Netflix (NFLX) Chief Executive Reed Hastings led off the proceedings this morning talking about international expansion. The Internet movie outfit is going to launch in Toronto first, a “bold” move, going to Canada, he jested. Then, Netflix will open it’s doors in an undisclosed foreign market shortly thereafter.

The upshot: international expansion could hurt profits. “We tell investors that the better it goes, the more money we are going to lose because we are going to invest” more in expansion, Hastings says. He says it takes one to three years for Netflix to establish itself in a new country, which is relatively fast. Hastings, who is a Microsoft (MSFT) board member, would not comment about hedge fund manager David Einhorn’s call for Microsoft CEO Steve Ballmer’s ouster.

He was wiling to discuss his own open letter to short sellers to cover their negative bets, even calling short-selling “healthy” for markets.

“I’m not trying to have a battle with the shorts,” (but) if you have a friend on the short side and you think he’s losing money, and you think he’s wrong, then you want to tell him.”

The conference, now in its ninth year, got off to a rip roaring start last night when News Corp. “acting CEO” Jane Lynch, the star of the Fox Television hit Glee, recommended comic strips be added to the WSJ and other humorous mandates involving Sara Palin and talk show shock host, Glenn Beck.

Google (GOOG) Executive Chairman Eric Schmidt was the opening night keynote. The former CEO, who serves as an advisor to President Obama, says he has no intention to take a cabinet post or agency job, which had been rumored. But he will be active in the coming campaign just as he was during the President’s first election.

Note: For further ongoing coverage of D, see also former Tech Trader editor Eric Savitz’s blog at Forbes.com.

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Specifically, Kaplan said his new company The Melt will offer be a “next generation fast, casual restaurant.” Users will be able to order grilled cheese sandwiches and soups via the Melt mobile website. Then they receive a QR code, redeem the code in any Melt restaurant, and receive their freshly made order in minutes.

This may seem like more of a lark than a serious business, but Kaplan has ambitious plans. The Melt will open five restaurants in the San Francisco Bay Area between August and November, and Kaplan wants to open 500 locations in the next five years. And The Melt has even raised venture funding from famed firm Sequoia Capital — Kaplan wouldn’t specify how much, but he said it was enough to open 20 stores, which cost between $500,000 and $1 million.

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Murtazin’s blog appears not to have that claim today, but he is cited as stating such by Todd Haselton in a piece this morning on BoyGeniusReport.

A Nokia spokesperson, however, tells The Wall Street Journal’s Christopher Lawton a short while ago that, “These rumors are completely baseless.”

Murtazin has speculated as recently as May 16th that the two companies were talking about a deal.

Microsoft shares are down 54 cents, or 2%, at $24.47.  Nokia shares are down 34 cents, or almost 5%, at $6.68.

Well, at least one believer this morning is Brian White with Ticonderoga Securities, who follows Apple (AAPL) and has a Buy rating and a $612 price target on that stock.

“We believe reports from Boy Genius highlighting the potential for a Microsoft purchase of Nokia for $19 billion should provide Apple investors with even greater confidence that the company can continue to gain market share at the expense of legacy vendors in the mobile phone market,” writes White.

“In our view, Apple investors could not ask for a better deal, and we believe a transaction would only further Apple’s market share gains in the coming quarters.”

Sounds like White is choosing his words carefully, but it also sounds like he believes the rumor.

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President Obama has nothing to gain by negotiating with Republicans in Congress in order to raise the debt ceiling. The Department of Treasury doesn’t need Congressional approval to issue more debt and it will be a long time before Treasury actually needs to exceed the debt ceiling.

The analyses I’ve read on the topic are nothing if not variable, but they all assume at some level an agreement by all parties on the basic necessity of raising the debt ceiling and the general wisdom of reducing the deficit. The President knows what needs to be done, the Congress knows and so does the electorate. Based on this shared understanding, it follows that those who act in the spirit of compromise will be rewarded and those who act to obstruct
progress will be punished.

Never mind the compelling absence of evidence that any such shared understanding exists; that’s just not how things work.

The President, and this President in particular, is not answerable to Congress. The President is answerable to history, to the voting public, to our allies, to business interests including bond markets and in relatively rare cases to a 2/3 majority in the Senate. When the executive branch and the legislative branch can’t work out their differences the Supreme Court acts as referree. If Congress failed to raise the debt ceiling, history would not be kind to a President who on their advice failed to honor our debts. The bond markets would not be kind, our allies would not be kind and consequentially neither would the voting public. But a President who stood up to a hostile, inexperienced Congress and continued to honor our debts would win support from all sides. There will have been sufficient turmoil and pain following Congressional failure to raise the debt ceiling that everyone on earth will understand who the heroes and villains are.

If Congress failed to raise the debt ceiling, the President could stand up to Congress on Constitutional grounds, in which case he could count on a fairly corporatist Supreme Court to eventually rule in his favor. He could stand up to Congress on National Security grounds, in which case he might even be able to secretly issue fresh debt. He could stand up to Congress on technical grounds for a very long time without provoking a Constitutional crisis or raising the debt ceiling simply by draining the Treasurys out of trust funds and replacing them with other assets. And if he had to break the law, as President, in order to stand up to Congress, then he could break the law on moral grounds, secure in the knowledge that if he is impeached, the Senate doesn’t have enough votes to convict.

What would the electorate think of a President who defies Congress on any or all of those grounds? The Democrats would rally behind him, the Republicans would still oppose him and the independents would admire him for acting independently.

Now alternatively he can compromise to avoid a direct conflict but what’s in it for him? He could give away everything his constituents like and it still wouldn’t be enough to balance the budget. By compromising he snatches defeat from the jaws of victory. Democrats will hate him. Republicans will (rightly) say that they won. Without any drama to overcome through courageous and decisive action, independents will conclude that he’s a weak leader who stands for nothing.

Politics is not about forethought, compromise and the public good. Politics is about personalities and political narratives and the balance of power. This narrative has yet to be written, but in the politics of the debt ceiling, President Obama has all the power and his opponents in Congress have none.

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As I wrote yesterday, some analysts see opportunity for RIM in Nokia’s flagging sales, but there’s also a concern Nokia’s turmoil at the hands of Android-based phones could be an omen for RIM as well.

For example, Jefferies & Co.’s Peter Misek today writes that average selling prices for the company’s wares could “collapse,” leading to an erosion of gross profit margin from 35% fiscal Q4 to 30% in the current quarter. And if operating profit on device sales falls to break-even, which he thinks it might, then the company’s profit would be dependent on subscription profits, which lag actual hardware sales.

Misek thinks Nokia’s deterioration highlights how difficult it is to transition operating systems — of particular concern to RIM as it moves from its “OS 7″ to the “QNX” operating system.

“We believe the transition from Blackberry OS to QNX will cause RIM to see the same pressures and challenges as Nokia is seeing, including ASP decline, margin erosion, and weakened carrier and consumer mindshare.”

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“As politicians continue to criticize the firm and the public scrutiny persists, we believe that Goldman’s clients will begin to rethink their relationship with the firm and the franchise will ultimately suffer,” he wrote. “With approximately 17 percent of the ownership in the hands of current and former partners, this control group has ample motivation to make amends with politicians and the public in order to reduce the threat to its franchise.”

[Bloomberg]

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I count three downgrades today, in all, from Goldman Sachs, Sanford Bernstein, and Canaccord Genuity.

As I wrote following that announcement, the bears warned that the worst may not yet be over in terms of the deterioration of the existing business, and that the partnership to develop phones with Microsoft (MSFT) still carries risk.

That’s generally the viewpoint of today’s actions as well. I’ll get to the Goldman and Bernstein notes in a moment.

Mike Walkley at Canaccord Genuity cut his rating to Hold from Buy and cut his price target to $8 from $11, writing that he is “increasingly concerned about sales for Nokia’s Symbian devices during the transition period.”

The vaunted Nokia distribution channel has in fact broken down in China, the company indicated, and the head of operations there has been let go. “Nokia indicated it had mismanaged inventory levels in China and has fired and replaced the head of its China distribution operations.”

Walkley cut his 2011 EPS estimate to $20 cents from 54 cents, and cut his 2012 EPS estimate to 28 cents from 83 cents, but he still thinks Nokia’s phones based on Windows Phone could become a viable third platform, after Apple’s (AAPL) iOS, and Google’s (GOOG) Android, and he models a profit of 83 cents in 2013, on a rebound in sales to €44.9 billion from a likely €39.7 billion in 2012.

Bernstein’s Pierre Ferragu, meanwhile, cut his rating from Market Perform to Underperform, with a $4 target price on the American Depository Receipts, down from $7.33 previously. His target price on Nokia’s ordinary shares goes to €3 from a prior €5.50.

Ferragu notes that he had upgraded the stock on March 11th, when there were 13 Sell ratings on the Street, thinking that investor expectations were low enough to offer some upside on the shares. But yesterday’s cut means the “worst case” scenario that he had imagined is, in fact, crystalizing.

The introduction of the Windows-based phone “will be challenging,” he thinks, “given the likely loss of traction and visibility of the Nokia brand, as well as the speed at which the opportunity for a third ecosystem to emerge is vanishing.”

In fact, Ferragu thinks something is happening to Nokia akin to what befell Motorola back when it lost its grip on the number two spot in the phone market:

This new guidance is to us a strong indication that the company is falling into the Motorola-type scenario we have been worried about for some time. We expect Nokia’s smartphone and mobile phone shipments to shrink sequentially in the second quarter, leading to market shares of 19% and 30%, down 19 pts and 5 pts year on year. This precipitous acceleration of market share loss has two major implications. Nokia is now losing visibility in Europe. The brand lost its first spot to Samsung in the first quarter and our recent store visits indicated a dramatic loss of visibility for Nokia: In some stores, we couldn’t see Nokia phones on display above knee level. Nokia’s emerging market share is not well protected. It now seems clear that Nokia’s more stable position in emerging markets and especially in China was artificial. Management advocated that major inventory build-ups artificially increased shipment volumes in the last quarters. We now believe Nokia will face pressure in these markets similar to what it has been experiencing in Europe.

Goldman’s Tim Boddy cut his rating to Neutral from Buy, writing that the company’s “rapid market share loss threatens Nokia’s distribution advantage.”

Boddy writes that his prior convocation that the stock offered upside if new Windows phones succeeded failed to anticipate how quickly the business would deteriorate.

“With Nokia unlikely to have a full Microsoft- based smartphone line-up across all price points before mid-2012, risks to revenues remain material, threatening Nokia’s ability to retain its distribution relationships and retail footprint when new products arrive.”

Boddy cut his EPs estimate for this year to 17 cents from a prior 53, and cut 2012′s estimate to a loss of 1 penny, versus a prior estimate of 70 cents per share.

And like Ferragu, he draws parallels with the old Motorola’s troubles when it lost its position in phones:

We believe the parallels between Nokia’s situation and Motorola in 2007/8 are becoming more similar. We still argue that Motorola’s position was more precarious, given its dependence on a slim number of high end ‘hit’ models for its profitability, a structurally unprofitable EM business and a weaker balance sheet, but a clear lesson from Motorola’s challenges (or, for that matter, Sony Ericsson’s) is that it is both difficult and time-consuming to rebuild distributor, retail and supplier confidence in your brand once market share has collapsed.

Things that were an advantage for Nokia, moreover, such as in-house manufacturing, may come to be a liability, Boddy believes. For one thing, of the company’s 59,000 employees in its handset operations, about half are based in developed markets. That might make it tough for the company to restructure if it wanted to shift resources to emerging markets where the upside is greater.

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