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Slim Shady

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  • A Case For Adding Back Stock-Based Compensation [View article]
    IMAC - How would you account for a share offering without brokerage fees under GAAP, where the offering price is $0.001 per share when the stock price on the date of the offering was $150.85 per share (before adjusting for the 4 for 1 split)? I'll spare you the time and give you the would be an expense of $150.849 for every share issued.
    Jun 6 04:52 PM | Likes Like |Link to Comment
  • A Case For Adding Back Stock-Based Compensation [View article]
    WST - I appreciate your sarcasm, but the flaw in your sarcastic logic is that EPS stands for Earnings Per Share, so in effect, it doesn't increase EPS, but it does decrease LPS, Loss Per Share. Now we'll have to debate what the proper Price/Loss ratio is for a company that loses more money on every incremental dollar of product sold.
    Jun 6 04:41 PM | Likes Like |Link to Comment
  • The Charade Continues With Recent Acquisition [View article]
    With regard to Stock Compensation, an earlier commenter correctly pointed out that CRM has been shifting toward using Restricted Stock Units (RSU's), which are much easier to value than stock options, since the intrinsic value is known at the grant date and doesn't rely on a theoretical Black Scholes valuation which may have no reality to the true cost.

    The amount of expense for total Stock Compensation in the GAAP income statement was $379 million in 2013, which may actually understate the true costs of their stock compensation programs. The intrinsic value of RSU's granted in 2013, which vest over four years, net of those cancelled was $521 million in 2013 (the gross amount issued was $614 million). In addition, they granted 8.36 million options (adjusted for the 4 for 1 split) at an average exercise price of $30.75/sh, which have a future undetermined value. However, what is known is the intrinsic value of the options exercised in 2013, which was $507 million. In other words, to not dilute existing shareholders, Salesforce would have had to repurchase about $1.028 Billion of stock, equal to the intrinsic value of options exercised and the net RSU's granted.

    While the company is free to attempt to define its non-GAAP profitability however it likes, anybody who believes their definition is simply avoiding reality, naive or both.
    Jun 5 08:33 PM | 7 Likes Like |Link to Comment
  • Intel: No Has Been With Haswell [View article]
    If you have a margin account to effect these trades, the margin required should be the same on both trades, since brokerages understand put-call parity. How someone manages their portfolio is beside the point. If someone needs to buy stock and buy puts instead of buying calls so that they don't do something stupid, they probably shouldn't be investing for themselves.
    May 13 05:36 PM | Likes Like |Link to Comment
  • "I think Netflix (NFLX +4.1%) could be this decade's Amazon," says Whitney Tilson in a Yahoo talk (video). Though Tilson admits to "trimming" his position during Netflix's run-up, he still considers it undervalued relative to other media providers - "They're trading at $400 per subscriber in a world of $1,000 per sub" - and argues its scale gives it a big edge - "Who else is going to spend $3 billion a year for streaming content?" Of course, many of the firms valued at $1,000/sub are getting a lot more than $8/month. Netflix investors seem to be betting the company's library and customer loyalty will allow it to raise prices over time. (U.K. deals[View news story]
    Paying $1,000 per sub for a sub that generates $96 per year of revenue would be equivalent to a valuation of 10.4x revenues. If they could earn a net profit margin of 10% on those revenues on a normalized basis (it was less than 2% last quarter), that is a valuation of over 100x "normalized" earnings. Either Whitney Tilson doesn't understand basic math, or he's just pumping the stock (likely both).
    May 13 04:12 PM | 1 Like Like |Link to Comment
  • Intel: No Has Been With Haswell [View article]
    Your "married put" strategy is the same thing as simply buying calls.

    Stock = Long Call + Short Put

    Stock + Long Put = Long Call

    Given Put/Call parity, buying the calls will have the same economic result.
    May 12 02:13 PM | 3 Likes Like |Link to Comment
  • When The Music Stops, What Does The End Of Fed Policy Look Like? [View article]
    Thanks David for the historical comparison - only time will tell what the outcome is of this great experiment. The Fed has couched this indefinite Quantitative Easing under the guise of increasing employment, yet the real purpose is to have a buyer to finance the massive deficit spending on the fiscal side. QE Infinity will last until the Federal deficit can be financed on its own. Bernanke is taking the place of the Social Security "Trust Fund", which had previously run surpluses and was able to absorb significant amounts of debt supply. Apparently, the Fed believes that when the unemployment rate gets to 6.5%, the deficit will be small enough to be able to be financed. In the 12 months ended March 2013, the deficit was $911 billion, about $76 billion per month. Conveniently, the Fed is purchasing $85 billion a month in debt.
    May 9 11:25 AM | Likes Like |Link to Comment
  • Why We Bought Microsoft: Because 2013 Should Determine Whether Ballmer Stays Or Goes [View article]
    From your website:
    "Helix Investment Research was founded in July 2011 by Ivan Deryugin, who is currently attending Vanderbilt University, majoring in economics & political science, with a minor in corporate startegy."

    So how old were you when Ballmer took over Microsoft 13 years ago? After you have 13 years of experience at anything in this lifetime you may have a better perspective to be able to distinguish between those things that you can control (operating results) from those things you cannot (stock price).
    May 9 08:03 AM | 3 Likes Like |Link to Comment
  • Why We Bought Microsoft: Because 2013 Should Determine Whether Ballmer Stays Or Goes [View article]
    I'm not going to defend everything Ballmer has done in his tenure or his management style, but there are few companies out there that have had the level of performance of Microsoft since the beginning of 2000. Under Ballmer for the last 11 complete fiscal years, revenues have grown 11% per year, profits 12%, EPS has increased 13%, the share count from FY 2001 to FY 2012 has decreased by 25%, paid over $70 bln of dividends, while net cash is up $14 Bln. This record was achieved including the failings of the Online business and other missteps. You highlight his failures, but fail to mention the XBox business was a zero when he took over (introduced Nov 2001) and in FY '11 was a $9 bln revenue business with over $1.3 bln of operating income. In the end, in spite of these objective performance measurements, you blame him for the one thing that is not in his control...the stock price. Should he have not accepted the role of CEO because the enterprise value when he took over was $560 billion when revenues were only $23 bln and the company was valued at 46x FY 2000 EBITDA?

    Perhaps you would like to post your performance record since the beginning of 2000 for scrutiny?
    May 8 07:36 PM | 10 Likes Like |Link to Comment
  • Shame On You, Apple [View article]
    "Don't hate the playa, hate the game." Ice-T.
    May 1 01:41 PM | 6 Likes Like |Link to Comment
  • Why Netflix Is Not Overvalued [View article]
    Your math is wrong. If they increase price by 25% ($2 per month on an $8 per month subscription) but lose 20% of their customers doing it, the net effect on revenue is zero.

    25% * ( x *(1-20%)) - 100% * (x * 20%) = (x * 20%) - (x *20%) = 0
    Apr 24 07:58 AM | 4 Likes Like |Link to Comment
  • Rentech Announces Share Repurchase - More To Come? [View article]
    "RNF has a float of 15.54 million shares, so the total 2013 distribution should be 15.54 x $260 = $40.4 million. RTK's share should be 0.61 x $40.4 = $24.65"

    The float number excludes the shares of RNF that RTK owns. If you look in the RTK 10-K, they own 59.9% of the limited partners units of RNF. From the RNF 10-K, they have 38.839mm units outstanding. So RTK owns 59.9% x 38.839mm units = 23.26 mm units. At $2.60 of distribution, this is $60.5 mm per year, not $24.65. There could be significantly more buybacks going forward if they decide to not use the cash for acquisitions.

    The value of RNF shares owned by RTK is currently around $900 mm, whereas RTK has an equity cap of around $500mm and has net cash on its balance sheet. RTK can use the cash generated by RNF to essentially purchase shares in RNF by buying back their own stock at practically $0.50 on the dollar.
    Apr 22 10:48 AM | 2 Likes Like |Link to Comment
  • Can Microsoft Fix Its Strategic Mistake With The Surface Pro? [View article]
    Surface Pro with Keyboard with 128GB = $999 +$129 = $1,128

    MacBook Air 11.6" with 128GB at Best Buy = $ 1,035
    New iPad with 64GB at Best Buy = $ 699
    Total for comparable Apple Products = $ 1,734

    Try running MS Office on your iPad or connecting to your work environment. Surface Pro is priced $606 less and you end up with one product instead of two.
    Feb 11 01:44 PM | 4 Likes Like |Link to Comment
  • Dell LBO Deal Structure - Like Buying A Rental House With Cashback And No Money Down [View article]
    Lucas - Section 5.1 (b) (iv) of the merger agreement indicates they will continue to pay quarterly cash dividends of $0.08 per Share
    Feb 7 11:34 AM | 1 Like Like |Link to Comment
  • Dell Is Worth At Least $15.95 [View article]
    Nice analysis. A few comments. They should generate approximately $1.3 billion of cash flow in the 4th quarter ending 1/31/13, which is $0.75 per share of additional value, which would take your price up to $16.70. They have stated that substantially all of the cash is overseas, which if all repatriated and at the highest tax rate of 35% (which is unlikely as I believe they would get a tax break for taxes paid overseas), that would be $5.4 billion on the estimated year end cash balance or $3.11 per share, getting back down to $13.59. Your 5 multiple implies a 20% cash return for the buyers assuming that the cash flows remain constant going forward in the future, which is the big assumption that you have to make in the case of DELL. The fact that Michael Dell is willing to do this type of transaction at this time likely signals that the acquisition spree of the last 5 years is over with or without a deal (and that the head of M&A is now at Blackstone), otherwise they wouldn't want to give up having a currency or financial flexibility to pursue larger acquisitions in the future.
    Jan 23 08:34 AM | Likes Like |Link to Comment