Seeking Alpha


View as an RSS Feed
View Milkweed's Comments BY TICKER:
Latest comments  |  Highest rated
  • Netflix: Take Insiders' Points of View With a Grain of Salt [View article]
    BTW Rob I used to own a company called Formfactor (FORM) that makes advanced probe cards that are used to test semiconductors. There cards are ultra high tech made using MEMS (micro electro mechanical processes) technology in clean rooms custom to each order. They had a technology that was supposed to be at least one generation ahead of any competition that they called microspring with something like 700 patents. They also had a truly brilliant visionary founder and CEO (for a while)/ COB Igor Khandros who was riveting to listen to on conference calls talking about their market and their position in it.

    Up until late 2007 they were shooting the lights out and living up to all of the hype with huge new growth drivers beyond their bread and butter DRAM probe cards that were already gaining acceptance set to continue the growth streak. They had what was described at the time as a hiccup getting a new product out in 2008. Igor mysteriously announced he was leaving his post as COB that year and three years later they do about half the revenues they did in 2007 and lose money with only vague explanations about what exactly happened and how they plan to get back to where they were a few years ago. Having a complicated business run by a really smart and charismatic founder doesn't mean anything. With 20/20 hindsight it looks like Igor didn't just have a telent for solving complex technological problems he also had pretty good sense of when to bail. I'm betting in a couple of years NFLX investors looking back at all the stock ole Reed has been cashing in are going to be impressed with his timing as well.
    May 12 12:30 AM | 4 Likes Like |Link to Comment
  • An Analyst's Response to My Netflix Earnings Preview [View article]
    I don't agree that it takes a watershed event to kill a momentum stock MKW, I've seen plenty get crushed by what on paper looked like a great report but reality finally set in and it wasn't good enough to support the inflated share price.

    In NFLX case it doesn't matter because you can see the watershed event coming. Content costs are about to explode and having signed up ~53M subs over the last decade with ~70M potential broadband households in the U.S. their explosive growth spurt is near an end. They lose existing subs in droves only masked by all of the new subs. When new sub growth ends total subs count rapidly goes backward and their subscription streaming model implodes. Look out below if you are one of the bag holders.

    Just because early shorts got killed by insane momo's doesn't mean their analysis and valuation was wrong and that the stock price they predicted won't ultimately be realized. As far as I know Warren Buffet didn't short tech stocks in the late 90's but he was criticized for not getting it when he avoided them. His critics seemed to be right for a while.
    Apr 22 04:38 PM | 4 Likes Like |Link to Comment
  • Are Netflix's International Ambitions Justified and Achievable? [View article]
    Just as a frame of reference balazs there are ~70M broadband households in the U.S. If NFLX signed every one of them up at $8.00/ month that equates to ~$6.72B/ year in revenues. Ballpark maybe half of those revenues could go to content acquisition or ~$3.5B/ year. Comcast alone pays ~$7.4B/ year for content right now or roughly double what NFLX might be able to pay if they signed up every broadband enabled house in the country as a sub. You're dreaming if you think NFLX has the content providers over a barrel. Just the opposite they're not going to let NFLX screw with their bread and butter cable customers.
    Mar 12 11:08 AM | 4 Likes Like |Link to Comment
  • Are Netflix's International Ambitions Justified and Achievable? [View article]

    There is nothing new about NFLX delivery, the cable companies have been delivering content over copper and fiber optics for decades. The only thing that distinguishes NFLX over the cable companies is the bone headed deal STARZ did with them a couple of years ago giving them premium content for nothing. That's going to end with the upcoming renegotiations. At $8.00/ month per household there aren't enough households in the country for NFLX to be worth more to the content providers than the cable companies and as the author of this article points out there are not enough households in the country to generate the number of subs NFLX will need to justify their current share price and market cap. NFLX is a bubble that will be popped in the not too distant future.
    Mar 12 10:56 AM | 4 Likes Like |Link to Comment
  • Are Netflix's International Ambitions Justified and Achievable? [View article]
    In five years if NFLX is still around they won't have a subscription service anymore it will be DVD's and ala carte downloads. Comcast's programming costs come in at ~38% of video revenues. I think they normally charge around $15.00/ month for a STARZ subscription. So ballpark 38% of that is what they pay to STARZ for the content and their cost is ~$6.00/ month per sub. There ain't no way no how NFLX can pay that much. Also Comcast's programming cost are about $7.4B/ year. Even though they are the largest cable operator they are still just one of many. If you add up all the new deals NFLX signed and use the $200M-$300M estimate for their STARZ renewal maybe NFLX pays ~$1B/ year for content.

    Those numbers should tell anyone with half a brain two things. The content providers are not going to screw their cable customers to help NFLX out and NFLX isn't going to get the same STARZ content that the cable guys get. In fact STARZ CEO made this clear a few months ago when he stated "if NFLX wants cheap content they'll just get less of it". In other words when NFLX negotiates the next deal with STARZ they'll get what ever STARZ cable subs don't feel threatened by or they'll get the bottom of the barrel of STARZ content.

    How long will classic movies subs have already seen a dozen times, tv reruns and the bottom of the barrel of STARZ content keep the subs they've been signing up in droves lately renewing? What happens if they start walking in droves? Then they have to cut back more on content which will increase defections in a death spiral for their subscription service.

    I know churn has been holding steady recently at ~4%+ but with the avalanche of new subs they've been signing up lately shouldn't it be going down? Maybe there is a reason Hastings doesn't want to report standard churn metrics after 2011? Could it be a large percentage of the earliest classes of streaming subs are starting to walk? Their numbers are tiny compared to the recent classes so they wouldn't affect churn much but what happens when you start extrapolating those defections out to the newer classes over the next few years?

    Right now analyst are falling all over themselves to praise the virtuous circle of sub growth enabling better content leading to more sub growth. What happens if that virtuous circle reverses and becomes a death spiral? When you dig down a little just how sustainable is NFLX model? Sure they have tons of subs and are growing like weeds and wall street loves the story but you could say the exact same thing about AOL a decade ago.
    Mar 12 09:58 AM | 4 Likes Like |Link to Comment
  • Questioning Netflix's Numbers: Best to Stay Away From This Stock [View article]
    How about this prediction squealini, NFLX is the new AOL it's model is unsustainable and will trade down to teens or single digits over the next couple of years. They will get the cable companies scraps for content going forward and it's just a matter of time before all subs they are signing lately start walking en masse which will further limit content in an unvirtuous circle. By all means take your shots and tell me all about how the shorts have been wrong, wrong, wrong so far but also bookmark this post and remember Milkweed told you this was going to happen. BTW Hastings knows it's coming as well that's why he won't issues standard metrics on sub growth after 2011.
    Feb 21 02:51 PM | 4 Likes Like |Link to Comment
  • Short or Long? Delving Into Netflix Financials [View article]
    Excellent article Stoic. The only point I'd disagree about is the relationship of content cost, and churn being manageable. I do think you hit the nail on the head when you dove into subscriber mindset but I think subs believe they will be getting more content over time. What happens when NFLX renegotiates with STARZ and comes away with less content? IMHO it's likely subs eventually walk away from NFLX as fast as they signed up.

    I think there is a good reason why Hastings won't be reporting churn after 2011. I'd be willing to bet a large percentage of the earliest classes of streaming subs are not renewing however they aren't causing significant churn as their numbers are small and the recent class numbers are massive. what happens when as the larger classes start anniversarying? Particularly if NFLX has to cut back on content to maintain their subscription price. I can't believe he's getting a free pass on no sub metrics after 2011. He's practically telling us he sees issues with churn coming down the road.

    So yes they are signing up tons of subs lately but how long will those subs stick around for old content or the bottom of STARZ barrel of content? IMHO this is another AOL story massive early growth with the street loving every minute of it but ultimately an unsustainable model. How long will subs keep paying for old content?
    Feb 15 08:38 AM | 4 Likes Like |Link to Comment
  • Net Neutrality: Forced Errors Create Bad Bedfellows [View article]
    The carriers aren't forced to upgrade anything if Netflix and Hulu services run poorly on the carriers current infrastructure that's their problem to deal with. On the other hand I don't pay Comcast $50.00 a month for their crappy content I pay it for everyone else's content. Spare me the tears for the poor MSO's. They brag about all their bandwidth to get you to sign up for their service and then whine about how they can't handle all the content I pay them $50.00 a month to access. The greedy pigs are just trying to use their gate keeper status to fee services that compete with their own services out of business.
    Dec 21 12:17 PM | 4 Likes Like |Link to Comment
  • Lennar Posts Profits - But Not All Is as It Seems [View article]

    I'm a self employed architect that knew something was wrong a few years ago when customers were thanking for even deigning to talk to them and unfortunately knows all to well the stats showing housing starts are at an all time low 1/3 of normal are real. I grew up the son of a Union Carpenter, spent my whole life in the construction industry and and seen plenty of recessions. They all end and we eventually get back to normal.

    While there was excess inventory built in the recent bubble as I've been pointing out if you look at the long run housing starts stats it wasn't that significant. I don't have any convenient stats prove it but my hunch is home price appreciation was way out of whack in this bubble compared to past bubbles and long term price appreciation trends.

    That's in the process of being corrected right now but that process is dumping a lot of inventory on the market at fire sale prices. The builders are doing the rational thing and just sitting on the sidelines waiting for this to play out so that they can get back to competing in a rational market. Contrary to popular belief there are plenty of ways for them to be profitable in a lower price environment in fact falling prices help them lower their costs. When things really got crazy in 05 and 06 sales were up but LEN and some of the other builders gross profits were actually down. Their costs went up faster than home prices. I think land was the major culprit.

    BTW I don't work with any public builders and I find tract housing offensive. My business would be better off without it. That being said I like making money and I'm pretty sure there is an opportunity here.
    Jan 9 09:11 AM | 4 Likes Like |Link to Comment
  • Fadel Gheit: Oil Prices to Remain Inflated but Don't Pass on Gas [View article]
    <<<Sell-side analysts and commodity brokers seem to be obsessed with the fact that oil and refined products inventories are at very high levels currently. What they fail to consider, and what I think hedge fund managers, pension fund managers and the average ETF buyer realize, is that if the global economy catches a bid (i.e. if world GDP growth begins to accelerate), the price of oil will quickly reach new highs.>>>

    I agree the traders will use any increase in demand due to an improving economy as an excuse to create a self fulfilling prophecy running oil back up. Eventually the burden of ridiculously priced oil will slow the economy down and cut demand, giving the traders an excuse to go short and create a new self fulfilling prophecy. Rinse and repeat. Traders have already done enough damage to our economy do we really want to let them reek further havoc? If you don't produce it or use it you shouldn't be trading it.
    Oct 10 10:25 AM | 4 Likes Like |Link to Comment
  • How Much Is TARP Costing American Taxpayers? [View article]
    BofA already announced they are not going ahead with the government guarantees as they no longer need them. If the CBO and author haven't adjusted for this yet you have to wonder about the rest of their projections.
    Jun 28 07:37 AM | 4 Likes Like |Link to Comment
  • Big Banks in Trouble: Huge Mortgage Write-Downs Seem Inevitable [View article]
    Why do I think the job losses will end? Because this is not my first recession. The one thing all recessions have in common is "it's always different this time" and "we're not going to recover from this one". Evidently this is your first recession, watch and learn.
    Jun 23 04:23 PM | 4 Likes Like |Link to Comment
  • If You Bought NQ Mobile Over $9.80, You Could Get Hosed [View article]
    Let me help T.S. it's non binding, IE: never going to happen, so actual financing won't be an issue.
    Jul 30 11:00 AM | 3 Likes Like |Link to Comment
  • NQ Mobile Security Offering Boosts Stock [View article]
    I've got no problem with anyone who is just playing the momentum and knows what they are involved with. My issues are with the Einsteins who think downgrading from a Big 4 auditor to the "Auditor to the Frauds" is anything but a tacit admission that they are a fraud. If NQ was legit PwC would have signed off on their 20-F a long time ago.
    Jul 23 08:48 PM | 3 Likes Like |Link to Comment
  • NQ Mobile Looks Like A Tasty Short After Running 15% Friday [View article]
    Why would I scream bloody murder when I knew it wasn't going to happen anyway? What would be the conflict of interest if they were hired? They assisted the lawyer? So what?

    In regard to the "clean" 20-F, there is no such thing for NQ anymore, we already know PwC had problems with their financials and the only way MBP signs off is if they ignore the problems (if they think they can get away with it). Even if MBP plays ball NQ is already damaged goods and longs will never see the pre-Muddy share prices they dream of again. At best you might get a short term dead cat bounce on the news before it trades like a scam at best, zero likely.
    Jul 20 06:50 PM | 3 Likes Like |Link to Comment