Jeff Taylor

Jeff Taylor
Contributor since: 2011
Sure, Vivendi owns just shy of a 60% stake in ATVI, but I'm not terribly concerned for two reasons.
First, Vivendi is facing some hard times, but as the situation stands they will still be making a profit. So with the lack of impetus for an ATVI fire sale as well as ATVI being one of their strongest assets, I think they would hesitate before relinquishing too many shares.
Second, ATVI has a very active share buyback program. Assuming no drastic moves by Vivendi, I would expect the whole thing to, at worst, roughly balance out.
This is not to say that there won't be dips due to Vivendi sell offs, but these dips will be short term, effectively being nothing more than a great buying opportunity.
Either way, ATVI itself is still in strong shape and has wrongly dropped in price. Vivendi is anticipating struggles in it's telecom business which is wholly separate from Activision Blizzard.
Well said.
Some interesting ideas, though I disagree with your analysis of Zipcar (ZIP), especially concerning its ability to compete with established rental companies. Zipcar has a significant first-entry advantage that cannot be overcome as easily as you claim. Its inroads on college campuses make ZIP many peoples' first introduction to car sharing, which has led to it becoming the company that has come to define the car sharing concept. This, plus its large and growing international network of vehicles, will not be easily overcome.
I wrote an article on this subject about a month ago ( that you may find informative.
A quick off the cuff calculation:
Revenue for FY2011 was ~$240MM
Profit margin in established regions is ~20%
Annual profit if this margin were achieved company wide is ~$48MM
Thus the annual EPS would be ~$1.15
Which would make it priced at just under 12 times earnings
In reality, revenue's average growth for the past three years has been 30% and it is will take a few years to achieve a large company-wide profit margin but, without going into too much detail, I think it is a fairly priced (perhaps under-priced) growth stock.
Expansion will be much more based on the culture of cities rather than their size. While there are some cities, such as Los Angeles, that are very much centered on car ownership this is not the case in most cities. And, given how easy the Zipcar business model is to scale to all sizes, it is very easy to tailor their local vehicle network to specific needs of the city.
Basically, I think its expansion outside of its established cities will be fairly successful and non-eventful.
That's a very good point, Zoid.
And not only will the in-game auction system monetize player transactions as you describe but it serves to create a more inclusive online community which game companies are so actively pursuing nowadays (CoD: Elite, Xbox Live, PlayStation Network). These communities not only boost the sales performance of the game in question but also other similar titles.
Thanks, I'm glad you found the article useful.
Per usual, precise dates have not been published for the release dates, but based on prior experience we can expect Skylanders: Giants to be released in October and Call of Duty 9 in November.
The nearest catalyst, however, is the release of Diablo III sometime in Q2.
And as for when Blizzard's second release will be? No announcements have been made but in the past they have aimed for late November/early December.
You've made the refutation of your argument within this article:
You are correct in saying that it takes a visionary to revolutionize an industry. But you are also correct in saying that Hastings needs a business person to run Netflix. And you are correct in commending Zuckerberg for hiring Sandberg. And you are correct in saying that Gretzky needs the support of his team.
These are two very different roles. The visionary dreams the product. The MBA ensures the business is run in the best possible way.
To belittle MBA's for not being visionaries is absurd. A company needs both to successful. (Should we also criticize MBA's for not being office assistants?)
It is common to knock the need for education - how long has the myth about Einstein failing every subject been around? - but for all the successful people you list that dropped out of college there are thousands of people that failed.
On a separate note, I need to quote one of your closing lines: "Apple does make effective use of its capital. They just do things - everything - differently."
You make no arguments why sitting on a pile of money is effective in this article or your other one - basically you say 'shame on you for being greedy and a rigid business school student.' Doing things differently is only a good if the method is, in fact, better. I'm not convinced that having $100B in is better, just different.
I think you are dramatically underselling the amount of time spent in the car by the average driver. The US Census Bureau pegged the average American commute at just under 50 minutes per day. And for most drivers these are not 50 minutes of relaxation - these minutes are slow, stop-and-go traffic that is both difficult and frustrating to drive in. If SIRI can make this drive more pleasant, it has a very captive audience.
As myself and others have pointed out to you, Avis on Location is not, currently, a competing business. They only work for corporate clients, only have locations in business parks, and have yet to show any sign that they wish to compete with Zipcar and begin to target city dwellers and college campuses.
Coffee is exactly what it is - it is providing a desired service in a way that becomes part of people's lives and makes them feel good about it. That the products are different is a fairly minor detail.
Take a look at some of the comments in the third article of this series ( where Zipcar is compared to Starbucks.
There are no copyrights to prevent someone from opening a coffee shop, there is no denying that Starbucks has a significant advantage due to the strength of its image. Similarly, Zipcar's advantage will come from it's image not from any copyrights it holds.
Currently, of the companies I examined, Hertz on Demand is the only company that allows for one way rentals - however this is only on the limited number of vehicles that it keeps at a few airports and other office-based rental centers. So for the most part, if you wish to make a one way trip, you will have to rent a car by normal means.
There are several reasons that Zipcar does not allow one-way rentals:
- Zipcar makes significant investment in purchasing parking spots, creating deals with colleges, and arranging free parking places with apartment managers (in the belief that having a Zipcar raises the value of an apartment). Less tangibly, but no less important, is the amount of planning that goes into finding the optimum placement for vehicles.
- Tracking a constantly shifting network of vehicles is a logistical nightmare. How do they handle the parking charges? What if a vehicle is left in an unsafe neighborhood? What if the vehicle is parked far away from most users? If users are only allowed to return the vehicles to pre-approved parking spots, this (in an attempt to maximize the use of its spots) lends Zipcar towards creating a music chairs type situation.
- A key incentive for Zipsters to join is that they know a car is, for example, just down the block. If one way trips are allowed, then this incentive disappears.
- Zipcar targets people who want to run a few errands or take a day trip, not people who are moving cities or driving to a vacation spot who would take advantage of the one-way service.
In the Earnings Call (I think - though it may have been in the 10-Q), there was mention of one-way rentals, in that it was something they were actively looking into.
It would absolutely be a game changer, though I don't see it happening anytime soon.
I doubt it - whereas this time the outlook is to lose money after a profitable quarter, when Q1 earnings are released the outlook will be to earn money after an unprofitable quarter. The positive outlook should keep the price buoyant.
As it looks to me, the new arrangement where ZVF (a wholly owned subsidiary) purchases the vehicles and then leases them to Zipcar will bring operating costs per vehicle down but will require more long debt and larger interest payments. I haven't worked through all the details, but presumably this is a more profitable arrangement.
Transportation is such a big part of peoples' lives that the specific method becomes a key part of that person's lifestyle. Whether it is riding a bike, taking the subway, owning a car, or car sharing through Zipcar. As such, I think it would be very foolish to discount the lifestyle element. I made a comparison between Zipcar and Starbucks below in a reply to Francois54 that I think you will agree with.
Thanks for sharing all of that, James. My gut reaction as soon as I read what you said about the car driving itself to you was that it was science fiction drivel - then I remembered that 10 years ago, the smart phone that we can now use to reserve cars was science fiction drivel. I won't even try to guess where technology will be in 10 years, but I certainly agree with the general sentiment.
You are absolutely correct.
A good comparison would be Starbucks (SBUX). Creating a similar experience is not difficult and other chain coffee shops - example: The Coffee Bean and Tea Leaf - do this very well. But Starbucks has the competitive advantage because of their multitude of locations, positive image, and ubiquitous brand recognition.
While car sharing is a much younger industry than coffee shops, Zipcar is certainly on track to achieve a similar status.
Thanks, I'm glad you liked it. And yes, I have some comments and analysis - I'm hoping to have them published tomorrow.
Directly copied from the latest 10-Q:
"Zipcar, Inc. (“Zipcar” or the “Company”), a Delaware corporation, and its subsidiaries comprise a membership organization that provides self-service vehicle use by the hour or by the day. The Company places vehicles in convenient parking spaces throughout major metropolitan areas and universities in North America and in the United Kingdom. Through the use of the Company’s proprietary software, members are able to reserve vehicles online, through a wireless mobile device or by phone, access the vehicle with an electronic pass card or mobile device, and receive automatic billings to their credit card."
It is safe to say that Zipcar is significantly more appropriate than a Zeppelin business.
Zipcar and Avis on Location compete in completely different ballparks. Whereas Zipcar caters to college students and city dwellers, Avis on Location exclusively serves corporate campuses - not in locations that are accessible for Zipcar's audience. The size or success of Avis on Location will have a very limited affect on Zipcar.
As for the IDSY tech vs. ZIP's RFID cards, I think it is very much open for debate. My personal preference would be to pull a card out of my wallet rather than fiddle with my phone. Obviously that doesn't mean anyone else necessarily agrees with me on that. But it is not as open and shut as you make it sound.
Concerning the supposed patent infringement, I'd be very interested in knowing more. Personally, this is the first I'm hearing of it, so please post your sources.
Your points about rising gas prices and the cost of expanding do not make sense. Both Avis and Zipcar pay for all the gas, regardless of price and regardless of how consumption is measured - unless Avis hedges against gas prices using a method you failed to explain. As for the expansion costs, it is very true that Zipcar has to pay higher costs than its competitors, however once established in an area it has a 20% EBITDA operating margin.
dbtunr - Very true and something I hadn't fully considered. At nearly 19% percent of revenue, the removal of the annual fee would be extremely harmful. However, I believe there are several mitigating factors:
- The annual fee will neither be removed soon or all at one time. This transition period will give Zipcar time to adjust its fee schedule to compensate.
- It is reasonable to assume that the revenue per person is greater in established regions than in new, growth regions.
SHB - That is a very good point and one deserving of more thought and research. ARPU is currently just over $400 per year, but I'm not sure where the inflection point will be. On on hand, I would expect the inflection point to be sooner rather than later because the average user's needs will change dramatically - so the ARPU will also not change dramatically. On the other hand, it is reasonable to assume that the ARPU is much less in new regions than in established regions, but I do not know by how much.
Regardless, this definitely does create a cap on the revenue per vehicle, but it is worth noting that while ARPU this past quarter dropped by one dollar from the previous year ($107 from $108), the revenue per car per day actually increased $5 (to $65 from $60). The reason cited for the decrease in ARPU is an increased tendency for hourly rentals rather than daily rentals. The reason cited for the increased revenue per car is greater efficiency and more usage primarily due to this shift towards hourly rentals.
Thanks, I'm glad you found the article to be informative. You're questions are really good; Zipcar buys, sells, and leases vehicles differently than other companies in the rental industry so I'll try to answer your questions as best I can:
1) ZIP has a mixture of owned and leased vehicles, but the basic process is the same for each. The purchase or lease fees are recorded in fleet operations. Over the course of the lifetime of the owned vehicle, usually three years, depreciation is recorded as the difference between the purchase price and the expected resale price. Similarly, the lease agreements include an expected resale price. So when the vehicles are sold, anything in excess of the expectation is recorded in operating income, anything short of the expectation is recorded in fleet operations - and, for the leased vehicles, paid to the lessor. Unlike Hertz, Zipcar has no agreements with manufactures, so they vehicles are all sold through auctions and direct sales to dealers.
2) I don't know how it has changed over time, but I can say that since they do not have a fixed repurchase plan they are much more susceptible to changes in the economy. When the resale price is higher than expected, ZIP will reap the benefits whereas other companies such as Hertz will not. However, if the resale price is less, ZIP will have to pay the difference, whereas Hertz will not. I would presume that this allows ZIP to purchase and lease vehicles for less, but I do not know how much less or if it is enough to properly compensate for the increased risk.
I hope these answers have clarified the issues for you; if not, I'm happy to discuss it more.
Also announced a 9% increase in its dividend - 18 cents up from 16.5 cents
From the first page of the Executive Summary:
"The Congressional Budget Office recently
increased its estimated cost of TARP to $34 billion."
That works out to a bit over $12K per taxpayer over the course of at least 10 years. And when you consider that individuals only pay about half of the taxes collected....
Gambling is placing money when you hope on your side.
Investing is placing money when you have evidence on your side.
And the difference in taxes between short and long term holdings is worthwhile if you can make 20% more profit through short term trades than long term trades.
I agree that the tax reasons are valid, but if you sell a CC on a stock you do not plan to hold long term, this does not apply.
Perhaps liquidity was not the correct word to use, because yes, you can sell the options and the stock if you so choose. But in doing so, the only profit you will make above the strike price is the (small) change in the time value of the option. So if you need the money, yes you can get it, but you lose significant profit. When it is assigned, you get the full value of the strike price plus CC price.
So if an option is assigned early you can have your cake - the profits from the entire exchange - and well and eat it too - reinvest, even sell another CC for the same stock and month if you are so inclined!
Depending on how long before the assignment date it occurred, you may have time to buy the stock again and write another CC. Why write just one when you can instead write two?
Also, it increases your liquidity - giving you the freedom to buy something something else if you see fit, rather than being locked into a limited profit situation until the assignment date.
Early assignment is how you can have your cake and eat it too.
stanmar -
I would refer you to this press release by NYSE from December 23:
Basically, they are still in the midst investigations. Don't ask what that means. Everybody who can talk about it knows nothing; everybody who knows something can't talk about it.
My best guess is that NYSE will not lift the trading halt until after the audited 10-K for FY2011 is released which, based on prior years, ought to be in March.
Agreed - but with the two exceptions of when you want to hold the stock long enough for it to become a long term holding or if you want to collect an upcoming dividend. Though if either of these are a concern, perhaps you should have waited to sell the covered call.