Highlights from January 26th Energy Roundtable with Stephen Maloney and Steve Jacobs

The Energy roundtable with Stephen Maloney and Steve Jacobs pinpointed challenges facing the energy space today. By addressing different technologies of drilling and profitability there was talk of everything from fracking (Schlumberger, Halliburton) to spill control technology with the likes of Helix. The “Steve show” addressed the full supply channel of many regions to discuss players and cost differential from deep water to The Bakken. Transportation and regulatory challenges were discussed at length to emphasize some of the challenges to forecasting. Steve Jacobs obviously knows the technology of drilling and is one of the most sought after insights to match best tech with the challenge of a region. Stephen Maloney truly understands the supply and demand impact to trends in the space. Neither sees a lot of consolidation looking forward in the near term.

Highlights from January 25th Cloud Roundtable with Igor Stenmark and Michael Liebow

At the recent roundtable on the cloud Michael Liebow and Igor Stenmark walked thru players in IAS, PAS and SAS and the migration to the cloud. By laying the overview of legacy systems and challenges to the CIO mode, they outlined the flexibility of cloud and pros and cons. Walking thru all the enterprise challenges of capital budgets, the dynamics of power needs, and the drivers of adoption the meeting really laid the groundwork for both presenters to highlight their insight.

Michael has a unique insight brought about as an entrepreneur having sold companies to IBM and Cisco and now starting a new data company in Foretuit( www.foretuit.com ) that analyzes trends and processes to improve results to at this point primarily sales forces. The application is an application on top of software like Salesforce.com. This puts Michael in a unique understanding of where data analytics is going in the cloud.

Igor’s company MGI Research works with companies and investors to analyze all expenses in technology companies to understand their ROI of R and D. This has been a consistent indicator successful allocation of company capital. This is ideally suited to Igor and his team’s unique insight to the industry.

The two really contrasted views productively to understand metrics in the integration of cloud use. As SAS consolidates and IAS looks to move out of pure commodity to growth areas more in PAS companies like Amazon are taking leading roles. Virtualization is rapidly expanding in the US and China while Europe seems to be 2 years behind. This is where growth seems the most opportunistic. SAS just seems to have lots of room for growth and more roundtables to talk names in this space are coming up.

Meridian Bioscience update from San Francisco idea forum

Meridian Bioscience (NASDAQ:VIVO, $17.86) was presented at our December ide forum in San Francisco.  The company reported fiscal Q1 results this week.  VIVO missed EPS and revenue estimates for the quarter, but reaffirmed fiscal 2012 guidance for both.  The presenter’s original thesis still holds.  Weakness in Europe impacted the quarter, which he did cite as a risk, but fundamentally, the Illumigene platform for diagnostics continues to grow.  VIVO is, as planned, introducing more tests that are run on the platform, which increase hospitals’ rationale for placing the units.

The presenter projects eps of $.76 and $1.00 for fy 2012 and 13 and the current dividend rate of $.76.   He would still buy the stock if it broke below $17, since we are now in front of earnings acceleration and the expectations are coming down.  If investors can establish a position at $17, in a year one would have $.76/$17 or 4.5% from the dividend and at least $3/$17 from stock price appreciation for a total return of at least 22%.  22% may not sound exciting, but it’s a low risk 22%, in the presenter’s view.  As he puts it, an institutional manager who could generate a 22% return for clients this year will likely be a very happy camper.

 

Notes from JC Penney presentation

After JCP’s presentation in New York and the progress after only 11 weeks on the job for Ron Johnson a few things stuck out.

Ron Johnson didn’t need this job.  The loss of Steve Jobs did not lead him to this opportunity. This guys has rocks of stone.  He isn’t bringing in a whole new team.  He brought in an operator and an HR guy that both have a ton of respect.  The rest of the team was there and to say they have been motivated is an understatement. T he progress in three months is overwhelming.

Pricing and stores within a store are the headlines, but he has ideas for “Appleizing” the store with Main Street and Town square to create the experience.  Don’t cut short the imagination of the team and some of their outside advisors.

We spent some time with vendors.  This company is going to be further empowered by offering to all of these partners the opportunity to participate. That means many companies will be participating with novel ideas that might want to be one of these stores.  Now it’s a premise.  If it catches on, not only current vendors will want to participate,  but other new and novel concepts as well.  The potential for international players not interested in brick and mortar investment and test concepts is very broad. T he execution of 100 stores that work does not have to all fall on the shoulders of JCP management. The concept is novel.  It might not be an aircraft carrier to turn.

It seems the plan is to maintain current margins, while making the pricing change, and then increase volume and margins through the new concept and the other “P’s” Johnson announced at meetings in New York.  The concept of creating an entertainment zone in the middle of the store is novel to bring a new type of customer. The forums that can be created should not be underestimated with Ron Johnson’s type of creativity.  

 

Roulston Technology Partner Bart Perkins on Whether Social Connectivity is a Friend or Foe to Corporations

With the recent news that Facebook is planning on launching their IPO in May of 2012 Bart Perkins examined whether social connectivity is a friend or foe to corporations. The introduction of social networks have made the world much more connected than ever before. Facebook recently studied the connectedness among its 721 million active users and determined that the distance between any two Facebook users is now 4.74 “hops” which is down from 5.28 in 2008. This benefits corporations because they can use social networking to provide easy two-way customer communication and facilitate target marketing but it doesn’t come without uncertainties. Now more than ever news travels faster so dissatisfied customers can easily make their voices heard about their dislike with a company’s products or corporate polices. In addition, all of a company’s stakeholders can be connected (customers, suppliers, bankers, etc.) so suppliers can easily try and bypass you to sell their product directly to the consumer. The era of squeezing suppliers is over now and corporations have to work with their suppliers to ensure a mutual beneficial relationship. Finally, customers have a lot more information now about products and services to make informed decisions. Corporations should understand these issues and look to improve their monitoring and response strategies. To read the full article please visit http://www.computerworld.com/s/article/9223200/Bart_Perkins_Is_social_connectivity_friend_or_foe_to_corporations_.

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.

Roulston Retail Partner Craig Johnson on the New Looked J.C. Penney’s

Over the past two days new J.C. Penney’s CEO Ron Johnson made several significant announcements at the company’s annual investor days in New York that should have a significant impact on the company moving forward. The announcements focused on an overhaul of pricing and store layouts. The company will introducing a more straight forward pricing and promotions on February 1^st that will incorporate a three-tier pricing model and will scale back sales to 12 a year down from 590 promotional events in 2011. They will be offering discounted prices on seasonal products and will have a “best prices” promotion on the first and third Friday of every month. Ron announced Penney’s will spend $80 million a month to promote these promotions and will reconstruct store layouts and change the colors and presentation on a monthly basis to promote sales. Penney’s will also divide the stores into as many as 100 small shops inside their stores and hope to add as many as 30 new and revamped brands this year that include the likes of Martha Stewart and Nanette Lepore. Craig states, “Johnson needs to make J.C. Penney a destination, which it hasn’t been in decades. He did that for Apple, but now he must do that for a tired mall anchor. His background at Apple might serve him well, but merchandising a department store is much more challenging.” To read the full article please visit http://www.businessweek.com/news/2012-01-26/j-c-penney-to-change-prices-as-ceo-johnson-remakes-retailer.html.

Craig Johnson is President of Customer Growth Partners of New Canaan, CT, consultants serving the Retail and other Consumer industries. He has three decades of experience in consumer service industries, in both senior executive and consulting roles, and has advised institutional investors and private equity participants on opportunities in the consumer discretionary sector. He is cited as an authority on retail and consumer issues in publications such as Business Week, Fortune, New York Times, The Times (London), USA Today, and the Wall Street Journal. His Retail clients have included firms such as BJ’s Wholesale, Crutchfield Electronics, JC Penney, Lands’ End, Lowe’s, Perry Ellis, Simon Group, Toys R Us, Walt Disney,Westfield America and Williams-Sonoma.

Roulston Retail Partner on Retail Environment Moving into 2012

Maggie Gilliam recently commented on the retail environment moving into 2012 along with what trends are expected to continue. We are finally starting to see a downsizing of brick and mortar as online business has been consistently taking market share. This development will have a negative affect on Retail REIT’s since they are going to have a difficult time finding and maintaining tenants. Numerous companies have been selling off under performing stores and are focusing instead on improving there in-store experience. Companies have also focused on integrating ecommerce into their stores and JC Penney’s, Nordstrom, and Urban Outfitters in particular have been very successful in this respect. Two of the major stories in 2012 will be the developments with JC Penney’s and Sears Holdings. This week in New York JC Penney’s will be having its annual investor day where CEO Ron Johnson is expected to layout his strategy on how he is planning on transforming the brand moving forward. Sears Holdings recently announced that they will be closing 100-120 Kmart and Sears stores around the country after holiday sales came in well short of expectations. It appears the years of neglecting their stores have caught up with the company and it will be interesting to see how the company responds in 2012.

Maggie Gilliam is founder and principal of Gilliam & Co. and publishes a monthly publication called the Gilliam Viewpoint which covers the events taking place in the retail and related industries.

Roulston Technology Partner Timothy Prickett Morgan on the Launch of Intel’s Xeon E5

Intel recently announced that the “Sandy Bridge-EP” Xeon E5 processors and related “Romley” server platforms are now in volume shipment and due to be launched in the first quarter of next year. They were expected to be introduced in Q4 2011 but speculation was that the C600 chipset has a bug in one of the SAS controllers that delayed the launch. Intel revenue rose 22% to $13 billion in the fourth quarter of 2011 with net income rising 6% to $3.4 billion. They would have liked profits to grow faster than revenues last year but that was not possible with a PC slowdown and a delayed server ramp. Profits were under pressure in Q4 for the Data Center Group, which makes chips, chipsets, and mobos for servers and workstations as well as networking and communication gear, with the delay of the Xeon E5. Despite the setback Intel’s server-related sales are rising faster than the server market overall and are not facing much pressure from AMD at the moment. 2012 promises to be a stronger year for Intel and the launch of the Xeon E5will be a big part of their success. To read the full article please visit http://www.theregister.co.uk/2012/01/20/intel_q4_2011_server_drilldown/.

Tim Morgan is the Systems Editor of the UK based Register and is President and Editor in Chief of IT Jungle. He has been keeping a keen eye on the midrange system and server markets for 15 years, and was one of the founding editors of The Four Hundred, the industry’s first subscription-based monthly newsletter devoted exclusively to the IBM AS/400 minicomputer, established in 1989. For the past decade, Prickett Morgan has also performed in-depth market and technical studies on behalf of computer hardware and software vendors that helped them bring their products to the AS/400 market or move them beyond the IBM midrange into the computer market at large.

Roulston Energy Partner Stephen Maloney on the Ramifications of the Keystone XL Pipeline Rejection

Yesterday the Obama Administration formally rejected a bid by Canadian energy company TransCanada to build the $7 billion Keystone XL oil pipeline that would run 1,700 miles from the Canadian tar sands to refineries on the Gulf of Mexico. In December Congress forced the President’s hand by placing a proposal in the payroll tax cut bill that he signed into law which made him have to make an accept/reject decision on Keystone XL within 2 months. He believed that the imposed deadline did not provide adequate time for the State Department to finish a customary review of the pipeline’s route through six states to properly assess its safety and environmental impact. The impact is already being felt as the Canadian Natural Resource Manager Joe Oliver said relying less on the U.S. would help strengthen the countries financial security and that they will now focus on diversifying and expanding their markets, including the high growing Asian markets. TransCanada is still committed to working out a solution for the Keystone XL Pipeline but Canada is ready to move on if the United States keeps dragging their feet. To read the full posting please visit http://www.azuolasriskadvisors.com/index.html?entry=canada-sells-to-china.

Stephen Maloney is a partner at Azuolas Risk Advisors with over 30 years experience in the US and EU modeling risk and valuation in energy, FX, and other commodities. His clients include companies, hedge funds, and financial institutions actively marketing or trading physical and financial commodities and derivatives. He will be participating in our Energy Roundtable on January 26th in New York City with Steve Jacobs.

Ross Rubin on CES 2012

Roulston Technology Partner Ross Rubin recently attended the annual Consumer Electronics Show and provided his insight into the new and emerging trends that this year’s conference offered attendees. Last years show featured an array of smartphone launches spurred by the introduction of Verizon’s LTE Network and the HSPA+’s expansion by AT&T and T-Mobile along with a variety iPad competitors tablet launches. There was some of that at this year’s CES but the focus was on more established devices categories such as TV, ultrabooks, imaging products, and home networking devices. One of the big TV focal points for Samsung was the idea of Smart TV Evolution, in which the “computing” part of the set, including components such as the processor, can be swapped out every year to keep up with the latest advances. This essentially borrows from the old idea of desktop CPU and RAM upgrades, but in the connected AV space. Another major development introduced was that Vizio will be introducing ultra-thin notebooks and desktops after their success in TV’s.

Ross has more than 16 years of experience analyzing consumer technologies. Prior to founding Reticle Research, he was executive director and principal analyst at The NPD Group, where he provided analysis on a wide range of technology topics to clients and helped to launch several research products. Before NPD, Ross founded and developed the consumer access and technology service at Jupiter Research, where he served as vice president and chief research fellow. Ross is a senior columnist for Engadget, where he has written the Witched On column since October 2004, and a columnist for ABCNews.com and Tecca, where he writes Rubin’s Roundup. Ross has appeared on ABC, The Today Show, CNN, CNBC and Fox News and is frequently quoted by media outlets such as The New York Times, The Wall Street Journal, Bloomberg Businessweek, San Jose Mercury News, Associated Press and other leading publications. To learn more about Reticle Research please visit http://www.reticleresearch.com/.