I Was Wrong About Starbucks

Shortly before Christmas, I wrote about how Starbucks (Nasdaq: SBUX  ) had lost its appeal as a destination, a place for writers like to me sit, sip, get connected (wirelessly), and write.

Since then, my regular coffee shop has been destroyed by the recession. Color me bummed. I've tried other places that offer free Wi-Fi, including my favorite independent bookstore and a great little place just outside Denver called Stella's. Both are far more appealing than Starbucks -- but neither is as useful.

Not. Even. Close.

Wi-Fi is the problem. Stella's is crowded. So is my favorite bookstore. When too many PCs try to take a slice of bandwidth pie, we all get a sliver. Or nothing. Connectivity is a big deal for yours truly, whose scribblings are usually published on the Web. The Internet helps me to check facts and find source documents.

Enter Starbucks, the only reliable deliverer of Wi-Fi outside of my home office and The Apple Store. As it turns out, paying for access makes sense after all.

This isn't just good news for Starbucks. AT&T (NYSE: T  ) will once again get $20 a month from me. Deutsche Telekom's (NYSE: DT  ) T-Mobile, meanwhile, continues to get play on the Starbucks Wi-Fi page as a roaming partner. As more of us become mobile, self-employed workers -- New York City mayor Michael Bloomberg is concerned enough that he's proposing an unemployment safety net that would cover local freelancers -- these services could see higher revenue.

That, in turn, could create more incentive to roll out metropolitan wireless via WiMAX from Clearwire (Nasdaq: CLWR  ) and its development partner Sprint Nextel (NYSE: S  ) . Having WiMAX would loosen the leash for mobile workers by covering portions of entire cities (and suburbs) with wireless Web signals. Jack in at the coffee shop, the bookstore, the park, anywhere. Someday.

What we have now is ... Starbucks. Yet investors don't seem to care. Those following the stock in our 130,000-strong Motley Fool CAPS database are more bearish today than in December. Only 77.9% of those rating Starbucks give it the green thumb versus 78.9% a few months ago.

I understand. I'd rather be writing at Stella's. I just can't afford to be.

How about a steaming hot cup of related Foolishness?

Sprint Nextel and Starbucks are Inside Value picks. Starbucks is also a Stock Advisor selection. Try either of these Foolish services free for 30 days. There's no obligation to subscribe.

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool owns shares of Starbucks and is also on Twitter as @TheMotleyFool. The Fool's disclosure policy, like a Starbucks brew, is tall, dark, and tasty.


Read/Post Comments (4) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 13, 2009, at 4:36 PM, amicidelbosco wrote:

    The remainder of 2009 is not going to be pleasant for Starbucks. I consider this company as an important "bellweather" stock. The economy will continue to deteriorate despite the recent optimism generated by the Wells Fargo reports. There will continue to be a North American adjustment to a global economy. Our prices of goods and cost of production are no longer sustainable on "yester years's" models. Starbucks will survive but on what basis is another matter. It will continue be an important indicator of how people will spend and how people are generally really doing. I see Starbucks test the $7 to $8 dollar lows before the year end.

  • Report this Comment On April 13, 2009, at 8:44 PM, 102971 wrote:

    I think that I was one of the lucky ones who sold Starbucks last October. I sold them because I felt that they were no longer the "in place" to go. Their drinks are expensive and their food (snacks) even more so. I still go to my local Starbucks once a week but I buy my donut at a store not 50 yards away for 70c instead of Starbuck's $2.25.

    I don't see any immediate recovery and can think of at least 100 companies that I would sooner iinvest in at this time. If you've got them you may as well hold them but to buy them? NO WAY

  • Report this Comment On April 14, 2009, at 10:50 AM, TomJohnsonZ wrote:

    So you think that 78.9% is statistically significant compared to 77.9%? Perhaps you would consider adding a stats course as pentence for being wrong about Starbucks. Oh, you of little faith! Here is a stat: SBUX price in November 2008; $7, price today $11.86..that appears to be close to a 70% increase. How come you're not talking about that?

  • Report this Comment On April 16, 2009, at 2:40 AM, mberan wrote:

    So on statistics, what was the drop in price from the $50-$60 range of SBUX? It's still overroasted, and over priced even at $12.

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