Our panelists give you the scoop on all the inside business information before you hear it anywhere else in The Informer segment:
David Asman: Victoria Murphy, we’ve been talking about cell phones (search). What do you know?
Victoria Murphy, senior reporter: Well, I like Sprint PCS (PCS). The stock is really cheap relative to other carriers. But the reason that I think it’s interesting is this: for years carriers have been dreaming of the day when they can charge us for stuff like horoscopes, stock quotes and sports scores, and Sprint PCS is actually doing this. In June, ten million Sprint customers downloaded ring tones and screensavers, which is pretty amazing.
David Asman: Yeah, but Leigh, I go “hmmmmm” because a lot of people have some bad experiences with Sprint.
Leigh Gallagher, senior writer: Well, my issue with this is that wireless prices have been falling since the mid-90’s and I just don’t know if we’re going to be able to get customers to pay for these extra services.
David Asman: Victoria, has Sprint gotten over some of the bumps in the road?
Victoria Murphy: Yeah they are getting customers to pay. It’s, like, $15 a month, and people are signing up. I think the U.S. market has been slow to, kind of, pick up on paying extra for the perks, but people are starting to do this. Ring tones are supposed to be a billion-dollar market in the U.S. within 18 months.
David Asman: All right, Leigh, let’s keep it on tech and talk about stores that sell it.
Leigh Gallagher: Sure. One of the bright spots in tech, right now, is video games. I don’t play them, maybe you don’t play them, but a lot of people do. In fact, last year consumers spent more on video games and stuff you need to play them than they did at the Hollywood box office.
David Asman: So what company and stock deals with it?
Leigh Gallagher: So, Electronics Boutique (ELBO) is a retailer of 1200 stores that sells video games and everything you need to play them. One key that is really, sort of, going to be a great growth avenue for this company is its used business. It sells about 10 percent in used video games, and that’ll allow it to get a, sort of, wider audience in the form of casual gamers.
David Asman: Victoria, is there exciting, new stuff coming out of that industry?
Leigh Gallagher: Well there is, but I think Leigh and I are going to be in disagreement, again, here. I just wonder when they’re going to realize that they can do this faster and cheaper online. I mean they’re going at a torrid pace right now, something like 300 stores this year, which is impressive. But I wonder how many of those they’re going to close down when people are buying this stuff online.
David Asman: All right, then. Mike, what do you have for us?
Mike Ozanian, senior editor: We have a newsletter called the Forbes Earnings Quality Report. We’re looking at Colgate-Palmolive (CL) this issue, and what we found out is that this company is set for spectacular earnings growth. The reason is that it continually leverages more and more brands over set operating and marketing costs, so its profits are booming. For example, it generates 23 cents of cash for each dollar of assets it employs, versus 19 cents for P&G, so I like this stock a lot.
Leigh Gallgher: I think it’s a great company, consistent results, great management, I would just be concerned because it’s brushing up, a little bit, against its 52-week high right now, so I might wait a little bit on this one.
Victoria Murphy: Well, you never underestimate America’s need to make our teeth whiter. I mean they are selling the teeth whitening stuff, like overnight teeth whitening products, like crazy. There’s a market for that stuff. We all think we have yellow teeth, apparently.
Makers & Breakers
David Asman: They scored two big contracts with a couple of airlines who ordered some 737s. The deals could bring in as much as 8 billion bucks. Liz, that’s a lot of cash, is it going to help the stock?
Liz Miller, portfolio manager with Trevor, Stewart, Burton, Jacobsen: BREAKER
No. I’m mostly concerned with the industry that they’re in, more than I am with Boeing. You know, the commercial aviation industry is in the toughest markets it has seen in its history. I don’t see that turning around in 12-18 months.
Elizabeth MacDonald, senior editor: BREAKER
I don’t like Boeing either. It has a lot of inefficiencies; I don’t think this deal is going to resurrect the stock. Its cash flow and operating earnings fell into the basement in the first quarter. I have problems too.
Jim Michaels, editorial vice president: BREAKER
I don’t hate the stock the way you do, Elizabeth. But what bothers me is that they’re going to be on the federal dole in order to keep themselves going over the next five years with this Pentagon deal. That makes me a little nervous, especially with Senator McCain fighting it, so I’m afraid I’m a breaker.
David Asman: Launched their new, faster chips this week. They're hoping the new products will put them back on top. The Itanium 2 chip, is it good for the Intel?
Liz Miller: MAKER
It is good for Intel. You know, Intel really is the bellwether to IT spending. We haven’t seen it yet, but I see it coming back in the next year. And Intel will be the first to benefit.
Jim Michaels: MAKER
I hate to be so agreeable with everybody, it goes against my nature, but if I like technology, I’ve got to like Intel. That operating leverage is what is working for it, their profits can go through the roof.
Elizabeth MacDonald: MAKER
I like Intel too. Intel is a cash flow powerhouse in the marketplace. These two chips are going to make applications much faster. They’re going to go up against IBM (IBM) and Sun Microsystems (SUNW) big time.