things won’t make me the slightest bit happier. I’d be the same dolt I was before… only now, I’d be $50,000 poorer!

It took me a while to get to this point in my life. But I’m glad I made it… I’m at the point where I can buy what I want. But I don’t. It’s an important point to reach.

I don’t try to keep up with the Joneses. I’m doing the opposite, actually. I’m downsizing. I’m reducing my “stuff.”

Think about this… What good is all this stuff, really? You can’t take it with you when you die… Doug Casey, the legendary newsletter writer who joined us last week on Jekyll Island, says it best:

“I’ve never seen a hearse with luggage racks.”

Doug is extremely wealthy, and has been for a while. But he didn’t arrive at Jekyll Island in a blingy Suburban, and he wasn’t chatting on an iPhone.

My friend Bob Bishop is a wealthy guy like Doug. Bob wrote the excellent Gold Mining Stock Report newsletter for a few decades. He recently retired. Bob decided to sell some of his extraordinary possessions… for no particular reason I could see. He didn’t need the money. And they weren’t really taking up space. I asked him why he was selling. He said:

“After a while, you don’t own your stuff… Your stuff owns you. Steve, you’re young… so you’re probably in the accumulation phase. Me? I’ve been there. Now I want to downsize and simplify. I don’t need all this stuff.”

Bob can buy anything he wants. But, like Doug, he doesn’t drive a blingy Suburban, and I doubt he’s got an iPhone. It’s just stuff!

This brings me to the point of this essay… What’s the point of saving money anyway? What’s the point of investing?

When you get older (if you’re not already older!) just what are you going to buy with that money you’ve saved?

Jonathan Clements gave a good answer to this in his farewell column for the Wall Street Journal this week (Clements has written more than 1,000 columns for the Wall Street Journal).

Clements says your savings “can deliver three key benefits.” Even better, he says, “You can enjoy this trio of benefits even if you don’t have great wads of cash.” Here’s how:

1. If you have money, you don’t have to worry about it.
2. Money can give you the freedom to pursue your passions.
3. Money can buy you time with friends and family.

When I think about it, these three things are exactly what Doug and Bob are doing with their lives. The great thing is, it doesn’t (usually) take millions to spend time with friends and family or pursue your passions. You don’t need a fortune to live well.

But in order to get there, the Georgia homebuilder couple needs to skip out on his and hers blingmobiles.

The quicker you grasp this about saving versus spending, the quicker you’ll be able to start living like Doug and Bob… even if you don’t have many millions in the bank.

You might think it’s hard to stop buying ultimately useless stuff… You might think it’s hard to stop keeping up with the Joneses.

But actually, it is quite liberating… And even better, you’ll be financially free much quicker. So give it a try…

Good investing,

Steve