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You Can't Always Get What You Want
Posted at 8:29 a.m. EDT on Thursday, Oct. 31
Perhaps people are just asking for too much. That concept was pretty stark last night on the two most important conference calls: Starbucks and Facebook .
Facebook delivered a monster quarter, but it seemed that all anyone could focus on was a comment about how younger teens have decreased usage and how the company does not expect to significantly increase ads as a percentage of news feeds.
The result? We got a real dead-horse beating about the peaking of Facebook and, even though ad revenue grew 60% and mobile ads are now 49% of the business and the company generated $1.8 billion in ad sales, you left the call with a sense that Facebook's best times are behind it.
Of course that's fatuous logic in that revenues for video and Instagram haven't even hit yet and the company is just scratching the surface of the ad market. Given that digital media now represents a much bigger part of viewing than television, specifically 5.25 hours a day for Internet vs. 4.5 hours for TV and the fact that Facebook has 1 in 8 minutes of that time of desktop and 1 in 5 minutes on mobile, that's a lot of time to monetize.
But the analysts saw it differently, contending, at least from the questions, that the company has a self-imposed limit of how much advertising it can offer without spoiling the user experience, with an undertone that younger teenagers must already be turned off by the ads.
The Q&A turned the biggest upside surprise of the season into a downer and it shouldn't have been. There's no slowing here that I can find, but I felt very lonely with that viewpoint after listening to the interplay.
The Starbucks call also had a denouement feel about it. There was a sense among the analysts that Starbucks can't possibly exceed what it's done already. At one point it got so difficult that Howard Schultz mentioned that the "tension between us and you regarding comparable growth guidance" had gotten out of hand and it would be irresponsible to say that Starbucks will beat the 8% comps in the Americas and 7% overall.
Lost in the shuffle were the fabulous packaged-goods initiatives, the Teavana rollout and the day-part expansion. Instead the mob wanted facts and figures about how the Boulange food rollout was impacting comparable-store sales and Starbucks management just wouldn't go there. It didn't seem to matter to the analysts one bit that Starbucks may actually be using its stores as launching pads for supermarket aisle takeaway and for lunch and dinner, a true monetization of bricks and mortar.
Frankly, I found the Q&A here of the total nit-pick variety, but I respect the fact that most of these analysts are trying to build models and they are flummoxed about how to interpret all of these initiatives within the confines of the spreadsheet, a common problem when it comes to this chain.
How do you value loyalty? How do you put a price tag on affinity cards and mobile? They don't know how to do it, so the credit where credit should be isn't there. Instead, the focus is on kinks in new initiatives even though Howard took pains to point out that the Panera problem -- slow throughput on hard-to-make specials -- and new products isn't an issue for Starbucks.
The commonality of both conference calls? Managements are trying to explain how good business is and analysts were crafting possible theses about how business reached its zenith and it is all downhill from here. Hence the tentative nature of after-hours trading.
To me, we're getting a chance to buy companies at the top of their games for less than we might otherwise because of these updates, making the stocks more of a value. That's necessary because of the heightened valuations and the run-ups into the quarters.
Bottom line: these companies are terrific and while their stocks may be expensive, they are better than just about everyone else at what they do and to bail from best of breed this easily seems a little glib and a lot fatuous and I'm just not going there.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long FB.
A Botched Opportunity for Obamacare
Posted at 1:39 p.m. EDT on Wednesday, Oct. 30
Look, I don't know who is at fault for this disaster of a Web site that's meant to be the portal to the crowning achievement of President Obama's administration, the Affordable Care Act. I don't know if Kathleen Sebelius, the secretary of Health and Human Services, is totally at fault, even as she told Congress today, "Hold me accountable."
Nevertheless, if that's the case, than how can you not fall on your sword and quit this very red-hot minute? To hold Sibelius accountable for this travesty is to fire her immediately. Even Michael Brown knew to resign from the Federal Emergency Management Agency, or FEMA, after he botched the federal government's handling of the Hurricane Katrina tragedy. We don't know if Brownie really resigned on his own accord or if he was pushed out by President Bush, but at least he vanished, and that's not a bad idea for Sebelius to at least mull over or perhaps act on.
I don't know if CGI Group Inc. , the gigantic Canadian concern that powered the Web site, knew what it was doing when it set up this ridiculous excuse for an interface between the government and its people. Nor do I want to blame Verizon for a big portion of the failure here, as Sebelius did today, implying that Verizon's hosting abilities were less than stellar. Verizon ... thrown right under the bus. Well done.
However, I can tell you how I would have done this, and made the president proud, given that this is his signature program, instead of giving the Republicans all the ammunition they need to wipe the program out in 2014. It's ironic, isn't it? The Republicans could have just said, "Look, this whole thing is going to fall on its own darned weight -- we don't need to protest now that it's passed." Had they done that, I think they would have been heroes to the American people.
First, I would not have given this contract to a Canadian information-technology company. Why not give it to a U.S. company simply given that, alas, this is the U.S.? Have some pride in our American companies, for heaven's sake. I wonder if the people at IBM , for example, are cracking up about how CGI, the fifth-largest information-technology company in the world, could have gotten this contract and screwed it up so badly.
I am surprised -- and I say this facetiously -- that the U.S. government didn't give the work to SAP , and Infosys Limited . If you are going out of town and offshore, why not go all the way off the darned continent and give it to SAP, located in the heart of scenic Walldorf, Germany? Or why not give it to Infosys, in good old Bangalore, India? At least SAP is run by Bill McDermott, an American, and I think that company would have never performed as poorly as this CGI.
Nope, I would have stayed in the country and approached the whole thing differently from the way Sebelius has done. You see, this isn't and was never an information-technology initiative, and it should never have been given to an information-technology company.
It was a customer-relations-management project -- and if there's a real issue here with Sibelius and her crew, it was their failure to recognize that this whole Web site was about the client, the citizen of the United States, and not at all about the health care system.
I would have given this entire contract to Salesforce.com , and told CEO Marc Benioff to make sure that the customer gets all the help he or she needs to figure out how to choose the right health care plan. I bet Benioff could have put together an all-star team of companies to make this work, perhaps Google , to answer queries and Apple , itself to develop the cleanest app and Amazon , to deliver a hard copy with instructions if you didn't know how to use a computer.
The actual implementation? The dream team could have figured that out, too, maybe working with a company such as Athenahealth , or Cerner , some company with a superb background in medical records.
This was a moment for American companies to shine, and instead it's been about a Canadian company struggling to make things right. Sadly and shamefully, I think the moment has now passed, a victim of inept execution and a failure of imagination -- the imagination required to realize that the customer is always right and the relationship had needed to be managed in the cheapest, best and most efficient way possible. That is exactly what these U.S.-based companies can do better than any other enterprises in the world.
At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long AAPL .
- the Starbucks-Facebook drama and
- Obama falling on his own sword