WSJ Articles: Bankruptcy Revisions

An article posted on the Wall Street Journal describes the revisions that may alter the flow of money when a company declares bankruptcy. Currently, bankruptcy professionals are paid high amounts to aid companies. Federal watchdogs believe investors and company employees should be the ones first receiving the company’s funds.

Bankruptcy professionals’ cost to companies often includes non-business related costs, such as travel expenses and food. In the authors’ words, a company’s declaration of bankruptcy results in a “feasting off a corporate carcass.” Some bankruptcy specialists are believed to take advantage of their clients, requesting reimbursement for expensive hotel stays and “abusive billing” for little items such as a pack of gum.

The proposed guidelines, which have undergone two revisions as of now, will limit attorneys’ rights in bankruptcy cases regarding “overhead” charges. In 2011, law firm Slaughter and May sought reimbursement for photocopying and stationary charges, but later took a $73,000 reduction.

Two other noteworthy articles:

Wider Problems Found at IRS

Stocks Weaken Despite Retail Data

Final Project- Book Industry, Barnes & Noble and Christian Bookstores

Barnes & Noble Banks on Underperforming NOOK e-Reader

to Revitalize Declining Book Sales

 To compete with Amazon’s popular Kindle e-reader, retailer Barnes & Noble continues to invest in its NOOK tablet, although profits have been lower than expected due to consumer preferences and higher tablet and content prices.

Since the launch of the first e-reader in 2009, both Barnes & Noble and Amazon have shifted their strategy away from selling print books to developing multi-channel strategies including online stores offering electronic content and book sales. Over the past three years, the content available to tablets has rapidly grown, with the NOOK bringing in $1 billion in sales in fiscal 2013.

Despite its prominence as the top storefront book retailer, Barnes & Noble has always fallen second to Amazon, facing a loss of nearly $69 million in 2012, its fifth consecutive year of decline despite sales increasing by 2% over the year. As the company aims to compete in the e-reader market, the costs of developing and improving the NOOK have driven up its expenses.

Barnes & Noble additionally faces costs to vendors who distribute the NOOK, who earn a commission on content sales. NOOK, one of the company’s three sectors along with Barnes & Noble Retails and Barnes & Noble College, faces an additional expense of paying publishers to acquire the rights to distribute content digitally.

According to the company’s SEC filing in March, publishers set fixed prices for electronic book content, with NOOK only receiving a fixed commission. Although popular book series like the “Harry Potter” children’s books and the “50 Shades of Grey” trilogy driving consumers to purchase content, sales have not been enough to offset the company’s debt.

Despite the company’s high expectations during and after the 2012 holiday season, NOOK sales were down 26% for the most recent fiscal quarter 2013 compared to the same period in 2012. NOOK expenditures in the same quarter were tripled, however, compared to a year prior. Overall company sales were down 9% in the most recent SEC filing compared to the sales of the same 2012 fiscal quarter.

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Over the past six months, Barnes & Noble’s stock price has fluctuated, although the price has been on a fairly steady rise since February. However, in February 2011, the company halted its quarterly dividend payments in response to its steady net loss.

Despite its net loss and a disappointing last fiscal quarter, a recent investment by Pearson, a global learning company, in NOOK Media, a subsidiary of Barnes & Noble dedicated to online development and strategy has prompted the company to maintain an optimistic outlook on the future of its e-reader.

In January, Barnes & Noble reported that Pearson had completed its $89.5 million cash investment in NOOK Media, with the option to purchase additional ownership in the subsidiary. Microsoft also owns membership interest in NOOK Media.

According to the company’s press release, the investment will “accelerate customer access to digital content by pairing its leading expertise in online learning with NOOK Media’s expertise in reading technology, online commerce and customer service.” In accordance with the boosted confidence in the NOOK, a recent filing with the SEC disclosed that Barnes & Noble’s CEO, William Lynch Jr., will receive a $1.8 million bonus for the completion of transactions with Microsoft in the creation of the NOOK subsidiary, as well as for the Pearson investment.

Additionally, if Lynch is reassigned to the position of NOOK Media’s CEO in the future if the NOOK subsidiary eventually separates from the company, he will retain a cash bonus of $15 million.

The company has released eight versions of its e-reader, including the “NOOK 1st Edition,” “NOOK Wi-Fi 1st Edition,” “NOOK Color,” “NOOK Simple Touch,” “NOOK Tablet,” “NOOK Simple Touch with GlowLight,” “NOOK HD,” and “NOOK HD+.” NOOK devices have an estimated two year life span, a short period of time for some of the costlier devices.

The cheapest NOOK model, the NOOK 6 in simple touch starts at $79, and is the simplest model that most closely replicates the experience of reader a paper book. The priciest model, the NOOK HD+, begins at $269, and offers an HD screen, built in WiFi capabilities, and can play videos. Amazon’s e-readers are slightly cheaper than the NOOK, with the simplest version of the kindle starting at $69. Both models have similar interfaces, although the kindle weighs less than the NOOK.

The first level of HD models for both Amazon and Barnes & Noble both start at $199, but the Kindle Fire HD offers a front facing camera, while the NOOK HD does not have picture-taking capabilities.

The Kindle store’s prices for content in comparison with the NOOK store’s are nearly identical, as prices are set under an agency model by the publisher. The popular young adult novel, “The Fault in Our Stars” by John Green, retails at $10.99 on both online stores.  The hardcover version sold on Amazon is $10.25, while the Barnes & Noble offered hardcover is $11.98.

The thriller “Gone Girl” by Gillian Flynn, retails at $12.99 for both a NOOK and kindle download, but the hardcover version costs $19.92 on Barnes & Noble, and $16.25 on Amazon. Although the e-reader content is nearly identical, consumer perceptions that Amazon books tend to be cheaper than Barnes & Noble’s may sway customers to purchase kindle devices instead.

Selected popular books are offered at a significantly reduced price for e-readers, as the digital version of “The Great Gatsby” is available on the NOOK store for only $2.99, far cheaper than the $13.05 paperback version. The prices of popular series, including children’s books, offered digitally are only slightly lower than the price of print books. The “Diary of a Wimpy Kid” series ranges from $7.50 to $9.39 online, with the hardcover books ranging from $8.49 to $10.86.

As a result, the combined price of both the e-reader and the cost of downloading content may dissuade some customers from purchasing a NOOK. Other devices, including Apple’s iPad and iPhone, also double as e-readers with apps like “Books” offering unlimited access to books by classic authors like Mark Twain, H.G. Wells and Charles Dickens for $0.99. The Apple Store also sells digital books at the same price as the NOOK and Kindle stores, in addition to audiobooks.

Although an e-reader may seem like a necessity in the growing digital age, the lower than expected performance of the NOOK illustrates that customers may prefer paper books to electronic downloads. E-readers offer user-friendly interfaces, but readers who prefer to take notes in margins or highlight continue to purchase regular books.

*All data in the story and graphs taken from SEC Filings

Beyond Barnes & Noble: The Christian Book Industry

WSJ Articles: Preferred Shares, Stocks Rise, Summer Blockbusters

An article by Katy Burne recently posted on the Wall Street Journal website defines and emphasizes the significance of preferred shares, as $13.6 billion shares of preferred stock have been sold by primarily big banks this year alone.

Preferred stock is advantageous for both purchasers and banks, as investors are ranked ahead of common shareholders and banks are able to add capital to their balance sheets without affecting current stockholders.

Some analysts and investors view the rise in preferred stock as an indicator of the market’s recovery from the 2008 crisis as banks are now issuing stock with lower dividend payout rates after a recent bond-market rally. Prices are expected to continue to rise over the next year.

Bank bonds continue to outsell preferred stock, with $124 billion in bonds trumping the $7.4 billion in preferred shares this year. Citibank, J.P. Morgan, Goldman Sachs and other large banks will likely continue to issue preferred shares as an inexpensive way to raise funds and attract investors.

Two other noteworthy articles:

Stocks Bounce Back: Both the Dow Jones Industrial Average and the S & P 500 have recovered from last month’s slumps.

Hollywood Risks Glut This Summer: At least 22 anticipated and big-budget movies will debut this summer, including “The Great Gatsby,” “Monsters University,” and “Man of Steel.” Movie attendance has decreased in the past year, but the film industry is banking on competition and word of mouth to attract moviegoers over the next few months.

WSJ Articles-Microsoft Profit Up, but Windows Down

A story in the Wall Street Journal describes the changes in the consumer market that have affected Microsoft’s earnings in the last fiscal quarter. Due to the surge in Apple product popularity, PC demand has gone down. 

The Bing search engine and Microsoft’s Xbox game console have contributed to a 8.2% growth in sales and 19% rise in profit compared to last year, but the Windows software failed to rake in noticeable revenue for Microsoft.

Although the company has developed and released devices with new Windows 8 software, sales were low due to negative consumer feedback and failed to win over new fans in the “Mac vs. PC” debate.

Microsoft’s share price may fluctuate in the coming months, as the company appoints a new CFO in the wake of Peter Klein’s resignation. The company will likely also release a new Xbox gaming console before the end of the year.

CEO Profile- Debbra Malchow, Emily’s Cookie Mix Shoppe

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Emily’s Cookie Mix Shoppe

Debbra Malchow is a “one-woman show.” Several hours before the doors of her bakery swing open luring customers in with the scent of freshly baked chocolate chip cookies, Malchow is in the kitchen prepping for the day. From 11 a.m. to 5 p.m., both familiar faces and curious first-timers stop by Emily’s Cookie Mix Shoppe, and Malchow, the owner and sole employee, attentively stops to chat with each guest, even promising one young fan that she will step outside the bakery to meet her new puppy. Although Emily’s is nestled in the countryside of Burlington, the baked goods at Emily’s are worth the drive.

Since the debut of baking shows like “Cake Boss” and “DC Cupcakes,” several neighborhood bakeries have popped up in the past few years. Despite the growing competition, Malchow is fully confident that Emily’s has what it takes to outlast the budding bakeries. Emily’s offers an extensive menu, ranging from the ever-popular cupcake, to flower-shaped cheese straws, to hand-made chocolates. However, Malchow’s path to becoming a successful baker, originating out of her home kitchen, may surprise first-time visitors.

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owner Debbra Malchow

Growing up, Malchow’s grandmother taught her how to bake. Baking was initially a hobby, rather than a career, as she studied interior design at the University of Wisconsin-Stout, and later went into legal and financial management. In 1997, Malchow’s daughter Emily, her third child, was born with Trisomy-18, a terminal chromosome disorder where only five percent of babies survive their birth, and an even smaller number live to their first birthday. After Emily underwent open-heart surgery at five-days-old, Malchow and her husband Craig set a goal: they would bring their baby home.

At the time, Alamance County only offered a hospice program for adults. After bringing Emily home, Malchow played an instrumental role in the development of Kids Path, a program for pediatric hospice patients that supports families by providing medical care and equipment at patients’ homes, as well as counseling services and support groups. Emily was Kids Path’s first patient, and the hospice now cares for over 200 pediatric patients and their families in the area.

As hospice workers visited her home, Malchow supported those who came to support her by baking them treats in her kitchen and thus perfected her chocolate chip cookie recipe. With the support of Kids Path and the care of her family, Emily beat the odds, living to be two years, two months and two days old. In her memory, Malchow began “Emily’s Cookie Mix, Inc.” selling chocolate chip cookie mixes online to raise funds for families facing financial difficulties in bringing their children home from the hospital.

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Emily’s Chocolate Chip Cookies

Malchow initially sold only one product, hoping to sell mixes that would send money directly to Kids Path. As her website grew more popular, she added more mix flavors and beverages to the menu, processing orders out of her kitchen and shipping them across the country. After numerous requests from customers to buy already-baked cookies, Malchow opened up a storefront on Huffman Mill Road. One year later, Emily’s moved to its current location at Jeffries Cross Road.

Since moving to the current storefront, Malchow has expanded her bakery far beyond the cookie mixes. Emily’s has added cupcakes and wedding cakes to its menu, which have grown to become her best-selling products. A meticulous and self-taught cake decorator, Malchow bakes all day from open to close, in addition to working closely with brides and event planners to create the perfect wedding cake.

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Wedding Cake Display

Couples flock to the bakery to work with Malchow, who says she is “not scared of brides.” Malchow says she tries her best to accommodate brides and give them the best option for their budget, charging for the whole cake, not each slice. She capitalizes on the growing cupcake trend, creating displays of tiered cakes surrounded by matching cupcakes. Cupcakes are “self-serving,” in Malchow’s words, and appeal to brides on tight budgets, as they can be customized with cute liners and are good for kids. Emily’s is booked through October, so those hoping to serve an Emily’s cake at their special day should contact Malchow far in advance.

Looking at the current economy, one wonders how a small business can survive the ups and downs. Although Malchow only knows too well that market fluctuations influence the price of ingredients, she believes that the need for a good cookie will never go away. Emily’s has raised its prices slightly in the past year, as eggs, butter and powdered sugar continue to be the priciest ingredients. Malchow says that “You can’t fool the tongue,” and people will gladly pay more for the homemade taste. Sales continue to steadily grow, increasing by five to ten percent each year.

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UNC Tarheel Cookies

As a business owner, Malchow embraces the flexibility of running a bakery, as she can change her products based on customer feedback and requests. Malchow is a Jack-of-all trades, crafting gift baskets, baking cookies for the ice cream sandwiches sold at Smitty’s and running a consignment area that gives the store “decoration.” Malchow says the key to being a strong female in business is to be smart and have a backbone. She explains that “failure” is not a word in her vocabulary. In business, she believes that “If you believe in something, you need to stand your ground.” In the future, Malchow hopes to expand the bakery, and potentially relocate to gain more walk-in traffic. Despite the growing number of bakeries in the area, she is undaunted. In her words, “Bring on the competition.”

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Consignment Corner

 

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Menu

Emily's Cookie Mix Shoppe

Emily’s Cookie Mix Shoppe

WSJ Articles: Stock Prices Rise, Record-Setting Kickstarter Campaign, Product Placement in Marvel Films

Stocks in the Standard & Poor’s index continue to rise, a trend further clarified in “Stocks March Higher.” A surge in natural gas prices combined with a falling number of workers filing for unemployment benefits propelled the S&P 500 to 1563.23, nearly matching the all-time high set in October 2007.

The upward trend in stock prices have helped in maintaining investor confidence, although not solid enough to “shock people into thinking that the Fed is going to pull back or raise interest rates,” according to Seth Setrakian, co-head of equity trading at New York First Securities.

As expected, the producer price index also increased last month, a direct result of the 3.6% natural gas price increase worldwide. Both European and Asian markets also experienced an increase in stock prices. However, not all S&P 500 companies had a strong showing in light of the general trend, as E*Trade and Vera Bradley both declined. On the opposite side, the WSJ lists EBay and Men’s Warehouse as two of the companies contributing to the raising stock prices and investor confidence.

More on the 10-Day Rally

S&P 500 Takes Its Own Shot

Other Good Reads

Kickstarter campaign raises $2.7 million to fund new Veronica Mars movie

Tony Stark will once again be driving an Audi in the next Iron Man film

WSJ Articles: Silicon Valley Start-ups, Struggling Apps, Investor Windfall

The article “New Money Ventures to Silicon Valley” elaborates on the abundance of hedge funds, sovereign-wealth funds and venture capitalists in the Silicon Valley looking to invest in up-and-coming young technology companies. Although technology companies like Facebook and Groupon haven’t performed as well as expected publicly, investors continue to fund start-up companies as previous sources of income have been less profitable in the past few years.

In January, Tiger Global Management LLC, an investment firm, played a significant role in Palo Alto based SurveyMonkey’s $880 million recapitalization. In addition to long-term investors like Tiger Global, other companies have recently entered the Silicon Valley start-up industry. Hedge fund Valiant Capital Management led a $200 million investment in Pinterest last month, while BlackRock Inc. agreed to purchase up to $80 million of Twitter’s stock.

Although Facebook and Groupon’s growth rates may have ceased to increase after turning public, investors still have faith in new tech companies. Entering a partnership with an likely investor is a new strategy for some start-ups, as Phil Libin, the CEO of Evernote plans on turning to public-market investors to buy out the company’s original investors once Evernote goes public and revenue peaks a few years down the line.

As a California native, it’s interesting to read that despite the economic troubles the state continually faces, money still pours into Silicon Valley. In addition to Apple, the pride of the state, other technology companies may take over the next few years and bring in some much needed revenue into the area.

Two other noteworthy articles this week:

“The Dirty Secret of Apps: Many Go Bust”

Unfortunately not all Silicon Valley start-ups fare as well as SurveyMonkey, with independent developers finding out the hard way that not all apps survive in the competitive market.

“Firms Send Record Cash Back to Investors”

Companies in the Standard & Poor’s Index are expected to pay investors $18 billion more in dividends than last year. The boost in investors confidence may result in more investment in start-up companies, an effect that may carry over all the way to the Silicon Valley.