Best Buy stock plummetted 15% yesterday. The headlines were all about “Q3 Profit Misses, Outlook Slashed” but I think the real story goes way deeper.
If you look at the numbers – their Q3 net income was $217m (54c/share) compared to $227m (53c/share) in the same quarter during the previous year. The previous year was one of the most difficult years in US business history. Their stock dropped like a rock, from about $41.70/share, to about $34.50/share.
Seeking Alpha thinks Best Buy is being “unduly punished by Short Term Factors” and they might be correct, but I think their stock price reflects risks.
If you just look at numbers and projections, the stock IS undervalued in the 9.5x P/E ratio/ $34-35 range where it is at.
The stock is undervalued in the 9.5x P/E ratio/ $34-35 range where it is at – if one only considers the numbers. It is extremely significant that their net income dropped between these particular quarters in these particular years. The economic climate was so much worse last year. There should have been growth. Best Buy’s net income drop goes deeper than the appraisal of delivering products to/for customers that weren’t there. Best Buy’s customer service issues are significant and not necessarily related to how many people are on their floors.
Their marketing dept would probably pick a generic version of me as their perfect customer: An employed geek with a couple of thousand followers who knows the difference between 60hz and 240hz, the difference between i3 and i7, the difference between wireless g and n, and is extremely impressed by the performance gains delivered by SSD as compared to 7200 rpm.
My very personal and admittedly anecdotal experience is that their service is so horrid – that their prices, selection and availability just don’t matter. I should be their customer, but I am not. When a business loses its target-customer base, drops in net income are a predictable result. Facebook shows such a negative reaction to Best Buy – and Victoria Barret pointed out on Forbes that YouTube and Netflix are competitive problems as well. She thought their competitive advantages were around viewing patterns. Netflix and YouTube excel in customer service, and I think that it will be essential for Best Buy to master the customer service components.
Bernhard Warner (Social Media Influence) looks at Best Buy’s social media efforts and distills their issues:
“we get news that Best Buy is finding it difficult to compete with the likes of Walmart and Amazon. com who seem to be doing a better job of discounting and delivering a more satisfying customer experience. In the retail business, mastering those two parts of the business and you usually finish with a strong quarter. Only after that should you focus on new apps.”
Best Buy’s stock might certainly be a bargain, but the current price figures in the risks of their complex competitive landscape and whether Best Buy can recover, or if they are on the Circuit-City path.
Mark Madoff’s suicide touched me.
“On the morning of December 11, 2010 — exactly two years after Bernard’s arrest — his son Mark Madoff, age 46, was found dead in his New York City apartment. The initial ruling for the cause of death is suicide by means of hanging.” I did not know Mark Madoff or any other member of his family. Mark Madoff profited from an enormous Ponzi scheme that his father ran from a business that MARK worked for – for more than 20 years. He profited from his father’s scheme that resulted in the destruction of billions of dollars of wealth, charitable foundations. It was a scheme that has inspired/caused/incited other people’s suicides.
Mark Madoff and his brother Andrew probably understood or should have understood what was going on. They were educated and experienced. One had a degree from the University of Michigan and the other a degree from the Wharton School. Both had worked for their father’s firm since the 1980s. (Ironically, they worked there from around the time that Michael Douglas’ oscar-winning performance as Gordon Gekko who said that “that greed, for lack of a better word, is good.” in Oliver Stone’s Movie: Wall Street)
Given Mark’s involvement in the family business, it is amazing that he and his brother turned their father in to the SEC. It is possible, as ABC contends, ‘I’m going to say you knew nothing about it, because I’m seventy years old, you’re forty, you’ve got children. So I will take the fall for this.’ It is also possible that they realized what their father did, and turned him in because they felt ethically compelled to do so. It seems that their family has been destroyed by their decision to turn in their father.
Mark’s Mother Ruth Madoff – his estranged mother – blames his father for his suicide.
I am saddened by Mark’s death. I know what it is like to lose a parent. I know what it is like to feel pressure. I cannot imagine what it must be like to have an $80m lawsuit filed against me, to have bankruptcy trustees after me, to betray my father in an act that results in a 150 year prison sentence, and to live with the aftermath. There’s a small list of people who understand that – probably only one now: Mark’s brother Andrew.
I don’t for a second condone what his family did and I don’t think anyone should. Yet his suicide still touched me. I feel sad for his family and for his children. His children will now grow up with a grandfather who is in prison and knowing that their father killed himself, hung himself with a dog leash on the 2nd anniversary of their grandfather’s arrest. In committing suicide, Mark picked a final, sad way out for himself. I don’t think are any ethical lessons beyond the WAY obvious ones. There’s no techie thing here, no marketing thing, no business thing – just a human thing.
Mark Madoff’s suicide is just sad – just a sad suicide.
Andy Rubin has only ever made 2 public tweets and only follows one person. His twitter page links to Spies.com – which was last alive as a website with a binary dog portrait in 2008 or so. This morning he tweeted: “There are over 300,000 Android phones activated each day.” (Andy Rubin is also VP of Engineering overseeing Android at Google, and he knows how to design products that customers LOVE.) @Engadget pointed out that 300k Android Phones Activated DAILY is an increase from August when only 200k were being activated daily. A 50% increase in 3 months is an incredible business trend.
|THIS seismic shift will bring a tsunami of opportunity for businesses that are creative enough to harness it. Tsunamis are destructive too, but thats another story.How significant is this? Two days ago, Penny Crosman in Bank Systems & Technology published “Who will be the Google of Mobile Payments” and discussed the tangled mess of providers, banks, systems and technology.
She didn’t make the case that the “Google” of mobile payments could be GOOGLE. Given 300,000 Android Phones activated *DAILY* that has to be worth consideration.
So – that is only mobile banking, and that is just a ripple. The tsunami has to be understood creatively, by the businesses who will use this explosion as competitive advantage. Want to sell a mobile app? Android has 300k new users each day.
Even considering Android as one of the big 3 or 4 types of smartphone – with Blackberry and iPhone, and … others, it is very safe to say, the trend is for Android smart phone domination. There are only a few models of iPhone, and only one manufacturer each of iPhones and Blackberry phones. (The key corresponding fact, is that Android is on dozens of phones made by an array of companies, and Google shares success with all of them… Motorola, LG, Samsung, HTC, etc.) To flesh that out a bit… It is in the corporate interests of all of those cell phone producers to help Google succeed by selling more android phones. Even Google’s competitors are selling phones that spread Android. For instance – Google opened their bookstore 2 days ago. As ironic as this can be – Amazon is discounting the Droid Pro to $19 each. Google is smart and they ARE going to take advantage of this installed base.
When your platform is exploding, and your fiercest competition contributes to your expansion – well, that is a bit like IBM selling PC’s and including Microsoft’s DOS as the key component that made a PC “IBM-Compatible.” Good for IBM, but VERY good for Microsoft.
Beyond Cell Phone manufacturers, Android users use more data than other smartphone users, which will make them a favorite of cell companies who want to profit from data transmission. “Samsung Galaxy users typically upload 126% more data than iPhone 3G users, and HTC Desire users download 41% more data” (Arieso)
Want to be available to mobile users? 300k per day is a trend that you MUST account for.
Technology competition is ramping up everywhere, and it surrounds the value of Personal Data. Google is launching its E-Bookstore to compete with Amazon, Apple, and others. Facebook is releasing a new “profiles” feature that will certainly compete with LinkedIn and Twitter, and Google Buzz.
Motorola’s Droid Pro has to be giving RIM nightmares because the reasons for having their Blackberry are dwindling at an amazing speed. Cellphone competition is at a feverish pace. As Verizon prepares to get the iPhone, it sounds like they’re willing to pay Apple to prevent either Sprint or Tmobile from getting it… Google released the new Nexus S phone with a reference build of their android operating system, with no additional-anything to impede user experience. (TechCrunch says that “Google’s various apps, some of which are unavailable for the iPhone, that make it the best phone on the market today.”)
All of the technical competition has a downside though… Google’s Nexus S has a Near Field communication, NFC, feature that will let you use the phone in lieu of a credit card by simply tapping it against a device in a store. (read more about that here) Given the data that they gather every second about customer preferences with their search engine, and the data that they gathered over the last few years with Street view – One has to wonder about the data they will gather from their Ebookstore and their Nexus S. One has to wonder what Facebook is going to gather with their new Profiles Feature. Another good question is… WHO is Facebook competing with there? Is it LinkedIn? Is it Twitter? Is it Google Buzz? or is it just Facebook improving for the sake of improvement? And what personal data will THAT improvement release?
Given the enormous value Google reaps from its growing googlebytes of data, it seems safe to question every “technical” advance, innovation, invention and announcement in terms of what personal data will be freshly captured for corporate plundering.
Is it all about the data? Should we be concerned about Ford gathering consumer information with their “Vehicle Interaction Revolution?” The new MyTouch feature of the Ford Edge understands thousands of commands. It connects to Cell phone, MP3 player, USB drive, SD Card… and features an ADHD-enabled delight: “Two 5-way switch pads on the steering wheel with 3 LCD displays – 2 in the instrument cluster, and 1 in the center stack. The available MyFord Touch™ features an 8-inch touch-screen display in the center stack.” (I’d love to trade my 10 year old Ford Explorer in for one. I’d think of it as a Ford Digital Explorer!)
Does it know how to phone home? How long will it be before your Droid Pro can sync with your Ford Edge to update your Facebook Profile with 4Sq information, and feed all that into Google’s database so that Groupon can target you with an advertisement? How much personal data is too much?
What do you think?