Roulston's Technology Consultant on Innovation in Wi-Fi

Roulston Research’s Technology Consultant Craig Mathias recently wrote an article on how the wireless-LAN industry continues to see remarkable innovation despite being around for over twenty years. He points to the introduction of new products from Motorola and Meru Networks as perfect examples of how the industry continues to reinvent itself. Motorola introduced a new high-end controller called the NX 9000 which has the potential to evolve from simply a controller to a platform of applications. Craig states, “As controllers are basically single-board computers running specialized software, why not host that software on a platform capable of much more? And, indeed, Motorola is going to move in that direction over time.”

Meru Networks announced the new AP400 series which allows users to have up to four radios at capacity levels that were once thought to be unheard of. Craig expects the level of innovation in this space to slow over the next three to five years based on his belief in the life-cycle of high technology products. He explains, “Products and services are essentially good enough to address almost any common application with very favorable price/performance, and that further innovations from that point would more likely be in pursuit of incremental enhancements in revenues and profits (via product-line extensions), not the application of new basic technologies.” This will eventually allow people to focus on applications instead worrying about constantly upgrading rapidly changing technology. You can read Craig’s full blog post at
http://www.networkworld.com/community/blog/wi-fi-no-slowdown-innovation-yet

Craig J. Mathias is a Principal with Farpoint Group, an advisory and systems-integration firm based in Ashland, MA, specializing in wireless networking, mobile computing, and related technologies, products, and services. He will be participating in the Wireless and Mobile Device Roundtable event on Wednesday June 8th at 2 PM in New York City.

Roulston's Retail Consultant on Rising Raw-Material and Labor Costs at Specialty Retailers

Roulston Research's Retail Consultant John Kyees gives his take on how retailers have been dealing with higher raw-material and labor costs. Gap reported last week that raw-material costs are rising faster than expected and faster than they will be able to raise prices. This will reduce profit margins at the company for the year and it is feared that other specialty retailers will face similiar problems. John explains, "Actually I think cotton price increases have slowed a bit. Gap is in that tier of retailers that can't raise prices easily without incurring a competitive disadvantage. Those retailers who are highly differentiated will be able to add 5-10% to their retail prices and preserve their profitability. Gap sales basics for the most part which are identifiable and very price competitive. Gap is also probably heavily concentrated with China sourcing which means they're experiencing labor cost increases as well as cotton cost increases. Retailers such as Urban Outfitters have maintained a diverse sourcing structure with China only accounting for about 20-25% of their sourcing. This gives URBN leverage with the Chinese factories in that URBN can move production to a lower cost country in which they've already established a reliable factory base."


John Kyees retired from Urban Outfitters on June 30, 2010. He joined the company in November 2003 as the CFO and served in that capacity until February 2010. John is a 33-year veteran in the retail industry with CFO roles at several retailers.

Roulston's Social Media Consultant on LinkedIn IPO and Valuation

Roulston Research's Social Media Consultant Rob Enderle has an interesting perspective on LinkedIn's initial public offering. The company sold 7.84 million shares at $45 last Thursday and shares soared 109% on the first day of trading. Rob states, "The feeding frenzy surrounding LinkedIn is largely the result of an imbalance between the number of investors and the amount of equity available for them to invest in. In short we have a supply/demand imbalance which is driving the stock higher than the company performance can sustain. This has likely created a bubble and a problem for the companies coming after because LinkedIn’s prospectus anticipates slowing revenue growth and uncertain profits going forward which could cause this bubble to break prematurely and before the other IPOs can come to market.

The big problem for the category is that the sustaining revenue that supported a similar trend surrounding Google’s IPO has largely been consumed by Google and Microsoft leaving it unavailable to the Social Networking vendors. Granted through Microsoft Facebook has some extra leverage but Microsoft isn’t Google and the uplift they can provide, as a result, is much more limited. Large IPOs also drive venture investment into competitors and social networking is still in its infancy and the combination of privacy concerns and legislation could cause any one of these companies to fail if the right, and increasingly likely, set of scenarios were to take place. Given we are, in the US entering an election period and the topic has already become an issue, these risks appear to be increasing at the moment. In short the over valuation of the social networking companies is the result of a feeding frenzy on a limited resource and while I believe we have some headroom through the Facebook IPO, there is increasing risk it will collapse prematurely. That should be factored into related investment decisions."


Rob Enderle is President and Principal Analyst of the Enderle Group, a forward looking emerging technology advisory firm. He specializes in providing rapid perspectives and suggested tactics and strategies to a large number of clients dealing with rapidly changing global events.

Roulston's Retail Consultant Bloomberg Interview on Wal-Mart Earnings and Outlook

Roulston Research’s Retail Consultant Craig Johnson of Customer Growth Partners recently appeared on Bloomberg discussing some of the major challenges Wal-Mart is facing moving forward. The company’s first quarter results beat Street expectations by 3 cents coming in at 98 cents per share. However, sales of stores based in the United States fell for the eighth straight quarter. Their core consumers have been hit hard by the economy and they have been losing sales to bottom-end food retailers like Aldi and Save-A-Lot. Wal-Mart’s super-center stores were created for the retail wars of the past but now consumers like convenience in addition to low prices so they have been shopping at other retailers. The company is rolling out smaller retail stores domestically to better compete with these stores but Craig feels they are 2-3 years late with this concept.

The other major problem the company has been having is that they have been losing sales to online retailers as consumers seek more convenience in their shopping habits. Consumer electronics has been a major growth driver for Wal-Mart over the past decade but the company has been losing sales to online retailers like Amazon.com. This is a major concern for them long-term and they have recently purchased online Chinese grocery store Yihaodian and social media start-up Kosmix, which is focused on e-commerce, to broaden their exposure in this area. However, in this space they don't have a major footprint and it will be one of their big challenges moving forward. You can view his whole interview at http://www.washingtonpost.com/business/johnson-says-wal-mart-losing-sales-to-online-retailers/2011/05/17/AFMZzo5G_video.html

Roulston's Retail Consultant on Wal-Mart's Entry into Home Delivery and Handgun Businesses

Walmart has recently decided to test out a home delivery system in parts of the country for consumers to purchase food, health-and-beauty products, medicine, and other basic household items online and have them delivered to their house with fees starting at $5 in an attempt to fight off Amazon.com and other online retailers. In addition, they have decided to sell shotguns, rifles and ammunition in half of their domestic stores to try and increase sales on a firm-wide basis. Roulston Research's Retail Consultant Maggie Gilliam gives her thoughts on Walmart's new strategy. She states, "Walmart pulled handguns out of all stores and cut back on other firearms when there was a lot of public outcry concerning them. They clearly don't belong in all stores in any event and require a lot of supervision.

However, guns have become a growth business in the last several years, and the company has been missing out to a considerable extent. In going from one-third to one-half of its stores though, the company is only going to be adding them into 17% of the stores incrementally. The addition is not going to move the needle of overall sales.

Walmart has a very successful home delivery business in the UK through its ASDA subsidary. It also conducts home delivery in Japan, somthing Seiyu started ten years ago and before Walmart acquired the company. However, home delivery hasn't been high priority at Walmart Japan, until this year, but the company is going to develop it. San Jose is a test in a less densely populated area and a state where powerful unions are hampering the development of Walmart's grocery business. Walmart's aim is to satisfy consumers however they want to shop."


Maggie Gilliam is founder and principal of Gilliam & Co. and publishes a monthly publication called the Gilliam Viewpoint which covers the events taking place in the retail and related industries.

Roulston's Technology Consultant on Microsoft's 8.5 Billion Dollar Aquisition of Skype

Roulston Research's technology consultant Robert Rose gives his take on the Microsoft 8.5 billion dollar acquisition of Skype last week. He states "The Monday morning quarterbacking has begun and all the pundits are debating whether Ballmer’s deal makes any sense. So, nearly a week later – and I (like the rest of the market) have run through an entire range of Kubler-Rossesque emotions about the deal. First I had disbelief that they paid so much (and I still believe they did). Then, there was the outright incredulity at what an idiotic move it was. And, then, after I’d thought about it a bit more – and read a bit more I shifted my opinion. Here are the things that I believe about the deal.

1. They had to do it. Almost certainly the high price was because Ballmer felt like he had no choice. It was going to be Google – and that was just too much for Microsoft to stomach. They needed to make a move. I mean certainly nothing has changed (technologically) since the eBay sale. And, one might even argue that Skype 5 is getting really horrible reviews. But, in the end – Microsoft needs to start making bold moves and this was one of many I suspect are coming.

2. This has everything to do with Nokia. Putting Skype (and Windows Phone 7) on Nokia phones will make Microsoft instantly credible in the market for smartphones. And, it could theoretically keep Skype away from Google, Apple and Android devices. Although….

3. Licensing will be huge. Microsoft will have to monetize Skype and monetize it quickly – so I see them doing deals with (at least) Facebook – and possibly Google and Apple to put Skype applications on their platforms. This will be tricky since in some cases it’s there – and of course free… So – what that deal will look like is anybody’s guess.

And then… my way out there thought…

4. This tees up Microsoft to buy RIMM. Certainly this has been brought up before – and with RIMM really struggling right now and if the price gets low enough in the next 18-24 months (guessing in the $15/$20B range)… I could definitely see Microsoft pulling that out…. That would instantly make Microsoft the #1 mobile platform in the world – and certainly the leader in the business enterprise… Bing is now the “official” search engine for Blackberries – and I’d look for more deals like that coming soon.


Basically, if MSFT is going to have any hope for major growth – they MUST become the number 1 or 2 player in the mobile market. They HAD to buy Skype. They HAVE to be successful with Nokia – and at some point – unless Windows Mobile Phone OS takes off virally (which I’m not convinced it will) then they will need to buy their way in."


Robert Rose is founder of Big Blue Moose and innovates creative and technical marketing strategies for his clients. You can view his website at http://www.bigbluemoose.net

Imperial Holdings: Large Upside Potential

A New York presenter recommends Imperial Holdings (NYSE: IFT, $9.74). The company has carved out a leading position in a very niche market of life insurance premium financing. IFT IPO'd back in February and now has sufficient capital to finance on its own, as opposed to borrowing from third parties at prohibitive cost. The company's structured settlements business is now breaking even and growing briskly with repeat business becoming more and more prevalent. The CEO has solid background in the space and has taken another company public, which was later sold at a favorable valuation. The stock is trading at book at the moment. The presenter believes the book value should grow at a mid-teen rate in the next few years and the stock then could trade up to 3x book.