Yesterday was all about earnings as investors took a break from concerns about the economy and the Fed policy and concentrated on positive reports from Time Warner Inc, Procter & Gamble, Adobe Systems and Cigna to name a few. Today, will also be partly about earnings but most likely in the other direction as Ford Motors Co said late Wednesday that its second-quarter loss was more than double what the automaker previously reported.
Weekly initial claims report is due at 8:30 this morning and factory orders at 10:00, but as I mentioned in the past few days, the market is awaiting tomorrow's employment report which would give investors further indication as to what the Fed policy might be when it is announced next Tuesday.
Oil prices eased as it became clear that Tropical Storm Chris would not hit the coast. Bond prices rose yesterday as the 10-year note yield declined to 4.96% from 4.98%. They were unchanged this morning.
Over night, Asian markets closed higher while European shares slipped before the expected decision of the European Central Bank to raise rates by a quarter point to 3%. Meanwhile, the Bank of England surprised analysts and raised rates by a quarter point to 4.75%.
Futures are negative in early morning trade (8:00 a.m.), indicating a possible lower start for stocks.
Here's a look at some key Blogging Stocks:
Apple Computer (AAPL) shares are down 46 cents to $67.63 as of 8:11 a.m. French law affecting iPod and iTunes stores goes into effect today.
General Electric (GE) shares are up 6 cents to $32.66 as of 8:13 a.m. Tyco reported Q2 earnings, lagging behind rival GE. An interesting article in Forbes looks how the fight against Al Qaeda affected, benefited the homeland security industry companies such as GE.
Time Warner Inc. (TWX) shares are down 16 cents to $16.51 as of 8:11 a.m. CNNMoney looks at the AOL changes and asks if it's Too Little Too Late?
Wal-Mart Stores Inc (WMT) shares are down 14 cents in pre-market trade to $44.23 as of 8:05 a.m. Wal-Mart announced this morning a 2.4% rise in July same-store sales, as expected.
Comfort Zone Investing: The unmighty dollar
Five winners of a weak dollar
For a quick-read on the U.S. economy, check the price of gasoline
Reader Comments (Page 1 of 1)
8-03-2006 @ 3:23PM
douglas mcintyre said...
AOL & Time Warner, The Day After
So there have been many stories discussing AOL as to the news, but what will the company and service look like after they change to a free model?
For starters they are sending about 5,000 jobs to the wolves, or a bit more than 1/4 of its 19,000 person workforce. Not all of these are firings. If it is able to sell its French operations that will be about 3,000 jobs. It is also trying to sell its UK operations, as well as its German unit. The marketing area is perhaps the largest area that will endure cuts. They will bare the brunt of many more cuts, and the company said if they stop putting disks everywhere and advertising its dial-up services that they can save $1 Billion per year. Since the WSJ has estimated that the drop in subscription revenue could be $1 billion, the AOL overall plan just may work.
The services will be free for broadband users, and you can expect the dial-up users to fall of a cliff in percentages over the next two-years. While everyone will get to keep their AOL email addresses, entering into a new free email model is sort of a me too product in today's world. The fact that they saw 40% ad growth year over year probably helped them reach this conclusion, but even a large of that growth is not sustainable for years.
Restructuring charges will run $350-ish million. What is surprising is that most Internet posts are putting this against Google (GOOG). If you will recall Google took a 5% stake in AOL for a $1 Billion price tag, and you can bet that Google will be participating in this. Maybe they will lose some of the ad dollars, but they will be participating in a new line of them as well.
In a move to ad-based services this may actually send AOL users to other services under Time Warner. If you will recall, they own Mapquest, MovieFone, CNN, CNNMoney.com, Warner Brothers movie studios, HBO, cable systems and more. So if they go to an ad model, then this means that the AOL unit is going to be tied to Time Warner for a long time. They do not have a Lord of the Rings coming out again since that is done, but when they do you can imagine what they will be hyping.
HERE is a Link to Doug's story yesterday.
Perhaps the most important thing to note here is that this is not just a Time Warner thing. This has implications for the entire sector, which is no longer the growth engine it used to be if you take all of the IT world into account. This switch is going away from TOP LINE numbers, meaning revenues. The company says the cost cutting will offset the loss of revenues after a couple years, and it is going to focus on EARNINGS. Maybe Peter Lynch really is right that "Earnings Drive Stocks."
Time Warner shares are down 0.3% today at $16.61, but they ran up over 2.5% yesterday on the news. Now that the dust has settled, this looks like the street still thinks they are making the right move.
Jon C. Ogg