The Tokyo-based company lost $1.1 billion (98.9 billion yen) last year, and it expects to lose another $1.4 billion (120 billion yen) in its fiscal year ending March 31.  That would be Sony’s first back-to-back annual loss since the company went public in 1958.

And despite renewed optimism within its ranks, Sony still faces a plethora of challenges, including a questionable direction, cost-conscious consumers and a strengthening yen.

The onetime bellwether of the electronics industry has seen its market share crumble in almost every category: Nintendo Co. Ltd.’s (OTC ADR: NTDOY) Wii game console has supplanted Sony’s PlayStation brand, Sony has given up its lead in portable media players to Apple Inc.’s (Nasdaq: AAPL) iPod, and Samsung Electronics Co. Ltd. is now the world’s largest seller of televisions.

Hoping to turn the tide, Sony earlier this year underwent a major restructuring with the goal of unifying its hardware, software and entertainment businesses. The idea is to leverage its growing catalog of networked products with the software and services its sells, such as Internet-enabled televisions that enable consumers to watch Sony movies through an online connection.

“Consumers want products that are networked, multi-functional and service-enhanced utilizing open technologies, and user experiences that are rich, shared and, increasingly, green,” said Sony Chief Executive Officer Howard Stringer. “[The restructuring] will now make it possible for all of Sony’s parts to work together to assume a position of worldwide leadership and, together, achieve great things.”

Doubts Cast Shadow Over Efforts

While analysts agree with Sony’s loss estimate for this year, some doubt its restructuring efforts – which included thousands of layoffs and a streamlining of manufacturing in the – will truly pay off.

“They were hit fairly early by the downturn and have moved quicker than some competitors to restructure, but it remains to be seen if those moves will pay off,” Hideyuki Ookoshi, who helps oversee $365 million at Chiba-Gin Asset Management in Tokyo, told Bloomberg News. “The problem with Sony is it doesn’t know what it wants to be: Is it a game company, a consumer-electronics maker, a financial-services provider? There’s no direction.”

Operating income at Sony’s financial services division was propelled more than 57% by a boost in its life insurance revenue in the company’s fiscal first quarter ended June 30. But this non-core business won’t be the catalyst that brings Sony out of the red, according to Makoto Haga, president of Tokyo-based hedge fund Wing Asset Management Co.

“Profit at the financial unit helped Sony narrow a loss, but investors don’t appreciate that,” Haga told Bloomberg. “I can’t see any engine that drives its recovery and the company’s prospects are dim.”

As it stands now, CEO Stringer’s cost-cutting efforts have only gone so far, and investors like Yasuhiko Hirakawa want the British-born executive to prove he can boost Sony’s sales, which are expected to be 6% lower than last year.

“Cost cutting and reshuffling of management may help mend unprofitable businesses but they won’t make Sony competitive against Samsung and other rivals,” said Hirakawa, a fund manager at DIAM Co., which oversees $80 billion in assets including Sony shares. “The brand is still highly regarded but that won’t last forever.”

Premium Without the Value in Tough Times

While all electronics manufacturers have suffered during the worst economic crisis since World War II, premium-branded Sony has been hit especially hard. The economy has brought out the practical side of consumers, who flocked to cheaper television sets from makers like Vizio Inc., which is No. 2 in North America behind Samsung.

It’s the “intensification of price competition” that contributed to Sony’s $1.7 billion operating loss in its electronics segment last year, the company said. Comparable televisions from Samsung are often hundreds of dollars less than a Sony, without a significant sacrifice in tangible quality.

“I don’t think you can say a Samsung TV has a better picture than Sony TV,” Richard Doherty, co-founder of industry researcher Envisioneering Group told the San Diego Union-Tribune. “But (the difference) has narrowed, and that’s one of the problems.”

Indeed, while TVs from Sony may have technically superior features such as 240mhz refresh rates, it usually won’t make a difference to the mass market. The benefit of such a feature is “difficult to discern,” writes CNET, a leading Web site from CBS Interactive Inc.

Televisions are just one area where Sony is struggling with its value proposition. Until recently, Sony faced mounting pressure from video game executives and analysts to cut the price of its $400 PlayStation 3 (PS3) console.

“They have to cut the price, because if they don’t, the attach rates [the ratio of games purchased to a console] are likely to slow. If we are being realistic, we might have to stop supporting Sony,” Bobby Kotick, chief executive officer and president of Activision Blizzard Inc. (Nasdaq: ATVI) said in a June interview with Times Online.

After months of lowering manufacturing costs on PS3, Sony finally dropped the price of the console to $300 in the United States and launched an ad campaign touting “It only does everything,” a reference to PS3’s ability to play games, Blu-ray movies and browse the Internet.

The result was Sony selling more than 1 million PS3s in the first three weeks of September, almost the same amount it sold in the entire second quarter. A similar price drop in Japan led to PS3 outselling Nintendo’s Wii last month, a first since the console was released in Nov. 2006.

Sony’s Walkman, which first revolutionized portable audio 30 years ago, now comes in the form of a touchscreen digital media player, but has failed to put a dent in Apple’s ubiquitous iPod, which also has a touchscreen model. Sony’s 32-gigabyte Walkman sells for $400. But while it gives users some limited Internet options, Apple’s comparable iPod Touch sells for $100 less and has access to thousands of applications – many of them free – in its vaunted App Store.

Without any tangible features to discern it from the competition, it’s no wonder Sony expects to sell just 6.7 million Walkmans this year, while Apple sold 10 million iPods in its third quarter alone.

Currency Crisis

Sony, like its Japanese counterpart Panasonic Corp. (NYSE ADR: PC), is inherently at a disadvantage to Korean competitors like Samsung and LG Electronics Inc. due to the yen’s strengthening position against the won and U.S. dollar. The yen’s gain has enabled the Korean manufacturers to sell its products at a discount of as much as a 10% without taking a hit on margin.

“We don’t have a moment to breathe,” Sony Vice Chairman Ryoji Chubachi said of the strengthening Japanese currency in a Bloomberg interview on Tuesday. “It is a tough environment.”

The yen has gained about 15% versus the Korean won and 14% against the dollar in the 12 months ended Sept. 30, according to Bloomberg data. The dollar is at its weakest levels against the yen since February, trading at as low as 88.86 yen on Tuesday. The yen has been the third-best performer among G-10 members in the past 12 months.

For Sony and other Japanese companies, a rising yen is “like a death warrant as things stand now and if this continues, they will have a very difficult time,” said Chu Moon Sung, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which manages the equivalent of $26 billion in assets. “For Korean companies, it’s a favorable environment and the currency has been the biggest factor for their good performance.”

Source: The Three Roadblocks to Sony’s Turnaround

I’m talking about organic light-emitting diodes, or OLEDs. OLED displays are taking off in a big way. These next-generation displays are perfect for the mobile phone and personal media device markets because they are thinner than traditional displays and produce sharper images.

OLED — and active-matrix OLED — technology has now reached its tipping point. Very soon, we will begin to see OLEDs used in a vast array of electronics, including small televisions, digital cameras, netbooks, phones — the list goes on and on.

The rise of the OLED display is similar to that of the flat-panel television. Once a novelty, flat-panel LCD and plasma televisions quickly became the industry standard as quality and production increased while prices fell. The “transition” from bulky tube televisions to sleek flat-panel displays took only a few short years.

Try walking into your neighborhood electronics store today to browse the tube television selection. Be warned: You will be disappointed. Only a few models remain, and you can easily purchase a comparable flat-panel television for about the same price. And a flat panel can actually save you money, since it uses less power than a standard TV. Yes, it seems that the tube television is going the way of the VCR. It won’t be long before they’re only available at yard sales and antique stores.

OLED Growth: The Story Is in the Numbers

Experts from world mobile display sector leader Samsung Mobile Display are banking on OLED screen use in mobile phones to “grow significantly.” And with overall smartphone use also growing dramatically, we have before us a unique opportunity in the OLED market.

The Samsung venture expects the global smartphone market to grow to 500 million units by 2012, making up almost 30% of the industry. To put this in perspective, consumers are using 170 million smartphones right now.

Better phone technology means better displays. Samsung predicts OLED screens will be used in half of these new phones over the next five years. That’s hundreds of millions of units…

Overall, the OLED display market will grow to $6.2 billion, according to DisplaySearch forecasts. Last year, the total OLED market was worth an estimated $600,000. As you can see, we are looking at exponential growth, with the mobile phone market leading the charge.

As the technology continues to improve, we will begin to see even larger OLED displays. LG Electronics and Sony (NYSE:SNE) are each planning on releasing 15-inch and bigger OLED display televisions by the end of this year, according to DisplaySearch, with OLED netbooks and larger televisions showing up by the end of 2010.

Obviously, LG and Samsung are the big players in this market. But there are a couple of small-caps that have also found success developing OLED technologies. A good place to start looking would be Universal Display Corp. (NASDAQ: PANL). While the company is not yet profitable, it does have a promising patent portfolio that includes phosphorescent OLED technology.

Best,
Greg Guenthner

Source: OLED: The Next High-Tech Profit Opportunity

Battles for dominate, market-accepted technology are rarely good for the companies mired in the fight. Sony’s (NYSE:SNE) torturous foray in the VHS versus Beta battle is a perfect example.

But a divided market is not always bad.

Just ask Sonic Solutions (NASDAQ:SNIC) shareholders. As the entertainment industry slowly figures out if DVDs or Blu-ray technology will dominate the video world, Sonic’s shareholders had the chance to rake in a fortune.

Shares of the $175 million company have soared by 1,050% over the past six months as the global economy rebounds and Blu-ray production increases.

As the go-to firm in Blu-ray production technology, Sonic is embarking on an era of strong growth. Earlier this week, the company announced a list of nearly two dozen European firms that are now using Sonic platforms.

European growth?

The growth comes as authoring facilities increase their Blu-ray production to meet the split demands of the world’s consumers. Until one platform becomes the accepted winner, Sonic will benefit from the dual revenue streams.

Investors interested in this company should be aware of several factors before making the leap.

The first should be obvious. After such a remarkable six-month climb, any negative news event could instantly erode recent growth. In the software industry a new competitor or the advancement of stronger technology can easily send even the strongest of players to the end of the line.

Shares of the company are up by nearly 20% this week, making it a good time to sit back and wait for a better buying opportunity.

Another important variable for the company and its shareholders is the next set of quarterly earnings figures.

Shares surged in August when the company announced a solid quarter (it lost just $1.8 million). If the momentum is not carried through the current period, investors will quickly lose their willingness to pay a premium for the position.

Room for more

When a stock starts to get top heavy, as an options investor, one of the first things I look at is the possibility of a covered call position.

Sonic is ripe for the taking.

As I write, savvy options investors could have a shot at low-risk gains in the neighborhood of 45% by selling out-of-the-money calls and using the premium to buy the underlying stock. It is a relatively safe play (by selling options, you are creating a layer of insurance), with a strong upside.

As the Dow approaches 10,000 and the third quarter comes to an end, volatility and resistance will be on the rise. Now is the time to lock in a smart strategy to take advantage of the situation.

Source: Sonic Solutions: Easy Options Opportunity

Amid a buzz of publicity, yesterday was the day that many Beatles fans had eagerly waited for, with the release of a new video game in the band’s name – “The Beatles: Rock Band.”

If you’re not familiar with the “Rock Band” concept, it’s a bit like karaoke, except you play music in addition to singing. Gamers follow along with their favorite musicians/songs, using an electronic drum kit and guitar, and sing the songs, too.

The game is enormously popular, having generated over $1 billion in revenue. And gamers can download individual songs, albums, or catalogs of groups like AC/DC, The Who and The Grateful Dead. So far, they’ve paid for and downloaded over 40 million songs…

Both Paul McCartney and Ringo Starr were part of the creative process and have endorsed the game in the ensuing media hype that developed.

But what about you and me? Well, while we might never be as wealthy as the “Fab 4,” perhaps we can profit from a new wave of Beatle Mania.

These “Fab Four” Stocks Are Set for a “Beatle Boost”

Let’s take a look at four companies that could make big bucks off the The Beatle’s Rock Band release…

• Viacom (NYSE: VIA.B): This firm should be the biggest beneficiary of the game’s success. Its MTV unit owns Harmonix Music Systems, the creator of “Guitar Hero” and several “Rock Band” titles, including “The Beatles.”

Viacom also owns cable TV staples such as Comedy Central, VH1, Nickelodeon and CMT. In addition, it produces and distributes movies through its Paramount Pictures division.

However, Wall Street likes Viacom about as much as conservatives liked Paul, John, George and Ringo’s mop-top haircuts in the 1960s. Analysts currently have eight “Buy” recommendations on the stock, 17 “Holds” and eight “Sell” ratings.

Keep in mind that most analysts rate stocks as “Buy.” A “Hold” essentially means sell, while an outright “Sell” rating means “this stock is so bad, even we don’t want the firm’s investment banking business.”

And note that Wall Street analysts have a horrendous track record when it comes to rating stocks.

So given my contrarian nature, I like stocks that have lots of “Hold” and “Sell” ratings, since analysts are often behind the curve and afraid to go against the grain. When a company turns around, they’re then forced to upgrade the stock and that often leads to gains in the share price.

And as for Viacom, the future doesn’t look as bad as they portray it. The company is expected to earn $2.05 per share in 2009, followed by a nearly 10% increase to $2.25 next year. In 2011, Wall Street projects earnings of $2.61.

The stock trades at just 12 times this year’s expected earnings, 11 times next year’s and just 1.1 times its trailing 12-month sales.

Viacom shares seem cheap. And if the game sells as well as I believe it will, shareholders will reap the reward.

• Sony Corporation (NYSE: SNE): Sony owns partial rights to The Beatles’ music catalog. That means every time a Beatles record is purchased, a song is downloaded, or a tune is played on the radio, Sony rings the register. The rights are held by Sony/ATV Publishing, a joint venture between Sony and Michael Jackson’s estate.

Of course, Sony has other businesses, too, aside from waiting for oldies radio stations to play Yellow Submarine…

It makes the ever-popular PlayStation video game consoles, on which users can play “The Beatles: Rock Band” (in addition to Microsoft’s X-Box and Nintendo’s Wii systems). Sony also makes a mass of other electronic equipment and is in the television and movie businesses.

Wall Street isn’t exactly enamored with the company at the moment. There are 12 “Buy” recommendations against 10 “Holds” and one “Sell.”

After a series of missteps, Sony isn’t expected to be profitable this year or next. But it does boast a strong film division and restructuring could result in its weak stock price rebounding.

• Electronic Arts (Nasdaq: ERTS): The company is the publisher of “The Beatles: Rock Band.” Like Viacom and Sony, Wall Street thinks it’s also going to be a Hard Day’s Night for ERTS. There are 14 analysts who believe the stock is a “Buy,” while 15 say, “Hold” and three have a “Sell” verdict.

In the face of stiff competition and few exciting new titles, Electronic Arts is expected to lose 30 cents per share this year. But in 2010, the books are expected to turn into the black, with the company projected to earn 97 cents per share, rising to $1.27 in 2011. In addition, it has over $2 billion in cash and no debt, and enjoyed recent success with its EA Sports Active.

The stock has suffered a beating, but has thus far failed to mount much of a rally, unlike many others who also took a hit in the downturn.

But should “The Beatles” and other games help turn things around, Electronic Arts might wind up being a great contrarian play.

• Gamestop (NYSE: GME): If you have a teenager, chances are they already spend Eight Days A Week browsing and playing games at Gamestop, a leading video game retailer in the United States, Europe, Canada and Australia.

The firm should benefit from increased consumer traffic related to purchases of “The Beatles,” plus a host of other games and accessories that it sells.

In contrast to the other three companies, Gamestop is much more popular, with analysts in giving it 14 “Buy” ratings and just two “Holds.” While earnings growth isn’t exactly stellar – EPS is estimated at $2.40 this year and $2.55 next year – the stock is cheap at 10 times this year’s EPS.

If you want to talk “best of breed” in the video game retailing world, Gamestop is it. Gamers can sell back or trade their games at Gamestop for other titles, which gives the company an advantage over retailers like Amazon.com (Nasdaq: AMZN) and eBay (Nasdaq: EBAY). Plus, in addition to browsing the store, gamers can test-drive the games on the demo consoles and talk with employees, who are usually gaming enthusiasts, too.

Gamestop is gaining market share and is cheap enough to buy at current levels. If the upcoming holiday season is particularly strong, look for it to beat estimates and send share prices higher.

These four stocks have the potential to generate significant gains and put money in our pockets. And I hope we manage to make gobs of it. Just remember, money Can’t Buy Me Love.

Marc Lichtenfeld

Source: A New Wave of ‘Beatle Mania’… Four Ways to Profit from the Beatles: Rock Band

Shares of Apple Inc. (Nasdaq: AAPL) have gained 100% since the start of the year, and with the likely release of an innovative “tablet” computer and the pending debut of its wildly popular iPhone in China both in the offing, the company’s stock could still find some room to run.

Shares in the Cupertino, Calif.-based company are at their highest level since August 2008, thanks to a successive string of upbeat earnings reports, a near-$30 billion cash reserve and recession-defying sales of its products.

The iPhone alone sold 5.2 million units in the second quarter, compared to 717,000 the year before, and its Macintosh computers, which still have a miniscule share compared to Windows-based PCs, are gaining momentum.

Several market research firms, including Deutsche Bank AG (NYSE: DB) and Barclays PLC (NYSE ADR: BCS), now have price targets for Apple stock that exceed $200 a share.

Apple’s shares closed Friday at $170.05, up 60 cents, or 0.35%, each. An advance to $200 would represent a gain of about 18% from current levels.

Sales of Apple’s now-ubiquitous iPod have slowed, but Apple executives anticipated that would be the case, as sales of its music-playing iPhone and iPod Touch grow.  Both of those devices have access to thousands of applications sold in the App Store.

A tablet computer from Apple, which has been a hot news topic in the tech world since last spring, moved closer to reality last week. The Wall Street Journal reported that since returning from leave to undergo aliver transplant, Apple Co-Founder and Chief Executive Officer Steve Jobs has devoted almost all of his time to this specific device.

Pundits have already dubbed the gadget the “MacBook Tablet” or “iTablet,” and executives believe it will have positive implications for media going forward.

“It’s a portable entertainment device,” one entertainment executive toldThe Financial Times. “It’s going to be fabulous for watching movies.”

Recording executives say Apple plans on using the large screen for interactive booklets and liner notes that typically accompany compact discs. And book publishers could view the tablet as an alternative to Amazon.com Inc.’s (NASDAQ: AMZN) popular Kindle or Sony Corp.’s (NYSE ADR: SNE) Reader in the growing e-book market.

Sign up below… and we’ll send you a new investment report for free: “Credit Crisis Report.”

“It would be a color, flat-panel TV to the old-fashioned, black-and-white TV of the Kindle,” one book executive told the FT.

Hollywood and video game executives haven’t been briefed on the tablet, but both have shown optimism for it. A large selection of movies and games are already available for the iPod, iPod Touch and iPhone.

Apple is one of the most secretive companies in Silicon Valley. Its iPhone 3G S, which sold 1 million units in its first weekend, wasn’t announced until a few days before its release. By contrast, one of its primary competitors Palm Inc.’s (NASDAQ: PALM) Pre smartphone, released a few weeks before the 3G S in June, was first announced in January at the Consumer Electronics Show. Apple is aiming for a September or October launch of the tablet, The FT said.

While tablet computers are nothing new – they first debuted in the early part of this decade – they only comprise 1.4% of the global portable market, The Journal said. Toshiba Corp., Hewlett-Packard Co. (NYSE:HPQ) and Fujitsu Ltd. (OTC ADR: FJTSY) all attempted to sell tablets, but ultimately the devices proved to be too cost-prohibitive for consumers.

Despite the worst economic downturn since World War II, Apple is having no trouble convincing consumers to buy iPhones with pricey plans and more expensive Macs. Oppenheimer & Co. analyst Yair Reiner told the FT he expects Apple’s tablet to cost between $600 and $1,000, the range for many Windows-based laptops today.

The tablet is considered by analysts to be Apple’s answer to popularnetbooks, which are smaller laptop PCs designed for navigating the Internet. They usually cost between $200 and $400. CEO Jobs and others in the Apple brass ruled out developing a netbook in a conference call last fall.

“We don’t know how to make a $500 computer that’s not a piece of junk,” Jobs said at the time.

The iPhone Meets the Red Dragon

Apple, whose Mac computers have played second fiddle to personal computers since 1984, found mainstream success in the gadget realm starting in 2002 when it debuted the iPod. To date, roughly 300 million iPods have been sold since 2002. In 2007, Apple debuted the iPhone, which has sold more than 26 million units.

The iPhone will make its debut in mainland China in the fourth quarter with state-owned China Unicom Ltd. (NYSE ADR: CHU) having cut a deal to act as the exclusive carrier for three years. Like AT&T Inc. (NYSE: T) in the United States, Unicom will not share revenue with Apple. Instead, it will offer a subsidy to consumers to lower the price, which is expected have a similar $99 to $299 range with two-year service contracts.

Unicom, which is rolling out its third-generation network (3G), enabling wireless video and high-speed Internet navigation, has 141 million wireless users. Unicom will be competing with an estimated 1.5 million gray market iPhones, The Journal reports, citing research firm BDA China Ltd. Unicom, which just reported a 45% drop in profit, is counting on Apple’s iPhone to gain share over market leader China Mobile Ltd. (NYSE: CHL), which has over three times Unicom’s subscribers.

The overall Chinese mobile market, which has 687 million subscribers – more than twice the population of the United States – is highly competitive. Several phones running Google Inc.’s (Nasdaq: GOOG) Android operating system are due by year’s end, and China Telecom Ltd. (NYSE ADR: CHA) is in talks with BlackBerry maker Research in Motion Ltd. (Nasdaq: RIMM) and Palm to bring those phones to the world’s fastest-growing major market.

“It’s essential for Apple to be in China; it’s a huge market,” CIMB Securities Ltd. Deputy Head of Research Bertram Lai told Bloomberg News. The iPhone “is not just the premium product, it’s an aspirational product,” he said.

Source: Hot Stocks: Up 100%, Apple’s Shares May Still Have Room to Run ]]> http://www.contrarianprofits.com/articles/hot-stocks-up-100-apple%e2%80%99s-shares-may-still-have-room-to-run/20247/feed 0 http://www.contrarianprofits.com/articles/eight-ways-to-profit-from-japan%e2%80%99s-game-changing-election/19401 http://www.contrarianprofits.com/articles/eight-ways-to-profit-from-japan%e2%80%99s-game-changing-election/19401#comments Thu, 23 Jul 2009 19:45:18 +0000 Martin Hutchinson http://www.contrarianprofits.com/?p=19401 Investors who pay attention to Japan’s looming election can expect to be well-rewarded for their time.  Normally, we confess, Japanese elections don’t matter much, because the same guys always win. However, this one – set for Aug. 30 – looks different: It may actually bring about the first real change in Japan’s government in 55 years. That’s important.

The opposition has different ideas about what the Japanese economy looks like. That means you should be buying different Japanese stocks, not the well-known names.

The Liberal Democratic party (LDP), in power since 1954 except for 11 months in the 1990s, hasn’t done a bad job. After all, Japan is hugely richer than in 1954. However, after a successful period in 2001-06, the country has had…

That quickly turned to mania, as the media went nuts over it and fans clamored to pay their respects by buying tons of Michael Jackson merchandise. And MJ fever shows no signs of being ready to “Beat It.”

As demand for all things Michael has spiked, there’s are no doubt that many suppliers are willing to meet it. From vendors outside the Staples Center selling cheesy souvenirs, to multi-billlion dollar corporations, there are several beneficiaries of massive spending on Jackson’s music and memorabilia.

While I’m not suggesting you should unscrupulously profit from his demise, it’s a fact that some companies are enjoying a boom in Michael Jackson-related business. Here are four of them…

Four Companies At The Center Of The Michael Jackson Story

• eBay (Nasdaq: EBAY): As soon as tickets to the memorial were released, they predictably went on sale on eBay for thousands of dollars.

A search for “Michael Jackson” on eBay yielded 47,611 results, including an autographed photo for $3,200, a sealed version of “Thriller” for $1,200 and even this $1 million bill with Jackson’s face on it. And people say the Federal Reserve has recklessly printed money!

• Amazon.com (Nasdaq: AMZN) – If it’s for sale, chances are Amazon sells it. You can download the mp3 of “Thriller” for $1.29, purchase a “Michael Jackson Superstar of the 80s” outfit doll for about $1,000, or the Michael Jackson $1 million novelty notes above for $0.99 each (or 100 for $30). At that price, you can’t afford to be without your fake Michael Jackson currency.

• Sony (NYSE: SNE): Michael Jackson’s record label was Epic Records, part of Sony Entertainment. He’s sold half a million albums since his death, compared with 10,000 the week before he died. You can be sure Sony will try to capitalize on his newfound popularity with some greatest hits albums in the near future.

• Time Warner (NYSE: TWX): With the vast amount of media coverage that the story is attracting, detailing every morsel of Jackson’s life and death, one outlet is emerging from the hungry pack.

Already a well-established site for entertainment news, celebrity gossip and video, the death of the greatest entertainer since Elvis has launched TMZ.com into the stratosphere. Mainstream outlets like CNN and Fox credited TMZ with breaking the story of Jackson’s death.

TMZ is a joint venture between two TWX divisions, AOL and Telepictures Productions. Anyone looking for this type of news now has to consider TMZ the go-to website. And over the past three months, page views have jumped more than 26%, in large part due to the spike in Michael Jackson traffic just in the past few weeks.

In short, while it might be difficult to play this news directly, companies with exposure to Michael Jackson’s popularity could see a bump in revenue.

Hoping your longs go up and your shorts go down.

Marc Lichtenfeld

Source: How the Michael Jackson Story Impacts Investors

If the last three months are any indication, the U.S. tech sector has shaken off its recession-heightened late-winter doldrums, and could see its fortunes soar in the year’s second half as businesses and consumers open their wallets and the broader economy picks up speed.

The technology-laden Nasdaq Composite Index was at the forefront of the most-recent market rally, having soared more than 45% since hitting its 52-week low on March 10. That outpaced both the Dow Jones Industrial Average – up 30% in that time – and the Standard & Poor’s 500 Index – up about 37%.

According to industry analysts, the technology sector – because it is heavily reliant on borrowing, as well as consumer demand – can serve as a harbinger of economic recovery.

“Technology tends to be a leader in the early stages of an economic turn. That’s what we took for as confirmation of a sustainable rally-money rotating into a sector that historically is seen as consumer- and business-sensitive, and requiring more leverage in terms of borrowed money, because it is more sensitive to the economy,” Marc Pado, U.S. market strategist at Cantor Fitzgerald told MarketWatch.com. “I expect technology to continue to lead well through this year and into February of next year.”

Spearheading the Nasdaq’s charge has been Redmond, Wash. software giant Microsoft Corp. (Nasdaq: MSFT).  While its fiscal third-quarter profit fell 11% from a year earlier, Microsoft beat analysts’ expectations, helping the company’s stock to surge more than 50% from its mid-March low. Microsoft is up about 16% in the past month.

Semiconductor manufacturer Texas Instruments Inc. (NYSE: TXN) could trade in the is up more than 45% in the past six months to its current level of about $21 per share. The company could trade up into mid-$30s within 12 months, according to Paul J. Nolte, director of investments atHinsdale Associates Inc., an Illinois money management firm.

Earlier this month, in fact, Texas Instruments sharply raised its second-quarter financial guidance. The reason: Customers had slowed the rate at which they were reducing chip inventories – a signal that the market for semiconductors may be stabilizing.

The company now expects to report earnings per share (EPS) of 14 cents to 22 cents, up from the previous forecast of 1 cent to 15 cents per share.

Opening New Windows

The long-suffering PC market may get a shot in the arm this fall with the Oct. 22 release of Microsoft’s Windows 7, which is all but guaranteed to generate better reviews than its predecessor, Windows Vista. Pre-release versions being publicly tested are already being called better than Vista, which was dogged by geeks and general end-users alike for its slow performance and questionable compatibility with legacy software and hardware.

Stopping short of admitting the goof and giving away Windows 7 to existing Vista users, Microsoft is offering cheaper upgrades to those who pre-order Windows 7 between June 26 and July 11.  The company will offer free Windows 7 upgrades to anyone who purchases a PC pre-installed with Vista after June 26.

Windows 7 is expected to be the operating system of choice for information technology (IT) managers who make purchasing decisions for corporate users.

“The upcoming introduction of Windows 7 could spur a rapid corporate PC upgrade cycle starting in late 2010/early 2011, catalyzed by the end of support for Windows XP and a recovery-based increase in IT spending,” said Jeffries & Co. Inc. analyst Katherine Egbert wrote in a recent research report.

But history shows that a release of a new operating system – no matter how positive the buzz – will translate into only a slight increase in PC sales, Microsoft Senior Vice President Bill Veghte said in a webcastearlier this month. On the business side, enthusiasm is high for Windows 7, but corporations will not rush to upgrade when it is released. The release “will get drowned by the macroeconomic environment,” Veghte said. “As the macro environment comes back, people will have to buy new PCs. People aren’t using PCs any less.”

Game On

Looking ahead, the tech sector is anticipating a slew of product releases in the year’s second half – many of them in the $22 billion video-game sector, which lives and dies on new releases.

Activision Blizzard Inc. (Nasdaq: ATVI), the largest third-party game publisher in the world, will lead the way with the latest in its rock music game series with the September release of “Guitar Hero 5″ on four platforms: Sony Corp.’s (NYSE ADR: SNE) PlayStation 2 and 3, Microsoft’s Xbox 360 and Nintendo Co. Ltd.’s (OTC ADR: NTDOY) Wii. The third iteration of “Guitar Hero” became the first video game ever to achieve $1 billion in sales.

But the music from Activision won’t stop with the last strum of a toy guitar: The company will debut “DJ Hero” in October for the same four platforms. “DJ Hero” will ship with a mock turntable and should appeal to fans that don’t turn to rock for their music fix.

Activision will release new titles for proven franchises such as “Modern Warfare” and “Tony Hawk.” The first “Modern Warfare” title, released in 2007, has sold 13 million copies worldwide and is one of the best-selling games on Xbox 360. The new “Tony Hawk” game represents the 12th installment in the series since it was started 10 years ago.

While sales of console games typically garner most of the attention, it is Activision’s “World of Warcraft” (WoW) playing the role of its single largest sales generator. In 2008, WoW accounted for $1.1 billion in revenue, or 38% of Activision’s total revenue. Sales from all of Activision’s console titles were $1.2 billion. WoW has more than 11.5 million subscribers, Activision said.

Since its dropping down to its 52-week low of $8.14 in January, Activision shares have risen steadily, and are now trading in the $12 range. With a war chest stuffed with nearly $3 billion in cash and ratingsof mostly “Buy” or “Strong Buy” from analysts, Activision may warrant closer study by individual investors, too.

Activision’s rival, Electronic Arts Inc. (Nasdaq: ERTS) also has some potential-big-hit titles coming in the year’s second half, but saw its losses more than double to $1 billion for the fiscal year that ended March 31. Like most game publishers looking to cash in on the holiday shopping season – primetime for consumer spending – EA is saving its best for the second half of 2009.

Titles such as “Madden NFL 10,” “The Beatles Rock Band” and “Left 4 Dead 2″ will sell well, but the outlook for EA on Wall Street is mixed, with the majority of analysts rating the company as a “Hold.”

Some analysts say that EA can weather the current downturn in consumer spending, as it sits on more than $1.6 billion in cash, according to its annual regulatory filing with the Securities Exchange Commission (SEC), but the outlook for the 2009 Christmas shopping season remains uncertain.

Will iSpend?

Following a sharp drop in its stock after the revelation that its chief executive officer’s health may be worse than previously thought, shares of Apple Inc. (Nasdaq: AAPL) have slowly been climbing back toward its 52-week high of $180.91. The shares are currently trading at about 21% below that peak.

The Cupertino, Calif.-based company on June 8 removed a barrier that had stopped many consumers from purchasing its popular iPhone when it lowered the price of its 8-gigabyte 3G model to $99. With wireless plans starting at around $70 per month, Apple’s phone – and perhaps more importantly, its app store – will find its way into the hands of many more consumers in the second half of 2009.

Couple the 8GB iPhone 3G with the newly released, feature-rich 3GS model – and then stir in a barrage of television commercials – and the result should be a marked improvement in revenue.

It is unlikely that Palm Inc.’s (Nasdaq: PALM) Pre will put a dent in iPhone sales, partly because of sustained shortages as Apple floods the market with its phone. However, Sprint Nextel Corp. (NYSE: S) customers locked in their contracts looking to upgrade to a phone with a growing app catalog will see the Pre’s similarities with the iPhone.

Sprint Chief Financial Officer Bob Brust told investors via a webcast at Wachovia Corp.’s Annual Mid-Year Equity Conference that Pre shortages still exist weeks after its launch.

“We still have a backlog of subscribers but it’s not unmanageable and we get shipments every week,” Brust said. Sprint is the exclusive carrier of the Pre.

Analysts estimate that 50,000 to 100,000 Pres were sold in its debut weekend earlier this month, while Apple said the new iPhone sold 1 million units in its opening weekend.

Source: Rebounding Tech Sector Stars Could Play Key Role in U.S. Economy’s Second-Half Rebound

[Editor's Note: This tech-sector preview is the opening installment of a new Money Morning series that will make economic projections for key U.S. sectors for the last half of 2009. As part of that series, look for forecasts for housing, energy, U.S. stocks and the emerging markets.] ]]> http://www.contrarianprofits.com/articles/rebounding-tech-sector-stars-could-play-key-role-in-us-economy%e2%80%99s-second-half-rebound/18629/feed 0 http://www.contrarianprofits.com/articles/investment-news-briefs-tuesday-june-23-2009/18216 http://www.contrarianprofits.com/articles/investment-news-briefs-tuesday-june-23-2009/18216#comments Tue, 23 Jun 2009 15:30:58 +0000 Money Morning Staff http://www.contrarianprofits.com/?p=18216 Oil Takes a Spill; SEC Expands Madoff Investigation; Sony Could Lose Largest Game Publisher; Nasdaq Outpaces Other Indices; Walgreens Misses Street Estimates; U.S. Car Brands Close Gap with Toyota Quality…

• In spite of tense geopolitical situations in the Middle East, light sweet crude for July delivery yesterday (Monday) fell $2.62, or 3.8%, to settle at $66.93 a barrel on the New York Mercantile Exchange (NYMEX). Large and violent protests in Iran over the outcome of its recent election would normally raise concerns about supply disruptions and drive up the price of oil. Instead, the market is looking past this tense backdrop in the world’s No. 4 oil producer because of a large supply worldwide, Alaron Trading energy analyst Phil Flynn told CNN…

GM dealers targeted for separation were informed by letter over the weekend, Reuters reported.

The eradication of hundreds of hundreds of American auto dealerships is merely the latest development in the ongoing dismantling of the so-called U.S. “Big Three’’ – a  process that seems likely to leave Ford Motor Co. (NYSE: F) as the last American automaker standing.

“These companies are making up for now for what they have avoided doing for years, if not decades,” industry analyst John A. Casesa, managing partner of consultantcy Casesa Shapiro Group LLC, told The New York Times. “And if the market doesn’t stabilize, this may only be Phase I.”

The moves will clearly change the entire auto-purchasing landscape for U.S. consumers. All told, nearly 800 dealers selling Chrysler brands were given notice that they would be cut off next month. These dealers represent about a quarter of the 3,200 in Chrysler’s dealership network, but account for only 14% of the company’s sales.

Without the dealership cuts, U.S. automakers will likely see their troubles continue. For instance, in its bankruptcy filing, Chrysler says it needs to streamline its distribution-and-sales operation to become more competitive. The current Chrysler dealership sells 303 vehicles per year, compared with 1,219 for a Honda (NYSE ADR: HMC) and 1,292 for Toyota. (NYSE ADR: TM).

GM is looking to close as many as 2,600 of its dealers – about 40% – by 2010. This weekend, it notified the first 1,010 that their franchise deals with General Motors would not be renewed after they expired in October. The other dealerships that will get cut are those that sell such brands as Hummer and Saturn – brands that GM plans to divest.

Both Chrysler and GM have been subsisting on government loans for months.

Just a few years ago, U.S. auto dealers were selling an aggregate 16 million vehicles annually. But after the biggest drop in vehicle sales in a quarter century, dealers are now struggling to even reach the 10-million-vehicle mark.

The letters to GM dealers did not specifically say the company would be filing for bankruptcy, but the move indicates that could well happen next month, which is when the longtime No. 1 U.S. automaker is due to submit a restructuring plan to U.S. President Barack Obama, The Times reported.

In fact, General Motors sales chief Mark LaNeve told reporters on a conference call that carrying out the plan without the benefit of bankruptcy-court protection would be nearly impossible, since state franchise laws make it “onerous and expensive” for manufacturers to force dealers out of business. Wrapped in the cloak of bankruptcy protection, however, the dealership contracts can be nullified, the The Wall Street Journal said.

Chrysler on Thursday asked its bankruptcy judge, U.S. Justice Arthur J. Gonzalez, to hold a hearing on June 3 to allow the company to reject its “contracts and unexpired leases with certain domestic dealers.”

At a time when the falling earnings are continuing to push U.S. companies to make deep job cuts, the dealership closures will add to the national rise in joblessness. The National Automobile Dealers Association (NADA) has estimated that all dealership closings – including those already announced by Chrysler and GM – could cost the U.S. economy 187,000 jobs – or more than the total U.S. employment of the two companies.

Market Matters

When the government was “forced” to help resolve the global financial crisis with bailouts and stimulus packages, analysts hoped for the best (economic and market recoveries) and feared the worst (overreach or even socialism).

To date, some signs have emerged that the recession may be nearing an end, though naysayers also warn about the ramification of “excessive” intervention.

On that note, the Obama administration has begun talks about a complete overhaul of the compensation structure for the entire financial services industry, a move that could even impact employees at institutions that did not accept bailout moneys.  While some believe the current system rewards short-term goals in lieu of longer-term performance, many still feel the government is overstepping its bounds.

President Obama’s administration also announced plans to regulate certain derivative securities, many of which have done considerable damage to the balance sheets of the world’s leading institutions.  While many “experts” agree greater transparency and oversight may have prevented some of the carnage, others worry that over-regulation is never a good things and efforts to improve the system actually may have the exact opposite impact.  Stay tuned.

With the much-ballyhooed stress-tests in the books, banks moved to raise capital with US Bancorp (NYSE: USB), Capital One Financial Corp. (NYSE: COF), and Bank of NY Mellon Corp. (NYSE: BK) among those issuing $1 billion to $2.5 billion in new stock (and diluting current shareholders).

In fact, US Bancorp expects to be the first major institution to repay Troubled Asset Relief Program funds over the next few weeks.  Meanwhile, as banks begin to move off the Treasury’s coffers, insurance companies become the latest recipients as The Hartford now is eligible for a $3 billion-plus government infusion with others to follow.  Automakers continued their cost-cutting moves as both GM and Chrysler started saying goodbye to large percentages of their dealers (and perhaps another 150,000 in related workers), while Ford raised about $1.6 billion through a 300,000-share offering of its own.  GM’s share price fell into penny stock territory for the first-time since 1933 as bankruptcy becomes an even greater likelihood.

On the earnings front, Macy’s Inc. (NYSE: M), JC Penney Co. Inc. (NYSE: JCP), Liz Claiborne Inc. (NYSE: LIZ), and Sony Corp. (NYSE ADR: SNE) all posted disappointing results, a sign that retailers have yet to overcome the ongoing consumer negativity.  While Wal-Mart Co. Inc. (NYSE: WMT) continued to outshine rivals, its earnings were negatively impacted by currency translation.

Both SAP AG (NYSE ADR: SAP) and Intel Corp. (Nasdaq: INTC) expressed optimism about the future for techs as phrases like “bottomed out” and “glimmers of hope” brought renewed investor confidence, though the latter was greeted with a $1.45 billion record fine in Europe over sales and marketing abuses.  Microsoft Corp. (Nasdaq: MSFT) announced its first debt offering in its 36-year existence and some expect the tech giant to explore acquisition opportunities.

Economically Speaking

Yep, the consumer is a fickle sort.  In fact, consumer statistics are quite fickle these days as well.  A few weeks back, same store sales for April showed enhanced retail activity, a strong sign for the consumer-driven economy.  Well, this past week, the U.S. Commerce Department reported that April retail sales actually fell by 0.4%, a worse than expected showing and the eighth decline over the past 10 months.  Before analysts could express renewed doubt about any pending recovery, Redbook Research threw even more confusion into the equation by reporting that chain-store sales climbed 0.1% during the first week in May and bested Wall Street expectations.

Additionally, the University of Michigan Sentiment Index reached its highest confidence level since September 2008.  As long as the labor picture remains bleak, however, consumer activity may vary from one month (week) to the next as many folks remain hesitant to spend and continue saving for that rainy day.

The inflation gauges calmed down those deflation naysayers as the producer price index (PPI) climbed in April on rising food prices and the consumer price index (CPI) was reported as unchanged last month.  Additionally, as oil prices creep a tad higher, the threats of (economy-hurting) price declines lessens; therefore, analysts can focus on other more pressing matters (like labor, manufacturing, housing, retail, etc.) and leave the (soon-to-come) inflation hysteria for another day.  Of note, RealtyTrac reported foreclosures soared by over 30% last month as unemployed homeowners struggle to make their mortgage payments.

Weekly Economic Calendar

Source:  Chrysler, GM Dealer Cuts Point to More Rough Times Ahead for U.S. Automakers