There is logic to the suggestion that Apple needs to break down the walls to its closed garden. If Apple is a devices and services company, as it claims, the company's lack of dominance in the smartphone business is hindering its growth. However, you're not going to hear someone say that Apple needs to sell cheaper products. Instead, Apple needs to sell its products on other platforms. 

The Android and Windows Phone problem
You could easily make the argument that there are three huge companies fighting for the future of computing. Apple is an obvious entrant with the popularity of its iPhone, iPad, Mac, and iTunes lineup.

Google , with its Chromebooks and Chromeboxes, the Nexus lineup and Android, is a natural competitor. Though some thought the company was permanently left behind, Microsoft  has emerged as the clear third system with Windows 8, Surface revenue jumping 123%, the hit Xbox lineup, and Windows Phone taking third place in global smartphone sales.

The problem facing Apple is, according to Strategy Analytics, that the global smartphone market grew by 41% in 2013, while Apple's shipments grew by just 13%. Android and Windows Phone, on the other hand, grew their shipments by 62% and 90%, respectively. With Android and Windows gaining market share, and Apple losing it, Apple may need to release its tight grip on the company's software and services.

Google almost has it
Google is almost perfectly positioned to allow users access to its offerings on all three major platforms. The company's apps are largely present on Android and Windows Phone, as well as iOS.

There are a few exceptions, like no official Google+ app for Windows Phone, and no official YouTube app for Windows desktop store, but there are workarounds. With Google Play generating part of the $1.6 billion in revenue from Google's other division, and a 99% growth rate in revenue, the company has the three big operating systems covered.

Microsoft is coming up fast
Though it would have been unthinkable a few years ago, Microsoft has realized that it can't just offer proprietary software on Windows systems. The company offers Office for Android and iOS, and there are rumors that Office for iPad is coming soon.

Though Windows Phone only carries about 3.6% of the global smartphone market, the system grew shipments faster than many others and took market share. Microsoft's decision to make its OneNote software free across all major operating systems is just the latest salvo in the company's push to become a devices and services company.

With almost half of Microsoft's revenue generated by corporate sales, and another roughly 25% generated from devices and consumer hardware, the company is less reliant on traditional Windows sales than before.

Apple...not so much
Unlike Google, which makes its services and software available everywhere, or Microsoft, which is moving that way, Apple has almost no official apps on either Google Play or the Windows Store.

With 56% of the company's revenue generated by the iPhone, and another 20% from the iPad, maybe Apple doesn't think it needs diversity to its revenue stream. However, its fastest growing unit is actually iTunes, which generated over $4 billion in revenue and grew by 19% last quarter.

If Apple's hardware is good enough to compete against other devices, it should be able to compete even if the company's services are available on other operating systems. To help drive iTunes revenue and diversify Apple's revenue stream, it's time for the company to offer iTunes on both Android and Windows platforms.

Conclusion
Millions of users love the iTunes store to purchase music, videos, and more, and not making an official iTunes app for Android or Windows Phone is shutting out a tremendous opportunity.

Though this probably sounds like heresy to many Apple fans, it really isn't. When more than 82% of the global smartphone market uses your competitor's OS, you either adapt or you don't. This would be a bold move and could lead investors to reexamine Apple's growth potential. For a stock that seems to be looking for a catalyst, this could be exactly what investors are hoping for, even if they don't know it yet.

Take a look at the mobile system-on-a-chip, or SOC, landscape today -- in particular on smartphones. What do you see? You see Qualcomm , essentially owning the high-end market; Qualcomm and MediaTek in a tug-of-war for high-volume mass-market phones in Asia, and a number of other Asian vendors such as Allwinner, Rockchip, and Spreadtrum fighting for the scraps. It's a brutal business.

Why is it so brutal? Barrier to entry. For the low-cost mainstream devices, these chips need to be cheap; and within a fixed price, they still need to offer as much functionality and performance as possible. Thanks to the ubiquity and quality of off-the-shelf intellectual property, or IP, from ARM Holdings and Imagination Technologies, the focus is on enhancing the non-computing parts of the SOC for both functionality and low cost (think video decoding blocks, modems, connectivity, and the like).

In this business, if you over-design your chip and end up with one that's too expensive (or, worse, late), then you're not getting the sale. If you under-design the chip and end up lacking on performance or features, you, once again, don't get the sale. With so many competitors duking it out with much of the same IP, getting your SOC wrong is deadly to your business.

The market share numbers have spoken
According to Strategy Analytics, here were the top apps processor vendors by market share in 2013:

In the "Others" category you have the following vendors (this list is not exhaustive):

• Broadcom
• Intel
• NVIDIA
• Spreadtrum
• Allwinner
• Rockchip
• ST-Ericsson

The overall market is still growing, and, frankly, a very strong and focused player could wrestle away share from Qualcomm, or, to a lesser extent, MediaTek, but it's not for the weak-hearted or those without the willingness to eat gross/operating margin dirt in order to make real headway.

NVIDIA no longer focused on mainstream phones
With the Tegra 4i (codenamed "Grey"), NVIDIA had hoped to make a real dent in the value smartphone market. With an integrated LTE baseband (courtesy of the company's Icera acquisition), and a pretty solidly performing part, there was a lot of hope that NVIDIA could become a real competitor to Qualcomm in lower-cost phones. It seems that NVIDIA believes that this market is no longer one it should be spending its resources fighting for.

Indeed, the following question and subsequent answer from NVIDIA CEO Jen-Hsun Huang essentially confirms that the Tegra 4i could perhaps be the first -- and last -- NVIDIA effort for mainstream phones:

Analyst: So, a lot of detail on virtually every segment of your business, but not too much on the cellular front. I was wondering, is that an integral part of the Tegra strategy and do you need cellular to continue in your roadmap?

Jen-Hsun Huang: So, we also didn't talk about PC OEMs today. And let me tell you why, because in the final analysis those are design wins; they come and go. Let me give you some -- I'll say some things I believe. Now, we are going to get design wins in tablets in very important companies, super-phones in important companies, and we're going to continue to. I believe that the mainstream smartphone market is saturated and it's not worthwhile to pursue.

It doesn't get much clearer than this, and, frankly, NVIDIA is likely better for it, as it doesn't really need to win in the mainstream smartphone market for Tegra to be successful. Remember: NVIDIA's R&D investment in Tegra is about $600 million (per GTC 2013), and so at 50% gross margins, the company needs $1.2 billion in sales to break even, and then from there the business is at scale.

Can tablets, automotive, and other markets help Tegra win?
So the question is whether Tegra can hit that $1.2 billion in revenue mark to break even and from there grow into profitability. The tablet market is, according to IDC, going to come in at about 260 million units, and assuming NVIDIA can capture 10% of that market at $25-per-unit average selling price (remember: NVIDIA is playing only in the high end), that gets us halfway there.

The other half is going to have to come from automotive and perhaps other applications. It's anyone's guess as to whether NVIDIA can grow its non-tablet Tegra business to north of $600 million a year, but management likely wouldn't continue to invest in Tegra if it didn't believe that it could eventually get the business to scale.

Source: Lululemon

Lululemon  surged by 6.16% on Thursday after the company delivered better-than-expected earnings for the fourth quarter of fiscal 2013. The company seems to be gradually recovering from past mistakes and getting ready to refocus on growth opportunities. However, competitive pressure from players such as Gap and Under Armour is materially increasing, and Lululemon will need to improve its performance in order to justify current valuation levels.

The numbers
Net sales during the quarter ended on Feb. 2 came in at $521 million, a 7% increase versus $485 million in the same quarter of the prior year, and better than the $514.9 million forecasted on average by Wall-Street analysts.

The direct-to-consumer segment was particularly strong with a 25% annual increase, and reaching $97.8 million during the quarter. This represents 18.8% of total revenues. On the other hand, comparable-store sales decreased by 2% on a constant-dollar basis.

Margins were under pressure during the quarter. Gross profit margin decreased to 53.5% of sales versus 56.5% in the fourth quarter of fiscal 2012, and operating margin fell to 29.6% compared to 31.4% in the year-ago quarter.

Earnings per share were flat versus the prior year at $0.75, but above analyst's forecasts of $0.73 on average.

Forward guidance was below estimates, though. The company is forecasting sales in the range of $377 million to $382 million during the first quarter of fiscal 2014, compared to an average estimate of $389.4 million. Earnings-per-share guidance of between $0.31 and $0.33 also fell short of analysts' expectations for the coming quarter, in the area of $0.38 per share.

CEO Laurent Potdevin seems quite optimistic about the company´s growth prospects in the middle term. He said that, "2014 is an investment year with an emphasis on strengthening our foundation, reigniting our product engine, and accelerating sustainable and controlled global expansion."

The challenges
Lululemon made a series of embarrassing mistakes last year. In March of 2013, the company had to recall 17% of the yoga pants it had in stock because of excessive sheerness. However, this did not provide a definitive solution to quality problems, as the company received further criticism and complaints from customers regarding product quality during the following months.

Making things worse, founder and former chairman Chip Wilson made some very inadequate comments insinuating that women's bodies may be to blame for the problems with the company's products. "Frankly, some women's bodies just actually don't work," Wilson said on Nov. 5 in an interview with Bloomberg TV.

Competitors have not wasted any time in trying to benefit from Lululemon's mistakes. Gap is directly targeting Lululemon with its Athleta yoga brand, placing its Athleta stores in close proximity to Lululemon locations, and selling its products for considerably lower prices.

Athleta is also imitating Lululemon's marketing strategy by building relationships with yoga instructors and sponsoring workshops, classes, and similar activities to build brand awareneess.

Under Armour took advantage of Lululemon´s sheerness problems by launching a marketing campaign for its yoga pants under the slogan: "We've got you covered." Like Lululemon, Under Armour is trying to position itself as a brand that can be used for both the gym and other everyday activities.

In the words of CEO Kevin Plank, "One of the reasons we are so bullish on our Women's business is that there has been a quiet shift going on, where women are increasingly wearing athletic product outside of the gym."

Valuation vs. growth
Lululemon seems to be stabilizing after its recent mistakes, and it will be interesting to watch the company as it expands internationally. Lululemon will open its first store in London next week. If the brand does well among consumers in global markets, it could provide considerable opportunities for growth in the years ahead.

On the other hand, the stock looks too expensive for a company that is still trying to definitively turns things around. Lululemon carries a P/E ratio near 27 times earnings during the last year. That´s more expensive than industry leader Nike , which trades at a P/E ratio near 25.

Nike is much bigger than Lululemon, but the company is still generating superior growth rates with sales increasing by 13% during the quarter ended on Feb. 28, to almost $7 billon. Besides, Nike owns arguably the most-recognized brand in the industry, and it has a much wider customer base on a global scale.

Unless Lululemon manages to materially accelerate growth, an alternative like Nike looks like a sounder option for a similar valuation.

Bottom line
Lululemon seems to be moving in the right direction, and stabilizing sales could be the first step to getting over its problems and accelerating growth in the future. However, in terms of valuation versus financial performance, investors could find a stronger alternative in an industry leader like Nike.

This morning's better-than-expected number of initial jobless claims was not enough to lift U.S. stocks today, as the benchmark S&P 500 ended the session with a 0.2% loss. The narrower Dow Jones Industrial Average was essentially flat, down just three hundredths of a percentage point. On Monday evening, I pondered whether the momentum rally had just stalled and, while the jury is still out on that question, there does seem to have been a shift away from high(er)-beta shares this week, including technology and small-capitalization shares, both of which continued to underperform the S&P 500 today.

Furthermore, the technology-heavy Nasdaq Composite Index and the small-cap Russell 2000 Index have been very tightly correlated since the beginning of the week, particularly during the past two days. One of the high-profile growth stocks that underperformed today is Tesla Motors , which lost 2.6%. While Tesla's stock is already down by more than a fifth from its 52-week high, the price remains significantly above its intrinsic value (more on this below), which suggests that further declines could occur.

A possible catalyst for today's drop was the publication of a research note by Wedbush Securities, lowering its price target for the stock from $295 to $275 on the basis that:

We take a moderately more conservative position on evidence of rising risks for Tesla's Giga Factory with a noncommittal commentary from Panasonic and supply chain indications that materials asking prices are rising. [Note: the gigafactory -- Tesla Motors' own term -- refers to a planned battery manufacturing facility.]

Nevertheless, whether $295 or $275, these are breathtaking numbers as another, more interesting piece of research published this week demonstrates. I have referenced in the past the blog of Aswath Damodaran, who is a professor of finance at New York University and the guru on stock valuation. On Tuesday, he published his revised valuation of Tesla Motors. The good news for Tesla bulls is that his new estimate of Tesla's per-share value has risen by two-thirds compared to when he performed the same exercise in September. The bad news is that, at $112.50, it is barely more than half the current share price.

If you own shares of Tesla Motors or are considering owning them, I cannot urge you strongly enough to read Professor Damodaran's blog post in its entirety (as well as the discussion in the comments section, in which he participates.) Not only does Professor Damodaran present and discuss his assumptions, but he also provides links to his valuation spreadsheets so that investors can perform their own analyses.

Finally, the post contains some broader thoughts on the nature of investing that are filled with wisdom. Prof. Damodaran is a value investor, at least insofar as "investment philosophy is built on the foundation that you should buy an asset only if trades at a price less than your estimated value for that asset." As such, he "cannot justify buying Tesla at the current price;" however, he allows that people may follow other approaches:

Your philosophy on investing may be different from mine, and probably better (or at least more lucrative). If you are a Tesla stockholder, though, I hope that you are one for the right reasons. That would include being a trader (whose focus is price, not value), buying into the disruption model or investing on the expectation of an acquisition, but it would not include investing because others have been making money on the stock, equity research analysts are bullish or just because you love the company, its products or its CEO.

In other words, the only rational, purely fundamental reason for buying the stock is believing in the disruption model (read the post to understand what this means.) There is nothing wrong with that per se, but it looks like a very long odds bet to me.

In just a short time, Activision Blizzard will launch its new digital card game, Hearthstone: Heroes of Warcraft, on to Apple's iPad -- and it could quickly become one of that device's biggest gaming hits.

Image source: Activision Blizzard.

In the video below, Fool contributor Demitrios Kalogeropoulos discusses why he thinks the game will be a blockbuster on the tablet. A spinoff of Blizzard's popular World of Warcraft franchise, Hearthstone has been developed with both seasoned and casual gamers in mind, he says. And that broad appeal, and established branding, should help the title dominate the download charts. It also can't hurt that the game is "ridiculously good." The best news for Activision investors, Demitrios argues, is that Hearthstone should generate substantial revenue for the company despite the fact that it is free to play.

MannKind faces an advisory committee meeting on Tuesday that will make a recommendation about whether the FDA should approve its inhaled insulin drug Afrezza.

But investors will get a sneak peek of what the FDA is thinking when the agency releases documents for the committee on Friday. Since the FDA has the final say -- it occasionally goes against the panel's recommendation -- the documents could be a big clue as to whether Afrezza is approved.

If Afrezza is approved, MannKind will face more catalysts, including signing a marketing partner to sell the drug and how well the launch proceeds.

Afrezza will compete with rapid-acting, injected insulins from Eli Lilly and Novo Nordisk . The inhaled version is arguably a better drug because it's both more convenient and causes fewer incidences of low blood sugar levels, but MannKind and its market partner (if it managed to find one) face an uphill battle to lure patients away from Eli Lilly's Humalog and Novo Nordisk's Novolog, which doctors have prescribed for years.

Watch the video below for more thought on the upcoming catalyst from Fool contributor Brian Orelli and health-care bureau chief Max Macaluso.

According to FairSearch, more than half of the world's travel sales are consummated online. For online search giant Google , travel ads by online travel agencies, or OTAs, are a good source of revenue. Google accounts for approximately 67% of all U.S. online searches. 

Online travel companies such as Priceline , Expedia , and TripAdvisor have been competing fiercely to establish themselves as the travel agencies of choice for customers. To catch the eyes of prospective customers, these companies have been spending massively on sales and marketing, particularly on online ads. Priceline spent $1.8 billion on online ads in fiscal 2013, while Expedia spent $1.2 billion. TripAdvisor spent $236.5 million on ads last year. Their top lines have also continued to grow impressively.

Online ad spending for the three companies has been growing at an even faster clip than their revenues. Priceline has more than tripled its online ad spending in the last three years. About 90% of that money ends up in Google's coffers. 

Expedia spent 46% of its revenue on sales and marketing expenses (of which online advertising takes the lion's share) in fiscal 2013, up from 42.8% in the previous year. TripAdvisor spent 39% of its fiscal 2013 revenue on sales and marketing compared to 32.8% the year before.

Google has been the biggest beneficiary of the cutthroat competition in the industry. Although it's rather difficult to get the actual figures for the share of online ad spending by Expedia and TripAdvisor that Google gobbles up, they are probably in the neighborhood of Priceline's -- about 90%. Quite likely, the trend pervades the entire industry. Little wonder that Google's revenue has been expanding exponentially over the last few years.

 

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There's been no shortage of activity, or intrigue, for Sirius XM investors since I first bought shares of the satellite radio provider in December. In an apparent attempt to support Charter Cable's bid for Time Warner Cable, media magnate John Malone's Liberty Media threw out a lowball offer to acquire the 48% of Sirius it didn't already own. Shareholders, from all indications, weren't impressed. Unable to advance his cause, Liberty abandoned its Sirius bid in favor of tracking stocks and a rights offering.

A few months passed, and that leaves us just about where we started. I bought Sirius on a simple premise: That it was a cash-generating machine that, under Malone's guidance, would aggressively employ leveraged share repurchases -- compounding value to shareholders at an astronomic rate. That's still going to happen. The market, meanwhile, has cogitated over competing offerings from Apple , Pandora , and Spotify, and guidance for slowing rates of subscriber growth in 2014 -- and shares have gotten cheaper.

That mind-set fundamentally misunderstands the strength of Sirius' competitive advantages, platforms, and its ability to turn competition into revenue via its recent Agero acquisition. That's why I'm using the opportunity to buy shares of Sirius XM for my Real Money Portfolio again, in a position equal to 2% of my portfolio's capital.

Turning cash into cash
At the core of my Sirius thesis was a simple, but powerful, premise. Majority-owned by John Malone's Liberty Media, it would employ a classic piece of the Malone playbook -- what wonkish types call a leveraged recap. The mechanics work like this: Sirius, which produces a recurring, high-margin stream of cash flow, can assume a lot of debt, and more than adequately service it. It would use its cash flow and debt to repurchase undervalued shares, supercharging value accretion to shareholders. In a low-rate environment, like today's, that can be particularly powerful.

With the Liberty offer no longer on the table, Sirius is free to resume share repurchases. And if the company takes debt to its target leverage ratio, four times debt to EBITDA, and simultaneously uses free cash flow, I estimate it repurchase up to 15% of its shares outstanding. If Sirius generates $0.18 of free cash flow, a number I think is quite attainable, before share repurchases, and buys 15% of its shares, the number jumps to $0.21. Suddenly, Sirius shares are trading hands for a very reasonable 15 times earnings. For a company that could post double-digit earnings growth for the foreseeable future, that's wicked cheap.

There's good reason to believe repurchases will continue, and at a furious rate: I don't think Malone's done with his Sirius forays. Share repurchases increase his effective ownership of the Sirius enterprise, which could make it easier to effectuate a deal at some later point.

A fading signal?
Much attention has focused around two factors, which have afforded prospective buyers a nice discount: Slowing sub growth, and the possibly damaging effects of competing streaming offerings. On the matter of sub growth, which calls for 1.25 million additions on management's 2014 guidance, I don't think there's cause for worry. For one, the laws of gravity dictate that, at some point, this number slows. Sirius has added more than 1.5 million net subs for each of the past years, and total subs currently sit at 25 million. A little lumpiness is to be expected. More importantly, even if growth slows to 1.25 million subs, Sirius shares are cheap.

That's, in part, because of a second factor: A promotional agreement with a "large OEM," widely believed to be GM , expired at the end of last year. Under the previous arrangement, GM paid Sirius a sum for promotional subs in every GM-equipped car, and kept a share of Sirius' cash flow if and when promotional subs upgraded. Under the new agreement, GM doesn't pay Sirius for trial subs and, in turn, Sirius keeps more money on the back end. The likely implication is accelerating free cash flow growth, even if subscriber growth slows.

Market soothsayers continue to worry about competing offerings from the likes of Apple, Pandora, and Spotify. Foremost, they fail to understand three critical factors: 1) these services carry a whopper of a hidden cost -- data fees; 2) they can be complementary; and 3) they don't offer the depth and breadth of content on tap at Sirius. But even where these arguments fall flat, there's a more subtle point: Sirius can actually use competition to its advantage.

Sirius's Agero platform, what wonkish types call telematics, can make competition its friend. Effectively speaking, Agero amounts to placing a smartphone and operating system in your car's dashboard. Looking forward, Sirius expects to charge for inclusion of its platform (which already has strong relationships with OEMs), and various subscription services offered within it. Placing Pandora, Apple, or Spotify apps into a vehicle dash strengthens Agero's offering, allows it to charge automakers more, and possibly opens a licensing revenue stream for Agero.

Also remember that, while not bite-sized, Pandora and Spotify aren't too big for Sirius or Liberty to acquire. The benefits could be mutual, and huge: Sirius could use its clout with content providers to negotiate lower costs, which could dramatically improve the lot's flagging profitability. Likewise, integrating the Sirius and Spotify/Pandora offerings, and intellectual property, could make for a powerful consumer offering.

The bottom line
In short, the core elements of my Sirius investment remain intact. The signal's strong, and the price is better. That's why I'm back for more.

The Department of Defense awarded 19 separate defense contracts Thursday, worth $6.64 billion in total.

Textron won two of them:

• A $59.7 million contract modification funding the purchase of long-lead items needed to manufacture and deliver 15 new Lot 12 UH-1Y Venom utility helicopters and 11 new Lot 12 AH-1Z Viper attack helicopters for the U.S. Marine Corps. Work on this contract should be complete by September 2015.
• An $11.4 million option exercise under which Textron will provide systems engineering and program management support for the production and delivery of these helicopters for the Marine Corps. This second contract will run through only December 2014.

And Northrop Grumman won two more:

• A $20.2 million contract modification to provide the U.S. Army with logistics services related to Hunter unmanned aircraft systems (i.e. drones) through March 30, 2015.
• A $13.7 million contract modification to perform "sustaining engineering services" for Air Force ICBMs through Sept. 30, 2014. 

Favorable economic news helped send the stock market higher despite the usual pre-weekend jitters on Wall Street, as larger gains earlier in the day gave way to traders once again choosing not to hold onto positions in light of geopolitical uncertainties and other risks. Yet, even though major indexes hung onto modest gains, Red Hat , Caesars Entertainment , and Exelixis fell sharply on the day.

Red Hat dropped 7% despite reasonably encouraging quarterly results. Revenue growth of 15% led to year-over-year gains in adjusted earnings, and the balances on its deferred revenue arrangements tied to its long-term contracts jumped by 18%. Yet, even as subscriptions rose, Red Hat expects adjusted earnings for the current fiscal year to come in around 5% below what investors had wanted to see, with guidance for a 14% jump in revenue proving insufficient to satisfy shareholders. With intense competition for its Linux operating system, Red Hat's efforts to maintain its market share and invest in future-looking initiatives could hurt operating margins, and that has some investors nervous about whether Red Hat can successfully keep its rivals at bay.

Caesars declined more than 7% after reporting that it would sell seven million shares of common stock, hoping to raise between $130 million and $140 million in order to help finance its operations. With major investors Apollo Global Management and TPG Capital guiding the company, Caesars said that it would close its Harrah's Tunica casino in Mississippi because of poor sales, and conditions on the Las Vegas strip have been poor, as well. Without the exposure to the fast-growing gaming market in Macau that most of its rivals have, Caesars faces billions in debt, and credit-default swaps are priced at levels that reflect a high probability of future default on bonds -- let alone possible returns on stock.

Exelixis plunged another 12%, extending its losses from earlier in the week after failing to hit a home run with its study of prostate-cancer treatment cabozantinib. The drop in Exelixis stock might seem unwarranted given that the only news from the study was that an independent committee recommended that it continue to its natural conclusion rather than stopping early. The problem, though, is that Medivation , Johnson & Johnson, and Bayer all were so promising that they had their late-stage studies conclude early, and so Exelixis investors got their hopes up that cabozantinib would work out the same way. The news isn't fatal to Exelixis' hopes, but it does raise concerns about whether the drug's efficacy will match up to its rivals.

Amazon is holding a media event next Wednesday to provide an update on the company's video business. Many reports have indicated that it will be launching a free, ad-supported TV service separate from Amazon Prime. Is this the right move for the company, or does it take away from the Prime service already offered?

In this segment of Friday's Investor Beat, host Chris Hill and Motley Fool analyst Ron Gross take a look at the potential move by Amazon, and what it could do for the company's business. Ron sees room for both the subscription service and the free ad-supported television service, and notes the enormous amount of advertising dollars out there, that could be a big win if executed well.

Nike  recently reported solid third-quarter earnings results. However, the market did not seem too excited, pressuring the stock by as much as 5% to around $75.20 per share. Nike's share price decline might be due to weak guidance offered for the fourth quarter of 2014 and full-year 2015. Let's examine whether Nike is a stock to buy now.

Source: www.flickr.com/fooleditorial

Solid performance and ongoing share buybacks
In the third quarter, Nike's revenue experienced a significant jump of 13% to $7 billion. Results were driven by 14% currency-neutral revenue growth in the Nike brand and 16% currency-neutral revenue growth for Converse. Net income from continuing operation stepped by 3% to $685 million. Third-quarter diluted earnings per share came in at $0.76, 4% higher than year-ago results. 

The EPS increase was also helped by ongoing share-repurchase activity. In the recent quarter, Nike spent $788 million to buy back 10.4 million shares. Thus, in a four-year, $8 billion share-repurchase program, Nike has retired 39.6 million shares for around $2.5 billion.

Negative currency exchange rates and a high valuation
What's worrying about Nike in the near future are weaker currencies in developing markets. The company estimated that the negative impact from currency exchange rates lowered its EPS growth by 6 percentage points for the third quarter and 9 percentage points year to date. Nike expects that negative currency exchange rates could be one major headwind to its overall growth rate in 2014 and 2015.

I personally think that Nike could continue to experience a declining stock price for the near term because of upcoming foreign exchange headwinds combined with a high valuation. At the current trading price, Nike is valued at nearly 22.2 times its forward earnings with the PEG ratio of 2.1.

Its smaller U.S. peers, including Foot Locker and The Finish Line , have much lower valuations. Foot Locker is the cheapest among the three at nearly 13 times forward earnings and a PEG ratio of 1.4; Finish Line is trading at 14.9 times forward earnings and a PEG ratio of 1.4. The two companies are also quite active in retiring their share counts.

In fiscal 2013, Foot Locker spent $229 million to repurchase 6.4 million shares, yielding nearly 3.4%. Including a dividend yield of 1.9%, Foot Locker offers a total cash return of nearly 5.3%. Finish Line repurchased $5.2 million worth of shares in the third quarter, leaving the company with 4.1 million shares remaining in the current share-buyback authorization. Moreover, Finish Line also offers investors a dividend yield of 1.1% with a conservative payout ratio of 21%.

Foolish takeaway
Nike, with its well-recognized global brand, will continue to deliver impressive operating results, and with its ongoing $8 billion share-repurchase program, Nike will continue to return cash to shareholders for the next several years. However, because of foreign exchange headwinds and the high valuation, I would wait for more of a stock price correction in the near future before establishing a long position.

On Thursday, Microsoft CEO Satya Nadella made the news that was rumored to be true finally official: Microsoft Office is now available on the iPad. Shares of Microsoft were up on the news.

On Friday's Investor Beat, host Chris Hill and Motley Fool analyst Ron Gross discuss the move, which many considered to be long overdue. Ron thinks it was an excellent decision, one that could potentially bring in $1 billion or more in additional revenue. One reason former CEO Steve Ballmer had resisted the move for so long was due to Apple getting a portion of that revenue. Thirty percent of Office 365 subscriptions are made as in-app purchases; but as a win-win for both companies, this may represent a fundamental shift in the way Microsoft approaches crossing platforms to sell software.

Then, Amazon is holding a media event next Wednesday to provide an update on the company's video business. Many reports have indicated that it will be launching a free, ad-supported TV service separate from Amazon Prime. Is this the right move for the company, or does it take away from the Prime service already offered? Chris and Ron take a look at the potential move by Amazon, and what it could do for the company's business. Ron sees room for both the subscription service and the free ad-supported television service, and notes the enormous amount of advertising dollars out there that could be a big win if executed well.

And finally, Perry Ellis International reports earnings next Thursday, and in this segment of Friday's Investor Beat, Motley Fool analyst Ron Gross discusses why he's looking at the stock this week. Shares were crushed when the company reported preliminary earnings a couple of weeks ago, citing similar difficulties to other apparel retailers, including the winter weather this quarter and the overall retail environment. Ron will be watching closely to see where the company actually lands next week.

The Dow Jones Industrials gained almost 59 points on Friday, managing to give the Dow a small gain of just over 20 points on the week. Yet, even though positive contributions from ExxonMobil and Microsoft helped keep the Dow moving higher, Visa's substantial drop reflected some of the uncertainties in investors' minds about how much further consumer spending can take the stock market.

Visa's fall of 1.7% came on the heels of a lawsuit from retail giant Wal-Mart , seeking $5 billion in damages concerning the credit card network's policy on swipe fees. The move had been long anticipated, given that Wal-Mart and many other major retailers had chosen not to participate in a class action lawsuit that led to a $5.7 billion settlement that Visa and MasterCard paid to thousands of smaller retailers. Given Visa's growth in recent years, the company should be able to afford to resolve the dispute relatively amicably at some point in the future if it wants to, but in the meantime, it will be interesting to see whether Wal-Mart's allegations of antitrust violations actually gain traction in a court proceeding.

ExxonMobil, on the other hand, gained 1.5%, adding to its similar-sized jump Thursday following optimistic comments about the oil giant from Merrill Lynch. Analysts at Merrill upgraded Exxon stock, pointing to relatively low valuations compared to the broader market's earnings multiples. Of course, one issue pointing the other way is that Exxon has struggled to produce growth lately, with sluggish prices and production actually threatening to make profits contract in the near future. Still, as other stocks in the Dow have climbed even more dramatically during the past year or two, Exxon starts to look more attractive by comparison, especially as investors start to hope that economic sanctions against Russia won't hamstring the oil giant's profit potential.

Finally, Microsoft finished the day up 2.4%. Most investors focused on the company's initiative to make its Office software available on the iPad this week, but Microsoft's long-term success relies on much more than a single product -- even one as important as Office. Rather, the big question that Microsoft investors have to answer is whether they believe that new CEO Satya Nadella can lead the tech behemoth in a better direction after years of what many saw to be stagnation. So far, just the appearance of promising changes has been enough to inspire long-term investors about the potential for gains at Microsoft; but after Nadella's honeymoon period ends, Microsoft will have to show that his efforts have actually borne fruit in the form of sales and earnings growth.

While at NVIDIA's GPU Technology Conference, I heard a rumor from two independent sources that Intel went ahead and closed an R&D center in Barcelona, Spain. At this particular R&D center, there was a team responsible for the development of the company's Xeon Phi (which is a high performance computing oriented processor), so naturally, many folks started asking some pretty serious questions about Xeon Phi's future.

What is Xeon Phi?
Xeon Phi is, today, sold as a separate add-in board that houses a massively parallel architecture. While it's viewed as a "bunch of X86 processors," it's actually an X86 processor with a very wide vector unit bolted on, which is responsible for the vast majority of compute capability. Of course, the X86 core is there to "feed" the beast and -- in the case of the stand-alone iterations of Xeon Phi -- to run the standard serial program code.

On the left is a Xeon Phi "core;" on the right is the vector unit. Source: Intel via ExtremeTech

Now, the company has been very bullish about the HPC market in general and, more importantly, Intel's role in that market. Today, the company participates very heavily by selling its Xeon E5/E7 processors into this space, and NVIDIA has made a fine business with its Tesla co-processors (based on its GPU technology) to be paired mostly with Xeons (although NVIDIA and IBM have been bullish about working together). With Xeon Phi, Intel wants a piece of NVIDIA's Tesla business (and according to NVIDIA's Analyst Day, the HPC & Data Center business is worth nearly $200 million/year).

What's going on with Xeon Phi?
So, now we have rumors that Intel is closing down one of the R&D sites for its Xeon Phi products, which, in turn, leads some to believe that Intel may be defocusing or even killing that line of products. Well, cutting through the noise and going straight to the source, I emailed Intel's Chuck Mulloy, Director of Corporate & Legal Affairs at Intel, and learned the following:

• This site closedown is a part of the broader restructuring/streamlining that the company announced about a year ago
• A very small number of individuals is affected by this closedown (i.e. this wasn't a full Xeon Phi design team, but an R&D center, likely staffed with a handful of architects)

It seems extremely unlikely that Intel has any plans of cancelling the Xeon Phi lineup, particularly as the architecture looks like it's going to become quite exciting with the 14-nanometer variant, Knights Landing. Further, given that Intel's very serious about not leaving any stone unturned in the datacenter, it wouldn't be in the company's best interests to cancel Xeon Phi development at this stage of the game, and especially given that it can afford to continue development (datacenter group has operating margins nearing 50%).

Foolish bottom line
In a nutshell, don't panic. Intel is likely to continue Xeon Phi development for the foreseeable future, and given that the datacenter group is so profitable, Intel can afford to take chances and pursue products that might not seem to add a lot to the top and bottom lines today. (NVIDIA's Tesla business is less than $200 million/year, but it is growing very quickly.) Besides, Xeon Phi is based on Intel's Larrabee project -- one that, no matter what, seems to never die!

Less is more is the antithesis of the beliefs of modern empire-building executives. In the hotel industry, management tends to prefer building cookie-cutter hotels which have the largest possible footprints. Furthermore, they want the bragging rights that come with the ownership of hotel properties. Owner-operated hotels boast higher revenues than their franchised peers and this makes these companies appear larger, although they have lower profit margins.

Morgans Hotel Group , a boutique hotel management and brand company, signifies the change in times as even its larger and more established peers in the hotel industry have pursued boutique concepts and asset-light models.

Portfolio of niche and boutique brands
Morgans Hotel sets itself apart from its peers with unique lodging experiences for each of its differentiated brands. For example, Delano serves as Morgans Hotel's upscale luxury brand while the Hudson brand appeals to the younger and more price-sensitive traveler.

Critics might claim that this doesn't differ significantly from the multiple hotel tiers offered by traditional hospitality groups. In that case, Morgans Hotel's portfolio of original brands (Sanderson, St Martins Lane, Morgans, and Clift) serves as a perfect rebuttal by taking the concept of niche hotels and customization to a completely new level in which each hotel has individual branding. While Morgans Hotel has located its Mondrian-branded hotels in New York, Los Angeles, and the South Beach, it only has only one Sanderson hotel in London, a single Morgans hotel in New York, and one Clift hotel in San Francisco.

Morgans Hotel's focus on building a portfolio of niche hotel brands has granted the company pricing power. Its average daily rate, or ADR, which serves as the hospitality industry's pricing metric, has increased in every single year over the past few years from $200 in 2009 to $236 in 2013. This represents a decent compound annual growth rate, or CAGR, of about 4.2%.

InterContinental Hotels Group is an established hotel group that owns the flagship international luxury brand InterContinental Hotels & Resort and it has a market capitalization approximately 30 times that of Morgans Hotel. However, size hasn't been a stumbling block for InterContinental with respect to pursuing niche brands that appeal to new customer segments.

InterContinental understood that being everything to everyone doesn't work anymore. It launched the new niche hotel concepts EVEN Hotels and HUALUXE Hotels and Resorts in February 2012 and March 2012 respectively. EVEN Hotels comes as InterContinental's answer to the rising health and wellness trend. The differentiated offerings provided by EVEN hotels include fitness studios and healthier food choices. On the other hand, HUALUXE is the first luxury hotel created by Chinese for the Chinese. Instead of exporting the Western luxury hotel model to China, InterContinental got its local team in China to come up with an entirely new model which culminated in the creation of the HUALUXE brand.

Asset-light model
A transition to an asset-light model for a hospitality company typically involves both asset monetization and an increase in fee income.

Morgans Hotel sold five of its hotels (partially or fully owned) in 2011 to reduce its capital intensity. It currently still owns five (including two partially owned) of the 11 hotels that it manages. Morgans Hotel previously mentioned in March last year that it was prepared to sell properties like Delano South Beach and Hudson New York if and when the opportunity arose. With respect to fee income, Morgans Hotel has been actively seeking new management contracts. It has a robust pipeline with hotel management agreements signed for seven hotels, with five of them expected to open in 2014 and the remaining two expected to open in 2015.

Hilton Worldwide Holdings , the largest hotel group in the world, has similarly moved toward a capital-light model. While hotel management and franchise fees used to account for slightly more than a quarter of Hilton's top line, they currently contribute about 52% of Hilton's revenue. With the inclusion of Hilton's timeshare segment, recurring fee income now makes up about 63% of Hilton's revenue.

Asset ownership highlights a slight difference in strategies between Hilton and Morgans Hotel. While Morgans Hotel is more likely to sell its hotel properties at the right prices, Hilton prefers to retain ownership of some of its extremely valuable and almost irreplaceable trophy assets. These include iconic hotels such as the Hilton New York, the London Hilton on Park Lane, the Hilton Sydney, and the Waldorf Astoria New York, among others.

Foolish final thoughts
Hospitality groups' management teams have learnt painful lessons from various financial crises and outbreaks of diseases in the past and they understand that business isn't always rosy and travelers aren't loyal to any single hotel.  

By applying the 'less is more' principle, successful hoteliers have focused on creating new boutique or niche hotel concepts, paring down asset ownership, and increasing the share of stable recurring income streams. Morgans Hotel offers one notable example of this, especially as it carries wide recognition as the pioneer of the boutique hotel concept.

It's hard to forget that BlackBerry once commanded the brand cachet that Apple and arguably Samsung  do today. Of course, a number of strategic blunders, coupled with the rapid rise of Apple and the various Android vendors, made life extremely tough for BlackBerry, and its shares ultimately trade at just a fraction of their 2007 peak. With yet another quarter turned in, BlackBerry once again stumbles to the finish line.

Weak, but manageable, financials
Revenue of $976 million represented a 63.6% decline from the year-ago period. GAAP loss from continuing operations was a whopping $423 million, or $0.80/share. Of course, to be perfectly fair, this GAAP net loss included the following:

• Non-cash charge of $382 million
• Pre-tax recovery of previously reported inventory charges of approximately $149 million
• Pre-tax restructuring charge of about $148 million related to the "Cost Optimization and Resource Efficiency" program

Excluding these extraordinary items, BlackBerry lost $42 million from continuing operations, or a much more modest $0.08 per diluted share. This is still down pretty significantly from a GAAP profit of $94 million ($0.18/share) in the prior quarter, but aggressive cost controls/reductions have managed to keep the loss manageable -- and with a $2.7 billion war chest, BlackBerry can hold out for quite a while.

The fundamental problem 
Okay, so the cash burn should slow in the coming quarters, and BlackBerry expects that it should be at cash flow breakeven by the end of fiscal year 2015. There's an interesting services story going on here, but in order to become a viable business on the back of that alone, the company would need to essentially ditch its hardware sales. And, frankly, it's difficult to see BBM being relevant, outside of assimilation by an acquirer, without the hardware business.

But, the hardware business is the problem, isn't it? In the most recent quarter, BlackBerry stated that 3.4 million BlackBerry devices were sold through the channel, but that a whopping 2.3 million of those devices were legacy BlackBerry 7 devices! At some point, that "gravy train" (if you can call it that) ends, and the world will have moved past the by-then antiquated BlackBerry 7 devices. If Apple, with its powerful brand, loyal customers, and up-to-date products, is having trouble maintaining/growing share, what shot does BlackBerry have? 

To illustrate the point, BlackBerry's share of the non-legacy BlackBerry 7 smartphone market, based on 1.1 million BB10 phones out of about 287 million adjusted-for-BlackBerry 7 total smartphone units, was less than 1% in Q4.

So, what does BlackBerry do?
The multi-billion dollar question is: What does BlackBerry do from here? Clearly, the hardware business isn't working out, and while the services division is now the majority of the revenue mix (56% of sales in Q4), it's unclear whether the company could survive, at its currently opex run rate, on services alone, especially with a hardware business that seems to be trending to zero.

The interesting thing though, is that with $2.7 billion in cash, the market is assigning an enterprise value of $1.7 billion to the company. Now, in the most recent quarter, services made up 56% of a $974 million revenue base; this works out to $545 million in revenue. In the year-ago period, services made up 36% of revenue on a $2.7 billion base; this works out to $972 million in revenue. Revenue in services declined substantially year over year, so it's not as though this is a high-growth business that will compensate for the decline in hardware, even if the CEO tells investors that people are just holding off for BES 12.

Foolish bottom line
In short, BlackBerry is just in a tough spot, and the cash on hand is the only thing keeping the stock anywhere close to its current levels. While it will take time for that cash position to erode, and while some may still hold the shares on speculation of a "buyout" (look many people got burned by Prem Watasa's "offer"), the truth is that BlackBerry needs to dramatically reinvent itself. Even if it does, there's very little assurance that it will be in the right business at the right time.

Stocks finished higher today, jumping out of the gate on word from China's Premier Li Keqiang that his government would take action to boost its slowing economy, including investing in infrastructure, though a late afternoon sell-off among biotech stocks dented earlier gains. The Dow Jones Industrial Average  finished up 59 points, or 0.4%, while the S&P 500 gained 0.5%, though both indexes finished down for the week.

Earlier in the day, reports showed personal income increasing by 0.3% in February, ahead of expectations of 0.2%, while personal spending improved 0.3%, as well, in line with estimates. Meanwhile, the University of Michigan reported consumer confidence levels at 80, matching economist expectations, but falling from 81.6 in February. The index hit a four-month low though it's still at a relatively high level.

 Source: Wikimedia

Among stocks pushing higher today was Restoration Hardware , which finished up 13% after a strong fourth-quarter earnings report. Investors forgave a middling quarter from the home-furnishings retailer, as bad weather took a bite out of sales. The company said revenue grew 18% in a calendar-shortened quarter, to $471.7 million, short of estimates at $493.1 million; however same-store sales grew by a robust 17%. Adjusted earnings of $0.83 per share matched estimates also, indicating margin improvement. CEO Gary Friedman noted the company "continued to outperform the home furnishings industry by a wide margin," as Restoration has been one of the better plays on the housing recovery. Today's stock jump seemed to come from the strong guidance, as the company sees a per-share profit of $0.09-$0.11 in the current quarter, ahead of estimates at $0.07. Meanwhile, full-year EPS guidance of $2.14-$2.22 was in line with expectations of $2.17. With several new stores planned for the year and strong organic growth, I'd expect Restoration shares to continue to move higher. 

A day after falling on its earnings report, GameStop  shares were roaring back today, finishing up 8.8%. The video game retailer got a boost from research firm Sterne Agee, which maintained its buy rating and a $52 price target following yesterday's disappointing report and outlook. Analyst Arvind Bhatia said strong console sales bode well for the stock, and predicted its earnings per share could reach $4. Separately, CEO Paul Raines said Wal-Mart, which recently decided to get into the video game exchange business, was good for the category. GameStop's model faces a number of challenges, including new competition, technological advances, and the potential of game makers to make used games less accessible. Still, with two new consoles on the market, the company seems to have bright short-term profit growth ahead of it. It seems like the market was overreacting yesterday when shares fell 4%.

After years of speculation, Microsoft has finally brought its well-known productivity software suite, Microsoft Office, to Apple's iPad. Microsoft CEO Satya Nadella announced the move on Thursday, in line with previous rumors. This launch has been a long day coming, as Microsoft finally embraces its longtime rival's mobile platform.

In this segment from Friday's Tech Teardown, host Erin Kennedy and Motley Fool tech and telecom bureau chief Evan Niu discuss the groundbreaking move by Microsoft, and why this was a long time coming. Evan sees this as one of the most important strategic shifts coming from Microsoft in mobile in a long time, and says that the move is absolutely a win-win for both Microsoft and Apple. He sees this as potentially being a meaningful driver for Office 365 subscriptions, and a great sign that Microsoft is now taking the necessary steps to broaden its horizons.