Content is Still King
Content vs. distribution, the long-standing debate in the world of media, may have finally anointed a clear winner: content. Years before the advent of cable television, the Internet, satellite radio and the numerous other distribution channels in the market today, companies that controlled distribution were regarded as the “gatekeepers.” Content providers battled over airtime and the gatekeepers chose the victors. As each new distribution channel was introduced, the number of consumer viewing options multiplied, reducing the power of the gatekeepers.
Rather than simply provide access to content, media companies discovered a need to aggregate quality content in order to attract the consumer. Comcast's $51 billion acquisition of AT&T in 2002 provided Chief Executive Brian Roberts with nearly 60 percent of all cable/satellite television subscribers, leading market mavens to speculate the return of the gatekeepers to power. This speculation resulted in a spate of acquisitions as News Corp., Time Warner and other media giants fought to keep pace. But as HBO, ESPN, USA Networks and other powerful cable networks have shown, the experts miscalculated the power of the consumer. With the growing reach of the Internet—through streaming media sites such as Hulu and YouTube, social networking sites including Facebook and MySpace, news aggregators like Digg, and the ubiquitous blogging community—the options available to the consumer have never been greater. Read complete report.
Monday, July 28, 2008
Healthcare industry review Q2-2008; RSM EquiCo Capital Markets
Healthcare Information Sharing
Advances in information technology have enabled better gathering, processing, management, and distribution of data. Nevertheless, less than one third of all U.S. hospitals and less than 20 percent of physicians' offices have meaningful forms of electronic data handling capability. As a result, IT spending is likely to remain robust for the foreseeable future.
Two areas of particular interest involve interoperability of healthcare systems and patient information management. Interoperability of health systems enables information exchange between hospitals and other facilities in order to improve the quality, efficiency, and effectiveness of treatments. In June, the Certification Commission for Healthcare IT (CCHIT) published its approved criteria for certifying certain electronic-health-record products, and they will begin accepting applications as early as August. Organizations such as CCHIT and the Healthcare Information Technology Standards Panel are committed to the adoption of widely accepted interoperable healthcare IT standards throughout the United States.
Concerning patient information management, Longs Drug Stores Corporation announced a partnership with Google to launch Google Health, a platform for linking Longs' pharmacy clients with doctors and healthcare providers in order to manage their electronic medical records. Separately, Kaiser Permanente has teamed up with Microsoft to launch a pilot program that would allow Kaiser's members to store their personal health information securely online using Microsoft's Health Vault. Read complete report.
Advances in information technology have enabled better gathering, processing, management, and distribution of data. Nevertheless, less than one third of all U.S. hospitals and less than 20 percent of physicians' offices have meaningful forms of electronic data handling capability. As a result, IT spending is likely to remain robust for the foreseeable future.
Two areas of particular interest involve interoperability of healthcare systems and patient information management. Interoperability of health systems enables information exchange between hospitals and other facilities in order to improve the quality, efficiency, and effectiveness of treatments. In June, the Certification Commission for Healthcare IT (CCHIT) published its approved criteria for certifying certain electronic-health-record products, and they will begin accepting applications as early as August. Organizations such as CCHIT and the Healthcare Information Technology Standards Panel are committed to the adoption of widely accepted interoperable healthcare IT standards throughout the United States.
Concerning patient information management, Longs Drug Stores Corporation announced a partnership with Google to launch Google Health, a platform for linking Longs' pharmacy clients with doctors and healthcare providers in order to manage their electronic medical records. Separately, Kaiser Permanente has teamed up with Microsoft to launch a pilot program that would allow Kaiser's members to store their personal health information securely online using Microsoft's Health Vault. Read complete report.
Wednesday, July 23, 2008
Government Services industry review Q2-2008; RSM EquiCo Capital Markets
Key Topic: Beyond the Beltway - Huntsville, Alabama
The release of the Defense Department's 2005 Base Realignment and Closure (BRAC 2005) transformation put Huntsville, Ala. on executive whiteboards throughout the government services and defense community. BRAC 2005 effectively cements Huntsville's position as the center for U.S. missile technology by realigning the Missile Defense Agency and the U.S. Army Space and Missile Defense Command with the Army Aviation and Missile Command and the Aviation & Missile Research, Development and Engineering Center at Redstone Arsenal and NASA Marshall Space Flight Center.
The Missile Defense Agency, part of the Defense Department, facilitates missile defense systems development that integrates multi-service capabilities into a seamless theater-defense system. It is also responsible for guiding the development of a missile defense system capable of defending the United States from foreign missile attack. Space and Missile Defense Command is responsible for developing the Army's missile defense systems and assuring the Army's access to and utilization of space access in the execution of its mission.
Senior leaders from the Beltway and beyond have taken note and many are actively building a presence in northern Alabama. Following is a timeline highlighting the recent migration to Huntsville. Read complete report.
The release of the Defense Department's 2005 Base Realignment and Closure (BRAC 2005) transformation put Huntsville, Ala. on executive whiteboards throughout the government services and defense community. BRAC 2005 effectively cements Huntsville's position as the center for U.S. missile technology by realigning the Missile Defense Agency and the U.S. Army Space and Missile Defense Command with the Army Aviation and Missile Command and the Aviation & Missile Research, Development and Engineering Center at Redstone Arsenal and NASA Marshall Space Flight Center.
The Missile Defense Agency, part of the Defense Department, facilitates missile defense systems development that integrates multi-service capabilities into a seamless theater-defense system. It is also responsible for guiding the development of a missile defense system capable of defending the United States from foreign missile attack. Space and Missile Defense Command is responsible for developing the Army's missile defense systems and assuring the Army's access to and utilization of space access in the execution of its mission.
Senior leaders from the Beltway and beyond have taken note and many are actively building a presence in northern Alabama. Following is a timeline highlighting the recent migration to Huntsville. Read complete report.
Global Financial Services industry review Q2-2008; RSM EquiCo Capital Markets
Sector Highlights - Specialty Finance
Sovereign Wealth Funds - Controversial Value
Wobble or topple? Which word will come to mind should another $55 billion evaporate out of the U.S. and European financial institution communities? Since the fourth quarter of last year, Sovereign Wealth Funds have poured about $55 billion into U.S. and European financial institutions, to the great benefit of their shareholders and customers. And this number is expected to growth further.
Questioning the steady stream of SWF capital infusions has become the fodder of politicians, lobbyists, protectionists and bloggers, among others. Yet alternative solutions on par with the magnitude of needed capital have yet to surface. With many of our financial institutions taking massive hits due to bad risk management and investments, the foreign capital has enabled balance-sheet strengthening and saved more than a few shareholders and taxpayers from painful results. Using SWFs to redistribute surplus wealth to those in need is a huge benefit to our capital system. Where are the Democrats when you need them? Read complete report.
Sovereign Wealth Funds - Controversial Value
Wobble or topple? Which word will come to mind should another $55 billion evaporate out of the U.S. and European financial institution communities? Since the fourth quarter of last year, Sovereign Wealth Funds have poured about $55 billion into U.S. and European financial institutions, to the great benefit of their shareholders and customers. And this number is expected to growth further.
Questioning the steady stream of SWF capital infusions has become the fodder of politicians, lobbyists, protectionists and bloggers, among others. Yet alternative solutions on par with the magnitude of needed capital have yet to surface. With many of our financial institutions taking massive hits due to bad risk management and investments, the foreign capital has enabled balance-sheet strengthening and saved more than a few shareholders and taxpayers from painful results. Using SWFs to redistribute surplus wealth to those in need is a huge benefit to our capital system. Where are the Democrats when you need them? Read complete report.
Sunday, July 20, 2008
Food & Beverage industry review Q2-2008; RSM EquiCo Capital Markets
Consumer Shopping Habits are Changing
A recent survey on food shopping in 2008 indicates that increased fuel and food costs are influencing how consumers shop, cook and dine. So far in 2008, families are eating their main meal at restaurants only 1.2 times per week, down from 1.3 in 2007 and 1.5 in 2006. Although retailers are benefitting as consumers eat at home more often, shoppers are making fewer two trips per week due to higher fuel costs.
Grocery spending has increased by 4.9 percent to a weekly average of $97.80 so far in 2008, up from $93.20 in 2007, exceeding food-at-home inflation of 4.2 percent over the same period. Some 48 percent of consumers claim their grocery-shopping patterns are being impacted by higher prices, up from 41 percent in 2007. In 2008, shoppers are changing their overall behavior: 48 percent are purchasing fewer food items, up from 40 percent in 2007, while 40 percent are purchasing more canned, frozen or boxed food items as opposed to fresh, non-preserved food, up from 30 percent in 2007. Read complete report.
Energy Services industry review Q2-2008; RSM EquiCo Capital Markets
Valuations Rise Rapidly as Competition for Deal Flow Intensifies
Although overall M&A deal volume declined in the second quarter of 2008 as global credit markets tightened and leverage became sparse, activity in the renewable energy sector remained strong. The industry continued to consolidate as companies sought to expand their energy-generation capacity through strategic acquisitions. The escalating competition for deal flow, particularly among the large, international power companies and specialized renewable energy companies, put upward pressure on valuation multiples. While it is still difficult to determine appropriate values for renewable energy transactions, average valuations increased to $4.2 million perMWof operating capacity. Compared to the cost of recent greenfield developments for approximately half that amount per MW, it appears that buyers are increasingly willing to pay significant premiums for attractive targets. Read complete report.
Wednesday, July 16, 2008
Engineering, Construction and Building Materials Industry review Q2-2008; RSM EquiCo Capital Markets
Global Infrastructure Growth
Global infrastructure spending is estimated to average $2 trillion annually through 2015, fueled by population growth, urbanization and industrialization. More than half of that spending is forecast to occur in emerging economies, driven by favorable regulatory policies, improved government finances and increased private-sector participation. Developing countries such as China and India have set ambitious infrastructure targets. China is earmarking over $543 billion for infrastructure expenditures from 2006 to 2010. Meanwhile, India is budgeting $494 billion for the next five-years (2008-2012) and $989 billion from 2013 to 2017.
The U.S. infrastructure is “aging and inadequate,” which will drive infrastructure expenditures. Recent commentary by E&C companies regarding infrastructure needs, backlog and order trends bodes well for continued strength in the infrastructure related end-markets. Read complete report.
Global infrastructure spending is estimated to average $2 trillion annually through 2015, fueled by population growth, urbanization and industrialization. More than half of that spending is forecast to occur in emerging economies, driven by favorable regulatory policies, improved government finances and increased private-sector participation. Developing countries such as China and India have set ambitious infrastructure targets. China is earmarking over $543 billion for infrastructure expenditures from 2006 to 2010. Meanwhile, India is budgeting $494 billion for the next five-years (2008-2012) and $989 billion from 2013 to 2017.
The U.S. infrastructure is “aging and inadequate,” which will drive infrastructure expenditures. Recent commentary by E&C companies regarding infrastructure needs, backlog and order trends bodes well for continued strength in the infrastructure related end-markets. Read complete report.
Chemicals Industry review Q2-2008; RSM EquiCo Capital Markets
Recent Trends
These are extraordinary times for the industry, with major producers announcing 40-45 percent price increases during the past two months in response to skyrocketing raw materials costs. With oil at $135 a barrel, one might expect the chemical industry to be suffering — and it is in specific sectors. Yet the questionwe keep hearing is: “Can I get the product?” Price concerns are much less important.
During the past year, the United States has again become an attractive place to produce chemicals, largely because of the soft dollar. Recently, the nation's appeal has been further enhanced by the rising cost of shipping, which has made Asian and Middle Eastern bulk-chemical suppliers less competitive. Despite the slowdown in the U.S. economy, the domestic market is still significant, and a production base in the United States has become almost mandatory for European producers, most of which have seen significant margin decreases due to the strong euro.
The result: some U.S. plants are gaining new life…and some companies are becoming highly attractive to international buyers. Read complete report.
These are extraordinary times for the industry, with major producers announcing 40-45 percent price increases during the past two months in response to skyrocketing raw materials costs. With oil at $135 a barrel, one might expect the chemical industry to be suffering — and it is in specific sectors. Yet the questionwe keep hearing is: “Can I get the product?” Price concerns are much less important.
During the past year, the United States has again become an attractive place to produce chemicals, largely because of the soft dollar. Recently, the nation's appeal has been further enhanced by the rising cost of shipping, which has made Asian and Middle Eastern bulk-chemical suppliers less competitive. Despite the slowdown in the U.S. economy, the domestic market is still significant, and a production base in the United States has become almost mandatory for European producers, most of which have seen significant margin decreases due to the strong euro.
The result: some U.S. plants are gaining new life…and some companies are becoming highly attractive to international buyers. Read complete report.
Wednesday, July 9, 2008
Basic Industries review Q2-2008; RSM EquiCo Capital Markets
Logistics Growth Rates Average Four Times that of GDP
The U.S. Gross Domestic Product growth rate is an accurate leading indicator for the annual growth rate of the third-party logistics (3PL) market. The 3PL market has grown at an average rate of more than four times that of the overall economy since 1998 . The primary growth factors for logistics outsourcing (besides general economic growth) include the desire of 3PL customers to concentrate on core competencies, reduce aggregate logistics costs, and improve supply-chain efficiencies through economies of scale.
These drivers traditionally move in an inverse relationship with the economy and actually increase during economic slowdowns, as many 3PL customers increase cost-cutting measures. Figure 1 (see the full report for image) illustrates the correlation between U.S. 3PL market growth and U.S. economic growth as measured by GDP.
For 2008, forecasted growth for the U.S. 3PL market involves modest growth of 8 percent, from approximately $119-$124 billion in 2007 to an estimated $125-$134 billion for 2008. Figure 2 shows 3PL growth through 2008. Read complete report.
The U.S. Gross Domestic Product growth rate is an accurate leading indicator for the annual growth rate of the third-party logistics (3PL) market. The 3PL market has grown at an average rate of more than four times that of the overall economy since 1998 . The primary growth factors for logistics outsourcing (besides general economic growth) include the desire of 3PL customers to concentrate on core competencies, reduce aggregate logistics costs, and improve supply-chain efficiencies through economies of scale.
These drivers traditionally move in an inverse relationship with the economy and actually increase during economic slowdowns, as many 3PL customers increase cost-cutting measures. Figure 1 (see the full report for image) illustrates the correlation between U.S. 3PL market growth and U.S. economic growth as measured by GDP.
For 2008, forecasted growth for the U.S. 3PL market involves modest growth of 8 percent, from approximately $119-$124 billion in 2007 to an estimated $125-$134 billion for 2008. Figure 2 shows 3PL growth through 2008. Read complete report.
Aerospace & Defense industry review Q2-2008; RSM EquiCo Capital Markets
Key Trends
High Jet Fuel Prices Challenging Financial Health of the Airlines
The current operating environment for the commercial airline industry presents a set of unprecedented challenges that may threaten the viability of even the largest fleet operators. A combination of $143 a barrel oil and a weakening global economy has forced over 20 airlines into bankruptcy this year and caused many others, including Air Canada, Qantas, and US Airways, to reduce capacity. Today's oil prices have reduced the financial effectiveness of capacity cuts, as even full planes are not cash-flow positive at these levels. Drastic measures such as fuel surcharges and baggage fees may not be sufficient to return the airlines to profitability. Operators are struggling to generate a profit as the rise in fuel prices has increased fuel expenditures to between a third and a half of most carriers' operating costs. In the equity market, volatility surrounds the sector as analysts have questioned the ability of industry participants to adapt to high oil prices.
The difficulties facing the airline industry have caused concern over the health of the order book for new commercial aircraft, since the order book is only as healthy as the customer accepting delivery. Over the near term, orders appear secure as the initial deliveries are going to international, regulated airlines that generally are in stronger financial condition. Uncertainty arises when the unregulated, mostly U.S.-based airlines are due to accept deliveries in 2010 and 2011. The effect on the global supply chain is unclear, as the airline industry must face the difficult decision of buying new, more fuel-efficient aircraft or cancelling orders in order to conserve cash. Read complete report.
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