Friday, September 28, 2012

Stocks in News: NIKE Inc. (NYSE:NKE) & Youku Tudou (NYSE:YOKU)

Lower costs will lead to better 2013 results for Youku Tudou

Youku Tudou Inc (ADR)(NYSE:YOKU) ‘s acquisition of smaller rival Tudou will result in lower costs and higher earnings for Youku Tudou, China’s biggest online video company. Youku’s CEO Victor Koo said that content and bandwidth which form the major part of the costs have started to fall. However, he did not indicate the time period when the company would start making profits.

“Last year because of some competitive issues, you saw inflation of content costs,” said Koo in the company’s Beijing headquarters, adding, “We see a lot of rationalization happening this year and that will improve the financial situation on the P&L standpoint next year.”

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Youku’s revenues in the second quarter rose a whopping 96 percent from the corresponding period last year to 387.4 million yuan or $61 million. The net loss however increased to 62.8 million yuan from 28.1 million yuan.

Tudou will be fully integrated by the fourth quarter and no employee will be laid off.

Koo said, “We see the path to profitability very clearly.” He further added, “Revenue is growing very strong. Part of it will be derived from the synergy we see coming from the merger.”

Dip in Nike’s earnings and China orders

NIKE, Inc.(NYSE:NKE)’s first quarter earnings are lower than those of the corresponding period last year. Not only that, for the first time in three years, China orders for the coming months fell. High cost of materials used for the shoes and T-shirts produced by Nike has shrunk margins.

Last year, orders from China had risen 27 percent from September through January. This year, the orders have fallen 5 percent. Overall, Nike’s orders for the period have risen 6 percent.

On Thursday, the stock dipped 2.3 percent at mid day session.

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