Rob Black's "Winners & Losers" Facebook Slows Growth, Social Security Underfunded and Netflix Tumbles

By: Rob Black - Mon, 23 Apr 2012 17:11:58 -0800

Loser: Stocks Join Global Slump

Stocks joined a global selloff as political uncertainty in France and the Netherlands intensified concern about Europe’s sovereign debt crisis.

Dutch Prime Minister Mark Rutte offered to quit after lawmakers split over austerity and French President Nicolas Sarkozy lost the first round of his re-election bid.

Wal-Mart retreated 4.7 percent amid a bribery probe in Mexico.

 Equities from Hong Kong to Paris and Sao Paulo slumped.

The financial markets are correcting, but they will do better later in the year

Apple reports results tomorrow.   Profits at the maker of iPhones and iPads have beaten analysts’ estimates 97 percent  of the time since 2003. The stock rises by an average 2.6 percent from the close prior to earnings to 8 a.m. the next day.

Loser: Social Security Fund to Run Out in 2035

The Social Security program will exhaust its trust fund in 2035 and have to start reducing benefits to senior citizens unless Congress intervenes.

That is three years sooner than projected in 2011 for the retirement benefits program, which serves 44 million people.

Social Security’s disability program, which aids 11 million Americans, will run through its trust fund in 2016, two years earlier than predicted.

 Medicare will run dry in 2024, the report said.

House Republicans propose replacing Medicare with government subsidies to help seniors buy private insurance. Democrats and the Obama administration rejected that plan and have said they want to find ways to shore up the traditional program.

Neither side has offered a plan for Social Security, which at a 2011 cost of $736 billion is the U.S. government’s largest single program.

Mitt Romney proposes raising the Social Security retirement age for younger people and indexing benefit increases for higher-income retirees to inflation instead of wages.

The slow economy harms the programs because when unemployment rises, fewer Americans pay the payroll taxes that support Social Security and Medicare. At the same time, some people unable to find work apply for Social Security benefits earlier than they had planned.

Loser: Facebook Profit Drops as Costs Almost Double

Facebook, the social network planning an initial public offering, said first-quarter profit  of $205 million fell 12 percent as operating costs almost doubled.

Sales climbed 45 percent to $1.06 billion, a slowdown from 55 percent in the December period.

Expenses surged to $677 million, reflecting higher costs of helping marketers reach Facebook’s growing user base, which swelled by one-third to 901 million last quarter.

This was a transition quarter for Facebook. New ad services and increased emphasis on mobile users “will likely have a more significant impact on the company’s revenues later in the year”.

Facebook unveiled a new metric that showed monthly revenue per user climbed 6 percent to $1.21.
The company valued its shares at $30.89 apiece at the end of January, up from $29.73 at the end of last year.

Facebook said 82 percent of its revenue came from advertising last quarter, down from 83 percent in the preceding period. The company also derived less revenue from gaming company Zynga, which contributed 11 percent of the total in the quarter, down from 13 percent a year earlier.

The number of daily active users rose to 526 million, an increase of 41 percent from a year earlier.
“Our costs are growing quickly, which could harm our business and profitability,” the company said in the filing.“

Loser: Netflix Tumbles on Slower Online Growth
Netflix, the world’s largest video-subscription service, said customer growth will slow after posting first-quarter gains that met analysts’ estimates.

 The stock fell 16 percent in extended trading.

Los Gatos based Netflix,  added 1.74 million new U.S. online subscribers to reach 23.4 million.
Second-quarter growth will slow by at least half and probably more.

Chief Executive Officer Reed Hastings cited seasonal factors for the slowdown.

The company is racing to add customers to confront competition from Comcast’s StreamPix and Verizon’s online venture with Coinstar’s Redbox.

 While Netflix may post a second-quarter profit, investors are focused on customers additions.

For the second quarter, domestic online users will increase to between 23.6 million and 24.2 million, suggesting growth of 200,000 to 800,000. Analysts were predicting a gain of 781,000 online users.
DVD users will shrink by 740,000 to 1.14 million, declining to as little as 8.95 million, the company said. Analysts had forecast a drop of 623,000.
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