Thursday January 31, 5:38 am ET
By Jessica Mintz, AP Technology Writer
Amazon Says It Expects Sales to Rise, and 4Q Profit Soars, but Shares Sink on Outlook
SEATTLE (AP) -- This year isn't looking quite as sweet for Amazon.com shareholders as 2007. Despite a possible recession in the U.S. economy, the Web retailer said it expects sales to rise briskly again in 2008. But the gains won't translate as readily to bottom-line growth.
"A lot of old Amazon bears are going to be growling," said Tim Boyd, an analyst at American Technology Research.
And growl they are. Shares of Amazon.com Inc. plunged $8.92, or 12 percent, to $65.29 in extended trading Wednesday.
Amazon had revealed after the closing bell that its holiday-quarter profit more than doubled on revenue that jumped 42 percent. But while it forecast stellar sales growth in the coming year and executives shrugged off concerns about the economy, its operating income guidance fell short of what Wall Street was expecting.
Boyd said international spending could carry Amazon through a slowdown in U.S. consumer spending. However, based on the company's lackluster profit guidance, the analyst said Amazon appears poised to spend more and pocket less as it expands and fights off competition.
Some of the retailer's cash may be spent fending off eBay Inc., a competitor for Amazon's third-party seller business, Boyd said.
He also said Amazon's digital music business may be losing money in this early phase. Amazon would not say how its MP3 store performed financially.
In 2005 and 2006, investors and analysts were similarly unhappy with near-term results as Amazon spent heavily on technology and content. When spending slowed and margins rose last year, the dot-com returned to favor and shares climbed. Now, said Boyd, it seems Amazon has returned to investment mode.
Amazon matched Wall Street's expectations Wednesday when it reported its fourth-quarter profit more than doubled to $207 million, or 48 cents per share, from $98 million, or 23 cents per share, in the same period last year.
Strong domestic and international sales in all categories drove revenue up 42 percent to $5.67 billion, topping analysts' average prediction of $5.37 billion in revenue, according to a Thomson Financial poll.
Changes in foreign exchange rates lifted sales by $195 million.
"This company has just done an unbelievable job," Boyd said. "They're obviously just eating eBay's lunch. They're eating every one of their competitors' lunches."
Amazon's gross margin was lower than in the year-ago quarter. In a conference call, Chief Financial Officer Tom Szkutak said the company's entrance into new product categories eats into profits. That's because Amazon sells at competitive prices even before it has amassed the sales volume and business relationships necessary to command lower wholesale prices.
The retailer's margins also take a hit as the number of people who pay up front for a year of free express shipping rises, as it did in 2007, and as the mix of products sold on the site shifts.
For all of 2007, Amazon said it earned $476 million, or $1.12 per share, a 150 percent increase over the previous year. Annual sales grew 39 percent to $14.84 billion.
The midpoint of Amazon's operating profit outlook for the quarter and the year fell short of what Wall Street is currently looking for, even as sales forecasts topped analysts' view.
For the current quarter, Amazon forecast between $3.95 billion and $4.15 billion in sales. For the full year, it predicted revenue of $18.75 billion to $19.75 billion.
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Thursday, January 31, 2008
Amazon Expects Sales to Rise in 2008
Investors Want More Interest Rate Cuts
Thursday January 31, 5:54 am ET
By Martin Crutsinger, AP Economics Writer
Investors Demand More From Federal Reserve Despite 2 Big Rate Cuts in 8 Days
WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke, criticized last year for being too tentative in cutting interest rates, has shown he can act boldly. But the Fed's two aggressive rate cuts in the past eight days have left investors demanding still more.
That may be a sign of how much trouble the economy is facing, with many analysts contending that the country is flirting with a recession and may, in fact, already be in one.
The Fed announced Wednesday that it was cutting its federal funds rate, the interest that banks charge each other, by a half-point, double the quarter-point cut that many economists had been expecting. That move followed on the heels of a reduction last week in the funds rate of three-quarters of a point, which had been the biggest single rate cut in more than two decades.
Initially, the Dow Jones industrial average was up by more than 200 points after the Fed announcement, but then investors pulled back and the Dow finished the day down 37.47 points, indicating lingering worries about the economy.
All the changes mean that the funds rate, which stood at 5.25 percent in early September before the Fed started cutting rates, now is at 3 percent. The Fed is hoping the lower rates will stimulate the economy through increased borrowing by consumers and businesses.
While Bernanke and his Fed colleagues were criticized last year for giving the appearance that they were cutting rates only grudgingly, the January rate cuts have signaled that the Fed is in full-blown crisis mode.
The 1.25 percentage point reduction in the funds rate in just over a week is unprecedented in recent memory. The Fed hasn't been that aggressive about cutting the funds rate since the early 1980s, when then-Chairman Paul Volcker was reversing a tightening cycle that had driven interest rates to the highest levels since the Civil War in a successful effort to break the back of a decade-long bout of inflation.
In its statement Wednesday, Fed officials said its string of rate cuts "should help to promote moderate growth over time and to mitigate the risks to economic activity."
Analysts saw that language as an effort to tell markets that just because the Fed slashed rates in January, such bold actions should not be expected in the future. But those words could very well fall on deaf ears.
"The markets felt the Fed had fallen behind the curve. That caused a loss of credibility," said David Jones, chief economist at DMJ Advisors. "Once the Fed loses credibility, it can be hard to regain it."
Investors are already betting that there are more rate cuts to come. A futures contract tied to the federal funds rate is projecting that rate could get down as low as 2 percent this summer.
The Fed's next meeting is March 18 and that will be followed by meetings in April and June. Many analysts said the Fed could trim the funds rate by a series of quarter-point moves during that time period, especially if the economic data remains weak.
The government reported Wednesday that the overall economy, as measured by the gross domestic product, grew at a barely discernible 0.6 percent rate in the October-December period. The fear of some economists is that the GDP rate could slip into negative territory in the current quarter. By one definition, a recession occurs when the GDP is negative for two consecutive quarters.
While the Fed is not publicly forecasting a recession, Bernanke and other officials have said they expect to see a period of slow growth, reflecting the impact of the severe housing slump and the credit squeeze which hit last August.
"Financial markets remain under considerable stress, and credit has tightened further for some businesses and households," the Fed said in explaining Wednesday's rate cut.
"The Federal Reserve is obviously very nervous about what is going on in the financial system and the housing market," said Mark Zandi, chief economist at Moody's Economy.com.
While Fed officials were widely viewed as being slow to react last fall, analysts said they are now making up lost ground.
"The Fed misjudged the problems in the economy and the financial system through the Fed's December meeting. They just underestimated what was going on," Zandi said. "But I think they caught up in January and now they are fully engaged."
Zandi predicted a series of quarter-point rate cuts at upcoming meetings, but he said if the financial system begins to unravel, the Fed will return to more aggressive half-point rate reductions.
Wednesday, January 23, 2008
US shares make stunning recovery
US shares rebounded on Wednesday on fresh hopes that regulators will steer the US economy out of a recession.
All three stock market indexes erased deep losses to end strongly ahead. The Dow Jones rose 2.5% at 12,270.17, while the Nasdaq turned around a 4% decline.
The rally followed news of a plan to bail out bond insurers, which lie at the heart of the financial system. They guarantee about $2 trillion of assets.
Earlier, European stocks fell. The UK's FTSE 100 was down by 3.9% at one point.
Panic has swept through stock markets worldwide on fears that key global economies will enter recession.
Relief rally
On Tuesday, the US Federal Reserve made its biggest rate cut for 25 years to stoke up growth and bolster markets.
However, worries persisted that the move may have come too late, as many firms have already reported lower profits and a worsening business environment.
Another major concern in the US has been the fear that bond insurers embroiled in the sub-prime crisis will not be able to cover their liabilities.
This could force banks to write down further losses on investments backed by crisis-hit sub-prime mortgages.
This meant news of the government plan to inject capital into bond insurers gave fragile confidence in the financial sector a boost, and sent shares in banks, including Citigroup and JP Morgan surging, while technology firms also gained.
The technology-heavy Nasdaq rose 1%, while the wider S&P 500 index also ended ahead, up 2.1%.
But volatility is expected to persist in the coming weeks.
Market movers
Earlier, the UK's FTSE 100 index finished a nerve-wracking session 131 points, or 2.2%, lower at 5,609.3, erasing gains it had made on Tuesday.
Germany's Dax lost 4.9% at 6,439.21, while France's Cac 40 was down 4.3% at 4,636.76.
Shares suffered after the European Central Bank hinted it would not follow the Fed by slashing rates, and analysts said the Bank of England was unlikely to accelerate rate cuts.
"The uncertainty about corporate earnings growth in 2008 has risen, not only in the financial sector," said Matthias Schellenberg, managing director at ING Investment Management.
"The markets are expecting a flood of profit warnings in the next few months."
So far this year, the FTSE 100 has lost more than 13% of its value, wiping about £225bn off the total value of the companies listed on the index.
Germany Dax's index has been one of the worst hit in Europe, down almost 20% this year.
Werner Bader, a stock strategist at LBBW bank, put the falls down to the fact that German firms make most of their earnings overseas, particularly in the US.
"Dax companies are more exposed to the global economy because of their strong exports," he said.
Inflation risks
Despite slowing economic growth on both sides of the Atlantic, the Bank of England and the European Central Bank have insisted on the need to fight inflation, making extensive rate cuts unlikely.
Bank of England governor Mervyn King said that the UK faced its toughest economic challenges since 1997, when the Bank gained independence from the government.
European Central Bank (ECB) President Jean-Claude Trichet told the European Parliament in a speech on Wednesday that price growth was still the ECB's main concern.
"In all circumstances, but even more particularly in demanding times of significant market correction and turbulences, it is the responsibility of the central bank to solidly anchor inflation expectations to avoid additional volatility in already highly volatile markets," he explained.
Earlier on Wednesday, Japan's Nikkei 225 had closed up 2%, and Hong Kong's Hang Seng added 10.7%.
BBC NEWS
EBay wavers after 4Q report
NEW YORK
Shares of online auctioneer eBay Inc. rose Wednesday ahead of its fourth-quarter report, as a Stifel Nicolaus & Co. analyst called the stock his "best short-term idea" -- but retreated in after-hours trading after the report's release.
EBay shares rose $1.81, 6.7 percent, to close at $28.94 in advance of the earnings report and before Chief Executive Meg Whitman announced she would soon step down. In extended trading, the stock initially rose but then retreated to $27.50.
The stock hit a 52-week low of $26.02 on Tuesday, as fears of a recession hurt stocks around the globe, despite a decision by the U.S. Federal Reserve to cut the federal funds rate by three-quarters of a percentage point to 3.5 percent.
In a client note Wednesday, Stifel Nicolaus analyst Scott Devitt said that though eBay is losing e-commerce market share, its competitive position is stabilizing in core areas including liquidation inventory, collectibles and difficult-to-find items, he said.
"While (Amazon.com Inc.) is our best long-term idea, eBay is our best short-term idea," Devitt said.
Devitt, who reiterated his "Buy" rating and $39 price target, also noted eBay's ability to generate free cash flow. He said eBay has bought back $2.8 billion of stock since June 2006, and could repurchase $9 billion in stock during the next two years.
By way of comparison, Devitt noted that eBay generates $6 in gross merchandise volume for every $1 in assets, while Target Corp. generates $1.50 in gross merchandise volume for every $1 in assets.
On Wednesday, eBay reported a 53 percent gain in fourth-quarter profits due to a strong holiday season. It beat Wall Street's expectations, though its future guidance was tepid.
The San Jose-based company said that in the last three months of 2007, it earned $530.9 million, or 39 cents per share. In the same period a year earlier, eBay earned $346.5 million, 25 cents per share.
Analysts surveyed by Thomson Financial had been expecting eBay to earn 41 cents per share. EBay also exceeded Wall Street's revenue projection of $2.14 billion.
Whitman said she was pleased with the results, which ended "a remarkably strong year."
from businessweek
Tuesday, January 22, 2008
Asian stock markets plunge amid fears of U.S. recession
Last Updated: Tuesday, January 22, 2008 | 8:59 AM ET
The Associated Press
Global stock markets extended their shakeout into a second day Tuesday, plunging amid fears that a possible U.S. recession will cause a worldwide economic slowdown.
The dramatic declines in Asia and Europe were expected to spread to Wall Street, where stock index futures were already down sharply hours before the trading day began.
Japan's Nikkei 225 index nosedived 5.7 per cent — its biggest percentage drop in nearly 10 years — to 12,573.05, a day after falling 3.9 per cent. Australia's benchmark index sank 7.1 per cent, its steepest slide in nearly 20 years. Hong Kong's Hang Seng index, which slumped 5.5 per cent Monday, was down 8.2 per cent in afternoon trading.
In China, the Shanghai Composite index lost 7.2 per cent to close at its lowest level since August.
Indian Finance Minister P. Chidambaram urged investors to remain calm after trading in Mumbai was halted for an hour when the stock market there fell 10 per cent within minutes of opening. The Mumbai Stock Exchange Sensitive Index ultimately finished down almost five per cent.
"There is no reason at all to allow the worries of the Western world to overwhelm us," Chidambaram said.
Investors across the region dumped shares in frenetic trading on worries that the U.S. economy, battered by a credit crisis and housing slump, will shrink in coming months, weakening demand for Asian exports.
Markets have been plunging amid pessimism about the ability of American authorities to prevent a recession. The U.S. Federal Reserve has indicated it will lower interest rates further, and U.S. President George W. Bush has proposed an economic stimulus package that includes $145 billion US in tax cuts, but investors around the world are doubtful the measures will lift the economy quickly.
"Unless we get some positive 'shock effects,' such as drastic measures from the U.S. government, there is almost no hope for a recovery in stocks," said Koji Takeuchi, senior economist at Mizuho Research Institute in Tokyo.
U.S. markets were closed Monday for a holiday commemorating civil rights leader Martin Luther King Jr. But Wall Street future prices were down sharply, portending a plunge when trading begins at 9:30 a.m. ET.
Noritsugu Hirakawa, who monitors stock trading at Okasan Securities Co. in Tokyo, said investors were spooked by the drastic falls on Chinese and Indian markets — the two emerging economies that are viewed as capable of sustaining global growth even as the U.S. economy sputters.
"The end to the slides in Asian stocks is nowhere in sight," he said. "There is even speculation that China may be exposed to the U.S. subprime mortgage crisis."
In Europe on Monday, investors also dumped stocks, sending Britain's benchmark FTSE-100 down 5.5 per cent and France's CAC-40 index sliding 6.8 per cent. Germany's blue-chip DAX 30 plunged 7.2 per cent to 6,790.19.
That sell-off continued Tuesday throughout Asia, with benchmark indices in South Korea, Taiwan, Singapore and the Philippines all falling more than four per cent. Indonesia's market sank 8.5 per cent.
Asian markets have been in a downward spiral for most of January. Since the start of the year, Japan's Nikkei index has tumbled nearly 18 per cent, while the Hang Seng is down a stunning 21 per cent.
Even the usually upbeat Japanese Economy Minister Hiroko Ota acknowledged that threats were growing.
"We must take the approach of working together with other nations on this," she said on nationally televised news.
From CBCNews
Paulson Makes Push For Stimulus Measures
By MAYA JACKSON RANDALL
January 22, 2008 8:17 a.m.
WASHINGTON -- Treasury Secretary Henry Paulson said Tuesday he is optimistic that the Bush administration can work with congressional leaders to quickly enact a temporary fiscal stimulus package this winter.
On Friday, President Bush put forward the broad outlines of a stimulus plan of around $150 billion that would include tax cuts for individuals and businesses.
"I am optimistic that we can find common ground and get this done long before winter turns to spring," Mr. Paulson said in prepared remarks Tuesday, noting that he has had very positive discussions with Republican and Democratic leaders on Capitol Hill.
He added that it's important that measures meant to boost the economy be enacted very quickly.
Immediate tax relief for income taxpayers and incentives for businesses to invest and hire are often effective in creating growth and jobs in the near-term, he said.
"By working together, we can disprove the old Washington axiom that partisan politics prevents most short-term growth packages from being enacted fast enough to do any good," said Mr. Paulson. He reiterated that legislation should be "swift, robust, broad-based and temporary in order to be effective."
A package that falls short of approximating 1% of gross domestic product won't be effective, he said. "I look forward to engaging intensely with the Congress to get money into our economy quickly," he said.
Copyright © 2008 Associated Press
Tuesday, January 15, 2008
Apple annouces ultra-thin laptop
The computer, which is 0.76 inches (1.93cm) at its thickest, was unveiled at an event in San Francisco.
The Apple head also launched online film rentals for iTunes users in the US from almost every major film studio, including Disney and Fox.
Mr Jobs admitted that Apple's first attempt to put online video in the living room had failed.
Of the laptop, Mr Jobs said: "It's an amazing feat of engineering."
It does not have a CD or DVD drive in order to save space.
"It was built to be a wireless machine," he added.
The laptop will compete with a range of portable devices, from companies such as Sony, Dell and Asus, which are building so-called sub-notebooks, designed to be lighter and more mobile.
The machine goes on sale in two weeks and costs from $1,799 in the US and comes with either a hard disc drive or solid state drive.
Apple worked with chip maker Intel to produce a smaller version of its Core2Duo processor for the laptop.
Movie rentals from the key Hollywood movie studios will be available in the US immediately.
"We're dying to get this international as well," said Mr Jobs, saying it would roll-out to other countries later in the year.
Movie lovers will be able to download films to their computers, and transfer them to the latest iPods and iPhone, in standard and high-definition.
The company also announced it was revamping the Apple TV device so that it can now download content independently of a computer.
"[Apple TV] was designed to be an accessory for iTunes and your computer.
"It is not what people wanted. What people really wanted was movies, movies, movies
"We weren't delivering that. We're back: With Apple TV Take Two."
Mr Jobs also announced a wireless back-up system called Time Capsule, offering a combined wi-fi router and hard drive.
BBC NEWS
Read more!
Sunday, January 6, 2008
Kohn Says Fed Is Trying to Signal When Views Shift `Materially'
By Scott Lanman and Steve Matthews
Jan. 5 (Bloomberg) -- Federal Reserve Vice Chairman Donald Kohn said the central bank has increased its communication on policy views to the public in the wake of the financial-market ``turmoil'' that began in August.
Fed officials have tried to signal when the central bank's reading on the economic outlook shifted ``materially'' in between regular meetings, Kohn said in a speech in New Orleans. ``We have tried to provide more information than usual to reduce uncertainty and clarify our intentions.''
Kohn spoke before a week in which Chairman Ben S. Bernanke and six other Fed policy makers are scheduled to deliver remarks. The speeches come amid increasing signs of danger to the U.S. economic expansion, including a jump in the unemployment rate to a two-year high and a contraction in manufacturing. Traders anticipate the Fed will cut interest rates again Jan. 30.
Still, investors ``should understand'' that officials ``do not coordinate schedules and messages, and that members' views are likely to be especially diverse'' when circumstances are rapidly changing, Kohn said.
Kohn held out Bernanke's last speech on Nov. 29 as a signal of a change in the Fed's views. The chairman said at the time that volatility in credit markets had ``importantly affected'' the economic outlook and declined to repeat the Federal Open Market Committee's October statement that inflation and growth risks were about equal. The Fed then cut rates on Dec. 11.
`Let People Know'
``We have attempted to let people know when our views of the macroeconomic situation had changed materially between FOMC meetings,'' said Kohn said in prepared remarks at the National Association for Business Economics panel discussion, part of the Allied Social Science Associations annual meeting.
The vice chairman didn't comment on the outlook for monetary policy or the economy in the text of his remarks.
Bank of Japan Deputy Governor Kazumasa Iwata and European Central Bank Vice President Lucas Papademos were also scheduled to speak in the same session.
Traders yesterday shifted to bets on 50 basis points of interest-rate cuts by the Fed this month from 25 basis points after U.S. hiring slowed more than forecast in December and unemployment rose to 5 percent. The Fed lowered its main rate a quarter percentage point to 4.25 percent at its last meeting on Dec. 11. A basis point is 0.01 percentage point.
Fed Speakers
Bernanke speaks Jan. 10 in Washington. Other Fed officials giving talks include Boston Fed President Eric Rosengren and Kansas City Fed President Thomas Hoenig, the last two policy makers to cast dissenting FOMC votes. Charles Plosser, head of the Philadelphia Fed, votes as an FOMC member for the first time this month; he will discuss his economic outlook Jan. 8.
The FOMC is scheduled to meet Jan. 29-30 in Washington.
Separately, Kohn said today that the FOMC's new forecasts for inflation three years out do not represent an ``explicit numerical definition of price stability,'' something the committee decided against, but rather the inflation rate that is ``acceptable and consistent with fulfilling our congressional mandates.''
Kohn, who said in 2003 that he was ``skeptical'' about a price target, chaired a subcommittee of officials that coordinated work on the Fed's communication review that began in 2006. He suggested in September that his doubts about the idea had eased.
Inflation Expectations
``I expect that our new projections will provide some of the benefits of an explicit target in better anchoring inflation expectations while not giving up any flexibility to react to developments that threaten high employment,'' Kohn said today.
He also echoed remarks by Bernanke that the Fed will continue to look for ``additional steps'' to improve communication.
Fed officials decided last year not to report members' assumptions of the ``appropriate'' path of interest rates because of concern that investors would ``infer more of a commitment to following the implied path than would be appropriate for good policy,'' the vice chairman said.
Kohn, speaking yesterday at the same conference, said diverse views on the 19-member FOMC lead to better monetary- policy decisions. ``The authority of the chairman rests on his ability to persuade the other members of the committee that the choices they are making under his leadership will accomplish their objectives,'' he said.
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net ; Steve Matthews in New Orleans at smatthews@bloomberg.net .