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I am an individual investor, and have never been employed in the securities business in any way. My professional background is in the finance area. I have managed my own investments for over 30 years. For most of that time, my focus was on portfolio building using individual stocks. About 5... More
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  • Starbucks' Sale Of La Boulange Highlights So Much That Is Wrong With Our Culture

    This is a rant.

    I am ETF Monkey. Not Stock Monkey, ETF Monkey. For the most part, my goal is to write about ETFs. But today I am going to write about a stock. I am going to write about Starbucks (NASDAQ:SBUX). A company I like. A company I am going to try very hard to like after today. But a company that just made it a little harder for me to do so.

    What has made it so difficult for me? This announcement, released two days ago, June 16, 2015. In a masterpiece of "corporate speak," Starbucks announced that they are going to "close all 23 La Boulange retail (bakery cafes) locations, as well as the two manufacturing facilities that serve those locations, by the end of September 2015." In other words, pretty much everything that was actually La Boulange. What do I mean by that?

    La Boulange - A Brief History

    La Boulange was founded in San Francisco in 1999 by Pascal Rigo, a native of Bordeaux, France who later emigrated to the United States. Rigo had earlier started the Panissimo Group, starting with a small bakery on Pine Street in San Francisco. Between 1999 and 2010, the date of the article linked above, La Boulange had expanded to 13 locations--all in the San Francisco Bay Area--and was generating $19 million in sales. By the date of the sale to Starbucks, announced on June 4, 2012, La Boulange had grown to 19 locations.

    All baking was done each night in a central bakery, and the freshly baked bread and pastries were delivered to each retail location prior to their 7 a.m. opening time. Any items left over at the end of the day were donated to local charities, ensuring that everything sold in their stores was fresh.

    Clearly, the combination of La Boulange's ambiance, quality freshly-baked items, as well as their other offerings, captured both the hearts and wallets of local consumers.

    After the Sale

    Reaction from locals to the sale was immediate, and largely negative. Here is just one example, tweeted by a retail analyst in the San Francisco area:

    Rob Wilson @RetailRobWilson

    This just sucks! $SBUX buying my FAVORITE lunch spot. The mom & pop atmosphere will all but disappear at #La Boulange. #SadDayforSF

    But more than that, once the "La Boulange" items started to appear in Starbucks stores, customers quickly noticed that they, uh, weren't exactly the freshly-baked and delivered items that you got in an actual La Boulange. In fact, one blogger went as far as to call them 'The Most Disgusting Breakfast On Earth.'

    The End of the Story?

    Apparently, yesterday's announcement means the end for the retail concept known as La Boulange.

    • For employees, it apparently means that Starbucks will attempt to relocate them to nearby Starbucks locations, if possible.
    • For Pascal Rigo, it apparently means that he will move on to other ventures, including "dedicating more time and resources to his nonprofit ventures . . . ." That sounds, to me, like corporate-speak for "we have a non-compete agreement firmly in place so Pascal doesn't start another competing concept."
    • For consumers, it appears that the unique concept known as La Boulange, with the delicious freshly baked bread and pastries, will simply disappear.

    At the end of the day, then, it would appear Starbucks bought La Boulange for their intellectual property.

    Starbucks has the right, of course, to run their business as they see fit. I don't deny them that.

    I wonder what, though, this says about our culture? Apparently, our lives are so rushed, so fast-paced, that speed is more important than quality? Gone is the appeal of a freshly baked croissant, literally minutes (or at the most a few hours) out of the oven, in favor of something that has been baked far away, forced to survive channels of distribution, and reheated in an attempt to recapture some of the original quality? Essentially, not much different from what you could find in your local supermarket. All in the name of speed, and efficiency.

    And for the local community of San Francisco? Just one more business shut down. One more favorite hangout that no longer exists. One less choice, replaced by incessant homogenization.

    Investment Thesis

    Oh, by the way, buy Starbucks. From a business standpoint, I'm sure this move makes eminent sense.

    From a cultural standpoint, though, I wonder if we have become desensitized to just how much we are missing?

    Tags: SBUX, long-ideas
    Jun 19 3:33 PM | Link | 4 Comments
  • OK, Nokia, Microsoft, And AT&T. Put Up Or Shut Up

    At the Lumia 1020 release event, Stephen Elop promised that the phone would be the beneficiary of a coordinated marketing campaign featuring the combined efforts and budgets of Nokia, Microsoft, and AT&T. He basically promised that nothing would be hidden in a back room, or under the counter, as many have observed at both dedicated stores as well as the cellular kiosks at Costco.

    Even though I am a patient Nokia long, I am watching to see how closely the results match the promise. There is a innovation window here that needs to be exploited. It's time to put up or shut up.

    Disclosure: I am long NOK.

    Tags: NOK, MSFT, T
    Jul 24 2:43 PM | Link | Comment!
  • Nokia's Impressive Cellphone Lineup Bodes Well For Future

    Nokia (NYSE:NOK), once the world's preeminent cellphone manufacturer, now finds themselves in the fight of their lives.

    Background and Challenges

    On the upper end of the spectrum, Apple (NASDAQ:AAPL) has established dominance. Beginning with the iPhone 3G, Apple literally revolutionized the smartphone. Today, Apple's flagship phone is the iPhone 5.

    Via their Android operating system, Google (NASDAQ:GOOG) has also developed a commanding presence in the marketplace. In fact, while Apple is still the #1 smartphone manufacturer in the U.S. (37.8% OEM market share), Android is now the #1 platform (52.3% platform market share). (Source: comScore January 2013 report)

    As Nokia struggles to regain market share, it finds itself waging war on multiple fronts. In the high end of the market, it finds itself in competition with both Apple's iPhone5 as well as high-end Android phones, perhaps most notably Samsung's (OTC:SSNLF) Galaxy S3 (and likely the just-released S4). At the same time, Android phones offer competition at the lower end of the market.

    Nokia has responded by aligning themselves closely with Microsoft (NASDAQ:MSFT). Abandoning their home-grown Symbian operating system, CEO Stephen Elop partnered with Microsoft, declaring that Nokia would develop exclusively using the Windows Phone operating system.

    In November, 2012, Nokia released a new flagship phone, the Lumia 920. In the U.S., the phone is an AT&T (NYSE:T) exclusive. This phone boasts several impressive features, including:

    • A 4.5% screen with 1280 x 768 resolution. At 332 ppi pixel density, this screen offers better density than even the iPhone 5's 326 ppi. Further, it is touch-sensitive even if the user is wearing gloves.
    • An 8.7 MP camera with Carl Zeiss optics and image stabilization
    • Wireless charging
    • 4G LTE connectivity

    However, doubts as to Nokia's continued success still abound. These are reflected in everything from assertions that the 920 is too big and heavy to doubts that Nokia can compete against low-cost Android devices. The latest concern I have read is that Microsoft themselves may come out with a competing smartphone.

    Nokia Expands the Lineup

    At the 2013 Mobile World Congress (MWC), expectations ran high as to what Nokia might announce. Most of these focused on "wow" potential; such as perhaps the release of their full 41 MP Pureview camera in a Windows 8 phone.

    However, Nokia went in a little different direction. They focused more on expanding their phone lineup, including the Lumia line as well as new offerings in their Asha line.

    For purposes of this article, I would like to focus on what I might call the "middle ground" of Nokia's lineup, their newest offerings in the Lumia line. In my view, these phones appear to offer very unique value; a combination of true smartphone functionality and specs at very competitive price points. To hopefully make the point, I decided to compare some key specs on the Lumia 520 and 720, two phones announced at the MWC, along with the earlier-announced Lumia 620. As a reference point, I selected the iPhone 4S for comparison. Remember, the iPhone 4S is no slouch. It is second only to the iPhone5 in Apple's line. But, I felt it offered a solid basis for comparison as to how the new Lumias stack up.

    Have a look at the following table:

    Selected Nokia Models vs. iPhone 4S

     Lumia 520Lumia 620Lumia 720iPhone 4S
    ProcessorQualcomm Snapdragon S4, Dual-Core 1 GHzQualcomm Snapdragon S4, Dual-Core 1 GHzQualcomm Snapdragon S4, Dual-Core 1 GHzApple A5, Dual-Core 800 MHz
    Size119.9 x 64 x 9.9 mm (4.72 x 2.52 x 0.39 in)115.4 x 61.1 x 11 mm (4.54 x 2.41 x 0.43 in)127.9 x 67.5 x 9 mm (5.04 x 2.66 x 0.35 in)115.2 x 58.6 x 9.3 mm (4.54 x 2.31 x 0.37 in)
    Weight124 g (4.37 oz)127 g (4.48 oz)128 g (4.52 oz)140 g (4.94 oz)
    Screen Size4 inches3.8 Inches4.3 Inches3.5 inches
    Resolution800 x 480 (233 ppi)800 x 480 (246 ppi)800 x 480 (217 ppi)960 x 640 (330 ppi)
    RAM512 MB512 MB512 MB512 MB
    Internal Storage8 GB8 GB8 GB16 GB - 64 GB
    External Storage64 GB64 GB64 GBNone
    Rear Camera5 MP, 720p5 MP, 720p6.7 MP, 720p8 MP, 1080p
    Front CameraNone.3 MP1.3 MP.3 MP
    Battery1430 mAh1430 mAh2000 mAh1432 mAh
    Price (Unlocked)

    €139

    $289.99 (Approx. €223

    €249

    Approximately $450

    As can be seen, the Nokia offerings compete very well. The screen sizes are competitive, though the iPhone 4S has slightly better resolution. While the internal storage on the Lumias is slightly lower, it is expandable to a value equal to that possible with the 4S. The camera offerings are also competitive. Finally, the battery capacity is equal-to-superior.

    But more than that, these are full-fledged Lumias. They come with proprietary Nokia software and capabilities, such as the HERE suite (HERE maps, HERE Drive, and HERE transit). In the words of Stephen Elop, "We are bringing elements of our high-end flagship Lumia devices to more prices and therefore to more people."

    Summary and Conclusion

    Nokia is a world-class phone manufacturer, and has been for many years. If an individual does not believe this, likely they should steer clear of Nokia as an investment.

    I believe these new phones are evidence of Nokia's abilities. I love their design aesthetic and, quite frankly, the fact that they use Windows Phone. Between the freshness and vibrancy of the color palette that Nokia is featuring, and the innovative Live Tiles interface of Windows Phone 8, these phones offer differentiation in a smartphone world that at some level has become rather bland.

    With the phones I have featured in this article, Nokia has now done exactly what Elop said, brought many of the capabilities of their flagship devices within the reach of many more people. Apple has yet to do this. And some feel that Android phones at lower price points come off as plasticky and cheap. At some level, Nokia is offering great value to everyone from the father looking for a modestly-priced phone for a teenage son or daughter to a small business looking to provide a consistent platform for their employees.

    I believe this same strength should hold Nokia in good stead even if Microsoft develops their own smartphone. First of all, I believe that Nokia's combination of quality hardware and innovative proprietary features makes them a formidable competitor. Second, if Microsoft proves a fickle or even devious partner, Nokia would have the option to embrace Android as an alternative. One of my fellow Seeking Alpha contributors discussed this possibility in a recent article. I find myself in agreement with his view, as I find it hard to believe that Nokia, irrespective of their public position, does not at least have some secret "skunkworks" projects with respect to some "Plan B," and Android makes the most logical sense.

    In the final analysis, however, all of that is speculation and conjecture. What is known is what Nokia is producing today, a line of phones that cuts across a wide swath of the world's population. High-end? The Lumia 920 has received very positive reviews. Middle-ground? I would point to the lower-end Lumias features in this article. Lastly, do not ignore their Asha line; smartphone-like feature phones with impressive functionality at an extremely low price point. I believe all of this bodes well for their future.

    Disclosure: I am long NOK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Mar 18 9:32 AM | Link | Comment!
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