Through TheFLY's Eye:

Through TheFLY's Eye:Possible Sale of Cendant's Travel Distribution Business

Rumors are circulating this morning that the consolidation of the online travel business is about to begin. From this Fly's perspective, the consolidation of the online travel business could prove to be one of the best investment themes going forward.

The industry has gotten hit pretty hard during the last year as there seems to be too many competitors. In addition, the industry, at this stage of its life cycle, appears to be counter-cyclical. The online travel business seems to get more inventory when the economy is weak and there is an oversupply of hotel rooms and airplane seats. When things are good, the hotel companies and airlines like to book the customers themselves.

This weakness in the online business may prove the best time for the industry to consolidate. Interactive Corp. laid the foundation for a consolidation by spinning off Expedia and most likely would play the lead role. Henry Silverman, head of Cendant, is breaking his company up which owns online travel distribution businesses with well-known names Orbitz and Cheaptickets in the consumer space, in addition to Galileo which is a leader in the business online travel market.

Expedia, during its existence, has shown great financial metrics with high operating leverage. Combining two industry leaders could create a profit generating machine. The $900 billion world travel business will grow nicely as the global economy booms. Expedia has been growing its online business twenty percent per year. A consolidated online industry will give it more power and more profit potential for shareholders. Stay tuned....

AMD: Great Results

WOW!!! What results! Who would have ever thought this from AMD.

YOY revenue growth of 20% for 11 consecutive quarters

• Channel partners continue to improve, which is important for this company that has a history of chip durability.
• HP, IBM, and the 3rd largest China PC company are doing more and more business with AMD. And Lenova continues to increase business with AMD.
• Gross margins of 58% and free cash flow of $270 million. Wow!!! Is this AMD?
• ASPs increased
• Inventories down by 6 days going into a seasonally weaker period which is very good.

The big plus in this semi upturn is that a lot of the growth is occurring in new markets that were not aware of AMD chip problems in the 1980s and 1990s and are willing to try them--sales strong in China, Russia and other Asian countries. In addition, enterprise, data center, blade servers are all doing well—all important high growth market segments.

Gross margin outlook OK and most likely being overly cautious but it appears serious pricing pressure at the high end is still not a concern for 2006. AMD management still believes it can get 30% market share.

From this Fly's perspective, with quarter after quarter of good results, large institutional portfolio managers will have to continue getting back into AMD.

GE Results

GE released results this morning and will hold a conference call this morning at 8:30. The top-line numbers look very strong with 5 of 6 business segments showing double-digit growth. EPS in line but questions about whether it should have been higher. Good second outlook. Stock movement will depend on comments during the call and whether any investor can get excited about a large cap stock regardless of how good the results are. Back to you later...

Midday Reminder

Advanced Micro releases results tonight after the close and will have a conference call at 5:00 EST. The key factors regarding AMD's results are the ability to grow market share and maintain margins. Intel, after lowering guidance at its mid quarter update, unequivably stated that it would start targeting market share at the expense of margins, or in as plain English as English can be, Intel will compete on price at any cost to maintain or increase share. This sounds like a good old-fashioned price war. Since that time, Intel's stock is down big and AMD has maintained its value.

It will be fascinating to see to if little AMD can compete against the big Intel machine. More to come after the call.