NBR Complete Transcript: 11-09-2006
Thursday, November 09, 2006The House of the Mouse Is Expecting Some Big Cheese
SUSIE GHARIB: A treasure island of earnings for the Walt Disney Company late today. After the closing bell, the media giant posted better than expected earnings and revenues. Disney made $0.36 a share in its fiscal fourth quarter, $0.02 more than estimates. It also reported a 14 percent gain in revenues, $8.8 billion. The big drivers: theme parks, movies and media, with stellar performances from the "Pirates of the Caribbean" films, ESPN`s networks, and attendance at Disneyworld and Disneyland.
One on One With Tuna Amobi, Sr. Media & Entertainment Analyst at Standard & Poor's
SUSIE GHARIB: Media giant Viacom reported better than expected earnings for its third quarter, $0.50 a share. Analysts were looking for $0.48. Still, that's down more than 10 percent from Viacom's year-ago profits of $0.60 a share. Disappointing box office results from its Paramount films offset higher ad sales at the MTV networks cable service. The company also announced its CFO Michael Dolan is leaving at the end of the year and Chief Administrative Officer Thomas Dooley will take his place. Joining us now with more analysis on today's numbers from Disney and Viacom, Tuna Amobi, senior media and entertainment analystc. Hi, Tuna.
TUNA AMOBI, SR. MEDIA & ENTERTAINMENT ANALYST, STANDARD & POOR'S: Thanks for having me.
GHARIB: Well, those are pretty strong numbers from Disney today. Do you think that the company can keep up the momentum throughout its first fiscal year?
AMOBI: I think clearly this robust result sets them up for a very strong fiscal year. If you look at the underlying trends, the theme parks or the film entertainment or the media networks, I think the story is across-the-board strength. Clearly there's some underlying momentum going. I think the outlook that they have for double digit growth at least through the next fiscal year seems pretty much intact.
GHARIB: Does Disney have any movies or from whether its Disney line or Pixar that are in the pipeline that could turn out to be real blockbusters for the new year?
AMOBI: Sure, well, if you look at the slate, I think there is a number of very key titles coming up. First of all, "Pirates of the Caribbean," DVD sales I think should ship very strong for the holiday season. If you look ahead to next summer, there's a number of key titles coming up on the Pixar as well as the Walt Disney picture side. Overall, I think the film division should continue to ride, you know, this solid results that is generated which should enable the company to not only reap the benefits in film, but also the cross platform synergies, so whether it is "Ratatouille" from Pixar or "Day with the Robinsons,: as well as other titles that we really have high hopes for.
GHARIB: Taking a look at Viacom, Viacom's Chairman Sumner Redstone said today that the company's on track to deliver good results for the rest of this year and that is despite problems at the Paramount studios and this big management overhaul that they have had. Do you buy into that?
AMOBI: Well, I think Viacom we still have concerns with the pace of the restructuring at the Paramount studio. We also have some concerns with the advertising growth at MTV networks. But overall I think the new management team, it seems like they are staying the course. I would venture to guess that their honeymoon period with the Street is almost over. So I think the pressure is going to be on them to deliver consistent results. I think no one is more upset than stock price than Sumner Redstone and perhaps rightly so, so investors will keep a keen focus on that.
GHARIB: Well, speaking of the stock, Disney stock has been on the rise. Viacom's has been struggling. What is your view on Disney and Viacom?
AMOBI: Well, I think Disney clearly demonstrated that there is the underlying momentum in the core businesses which is why we are recommending the stock. Over the next 12 months we believe their core catalyst is going to drive the stock up, perhaps you know higher than in 35 which I think could present some resistance. If you look at Viacom, the story is somewhat mixed there. Ad sales are somewhat tentative in the U.S. and internationally. Affiliate fees seem to have somewhat maxed out. I think MTV has yet to demonstrate that it can be a very significant player in this digital space, particularly with a kind of young demographics that it has. So overall I would maintain a neutral stance on Viacom.
GHARIB: Just in terms of disclosure, do you own either one of these stocks?
AMOBI: I neither own nor do I have any affiliation with Disney nor Viacom.
GHARIB: All right. Thanks a lot, Tuna.
AMOBI: Thanks for having me.
GHARIB: We have been speaking with Tuna Amobi, senior media and entertainment analyst at Standard & Poor's.
Settling Into The New Capitol Hill
SUSIE GHARIB: It's official tonight. The Democrats now have control of both Houses of the 110th Congress. It came as Virginia Republican Senator George Allen conceded this afternoon to Democrat Jim Webb. Now that the dust has settled on just who's in charge, the next order of business will be significant for business. Stephanie Dhue takes a look at the key committee chairmanships.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The changeover in Congress from Republicans to Democrats is most dramatic in committee. In the tax-writing Ways and Means Committee, for example, Charlie Rangel, one of the most liberal members of Congress, is taking the place of Bill Thomas, one of the most conservative. Former Congressman Charlie Stenholm expects Chairman Rangel to be more open to new ideas.
CHARLES STENHOLM, SR. POLICY ADVISOR, OLSSON, FRANK & WEEDA: I would be very surprised if he doesn't open with serious hearings on tax reform, instead of just talking about it every two years, about these new ideas and flat tax and all of these things and value added tax, actually hold hearings and actually get some discussion going.
DHUE: There may be a discussion of runaway CEO pay as Barney Frank takes over from Michael Oxley on the House financial services committee. The government reform committee under Henry Waxman could increase scrutiny on Halliburton, pharmaceutical companies and big tobacco. But the conversation on climate change may not be much different at the Energy and Commerce Committee under John Dingell as it was under Joe Barton.
JAMES THURBER, PROF. & DIR., CENTER FOR CONGRESSIONAL AND PRESIDENTIAL STUDIES, AMERICAN UNIVERSITY: Mr. Dingell is very close to Mr. Barton when it comes to the internal combustion engine, because he has United Auto Workers, Ford, GM, others that he represents. So he's been very careful about regulating the Clean Air Act, which has significant impact on business. So you have to look at the personalities, where they are from, very carefully.
DHUE: Business groups which largely supported Republicans expect the new Congress as a whole to be more moderate then the committee chairmen.
GREGORY CASEY, CEO, BUSINESS & INDUSTRY POLITICAL ACTION COMMITTEE: While we look skeptically at some of the leadership, we understand that there is the possibility that they will also want to work with us and we are open to that. And I think they're going to have some assistance because... I think that the conservative Democrats in both the House and the Senate have just expanded their ranks.
DHUE: The talk in Washington the last two days has been all about bipartisanship and cooperation. Experts say Democrats have a vested interest in proving they can work with Republicans to get things done. If Democrats succeed, they have a better shot at keeping control beyond the next two years. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
Starbucks Gets Into The Holiday Spirit
SUSIE GHARIB: Starbucks decked the halls today, all 9,000 of them. It wrapped all of its U.S. coffee shops in red and rolled out a slew of holiday offerings -- Christmas coffee blends, gift items and gift cards. Starbucks' CEO was making the rounds in New York today, starting at the NASDAQ where he rang the opening bell. When I talked with James Donald this morning, I asked him how important the holiday season is for Starbucks.
JIM DONALD, CEO & PRESIDENT, STARBUCKS: The holiday season for Starbucks is very important for a lot of reasons. For financial reasons, it's our biggest quarter in terms of total revenue, but it is also the opportunity to connect more with partners as our transaction growth grows as well and we're able to provide the environment that we do every day to even more customers over the holiday season.
GHARIB: Mr. Donald, you announced recently that Starbucks is going to open 2400 stores worldwide with the goal ultimately of 40,000 stores. What is the goal? What is the strategy here?
DONALD: Our goal is one store at a time, one customer at a time, one partner at a time, meeting the needs for our customers and our partners alike. And if it gets to 40,000 stores in a certain amount of time, that's great, but there could be some upside to that as well.
GHARIB: It seems like everywhere you look there is a Starbucks store. Where do you see this opportunity to grow?
DONALD: As the urban environments and suburban environments change, as they spread out or as they contract, we find that we might not have a store in the location that we might have missed or it wasn't populated enough to put one there. So we find those sites as well and there's opportunities for us in malls across the world as well as remote locations which are smaller areas or off highway areas.
GHARIB: You were telling me that this expansion works out to six new stores a day. How do you manage that growth and still maintain and grow your current store base?
DONALD: Our business is all about people and our partners are our biggest asset. And so from a one-store neighborhood to a 12,500 store company, we look at it that way and the train that we put in place and how that we connect with our partners, enables them to execute on a daily basis in every store across the world.
GHARIB: We know that people who regularly get their coffee from Starbucks are very sensitive to any price increases. What kind of pricing flexibility do you have?
DONALD: We like to think that we notify our customers of these increases, usually a week ahead of time. We help explain to them where and our partners know where these price increases (INAUDIBLE) are being put in place and what they are going to do. And the customers understand that. And as we've seen in the past in '04 and in '06, our transaction growth continues to be robust and has not changed in terms of the normal growth patterns.
GHARIB: How do you feel about the big push from Dunkin' Doughnuts? We are seeing it opening many more coffee shops all over the place and their coffee is cheaper. Are you concerned that they are going to eat into Starbucks market share?
DONALD: Our competitors in the other coffee companies that are getting into super premium coffee are actually helping us educate the overall customers about super premium quality coffee and what a great cup of coffee tastes like. So what we're finding is that there's room for all kinds of individual companies and independents to get into the super premium coffee and it helps us at the end of the day.
GHARIB: I see that Starbucks is also moving into entertainment, music movies, books. How much does this add to the bottom line?
DONALD: Well, we don't look at entertainment as a driver of the top and bottom line. It is a piece of that for sure. But what it adds to the experience can't be measured. It's just a big -- it's a big surprise and delight for our customers and it adds texture to that experience and texture to what Starbucks stands for.
GHARIB: What is the next big surprise that we're going to hear from Starbucks?
DONALD: The next big surprise at Starbucks will be -- I can't tell you that.
GHARIB: Well, we're here at the NASDAQ and Starbucks stock has been moving up. What do you think it's going to take to keep the momentum going?
DONALD: We're very excited about our international business. We're very excited about the returns still of our stores in the U.S. and there is so much territory yet for us to expand. And if you look at our track record, it has been consistent as any company that I have ever known or worked for but we are still in the very early days of opportunities at Starbucks.
GHARIB: Mr. Donald, thank you very much.
DONALD: Thanks, Susie.
"Bill of Health"-Medical Devices Become A Handful
SUSIE GHARIB: If you've been a patient in a doctor's office recently, chances are you may have seen an ultrasound machine. Now, thanks to technology originally developed for the U.S. military, new, portable ultrasound devices are making their way into all kinds of new medical settings. As Jeff Yastine reports, in our "Bill of Health" segment, the small, handheld machines are turning up in emergency rooms, surgical suites and other places.
JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: It looks like someone's laptop computer. But it's a complete ultrasound imaging system, in a package weighing less than eight pounds. Because of that, ultrasound use is making its way from the obstetrician's office to the operating room. Anesthesiologist Dr. Howard Palte started using hand-carried ultrasound devices in the past several years.
DR. HOWARD PALTE, ANESTHESIOLOGIST, MILLER SCHOOL OF MEDICINE, UM: With the ultrasound machine, we are actually able, in real time, to see the nerve, see our needle approach the nerve. And at the same time, we can assist where our local anesthetic solution is distributed around the nerve when we inject-which we couldn't do previously.
YASTINE: These hand-carried ultrasound devices also are finding their way into emergency rooms, where doctors use them to quickly and easily examine tissues and organs for damage. The makers of these ultra- portable ultrasounds say the devices continue to get lighter and more sophisticated, compared to traditional ultrasound machines which typically cost more than $100,000.
TOM DUGAN, SR. VP, SONOSITE: A hand-carried system weighs 7.7 down to three pounds. They are roughly $50,000 in cost and are very simple and easy to operate and they will work virtually anywhere in the hospital where you cannot get a cart-based system to the patient. You can always bring a hand-carried system right to the patient, even to the extent that you can lie it right on a patient's bed.
YASTINE: Just seven years ago, the market for hand-carried ultrasound devices was tiny. Sonosite's revenues were just $5 million, but have expanded rapidly since then. And that number continues to grow industry- wide, especially as cardiologists and other physicians use the systems as low-cost screening devices for hard-to-diagnose conditions like aneurysms.
DUGAN: Right now, the physician has to basically use his manual exam skills to detect an aneurysm. So the ability to provide a physician with a tool in their office, where they can easily and quickly diagnose a potential aneurysm, I think, is going to have a major impact on healthcare.
YASTINE: As computing power grows, costs come down. Some physicians say you shouldn't be surprised if hand-carried ultrasound devices become as ubiquitous as stethoscopes in physicians' offices of the future. Jeff Yastine, NIGHTLY BUSINESS REPORT, "Bill of Health."
"Commentary"-Laboring With Workers
SUSIE GHARIB: Tonight's commentator says it's easy to get good work out of your employees and he has some suggestions on just how to do that. Here's Richard Levin, syndicated columnist and author of "Shared Purposes."
RICHARD LEVIN, SYNDICATED COLUMNIST & AUTHOR, "SHARED PURPOSE": You've probably seen or even written a performance review that says something like: this employee should go far and the sooner he starts, the better. Even the strongest managers quake in their boots when they hear the phrase "performance review." But evaluating someone's performance doesn't have to be the drudgery people make it out to be. Quite simply, a performance review is a way to measure whether people are doing what they're supposed to do.
Of course, they have to know what they're supposed to do, and since most employees don't have x-ray vision, the manager's job is to clearly communicate the goal and identify the expectations for reaching that goal. This isn't rocket science. If you want your employees to perform, you have to tell them what you expect. The specifics of how they reach or hopefully exceed that expectation is often best left to them, because what's important is not necessarily how they reach the goal, it's about the results.
It used to be and in some companies, it's still the case, that if your manager saw you at your desk for long hours, you'd be regarded as a dedicated employee, even if you weren't doing anything. Today it doesn't always matter how many hours you work, but whether you get the job done. When it comes to excellent performance, it's about crystal clear communication, clear standards, clear expectations and clear measures of accountability. Fundamentally, it's all about the results. I'm Richard Levin.
Paul Kangas' Stocks In The News
PAUL KANGAS: Wall Street's blue chips moved lower this morning as oil prices rose and the University of Michigan's November consumer sentiment index fell. But the NASDAQ headed higher on yesterday's good earnings we told you about from Cisco. So at noon, the Dow was down 32 points, but the NASDAQ was up 12. Persistent weakness in the drug, defense, and healthcare stocks dragged the market in general down this afternoon, resulting in a broadly lower close. The Dow Industrial Average lost 73.24, ending at 12,103.30. The NASDAQ Composite off 8.93 ending at 2,376.01. Standard & Poor's 500 Index dropped 7.39 to 1,378.33. In the bond market, the 10-year note gained 4/32 to 99 and 31/32, putting the yield at 4.63 percent. For the second day running, big board volume leader, Pfizer (PFE) today on 37 million shares, down $0.78.
Then Texas Instruments (TXN) a $0.69 loss.
Lucent Tech (LU) dropped a penny.
AT&T (T) losing $0.95.
Fifth in volume, Motorola (MOT) a $0.27 drop there.
CB Richard Ellis (CBG) bucked that trend with a gain of $1.30. The big real estate services company got an upgrade from JPMorgan and also JPMorgan boosted 2007 earnings estimates from $1.69 to $1.92, boosted its price target for Ellis stock from $31 to $38 a share and after the close, Ellis stock was added to the Standard & Poor's 500 Index, a lot of news there on that stock today.
EMC Corp (EMC) up $0.34.
CVS Corp (CVS) down $1.01.
Sprint Nextel (S) rose $0.25.
And then ExxonMobil (XOM) on the higher oil prices, up $0.80 today.
American Intl Group (AIG), the big insurance firm and a Dow stock, reported earnings right after the close today. Third quarter earnings jumped to $1.61 from only $0.66 a year ago. In after hours trading, the stock was up about $0.40 from this price.
Then we see Hewlett-Packard (HPQ) up $0.68. Goldman Sachs boosted its 12-month price target for the stock from $42.50 up to $46 a share.
JC Penney Co (JCP) up $1.35. Second quarter earnings or I should say third quarter earnings 22 percent higher than last year at $1.26 versus $0.94 there and that was $0.03 above the Street estimate. Same store sales rose 5.2 percent.
Goldcorp (GG) rising $2.22. The company's CEO forecast gold prices will hit $850 an ounce in the next two years. The New York December gold contract today was up $18.50, ending at $636.80 the ounce.
Borders Group (BGP) rising $2.11. Reportedly, William Ackman (ph), the head of Pershing Square Capital Management, has purchased an 11 percent stake in Borders.
BMC Software (BMC) up $2.87. Second quarter earnings, $0.37, up from $0.27 a year ago. Revenues up nearly 7 percent. The company also boosted 2007 earnings estimates.
Big loser of the day, Westwood One (WON), this provides radio and television stations with programming and third quarter earnings dropped to $0.12 from $0.22 a year ago. Revenues fell 15 percent. The company's board will evaluate alternatives to enhance shareholder value.
Two public offerings today, KBW Inc (KBW). This is the former Keefe Bruyette and Woods, the investment bank boutique, 6.8 million shares offered at $21, high, $26, the high was $27.38 and then it backed off just a little bit.
Onebeacon Insurance (OB) was offered to the public at $25 and a 24 million share offering.
Cisco Systems (CSCO) topped the active list, up $1.61. The high today, $27.44 on those earnings that we told you about after the close yesterday.
Apple Computer (AAPL) $0.89 gain.
Microsoft (MSFT) up $0.28.
Google (GOOG) fell $2.73.
Research in Motion (RIMM) a $0.12 loss, fifth in volume.
And then Qualcomm (QCOM) dropping $1.45. Japan's trade commission warned the company it may have to investigate the business practices that the company's using in Japan.
Intel (INTC) $0.29 loss.
Dell (DELL) moved up $0.80.
Broadcom (BRCM) $0.03 gain.
Tenth in volume, Yahoo! (YHOO) up $0.55.
Hansen Natural (HANS), the beverage company, down $4.14. Remember this is the four for one split stock, but the company is delaying its quarterly financial report due to an ongoing review of its stock option grants.
And those are the stocks in the news tonight.
