Amazon recently announced that they have agreed to a licensing deal with Viacom to add dozens of shows to their streaming lineup. This is in addition to the previously struck deals with CBS, Fox, PBS, NBC-Universal, Sony, Warner Bros. and Disney-ABC Television and brings their total Prime Instant Videos to above 15,000. The streaming video content is part of the $79 Amazon prime service which includes free shipping on several items available for purchase and access to the Kindle’s lending library for digital reading among other things. The Viacom deal puts Amazon in position to be a direct challenger to Netflix who has been struggling to hold membership after the failed attempt to separate their streaming and rental businesses. Rob Enderle believes, “The bigger strategy is to create what amounts to a content loyalty program for Amazon and increasingly turn the Kindle Fire and following tablet offerings into a dedicated store front in every home. This is a very unique attempt to effectively corral Amazon’s growing set of services, which would increase customer retention and effectively lower the cost of customer acquisition as well.” To read the full article please visit http://www.newsfactor.com/news/Amazon-Adds-TV-Shows-from-Viacom/story.xhtml?story_id=0200029Q4JH8&full_skip=1.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward looking emerging technology advisory firm. He specializes in providing rapid perspectives and suggested tactics and strategies to a large number of clients dealing with rapidly changing global events.
Roulston Technology Partner Keith Mallinson on Challenges for Expansion of Mobile Broadband
Data traffic already exceeds voice on many mobile networks which has led companies to get rid of the flat-rate unlimited data pricing models that existed when operators were trying to get people to use 3G. The new 3G and upcoming 4G and LTE challenges are that escalating demand must be economically balanced with supply. The old model fails to extract higher expenditures from those who are willing to pay more, excludes price sensitive users who would be willing to pay lower prices for limited usage, and subjects operators to an extremely high usage from a small proportion of customers. New networks that have excess capacities still use the old model to accelerate subscriber acquisition, which eventually leads to slower speeds due to traffic congestion. Wireless broadband provides the most economical option for voice and Internet access over the next 15 years for nearly half of the world’s population. Most of the competitors have already changed to this multi-pricing strategy but it will be interesting to see how they will be able to deal with the excessive demand in this competitive industry over the coming years. To read the full article please visit http://www2.alcatel-lucent.com/enrich/en/v5i1/mobile-operators-respond-to-global-trends/.
Keith Mallinson is founder of WiseHarbor, providing expert commercial advisory to technology and services businesses in wired and wireless telecommunications, media and entertainment serving consumer and professional markets. He is also regular columnist with Wireless Week, FierceWireless Europe, and IP Finance. Prior to forming Wise Harbor Mallinson led Yankee Group’s global Wireless/Mobile research and consulting team as Executive Vice President. He currently forecasts the long-term outlook in mobile operator services, network equipment and devices to 2025.
EnPro Industries: Overlooked Name with Significant Upside
San Francisco-based portfolio manager likes EnPro Industries (NYSE: NPO, $37.11). This manufacturer of industrial sealing products, bearings and diesel and gas-fired engines holds leading market postions in all of its businesses. Repeatable, high-margin business accounts for 55% of total sales. The company has made a number of small, niche acquisitions at very reasonable multiples in the last few years to complement existing lines. One of its largest subsidiaries filed for Chapter 11 in 2010 when asbestos-related claims began to pick up. The claims process shoud be resolved favorably with the final liability likely reduced to around $200 million from $460 million on the balance sheet. The stock screens poorly due to the filing, and investors are overlooking EBITDA generated by the subsidiary. In the meantime, NPO is trading at 30% discount to the peer group. New coverage was initiated in December. The presenter’s target is $53 with the downside at $33-$34.
Silicon Image: Presenter’s Update Following Earnings
New York-based portfolio manager continues to recommend Silicon Image (NASDAQ: SIMG, $5.42) as a Buy.
Q4 a good quarter for the company (slight beat and raised guidance) and his thesis is playing out as expected. Mobile (MHL – mobile high-definition) continues to grow rapidly and is now the largest seller for the company. We should begin to see more TV’s rolling out with the MHL technology imbedded this year, which will only help accelerate the adoption of the MHL ecosystem. The presenter is expecting to see some announcements from device manufactures at the Mobile World Congress which should help continue the momentum. CE products, (read DTV market in general, not company specific) is still struggling. However, the presenter believes there is room for surprise to the upside in both Q2 and Q3 as the company will be comping depressed results.
Roulston Technology Partner Bart Perkins on the Growing Industry of Business Games
The business gaming industry will see major growth over the coming years rising from $100 million in 2011 to $1.6 billion in 2015. Engaging customers and employees with games has become a very effective way to increase the awareness of brands and also reduce the time it takes to train new employees. McDonald’s of Japan has been able to reduce the number of hours that it takes to train new employees from 45 to 24 hours and the company is heavily considering bringing this to the United States soon. Papa John’s is also considering implementing business games into their training process and this promises to be a growing trend with corporations who are looking to reduce the number of hours that it takes to get employees up to speed while reducing the time supervisors spend in the training process. Disney has been particularly successful at creating games for young children up to teenagers to get them engaged in the characters so when they release a movie focused on these characters it will already have a following. This also acts as a test market for the company because it will allow them to determine whether or not there is enough interest to make a high budget movie. Finally, companies are producing serious games that are designed to health purposes and to increase brain use. Insurance companies in particular have picked up on this in hopes it will reduce long-term problems among its client base. Most of the companies in the business games industry are small start-ups, academic, or spin-offs from larger entertainment companies but will be entering the public space in the coming years as the industry grows.
Bart Perkins has over 25 years experience leading IT efforts for major corporations and consulting firms. Former CIO of YUM! Brands and Dole Food Company, Bart developed technology supplier management systems to reduce risk, improve service levels and lower costs. Bart has been a Partner at KPMG Peat Marwick (Nolan, Norton & Co.), a Vice President at Technology Solutions Company, and co-founder of The Value Sourcing Group, an IT vendor management consulting firm. His consulting engagements span a wide range of industries. Bart’s clients include Marriott, Blockbuster, Thermo-Fisher Scientific, Diageo, General Foods, Kraft, Nabisco, IBM, Kaiser Permanente, PepsiCo, NCR, Thomson Reuters, Barilla, Boeing, Aetna, Georgia Pacific, and Heineken. Bart writes a monthly column on IT Management for Computerworld and is a judge for CIO Magazine’s CIO 100.
Oil production in North Dakota jumped by 55 percent from December 2010 to December 2011 and could surpass Alaska as the second leading oil producing state in 2012 if this trend continues. The rapid increase in production shows how important hydraulic fracturing is to the future of our domestic energy policy. North Dakota has benefitted the most from hydraulic fracturing combined with directional drilling where oil production has more than tripled over the last 5 years. There are several companies that are positioned to take advantage of the increase in oil production from the Bakken Shale. Continental Resources (CLR) is planning on spending $950 million in 2012 to develop its Bakken wells. Management has said that the majority of their land has not been developed yet so they have plenty of opportunity for growth once more wells are added. Northern Oil and Gas (NOG), Kodiak Oil & Gas Corporation (KOG), and EOG Resources (EOG) have also been heavily increasing their acreage in the Bakken as well and should perform well in 2012 as they increase production levels. To read the full article please visit http://www.instituteforenergyresearch.org/2012/02/11/north-dakotas-oil-production-increases-by-55-in-one-year/.
Thomas J. Pyle is the president of the Institute for Energy Research (IER). In this capacity, Pyle brings a unique backdrop of public and private sector experience to help manage IER’s Washington, DC-based staff and operations. He also helps to develop the organization’s free market policy positions and implement education efforts with respect to key energy stakeholders, including policymakers, federal agency representatives, industry leaders, consumer entities and the media. To read more about the Institute for Energy Research and their mission please visit http://www.instituteforenergyresearch.org/.
Roulston Technology Partner Rob Enderle on Facebook’s Upcoming IPO
After years of anticipation Facebook has finally decided to file for its initial public offering. The valuation range is expected to be between $75 billion and $100 million and the company is looking to raise upwards of $10 billion from the IPO. Facebook had $1 billion in profit in 2011 on $3.71 billion in revenues which largely consisted of advertising revenue. While there is excitement for the Facebook IPO Rob Enderle warns caution stating, “The social networks IPOs have been trending down. What is interesting is that there appears to be no connection to financial viability. The weakest company was Groupon, which started the strongest. The strongest company was Zynga and it was also the most tightly connected to Facebook and it barely made it out of the gate.” There has been sense that people are tiring from social networks and Facebook may be lumped into that despite its popularity. What separates Facebook from their competition is that they have a significant amount of untapped revenue potential because companies can distinctly target their advertisement dollars toward individuals and their friends. Despite that Rob exclaims, “Odds were this would go big initially and then collapse down to a more reasonable price. Facebook is limiting supply to drive the initial price into the stratosphere. While I think it will initially come out strong – it is Facebook, afterall – the risk it won’t is increasing, and suggests caution.” To read the full article please visit http://www.newsfactor.com/news/Might-Facebook-IPO-Spring-a-Leak-/story.xhtml?story_id=0020006M8WK2&full_skip=1 and his interview at here.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward looking emerging technology advisory firm. He specializes in providing rapid perspectives and suggested tactics and strategies to a large number of clients dealing with rapidly changing global events.
Roulston Energy Partner John Hofmeister on Rising Energy Prices
The price of a gallon of gas is a dollar higher than last year at this time and is starting to cause concern for domestic consumers. John Hofmeister explains that the reason for this is that United States is not producing its own oil, oil futures buyers are concerned about the recent activity in the Middle East, and Asian demand has been growing at a rapid rate and will only continue to increase over the years. China is expected to increase from 9-15 million barrels of oil per day and India will increase from 4-7 million. Right now the world doesn’t know where they are going to find an additional 9 million barrels of oil a day from so oil speculators will be able to solicit higher prices. The moratorium on offshore drilling in the United States has caused domestic oil production to drop from 7 million barrels a day today to 6 by the end of next year. John believes that if the United States decides to go back to there 1970’s and 1980’s levels of producing 10 million barrels of oil per day we would be able to create 3 million jobs while at the same time reducing our dependence on foreign oil. It will be interesting to see if Washington changes there stance on domestic drilling over the coming years and how it will affect the major players in the industry. To see John’s full interview please visit http://www.msnbc.msn.com/id/21134540/vp/42684538#42684538.
Upon retirement from Shell as President in 2008, John Hofmeister founded and currently heads the nationwide membership association, Citizens for Affordable Energy. This Washington, D.C.-registered, public policy education firm promotes sound U.S. energy security solutions for the nation, including a range of affordable energy supplies, efficiency improvements, essential infrastructure, sustainable environmental policies and public education on energy issues. You read more about Citizens for Affordable Energy and his recently published book Why We Hate The Oil Companies at his website http://www.citizensforaffordableenergy.org/
From recent visits to JC Penney stores
Two store visits and a vendor discussion reiterate just how far Ron Johnson, Michael Francis and Dan Walker have come in a short time frame. It’s very clear Johnson had a plan in September(before even arriving at JCP), setting in motion the additional hires and execution of the strategy at JCPenney. The new pricing strategy and store configuration is in place and employees are walking the talk. Saying rejuvenated is an understatement. This is clearly a thought leader who knows how to comuicate and execute. Through primarily a reduction in seasonal employee headcount the stores have already downsized labor, removed floor inventory (uncluttering thedirty look) and established a new model.
Both the employee base and the “old” customer are on the same page.
The speed of execution is impressive. Tagging, in store, promotional signing, logo changes, color coordination, stocking and fixturing all have made noticable overhauls. More importantly, the employees have been educated and a week into everyday low price they are able to communicate the concept.
Look for new technology to appear on the floor allowing better communication between customer and employees. Target and Apple features like customer service centers, on floor checkout and other retail technology highlighted at shows like Vegas last month will improve productivity and customer/store interaction and the service bar customer concept of friendliness.
Town Center is intriguing. This is going to be a magnet for new audience attraction. Many wall street types think this is more store in a store(even heard dry cleaning). They are missing Johnson’s creativeness to draw new demographics.
Will go back to Cleveland stores this weekend to check the post Feb.1 look. These stores two weeks ago looked like the “old” JCP stores(dirty and messy). To us the key is the mix of stores and how they can carry the model across the different quality store base.
Lam Research recently announced their Q4 earnings and Roulston Research Semi-Conductor partner Carl Johnson had several major takeaways from the announcement. Lam beat expectations and guided the next quarter higher than expectations. The insertion of SADP (Self Aligned Double Patterning), hard metal mask schemes, the transitions to FinFets and the printing of 14nm features will develop in to revenue opportunities that extend in to 2013 and 2014.
Lam is predicting that Wafer Fab Equipment (WFE) spending will be $30 to $31 billion in 2012. This is a flattish year-over-year outlook but they have the potential to shoot much higher. Notable are the larger than expected capital spending plans announced by Intel and Samsung. TSMC has announced that they will spend less than they did last year but he would not rule out the possibility of that moving higher as this year progresses. Of course, everyone has to issue a disclaimer so Lam (along with anyone else you can think of) noted the macroeconomic issues that will, no doubt, have an influence on how much is actually spent.
90% of Lam’s shipments in the December quarter went to customers producing devices with features less than or equal to 45nm. 46% of all the quarters’ shipments were to Foundries. This quarter Lam reclassified logic manufacturers that dedicate a significant portion of their production to foundry business to the Foundry segment (more than likely this means Samsung has been placed in the Foundry segment). >50% of the shipments expected to be made in the March quarter are headed to the Foundry segment.
In the coming months Lam will be providing an update on the Novellus acquisition. They expect the transaction to close in June. Most of you know that this is a perfect fit. Etch and Single Wafer Clean are offered by Lam while Novellus brings the adjacent steps of thin film deposition and wafer surface preparation. One would expect significant leverage as the combined entities develop advanced processes for 300mm and, ultimately, tools for the 450mm transition. There have been a number of post-EPS sell-offs in tech stocks so far this year. If the shares of Lam were to dip toward $40 hw would suggest stepping up to the plate to pick some up. It’s pretty clear that good things are happening. To read the full article please visit http://www.infras.com/.
Carl Johnson is the President of Infrastructure, providing editorial strategy and oversight. A co-founder, he has studied the semiconductor, semiconductor equipment/materials and related industries for over 16 years. Earlier, he spent more than 10 years on Wall Street with Merrill Lynch and Piper Jaffray. Carl is past Chairman of SEMI’s Strategic Business Conference Committee and is a member of SEMI’s Southwest Steering Committee. He is also a Research Fellow at Coburn Ventures. He has authored numerous columns for trade and financial publications and is frequently an invited speaker on technology industry trends and investments at both public and private events. He will be participating in the February 23rd Semi-Conductor Roundtable in New York with Mark Thirsk. If you would like to attend or dial-in please contact Michael Igelnik at migelnik@roulstonresearch.com.
