Demand for Macs, iPhones Fuels Apple

Wall Street Journal - Two days before it's set to unveil a major new product, Apple Inc. reported a surge in quarterly profit and revenue that showed demand for its technology hasn't cooled off.

The Cupertino, Calif., company continued to power through the weak economy. Apple, after adjusting for a key accounting change, posted a 50% rise in profit and a 32% increase in revenue for its fiscal first quarter ended Dec. 26.

The growth was fueled by strong sales across most of Apple's product lines as iPhone shipments more than doubled and Macintosh computer sales climbed 33%.

"What this demonstrates is the strength of Apple's brand in good and bad times," said Bill Kreher, an analyst with Edward Jones.

Overall, Apple reported a quarterly profit of $3.38 billion, or $3.67 a share, up from $2.26 billion, or $2.50 a share, a year earlier. Revenue increased to $15.68 billion from $11.88 billion.

Falling Beer Sales Have Brewery Mergers Over a Barrel

The Wall Street Journal - U.S. beer sales volumes fell 2.2% last year, the highest rate since the 1950s, with demand worsening late in the year in a sign of the pressures on big brewers to make their mergers pay off.

The decline, the industry's first since 2003, raises demands for industry leaders Anheuser-Busch InBev NV and MillerCoors LLC to come up with better advertising and to rethink recent price increases, said retailers and analysts.

But they must tread carefully, balancing price moves against a need to drive profits in the wake of the mergers that created the two.

The two giants increased prices by about 5% last year, fresh off InBev NV's acquisition of Anheuser-Busch Cos. and the move by SABMiller PLC and Molson Coors Brewing Co. to combine U.S. operations. Those increases, along with a weak job market and lackluster advertising, contributed to the sales drop, industry analysts said.

Starbucks Growth Revives, Perked by Via

Starbucks Corp. posted its first quarter of same-store sales growth since the end of 2008, citing the unexpected success of its Via instant coffee in the U.S. and strong holiday coffee sales in international markets.

U.S. same-store sales rose 4%, mainly due to a 4% increase in customers' average ticket that the company attributed mostly to Via.

"We expected a contribution from Via, but it was even more than we expected," said Starbucks Chief Financial Officer Troy Alstead in an interview. "We knew it fit perfectly for people on the go, but there was much bigger single-serve, at-home usage than we anticipated or hoped we could get in these early days."

Shares Edge Higher as Investors Await Earnings

Stock prices held to narrow ranges on Monday as traders at the New York Stock Exchange awaited news on corporate earnings

The New York Times - As companies began releasing fourth-quarter results on Monday, the question on Wall Street was not so much whether businesses turned a profit but how they did so.

Investors are looking for signs that employers moved beyond heavy cost-cutting and established a steady stream of revenue in the last part of 2009. On Monday, traders seemed cautious about that prospect: stocks searched for direction for much of the day, but a late rally pushed most indexes into positive territory. Oil briefly touched a 15-month high and the dollar weakened.

Expectations for fourth-quarter results are high. Over the last year, many employers have slashed work forces and reined in spending to spruce up earnings. Now, investors are looking for substantial revenue growth and indications that global demand is picking up.

Inside G.E., a Little Bit of Enron

The New York Times - A decade ago, General Electric was the shining star of American business. Its longtime chief executive, Jack Welch, was named manager of the century by Fortune Magazine, and its stock seemed always to go up.

It ran a bewildering array of businesses but somehow always managed to make the expected profits. That record was viewed as proof of superior management, and the battle to succeed Mr. Welch in 2001 was watched all over the business universe. When a winner emerged, the losers quickly were hired to run other major companies.

G.E. is different now. The stock has fallen and the aura has dissipated.

This week General Electric agreed to pay $50 million to settle a suit filed by the Securities and Exchange Commission that said the company fiddled with its books repeatedly early in this decade. In at least one case, that allowed it to preserve its reputation for making the numbers. Some of the details are eerily reminiscent of Enron.http://www.nytimes.com/2009/08/07/business/07norris1.html

Costco Leads Expected String of Retail Warnings

The Wall Street Journal - Costco Wholesale Corp. warned that its fiscal second-quarter profit will fall "substantially below" Wall Street estimates -- foreshadowing what's expected to be a glum parade of downbeat news in the January retail-sales reports that come out Thursday.

Costco, the nation's largest warehouse club chain by sales, had outperformed the retail pack for much of 2008. But Wednesday it said U.S. same-store sales in January were flat compared with a year earlier, while sales at its foreign stores, including markets such as the U.K. and Japan, fell 9%, partly because of unfavorable currency exchange rates.

Citing the "uncertainties surrounding the economy," Costco Chief Financial Officer Richard Galanti declared that the company will no longer publicly forecast financial performance for the remainder of its current fiscal year ending Aug. 30.

Most big retailers report January sales Thursday, and many analysts and consultants are predicting more companies will yank earnings forecasts altogether, as growing unemployment depresses consumer spending and clouds timetables for recovery from the recession.

At Costco, the recession cut into its sales of nonfood items and crimped profit margins in recent weeks as the company lowered prices to spur sales and boost market share, said Mr. Galanti.

Still, he struck an optimistic tone, saying that he believed the pressure on Costco's margins would soften in coming weeks as manufacturers lowered prices for retailers in response to falling commodity costs.

"Who knows where bottom is and how long it will last," Mr. Galanti said in an interview. "But relative to other retailers, we believe we are winning market share, not losing it."http://online.wsj.com/article/SB123373710879547371.html

Delta Airlines Faces Big Loss

The Wall Street Journal - Delta Air Lines Inc.'s fourth-quarter net loss widened on more than $900 million in stock-compensation costs and fuel-hedging losses.

Chief Executive Richard H. Anderson said, "Despite the difficult economic environment, we expect to be solidly profitable in 2009 driven by lower fuel costs, capacity discipline and merger synergies."

Delta, now the world's largest airline by passengers after its October merger with Northwest Airlines, posted a net loss of $1.44 billion, or $2.11 a share, compared with a year-earlier net loss of $70 million, or 18 cents a share. Excluding items such as $900 million in employee equity awards and fuel hedging, the latest quarter's loss would have been 50 cents.

Revenue jumped 43% to $6.71 billion. Assuming the merger was completed before the year-earlier quarter, revenue dipped 0.3% to $7.77 billion. Analysts surveyed by Thomson Reuters expected a loss of 34 cents on revenue of $7.99 billion.

Mr. Anderson said earlier this month that the global economic slowdown won't alter Delta's expectations from its purchase of Northwest. Anderson said the airline continues to aim to generate $2 billion of annual cost cuts by 2012 through steps such as optimizing combined fleets.

Mainline revenue passenger miles, or one paying passenger flown one mile, dropped 3.1% in the latest quarter, as capacity declined 4.2%.Delta, along with other carriers, has been cutting U.S. capacity -- eliminating some of its less-traveled routes -- as part of a plan to cut costs. The company said it would cut capacity by 6% to 8% in 2009 as the global recession continues to weaken demand for air travel.

Looking ahead, Delta expects first-quarter mainline capacity to be down 6% to 8%, down 13% to 15% in the U.S. and flat to up 2% internationally. The company projects fuel costs averaging $2.34 a gallon for the quarter and $2.15 for the year.http://online.wsj.com/article/SB123298393968415759.html?mod=article-outset-box

The Problem With Wall Street Analysts Research

New York Times - Frank P. Quattrone thinks Wall Street research has “proven to be a disaster, in my humble opinion.

You remember Mr. Quattrone, don’t you? He’s the mustachioed Silicon Valley banker who brought some of the biggest technology initial public offerings to market — Cisco Systems, Amazon, Netscape, just to name a few. His career was famously derailed by a four-year-long public battle against obstruction of justice charges at the height of the previous market bubble. The charges were ultimately dropped, and he’s now back in business.

“I do think the industry should petition to remove the Spitzer initiatives because ultimately they hurt the competitiveness of our country by denying small companies the access to research analysts,” he said, throwing a proverbial grenade into the auditorium.

Mr. Quattrone was referring, of course, to the former New York attorney general Eliot Spitzer’s landmark settlement in 2002, which forced the separation of investment banking from research. The settlement followed an investigation into whether some Wall Street analysts were providing misleading ratings of the companies they covered to bolster their firms’ investment banking business. Henry Blodget of Merrill Lynch and Jack Grubman of Citigroup were barred from the securities industry and others took their licks. (As an aside, Mr. Spitzer was not behind Mr. Quattrone’s prosecution.)

As a result, banks are no longer allowed to pay their analysts from any revenue derived from investment banking, only from trading operations. Beyond that, an investment banker can’t even call a research analyst at the same firm without a lawyer chaperoning the conversation.”http://www.nytimes.com/2008/08/12/business/12sorkin.html?ex=1376280000&en=d816fb300d1d487b&ei=5124&partner=permalink&exprod=permalink