As mentioned a few weeks ago, Riverdeeps banks (Credit Suisse, Lehman Brothers and Citigroup) conducted a roadshow to sell the debt associated with the Riverdeep acquisition of Harcourt. According to the Irish Times, the banks have suspended this process and will hang on tooth and nail to the debt themselves until the markets improve.
This will have limited impact on the operations of Riverdeep/Houghton Mifflin and while this is not positive news it could only reflect a desire for the banks to maintain a decent margin on the syndication rather than judgements about the risk of the underlying loans. At least that's what I would be saying if I were Riverdeep.
Wednesday, November 28, 2007
Books A Million Reports
BAM reported comp store revenues up 2% for the quarter and up 6.3% to $117.7mm over all. The Company reported a net loss of $0.5mm, or $0.03 per diluted share, for the third quarter of fiscal 2008, compared with a net loss of $0.2mm. YTD revenues are up 6% to $366.8mm and net income of $4.7mm is up $0.9mm versus the same period last year.
From the press release commenting on the results, Sandra B. Cochran, President and Chief Executive Officer, said,
From the press release commenting on the results, Sandra B. Cochran, President and Chief Executive Officer, said,
“We were very pleased with our sales results for the quarter; however, operating costs for the period, driven primarily by an increase in heath care expense, exceeded our plan. Looking forward, our fourth quarter best seller lineup is solid, and we are focused on executing our merchandising and marketing plans for the holiday season.”The closely held company also announced that its Board of directors approved a quarterly cash dividend of $0.09 per share. The quarterly dividend is payable on December 26, 2007, to stockholders of record at the close of business on December 11, 2007.
Borders Australia
The Australian Competition Commission anticipates making a final decision on the merger between Angus & Robertson and Borders Australia by December 19. In the meantime they have requested additional comments and specific requests related to several items.
The commission suggests that the reduction in competition could result in decreased discounting and notes that Borders promotions are 'particularly innovative' with 'weekly discounts' and 3/2 offers. (Gosh!) The ACC invites comments that counter or support its' contention that a reduction in competitive tension would reduce discounting to a wide range of titles.(The commisson is also asking to what degree loyalty programs are important in supporting discounts.)
The merged entity will concentrate more than 25% of all retail revenue for the industry and they are looking for comment regarding how A&R/Borders may weild this power. Principally will the retailer be able to negotiate more agressively for better discounts and will this influence publication plans by publishers? With respect to this item the commission is interested in consumer research regarding purchasing behavior. (Good luck.)
Lastly, the commission requests information about local market competition even explicitly asking what the impact has been of the entry of Borders into the Australian market. They remain interested in the impact of smaller local markets of the entry of 'large format' retail stores.
There doesn't appear to be too much consideration on the impact of international web retailing such as amazon.com or b&n.com. Both of these retailers are well known to book buyers in this market. (While they note the merged entity will represent more than 25% of the market it is unlikely that they have any idea how much retail business is off-shore, and it is likely to be considerable especially given territory rights issues that can limit selection and the weak US dollar).
It looks like this merger will be approved: Whether there will be any constraints placed on the merged entity remains to be seen.
The commission suggests that the reduction in competition could result in decreased discounting and notes that Borders promotions are 'particularly innovative' with 'weekly discounts' and 3/2 offers. (Gosh!) The ACC invites comments that counter or support its' contention that a reduction in competitive tension would reduce discounting to a wide range of titles.(The commisson is also asking to what degree loyalty programs are important in supporting discounts.)
The merged entity will concentrate more than 25% of all retail revenue for the industry and they are looking for comment regarding how A&R/Borders may weild this power. Principally will the retailer be able to negotiate more agressively for better discounts and will this influence publication plans by publishers? With respect to this item the commission is interested in consumer research regarding purchasing behavior. (Good luck.)
Lastly, the commission requests information about local market competition even explicitly asking what the impact has been of the entry of Borders into the Australian market. They remain interested in the impact of smaller local markets of the entry of 'large format' retail stores.
There doesn't appear to be too much consideration on the impact of international web retailing such as amazon.com or b&n.com. Both of these retailers are well known to book buyers in this market. (While they note the merged entity will represent more than 25% of the market it is unlikely that they have any idea how much retail business is off-shore, and it is likely to be considerable especially given territory rights issues that can limit selection and the weak US dollar).
It looks like this merger will be approved: Whether there will be any constraints placed on the merged entity remains to be seen.
Tuesday, November 27, 2007
Broadcasters Unite!
What if CBS, NBC and ABC launched a joint web-based broadcast portal? Highly unlikely you say? Well, in the UK pundits might also have dismissed out of hand the notion that the BBC, ITV and Channel 4 could ever agree on anything let alone jointly developing a web portal for distribution of their content. Today these three companies announced they would launch such a web site in the early part of 2008. All three have existing web content portals and both BBC and ITV intend to keep theirs going in the short term. Earlier in 2007, the BBC launched their i-player client which has not been as successful as the hype that presaged its launch would have suggested. Residents outside the UK are unable to use the i-player and it is assumed the tri-company web site will be off-limits to non-UK users.
The web activities of BBC and ITV place them significantly ahead of the network broadcasters in the US. One aspect of their business model which has made their experimentation with web distribution possible is that the UK companies generally own the content they broadcast. This is not the case in the US although in recent years the networks have built production capability.
The collaboration in the UK will be watched closely and while it may be spun as a consumer bonus - having one location to access the content from the nations' primary broadcasters - the reality could be more prosaic. The costs of building and maintaining a portal for this content could be extreme and each would ultimately be in a race to augment their content with content from other providers. Why not join forces, pool resources and reduce the market for third (fourth) party content? It makes a lot of sense especially in a market that isn't that large to begin with.
In the early 1990's Sky beat the traditional broadcasters into new distribution territory and the broadcasters had no solution. As a result, they lost out on a vast expansion of the consumer broadcast market (satellite). In developing this new collective content portal they could be setting themselves up to be meaningful players in a potentially much larger market place for distributed content.
When Newscorp launched Sky these players were warming the bench but this announcement may enable them to have a role in the future of television.
The web activities of BBC and ITV place them significantly ahead of the network broadcasters in the US. One aspect of their business model which has made their experimentation with web distribution possible is that the UK companies generally own the content they broadcast. This is not the case in the US although in recent years the networks have built production capability.
The collaboration in the UK will be watched closely and while it may be spun as a consumer bonus - having one location to access the content from the nations' primary broadcasters - the reality could be more prosaic. The costs of building and maintaining a portal for this content could be extreme and each would ultimately be in a race to augment their content with content from other providers. Why not join forces, pool resources and reduce the market for third (fourth) party content? It makes a lot of sense especially in a market that isn't that large to begin with.
In the early 1990's Sky beat the traditional broadcasters into new distribution territory and the broadcasters had no solution. As a result, they lost out on a vast expansion of the consumer broadcast market (satellite). In developing this new collective content portal they could be setting themselves up to be meaningful players in a potentially much larger market place for distributed content.
When Newscorp launched Sky these players were warming the bench but this announcement may enable them to have a role in the future of television.
Monday, November 26, 2007
Not OK Computer
My trusty laptop committed suicide over the weekend. There will be a brief interruption to our service as I decide what my options are. Sadly my life seems to revolve around the machine and with its loss I seem at times to be entirely untethered to temporal life. The machine holds my calendar of course but the daily rhythm of email - and there is one - has been disrupted as well and as a result I feel I like a prisoner on being suddenly set free finds the lack of regimentation impossible to deal with. This is a very sad situation and the sooner I get a replacement the better. Help.
Wednesday, November 21, 2007
Quebecor Share Debacle
Quebecor the big printing rival to RH Donnelly cancelled a $250mm share sale and a related $500mm debt issue yesterday after the offers received less than full participation from the markets. From the Globe and Mail:
According to the newspaper, the company will now have to completely rethink how they refinance this company which is debt ridden despite selling their loss making European operations earlier this year. The performance of Quebcor compares unfavorably with the performance of RH Donnelly who appear to have weathered fundamental changes in the printing industry and intense competition from Asia to post consistently good results. Donnelly has also spent the summer successfully recapitalizing the company.
Shares dropped from $5.10 to $2.80 in the past seven days - this was a $40 stock five short years ago. Much of the drop over the past week can be traced to short sellers who sold, with the intention of buying back Quebecor World shares by participating in the equity or debenture sale. If these same short sellers own the convertible preferred shares, they have even more to gain from a lower stock price, as they will get more equity when they swap the preferred shares for common. Long-time Quebecor World shareholders seemed unwilling to step in and support the stock over the past seven days, which should be a cause for some soul-searching at head office.
According to the newspaper, the company will now have to completely rethink how they refinance this company which is debt ridden despite selling their loss making European operations earlier this year. The performance of Quebcor compares unfavorably with the performance of RH Donnelly who appear to have weathered fundamental changes in the printing industry and intense competition from Asia to post consistently good results. Donnelly has also spent the summer successfully recapitalizing the company.
Barnes & Noble Report 3rd Quarter
Barnes & Noble reported a solid same store sales increase of 2.6% and a 14.5% increase in dot com revenues for the third quarter. Gross revenues exceeded $1.2billion which reflected a 5.7% increase over the same period last year. Net income for the period was $4.4million or $0.07 per share but reflected an after tax benefit of $6.2million ($0.09/share). Excluding the one time effect, the company had a third quarter loss of $1.8milion or $0.03/share which was was "better than guidance of a loss of $0.06 to $0.10 per share."
From the press release:
The company also raised guidance for the full year (which should be anticipated given this and the second quarter performance). The company now expects full-year GAAP earnings per share to be in a range of $1.91 to $2.09, compared to previous guidance of $1.69 to $1.87.
B&N's stock price has fluctuated over the past six months from a mid-year high of $43 to its current $36. On the basis of these reported results the share price jumped on Tuesday. In contrast to Borders share performance and market cap ($715million), B&N has a market cap of over $2.4billion. Looking at that comparison with Borders may well make some private equity bankers sweat in anticipation.
Press release
From the press release:
“The company’s sales continued to perform at the higher end of expectations, due in part to strong sales of new releases and bestsellers, which combined with a better than expected gross margin rate enabled the company to outperform its third quarter earnings expectations,” said Steve Riggio, chief executive officer of Barnes & Noble, Inc. “In addition, we are encouraged by the sales trends at Barnes & Noble.com that began earlier this year and continued through the third quarter, in which we launched a newly designed website.”
The company also raised guidance for the full year (which should be anticipated given this and the second quarter performance). The company now expects full-year GAAP earnings per share to be in a range of $1.91 to $2.09, compared to previous guidance of $1.69 to $1.87.
B&N's stock price has fluctuated over the past six months from a mid-year high of $43 to its current $36. On the basis of these reported results the share price jumped on Tuesday. In contrast to Borders share performance and market cap ($715million), B&N has a market cap of over $2.4billion. Looking at that comparison with Borders may well make some private equity bankers sweat in anticipation.
Press release
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