Jason Stipp: I'm Jason Stipp for Morningstar and welcome to the Friday Five.
Now here on the Friday Five, we often have to make amends for our bad jokes. But this week we have five companies that are either trying to make amends or they are setting themselves up to be sorry.
Here with me to offer the details is Morningstar Markets Editor, Jeremy Glaser.
Jeremy, thanks for joining me.
Jeremy Glaser: Always a pleasure, Jason.
Stipp: What do you have for the Friday Five this week?
Glaser: Well, we're going to look at five companies that are going to have make amends or are making amends right now, and those are Google, Gap, Microsoft, Wal-Mart, and J.P. Morgan.
Stipp: There's some interesting news about Google this week and not all of that had to do with their earnings, what do you see on that front?
Glaser: Google had incredible earnings yet again. They're really on a roll; advertising is coming back, but there are a lot of stories about Google secretly testing driverless cars, investments in cables to connect wind farms, and other alternative energy.
Google has been known for a while that they make a lot of these kind of alternative investments that really are very far field from their core competency. And you can't help but wonder, if this is really in the best interest of shareholders. Seems like it's the founders are using their company as a piggybank for their hobbies; they're probably using it as a retention tool. I talked to our analyst Larry Witt earlier, he said that's probably one of the primary reasons they're doing it. But as a shareholder, I have to be wondering could this money be given back to me as a dividend or in a share buyback versus being spent on some hobbies.
Stipp: So Google trying to make amends for some of its drudge work to its employees by giving them something fun to work on.
Glaser: Yeah, I guess so.
Stipp: So this is the second one, Jeremy, this is a store, I have to admit, I've passed by a lot and haven't really taken a lot of time to look inside, but they got a lot of attention this week, because they changed their label, and that's Gap. What is the story with the Gap label?
Glaser: Gap very quietly rolled out a new logo that was not particularly well received. The Gap blue squares, one of the most iconic corporate logos, they decided to move the square to the side, and to make it, I don't know, maybe a little bit more modern, but it really looks like something that came out of a high school Photoshop class, not really a professional logo.
They made amends extremely quickly; about as fast as they rolled out the new one, they rolled back the old logo. I think it was probably a good decision. I don't think anyone would've recognized that that was the Gap clothing store. But it always shows another adventure in corporate branding.Read Full Transcript
Stipp: Something else that had a quick rollout and rollback was in the world of telecom, and Microsoft rolled out a phone called the KIN; we reported on this before. It rolled back pretty quickly but now they're making amends.
Glaser: Microsoft is making their actual push into the real phone space with Windows Phone 7, that they discussed the launch of this week and that the handsets are going to be available for the holiday season.
Now Microsoft's obviously had a Windows for phone for a long time, but after Google and Apple released their products, it just hasn't been that popular, and they've really lost a lot of mind share, let alone market share.
Windows Phone 7 is definitely a much better product. Really in a lot of ways, it's probably up to the technical standards that people are used to with the Apple and with the Google Phones, but is it too late? They have to get the developers to come in there and actually make the apps that are going to bring people to it, and convince consumers that there's enough of a difference that it's worth paying for this phone versus anything else.
It's going to be a tough battle. I think, they finally have a horse that has the possibility of running, but they could be making amends for this mistake for waiting so long for a really long time.
Stipp: Well, maybe I'll keep an eye out for that phone at my local Wal-Mart, which maybe coming to Chicago. Jeremy, are they making amends for urban dwellers and trying to move into the city now?
Glaser: We'll see. Wal-Mart said this week that they're really going to make a push to move into cities like New York, Chicago, Los Angeles with smaller-format stores that will be around 30,000 square feet or less compared to 200,000 square feet or more in their giant supercenters.
I think these stores are going to focus a lot more on groceries, are going to focus a lot more on disposables more than buying hardware, or some of the larger things that you could find at some of the bigger format Wal-Marts.
I think, time will tell if these are going to be successful or not. I think Wal-Mart has the resources to build a lot of these stores, to support them for a long time, to see if they gain traction in the community, but you have a lot of competitors there. Target has been targeting the urban market for an extremely long time. They've had some very successful multilevel and smaller format stores. We'll see if these amends for these consumers, if it works, if they'll be able to make amends for building some stores that were a bit too big at the peak in the bubble, but again it's one of those things we're going to have to wait and see.
Stipp: So lastly for number five, Jeremy, the financial services industry seems to be maybe having to make some amends now for getting people in homes that they really couldn't afford. Is this a good idea?
Glaser: J.P. Morgan and all of the big banks, really, are going to be making amends for putting people into homes that they couldn't afford, and for the financial crisis in its entirety for a long time. I think, you've seen it in their earnings. There are still very high losses with J.P. Morgan. This week we saw that they reported very high loss. I think, we're going to see that through all the banks as they report through the season.
But other things that keep coming up, like we keep hearing about this foreclosure gate, where instead of following the orderly process of getting people evicted, they are going to these law firms that just kind of mill through them, people aren't really checking the documentation, no one is really sure if these people should be evicted or not.
You know, chances are the vast majority of these loans are bad and do need to be handled through the foreclosure and through the eviction process. But it doesn't appear that all of them are that way. I think, it's a black eye for the industry, and one that has been beaten up so much over the past couple years. The fact that even now they can't quite get all the documentation right, they can't quite get the process right, doesn't instill a lot of confidence that they're going to be able to emerge from the crisis and be able to follow these new consumer protections and be able to be the better actors in the global stage they say they are going to be.
I think that certainly they are going to try to move in that direction and that everyone's heart is in the right place to get there, but as of now they are not there yet. I think it's something that they are going have to work on.
Stipp: Well, Jeremy, I am going to have make amends to you that it's not the Friday Six, and we're going to have to end it right there.
Glaser: Thanks, Jason.
Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.