tag:blogger.com,1999:blog-68536525615708527042024-03-08T08:21:34.750-05:00Wall Street MessThis blog is part of the Motley Fool Blog Network. Its goal is to explain complex investment subjects so that even the casual investor can understand.
Subscribe to ALL of my articles for the Motley Fool at http://beta.fool.com/tdalmoe/ and click on the subscribe icon located in the right column.Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.comBlogger261125tag:blogger.com,1999:blog-6853652561570852704.post-4092834098028778722013-02-19T14:04:00.002-05:002013-02-19T14:05:57.069-05:00Hana: Game Changer for SAP
<span style="font-weight: normal;">One
of the very few European technology companies that enjoys success
globally is Germany's </span><b>SAP AG </b><span style="font-weight: normal;">ADR
(NYSE: SAP). More than 60% of all global transactions involve a SAP
system.</span>
<br />
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Yet, it was feared
that the German firm's best days were behind it. The perception among
investors was that it had missed the change over of applications to
the cloud and on to mobile devices. It was this change that was
powering new challengers to SAP such as Salesforce.com.
</div>
<br />
<div style="margin-bottom: 0in;">
<b>New Leadership</b>
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
But the
appointment of co-CEOs – Bill McDermott and Jim Hagemann – in
2010 refocused the company on innovation and its customers.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
What followed was
12 straight quarters of double-digit growth in sales of software and
related services.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
But that wasn't
enough. Doubts still lingered about the company. Would it go down the
path of HP towards obscurity or remain relevant and successful?
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Luckily for SAP,
the man who developed its flagship software system - chairman Hasso
Plattner, is still hard at work. He developed a new system
architecture that may catapult SAP ahead of its competitors.
</div>
<br />
<div style="margin-bottom: 0in;">
<b>Hana Is Born</b>
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Plattner and a
team of computer scientists designed new architecture that is now
SAP's solution to the rapid growth of mountains of complex data and
companies' desire to exploit this information to their advantage.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
The new
architecture, Plattner's brainchild, is called 'Hana' and should be
the catalyst for SAP's future growth.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
SAP says Hana will
allow companies to run complex reports on voluminous data in a matter
of mere seconds instead of hours. That is due to the fact that Hana's
computing takes place directly in the memory chip of the computer,
instead of on a separate hard disk.
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">This
entire concept was originally sneered at a few years ago by SAP's
rival, Larry Ellison of </span><b>Oracle </b><span style="font-weight: normal;">(Nasdaq:
ORCL), who often likes to poke fun at everything SAP.</span>
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
However, he seems
to have changed his tune. Oracle now has its own in-memory product,
called Exalytics, which was released in February 2012. It is quite a
bit different than Hana, but both at their core do in-memory
calculations.
</div>
<br />
<div style="margin-bottom: 0in;">
<b>Microsoft </b><span style="font-weight: normal;">(Nasdaq:
MSFT) is also expected to launch an in-memory product by 2014 or
2015. It is currently working on it – project “Hekaton” - to
compete directly with Oracle and SAP. Hekaton is Greek for 100 times.</span>
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
It is expected
that customers will be able to install Microsoft's Hekaton on the
commodity servers they are using today.
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">Hana
is one of the key factors that is expected will allow SAP to keep
pace with rivals including Oracle</span><b> </b><span style="font-weight: normal;">and
</span><b>International Business Machines </b><span style="font-weight: normal;">(NYSE:
IBM). IBM recently reported excellent earnings (up 11%) powered by
gains in “analytics, cloud computing, [and] Smarter Planet
solutions”.</span>
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Last year's
acquisitions of Ariba and SuccessFactors and 2010 purchase of Sybase
are also expected to help SAP to keep pace with rivals.
</div>
<br />
<div style="margin-bottom: 0in;">
<b>The Future</b>
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">SAP</span><b>
</b><span style="font-weight: normal;">forecasts it will pass 20
billion euros in sales by 2015, powered by three key areas: mobile,
cloud computing and database computing.</span>
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Sales of Hana are
expected to reach 700 million euros in 2013, which may be a
conservative estimate by the company. Hana had sales of almost 400
million euros last year with about half of those sales coming in the
last quarter of 2012. </div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
An additional key
selling point for SAP this year is the fact that it reported earlier
this month that Hana will support SAP's business suite management
software, its cash cow.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Hana could turn
out to be a real game changer for SAP, which may set it on the right
path for the foreseeable future. As Hasso Plattner told the Financial
Times, “I see now a clear future for SAP for the next five to 10
years.” </div>
<div style="font-weight: normal; margin-bottom: 0in;">
</div>
<div style="font-weight: normal; margin-bottom: 0in;">
This article was originally written for the Motley Fool Blog Network. Be sure to read of all my articles for the Motley Fool at <a href="http://beta.fool.com/tdalmoe/" target="_blank">http://beta.fool.com/tdalmoe/</a>.</div>
Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com4tag:blogger.com,1999:blog-6853652561570852704.post-59663745254911796382013-02-12T13:02:00.001-05:002013-02-12T13:02:07.880-05:00PC Era Continues to Fade
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">The
PC era seems to be drawing to a close. The once dominating force in
the technology sector – Wintel – is not what is used to be. The
two companies involved, </span><b>Microsoft </b><span style="font-weight: normal;">(Nasdaq:
MSFT) and </span><b>Intel </b><span style="font-weight: normal;">(Nasdaq:
INTC), continue to search for a new path for success in the
rapidly-expanding smartphone and tablet era.</span>
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Take Intel, for
example. The company's most recent earnings report showed profits
fell 15 percent as revenues and profit margins dropped in 2012,
thanks largely to declining sales in its core PC market. Intel has
its processors in only a mere 10 tablet and seven smartphone models.
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">Of
course, Intel and Microsoft are not alone in trying to adjust to the
new realities. The fortunes of PC makers </span><b>Dell </b><span style="font-weight: normal;">(Nasdaq:
DELL) and </span><b>Hewlett-Packard </b><span style="font-weight: normal;">(NYSE:
HPQ) have also declined quite rapidly. HP is desperately trying to
maintain its number one position over rival Lenovo by cutting prices
and sacrificing its profit margin. . .not a long-term winning
strategy. </span>
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">Dell's
best hope seems to be a leveraged buyout by private equity firm
Silver Lake Partners, which specializes in saving 'dying' firms. The</span><b>
</b><span style="font-weight: normal;">buyout</span><b> </b><span style="font-weight: normal;">makes
sense for Dell because the decline in the PC market looks set to
continue to the years ahead. </span><br />
</div>
<br />
<div style="margin-bottom: 0in;">
<b>PC Decline to Continue</b><br />
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
The headwinds is
the industry is facing was borne out by data from both Gartner and
IDC Research this month that showed PC shipments declined in the
fourth quarter of 2012, 4.9% and 6.4% respectively.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Both research
firms blamed the failure of Microsoft's Windows 8 to ignite the
market and consumers' growing preference from lower-cost tablets. An
analyst at Gartner, Mikako Kitagawa, told the Financial Times
“Tablets have dramatically changed the device landscape for PCs,
not so much by cannibalizing PC sales, but by causing PC users to
shift consumption to tablets rather than replacing older PCs.”
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
The decline of the
industry caught the eye of the Fitch Ratings agency. Fitch warned
that revenues in the PC sector in particular would decline again in
2013. It said, “2013 marks an important year for the industry. .
.[it] is especially critical for Microsoft, Dell, HP and Intel, all
of which have been limited participants in faster growing products
over the last two years.”<br />
</div>
<br />
<div style="margin-bottom: 0in;">
<b>Stodgy Dividend Companies</b><br />
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Over the last few
years, companies in this once vibrant sector seemed to have turned
into stodgy old dividend-paying companies. They are now like the 'old
economy' companies they once made fun of.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Just look at how
their yields have risen since Apple first launched the iPad at the
beginning of 2010.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Microsoft's
dividend yield doubled to 3.5%. Intel's yield rose over 40% in the
same time frame to 4.4%. The dividend yields for both Dell and
Hewlett-Packard are above 3%.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Bear in mind that
during this same time frame, the yield on the 10-year U.S. fell by
half to 1.9%.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
With smartphones,
iPads and Android phones continuing to erode away market share from
the PC industry, these yields may climb even more.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
That's something
tech investors would have thought impossible a few years ago. It's
also something for Apple investors to chew on. In the tech space, no
one stays on top forever. </div>
<div style="font-weight: normal; margin-bottom: 0in;">
</div>
<div style="font-weight: normal; margin-bottom: 0in;">
This article originally appeared on the Motley Fool Blog Network. Please read all of my articles for the Motley Fool at <a href="http://beta.fool.com/tdalmoe/" target="_blank">http://beta.fool.com/tdalmoe/</a>.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
</div>
Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com1tag:blogger.com,1999:blog-6853652561570852704.post-86623097910896826332013-01-23T16:17:00.002-05:002013-01-23T16:17:38.837-05:00Pharmas Look to Fatten Up With Obesity Drugs
Pharmaceutical
companies have had some recent lean years thanks to the patent cliff
and other factors. But some pharma companies hope to grow fat with
profits again soon.
<br />
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Their plan to do
that? Jumping on the growing global trend of obesity. Pharmaceutical
firms believe consumers are moving away from fad diets and look
forward to a surge in sales from prescription medicines that promise
to help consumers lose weight.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
In the United
States alone, there is a need for something that can tackle the
nation's problem with its citizens being overweight. According to the
Centers for Disease Control and Prevention (CDC), more than two
thirds of Americans are overweight and more than one third – 78
million U.S. adults – are considered to be obese. That percentage
is forecast to climb to 42 percent by 2030.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
A study last year
indicated that obesity accounts for $190 billion in annual medical
costs, which is quite a burden on the U.S. healthcare system. The CDC
estimate is that obesity costs the U.S. economy $147 billion annually
in medical expenses. <br />
</div>
<br />
<div style="margin-bottom: 0in;">
<b>Companies Looking to Fatten Up</b><br />
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">Several
drug companies are moving forward in the battle against Americans'
expanding waistlines. One company, </span><b>Vivus </b><span style="font-weight: normal;">(Nasdaq:
VVUS), last autumn it launched its weight loss drug Qsymia. The
company's president, Peter Tam, told the Financial Times “It's been
a very challenged category, but there is a feeling we have to do
something about obesity with the realization that it is a medical
epidemic.”</span>
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">The
last diet drug approved – Xenical from Switzerland's </span><b>Roche
Holding AG </b><span style="font-weight: normal;">(NASDAQOTH: RHHBY) –
was approved in 1999. The FDA has held to a very high standard for
diet drug approvals since the withdrawal of “fen-phen” in 1997.
That drug, created by Wyeth, was found to cause heart valve problems.
This caused Wyeth, now part of Pfizer, to set aside reserves of $21
billion for legal bills and payments from lawsuits. </span>
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">But
now apparently, the FDA agrees with Mr. Tam and is moving forward.
Last year, it also approved another diet drug, Belviq, which will be
launched very soon by </span><b>Arena Pharmaceuticals </b><span style="font-weight: normal;">(Nasdaq:
ARNA). Arena's partner on Belviq is Japanese pharmaceutical company
</span><b>Eisai </b><span style="font-weight: normal;">(NASDAQOTH:
ESALY).</span>
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">A
third company, </span><b>Orexigen Therapeutics </b><span style="font-weight: normal;">(Nasdaq:
OREX), is preparing to submit its Contrave diet drug for FDA approval
again after previous rejections. It also has a Japanese partner,
</span><b>Takeda Pharmaceutical </b><span style="font-weight: normal;">(NASDAQOTH:
TKPYY). </span>
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
But investors
shouldn't worry about the prior FDA rejections. Qsymia and Belviq
were also rejected by the FDA before receiving approval. Senior
biotech analyst with Cowen, Simos Simeonidis, told the Financial
Times “There has been a very significant and rather sudden shift in
the views of the regulator (FDA) over the past year.”<br />
</div>
<br />
<div style="margin-bottom: 0in;">
<b>Lingering Problems</b><br />
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
The changing of
the FDA's hard stance against diet drugs is good news for these
companies. But several problems still remain.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
One is the limited
effectiveness of these diet drugs. The weight loss impact of Qysmia
and Belviq was found to be 10% and 6% respectively. Those results
were under ideal conditions with tight medical supervision too.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
The second problem
is bigger – the risk of side effects. Diet drugs have had history
of unwanted side effects with fen-phen being the worst example.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
The current
generation of diet drugs also has side effects. Roche's Xenical is
also only moderately effective while producing unwanted side effects
like oily stools. It is now sold over-the-counter as Alli by GSK,
which has been trying to unload it for months now. But no buyers have
stepped forward.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Qysmia can cause
birth defects. So Vivus had to agree to a tight monitoring program
with the FDA in order to gain approval.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
But the more
widespread the use of Qysmia and other diet drugs becomes (with usage
perhaps not so closely monitored by physicians), the door opens wider
for misuse of the drugs. Consumers may not only become disappointed
by results but litigious if side effects become apparent.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
That is likely one
major factor keeping the stock price of company like Vivus near its
52-week low despite the approval from the FDA.</div>
<div style="font-weight: normal; margin-bottom: 0in;">
</div>
<div style="font-weight: normal; margin-bottom: 0in;">
This article originally appeared on the Motley Fool Blog Network. Make sure to read all my article for the Motley Fool at <a href="http://beta.fool.com/tdalmoe/" target="_blank">http://beta.fool.com/tdalmoe/.</a> </div>
Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com3tag:blogger.com,1999:blog-6853652561570852704.post-37299346160225382332013-01-16T10:00:00.000-05:002013-01-16T10:00:02.182-05:00Amazon Continues Changing Retail Landscape
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">One
thing is certain. Online retailer </span><b>Amazon.com </b><span style="font-weight: normal;">(Nasdaq:
AMZN) has changed the retail landscape in the United States forever.
But that change is an ongoing process. The way Amazon does business
continues to prod other retailers to change the way the companies
relate to their customers. </span>
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
For instance, take
deliveries of items ordered by customers of retailers' websites.
Amazon offers same-day delivery in 10 U.S. cities for an $8.99 fee in
most cases. The company is able to do this thanks to the expanded
number of warehouses it has across the country.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Amazon has
invested hundreds of millions of dollars into expanding its portfolio
of warehouses. These new warehouses are an effort to both get closer
to its customers (speedier deliveries) and to get around the
imposition of sales taxes on items ordered online.<br />
</div>
<br />
<div style="margin-bottom: 0in;">
<b>Same-Day Delivery Service</b><br />
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Amazon's
introduction of same-day delivery service led to some other retailers
jumping aboard the ultra-fast deliveries of online purchases
bandwagon last year. But the cost of offering such a service may
adversely effect retail companies' profit margins that are already
pressure.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Retail firms are
still flying blind as many continue to search for the answers to
vital questions such as how many customers actually will use such a
service,the cost of it and how to divide the cost between the
customer and the retailer itself.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Logistics
strategist at consultancy Kurt Salmon, Al Sambar, told the Financial
Times “It's ultimately a pretty costly service to deliver.” He
does not think consumers will be willing to pay for such a service
except for a few special circumstances, such as medicines and
Christmas toys.<br />
</div>
<br />
<div style="margin-bottom: 0in;">
<b>Firms Jumping Aboard the Bandwagon</b><br />
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
Nevertheless, many
retail firms are pushing ahead with offering same-day delivery
services.
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">One
prime example of this is the country's biggest retailer, </span><b>Walmart
</b><span style="font-weight: normal;">(NYSE: WMT). In several
markets, it is testing same-day delivery service of goods ordered
online. In these markets, customers can have an unlimited number of
items delivered for a flat $10 fee.</span>
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">The
company doing the heavy lifting for Walmart is the Supply Chain
Solutions division of leading delivery company </span><b>United
Parcel Service </b><span style="font-weight: normal;">(NYSE: UPS) to
make these deliveries.</span><b> </b><span style="font-weight: normal;">This</span><b>
</b><span style="font-weight: normal;">division</span><b> </b><span style="font-weight: normal;">of</span><b>
</b><span style="font-weight: normal;">UPS is normally used for
instances such as the ultra-fast delivery of key machinery parts for
a machine that may have broken down.</span>
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
This business is
not completelt new for UPS though. Last year, it took a 6% stake in
Shutl, a London-based firm that matches up retail orders with
couriers that can make high-speed deliveries.
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">Online
auction site </span><b>eBay </b><span style="font-weight: normal;">(Nasdaq:
EBAY) is also trying out a same-day delivery service in New York and
San Francisco. Customers using eBay's special iPhone app in those two
cities that place an order are charged only $5 for delivery of the
product that day.</span>
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
According to the
Financial Times, eBay is working closely with Target, Toys R Us, Best
Buy, Home Depot and Urban Outfitters to make this experiment work.<br />
</div>
<br />
<div style="margin-bottom: 0in;">
<b>The Future of High-Speed Delivery
Services</b><br />
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
The real question
here is whether the majority of consumers really want the option of
same-day delivery service.
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
After all, it
would be a costly option for retail firms to offer. Most retailers
would have to upgrade their logistics system. Many simply do not know
what items they have and where. That makes it difficult to locate a
product and ship it immediately.
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">So
far, results have shown customers are more interested in knowing </span><i><span style="font-weight: normal;">when
</span></i><span style="font-style: normal;"><span style="font-weight: normal;">an
item will arrive and not if it can be delivered same day.</span></span>
</div>
<br />
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
UPS has found that what customers really want is a service that helps
them to not miss deliveries. UPS does currently offer such a notice
service that gives customers a four-hour window in which the delivery
will be made.
</div>
<br />
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
A UPS spokesperson told the Financial Times, “Quite honestly, what
customers are telling us is as long as they know what the committed
delivery date and time is, they are fine.”
</div>
<br />
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
Even Amazon's CEO Jeff Bazos told Fortune that he's “a little
skeptical that same-day delivery is ever going to be a huge part of
the business.”
</div>
<br />
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
Bottom line – such a service is going to be offered by more and
more retailers. But it really will not be a driver of the business
and may actually be a further drag on already tight profit margins. </div>
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
</div>
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
This article originally appeared on the Motley Fool Blog Network. Make sure to read all my articles for the Motley Fool at <a href="http://beta.fool.com/tdalmoe/" target="_blank">http://beta.fool.com/tdalmoe/.</a></div>
Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com6tag:blogger.com,1999:blog-6853652561570852704.post-86033199963174840312013-01-08T16:47:00.002-05:002013-01-08T16:47:49.938-05:002013 Will Not Be a Good Year for E-Reader Makers
In the midst of a
disappointing sales season for retailers, there have been several
bright spots. One of those has to be the number of e-book readers
that appeared under Christmas trees.
<br />
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
But the cheer is
not expected to last throughout 2013. According to some technology
analysts, this category of tech gadgets is expected to see a very
rapid decline in its fortunes over the coming months thanks to
competition from other devices.<br />
</div>
<br />
<div style="margin-bottom: 0in;">
<b>Competition From Tablets</b><br />
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">There
are several well-known e-readers on the market including the Nook
from </span><b>Barnes & Noble </b><span style="font-weight: normal;">(NYSE:
BKS). Last April, the company announced a partnership with </span><b>Microsoft
</b><span style="font-weight: normal;">(Nasdaq: MSFT) whereby
Microsoft invested $300 million into its Nook unit. This investment
is interesting in the light of Microsoft's move into tablets with
Surface. </span>
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">There
also a number of Asian manufacturers, but the best known of the
e-readers are the various versions of the Kindle from </span><b>Amazon.com
</b><span style="font-weight: normal;">(Nasdaq: AMZN). In the run-up
to Christmas, the latest Kindles occupied three of the top 10 slots
for electronics at Amazon's website. </span>
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
But they were
outsold by tablets, which occupied eight of the top 20 spots for
electronics on Amazon's website.</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">Tablets
are becoming more user friendly. . .lighter, cheaper and with longer
battery life. Not to mention tablets are multifunctional. The Kindle
and others are under direct fire from the mini-iPad from </span><b>Apple
</b><span style="font-weight: normal;">(Nasdaq: AAPL) and the Nexus 7
from </span><b>Google </b><span style="font-weight: normal;">(Nasdaq:
GOOG) that costs only $199.</span>
</div>
<br />
<div style="font-weight: normal; margin-bottom: 0in;">
It is this
competition that has industry analysts so worried.<br />
</div>
<br />
<div style="margin-bottom: 0in;">
<b>The Way of the Dinosaurs?</b><br />
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-weight: normal;">One
worry wart is the research firm IHS iSuppli. It titled its recent
</span><span style="color: navy;"><span lang="zxx"><u><a href="http://www.isuppli.com/Home-and-Consumer-Electronics/MarketWatch/Pages/Ebook-Readers-Device-to-Go-the-Way-of-Dinosaurs.aspx"><span style="font-weight: normal;">report</span></a></u></span></span><span style="font-weight: normal;">
on the industry: </span><i><span style="font-weight: normal;">Ebook
Readers: Device to Go the Way of Dinosaurs?</span></i>
</div>
<br />
<div style="margin-bottom: 0in;">
<span style="font-style: normal;"><span style="font-weight: normal;">According</span></span><i><span style="font-weight: normal;">
</span></i><span style="font-style: normal;"><span style="font-weight: normal;">to
iSuppli, total e-book readers shipments grew from a mere one million
worldwide in 2008 to ten million in 2010. Shipments hit a peak of
23.2 million units in 2011. But even then, tablets had already taken
the lead over e-readers with shipments of 67 million units.</span></span>
</div>
<br />
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
In 2012, iSuppli has forecast that sales will fall 36% to just 14.9
million units. Another drastic 27% fall is forecast for 2014 when
shipments decline to 10.9 million units. The firm sees sales of only
7.1 million units by 2016 as the consumer trend toward a
multifunctional device – the tablet – continues.
</div>
<br />
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
Research firm Forrester is in agreement with iSuppli. It also
believes that tablets will be become cheaper and cheaper while at the
same time screens and battery life improves.
</div>
<br />
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
An analyst with Forrester, James McQuivey, believes e-reader prices
and sales have only one direction to go. . .down. He told the
Financial Times' Chris Nuttall, “Prices are falling so quickly that
at some point Amazon's going to give you one for free to extend its
customer relationship.”<br />
</div>
<br />
<div style="font-style: normal; margin-bottom: 0in;">
<b>Small Hope</b><br />
</div>
<br />
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
As iSuppli points out in its report, it is an inexorable move from a
single-use device to multifunctional devices. But it doesn't mean the
complete end for e-readers. Think GPS devices and MP3 players.
</div>
<br />
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
There still may be some demand for the devices from one specific
sector – the education industry in emerging markets.
</div>
<br />
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
With the growing popularity of the iPad and other tablets, it may too
late to tap into the U.S. educational market in a big way. But it is
a different story in the emerging world. But only if the e-reader
makers grasp the opportunity quickly.
</div>
<br />
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
Jordan Selburn, an analyst with IHS, told the Financial Times “the
future [for e-readers] is in emerging regions and in heavily
subsidized opportunities.”<br />
</div>
<br />
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
But in those markets, with incomes low, e-readers would have be very
low-cost. Perhaps in the less than $20 range for end users. Some one
(governments?) would have to subsidize the cost so e-reader
manufacturers would make some profit.
</div>
<br />
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
So there is a bit of hope for e-reader manufacturers. But just not a
lot of it.</div>
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
</div>
<div style="font-style: normal; font-weight: normal; margin-bottom: 0in;">
This article originally appeared on the Motley Fool Blog Network. Make sure to read all of my articles for the Motkey Fool at <a href="http://beta.fool.com/tdalmoe/" target="_blank">http://beta.fool.com/tdalmoe/.</a></div>
Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com1tag:blogger.com,1999:blog-6853652561570852704.post-77407400562934628762012-12-05T15:44:00.001-05:002012-12-05T15:44:04.514-05:00Gaming Console Landscape Changed ForeverDuring its first week on sale in the United States, Wii U from Nintendo ADR (NASDAQOTH: NTDOY) sold more than 400,000 units. This is far less than the original Wii, which sold 600,000 units in its first 8 days on sale. No wonder many Wall Street analysts said that the 400,000 figure was disappointing. But is it really? It may not be, because the video console gaming landscape has changed drastically in the last few years.<br />
<br />
The introduction of the Wii U is obviously important to Nintendo. It is trying to revive its flagging sales. . .sales that led the company to report its first annual loss in five decades as a public company. Nintendo has been especially hurt by poor sales of its handheld 3DS gaming device.<br />
<br />
The original Wii to date has sold approximately 97 million units, the best of its generation. Its competitors – the Xbox 360 from Microsoft (Nasdaq: MSFT) and the Playstation 3 from Sony ADR (NYSE: SNE) – have sold about 70 million units each to date.<br />
<br />
The Wii U<br />
<br />
Nintendo is hoping to get back its mojo with the Wii U and its GamePad controller that has a 6.2 inch touchscreen imbedded in it. This not only allows a different view of the game but also permits users to transfer, if they wish, a game on the TV to the controller. This allows a game to be played on just a handheld device.<br />
<br />
The Wii U also offers HD-quality gaming as well as online gaming. This matches its rivals and should encourage games publishers including Activision to release some of the most popular games on the Wii U, such as Call of Duty: Black Ops 2. But so far, only games publisher Ubisoft seems willing to promote its game on Wii U. This may leave Wii U with a limited selection of games and not many of the best selling games. <br />
<br />
Changed Gaming Landscape<br />
<br />
The Wii U is also vitally important to the video console as a whole. This launch served as the introduction to the eighth generation of the traditional video game console. The previous cycle was kicked off seven years ago by Microsoft and its Xbox 360. The worry in the industry is that this may be the final generation of video game consoles.<br />
<br />
These worries are centered around the fact that the gaming world is very different from the one that Microsoft launched the Xbox 360 into. Back then Facebook social gaming, smart TVs, smartphones and tablets from Apple and others were not a threat. But they are today.<br />
<br />
As Piers Harding-Rolls, head of games at research company IHS Screen Digest, told the Financial Times “It's a much more competitive landscape. The question is whether Wii U. . .has enough selling points to elevate it to being a device that consumers will see themselves purchasing and engaging with on a daily basis?”<br />
<br />
It is right to be concerned about the industry, but don't bury it yet.<br />
<br />
Nintendo's Future<br />
<br />
Despite all the concerns, Nintendo will have a rather successful launch of the Wii U. The company should still be able to hit its target of 5.5 million units sold by the end of its fiscal year in March 2013.<br />
<br />
However, late next year will see fresh competition for the Wii U as both Sony and Microsoft come out with their new consoles. Sony's next game console will be the Playstation 4 or perhaps Playstation Orbis. Microsoft' offering will be the Xbox 720. <br />
<br />
Early talk among analysts about the competition between the three consoles is that Microsoft's Xbox 720 will be the winner. Doug Creutz, analyst at Cowen & Company, told the Financial Times that Microsoft's superior media content and services will give it a clear edge.<br />
<br />
But the question remains whether there will ever be a big “winner” again in the video game console industry in the true sense of the world.<br />
<br />
This article originally appeared on the Motley Fool Blog Network. Please be sure to read all of my Motley Fool articles at <a href="http://beta.fool.com/tdalmoe/" target="_blank">http://beta.fool.com/tdalmoe/</a>. Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com9tag:blogger.com,1999:blog-6853652561570852704.post-25716264960429977542012-11-20T16:17:00.002-05:002012-11-20T16:17:59.227-05:00Qualcomm On the Rise, Intel On the DeclineThe latest quarterly earnings statement from Qualcomm (Nasdaq: QCOM) blew away most estimates. This resulted in the company's stock actually briefly surpassing the market valuation of long-time chip champion, Intel (Nasdaq: INTC). This is not a blip. There are reasons why investors should expect this to be the continuation of a long-term trend where Qualcomm outperforms Intel.<br />
<br />
Qualcomm had such a good quarter because it is largest seller of semiconductors for mobile phones, including the iPhone 5 from Apple (Nasdaq: AAPL) and the latest offerings from Samsung like the Galaxy S III. It is also a big player in chips for tablets. The majority of the company's revenues comes from baseband chips, which connect phones to cellular networks. These chips are sold to firms like Apple and Samsung.<br />
<br />
Mike Burton, an analyst at Brean Capital LLC, said “Qualcomm has absolutely been one of the prime beneficiaries in smartphones and tablets.” Meanwhile, Intel is a laggard in the market for mobile phone chips and is being hurt by the steady decline in demand for PCs. PC shipments are headed for their first annual decline in 11 years this year, according to research firm IHS iSuppli.<br />
<br />
Qualcomm's chips are based on designs from Intel's adversary, U.K.-based Arm Holdings PLC ADR (Nasdaq: ARMH). Arm designs chips that use much less power than Intel chips while still being powerful. In fact, Bloomberg has reported that Apple is even considering dumping Intel's chips from use in its MAC computers in favor of Arm-designed chips. <br />
<br />
Clear Sailing in 2013<br />
<br />
More good news for Qualcomm shareholders is the fact that the company forecast continued strong demand for its chips in the current quarter. Qualcomm pointed to factors such as fast-growing demand for smartphones among emerging market consumers. Qualcomm's CEO Paul Jacobs told the Financial Times “Smartphones in China are really strong right now and cell phones are staples, not luxury items any more.”<br />
<br />
Despite a bit of a slowdown in the sales growth rate in the third quarter, the future is bright for smartphones. Research firm NPD Display Search says that 567 million smartphones will be shipped this year and that number will surpass 1 billion in 2016. <br />
<br />
Qualcomm is not sitting on its laurels either. It is aggressively expanding into the market for application processors. These are the chips that run programs in smartphones and tablets. For example, the company will be supplying its Snapdragon product to computer makers using the new version of the Windows operating system, Windows 8, from Microsoft (Nasdaq: MSFT). Snapdragon is also the sole supplier being used by every manufacturer of Windows smartphones.<br />
<br />
The Years Ahead<br />
<br />
This move into application processors is not surprising. Qualcomm was quick to enter the mobile phone market too. Its president Steve Mollenkopf told the Financial Times “We saw that mobile was going to be the key market to be in some time ago and we invested in key technologies much earlier than everybody else.” Particularly Intel, which is still talking about a golden age for PCs.<br />
<br />
In the years ahead, if current trends continue, Qualcomm will be a more valuable company than Intel.<br />
<br />
Look at the past decade. Intel's valuation peaked at $502 billion in 2000 during the internet bubble. Its shares have fallen about 15% this year alone and about 14% over the past 10 years. Meanwhile, shares of Qualcomm have jumped about 255% over the past decade and are up roughly 8% this year.<br />
<br />
The next decade will likely show an ever growing gap between the two companies fortunes.<br />
<br />
This article was originally published on the Motley Fool Blog Network. Be sure to read all of my articles for the Motley Foll at <a href="http://beta.fool.com/tdalmoe/" target="_blank">http://beta.fool.com/tdalmoe/</a>.Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com1tag:blogger.com,1999:blog-6853652561570852704.post-9029486551242706932012-11-08T16:24:00.001-05:002012-11-08T16:24:19.093-05:00Nokia May Be at the 'Last Chance Saloon'The ills of the once dominant Finnish mobile phone maker Nokia ADR (NYSE: NOK) are many and, to some extent, getting worse. The company may be at 'The Last Chance Saloon.' The bartender is Steve Ballmer of Microsoft (Nasdaq: MSFT). He is pouring Nokia not the Finnish traditional 'long drink', but what he hopes is a nice, smooth and profitable drink of Windows 8 for smartphones.<br />
<br />
Windows 8 had better be all that Microsoft has promised for Nokia's sake. It sold fewer of its flagship Lumia smartphones in the third quarter than Apple (Nasdaq: AAPL) did of its new iPhone 5 in its opening weekend! <br />
<br />
Poor Sales and Market Share Trend Continues<br />
<br />
Nokia's smartphone sales in the third quarter amounted to just 6.3 million units. There were 2.9 million Lumias sold in the quarter, down from 4 million the previous quarter. In the important U.S. market, sales amounted to a mere 300,000 smartphones. That is down about 50% from the previous quarter. In addition, revenues in China fell 80% year-on-year. Much of the blame lies with the fact that consumers globally were waiting for the Lumia smartphones that run on the new Windows 8.<br />
<br />
Right now the Windows operating system accounts for only 4% of the global smartphone market, badly trailing Apple's iOS and the Android operating system from Google (Nasdaq: GOOG). Samsung's new Galaxy III runs on Android. That's just another reason it wasn't a great shock that Nokia was bumped out of the top 5 smartphone makers in the third quarter. That was the first time that happened since researchers at IDC began compiling such data in 2004. <br />
<br />
Sales are unlikely to improve as much as initially expected in the short term either. This quarter is traditionally the strongest for sales of phones due to the holiday season. However, for Nokia, the flagship 920 Lumia smartphone will not be available for several more weeks. It will also be available only through one carrier, AT&T. This combination will likely hold back sales despite Nokia's market-leading mapping and photo technology.<br />
<br />
Carriers Want an Alternative<br />
<br />
There is one huge positive in the corner of Nokia and Microsoft though. The telecom carriers such as AT&T, Sprint, T-Mobile and Verizon (NYSE: VZ) want a viable third choice to the current duopoly of Apple and Google.<br />
<br />
Verizon's CEO, Lowell McAdam, told the Financial Times recently that “the carriers are beginning to coalesce around the need for a third ecosystem. It'll between [Blackberry maker] RIM (Research in Motion) and Microsoft, and I expect Microsoft to come out victorious.”<br />
<br />
He may be right about Microsoft beating out RIM. According to the consumer research firm Kantar Worldwide, in Europe, Windows will overtake RIM's operating system by the end of the year. Nokia's entry-level smartphone Lumia 610 seems to be winning over cost-conscious consumers there. In a first for Windows, it now has more than 10% of the market in Italy. <br />
<br />
The Future<br />
<br />
Europe could prove to be very fertile ground for Nokia and Microsoft since more than 50% of European consumers have yet to purchase their first smartphone and still have older phones. The brand these consumers is most familiar with is Nokia.<br />
<br />
Another plus is that the launch of Windows 8 should give an impetus to developers to build applications and content that is currently lacking on Windows phones. The myriad of apps and content is a huge selling point for Apple. <br />
<br />
But getting that content is a slow process and Nokia may not have the luxury of waiting too long. It is burning through its cash position rather rapidly thanks to its continuing operating losses. Standard and Poor's has forecast that, by year's end, Nokia will be down to 3 billion euros in cash. Some credit analysts even doubt whether the company can make a 1.25 billion euro bond repayment in April 2014. <br />
<br />
So the Windows 8 effect had better kick in and fast. The next six to nine months will be critical to the fate of Nokia. <br />
<br />
This article was originally published on the Motley Fool Blog Network. Make sure to read all of my articles for the Motley Fool at <a href="http://beta.fool.com/tdalmoe/" target="_blank">http://beta.fool.com/tdalmoe/</a>. Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com3tag:blogger.com,1999:blog-6853652561570852704.post-39250241029528895632012-10-30T15:10:00.002-04:002012-10-30T15:10:21.319-04:00Why AT&T and Verizon Fear SoftbankAs discussed previously, there is a shake-up underway in the U.S. mobile provider market. Japan's Softbank taking a 70% majority position in Sprint Nextel (NYSE: S) is just step one in its plan to shake the complacency out of the two leaders in the industry domestically, Verizon Communications (NYSE: VZ) and AT&T (NYSE: T).<br />
<br />
Another part of Softbank's plan was revealed recently when Sprint resumed majority control of Clearwire (Nasdaq: CLWR). It bought a 4.5% stake in Clearwire from Eagle River Holdings LLC, the investment vehicle of Clearwire founder, Craig McCaw. This additional stake gave Sprint a 50.8% controlling interest in Clearwire.<br />
<br />
With Clearwire's stock falling upon announcement of this transaction, it was clear that its shareholders were disappointed that Sprint did not launch a full takeover offer for the company. At the moment, Sprint with its own heavy debt burden - $4 billion due next year – does not want to consolidate Clearwire onto its balance sheet with Clearwire's $2.9 billion of debt due in 2015. <br />
<br />
But shareholders should be patient. It is highly likely that once the Softbank–Sprint deal is finalized, a full takeover of Clearwire will be at the top of the agenda. Sprint's current arrangements give it full access to Clearwire's wireless spectrum through only 2014. <br />
<br />
Softbank's Agenda<br />
<br />
Why will Clearwire be at the top of Softbank's agenda? Because without it, Sprint will always be a very distant third in terms of spectrum behind both Verizon and AT&T. With it, according to the Financial Times, Sprint will control more spectrum in the 100 largest U.S. wireless markets than Verizon and AT&T combined! With the advent of data-eating smartphones and tablets, spectrum is needed in order to build networks that are both fast and reliable.<br />
<br />
In addition, Clearwire uses a form of 4G LTE technology, TDD-LTE, which is different than Sprint's version. However, it is the same technology that Softbank has used very successfully in Japan for years. Sprint does say phones which work on its network will also work on Clearwire's planned 4G network. <br />
<br />
Both Verizon and AT&T are well aware of the potential that a Sprint-Clearwire combination, backed by Softbank's financial muscle and acumen, has. They do not favor having a strong new competitor in the market they now control. That is why AT&T already is raising objections to the deal. It has called on regulators to scrutinize Softbank's plan for the U.S. mobile market very closely.<br />
<br />
There is one possible hiccup, from a technology standpoint, to Softbank's plan. Clearwire's spectrum is in a higher frequency range than the more desired lower frequency ranges owned by Verizon and AT&T. Higher frequencies do not penetrate obstacles such as buildings as well or travel as far. This means that in urban settings more cell towers may have to be built. Softbank can finance such an undertaking. . .but it may actually be harder getting local approvals to build additional towers in certain locations across the country.<br />
<br />
The Future<br />
<br />
What's next in this telecoms soap opera? AT&T and Verizon know how Softbank came from a very distant third in the Japanese market to today rival the big two players in that market. They see that Softbank has a bold vision for the U.S. market as well. Look for both to push U.S. regulators very hard to block the deal. In the spirit of competition and for the benefit of consumers, hopefully that does not happen and a strong, viable third mobile provider is allowed to happen.
This article originally appeared on the Motley Fool Blog Network. Please read all of my articles for the Motley Fool at <a href="http://beta.fool.com/tdalmoe/" target="_blank">http://beta.fool.com/tdalmoe/</a>. Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com3tag:blogger.com,1999:blog-6853652561570852704.post-54358129651350236012012-10-23T16:42:00.001-04:002012-10-23T16:42:06.865-04:00Steel Industry Slowdown to PersistThe global steel market is huge, valued at about $850 billion by analysts. That is not surprising considering that steel is one of the world's most widely traded commodities, with a myriad of uses. But right now, the industry is going through a rough patch. Unfortunately for investors in steel and iron ore stocks, it looks like the tough times will extend for another few years. <br />
<br />
For investors interested in the industry, they can easily track the steel and iron ore industries through an exchange traded fund, the Market Vectors Steel ETF (NYSEMKT: SLX). Its portfolio consists entirely of steel and iron ore producing companies. Fully 60% of the fund's holdings are international stocks. The ETF is down about a third in value in the past two years.<br />
<br />
Just several days ago, the World Steel Association (the industry's main body) lowered its forecast for global steel consumption growth this year to 2.1%, from its previous estimate of 3.6%. Last year, global steel demand was rather decent, growing at a 6.2% rate. The Association pointed to several reasons for the slowdown. These factors include slower economic growth in emerging markets, especially China, and the debt crisis in Europe. <br />
<br />
Chinese Steel Industry Slowing<br />
<br />
China is a huge player in the global steel market as it is both the world's biggest consumer of steel, as well as its largest producer. Many prominent international bodies including the Asian Development Bank and the World Bank have lowered their outlook for economic growth in China over the past few weeks. Even China bulls agree that Chinese economic growth is slowing the torrid double-digit pace of years past to the 6%-7% range.<br />
<br />
The World Steel Association trimmed its forecast of Chinese steel demand this year from 4% to only 2.5%. In 2011, demand grew at a 6.4% rate. Data from China backs up the Association's forecast. Chinese steel industry profits have collapsed by 96% in the first half of 2012 compared to a year ago, according to the China Iron and Steel Association. CISA went on to describe the industry's current state as a “disaster zone”. <br />
<br />
Weak conditions in China led the World Steel Association to predict that steel demand for all the emerging markets would only grow by 3% in 2013. Quite a slowdown from the 10% annual rate experienced over the last decade.<br />
<br />
The news from China and elsewhere in Asia cannot be good news for a company like South Korea's POSCO ADR (NYSE: PKX). It is the world's third largest steelmaker and has a large presence throughout Asia. It is still expanding rapidly in emerging markets such as China, where the industry is in that 'disaster zone'. The company just opened an auto steel processing plant in northeastern China, for example. Its stock is down about a third in the past two years. <br />
<br />
Eurozone Woes<br />
<br />
At least steel demand is still growing in the developing world. Quite another story in Europe where many of the economies are expected to contract this year.<br />
<br />
The World Steel Association now expects steel demand in Europe this year to fall by 6%. This is a sharp downward revision from its previous forecast of only a 1.2% decline. The drop-off in demand can only hurt further the European steelmakers. Many of them have already cut production and closed some facilities to reduce the chronic overcapacity in Europe's steel industry. <br />
<br />
When one thinks of the European steel industry, one name should pop up immediately – the world's largest steelmaker, ArcelorMittal ADR (NYSE: MT). The woes of the steel industry, particularly in Europe, have pushed this once $100 a share stock down to where it is today, about $15 a share. A potential credit downgrade by Moody's and others hover over this company.<br />
<br />
Further Fallout <br />
<br />
In addition to the steelmakers themselves, another group will also be impacted negatively by the global steel industry's problems. That group is the companies which produce iron ore, a key component in steel making.<br />
<br />
Prominent among the iron ore producers (and the two largest positions in SLX) are Rio Tinto PLC ADR (NYSE: RIO) and Vale S.A. ADR (NYSE: VALE), the world's biggest producer and exporter of iron ore. The problem for these firms is that their management is acting as if the economies in China, Europe and elsewhere are not slowing. The four major global iron ore producers, as projected by JPMorgan, will conservatively have 8% annual growth in iron ore production capacity. So it looks like there will be increasing supply and decreasing demand for iron ore – not good for prices and profits.<br />
<br />
The bottom line for investors? Avoid the entire steel and iron ore sectors completely. Only re-enter them if and when global economic growth picks up steam. Look to China and other emerging economies for a clue as to when that will happen.
This article originally appeared on the Motley Fool Blog Network. Make sure to read all of my articles for the Motley Fool at <a href="http://beta.fool.com/tdalmoe/" target="_blank">http://beta.fool.com/tdalmoe/</a>. Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com6tag:blogger.com,1999:blog-6853652561570852704.post-48785412063355267462012-10-18T09:53:00.001-04:002012-10-18T09:53:21.787-04:00Uranium Bulls May Have to Wait a Few YearsOne industry which has certainly seen better days is the uranium mining industry. Not long ago – 2007 to be exact – the price of uranium soared to a record high at $136 a pound. Sky-high oil prices had many in the market convinced at the time that oil-generated power would likely be replaced by nuclear power globally.<br />
<br />
But just several years later, uranium today is trading at a 2-year low of $45.75 a pound. Sentiment continues to be extremely negative toward uranium and nuclear power in general following the Fukushima disaster in Japan in 2011.<br />
<br />
Fukushima has been a disaster for shareholders in both individual uranium stocks and ETFs focused on uranium mining companies too. One hard hit uranium firm is the world's largest producer of uranium, Canada's Cameco Corporation (NYSE: CCJ). The company accounts for 16 percent of the world's uranium production and is backed by about 435 million pounds of proven and probable uranium reserves. Its stock is down to less than a third of its value at the peak in 2007.<br />
<br />
One ETF affected by uranium's woes is the Global X Uranium ETF (NYSEMKT: URA). Its portfolio is devoted entirely to uranium mining stocks. Its price is down about two-thirds from early 2011 levels. A second ETF greatly affected by the decline in uranium prices is the Market Vectors Uranium + Nuclear Energy ETF (NYSEMKT: NLR). Its portfolio has about 30% invested into uranium miners with another roughly 42% invested into industrial firms involved in the nuclear industry. Its price is also down by about two-thirds, over the past five years.<br />
<br />
Is there any hope for the uranium industry? Industry executives do believe that several years down the road will be a better time for the companies involved in uranium mining as supplies are squeezed while demand picks up.<br />
<br />
One hoped for source of demand is not surprising at all – China. The country is expected to announce an end to its 1-year moratorium on new reactor approvals. But it remains to be seen whether China, with its new leadership team coming in, will want to make such a decision so soon. The Chinese government has stated previously that it wants to boost its share of nuclear power generation from the present 2% to 5% by 2020. <br />
<br />
Other emerging countries including South Korea, Russia and India will also have new nuclear reactors come online by 2020. Overall, the industry expects 95 net new nuclear reactors to be operational by 2021, with 60 of these currently bring constructed.<br />
<br />
The most interesting aspect of the years ahead for the uranium industry, however, comes from the supply side. There are a number of factors which may serve to support prices in the long run. One such factor is the expiration of long-term contracts in 2016-17. These agreements account for the majority of sales agreements between the uranium miners and utility companies.<br />
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A very big factor will be the expiration in 2013 of a treaty between Russia and the U.S. that supplies uranium from decommissioned nuclear weapons. This uranium from Russia currently accounts for approximately 16% of total demand and supplies half of utilities' needs for uranium in the U.S.<br />
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Another big factor in the coming years will be diminished supplies due to cutbacks in mining activities. The cutbacks are thanks to current low prices for uranium. Cameco, for example, noted recently it needed a uranium price of $62 a pound in order to proceed with development of one of its new uranium assets. BHP Billiton Limited ADR (NYSE: BHP) said in August that it would halt its $20 billion Olympic Dam copper-uranium project in South Australia. The company also recently sold another of its uranium mines, Yeelirrie, in western Australia.<br />
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All of these factors on the supply demand do point to perhaps a brighter future in the years ahead for the uranium industry. It may not be time yet to turn out the lights on the uranium miners as a long-term investment.<br />
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This article originally appeared on the Motley Fool Blog Network. Please be sure to read all my articles for the Motley Fool at <a href="http://beta.fool.com/tdalmoe/">http://beta.fool.com/tdalmoe/</a>. <br />
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Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com4tag:blogger.com,1999:blog-6853652561570852704.post-35818810247327322972012-10-15T13:03:00.002-04:002012-10-15T13:03:26.994-04:00General Electric to Benefit From Gas Turbine BoomIts always good when a company raises its revenue growth forecast. This is especially true when the company is one of the world's largest. General Electric (NYSE: GE) recently raised its 2012 industrial revenue growth forecast to 10%, the high end of the previous 5-10% forecast. This news sent its stock price to levels not seen the autumn of 2008. Much of what powered that increased revenue forecast was GE's forecast of a boom in demand by power companies globally for natural gas-fired turbines as they increasingly turn to gas to provide baseload electricity.<br />
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In the past few days, the company announced $1.2 billion in new orders for 19 of its recently-developed, heavy-duty gas turbines from Saudi Arabia, Japan and the United States. General Electric has been investing heavily into its “flexefficiency” turbines and technology designed to allow rapid ramp up and ramp down in power output while using gas efficiently. GE has developed technology for both 50 hertz and 60 hertz, the two main frequencies for power grids around the globe. It has placed a big bet on natural gas and its future in the past few years, including acquisitions worth $11 billion in 2010-11. Now it looks as if that bet is just beginning to pay off. <br />
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Among the clients buying the GE turbines here in the United States are Hess Corporation, Xcel Energy (NYSE: XEL) and an unnamed industrial client. General Electric is supplying two gas turbines to the Cherokee Clean Air Clean Jobs Project in Denver, Colorado which will convert an existing coal power plant into a cleaner burning natural gas combined-cycle facility. Carbon dioxide emissions are expected to be lowered by half. The new plant will be owned and operated by Public Service Company of Colorado, a subsidiary of Xcel Energy. <br />
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General Electric is not alone in its belief in the bright future for gas turbine power. Its major competitor in the sector, Germany's Siemens AG ADR (NYSE: SI), also thinks along the same lines. Earlier this year, Siemens announced it had earmarked more than $1.3 billion to expand production of gas turbines and hopefully fend off GE as they jostle for top spot in the sector. This division is the largest of the German company's 10 main divisions, accounting for about 14 percent of the company's revenues last year. <br />
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In recent years, Siemens has almost doubled its market share to 40% in the large turbine segment for power exceeding 100 megawatts. It also currently has the at least 10-unit-a-year market to itself as GE and Japan's Mitsuibishi Heavy Industries (NASDAQOTH: MHVYF.PK) are still developing their offerings for that segment of the market. <br />
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Another competitor of GE and Siemens in the turbine market is France's Alstom SA ADR (NASDAQOTH: ALSMY.PK), but it is more focused on the steam turbine market. However, even Alstom has launched its upgraded GT24 gas turbine and KA24 combined-cycle power plant which the firm says is a response to the increasing demand for gas-fired power generation around the world. <br />
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The upturn in gas turbine business for GE, Siemens and the rest is being driven by four factors: the global shale boom which is making natural gas cheap and plentiful, fast-growing power needs in the emerging economies, concerns about nuclear energy in the wake of the Fukushima disaster and stricter emissions rules in the United States. <br />
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Environmental regulations alone will lead to roughly half of all U.S. coal power plants being upgraded or replaced in the next decade. General Electric itself forecasts that more U.S. power plants will be fueled with natural gas rather than with coal by 2017. As for the emerging world, as shale gas deposits are developed in China and elsewhere, the markets for gas turbines will expand even further. This bodes well for Siemens and GE, as it moves back toward to its industrial roots and away from financial services in the years ahead.<br />
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This article originally appeared on the Motley Fool Blog Network. Make sure to read all my articles for the Motley Fool at <a href="http://beta.fool.com/tdalmoe/" target="_blank">http://beta.fool.com/tdalmoe/</a>.Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com7tag:blogger.com,1999:blog-6853652561570852704.post-65681218608816923562012-10-10T10:38:00.002-04:002012-10-10T10:38:37.757-04:00US Consumers Shifting to Smaller CarsThe preliminary figures for vehicle sales in September are out and they were not as good as the August numbers. Sales were flat for Ford Motor (NYSE: F) and sales at General Motors (NYSE: GM) were only up 1.5%. Sales at Chrysler, majority-owned by Italy's Fiat S.p.A. ADR (NASDAQOTH: FIATY.PK), motored ahead in September at a 12% rate.<br />
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The most interesting aspect of the sales figures for Detroit's Big 3 is the fact that all three companies boasted about their fast-growing sales of smaller models of passenger cars. This is almost unheard of in the United States, famous for its gas-guzzling SUVs and pickups.<br />
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General Motors said its sales of mini, small and compact cars were up 97% from the year ago period. Ford reported small car sales jumped 73% from a year ago, to a record for the past 10 years. Meanwhile, Chrysler's Dodge Dart sales rose 72% from August and sales of the Fiat 500 subcompact climbed 51% year-on-year.<br />
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These sales reports are outstanding. But does it represent the beginning of a long-term trend? Thanks to high fuel prices, is America finally moving away from driving gas guzzlers?<br />
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If so, the Big 3 automakers will have to learn to adjust. After all, with smaller cars you have smaller profit margins. That is why they largely abandoned the field to foreign competitors, concentrating instead of high-margin larger vehicles.<br />
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One way the automakers are coping with possible tighter profit margins on small cars will not make most Americans happy. They are shifting production to places like Mexico. Ford makes it Fiesta model in Mexico. Fiat manufactures its Fiat 500 for the U.S. market also in Mexico. GM should be commended though. It does manufacture the Chevrolet Sonic, the smallest passenger car mass produced in the U.S., at its plant in Lake Orion, Michigan. It copes with small profit margins by trying to shorten the supply chain by moving actually moving suppliers in-plant.<br />
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Of course, one big plus that U.S. automakers have in their corner is that they have moved toward using global platforms for the production of many of their vehicles. That is, auto manufacturers build many vehicle models atop the same architecture. So Chevy's Sonic is built on the same platform as Opel in Europe and Ford's Fiesta is built on the same platform as vehicles in Europe. This is a real cost saver in the long run for automakers.<br />
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But the question still remains whether U.S. consumers are ready to switch to smaller vehicles permanently. The answer is probably as it has always been in the past . . . no. As soon as the price of fuel starts falling again (if it ever does), Americans will rush back into driving their favorite gas guzzlers. <br />
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Right now, according to Edmonds.com, compact and subcompact cars account for 21.5% of the U.S. car market versus 24.6% for SUVs. The two numbers will likely only reverse if gasoline climbs to over $4 a gallon and stays there. <br />
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This article originally appeared on the Motley Fool Blog Network. Be sure read all of my articles for the Motley Fool at <a href="http://beta.fool.com/tdalmoe/" target="_blank">http://beta.fool.com/tdalmoe/</a>.<br />
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Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com4tag:blogger.com,1999:blog-6853652561570852704.post-58882256194123259332012-10-03T11:22:00.003-04:002012-10-03T11:22:29.107-04:00US Railroads: Great Plays on ShaleThe boom in US shale gas and oil is now a fact of life for investors. But the best way to play that boom is not directly through oil and gas companies. Look at how many of them have suffered thanks to an excess of supply and the resulting plunging prices for both natural gas and natural gas liquids (NGLs).<br />
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The best way to play shale is from owning the beneficiaries of low gas prices – petrochemical companies – and the beneficiaries of transporting shale oil across North America – the railroad industry. <br />
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The fact is that increased oil production, from both Canada and North Dakota, have nearly overwhelmed the existing transportation system in that part of North America. Drilling techniques such as hydraulic fracturing have increased oil production in North Dakota sevenfold to more than 600,000 barrels a day, moving the state to second behind only Texas in U.S. oil production. The U.S. Energy Information Administration forecasts production there will surpass 1 one million barrels a day next year. Even in Canada, oil production is expected to top 4.1 million barrels of oil a day next year, up from just 3 million barrels a day in 2005. <br />
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The drilling in areas like North Dakota is occurring in a region with few refineries and a limited pipeline network. So that leaves one alternative to transporting the oil taken out of the ground in North Dakota – railroads. According to the Association of American Railroads, overall U.S. rail shipments of oil have almost quadrupled to 88,026 rail car loads in the first half of 2012 from only 22,714 in the first half of last year. In 2008, there were less than 10,000 carloads annually. <br />
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The key here for investors is that this is not a blip, but part of a long-term trend. Just take a look at what two of the country's major refining companies – Tesoro (NYSE: TSO) and Phillips 66 (NYSE: PSX) have done in recent months. Tesoro this month will complete a rail facility at its west coast refinery in Washington to receive Bakken crude from North Dakota from 800 rail cars it had ordered previously. In June, Phillips 66 ordered 2,000 rail cars at a cost of $200 million to transport shale oil from North Dakota fields to its refineries. <br />
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All of this is great news for the railroads and should bring smiles to the faces of shareholders in railroads including CSX (NYSE: CSX), Canadian Pacific (NYSE: CP) and BNSF, which is now owned by Warren Buffett's Berkhsire Hathaway (NYSE: BRK-B). Canadian Pacific, for example, recently told attendees at an investor conference that the company expected oil shipments it carries to rise from 13,000 carloads last year to leap to at least 70,000 carloads sometime in 2013.<br />
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Burlington Northern SantaFe (BNSF) is a particular beneficiary of the Bakken shale oil boom since it carries 44 percent of the region's oil exports. It has built terminals along its routes throughout the region which are capable of handling 1 million barrels of oil a day, well above the current 290,000 barrels a day it handles. The company expects that, even after planned pipelines are built, that it will still handle between 25 and 37 percent of the Bakken's oil exports.<br />
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Of course, it's not all gravy for the railroad companies. Take CSX, for instance. The shale boom has hit the coal industry hard and therefore coal shipments are down sharply. CSX coal shipments were down 28 percent in the first quarter of 2012, though earnings were up marginally. Coal has traditionally accounted for 20-25 percent of of traffic for big rail companies like CSX. <br />
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So the question remains whether transporting oil from the Bakken and elsewhere – after a large investment into tank cars which CSX CFO Frederik Eliasson calls a “risk” - will offset the decline in railroads' coal business. For now, the railroads think the answer is yes. They are planning to at least triple capacity to move oil in the months and years ahead. With cheaper domestic crude oil from the Bakken luring the refineries to use cheaper domestic oil instead of expensive imported crude oil, the railroads seem to be sitting in the perfect spot as the transporter of that oil. <br />
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This article originally appeared on the Motley Fool Blog Network. Make sure to read all of my articles for the Motley Fool at <a href="http://beta.fool.com/tdalmoe/" target="_blank">http://beta.fool.com/tdalmoe/</a>Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com4tag:blogger.com,1999:blog-6853652561570852704.post-71402313099893880072012-09-26T10:06:00.002-04:002012-09-26T10:06:40.481-04:00Augmented Reality: The Coming RealityOnce existing only in the realm of science fiction, augmented reality is becoming . . . a reality. It is making its way into popular media as apps for smartphones, like the iPhone, and tablet PCs begin using augmented reality to overlay contextual graphics and other information onto real-life images and objects using these devices in an interactive fashion.<br />
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The industry was rather tiny and was really just a collection of smartphone apps which generated only a few million dollars in revenues in 2010. But now, by reaching out to the media and advertising companies, the augmented reality industry is on the verge of becoming a real business and estimated to be worth perhaps $600 billion by 2016. Semiconductor research firm Semico Research say that more than 864 million mobile devices will be equipped with augmented reality by 2014 and more than 103 million vehicles could have some form of the technology embedded in them by 2020. <br />
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Investors can see that the industry is for real by the number of large companies which have moved into the sector. Take Intel (Nasdaq: INTC), for example. It has invested $14 million into a Dutch company, Layar, through its venture capital arm. Layar has the world's most used consumer augmented reality application, a reality browser that helps find services nearby on anything from restaurants to real estate to networking opportunities. Its app has been downloaded more than 20 million times, has 3 million active users and is actually making money. <br />
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Intel is also looking to add augmented reality features to its chips, as have some of its competitors including Qualcomm (Nasdaq: QCOM). The company's Vuforia platform allows developers to plug augmented reality into their applications. Its latest version of Vuforia now has cloud recognition. So now when you hold your device's camera over an image, it connects to the web and rifles through a database of more than one million images.<br />
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This week saw news from Europe on this front too with mobile telecommunications giant Telefonica S.A. ADR (NYSE: TEF) selecting Aurisma and its technology as its partner to expand its mobile advertising worldwide. Aurisma is the augmented reality business now owned by Hewlett Packard (NYSE: HPQ) after its acquisition of British firm Autonomy. Telefonica will use Aurisma technology across its operations in 25 countries (and 300 million consumers), starting with the United Kingdom. Financial terms were not disclosed but it is believed that this is the biggest-ever deal between a telecoms company and an augmented reality company. <br />
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Telefonica believes that augmented reality may be the solution to the main problem that mobile advertisers face . . . users are less tolerant of traditional internet-style ads on their smart devices. This fact has held back the sector with mobile advertising accounting for less than 1 percent of total advertising spending in the United States. Telefonica plans to build the technology into its mobile advertising platform, alongside location-based advertising services and mobile coupons.<br />
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Google (Nasdaq: GOOG) and Amazon.com are also investing in their own in-house augmented reality projects, but they are considered long shots in this industry. Google's project, for instance, is called Project Glass and its goal is to develop a head-mounted display which would allow the hands-free displaying of information currently available to owners of smart devices and also interaction with the internet through voice commands.<br />
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The tentative leader for now in augmented reality seem to be Hewlett Packard with Aurisma and its TEF deal, but it is still very early days with lots of start-ups in the sector which could surprise.
This article originally appeared on the Motley Fool Blog Network. Make sure to read all of my articles for the Motley Fool at <a href="http://beta.fool.com/tdalmoe/" target="_blank">http://beta.fool.com/tdalmoe/</a>Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com3tag:blogger.com,1999:blog-6853652561570852704.post-22575212389111607522012-09-17T13:49:00.000-04:002012-09-17T13:49:01.751-04:00Shale Gas Companies: Big Writedowns ComingFor any investors in the energy sector who have not paid attention for the past few years, Hurricane Isaac should have taught them a lesson...the economics of the U.S. energy industry has changed drastically thanks to the shale revolution brought about by hydraulic fracturing (fracking). <br />
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Hurricanes in the Gulf of Mexico used to send natural gas prices soaring due to the supply disruptions from the region. But no longer. Now the Gulf of Mexico produces only 7 percent of total U.S. natural gas as opposed to the 20 percent it produced as recently as 2005. Fracking has led to such a boom in gas production in the continental United States that there is now a huge glut of gas on the market. This glut has pushed down the market price of natural gas so low that it is leading to problems for the gas production companies. <br />
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This gas glut will lead to, when full-year results are revealed in 2013, a great number of natural gas firms taking large writedowns in their reported reserves. In other words, these companies will be revising downward (some more than others) the commercial prospects for their natural gas assets. This is important in many cases because many oil and gas agreements with banks link borrowings to reserves. The hit may be exceptionally hard, and catch investors off guard, at gas companies which were too aggressive in booking reserves. <br />
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The weakness in natural gas prices has even affected the big energy companies like ExxonMobil (NYSE: XOM), which after its purchase of XTO Energy is the biggest U.S. producer of natural gas. Poor results from its gas division led Exxon CEO Rex Tillerson in June to say that energy companies were “all losing our shirts” thanks to the very low gas prices.<br />
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But the poster child for these upcoming writedowns has to be the most aggressive of the natural gas companies, Chesapeake Energy (NYSE: CHK). In its second quarter results, the company already wrote off 4.6 trillion cubic feet of natural gas reserves. That was 24 percent of its reserves and equivalent to more than two months of U.S. consumption of gas! However, that was offset somewhat by reserve additions to make the net decline only 7 percent. Its full-year 2012 results, which should have some massive writedowns, will certainly have its suffering shareholders on edge. <br />
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Chesapeake has hardly alone in announcing reserve writedowns in its latest earnings reports. One of Canada's major natural gas producers, Encana (NYSE: ECA), took a second quarter loss of $1.48 billion after it took a $1.7 billion charge on some of its gas assets thanks to the low prices. And it warned that further writedowns were to come in the months ahead.<br />
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Natural resources giant BHP Billiton ADR (NYSE: BHP) also announced a major writedown. In August, it took an impairment charge of $2.84 billion against its Fayetteville gas assets that it acquired from Chesapeake Energy in February 2011 for $4.75 billion. The company ended up entering the U.S. gas market in a big way just before the major downturn in gas prices. BHP also wrote down the assets thanks to lower than expected production from the gas fields.<br />
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Smaller gas producers have also been hit, such as Ultra Petroleum (NYSE: UPL) which announced a $1.1 billion writedown on its natural gas assets, resulting in a $1.2 billion loss in the second quarter. Its average selling price for gas fell plunged 22 percent from $5.17 a year earlier to $4.04 in the second quarter of 2012. The company owns gas fields in Pennsylvania and Wyoming. <br />
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The only way for this situation to turn around in the long term for the natural gas producers is to see a substantial cutback in drilling activity. Some cutbacks have already occurred...the number of working gas rigs in the U.S. has fallen by almost half in the past year. However, figures from energy consultancy Bentek Energy show that gas production still rose by about 5 percent in the first half of 2012 due to increased rig efficiency. <br />
Translation? A lot more drilling activity has to be cut back before natural gas prices can enjoy a sustainable rise, ending the writedowns and the troubles for gas companies' shareholders. <br />
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This article originally appeared on the Motley Fool Blog Network. make sure to read all my articles for the Motley Fool at <a href="http://blogs.fool.com/tdalmoe/">http://blogs.fool.com/tdalmoe/</a>, Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com2tag:blogger.com,1999:blog-6853652561570852704.post-48775099239255150152012-09-11T10:32:00.002-04:002012-09-11T10:32:31.640-04:00New US Vehicle Fuel Standards Off TargetThe Obama Administration has announced that it is adopting new rules concerning vehicles' fuel efficiency. The Administration will demand a near doubling of the Corporate Average Fuel Efficiency Standards (CAFE) by 2025. Automakers will have to improve the overall fuel efficiency of their fleet from 27.5 miles per gallon to 54.5 miles per gallon by 2025, saving the United States a supposed 2 million barrels of imported oil a day.<br />
Also included by the Obama Administration are incentives for the introduction of natural gas-powered vehicles in addition to further incentives for both all-electric and hybrid vehicles. It remains to be seen whether these incentives for electric vehicles work any better than previous ones as electric cars have been a tough sale to the consuming public.<br />
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Automakers including General Motors (NYSE: GM), Ford (NYSE: F), Toyota Motor ADR (NYSE: TM) and Chrysler – majority-owned by Italy's Fiat S.p.A. ADR (NASDAQOTH: FIATY.PK) will all be affected by the new rules. General Motors and Ford, for example, are launching major initiatives to drop the weight of their cars, all with goal of improving their fuel economy. Toyota is developing hydrogen-powered vehicles which, if successful, will easily allow them to meet the new standard. In addition, automakers are downsizing their engines. The V8 used in cars like the Dodge Charger, in the words of Chrysler chairman Sergio Marchionne, will become “as rare as white flies”.<br />
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Eleven of the major automakers, including those mentioned above, have all publicly “endorsed” the standards put forth, perhaps happy that now these nationwide standards will avert California setting its own even tougher standards. But privately, executives at some leading automakers are warning that these new standards will distort the U.S. vehicle market and will likely not deliver the projected reductions in overall fuel demand.<br />
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The most outspoken automaker, which has not not endorsed the new fuel standards, is Germany's Volkswagen AG ADR (NASDAQOTH: VLKAY.PK). It rightly points out that initially the standards do not demand as much improvement from gas guzzlers like SUVs and pick-up trucks than from smaller cars, which are already fuel efficient. The regulations count these vehicles as 'trucks' which are subject to less stringent requirements.<br />
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This in effect penalizes companies that concentrate on passenger cars like Volkswagen. In addition, the new fuel standards may have a perverse effect on fuel consumption by having some vehicle makers pushing sales of fuel-inefficient pick-ups and SUVs at the expense of other smaller, fuel-sipping vehicles. Also companies that have fuel-saving technology such as clean diesel receive no extra credits under the rules. There are substantial credits for hybrid technology and “stop-start” technology which turns engines off even when vehicles are stopped for a moment.<br />
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Even supporters of the new regulations have their doubts about them. The vice-president of technical and regulatory affairs at Toyota Motor North America, Tom Stricker, told the Financial Times “Whether or not they will lead to the level of reductions and improvements that the regulations hope and expect is an open question.”<br />
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That is an understatement. Without tough regulations on SUVs and pick-up trucks, what is the incentive for automakers to switch to producing fuel-efficient cars or for Americans to switch away from driving their gas guzzlers? Look for sales of big Ford and GM pick-ups to continue unabated in the years ahead, albeit with smaller engines.Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com2tag:blogger.com,1999:blog-6853652561570852704.post-56533130043327467402012-09-06T10:21:00.002-04:002012-09-06T10:21:43.499-04:00China Looking to Africa for Gold RichesIn 2010, Barrick Gold (NYSE: ABX) floated its African subsidiary African Barrick (NASDAQPTH: ABGLY.PK) on the London Stock Exchange while retaining a 74 percent majority interest in the company. African Barrick is Tanzania's biggest gold producer with 17 million ounces in gold reserves. Despite this, African Barrick's stock has performed badly since listing – down about 30 percent. <br />
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The poor performance is due to poor production numbers – only about 700,000 ounces this year versus the expected nearly 1 million ounces – thanks to being forced to mine low-grade ores. African Barrick also has had to constantly battle power disruptions in Tanzania which have also pushed up costs (forced usage of diesel generation for power). The company struggling to keep costs within its $790-$860 per ounce range, well above the parent company's target of $550-$575 an ounce. Costs were only in the $530 per ounce range in 2009.<br />
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The decision to possibly unload poorly performing African Barrick should come as no shock to investors. New Barrick Gold CEO, Jamie Sokalsky, is in a tightening mode and a few weeks ago the company signaled that it was reining in its aggressive expansion plans, a review of vast portfolio of assets, and announced a renewed focus on disciplined spending. Mr. Sokalsky said during his first earnings call “Assets that do not generate target returns or significantly impact our ability to generate long-term free cash flow will be either deferred, shelved or divested.”<br />
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So, with the help of investment bank UBS, the parent company is looking to unload its stake in African Barrick as quickly as possible. The good news for Barrick Gold is that there seems to be no shortage of suitors for the firm.<br />
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Foremost among the suitors are the Chinese, who are hungry for more international gold assets. It is believed a Chinese buyer will substitute African Barrick's high-priced expatriate workforce with its own cheaper workforce. State-owned China National Gold is rumored to be at the front of the line and in preliminary talks currently with Barrick Gold about its African subsidiary. Another Chinese state-backed mining company and major gold producer, Zijin Mining Group, has also expressed an interest in African Barrick. But it is believed that its offer was too much of a low-ball offer and is not being seriously considered by Barrick Gold.<br />
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However, Zijin's interest in African Barrick has now sparked interest in the company from other gold mining companies. These companies are said to include AngloGold Ashanti ADR (NYSE: AU), Gold Fields ADR (NYSE: GFI) and Randgold Resources ADR (Nasdaq: GOLD). Gold Fields' main focus is on the deep mine shafts in South Africa's troubled gold industry and is interested is diversifying further into Africa on top of its existing open pit gold mining operations in Ghana.<br />
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Perhaps the better fit with African Barrick would be either Randgold Resources or AngloGold Ashanti. Both firms have been named as possible buyers of African Barrick in the past because they do mine geologically similar projects in greenstone belts in Africa. Randgold Resources, which has had a track record of building and running gold mines very successfully, has its operations mainly in the African nation of Mali. AngloGold Ashanti is a gold producer with operations in 10 countries including in South Africa, Namibia, Ghana, Guinea, Democratic Republic of the Congo, Mali and Tanzania.<br />
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The main attraction for all of these miners with African Barrick has to be its latest project in Tanzania, the Nyanzaga project. It is believed there are approximately 4.2 million ounces of gold located, in the Lake Victoria region, in higher-grade ores. It is this project which may turn African Barrick back into a growth story again. At least that is what the eventual buyer of the company must be hoping. <br />
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This article originally appeared on the Motley Fool Blog Network. Please make sure to read all my articles for the Motley Fool at <a href="http://blog.fool.com/tdalmoe/">http://blog.fool.com/tdalmoe/</a>. Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com3tag:blogger.com,1999:blog-6853652561570852704.post-39502177686413249422012-08-30T10:09:00.001-04:002012-08-30T10:09:47.314-04:00Pharma Companies Switch Drugs to OTC MarketGlobal pharmaceutical company AstraZeneca Group PLC ADR (NYSE: AZN) has suffered since late last year thanks to both expiring patents on key drugs and several developmental drug failures. The company has a much more substantial patent cliff than many of its peers with about half of its $33 billion in annual revenues expected to disappear by 2016. On the experimental drug side, it recently ended a second stage trail of CytoFab, a potential blockbuster drug treatment for sepsis, because it was found to be ineffective. In December, the company took a $382 million writedown on two other drugs which failed in late-stage trials. <br />
So AstraZeneca's management has to come up with different ways to generate revenues in order to remain a big player in the pharmaceutical sector.<br />
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One strategy management is now following was on display recently with its deal with Pfizer (NYSE: PFE). AstraZeneca sold the global rights for an over-the-counter version of its leading (with $4.4 billion in 2011 sales) heartburn drug Nexium – the little purple pill – to Pfizer. The OTC version may go on sale in 2014 if FDA approved. Pfizer will pay $250 million upfront and has committed to a series of future milestone and royalty payments to AstraZeneca. These future payouts are substantial enough that AstraZeneca raised its 2012 earnings guidance upward by 16 cents to between $6.00 and $6.30.<br />
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AstraZeneca retains the rights to the pharmaceutical version of the drug. But the Pfizer transaction should aid the company in realizing the full long-term value of Nexium and it may open the door to other similar deals for other drugs in its portfolio. Already there is talk of Pfizer paying for the OTC rights to the company's allergy medication Rhinocort Aqua.<br />
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This strategy adopted by AstraZeneca is hardly unique in the industry. Take a look at the French pharmaceutical company Sanofi ADR (NYSE: SNY). In 2009, it bought Chattem just to acquire that company's expertise in marketing OTC products in order for Sanofi to be able to successfully switch its blockbuster allergy drug Allegra from a prescription-only drug to now having an OTC version. And thanks to Chattem's expertise, it has done so successfully. Its OTC sales were up in excess of 100 percent in 2011, mainly due to Allegra. <br />
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The problem is that the strategy does not always work, either because the FDA will not approve an over-the-counter version of a drug or more widespread use of a drug across a broader population reveals previously unknown side effects. When it comes to lack of FDA approval, just ask Pfizer about the Food and Drug Administration's reluctance to approve an OTC version of Viagra.<br />
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As for the second problem, the prime example has to be the fiasco called Alli from GlaxoSmithKline PLC ADR (NYSE: GSK). Back in 2005, it bought the rights to the diet drug Xenical from Swiss pharmaceutical company Roche Holding AG ADR (NASDAQOTH: RHHBY.PK). Its plan was to alter it enough to comply with regulators (which it did) and then market it like heck over-the-counter to people globally who were looking to lose weight. It began to market Alli in the U.S. in 2007.<br />
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Two problems arose, one of which was limited efficacy. The other was embarrassing to both the company and the users of Alli. A major side effect was diarrhea and flatulence among users who did not limit their intake of fatty foods. No wonder then that sales disappointed and that GlaxoSmithKline is now trying to unload Alli, but as of yet no buyers have stepped up.<br />
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The trend toward switching drugs to OTC status is sure to continue. Consultancy Kline Group estimates that already more than a fourth of over-the-counter sales in the United States are switched products such as Advil, for instance.<br />
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What investors should look for in drug companies looking to switch some of their most popular drugs to OTC status is what type of drug it is the firms are looking to switch. The FDA seems reluctant to approve cholesterol, diabetes and blood pressure drugs. So far it has been much easier to obtain FDA approval for drugs that are used to treat pain, allergies and heartburn like Nexium. In fact, allergy-relief products were the fastest growing segment of the OTC drug market in 2011, with sales increasing by 16.3 percent. Companies sticking to those sectors should be successful in generating revenues from OTC versions of drugs coming off patent. <br />
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This article originally appeared on the Motley Fool Blog Network. Make sure to read all of my articles for the Motley Fool at <a href="http://blogs.fool.com/tdalmoe/">http://blogs.fool.com/tdalmoe/</a>. <br />
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Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com3tag:blogger.com,1999:blog-6853652561570852704.post-75598050123859921562012-08-28T10:22:00.001-04:002012-08-28T10:22:19.066-04:00Rare Earths Poised for a TurnaroundRare earths are 17 chemically similar metallic elements that have a wide variety of uses in today's high-tech world including in the defense, electronics and renewable energy industries. Many major firms such as Apple and Boeing rely on having access to rare earths. <br />
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That is why the politicians in the U.S. were such in an uproar a couple of years ago when prices for rare earths were skyrocketing due to export restrictions placed on them by China. It has about 30 percent of the world's rare earths deposits but accounts for well over 90 percent of production. Other countries such as the United States quit producing rare earths for a number of years because it is a highly polluting industry.<br />
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The political furor has died down somewhat as prices for rare earths have come back down to earth over the last year or so due to slackening demand brought on by the global economic slowdown. Prices are down more than half from the peak prices set in 2011. But now rare earths are back in the news as China continues to revamp its industry, shutting down about 20 percent of the country's production capacity, combining smaller firms into bigger ones and limiting the number of companies that can export rare earths in an effort to better control the industry.<br />
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But this news pales in comparison to what consumers of rare earths may be facing in a few years..... <br />
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China's consumption of rare earths has already quadrupled over the last decade thanks to its position as a leader in the magnet market which accounts for 30 percent of China's usage. Now it plans to develop their own downstream industries that use rare earths to manufacture value-added products. What does this mean? It means China will likely consume much of their rare earths production domestically. In fact, China may become a net importer of rare earths as soon as 2014. Here we go again...China as the 800 pound gorilla in a commodity market.<br />
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This is great news, however, for North American companies that are beginning to produce rare earths again and are already beginning to benefit from Chinese regulation of overproduction. These include the likes of Molycorp (NYSE: MCP), Rare Element Resources (NYSE MKT: REE), Avalon Rare Metals (NYSE MKT: AVL), Tasman Metals (NYSE MKT: TAS) and Quest Rare Minerals (NYSE MKT: QRM). In fact, Quest's CEO Peter Cashin said “They [the Chinese] are an unanticipated customer for us...The Chinese would be a huge market for us.”<br />
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Tasman Metals has rare earth properties in Scandinavia, Avalon has properties in the Northwest Territories of Canada, Quest has properties in Quebec and New Brunswick in Canada, Rare Element holds properties in Wyoming while the best-known name Molycorp is re-opening the Mountain Pass facility in California. <br />
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A caution here for investors...some of the companies – Tasman, Avalon and Quest – are low-priced stocks trading a little above $1 a share and thus are inherently volatile. Also rare earth production at these companies is still in the very early stages. Quest, for example, will not start production until 2017. The Government Accounting Office (GAO) says it may take many years for the North American industry to fully reboot itself and come onstream. <br />
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The Chinese becoming a net importer will exacerbate the supply situation in rare earths. Rarer heavy rare earths, used in mobile phones and magnets, are expected to remain in a supply deficit until 2025. While more common light rare earths are expected to, over the next five years, move from a surplus to supply balance and then to a supply deficit according to Mr. Cashin.<br />
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He may be right. As with other commodities China, for the first time ever, has begun building stockpiles of rare earths (according to China Securities Journal). That means, as with oil and many other commodities, Chinese authorities are anticipating a large increase in demand in future years.<br />
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That should mean good times are ahead for rare earth producers and time for investors to begin slowly accumulating these beaten down stocks like Molycorp.<br />
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This article originally appeared on the Motley Fool Blog Network. Make sure to read all of my articles for the Motley Fool at <a href="http://blogs.fool.com/tdalmoe/">http://blogs.fool.com/tdalmoe/</a>. Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com2tag:blogger.com,1999:blog-6853652561570852704.post-38023210429977634462012-08-22T09:50:00.002-04:002012-08-22T09:50:28.865-04:00US Drought Reignites Ethanol DebateOnce again economics and politics are colliding as the ongoing drought, the worst in 50 years in the United States, has reignited the debate about ethanol. The debate centers on whether is makes sense, at a time of food shortages globally, to turn corn into fuel. The U.S. ethanol industry uses roughly 5 billion bushels of corn annually, or about 40 percent of the U.S. crop. <br />
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Already strains in the industry are showing thanks to high corn prices in excess of $8 a bushel. Not to mention stagnant demand for fuel and the expiration of some subsidies which ended in December. Output of ethanol from producers has fallen to the lowest levels seen since October 2009. <br />
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The slowdown in the ethanol industry has already affected the producers. One of the largest producers of ethanol (with a capacity to refine 1.7 billion gallons a year), Archer Daniels Midland (NYSE: ADM), recently reported poor earnings. The company said it lost money on ethanol thanks to already-high inventory levels, weak fuel demand and low inventories of corn. Another large ethanol maker, Valero Energy (NYSE: VLO), also recently reported negative ethanol profit margins citing the same reasons as ADM. Both companies have shut down some ethanol producing plants in the Midwest.<br />
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Many organizations, including the United Nations, have asked the U.S. to waive government mandates for ethanol usage this year. The mandates will ensure that more than 13 billion gallons of ethanol will be used this year, no matter the price of corn. Also asking the government to suspend for a year its mandate for ethanol use are members of the U.S. livestock and poultry industry. Animal feed is the second biggest use for corn, behind ethanol. It accounts for about a third of corn usage, so the two industries are in competition for scarce, high-priced corn.<br />
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The livestock and poultry industry will suffer with falling profit margins because of the soaring price of corn for animal feed. Meat prices at the grocery store will rise, hitting consumers hard. Larry Pope, CEO of meat producer Smithfield Foods (NYSE: SFD), warned that U.S. meat prices will rise by “significant double digits” in the near future if nothing is done about the high corn prices.<br />
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But at least Smithfield Foods has done a decent job of hedging corn prices into 2013. Some of their peers such as chicken producer Sanderson Farms (Nasdaq: SAFM) have not done a good job of hedging corn. And this is important since animal feed makes up 55 percent of the company's cost of goods sold. Sanderson estimates that for every 30 cent jump in corn, it raises the cost of producing a pound of chicken by a penny. Doesn't sound like much, but it is important when you're working on the thinnest of profit margins. No wonder its stock has tumbled by about a fourth over the past few months.<br />
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The key question for meat producers and other consumers of corn is whether the government will waive, at least temporarily, its mandate for ethanol fuel. The answer is almost certainly no! In an election year, no politician in either party will want to risk losing votes in key Midwestern farm states where the ethanol program is very popular.<br />
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So other users of corn have best be prepared for even higher prices (unless the weather improves) by hedging as much corn as they can. For investors, it means continuing to invest into exchange traded funds (ETFs) such as the Teucrium Corn Fund (AMEX:CORN) which is up more than 40 percent since June. The ETF offers investors unleveraged direct exposure to futures for corn without having to open a futures trading account. The fund is set up in a unique way so as to reduce the effects of contango and backwardation. For specific information on how Teucrium does this using three different futures contracts, please visit Teucrium's website at <a href="http://www.teucrium.com/">www.teucrium.com</a>.
This article originally appeared on the Motley Fool Blog Network. Make sure to read all of my articles for the Motley Fool at <a href="http://blogs.fool.com/tdalmoe/">http://blogs.fool.com/tdalmoe/</a>.Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com1tag:blogger.com,1999:blog-6853652561570852704.post-43694546055725913672012-08-14T16:24:00.000-04:002012-08-15T11:34:18.969-04:00Can Apple Replicate Its Success in Emerging Markets?The success of the iPhone from Apple (Nasdaq: AAPL) in the United States is well known to nearly every investor. The iPhone and the iPad are the reasons why the stock has performed so well for so long. But what about the future? At least as far as the smartphone market goes, the future seems to lie in the emerging markets and cheaper smartphones.<br />
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The number of entry-level smartphones, according to Deliotte, sold this year (mainly in emerging markets) is expected to soar to 300 million units. This will more than double the total number in use globally to in excess of 500 million units. <br />
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Emerging markets, especially China, are key to Apple's future growth. It is expected that in excess of 150 million smartphones will be sold in China alone this year. Apple's CEO Tim Cook has said numerous times that demand there is “mind-boggling”. China, which has surpassed the United States as the world's biggest smartphone market, is already Apple's second-largest market after the U.S. Some analysts are worried that it may be losing its touch in China since its revenues in the region for the second quarter fell by 28 percent to $5.7 billion. The same quarter in 2011 had seen revenues jump sixfold. On the bright side, iPhone sales in the quarter still doubled year-on-year.<br />
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The main reason for the drop in Apple's China region revenues is simply competition for market share in the world's biggest smartphone market. The company's main competitor right now has to be Samsung with its Android-powered phones. Android is the smartphone operating system developed by Google (Nasdaq: GOOG). Samsung's smartphones currently have 30 percent of the Chinese market compared to only 10 percent for Apple. That is due to Samsung's strong retail presence in the country, even in the hinterlands.<br />
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In fact, Android phones have been so successful in China and other emerging markets that it led analyst Benedict Evans of Enders Analysis to recently tell the Financial Times that “It is very clear that Android is hoovering up market share in emerging markets”. This includes India where Apple is actually struggling, selling less phones there than in Norway. Its market share there is about 3 percent, versus 45 percent for Android-powered phones.<br />
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Apple has more to worry about than Samsung too. Microsoft (Nasdaq: MSFT) and its partner Nokia ADR (NYSE: NOK) are placing a definite emphasis on China and other emerging markets as a growth engine. Microsoft believes that the only reason Android is so successful in China is that it happens to be on the cheaper smartphones. It and Nokia plan to match the low prices ($100-$150) while at the same time offering users a better experience with its Windows-powered phones such as Nokia's Lumia, a prototype of which was spotted in China this week.<br />
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The major plus for Microsoft's push into emerging markets with its phones later this year is that Nokia, unlike in the United States, has an almost unmatched reputation in the emerging world for producing quality products. But in China, Microsoft is covering its bases by also partnering with Samsung, HTC and ZTE.<br />
Will Apple decide to compete on the low-end of the smartphone market? They may have to do something as the developed markets where they are so successful are becoming saturated. Most likely Apple will decide to the lower the price of their older 3G iPhone in order to make it more affordable to people in emerging markets. If they do this, these phones should sell well due to Apple's reputation. And don't forget that in China later this year Apple will, for the first time, release Siri in Mandarin. This article was originally written for the Motley Fool Blog Network. Please read all of my articles for the Motley Fool at <a href="http://blog.fool.com/tdalmoe/">http://blog.fool.com/tdalmoe/</a>.Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com2tag:blogger.com,1999:blog-6853652561570852704.post-13797553158610680362012-08-09T10:26:00.002-04:002012-08-09T10:26:51.841-04:00The Battle for Leadership in Network VirtualizationThere is perhaps no hotter area in the technology space than cloud computing and network virtualization. Two recent deals put the spotlight on that fact: the $1.26 billion acquisition of Nicira by VMware (NYSE: VMW) and the purchase of Xsigo by Oracle (Nasdaq: ORCL) for an undisclosed sum. Xsigo's software simplifies cloud infrastructure and data center operations. Oracle now can offer clients a full set of virtualization capabilities for cloud-based computing. <br />
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Both Nicira and Xsigo have some of the world's biggest companies among their customers and the deals highlight how fast the market for virtualization software is consolidating. It also shows the growing conflict coming between virtualization software firms and the network equipment companies. <br />
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The move by VMware, 80 percent-owned by EMC Corporation (NYSE: EMC), is particularly interesting. It already has a leading position in the market for virtualizing servers in data centers. Now VMware will be able to add a leader in virtualized networks products to its portfolio. Its chief technology officer, Steve Herrod, said that Nicira software-defined network virtualization will provide “the architecture for the cloud” to its users. Its main benefit is that it will provide corporate users the ability to cut hardware costs, offer lots of flexibility and speedy deployment. <br />
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In effect, this purchase by VMware fired a close shot across the bow of network equipment companies like Cisco Systems (Nasdaq: CSCO) and Juniper Networks (Nasdaq: JNPR), whose stocks initially lost 6 percent and 3 percent respectively on the day of the announcement of the Nicira deal by VMware. Israel Hernandez of MKM Partners said that there are “significant negative implications for Cisco and Juniper” from the Nicira-VMware deal. Both Cisco and Juniper have pushing into the nascent network virtualization market with their own technologies, albeit slowly. The overall global data networking market is currently valued at $37 billion.<br />
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Many Wall Street analysts believe that Cisco has the most to lose from VMware's push into this sector. The fear is that what VMware did to the server hardware industry – allowing companies to share servers in data centers – it will now do the same thing in networking routers and switches. Cisco does have a strategic partnership with EMC and VMware in virtual computing.<br />
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There is a real question out there as to whether Cisco has missed the market. That would be a difficult pill to swallow for Cisco, whose chairman and CEO John Chambers has always said that he was proudest of his company's “ability to capture market transitions that matter most”. It did lay off 1,300 employees due to slowing demand for IT equipment. But competitors like Alcatel also struggled due the weak global economy. And don't forget that Cisco it does have a $100 million investment in a Nicira competitor, Insieme.<br />
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Both Cisco and Juniper had better speed up their move into the network virtualization market, through acquisitions if necessary. Or else someday companies like AT&T and many others will wake up, slap themselves in the head and ask 'why have we been buying all this expensive gear from Cisco and Juniper?'. It will dawn on them that they no longer have to do so.<br />
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This article was originally written for theMotley Fool Blog Network. Please read all of my articles for the Motley Fool at <a href="http://blogs.fool.com/tdalmoe/">http://blogs.fool.com/tdalmoe/</a>.Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com1tag:blogger.com,1999:blog-6853652561570852704.post-41835978038721271662012-08-06T11:33:00.001-04:002012-08-06T11:33:49.067-04:00Electric Cars Looking for a SparkThe idea of electric cars has been around for more than a century. In fact, an electric vehicle held the vehicular land speed record until 1900. Henry Ford bought his wife two electric vehicles in the early 1900s. But the costs and the technology have never been just right in order to produce electric vehicles for the mass market. <br />
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That was all supposed to change with the introduction of the latest generation of electric vehicles and hybrids. After billions of dollars worth of investments by the auto industry and subsidies from many governments around the world, these vehicles are hitting the showrooms in mass. The only problem is that consumers are steering away from them, particularly all-electric vehicles, in droves. <br />
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According to LMC Automotive, roughly 50,000 electric vehicles and hybrids have been sold in the first half of 2012 in the world's major automotive markets. Those markets tracked by LMC include the United States, China and Europe. That figure is well below expectations the industry had for these type of vehicles.<br />
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Pure electric vehicle sales seem to need a spark. For example, General Motors (NYSE: GM) had expected to sell about 45,000 of its Chevy Volts this year. But bad publicity has kept sales down, with GM selling a mere 8,817 Volts (a gain of 22% from last year) in the first half of 2012. Sales for the all-electric Leaf from Nissan ADR (NASDAQOTH: NSANY) have been disappointing this year too and have trailed those of the Volt the past several months in the U.S.<br />
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On the plus side, hybrids seem to be doing better. The Prius from Toyota Motor ADR (NYSE: TM) have moved away from being a niche car. In the first quarter of 2012 it became the world's third best-selling car with sales of 247,230 cars trailing only the Toyota Corolla at 300,800 vehicles and the Focus from Ford Motor (NYSE: F) at 277,000 vehicles. Sales for even the Prius, however, have fallen back since. By the way, Ford says it will launch this fall the C-MAX Energi to compete directly with Toyota's Prius on price and performance.<br />
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So the main problem with the next generation of personal transportation seems to be centered in the all-electric vehicles segment. Why? Most industry analysts point to several factors including performance, comfort levels, improved mileage by internal combustion engine vehicles (Ford's EcoBoost, for example) and most importantly, price. Despite generous government subsidies, electric cars still cost much more than their hydrocarbon-fueled counterparts.<br />
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Even some of the major car companies remain skeptical of all-electric cars. Bill Reinert, Toyota's U.S. manager for advanced technology told Reuters “The expectations have always too high for electric cars.” Chrysler, now 61.8 percent owned by Italy's Fiat S.p.A. ADR (NASDAQOTH: FIATY), is another skeptic. Its head Sergio Marchionne has killed plans for a Chrysler electric car. He said a year ago that his company loses $10,000 or more on every Fiat 500 Electric it produces. <br />
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Auto industry analysts also remain downbeat on the future of the electric car. PricewaterhouseCoopers Autofacts estimates pure electric vehicles will make up only 1 percent of of the global car market by 2017. Edmunds.com says electric vehicles and hybrids will make up a mere 1.5 percent of the U.S. market by 2017. Its senior green car editor, John O'Dell, describes conditions for electric vehicles this way “It's going to be a slow slog”.<br />
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Of course, for every pessimist there is an optimist. GM has made the Volt the centerpiece of its efforts to take the title away from Toyota as the world's greenest automaker. Nissan's CEO Carlos Ghosn is unabashedly the most outspoken proponent of the electric car. He estimates that pure electric vehicle sales (including Nissan's Leaf) will make up 10 percent of the industry's global sales by 2020. It remains to be seen whether he and GM will be proved to be correct or the more cautious approach taken by Toyota and Fiat is the proper one. <br />
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This article was originally written for the Motley Fool Blog Network. Make sure to read mt daily articles for the Motley Fool at <a href="http://blogs.fool.com/tdalmoe/">http://blogs.fool.com/tdalmoe/</a>.Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com34tag:blogger.com,1999:blog-6853652561570852704.post-38170378375203002882012-07-24T13:34:00.001-04:002012-07-24T13:34:43.320-04:00How to Profit From Personalized MedicineNearly investor has heard about the patent cliff facing the major pharmaceutical companies. But there is another, quiet revolution occurring in the pharmaceutical sector right which very well may change its current business model drastically. That revolution is 'personalized medicine'.<br />
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Personalized medicine is the result of advances in genetics and molecular biology. While still in its early stages, it promises improvements in patients' treatment while at the same time reducing healthcare expenditures. It does so through molecular biology and the use of diagnostic tools, which is pivotal to determine whether an individual patient will benefit from a particular drug used to treat a specific disease such as cancer.<br />
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A recent advance in personalized medicine happened when the U.S. Food and Drug Administration approved a test called Therascreen from Qiagen NV (Nasdaq: QGEN) that will be used in conjunction with the drug Erbitux (used for colorectal cancer) that is owned by Eli Lilly (NYSE: LLY) and Bristol-Myers Squibb (NYSE: BMY). The test will allow the two companies to identify the 60 percent of patients who do not have a mutation in the KRAS gene and will benefit from the drug, thus avoiding giving the drug to patients who do have the mutation and will not benefit.<br />
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Based on history, this should be a big boost for sales of Erbitux. AstraZeneca's lung cancer drug Iressa, launched in 2002, had little success because of its high failure rate. But after a diagnostic test was developed in 2009, sales began to grow as the 10 percent of patients (with an EGFR mutation) helped by the drug were identified.<br />
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The okay for Therascreen is a milestone since the FDA has only approved a handful of drugs with companion tests over the past decade. Perhaps best known is Herceptin from Roche ADR (NASDAQOTH: RHHBY), which is given to the quarter of women with breast cancer that have a so-called over-expression of the Her2 gene. The diagnostic test is a joint venture of Genentech, now owned by Roche, and the Danish diagnostics company Dako which is now owned by Agilent Technologies (NYSE: A). Agilent bought Dako in June for $2.2 billion in cash from the Swedish private equity firm EQT. <br />
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The recent FDA approval underscores the growing importance of 'companion diagnostics' – used to analyze a patient's genetics – to determine whether that patient will benefit from a specific drug. This may change pharmaceutical companies entire business model to include companion diagnostics with all of their major drugs on the market. For example, Roche says that 60 percent of the drugs in its current pipeline are linked to a companion diagnostic. <br />
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Think about it...in the future, such diagnostic testing will nearly eliminate failure of drugs to work in certain patients and those costly side effects will be avoided because drugs will only be given to patients where the genetics have been determined to be compatible with the drug.<br />
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Even though some drug companies are keeping the companion diagnostics in house, the advancement of personalized medicine is potentially great news for companies in the diagnostics business such as Agilent Technologies, which is expanding its life sciences business into a fourth division at the firm, and Qiagen, which already manufactures 30 companion diagnostic tests.<br />
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Double-digit growth is forecast for this sector through 2015 and beyond, pushed along by a number of factors including treatment cost savings, optimization of therapies and drug safety. Personalized medicines for cancer are already dominating the market, accounting for more than half of all the personalized medicines currently. But with personalized medicines quickly expanding into other areas such as HIV as well as cardiovascular and neurological disorders, investors in the healthcare sector would do well by keeping stocks like Qiagen and Agilent on their radar screens. <br />
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This article was originally written for the Motley Fool Blog Network. Make sure to read my daily articles for the Motley Fool at <a href="http://blogs.fool.com/tdalmoe/">http://blogs.fool.com/tdalmoe/</a>.Tony D'Altoriohttp://www.blogger.com/profile/13546111527301954905noreply@blogger.com1