Sunday, September 27, 2009
Sunday, September 20, 2009
Wednesday, September 16, 2009
Wednesday, September 9, 2009
JP SOLBERG TRANSCENDENCE
Transcendence is a condition or state of being that surpasses physical existence and in one form is also independent of it. It is affirmed in the concept of the divine in the major religious traditions, and contrasts with the notion of God, or the Absolute, existing exclusively in the physical order (immanentism), or indistinguishable from it (pantheism). Transcendence can be attributed to the divine not only in its being, but also in its knowledge. Thus, God transcends the universe, but also transcends knowledge (is beyond the grasp of the human mind). Although transcendence is defined as the opposite of immanence, the two are not necessarily mutually exclusive. Some theologians and metaphysicians of the great religious traditions affirm that God, or Brahman, is both within and beyond the universe (panentheism); in it, but not of it; simultaneously pervading it and surpassing it.
patthe
Sunday, September 6, 2009
Market Watch: Quiksilver’s Quarter and Nine Months Ended July 31, 2009
Quik’s total revenue for the quarter fell 11.2% to $501.4 million from $569.9 million for the same quarter the previous year. Their gross profit margin fell from 50.4% to 46.7%. Selling, general and administrative expense was down 9.1% to $211.8 million. Interest expense rose 30% to $15.3 million. Instead of a foreign currency gain of $1.2 million, they had a loss of $3.5 million.
After taxes, they had income from continuing operations of $3.4 million compared to $33.1 million in the same quarter the previous year. Those numbers exclude Rossignol.
The loss from discontinued operations (Rossignol) was $2.1 million this quarter compared with $30.2 million last year. Net income this quarter was $1.35 million compared to $2.85 million last year. That’s $0.01 per share compared to $0.02 last year. Income per share from continuing operations was $0.03 compared to $0.26 in the same quarter last year.
The numbers for the nine months ended July 31 show a decline in revenue of 13.2% to $1.44 billion compared to the nine months the previous year. Gross profit margin fell from 50.0% to 46.9%. There was a net loss from continuing operations of $57.5 million compared to a profit of $79.4 million for nine months the previous year. Net income, including the impact of Rossignol, was a loss of $190.3 million this year and $225.3 million last year for nine months.
We learned in the conference call that footwear sales have finally softened, and that weakness in the junior’s market is having some impact on Roxy. They are in the process of implementing structural changes and expense reductions that should improve profitability by $40 to $60 million over a full year once implemented. About half of this amount will come from margin improvement, and the restructuring has been extended to include DC Shoes once it was clear that the brand was not going to be sold.
They are using what Chairman and CEO Bob McKnight characterized as “More measured and creative approaches to marketing and advertising.” He cited as an example a reduction of 75% in trade show expense achieved by utilizing buses outfitted as booths that are driven into the show and then surrounded by pop up tents. I like it and look forward to seeing it.
Over on the balance sheet, total assets fell from $2.34 billion at July 31, 2008 to $1.88 billion at July 31, 2009. That includes a $67 million reduction in trade receivables and a $25 million decline in inventory, both of which you’d expect as part of managing through a recession. Most of the reduction came from current assets held for sale falling from $358 million to $2 million with the sale of Rossignol. There was also a decline of $96 million in goodwill.
Total liabilities fell $204 million to $1.435 billion. This was almost exclusively due to the reduction in current liabilities. Long term debt fell only $10 million to $734 million. That’s not a surprise as the debt restructuring Quik has been working on (the last piece will close this month) was meant to spread out maturities, not reduce debt.
The current ratio, at 1.65 has declined only marginally from 1.71 last year. Total liabilities to equity has grown from 2.34 times to 3.26 times, largely as a result of stockholders’ equity falling from $700 million to $441 million. To me, this highlights the fact that Quik still has some work to do in improving its balance sheet, but with Rossignol and the restructuring behind them, they can do it by running their business well.
Quik expects its fourth quarter revenues to be down in the mid teens on a percentage basis compared to the same quarter a year ago. It anticipates a loss per share, on a fully diluted basis, in the mid-single digit range. Earnings will be impacted by the higher interest expense they will incur as a result of the restructuring. They reduced their projection of that expense by $10 million to $100 million and pointed out that $30 million is non cash. Interest expense in their last complete fiscal year was $45 million. They expect interest expense of $21 million in the fourth quarter, and further gross margin contraction of 150 basis points (1.5%)
Quik’s profitability improvement plan should just about make up for their increased interest expense. After all this good work in restructuring and managing expenses, the question is where do sales increases come from? In that regard they have the same issue as every other brand; “The company indicated that longer term visibility into revenues and earnings remains limited due to global economic conditions.”
patthe
tws
Friday, September 4, 2009
Big is back
IN 1996, in one of his most celebrated phrases, Bill Clinton declared that “the era of big government is over”. He might have added that the era of big companies was over, too. The organisation that defined capitalism for much of the 20th century was then in retreat, attacked by corporate raiders, harassed by shareholders and outfoxed by entrepreneurs.
Great names such as Pan Am had disappeared. Others had survived only by dint of huge bloodletting: IBM sacked 122,000 people, a quarter of its workforce, between 1990 and 1995. Everyone agreed that the future lay with entrepreneurial start-ups such as Yahoo!—which in late 1998 had the same market capitalisation with 637 employees as Boeing with 230,000. The share of GDP produced by big industrial companies fell by half between 1974 and 1998, from 36% to 17%.
Today the balance of advantage may be shifting again. To a degree, the financial crisis is responsible. It has devastated the venture-capital market, the lifeblood of many young firms. Governments have been rescuing companies they consider too big to fail, such as Citigroup and General Motors. Recession is squeezing out smaller and less well-connected firms. But there are other reasons too, which are giving big companies a self-confidence they have not displayed for decades.
Big can be beautiful…
Of course, big companies never went away. There were still plenty of first-rate ones: Unilever and Toyota continued to innovate through thick and thin. And not all start-ups were models of success: Netscape and Enron promised to revolutionise their industries only to crash and burn. Nevertheless, the balance had shifted in favour of small organisations.
The entrepreneurial boom was supercharged by two developments. Deregulation opened protected markets. Some national champions, such as AT&T, were broken up. Others saw their markets eaten up by swift-footed newcomers. The arrival of the personal computer in the 1970s and the internet in the 1990s created an army of successful start-ups. Steve Jobs and Steve Wozniak founded Apple Computer in 1976 in the Jobs family’s garage. Microsoft and Dell Computer were both founded by teenagers (in 1975 and 1984 respectively). Larry Page and Sergey Brin started Google in Stanford dorm rooms.
But deregulation had already begun to go out of fashion before the financial crisis. The Sarbanes-Oxley act, introduced after Enron collapsed in disgrace, increased the regulatory burden on companies of all sizes, but what could be borne by the big could cripple the small. Many of today’s most dynamic industries are much more friendly to big companies than the IT industry. Research in biotechnology is costly and often does not bear fruit for years. Natural-resource companies, whose importance grows as competition for resources intensifies, need to be big—hence the mining industry’s consolidation.
Two further developments are shifting the balance of advantage in favour of size. One is a heightened awareness of the risks of subcontracting. Toy companies and pet-food firms alike have found that their brands can be tainted if their suppliers (notably, from China) turn out shoddy goods. Big industrial companies have learned that their production cycles can be disrupted if contractors are not up to the mark. Boeing, once a champion of outsourcing, has been forced to take over faltering suppliers.
A second is the emergence of companies that have discovered how to be entrepreneurial as well as big. These giants are getting better at minimising the costs of size (such as longer, more complex chains of managerial command) while exploiting its advantages (such as presence in several markets and access to a large talent pool). Cisco Systems is pioneering the use of its own video technology to improve communications between its employees (see article). IBM has carried out several company-wide brainstorming exercises, recently involving more than 150,000 people, that have encouraged it to put more emphasis, for example, on green computing. Disney has successfully ingested Pixar’s creative magic.
You might suppose that the return of the mighty, now better equipped to crush the competition, is something to worry about. Not necessarily. Big is not always ugly just as small is not always beautiful. Most entrepreneurs dream of turning their start-ups into giants (or at least of selling them to giants for a fortune). There is a symbiosis between large and small. “Cloud computing” would not provide young firms with access to huge amounts of computer power if big companies had not created giant servers. Biotech start-ups would go bust were they not given work by giants with deep pockets.
The most successful economic ecosystems contain a variety of big and small companies: Silicon Valley boasts long-established names as well as an ever-changing array of start-ups. America’s economy has been more dynamic than Europe’s in recent decades not just because it is better at giving birth to companies but also because it is better at letting them grow. Only 5% of European Union companies born since 1980 have made it into the list of the 1,000 biggest in the EU by market capitalisation. In America, the figure is 22%.
…but size isn’t really what matters
The return of the giants could well be a boon for the world economy—but only if business people and policymakers avoid certain pitfalls. Businesses should not make a fetish of size, particularly if this means diversifying into a lot of unrelated areas. The conglomerate model may be tempting when cash is hard to find. But the moment will not last. By and large, the most successful big firms focus on their core businesses.
Policymakers should both resist an instinctive suspicion of big companies (see article) and avoid the old error of embracing national champions. It is bad enough that governments have diverted resources into propping up failing companies such as General Motors. It would be even more regrettable if they were to return to picking winners. The best use of their energies is to remove the burdens and barriers which prevent entrepreneurs from starting businesses and turning small companies into big ones.
patthe
te
Thursday, September 3, 2009
Wednesday, September 2, 2009
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