Street Speculator

Software-as-a Service (SaaS) is becoming a very popular medium and platform. Saas eliminates the need for loading (EXPENSIVE) software disks and DVD’s into computers in order to receive the latest tech innovations (Microsoft Office suite, etc…).

The SERVER. With SaaS, transactions are conducted within the net, or rather on a 3rd party’s (or the Host site) web server. This way, the user eliminates the need to purchase expensive e-Data storage materials while having the benefit of knowing their data is accessible 24 hours/day (As long as there is an Internet connection).

With SaaS, we believe major software applications that are available through “download”, while being hosted on the server of the software producer. Any data entered into these applications will be safeguarded as well. Companies using SaaS and some variations include Amazon.com (Symbol: AMZN) and Salesforce.com (Symbol: CRM).

What affect will SaaS have on XEROX (Symbol: XRX)? Detrimental. With SaaS, there may be no future need for Printing and Processing Paper. Both are the mainstay of Xerox’s revenues. We believe the company’s revenues will continue to fall, unless they adopt some form of SaaS integrate with their current product offerings.

Tell us what you think?

The New York Times (Symbol: NYT) recently reached an agreement with the Boston Globe employees union to certain labor and salary reductions. The Times had threatened to closed the entire paper if these concessions were not within a certain time period.

This is ONLY short-term good news for both the employees and Times shareholders. The Boston Globe along with other national newspapers have witnessed circulation and advertising numbers drop. The only exception is the Wall Street Journal, which actually gained customers for its print edition.

The Times and its management should prepare The Globe as an Internet-Only newspaper. Such a radical decision will not please Globe loyalists. However the Times wikk continue to see quarterly losses with keeping the print edition as a going concern.

The SPECs reported on this before when the Times attempted to sell The Globe and its Boston-based sports properties to raise capital. Remember, newspapers are becoming dinosaurs. The local and national news are becoming completely digitized for the desktop and mobile devices.

Long live Boston.com

Everyone knows, especially those on Wall Street that newspapers and newspaper companies are becoming dinosaurs. Print readership is down drastically as more people go online and to the blogosphere to get their news.

The financials of many newspaper companies are also highly leveraged, including the private entities. News reports of layoffs come in on a weekly basis and the implementation of cost-cutting strategies which include reducing the size of the paper. Nothing seems to be working.

The New York Times Company (Symbol:NYT) is not immune from the current environment. Heralded as one of the most recognized newspaper companies globally, they are not without problems.

The stock currently trades at $7.26/share, off tremendously from their 52-week high of $21.14. The TIMES also has $1.4 billion in debt on its books and advertising revenue for the print edition is down and continues to fall. Yet the company continues to pay an annual dividend to its shareholders (The SPECs have no idea why).

Unlike other media and newspaper companies, the TIMES has an asset it can use to shore up its balance sheet and potentially clear its heavy debt load.

THE DIGITAL/ONLINE BUSINESSES

The TIMES digital businesses include the following assets: nyt.com (New York Times online division), boston.com (Boston Globe online division), about.com, UCompareHealthCare.com, Calorie-Count.com, and consumersearch.com. According to the TIMES 2007 annual report, these assets generated $330 million in revenues, which amount was up 20% from 2006. Digital represents 10% of total revenues of the company.  OUR RECOMMENDATION………….

1.) Take all of the assets in the digital division and spin-off into a new publicly traded company.

2.) Use the IPO money received to pay down debt, debt contributed from the print division.

3.) The print division should only spin-off about 40% of the company, and retain the other 60% (This way “print” can still receive any profits from the online division; similar to what Microsoft [Symbol:MSFT] did with Comcast [Symbol: CMCSA] 10 years ago).

4.) Cut the dividend

SPORTS ASSETS

5.) Keep sports assets bundled with print. Sports assets include a 17.5% interest in New England Sports Ventures (owners of the Boston Red Sox, Fenway Park, and adjacent real estate), 80% of the New England Sports Network (NESN, the regional cable sports network that televises the Red Sox games), and 50% of Roush Fenway Racing (a NASCAR team). For now, the Sports industry does not seem affected by this economy.

These hypotheticals are bold steps, especially since the IPO market is not moving.  And although the TIMES is rapidly developing its “Mobile Internet Platforms” presence for Digital, their is still the perception with a connection to “print”.

If you are a TIMES shareholder, contact Arthur Sulzberger, Jr. (Chairman), and Janet Robinson (CEO) during the next shareholders meeting. Ask them and the other board members to consider this proposal.

The SPECs initially thought the reverse stock split the company is considering would enhance its stature on Wall Street. We did have the company on our previous “Reverse Split” list. Sirius XM (Symbol: SIRI) currently trades at $0.31/share, which removes the stock from being purchased by mutual funds (Mutual Funds are usually prohibited from buying stocks trading under $5.00/share). Sirius however does not generate enough revenue to service its debt obligations and pay for programming costs.

The merger between the two satellite companies has not produced the “cost savings” everyone thought would occur. 2009 will not be a good year for XM Sirius. According to their latest 10 Q, they have a substantial amount of debt due in next year. Look at these numbers:

$250 million credit facility– Matures in May ‘09

$100 million term loan– Matures in May ‘09

$400 million in Convertible Senior Notes– due in December ‘09

$300 million of 2.5% Convertible Notes– Matures in February ‘09

The SPECs would be more optimistic is this wasn’t such a bad credit environment. However, with the virtual stoppage in lending, Sirius XM will probably not be able to refinance any of the above mentioned debt at favorable terms, if they can refinance at all.

This is a direct quote from the Sirius XM 10-Q form: “An inability to access additional sources of liquidity to fund our cash needs in ‘09 or thereafter or to refinance or otherwise fund the repayment of our maturing debt instruments could adversely affect our growth, our financial condition, our results of operations, and our ability to make payments on our debt, and could force us to seek the protection of the bankruptcy laws, which could materially adversely impact our ability to operate our business and to make payments under our debt instruments.”

We did not mention Sirius XM’s other obligations:

Rights fees to MLB for $60 million annually through the year 2012, 5yr. $500 million to Howard Stern (Although some of that money was paid in company stock),

and $18 million annually to Oprah Winfrey (Oprah Winfrey and Friends show) for the next three years.

Sirius XM’s main source of revenue comes from subscription fees, including the prepaid subscriptions paid by auto manufacturers (Those free 6-months of satellite radio you get when purchasing a new car is actually paid by the auto manufacturer). However, with the slowdown in auto finance and purchasing, this source of revenue will diminish substantially. Also, as people cut discretionary spending, satellite radio services may not be one of the “necessary items” purchased from retail stores.

Sirius XM does not have many options if any. A reverse stock split would only look good on paper. This option is not a definite, but just an option. But, the SPECs believe Sirius XM will file bankruptcy to get favorable terms on its outstanding debt obligations (They will not be able to do so in this current environment).

If you want to profit off of Sirius XM, buy the corporate bonds and not the stock. At least bondholders have some input into the future strategy of the company post-bankruptcy, which also may include an attempt to reduce some of the programming fees paid to MLB, Howard, and Oprah.

YAHOO (Symbol:YHOO) has been the Wall Street whipping boy for the past year. Sure Google (Symbol:GOOG) has taken their luster in internet search and popularity (The word “Yahoo” is not yet a verb). But, in the mid to late 90’s Yahoo was the new “cool”.

When the Internet started to gain global popularity, even to the point where it became a “necessity”, I would use Yahoo exclusively to conduct web searches. Now I use Google. That is not a knock against Yahoo but rather a compliment to Google. However when looking for financial news, Yahoo! Finance is my EXCLUSIVE provider.

The SPECs create this report on Yahoo to bring investors back to reality. Sure they are being pursued by Big Brother Microsoft (Symbol:MSFT). Wall Street analysts thinks this merger would be good for Microsoft as Yahoo does not seem to show any significant growth potential in the future. In other words, they are calling Yahoo! a DINOSAUR.

Ignore this and BUY YAHOO!!! The closing price today was $12.10/share. This price is a great opportunity was small investors (Those with $500 + in liquid cash). They recently reported 3rd quarter earnings of $54.3 million. This is down from 3rd quarter ‘07 of $151 million. But, Yahoo! has U.S. $3.2 billion in cash, NO DEBT!! and they are somewhat feeling the economic crisis with everyone else.

We highlight the “U.S.” because of Yahoo’s use of an accounting procedure (Other 500 co.’s use the same procedure) when calculating its international revenue, REPATRIATION. Repatriation is the process of converting foreign currency into the currency of one’s own country (Investopedia). In layman’s terms, what Yahoo! does is 1st set-up foreign country subsidiaries. These entities control revenue generated by Yahoo! outside of the United States. This international revenue is free of U.S. taxation as long as it never enters the U.S.  Ex: All revenue generated from Yahoo! Japan and Yahoo! Canada are more than likely held in the banks located outside of the United States. Yahoo! (the one you and I know and hear about daily) however remains the parent company.

So, as long as Yahoo! does not bring this earned revenue into the U.S., they pay no corporate taxes on this money. This money can be used to invest in its other international subsidiaries, issue dividends, and invest in other securities.

Yahoo’s 2007 annual report states that it had over $1billion held by its foreign subsidiaries. Yahoo’s international revenue constitute about 40% of its total. That amount is likely to increase as emerging market countries continuously develop internet infrastructure which will bring more of its citizens online and further enhance revenue for Yahoo! and other internet companies.

Ignore the analysts and put this stock on your “buy” list. They will never need a government bailout nor an economic stimulus. Yahoo! has one of the most sound financial books of all publicly traded companies. They escaped the so-called “Internet Bubble” and operate a few of the top 5 internet destinations (Yahoo! Finance, and Yahoo! Sports).

Look at this feature of their initial entry into Interactive Entertainment:

Online Videos by Veoh.com