Competition can be so mean. In a country where the government is doing its best to make sure we  all have equal incomes and resources, you would think companies like Redbox, Netflix (NASDAQ:NFLX) and TiVo (NASDAQ:TIVO) would take it easy on Blockbuster (NYSE:BBI) for a few quarters.

After all, isn’t it “un-American” to force your fellow citizens into bankruptcy?

Banks can’t force homeowners delinquent on their mortgages out of their houses. General Motors (NYSE:GRM) and Chrysler were saved. How in the world can we stand by and watch Blockbuster go under? Where will I rent my Saved by the Bell Reunion video?

While it is not surprising to see a company that has done the absolute bare minimum to update its business model over the last, oh say, two decades is about to be rewound for the last time, it is time the markets seriously begin to discount the notion.

After yesterday’s horrific earnings report, it is safe to say there are plenty of folks taking bets on just how many days Blockbuster has left on this planet.

Be kind, DON’T rewind

Once yesterday’s closing bell was done vibrating, the company snuck onto the news wire and told investors it managed to lose $0.21 per share ($39.7 million total) last quarter, far worse than even the lowest analyst expectations.

On average, the company’s followers were looking for a per share loss of $0.11. The spread was enough to drive shares down by close to 20% in today’s notably rough session.

Although the quarter’s loss was less than last year’s corresponding period when the company spent $41.9 million more than it made, a same-store sales figure that is 17.8% lower proves that operating cuts and short-term margin boosters will not be able to prop up the company’s losses for much longer.

Unless consumers suddenly start flocking to Blockbuster instead of the growing list of competitors, Blockbuster’s bottom line is only going to sink deeper and deeper.

Just when the company thought the threat from Netflix in the mail-rental business was leveling off, Redbox shows up and slams its in-store business.

Why drive to the nearest Blockbuster and shell out five bucks when you can pay a buck a night from one of the kiosks that seemingly appear on every corner these days?

Blockbuster missed its shot at a first-entry position once again. It is proving it is not necessarily the company’s business model that is lacking, but its management team.

Unless these guys can offer something innovative and appealing to its customers real quick Blockbuster’s dwindling pile of cash is going to become a serious problem.

Shares are already trading well under a buck each. It won’t be long until they are trading back down at 52-week low territory, just above the single-digit range.

If you are holding shares of Blockbuster, you had better return them now. You are not going to like the late fees.

Source: Blockbuster: Where is the Rewind Button When You Need?

• Investors yesterday (Monday) cashed in on profits from Friday’s market rally, which followed better-than-expected unemployment news. The Standard & Poor’s 500 Index fell 0.33% to 1,007.10, the Dow Jones Industrial Average dropped to 9,337.95, down 0.34%, and the Nasdaq Composite Index closed at 1,992.24, a decline of 0.40%.

• Southwest Airlines Co. (NYSE: LUV) offered more than $170 million for bankrupt Fontier Airlines Holdings (OTC: FRNTQ). That’s up more than 50% from its first offer of $113.6 million. The move is intended to head off a bidding war with rival Republic Airways Holdings (Nasdaq: RJET). The winning bidder will get a stronger foothold in the Rocky Mountain region.

• General Motors Co. (OTC: MTLQQ) is partnering with eBay Inc.(Nasdaq: EBAY) to sell cars and trucks on a new portal sitestarting today (Tuesday). The joint venture will involve roughly 225 California dealerships and will run through September 8. If the program is successful, it could expand nationally as soon as next month, The New York Times reported.

• Shares of Dish Network Corp. (Nasdaq: DISH) rose more than 4% yesterday (Monday) to close at $19.30, as the satellite television provider reported its first increase in subscribers in more than a year, adding 26,000 new customers. Still, high expenses from increased marketing and patent dispute litigation with TiVo Inc.(Nasdaq: TIVO) caused Dish’s profit to fall to $63.4 million, or 14 cents a share, in the quarter ended June 30. That compares to a net income of $335.9 million, or 73 cents a share, a year ago. Revenue was flat at $2.9 billion.

• Bankruptcies among U.S. consumers grew by more than 126,000 in July, representing a 34% increase over July 2008, Bloomberg News reported, citing the American Bankruptcy Institute (ABI). “Rising unemployment on top of high pre-existing debt burdens is a formula for higher bankruptcies through the end of this year,” ABI Executive Director Samuel Gerdano said. The increase came after bankruptcies in the first six months of 2009 grew 36.5%.

• U.S. Federal Reserve Chairman Ben Bernanke deserves another term based on his success in battling the financial crisis, Nobel Prize winner and Princeton University economist Paul Krugman toldBloomberg News in an interview. “He turned the Fed into the financial intermediary of last resort,” Krugman said. “When the banking system failed to deliver capital where it was needed, he put the Fed into the markets.” In 2000, Krugman was recruited by Bernanke to join Princeton. Bernanke’s term ends on January 31 2010.

• Fast-food giant McDonald’s Corp. (NYSE: MCD) reported its same-store sales for July rose 4.3%. Sales in the United States grew 2.6%, Europe sales were up 7.2%, and sales in the Asia/Pacific, Middle Eastern and African markets rose 2.1%. The company attributed the growth to a strong reception of its McCafe espresso-based coffees, a tiered-menu approach and longer operating hours. “With July’s improved trends, we are encouraged by (McDonald’s) ability to gain or maintain share in a still challenging environment,” Oppenheimer analyst Matthew DiFrisco said in a note to clients.

• Bank of America Corp. (NYSE: BAC) will pay $55 million to employees of its Countrywide Financial Corp. to settle a class-action lawsuit in which the employees accused Countrywide of misleading them about its financial health and causing the value of their retirement plan to drop, Bloomberg News reported. Lawyers for the employees called the settlement “fair, reasonable and adequate.” BofA acquired Countrywide in January 2008.

Source: Investment News Briefs Tuesday, August 11, 2009

Without some big event or monolithic development coming down the road, there’s no reason for investors to care about these tiny companies.

You see, the majority of investors are only interested in making 5%–10% per year. That’s pretty much the maximum you can expect to gain if you are investing in blue chips. Here at Penny Sleuth, we view the stock market a little differently.

We want the money multipliers — double-, triple-, even quadruple-digit gains. For that to happen, we need some kind of spark to set our penny stocks apart from the rest. After all, there are currently over 6,000 to choose from.

So, what kind of catalysts can make a penny stock pop? Let’s look at a couple big ones:

• Commercialization — After years of research and development, and sometimes painstakingly long clinical trials and efficacy tests, there comes a time in any successful start up company’s life when it needs to actually manufacture and sell its products or services. Just take a look at what happened to Tata Motors Ltd. (NYSE: TTM)…

As you might already know, this was the growth story of last year, and it continues to today. Tata is the Indian car giant that made its mark on the global economy, when it released the world’s cheapest car.

In March of this year, the company commercialized a new product. It started selling the Tata Nano in India. Investors were so excited by this car design, they started buying enormous amounts of Tata stock. Since the company started pre-selling the car, shares are up 165%.

• Buyout Candidates — Sometimes, it’s as simple as waiting for a larger competitor to buy the penny stock. When one company buys another, they agree on a price. Many times, that price is much higher than what the soon-to-be-purchased company’s share price is currently trading. This gives those shareholders an instant gain.

A few weeks ago, I discussed the consolidation of the soda industry. Both PepsiCo Inc. (NYSE: PEP) and Coca-Cola Inc. (NYSE: KO) are buying out their bottling operations to save on expenses and double spending.

Pepsi is in the process of buying its two largest bottlers: PepsiAmericas and Pepsi Bottling Group. Shares of both of these companies popped more than 22% the day it was announced. From their March lows, PepsiAmericas is up 67% and Pepsi Bottling Group is up 94%.

• Legal Battles — The last of the major catalysts is court rulings. In many cases, a simple ruling can make or break a penny stock. Hardly any company has been entrenched in the courtroom like TiVo Inc. (NASDAQ: TIVO).

We wrote about TiVo back in December 2007. Its revolutionary digital recording technology is both a huge moneymaker and a legal nightmare. You see, plenty of other competitors claim rights to certain patents TiVo profits from.

It takes a tech geek to decipher the differences between most of its intellectual properties, which isn’t usually a prerequisite for a judge. For the last five years, TiVo has been tied up in court with its competitor EchoStar Communications Corp (NASDAQ:SATS), now part of Dish Network Corp. (NASDAQ:DISH), over a patent dispute. The court finally ruled in favor of TiVo, rewarding the company $103 million plus interest.

Upon the day of the ruling, shares of TiVo jumped 53%. This gain sent TiVo’s stock over $11 per share and out of penny stock land. That just a drop in the bucket of what a lawsuit ruling can do for a company. Imagine what $103-plus can do for an even smaller company…

These are just four types of things to consider when thinking about buying a penny stock. But even if you do have the perfect catalyst lined up, that’s only the beginning.

Sincerely,
Jim Nelson

Source: How to Tell When a Penny Stock Will Pop

According to the deal, TiVo users will be able to rent Blockbuster’s 10,000 titles for $1.99 and $3.99, and purchase movies for between $14.99 and $19.99. Blockbuster will also sell Tivo DVRs in its stores and on its Web site.

The move shows Blockbuster is starting to understand what Netflix and Amazon.com Inc. (AMZN) have all along: It’s cheaper and more profitable to chase the customer instead of building stores and waiting for the customer to walk in during business hours.

It’s also the second time Netflix beat them to the punch. Its top rival began renting films on TiVo last year and has developed streaming video on its Web site and through Microsoft Corp.’s (MSFT) Xbox 360 video game console.

This time – unlike Netflix – Blockbuster’s TiVo offerings will be available a few weeks after they arrive in rental stores, but before they reach pay-per-view audiences.

“You will see us in a large number of other devices going forward,” Kevin Lewis, senior vice president of digital entertainment at Blockbuster, said.

Lewis added that the company also plans to sell its movies via Apple Inc’s (AAPL) products.

“We need to be in the normal places that consumers want to watch movies,” he said.

Shareholders Happy… For Now

More than ever, Blockbuster needs a better business model – and fast. Last quarter, the movie-rental chain posted a net loss of  $359.8 million, or $1.89 per diluted share, while taking a $435 million non-cash charge “for the impairment of goodwill and other long-lived assets.”

Blockbuster’s shares dipped as low as 13 cents early this month when a report surfaced that the company hired Kirkland & Ellis LLP to advise a possible bankruptcy filing.

Chief Executive Officer Jim Keyes didn’t refute the report outright, but rather misdirected it, saying that bankruptcy is “not our objective,” Bloomberg reported.

“We have retained expertise both on the legal side and the investment-banking side to very aggressively pursue our refinancing alternatives,” Keyes said.

Keys said he has support from his investors, including Mark Wattles, founder of rival Hollywood Entertainment Corp., who took a 5.7% equity stake in Blockbuster as a sign of his confidence in the industry and Blockbuster’s financial stability.

“I was pleased to find he is a strong believer in our industry,” Keyes said. “We didn’t have any strategic discussions. He just emphasized his confidence in the direction of the company.”

But there’s one shareholder who demands that his actions and opinions about the company’s direction be watched: Billionaire Carl Icahn, who owns an 8.7% stake in Blockbuster, making him the company’s largest shareholder.

Icahn famously, and successfully, led the charge to dethrone Yahoo! Inc. (YHOO) co-founder Jerry Yang from his job as the company’s Chief Executive Officer. Icahn – upset with Yang’s performance – threatened to seek control of the board and resuscitate takeover talks with Microsoft.

Icahn ultimately won the battle, with Yang stepping down and Yahoo selecting Carol Bartz, chairwoman of Autodesk Inc. (ADSK), as his replacement a few months later.

Icahn did not get his ultimate wish, however, as Microsoft did not succeed in taking the company over.

Source: Blockbuster Teams with TiVo Go Global to Escape Extinction

This from Today’s Financial News:

Last night, I sat down at the kitchen table and realized I was a bit lopsided. I checked to see if the chair was broken. It checked out.  I sniffed my glass of water to make sure it wasn’t tainted. It was alcohol free.

It turns out my overstuffed wallet was the culprit. My worn-out leather companion has slowly grown to nearly two inches in thickness. The growth cannot because of an accumulation of greenbacks. You have a better chance of finding a moth infestation than more than forty bucks in cash in my back pocket.

The culprit was a collection of gift and membership cards. As I started digging through the mess, I uncovered memories I had long forgotten, like my membership to a local gym. I called to see if it was still active. The kind lady that answered the phone told me the gym closed over two years ago. No wonder I have not been going.

As my stack of “throw-away” cards grew to over an inch in thickness, I hesitated when I got to my Blockbuster (NYSE:BBI) membership card. I hadn’t used the thing in at least a year, but had a tough time convincing myself that would be a long-term trend. After all, I am recently married and that means I will be spending a lot more time at home, snuggling on the couch. Ugh…

In the end, I decided to experiment and toss the rectangular piece of plastic into the hopper that will ensure it is buried for all of eternity. I think I made the right decision.

The Internet killed the video star

Blockbuster is in a ferocious industry battle. The video-rental company was doing fine, even leading its industry, until Netflix (NASDAQ:NFLX) came along and changed the rules of the game.  No longer do consumers have to get in their cars and shell out four or five bucks for a movie that is due back in a couple of days. Thanks to Netflix, they are delivered straight to a subscriber’s door.

Blockbuster enjoyed nearly half of the industry’s “store” business, but cannot get anywhere close to a leadership position in the industry’s new monthly subscription business. Netflix dominates with nearly three-quarters of the $2.2 billion industry’s total sales.

Blockbuster has tried to keep up with the mail-based subscription industry, but as it was not able to obtain a position as a first-mover, its brand is rarely associated with the industry. Just as brands like Kleenex, Google and Xerox became synonymous with their products so has Netflix. It has become a strong and relentless competitive advantage for the company.

But now the industry is changing once again and Blockbuster is desperate to take the lead. Check out any of the latest in television or set-top products at the Consumer Electronics Show and you will see one thing. Almost all of them have Internet connections. A broadband-enabled TV is the way of the future.

At least that is what Blockbuster hopes.

Earlier today, the company announced a deal with Sonic Solutions (NASDAQ:SNIC), a $35 million company specializing in digital video software and products. Through Sonic’s CinemaNow video library and Blockbuster’s own digital content offerings, the companies are working to beat Netflix to the downloadable movie leadership position.

Netflix has the advantage. It has been offering online video downloads since 2007. Subscribers can download videos to their computers, Xbox systems and the company has a deal with TiVo (NASDAQ:TIVO) that sends movies straight to a TV set.

Blockbuster wants to follow the same route, but offer the content to even more digital devices hooked to the Web. It is going to be an interesting battle.

Playing for keeps

The real question is not what devices or technology the company’s should use. What investors need to know is if there is room for more than one player in this industry.

Just like the satellite-radio industry, the world of downloadable movies has high fixed costs and little in the way of variable costs. That means if the subscribers are spread over too many competitors, individual profits will remain low and we will see a wave of consolidation. Again, just look at Sirius XM (NASDAQ:SIRI).

But if one company emerges as the winner, it will be able to fend off competition because newcomers will not be able to afford the initial technology costs. That is why Netflix and Blockbuster are fighting so hard while this industry is in its infancy. The winner will secure a huge long-term revenue stream.

Right now, it is anybody’s battle to win. Netflix has the better brand, but it appears Blockbuster has the superior technology. Traders would be wise to look beyond these two companies and look at the firm’s making it all happen, like Sonic or even TiVo.

For investors looking to break into an industry of the future, this is a fantastic opportunity. Share prices are cheap and the profit potential can only grow from here. All you have to do is pick the winner.

Source: Want to get rich? Invest in the company that can dominate your entertainment

• In yet another indication of the weak economy, U.S. bankruptcy filings spiked in the second quarter, up 29% for the 12-month period ended June 30. Business filings ratcheted up more than 41% to 33,822 from 23,889 the year before. Non-business filings totaled 934,009, up 28% from the same period in the prior year, CNNMoney.com reported.

• Tokyo-based real estate developer Sohken Homes Co. Ltd. filed for bankruptcy, sparking concern over a weakening Japanese economy. “If consumers were confident their salaries would remain secure, they’d buy condos and homes even with 30-year loans,” Yoshihiro Ito, senior strategist at Okasan Asset Management Co. in Tokyo, told Bloomberg News. “With rising prices and stagnant income growth, that isn’t the case now.”

• Aerospace firm The Boeing Co. (BA) withdrew plans to begin phasing out its traditional employer-sponsored pension plan after threats of a strike from the International Association of Machinists and Aerospace Workers. Boeing had hoped to replace the costly plan with a 401(k)-type plan that was more dependent on employee contributions, MarketWatch reported.

• Shares of sports apparel maker Quicksilver Inc. (ZQK) jumped over 15% yesterday (Wednesday) after a $147.7 million (100 million euro) bid for its winter sports apparel and equipment unit from Chartreuse & Mont Blanc, which is majority owned by Australia’s Macquarie Group Ltd. The California-based retailer put the unit up for sale after a lackluster ski season and weak domestic economy dragged on sales, Reuters reported. The sale will allow Quicksilver to refocus on its marquee brand product lines.

• Light, sweet crude for October delivery rose $1.88 to settle at $118.15 a barrel on the New York Mercantile Exchange yesterday (Wednesday), after earlier spiking as high as $119.63. Crude has jumped more than $3 this week as Hurricane Gustav continues to slowly spiral towards the Gulf Coast.

• TiVo Inc. (TIVO) posted a quarterly profit for only the third time in its 11-year history yesterday (Wednesday), reporting $2.9 million in net income, or 3 cents per share, compared with a loss of $17.7 million, or 18 cents a share, over the same period last year. The company said it expects TiVo also said it expects a net loss in the range of $7 million to $9 million for the current quarter, MarketWatch reported.

• PetroChina Co. Ltd. (ADR: PTR) posted a 38% drop in quarterly earnings after refining losses and windfall taxes dissolved gains from soaring crude prices. The company will likely continue to find itself encumbered by state-capped fuel prices, even after Beijing raised gasoline and diesel prices by 18% in June, Reuters reported.

• BP PLC (BP) is conducting secret, high-level negotiations with the billionaires who co-own its troubled Russian venture TNK-BP and an outline deal to settle their dispute may come in weeks, a source familiar with the matter told Reuters. Lamar McKay, a top BP official brought in to end the saga at TNK-BP, held a five-hour meeting in London the week before last with Mikhail Fridman – the billionaire oligarch who calls the shots on the Russian side of the company, Reuters reported.

Source: Global Investing Roundups Thursday, August 28th, 2008