GameStop Corp. (NYSE: GME): Third Quarter Earnings Preview 2009

GameStop Corp.(NYSE: GME) is scheduled to release its third quarter financial results before the market open on Thursday, November 19, 2009. Analysts currently expect the company to report earnings of 30 cents per share on revenue of $1.73 billion. In the year ago period, GameStop reported earnings of 38 cents a share on revenue of $1.70 billion.

GameStop Corp. is the world's largest video game retailer. It sells new and used video game hardware; video game software; video game accessories, including controllers, memory cards, and other add-ons; PC entertainment software etc. As of January 31, 2009, GameStop Corp. operated 6,207 stores primarily under the names GameStop and EB Games that are located in regional shopping malls and strip centers in the United States, Australia, Canada, and Europe.

In August, the Grapevine, Texas-based company reported that its second-quarter profit plunged 32.3% due to lower new console unit sales and a lack of strong new software titles. Second-quarter net income declined to $38.7 million, or 23 cents per share, from $57.2 million, or 34 cents, in the prior-year quarter. Quarterly sales slipped 3.7% to $1.74 billion from the previous year's sales of $1.80 billion. Analysts, on average, expected the company to report earnings of 28 cents per share on revenue of $1.75 billion for the quarter.

Despite gaining over 200 basis points in new video game market share during the quarter, comparable store sales fell 14.1%. Gross margins increased by 170 basis points, as product mix shifted from low margin hardware sales to higher margin software sales. Early in November, the company reaffirmed its earnings forecast for the third quarter in a range of 27 cents to 33 cents per share, excluding debt retirement costs of $0.01 per share. The company also maintained its forecast for comparable store sales for the third quarter to decline in a range of 6% to 11%.

For the fourth quarter, the company anticipates earnings in a range of $1.47 to $1.65 per share, higher than $1.39 posted in the prior-year fourth quarter. Comparable store sales are projected to decline between 1.0% and 7.0%. For full year 2009, the company expects earnings to range between $2.40 and $2.64 per share, with a comparable store sales decline of 4.0% to 8.0%.

GameStop dominates the lucrative used-game market. The video game retailer's gross profit margin for used games is nearly 50 percent, compared to around 20 percent for a new game sale. During the second quarter, used video game products accounted for 32.3% of the company's total sales. Though overall video game industry could not escape unscathed from recession, sales of used video game witnessed unprecedented growth as bargain-hunting consumers slashed entertainment spending. During second quarter, sales of used video game products at GameStop surged to $560.8 million from the previous year's sales of $471.5 million.

The company is also expected to benefit from the release of highly-anticipated title releases such as Call of Duty: Modern Warfare 2, Assassin's Creed 2 and Halo 3: ODST during the third quarter. Activision’s brand-new Call of Duty 2: Modern Warfare, which hit store this week, shattered the previous record for opening-day sales by an entertainment property, earning $310 million in North America and the U.K. alone. Moreover, recent industry hardware price cuts too are expected to boost overall video game sales. Console makers Sony (NYSE: SNE), Microsoft (NASDAQ: MSFT), and Nintendo all slashed the prices of their systems by $50 to $100 in third quarter.

GameStop has continued with its aggressive worldwide expansion plans and expects to open between 75 and 100 stores with a goal of around 400 new stores for the year. During the quarter, GameStop opened 110 new stores with a goal of around 400 new stores for the year. Late last month, GameStop announced plans to hire about 15,000 seasonal part-time game advisers between now and December 24, 2009, in order to manage the upcoming holiday rush.

U.S. video game industry sales dropped in October, declining 19 percent from a year earlier, and 16.4 percent from September, according to data released by the NPD Group. Though the $1.07 billion in total sales turned in by the industry in October were paltry, compared with $1.32 billion in October 2008 and $1.28 billion in September 2009, it was still the third-best October sales report turned in by the video game industry, NPD analyst Anita Frazier noted in her monthly report.

Investors are expected to focus on management's commentary about holiday sales outlook and store traffic expectations. The Friday after the Thanksgiving holiday marks the start of the crucial holiday shopping period. Video game industry rakes in close to two-thirds of their annual revenue during holiday season.

In terms of stock performance, GameStop shares have gained 2% since the beginning of the year. Shares of the company fell 93 cents or 3.78% to close at $23.69 on Friday.

Full Disclosure: None.

Is This The Beginning Of The End Of Internet Explorer?

It seems that things are getting more cloudy every day for the Microsoft browser. Internet Explorer has been bleeding market share and is fast losing more ground in the internet browser battle.

Software giant Microsoft Corp. (NASDAQ: MSFT), which has been hounded by the Europe Union (EU) for anti-competitive behaviour regarding the pre-installation of Internet Explorer on Windows-equipped PCs, has said it will enable future European computer buyers to choose their preferred browsing platform. In orded to help settle anti-trust cases brought before it by the European Commission, Redmond-based Microsoft has agreed to present new PC owners with an introductory browser screen (a.k.a. the ‘ballot screen’) that explains the online browser experience and offers

Internet Explorer alongside rival alternatives. As a result, the introductory browser screen will offer up a selection of 12 viable browser installations that can be used in addition to, or instead of, Microsoft’s dominant Internet Explorer. The agreement between Microsoft and the EU Commission is expected to last five years.

The announcement comes at a time when browser is steadily losing market share to rivals like Firefox and Google Chrome. According to Web metrics company Net Applications, Internet Explorer (IE) lost 1.3 percentage points during the month of September, which leaves the browser with a 65.7 percent share of the market, while Mozilla’s Firefox browser gained 0.8 percent to secure 23.8 percent, and Google’s Chrome platform increased its presence by 0.3 percent for a share of 3.2 percent.IE has dropped a total of 8.5 percentage points in the last 12 months. According to projections made by Net Applications, if Redmond-based Microsoft fails to stem the current tide of loss, the market share attributed to its Internet Explorer browser is likely to fall below 50 percent by around May of 2011.Internet Explorer's share of the worldwide browser market has fallen 16% since the beginning of last year, from 78.2% to 65.7%, according to figures dug up from Net Applications' Web site. At one time, Redmond controlled more than 90% of the market.Internet Explorer's share of the worldwide browser market has fallen 16% since the beginning of last year, from 78.2% to 65.7%, according to figures I dug up from Net Applications' Web site. At one time, Redmond controlled more than 90% of the market.

The events have left many wondering whether it is really the beginning of the end of Internet Explorer?

Microsoft Bing "Decision Engine"

IN seeking to make the new search engine Bing as much a part of the popular culture as “bada bing,” Bing Crosby or Stanley Bing, Microsoft is buying prominent placement for bing.com inside television shows and the online video hub Hulu.

To promote Bing, a new search engine from Microsoft, Hulu.com will have an hourlong “Bing-a-thon” on Monday.

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The effort to weave advertising for Bing into content, known as branded entertainment, is intended to complement an elaborate traditional campaign, which began on Wednesday with commercials created by the JWT unit of WPP.

The Microsoft Corporation is estimated to be spending $80 million to $100 million on ads to help establish Bing as a viable alternative to the 800-pound gorilla of search, Google. It is the most recent of several attempts by Microsoft — all flops — to become a significant factor in search, where ad spending has held up better than in most other media.

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“It’s a very tall marketing challenge and a very tall product challenge,” acknowledged Yusuf Mehdi, senior vice president for the online services division of Microsoft in Redmond, Wash.

“It’s going to take multiple steps to get where we want to go,” he added, “and this is the first step.”

Bing has two goals, Mr. Mehdi said: “Win a fan base and start to grow share.” The latter refers to the fact that “every other provider” of search-engine services “has lost market share in the last five years,” he added, “except for the leader” — that being, of course, google.com from Google.

“The key will be whether we deliver a product and connect with people emotionally in the advertising,” Mr. Mehdi said. To achieve the second point, “you have to do something a little bit more surprising,” he added.

First up is a program-style commercial on Hulu, scheduled for 8 p.m. (Eastern time) on Monday. The hourlong spiel, a first for Hulu, is being styled like a telethon and carries the title “Bing-a-thon.” It was developed for Microsoft by the Creative Artists Agency in Los Angeles.

The cast of the faux show on Hulu — a joint venture of the NBC Universal division of General Electric and the News Corporation — will include Jason Sudeikis of “Saturday Night Live,” Olivia Munn of the G4 cable channel and the comedian Fred Willard.

Those Hulu users who watch the “Bing-a-thon” will receive a reward: the ability to watch TV shows or movies on hulu.com without commercial interruptions. (Yes, you have to watch a commercial to avoid watching other commercials.)

After that will come integrations of Bing into shows on networks that are part of NBC Universal as well as on cable channels that are units of the MTV Networks division of Viacom.

The NBC Universal networks include NBC, with segments on “Late Show With Jimmy Fallon,” beginning next Friday, and integrations of Bing into episodes of a summer series, “The Philanthropist,” which starts on June 24.

As a seller of technology products and services, Microsoft “is in a highly competitive space,” said Ben Silverman, co-chairman at the NBC Entertainment unit of NBC Universal in Los Angeles, so it needs “innovation marketing” to break through the clutter.

For instance, the segments on “Late Show” will present Mr. Fallon as a quiz master, asking contestants to use bing.com to search for answers to questions in categories like travel, health and shopping.

“ ‘Bing’ sounds like a Jimmy Fallon word,” Mr. Silverman said, laughing. “The alignment is great.”

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On “The Philanthropist,” in which James Purefoy portrays a globetrotting do-gooder, the Bing Maps feature will establish where in the world the character is; other characters will use bing.com to seek information.

And viewers will be prompted as commercial breaks begin to visit bing.com to learn more about subjects discussed during “The Philanthropist,” scheduled to run for eight episodes (which makes it, in the vocabulary of the drum-beating Mr. Silverman, “a summer maxi-series”).

The sponsorship deal with MTV Networks is to start on Thursday on “The Daily Show With Jon Stewart” on Comedy Central, and continue through June 17 on “Top 20 Countdown” on CMT, “The George Lopez Show” on Nick at Nite, “Charm School” on VH1 and “Real World — Road Rules Challenge Duel II Reunion Special” on MTV.

The Bing sponsorship will be centered on offering viewers about two minutes of additional content for each show by reducing the number of commercials. (Advertisers like Philips have done that before, enabling programs like “NBC Nightly News With Brian Williams” to report more news.)

The MTV Networks shows will carry a Bing spot, created by JWT, called “Fast Forward,” which looks like viewers are using the fast-forward feature on a DVR or VCR to zip through 2 1/2 minutes of commercials in 30 seconds. The intended message is that bing.com is about “getting what you want,” the spot declares.

“What’s great about ‘Fast Forward’ is that it flips traditional TV advertising on its head,” Judy McGrath, chairwoman and chief executive at MTV Networks in New York, wrote in an e-mail message, “to the benefit of the marketer and the consumer.”

“We’re delivering stronger exposure for the brand,” she added, “and more show for the fan.”

The risk with all branded entertainment is that it comes across to consumers as too much brand and not enough entertainment.

In searching for ways to be “baked into the shows,” said Eric Hadley, general manager of worldwide marketing for search and MSN at Microsoft, the goal must be to get consumers to “say ‘Oh, wow’ ” and not “ ‘That’s it?’ ”

Windows 7 RC Available, Includes “XP Mode”

The really good news is that Windows 7 will include “XP Mode”: a fully licensed, virtualized copy of Windows XP. XP Mode will be available as a download for users with Windows 7 Professional and up. As Jeff Atwood notes:

The attraction of virtualizing older operating systems is that it throws off the eternal yoke of backwards compatibility. Instead of bending over backwards to make sure you never break any old APIs, you can build new systems free of the contortions and compromises inherent in guaranteeing that new versions of the operating system never break old applications.

XP Mode should mean that Windows 7 is completely backwards-compatible with XP, and should also mean that Microsoft can start removing the older cruft from the OS that is currently only there to ensure backward-compatibility.

Cloud Computing: The Next Big Thing?

What Is Cloud Computing?

Cloud computing is a style of computing in which data and software is housed in remote data centers rather than on-site server, which are typically accessed through the Internet. It implies that instead of running software applications on your computer, you run the apps in the "clouds" in cyberspace, in other words through the Internet. All your programs and files are stored on an outsourced computer network.Users need not have knowledge of, expertise in, or control over the technology infrastructure "in the cloud" that supports them.

The concept incorporates infrastructure as a service (IaaS), platform as a service (PaaS) and software as a service (SaaS) as well as Web 2.0 and other recent technology trends that have the common theme of reliance on the Internet for satisfying the computing needs of the users. Examples of SaaS vendors include SAP Business ByDesign, Salesforce.com and Google Apps which provide common business applications online that are accessed from a web browser, while the software and data are stored on the servers.

Cloud computing should not be confused with grid computing ("a form of distributed computing whereby a 'super and virtual computer' is composed of a cluster of networked, loosely-coupled computers, acting in concert to perform very large tasks"), utility computing (the "packaging of computing resources, such as computation and storage, as a metered service similar to a traditional public utility such as electricity") and autonomic computing ("computer systems capable of self-management").

Advantages of Cloud Computing:

1.Cost is greatly reduced and capital expenditure is converted to operationalexpenditure. Server equipment cost is reduced due to elimination of the necessity of on site servers. Staffing cost also comes down, since there is little or no need for on-site network administration.

2. This lowers barriers to entry, as infrastructure is typically provided by a third-party and does not need to be purchased for one-time or infrequent intensive computing.

3.Device and location independence enable users to access systems using a web browserregardless of their location or what device they are using, e.g., PC, mobile. As infrastructure is off-site (typically provided by a third-party) and accessed via the Internet the users can connect from anywhere.

4.Multi-tenancy enables sharing of resources and costs among a large pool of users who can acces it through PC, netbooks, mobile phones and other handheld devices.

5.Clouds provide scalability; can easily grow as the organizaton grows.

6. Security typically improves due to centralization of data, though concerns are raised about privacy issues.

Cloud Service Providers (CSPs) include bigger names like Amazon, Microsoft , Google , Sun and Yahoo.

Worldwide cloud computing services revenue is continuing to grow at a rapid rate, and is expected to top $56.3 billion (US) in 2009, according to a report from technology research firm Gartner. Market revenue grew by 21.3 per cent from 2008's $46.4 billion, and it will continue to increase to $150.1 billion in 2013.

Nonetheless, there are still concerns about security and privacy from individual through governmental level, e.g., the USA PATRIOT Act and use of national security letters and the Electronic Communications Privacy Act's Stored Communications Act.