Tesla Motors, the electric car start-up headquartered in San Carlos, California, has announced it has achieved profitability in the month of July. It took Tesla seven years to turn a profit – a feat many other start-ups never achieve. In the month of July 2009, the company earned $20 million in revenue, which exceeded expenses by about $1 million. Since Tesla is still a private company, it has no formal obligation to disclose details when it comes to publishing financial information. In that regard, the firm was very selective about what information it revealed. With that, let’s take a look at the details behind the numbers.July turned out to be the best month for Roadster deliveries, with keys to 109 models dispatched to customers’ pockets (and purses). That is not a measly number for a start-up automaker and inherently deserves a round of applause and congratulations. At an average transaction price of $130,000 (added accessories), revenue would be about $14.2 million. Since most accounting practices today operate on a products delivered basis (counting revenue only when transfer of product ownership has taken place), deposits for the upcoming Model S can’t be counted as revenue yet. That leaves us with six million of unaccounted revenue, most of which probably came from the Daimler deal wherein Tesla supplied the German automaker with battery packs and charging systems for the Smart ED. Since the transaction is by all accounts a one-time deal, it will not be a recurring source of revenue.

Considering that revenue beat out expenses by only $1 million, it’s safe to say that profitability won’t extend to August or subsequent months. That might not matter much in the short run, since Tesla has received $701 million in total investment funding from many respected VC firms. The company is hard at work in bringing its  Model S to the general public. The all-electric sedan will be priced around $50,000, which will make it much more attractive to the mainstream luxury car buyer. If you ask us, the Model S is also very beautiful and, given what we’ve seen so far of the interior, will have very unique and innovative features. A few weeks ago, Tesla celebrated the opening of the fourth Tesla Retail store in Seattle area – which is all part of the overall strategy to make the firm’s products more widely available. Here’s the full press release, in case you’re interested:

[Source: Tesla Motors, Tesla Motors Club]

Press release

Tesla Motors attains profitability milestone

Electric vehicle manufacturer achieves record deliveries in July and will significantly expand in Europe this quarter.

August 7, 2009

SAN CARLOS, Calif.–(BUSINESS WIRE) -Tesla Motors attained a significant milestone in July when it achieved overall corporate profitability with approximately $1 million of earnings on revenue of $20 million.

Tesla reached overall corporate profitability while continuing to develop the all-electric Model S sedan and opening regional sales and service centers. Profitability arose primarily from improved gross margin on the Roadster 2, the second iteration of Tesla’s award-winning sports car.

Tesla shipped a record 109 vehicles in July and enjoyed a surge in new Roadster purchases. In the third quarter, the privately held company will make significant deliveries to European customers while expanding its presence in several countries.

“We achieved a bottom-line profitability thanks to a tremendous amount of hard work by the Tesla team to improve quality, while simultaneously reducing costs on the Roadster,” said Tesla CEO and Product Architect Elon Musk. “This also shows that there is strong demand for a car that is unique in offering high performance with a clean conscience. Moreover, customers know that in buying the Roadster they are helping fund development of our mass market electric cars.”

The highly acclaimed Roadster — faster than a Porsche and twice as energy efficient as a Toyota Prius – is the only highway-capable electric vehicle for sale in North America or Europe. It’s the first production EV to travel more than 200 miles per charge and the first US- and EU-certified Lithium-Ion battery electric vehicle. With an estimated range of 244 miles per charge and zero tailpipe emissions, it offers supercar performance with a clean conscience.

The Roadster 2, which Tesla is building and shipping to customers now, features an array of enhancements. Those include a more powerful heating, ventilation and air-conditioning system, more comfortable seats and a more luxurious dashboard and cabin.

Last month Tesla began delivering the Roadster Sport, an even higher performance car that does 0 to 60 mph in 3.7 seconds, compared to 3.9 seconds for the standard Roadster. The Sport includes a more powerful motor, custom-tuned suspension and forged wheels. A customer’s Roadster Sport sprinted the quarter-mile in 12.643 seconds in late July, setting a class record in the National Electric Drag Racing Association.

Financing Now Available

Last month, Tesla announced Roadster financing through Bank of America. Financing means the Roadster can have lower total monthly costs than a gas-guzzling sports car with a similar sticker price. Prospective customers may complete loan documents in Tesla’s showrooms or online.

The Roadster is six times as energy-efficient as comparable sports cars – yet it does not require routine oil changes or exhaust system work. Roadsters have far fewer moving (and breakable) parts than internal combustion engine sports cars, which need replacement such as spark plugs, pistons, hoses, belts and clutches. The Roadster costs roughly $4 to fully recharge – a bargain even when gasoline costs less than $1 per gallon.

Tesla sells cars online and at showrooms in California (Menlo Park and West Los Angeles), New York City, Seattle and London. Tesla is rapidly expanding its network of showrooms this summer with stores in Chicago, South Florida, Washington DC, Toronto, Munich and Monaco.

Tesla has developed an industry-leading mobile service team, including highly skilled technicians who make “house calls” to customers’ homes or offices in every region where Tesla sells cars. Electric vehicles have far fewer moving (and breakable) parts than internal combustion engine vehicles. They qualify for federal and state tax credits, rebates, sales tax exemptions, free parking, commuter-lane passes and other perks.

Tesla, which in June won Department of Energy approval for $465 million in low-interest loans, is deep into the development of the Model S. The all-electric sedan will have a base price of $49,900, roughly half the price of the Roadster. Reducing unit cost on the Roadster is helping Tesla to bring the Model S to market at a vastly lower price point, paving the way to mass-market EVs for mainstream buyers.

In addition to the Model S program, Tesla is jointly developing an electric version of the popular Smart car with Daimler. The first of an initial test fleet of 1,000 electric Smart cars are expected to be on the road in late 2009.

RadioShack is undergoing a major rebranding that will change the company’s forward-facing name to “The Shack.” The name change may hint at a new direction for the company, venturing into the general home electronics space thus far occupied by general technology retailer Best Buy. How will the move impact RadioShack and will it be a success?

Here’s the game plan: RadioShack stores will reflect the new name in displays this week, while store-front signs will be replaced by the end of the year. Only the corporate infranstructure will retain the old RadioShack name, however.

Financials

Financially, RadioShack stands on solid ground. The company posted an after-tax net income of just over $48 million in the second quarter of 2009. That’s a $5 million increase from the previous quarter and is attributed to cost-cutting throughout the company (overall revenue is down over $37 million from 1Q 2009). Compared to the year-ago quarter ended 6/30/2008, the retailer has posted an after-tax increase in net income of 17 percent. That’s a lot better than the giant electronics retailer Best Buy has fared in the down economy, which has posted a sharp 73 percent decrease in after-tax net income in Q2 2009 from the previous quarter. Perhaps the RadioShack executive team is predicting a change in market perception and/or shopping habits and is basing its re-branding decision on this forecast, caring to be proactive going forward with the company’s 4,453 company-operated stores.

Target market

Dating back to its roots, RadioShack is known for its supply of unique electronics and tech gear: adapters, cables, electricity converters – all these items are usually not available at a big-box retailer such as Best Buy or the now-defunct CircuitCity. In that regard, the company caters to the true tech geek. However, many see the name change as a sign of the retailer’s plans to make a greater push into the general electronics space. If that is the case, a move to rebrand the company is one thing, but if the name change will also bring with it a tidal shift to the type of products sold in the store (read: eliminating its unique product lines), The Shack faces the risk of alienating its most loyal customers. In fact, a commenter on this blog post went so far as to say that “The day I can’t walk in [Radio Shack] and buy a diode and some molex power connectors is the day I stop shopping there.” As with any unique product, RadioShack has built a small (yet powerful) cult-like following of hands-on tech fanatics. Therefore, I hope that if The Shack is planning on carrying more mainstream technology in its stores, it does not do so at the expense of the uber hands-on customer.

Hut or Shack?

Taking the word “Radio” out of “RadioShack” may have valid reasons. Radios today may be perceived old, outdated, and simply not hip, especially for generations X, Y, and Z. After the word”Radio” has been cut out, though, we are left with just The Shack. And here is where it may get a little shaky from a psychological interpretation perspective. When we speak about “living in a shack,” we usually refer to an environment that is not in pristine condition. Put simply, the word carries some negative connotations. So it looks like the branding folks at RadioShack were stuck between a rock and a hard place: radio is an outdated word and shack carries many not-so-positive associations. So they decided to put the word “The” in front of “Shack” to make this not just any kind of shack, but the most definitive shack in the world! Not sure about you, but without prior knowledge of RadioShack, I don’t think many would want to buy a 50 inch flat screen at a place that others call “The Shack.”

In June, Pizza Hut pulled a similar rebranding, slicing the name “Pizza” from the name to end up with “The Hut.” The move was held in conjunction with the chain adding pasta to its menu. Media and advertising trade publication MediaWeek characterized the name change as an attempt to transform its stores into hip hangouts. Is “hut” a little more positive than shack? You be the judge! At least there isn’t a “shed” – yet.

Concluding Thoughts

I see the rebranding as a way to make what otherwise is a hardcore geek haven a cool place for teens and tech fans to hang out: more traffic and more time spent in the store are surefire ways increase sales and customer interaction. To attract teens – many of whom are into gaming – The Shack would need to improve its gaming selection, perhaps adding functioning gaming consoles connected TVs. This would fall in line with the general consensus that changing the name to “The Shack” is part of an overall push into the general electronics space. As long as that doesn’t mean a pull away from its unique items such as diodes and molex power connectors, I think the plan has a good chance of success. Add to that the growing foray into wireless sales (T-Mobile will be joining AT&T, Sprint Nextel, and Alltel on The Shack’s shelves) and you’ve got yourself a recipe to keep those profits growing.

The company will hold launch events August 6-8 in New York City (Times Square) and San Francisco (Justin Herman Plaza) called the The Shack Summer Netogether and has launched a website dedicated to the event. Great name!

Image courtesy of lesjones.com

News of the iPhone having sold one million units during its opening weekend has been widely distributed all over the web.  This is an interesting number for more than one reason.  First, selling one million units at $199 and $299 a piece during the current economic climate is remarkable.  How so?  Let’s compare this number to the sales of the original iPhone in the summer of 2007.  The first iPhone sold anywhere between 250,000 and 700,000 units during its opening weekend.  Since this range is quite “fat,” let’s settle in the middle and assume that the actual number was 500,000 units.  Note that this was at a time when multibillion dollar banks were not failing, the world’s largest automobile manufacturer hasn’t gone under, and the Dow Jones Industrial average was trading at two times the rate as it is today.

However, the original iPhone sold for a higher price, between $500 and $600 initially (later lowered to $300 and $400).  Perhaps a better head-on comparison of sales figures would be to pit sales of the 3G S to those of the 3G.  Interestingly enough, the iPhone 3G also sold one million units during its opening weekend of sales, which was about a year ago.  Let’s use the Dow Jones Industrial Average to gauge the overall state of the economy: in July of 2008 – the month of the iPhone 3G launch – the Dow was trading around 12,000 points.  On the day of the iPhone 3G S launch, the Dow was trading around 8,550.

This tells us is that the iPhone is picking up steam with consumers.  Whether it’s in their hearts or minds, consumers are buying the iPhone in droves.  What’s remarkable is that they’re doing so in a down market – matching sales numbers to the iPhone 3G, which was being sold when overall market conditions were less cloudy.  This can mean one of two things:

• consumers are flocking to smart phones in general, and the iPhone hits the sweet spot in terms of functionality, price, and convenience, or
• consumers are flocking to the iPhone in a down market

Whether it’s the former or the latter is not yet clear.  Judging by the sales results of the Palm Pre, which sold approximately 84,000 units in its first week of sales, I’d say it’s the latter: consumers are flocking to the iPhone.  The real question, however, is how can Palm capitalize on this?

Taking a closer look at the iPhone 3G S sales numbers, we find out that the 3G S was – during U.S. launch weekend – only available in 8 countries, while the 3G was – at launch – on sale in 21 countries.  The Pre, by comparison, was only available in the U.S. and Canada.  Perhaps it would be in Palm’s best interest to make its multi-tasking slider available worldwide?  It would, if not for the fact that Palm would need to shoehorn a GSM chip in there.

Blu-Ray.  What comes to mind when you hear “Blu-Ray”?  An awesome high-def format or a medium that has outlived its prime?  Recent numbers from the NPD group suggest that it’s anything but the latter (even though we’d love to beg to differ here at TNR).

NPD’s retail tracking service found Q1 sales of standalone players up 72 percent over last year.  400,000 units were sold, representing a 14% increase in dollar sales.

Using our analytical skills, we project these numbers to increase even more in the coming months and years, as prices of both the players themselves as well as Blu-Ray disks (the medium) are expected to drop, with increased level of production efficiency as well as being able to take greater advantage of economies of scale.

It looks like I was wrong (again) about Blu-Ray.  Boy how much do I not understand the success of a physical format in today’s entertainment environment.  I still stare with disbelief at these numbers and ask myself, why would anyone buy into Blu-Ray when almost all programming can be acquired over the web, without leaving one’s home?  Without being tied to a particular device/screen?  And being able to take the said content with you on the road on your iPod/iPhone or any other mobile device.  Looks like old habits die hard and people still like the physical format after all.  I, personally, choose to take the red pill (and go all IP).  How about you?

The sole purpose of this post is to test the effect of site framing.  Specifically, we are testing the DiggBar and how a website’s traffic is affected by it.  We will report openly to the web community with the results of this mini-experiment.  Please follow the guidelines below.  This is the only way our experiment can work and for the results of this test to be accurate (very important):

1. If you are logged into Digg, please Digg this story and visit it through the DiggBar.  Don’t click through to the original.
2. If you are not logged into Digg, click through to the original story without the DiggBar.  Then go ahead and log in.  Digg the story but don’t click through a second time.

We are basing the baseline (constant) traffic that we should be getting on the amount of times the post gets Dugg.  For example: if the post is Dugg 100 times and fellow Diggers follow the above instructions, we should be able to tell how much traffic the DiggBar added/subtracted from overall site traffic.  So if we get 90 pageviews, it would means that 10 pageviews were stolen from us by the DiggBar.

Just in case you were referred here through a different site (not Digg), here is the link to Digg this post:
http://digg.com/tech_news/How_much_traffic_does_the_DiggBar_frame_steal_from_your_site

Why all the fuss?

As we discussed on the TNR Podcast over and over again (as well as countless others in the industry) we don’t like sites that frame other sites.  So we’re putting our traffic where our mouth is and want to find out what effect frames have on overall site traffic.  Frames are the underlying technology behind website bars such as the DiggBar, the Facebook bar, and the Hootsuite bar.  We’re starting our experiment with Digg (being the most tech-savvy place on the web in our opinion ) ).

Since this is an open experiment the results of which will be available freely to everybody, we will post them on Sunday, May 31st, 2009 on the home page of TechNestReport.com.  We will be using the above instructions as the baseline of the experiment and will be collecting traffic data using Google Analytics.

In Q1 2009, RIM increased its share of the consumer smartphone market by 15% over the prior quarter.  In other words, RIM now has a market share of nearly 50 percent when it comes to consumer smartphones.  According to NPD group, a “buy-one-get-one” promotion by U.S. CDMA carrier Verizon Wireless helped push the Canadian company’s BlackBerry Curve past the iPhone 3G in the first three months of the year.  This comes as bad news for Apple and Palm, since both companies lost 10% each.  NPD reported that the BlackBerry Curve was the top-selling smartphone during the quarter, followed by the iPhone 3G, the BlackBerry Storm, the BlackBerry Pearl, and the T-Mobile G1.  “Verizon Wireless’s aggressive marketing of the BlackBerry Storm and its buy-one-get-one BlackBerry promotion to its large customer base contributed  to RIM capturing three of the top five positions,” NPD analyst Ross Rubin said.

On the surface, it looks like the folks over at Waterloo (RIM HQ) should be celebrating.  But what if they don’t have anything to celebrate with?  By cutting margins in half – that’s what happens with a buy-one-get-one promotion – RIM is well on its way to becoming the Dell of the smarphone market.  Sure, the company’s products took three of the top five smartphone spots in the quarter.  But the iPhone was #2 – and it got there without using any “aggressive” promotions or buy-one get-one offers.  In other words, the iPhone spoke for itself (no pun intended), while the Curve needed all the help it could get to entice consumers to buy it.

You might say to me, “Alex, numbers are numbers; there are no if’s, and’s, or but’s about it.”  Well, there are in this case.  While RIM did sell more devices, the more important question is – at what cost?  By discounting giving away  the Curve, RIM has basically admitted that it can’t compete with Apple’s iPhone on the basis of value, user experience, or customer delight.  Thus, it resorted to price-cutting measures.  It’s kind of like deciding on that Porsche Cayman you’ve always wanted, but seeing a Toyota Yaris next to it for free, when purchased with another Yaris.  So you buy the Toyota because your sixteen year-old daughter needs her first car, and you just couldn’t pass on the buy-one get-one offer.  By allowing Verizon to give one Curve away as another one is bought commoditizes the BlackBerry brand, plain and simple.  This is something Apple didn’t have to do.A parallel of this can be seen in the PC market, where a Dell, HP, Acer, Asus, Gateway, Toshiba, and (name your PC brand here) can be purchased for hundreds of dollars less than an Apple Mac.  By choosing not to compete in the botton of the market, Apple has consistently won user satisfaction surveys and delighted its customers.  Year after year.  Can any of the aforementioned PC manufacturers say the same?  RIM is following the business model of the PC manufacturers, and it doesn’t have to.  It’s not relying on a third party to get its software, the way the PC makers are relying on Microsoft for Windows.  RIM makes the entire widget – the way Apple does.  So this is purely a choice on RIM’s part to position itself as the bottom-feeder of the smartphone market.  In the long run, I don’t think this is a sound strategy.  RIM might win some number wars, but at what (whose) expense?

Some more interesting tid-bits from the NPD report: smartphones now make up 23 percent of cell phone sales, up from 17 percent in the year-ago quarter (Q1 2008).  According to NPD’s Rubin, “Even in this challenging economy, consumers are migrating toward Web-capable handsets and their supporting data plans to access more information and entertainment on the go.”  Translation: people want information and entertainment on their mobile devices.  Guess what’s the best device that delivers?  iPhone.

On a closing note, I’ve been a long-standing supporter of the idea that Apple make the iPhone available on all the carriers once the exclusivity contract with AT&T runs out (hopefully during the summer of next year).  I truly belive that Apple will do just that: during the launch of the iPhone – the first few years of it – Apple wanted to understand the cell phone game and be conservative, attacking first and foremost with product.  It wanted to understand the various business models as well as perfect the technical and engineering techniques that go into making a cellular device.  Remember, the iPhone is Apple’s first cellular product.  Ever.  Apple also wanted to streamline the experience for the user: want an iPhone?  There is only one carrier where it’s available: AT&T.  Once the launch has come and gone and Apple has learned about the “ins and outs” of the cellular game, the company can really start to focus on making the device available to as large of a market as possible, and this means making it available on all carriers, not just in the U.S., but worldwide.  Once this happens, even the buy-one get-one promotion from RIM won’t stand a chance.  What do you think?