Monthly Archives: August 2013

HBCU Money™ Dozen Links 8/12 – 8/16

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Did you miss HBCU Money™ Dozen via Twitter? No worry. We are now putting them on the site for you to visit at your leisure. We have made some changes here at HBCU Money™ Dozen. We are now solely focused on research and central bank articles from the previous week.

Research

Want #climatechange research methods, models, tools, & databases? l EPA Research http://go.usa.gov/j6ZJ

Beyond Google Glass: The wearable tech that will revolutionize business l ComputerWorld http://ow.ly/nY3BT

Infinity’s end, a way to fix the emergency healthcare crisis l New Scientist http://ow.ly/nXXaa

Sensible solutions for outdoor water use l IL-IN Sea Grant http://fb.me/2qop246FH

Solar-Powered Unmanned Aircraft Flew 9 Consecutive Hours l Clean Technica http://dlvr.it/3pYb6X

Youth Engaged in the READY Program’s #GreenJobs l MD Sea Grant http://bit.ly/14NC20O

Federal Reserve, Central Banks, & Financial Departments

View the latest series of charts from our Economic & Financial Highlights page l Atlanta Fed http://goo.gl/9evgcc

Interest rate spikes causes stocks to plunge l Housing Wire http://hwi.re/3pZWlx

Richmond Fed Magazine Econ Focus Reports on the Debate Over Chinese Currency Policy l Richmond Fed http://bit.ly/1a95QG9

Stabilizing the economy: Evaluating the effects of industrial diversity l KC Fed http://ow.ly/nY7bw

Baltimore foreclosures escalate l Housing Wire http://hwi.re/3pYgks

Cleveland, TN, has the region’s strongest recent employment gains. #SouthPoint post looks at why l Atlanta Fed http://goo.gl/v5c38S

Thank you as always for joining us on Saturday for HBCU Money™ Dozen. The 12 most important research and finance articles of the week.

The HBCU Money™ Weekly Market Watch

Our Money Matters /\ August 16, 2013

A weekly snapshot of African American owned public companies and HBCU Money™ tracked African stock exchanges.

NAME TICKER PRICE (GAIN/LOSS %)

African American Publicly Traded Companies

Citizens Bancshares Georgia (CZBS) $6.00 (0.00% UNCH)

Radio One (ROIA) $2.38 (5.05% DN)

African Stock Exchanges

Bourse Regionale des Valeurs Mobilieres (BRVM)  206.54 (1.13% DN)

Botswana Stock Exchange (BSE)  8 465.47 (0.17% UP)

Ghana Stock Exchange (GSE)  1 972.10 (64.38% UP)*

Nairobi Stock Exchange (NSE)  125.95 (N/A)

Johannesburg Stock Exchange (JSE) 43 042.11 (1.25% UP)

International Stock Exchanges

New York Stock Exchange (NYSE) 9 464.07 (0.27% DN)

London Stock Exchange (LSE)  3 456.02 (0.36% UP)

Tokyo Stock Exchange (TOPIX)  1 142.65 (0.80% DN)

Commodities

Gold 1 371.70 (0.74% UP)

Oil 107.05 (0.26% DN)

*Ghana Stock Exchange shows current year to date movement. All others daily.

All quotes reported as of 2:00 PM Eastern Time Zone

Office Depot & Office Max Merge – Now They Need To Buy Best Buy & Barnes & Noble

By William A. Foster, IV

In business, the competition will bite you if you keep running; if you stand still, they will swallow you. — Semon Knudsen

mergers-acquisitions

Life between a rock and hard place is a place many individuals and organizations try in principal to avoid at all cost. At the moment the rock and hard place exist on the landscape of the internet and traditional brick and mortar space, with Amazon being the retail rock on the internet and Wal-Mart the retail hard place of brick and mortar. Leaving other major retailers scrambling for cover and being squeezed mercilessly like fresh oranges during a summer morning in the Hamptons.

Office Depot and Office Max in February agreed to a $1.17 billion merger. It was essentially a move for survival. However, if the two assumed this in itself would be enough to survive, then they were simply extending life support not getting off it. To get off and compete they are going to have to be bold to the point of it becoming a great success or great disaster. If they are going to do so they need to act fast because the moment Amazon is able to completely implement its plan to deliver products within hours of online ordering the game is over. Therefore, let us look at the strategic acquisitions that would make sense immediately for this company that could rival Amazon and Wal-Mart’s scale presence.

Barnes & Noble would at the top of my list for the company’s next acquisition. Books are Amazon’s core business still. They are on pace to control almost one-third of the e-book sales market and probably already control at least this much if you combine e-book and print book sales which makes Barnes & Noble a key acquisition. It would give Office Depot/OfficeMax a key foothold onto Amazon’s turf. Currently, Barnes & Noble barely has a market capitalization above $1 billion making it a prime takeover target and affordable. The key part of Barnes & Noble is the Nook, which is the company’s e-reader to rival Amazon’s Kindle. It has struggled to challenge the Kindle primarily because Barnes & Noble simply does not have the R&D or marketing to encroach on Amazon with its current financial situation. Folding it into the new company would allow it to close a number of stores and make other necessary cuts to free up capital it could reinvest into the aforementioned areas. The book inventory of Barnes & Noble would also allow Office Depot/OfficeMax to make real inroads on Amazon’s turf.

The next acquisition will prove to be a bit more difficult but just as vital and that is Best Buy. Their market capitalization is hovering around $10.5 billion and would require Best Buy to be the acquiring company but regardless of how the merger/acquisition happens it needs to happen. Again, we would see a number of stores closed and other cuts. It would also allow the new company to create its own retail front with retail experience that could be reinvented to be more consumer friendly. Now, the new company could feature the Nook even more and block the Kindle’s presence. A move that Wal-Mart has already done to slow down Amazon’s encroachment. Best Buy’s Geek Squad could be further developed as a business service through Office Depot/OfficeMax commercial accounts to integrate customers deeper with the company. The electronics aspect of Best Buy then would have more cross sell opportunities between commercial/retail consumers. Wal-Mart has already established a strong foothold in electronics and Amazon is coming on fast. The casualty that was Circuit City was simply a foreshadow of what will happen to Best Buy if it does not find a dance partner and soon.

An examination of the past five years shows just how bad things are getting for Best Buy and Barnes & Noble as Amazon continues its expeditious growth. In the graph below we see over the past almost five full years Amazon’s stock price has risen almost 300 percent, while Best Buy and Barnes & Noble are down almost 30 percent over the same period. This is saying something given that most stocks have benefited greatly from the quantitative easing of the Federal Reserve as the chart also shows even the S&P 500 up over 20 percent over the same period.

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The proverbial ground is shifting under retail. It is shifting so fast that we may have passed the point of no return but I believe they still have a chance if they can pull off a merger and acquisition of this magnitude. There is no doubt that bringing together four companies, two which are commercial focused and two which are more retail oriented will be no easy task. The possibility of culture clash is heightened in this type of unification. Especially, given that time is of the essence and there is risk for not properly vetting through making sure the t’s are crossed and i’s dotted. However, there is no doubt what awaits this group of companies if they try and remain independent niche companies. Instead of standing still as they are now and in danger of being swallowed whole, maybe they can get into sprint mode and start to bite back at the competition.

Disclaimer: There is no ownership of any companies mentioned in this article by myself, my business, or my family as of this article’s publishing.

The HBCU Endowment Feature – University of Arkansas at Pine-Bluff

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School Name: University of Arkansas at Pine-Bluff

Median Cost of Attendance: $16 554

Undergraduate Population: 3 283

Endowment Needed: $1 086 935 680

Analysis: The University of Arkansas Pine-Bluff needs approximately a $1.1 billion endowment for all of its undergraduates to attend debt free. Located in Pine-Bluff, Arkansas which has the ninth largest population in the state. The school is located in a predominantly African American city but the last census shows over a 10 percent decline in the population over the past decade. A disturbing trend given that college towns on the rise tend to see a boom in their population and property values. They are also located only 45 minutes from Little Rock (pop. 200 000) which has a more than 40 percent African American population and less than 3 hours to Texarkana (pop. 143 000) which has more than 40 percent African American population as well. This triangle formation gives the University of Arkansas Pine-Bluff a strong base from which to start its growth and hopefully dominate the recruitment in the area. The university needs to at least double in size if not triple which could be extremely difficult to do given the demographic hurdles it would be facing. None the less rapid growth is needed in order to start to increase its probability of producing high quality donors. Currently, the school is not even at 2/1000th of its current to needed endowment ratio. The current endowment is of grave concern. Its primary competition is the University of Arkansas which is over 6 times its size but has an endowment almost 500 times its size. This leaves UAPB vulnerable in any resource battles within the state and region. They have a lot of work to do to improve their current endowment situation and make it competitive. If they do not address the issue they could be endangering their long-term viability.

As always it should be noted that endowments provide a myriad of subsidies to the university for everything from scholarship, faculty & administration salaries, research, and much more.

HBCU Money™ Business Book Feature – The Comanche Empire

9780300126549

In the eighteenth and early nineteenth centuries, a Native American empire rose to dominate the fiercely contested lands of the American Southwest, the southern Great Plains, and northern Mexico. This powerful empire, built by the Comanche Indians, eclipsed its various European rivals in military prowess, political prestige, economic power, commercial reach, and cultural influence. Yet, until now, the Comanche empire has gone unrecognized in American history. This compelling and original book uncovers the lost story of the Comanches. It is a story that challenges the idea of indigenous peoples as victims of European expansion and offers a new model for the history of colonial expansion, colonial frontiers, and Native-European relations in North America and elsewhere. Pekka Hämäläinen shows in vivid detail how the Comanches built their unique empire and resisted European colonization, and why they fell to defeat in 1875. With extensive knowledge and deep insight, the author brings into clear relief the Comanches’ remarkable impact on the trajectory of history.