Disruptive Forces: The Internet vs. Cable TV

There was a very good article today on gigaOm.com by Robert Young titled "Back To The Future...For Broadcast TV. " Young writes about the disruptive force that cable TV was for the big broadcast networks which is now repeating itself as the Internet disrupts cable TV.

The premise behind his argument is that as on-demand changes viewer habits, both due to the evolution of the Internet and more interactive cable TV services, viewers can more clearly decide what and when they want to watch something. This will place a lot of pressure on the marginally successful cable TV program and on its advertising revenue. Young concludes that there will be a shrinkage of programming, and subsequently cable TV channels, as advertisers continue moving to more targeted advertising platform.

Programming will shift to the Internet as channels like Myspace.com, YouTuBe.com, Veoh and Brightcove begin to gain a bigger audience.

For those of you who do not spend a lot of time on the Internet, it is worth seeing where the future is by looking at these websites. You might not like it, but it is the future.

Happy Mother's Day

A video mother's day card from www.youtube.com

http://www.youtube.com/watch?v=bhcA4Ry65FU

Cramer Likes AES Corp.

AES Corp. was Cramer's focus stock last night on Mad Money. He must have read my blog, he said everything that I wrote about earlier this week.

AES Follow Up

AES reported very strong earnings yesterday. I provided a detailed update on AES in April after its year-end conference call in which management provided a tepid outlook for 2006. However, after yesterday's conference call, management was much more upbeat after a strong first quarter.

• International financial markets are finally willing to open up lending to AES-type of projects which are often located in emerging markets. It has been difficult getting deals financed during the last five or six years.
• Pricing and volume mix are good in many markets.
• AES continues to show it has built itself into a nice free cash flow machine.
• New construction prospects are picking up.

Despite the huge run up in emerging-economy stock markets during the last few years, the available financing for greenfield type of projects that AES normally does is just opening up. I mentioned in the April blog that 2006 earnings would be flat as it reinvests for growth in 2007 and going into 2008, but it appears 2006 might be OK. In addition, it appears management has greater confidence in its ability to complete some large projects during the next few years which will support management's outlook for double-digit earnings growth.

After the year-end conference call, it appeared that this stock might be dead money until the fall, but with Monday's earnings release and the announcement of some big projects, investors will have to get back into this stock now.

Revlon Corp: New Newsletter Idea

Today Mullane Asset Management issued a new newsletter on Revlon Corporation. Executives from Coca Cola joined the company in 2002 and their efforts are about to pay off.

Favorite Stock Idea For 2006: Oracle Corp. UP 20%

Going into 2006, our favorite stock idea was Oracle Corporation. Since publishing the newsletter, the stock is up over 20%. While investors continue to focus on commodity and old-time industrial companies, selected-technology stocks are performing pretty well.

As short-term interest rates continue to rise in many parts of the world, cyclical earnings and commodities are the most exposed to a slowdown. Oracle's business is just beginning to pick up and has a number of years of earnings growth in front of it.

Level 3 Continues Industry Consolidation: Part 2

Level 3 (LVLT) announced another deal to further consolidate the telecom industry yesterday. The stock, once again, was up big. Since I began writing about the stock in September of 2005, it is up about 90%.

As a reminder, Level 3 has acquired WilTel, Progress Telecom, ICG Communications and announced the TelCove deal yesterday. This is a classic consolidation of an industry which came out of a bust period. As I wrote in the September 2005 and November 2005 newsletters, IP traffic is growing 70% per year while the demand for oil grows 2 to 3% per year.

With Level 3 up over 90%, investors are beginning to focus on the real growth industry.