McMoRan Exploration Stockholders - Take the Money and Run

Despite the uncertainty surrounding Davy Jones and other ultra-deep wells, Freeport (FCX-$33.50) hasn’t shut out McMoRan Exploration (MMR-$15.69) investors completely. In addition to the $14.75 cash offer per share, the metals miner will issue 1.15 units of a royalty trust that will make payments – should any of McMoRan's existing ultra-deep exploration properties (in development) actually start-up producing natural gas and other hydrocarbons. Further, the trust could be callable in six-years at an implied valuation of $10 per unit (not bad for “dry” properties).

Continue Reading at YCharts: Ingrates! McMoRan Exploration Holders, Given Drilling Failures, Should Grab Takeover Offer

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Is Google In Need of Groupon coupon?

Chicago-based Groupon (GRPN-$5.01) remains a coupon-driven business, just one of many available to online shoppers. Further, a growing number of analytical and survey-based studies report disillusionment with the alleged effectiveness of coupon promotions. In particular, merchants are questioning the long-term profitability of daily coupon ventures, as a low percentage of customers spend beyond the deal value (with even fewer returning for full-price purchases). Evidence is surfacing, too, that shoppers drive up store congestion by waiting until expiry to use their coupons, which negatively affects perceptions of the participating vendors.

Groupon management says that it is addressing such concerns and is working more closely with its merchants to (a) improve profitability (such as, its new mobile payment app, called “Payments,” which will offer more competitive swipe-fees than the 2% - 4% transaction costs associated with traditional charge cards) and (b) design online promotional offerings that increase percentage of coupon redeemers into loyal customers.

Continue Reading at YCharts: Talk of Rekindled Google-GrouponRomance: Our Bucket of Cold Water

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Drilling for Dividends at Breitburn Energy Partners

Contrary to management’s optimistic guidance, an assessment of Breitburn Energy Partners' (BBEP-$18.18) recent financials strongly suggests the oil & gas MLP cannot continue to simultaneously fund day-to-day operations, cap-ex, interest payments and dividend distributions with cash flow from its operations. Fundamental weaknesses include falling net income and free cash flow, lower return on equity, and increasing debt leverage.

To some extent, the company has mitigated crude oil and natural gas price fluctuations with an active hedging program: In 2013, 78% of anticipated production has already been contracted, with oil and natural gas volumes fixed at $92.80 per barrel and $5.96 per mmbtu. The downside to this “price protected” portfolio is an ugly – and unspoken – truth at Breitburn Energy: cash flow growth is dependent on hitting the production target, which in turn, is tied to spudded wells and acquisitions, funded with more and more debt and by secondary stock offerings, which increases the amount of units outstanding and subsequent cash distributions paid out, too....

Continue Reading at YCharts: What’s Up With Breitburn Energy Partners’ 10% Dividend Yield? Our Man Looks Under the Rocks.

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Intel Stockholders Lose - But Otellini Retires a Winner

During Paul Otellini’s tenure as CEO - from the second quarter of 2005 through the third quarter of 2012 – there is no denying Intel (INTC-$19.50) achieved notable financial successes: cash generated from operations of $107 billion; annual revenue growth from $38.8 billion to $54 billion; and, cash dividend payments totaled $23.5 billion.

Digging deeper into the storied legacy of Paul Otellini, however, we find a man who might have been too myopic in transforming manufacturing – both in operations and cost – in his quest for profitable growth. According to Bernstein Research analyst Stacy Rasgon, "Intel’s phenomenal revenue growth over the last couple of years has been out-of-sync with many data points in PCs. Indeed, we find that most of Intel’s growth in PC revenues was not really due to outsized unit growth, but instead from significant upside to pricing.”

Continue Reading at YCharts: Otellini Nicely Milked Intel’s PC-Chip Business, But is Pay Justified With Mobile Strategy a Flop?

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Overreaction to FDA - Dynavax' HBV Decision

The Vaccines and Related Biological Products board voted its confidence in the immunogenicity of Dynavax's (DVAX-$2.44) Heplisav by a 13 – 1 vote; however, the committee said in an 8 – 5 decision, with one abstention, that it could not recommend the vaccine for approval to the FDA due to insufficient clinical safety data, especially in certain minority groups.

To ask Dynavax – or any company -- to power the study design specifically tailored to those at minority groups at higher-risk would be cost prohibitive. The biotech has spent more than $300 million (in just the last five years) to move the drug through the pipeline approval process.

If a larger cohort represented by a more diverse ethnic sampling is necessary, how come an under-represented enrollment of blacks (about nine-percent) was sufficient when the FDA positively reviewed GlaxoSmithKline’s (GSK) other adjuvant vaccines, like the Hep-A drug Havrix and the combination DTP-HBV vaccine Infanrix?

Continue Reading at YCharts: Dynavax: Little Stock With a Big Story – Plunge a Buy Opportunity?

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Priceline Paddles Upstream with Kayak Software

Though Kayak Software (KYAK-$39.68) is looking to move beyond the meta-search business, its business model is tethered to the “hunt.” In fact, the loss of any airline ticket search business would prove material to Kayak. The company derives 25% of sales from airfare searches. Moreover, management has previously stated in regulatory filings that “a significant number of travelers who use (our) websites and mobile applications for non-air travel services” come to Kayak first to conduct queries on airline ticket pricing information.

 

Continue reading at YCharts: Priceline’s Kayak Deal Has Competitive Pitfalls, But Here’s Why It Makes Sense, Anyway

 

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Carl Icahn - Netflix 'Tomb Raider' or Savior?

Unlike past proxy battles, Icahn’s $168.9 million invested in Netflix (NFLX-$79.60) is a highly leveraged bet. He controls his stake principally through in-the-money call options: Of 4.7 million shares “bought” in the past 60 days, almost 4.3 million (90%) were two-year call options (at $36.05 a share) purchased at premiums ranging from $18.94 to $24.78 per contract, which expire on September 4, 2014.

If Icahn is serious about turning Netflix’s performance around, he’ll have to spend millions more to convert his “beneficially”-owned stake into actual ownership.

Continue reading at YCharts: Carl’s Icahn’s Netflix Position Made of Cheapy Options: a Not-So-Serious Man

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Monster Beverage's Stock Needs Caffeine Jolt

Although Monster Beverage’s (MNST-$45.50) net sales in the second quarter grew by 28.2% to $592.6 million, gross profit fell 100 basis points to 51.8% due to a 31.9% increase in promotional allowances. Given the frenzied elbowing for domestic share, gross margins at Monster in coming quarters will likely decelerate further.

Although management will deny it, recent adverse publicity due to the Food and Drug Administration launching an investigation into five deaths allegedly tied to Monster Energy drinks means the company will need to improve its “public image.” Ergo, to get in front of a public debate whose aim would be to restrict sales of energy drinks to minors and/or regulate caffeinated-energy drinks, look for Monster to increase the budgets for two line items that fall under operating expenses: merchandise displays and direct/advertising – pressuring net operating margins well into next year.

Continue reading at YCharts: Monster Beverage Stock: There are Problems Beyond the Recent Health Scare

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

How Much is Enough for Workday's Duffield?

Both Workday (WDAY-$50.00) co-CEOs Duffield and Bhusri have had success building and selling software companies during the past twenty years, culminating in the January 2005 sale of PeopleSoft, the world’s second-largest application software company, to Oracle (ORCL) for $10.3 billion. As of September 2012, the 72-year old Duffield had an estimated net worth of $2.1 billion, ranking him 221 on The Forbes 400. At current values, his 44% stake (of the 160.3 million shares outstanding) in Workday has boosted his wealth by an additional $3.9 billion.

Wealth enough to bypass smaller sums? Not entirely, it seems....

Continue reading: Workday Founder Duffield: $3.9 Billion Richer on the Stock, So Why the Small-Time Items?

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Workday Stock Price Soars to Stratosphere, For How Long?

With Workday (WDAY-$54.00) management admitting in regulatory filings that profitability is not yet within reach, investors seem fixated only on sales visibility. In the first six months of 2012, revenue grew 118% to $119.5 million. The amount of subscription contract backlog – a sign of future growth – increased $85 million to $325 million on July 31, 2012. The reported operating loss for the period, however, was $46.3 million, which management attributed to “growing pains” (higher headcount and infrastructure build-out costs).

To date, Workday has derived most of its subscription revenue from its proprietary suite of on-demand human resource applications. However, the company is looking beyond its own R&D to ensure its survival in a land of enterprise software behemoths like Oracle (ORCL) and SAP AG (SAP).

Continue Reading at YCharts: Workday IPO Shares Quickly Double: Overheating of Cloud-Computing Stocks?

Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

How Reasonable Rackspace Hosting's Sky-High PE?

San-Antonio-based Rackspace Hosting (RAX-$64.75) is hoping to differentiate itself from its cloud-computing competitors by developing product offerings built around OpenStack, an open-source cloud platform. The differentiating benefit, according to chief executive Lanham Napier, is that customers wouldn’t be locked into a “static product” like Amazon’s Web Service.

Attracted to the growth-demand story for cloud hosting services, the competitive landscape is getting more crowded. Notwithstanding the plethora of VC-seeded providers flooding the market, better-capitalized companies are planting their roots in Rackspace’s yard too. Competitors include rival cloud solutions providers Equinix (EQIX) and VMWare (VMW); diversified technology companies like Amazon, Microsoft (MSFT), Google (GOOG), and IBM (IBM); and software companies like salesforce.com (CRM).

Read more at YCharts: Rackspace Hosting, an Expensive Stock, Looks Cheap if it’s a Takeover Candidate

David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Research in Backward's Motion?

Research in Motion (RIMM-$7.80) is counting on the new BB10 to revive sales growth and stop market share losses to Apple Inc.’s iPhone and devices running Google Inc.’s Android operating system. Now comes word that a previously anticipated January launch date could be delayed until March 2013. Too little - too late for the Canadian handset maker?

Read more at YCharts: That Little Run-Up in RIMM Stock: Could be an Ugly Head Fake

How Tasty is Buffalo Wild Wings' Stock Price?

If one embraces the concept that trending same-store sales is a healthy barometer of both consumer acceptance and future growth – which management does – then a closer look suggests that top-line growth is more fragile than Buffalo Wild Wings (BWLD-$87.23) and investors will admit: Eliminate menu price hikes (which contributed about 1.8%) and pre-sold gift cards (already booked into sales, another 60 basis points) – and same-store sales grew by a less-impressive 2.9 percent!

 

Continue reading at YCharts: Use a Napkin: Why the Rebound in Buffalo Wild Wings Stock is a Bit Messy

Adult Diapers, Stealing Content and PR Newswire Executives

While the 10Q Detective cannot confirm the veracity of this claim, we can tell you that PR Newswire continues to pirate our articles without compensation. If this article snakes through the ethers of the Internet and magically appears as a 10Q Detective story under the PR Newswire URL -- in effect, "stealing" traffic, well -- to you folks over at the parent company, FinancialContent Services, Inc. -- the quality of "your" news is about as good as the premium paid for it: nothing!

Chief executive, Wing Yu, who likes to boast that "FinancialContent is the trusted provider of stock market information to the media industry," could not be reached for comment. Does the media message of "trusted provider" imply veracity in the alleged diaper fetishes of his staff?

Entertainment Weekly's KILLER Headline

In light of the massacre during a midnight showing of the film, "The Dark Knight Rises," at a Colorado movie theater that left 12 dead and scores injured, the editorial staff at Entertainment Weekly (a Time Warner-owned publication) is probably wishing it could re-edit its KILLER headline.

The Denver Post: Another Example of "LAZY" Journalism

 The Denver Post prides itself on commanding one of Colorado's largest media footprints, hosting 5.2 million unique monthly visitors and more than 1.1 million Sunday readers of their print issue. Too bad they have TO STEAL to fuel their need for content. To wit: Best Buy No Longer for ex-CEO Dunn. I'll take that front page apology whenever you're ready - and this shout-out goes out to you folks over at PR Newswire too -- "Hey, assholes, I never gave you "permission" to "borrow" my research!"

- David J Phillips, Editor

Best Buy No Longer for ex-CEO Dunn

Best Buy (BBY-$21.96) disclosed that terms of former chief executive officer Brian Dunn’s resignation were still being finalized. Assuming alleged “personal misconduct” doesn’t include fraud or similar financial malfeasance, SEC documents do suggest that Dunn’s severance package will still be worth more than an 80-inch big screen television.

In 2011 and 2010, Dunn’s total compensation package (including salary, cash bonuses, and stock awards) approximated $5.03 million and $10.23 million. However, more than half of this pay was issued in the form of stock-based incentive awards, which are now mostly worthless (out-of-the money).

According to regulatory filings, Brian Dunn isn’t guaranteed any cash (future wage payments) for a “voluntary termination.” Further, as Best Buy doesn’t have an employment agreement (or “arrangement”) with its erstwhile CEO, at best (theoretically), Dunn can expect to walk away with only $1.15 million of in-the-money stock options. However, as the share price of the consumer electronics chain has declined by more than 50 percent in the last two years, much of this wealth has evaporated. The 10Q Detective found about 30,000 shares in incentive-based option awards that were in-the-money, worth an estimated gain of some $81,000.

Nonetheless, the Board, at its discretion, can negotiate additional severance with Dunn. That said, given the poor financial performance of Best Buy under his leadership in recent years – and the specious manner to which he left – it’s unlikely Dunn will be in a favorable position to negotiate an egregious exit package windfall, save for that flat-screen.

David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

Out to Lunch

The 10Q Detective is taking a creative break from the diurnal drudgery of digging through dusty and dry SEC filings. Hope to see you after lunch!