Category Archives: companies

Microsoft Yahoo: Is $32 now the magic number?

Posted on by
3

Microsoft’s very well played game to win Yahoo at a bargain price is wrapping up even more favorably than Microsoft planned. Yahoo refused the Icahn MS offer today to buy just pieces of the company, though in typical fashion Yahoo did not outline many details of their decision making process, rather they simply asserted it was a bad idea.

Obviously this was a strategic rather than serious move by MS as noted by Henry Blodget, though he’s wrong to think this is just a small play to soften up the Yahoo board before the proxy fight in August.

In fact this is the end game of a very smart plan by Ballmer / MS to aquire everything for less than they have been planning to pay for over a year. Yahoo’s intransigence has simply delayed the process by a few months and saved MS a few dollars per share on what they would have paid.

Over at Silicon Valley Insider we have Henry basically begging for an offer over $31 and indicating support for less.

Yahoo board is now *begging* MS for the $33 they could have had easily a few months ago but may not see again. MS can get it all for less so I’m now guessing the meeting offer will be $31 or $32. That will make MS look generous for keeping to the original plan in the face of a weakening Yahoo, and it will be acceptable to shareholders fearful of YHOO at $18 or lower if this all collapses.

Although this is likely to be resolved at or soon after the upcoming Yahoo board meeting it doesn’t have to resolve to work in MS’s favor. Yahoo’s pretty much exhausted all their options to the extent that it’s either Yahoo in the 30 range with Microsoft or Yahoo under 20 without MS.

Disclosure: Long on YHOO

Google Ranking Needs a Spanking

Posted on by
3

Over at the Google blog today Amit Singhal has post 1 of 2 that promises an introduction to Google ranking.  As usual I’m disappointed in the way Google maintains what to me is a pretense of transparency while using some very ruthless and mysterious tactics to downrank sites they claim don’t meet quality guidelines.   Google (correctly) sees themselves as warring with spammers for control of the web but (incorrectly) thinks transparency is the wrong approach in this fight.

There were some rumblings last year of contacting webmasters directly about site problems but my understanding is that this would represent only a tiny fraction of total sites under penalty.    Of course, due to so little transparency in this area we can’t know the real numbers.

I’ll hope Amit’s second post is a LOT more specific, because I think he’s already practicing the kind oblique speak that is becoming commonplace when many from Google talk about ranking:

Amit:
No discussion of Google’s ranking would be complete without asking the common – but misguided! 🙂 – question: “Does Google manually edit its results?” Let me just answer that with our third philosophy: no manual intervention.

That statement is false, and he should not say it.   He does try to clarify later in the post:

I should add, however, that there are clear written policies for websites recommended by Google, and we do take action on sites that are in violation of our policies or for a small number of other reasons (e.g. legal requirements, child porn, viruses/malware, etc).

Action?  Yes, of course he means the *manual intervention* he said above does not happen.  Google has a right to pull sites out of the rankings, though it is annoying how much they talk about NOT manually intervening when they do it.    Because of no transparency nobody outside of Google knows how often they manually intervene.    Amit makes  it sound like it’s only for horrors like child porn or malware, but note that the use of inappropriate “SEO” tactics such as “hidden text” can get you removed and even banned from the Google index.   Unfortunately for small sites – e.g. “Aunt Sally’s House of Knitting website”  Aunt Sally may have no idea her webmaster is using these tactics.   How often does this happen?    My guess is that hundreds of thousands of legitimate sites are ranked very improperly due to technical penalties, but due to no transparency (and probably no measure of this at Google) nobody knows.

The big Google problem is that the policies for algorithmic downranking are not *clear enough*.  Many SEO companies prey on this lack of transparency, ironically often using Google’s mystique to lure unsuspecting businesses into expensive “optimization” schemes that don’t work or can get them seriously penalized.

Part of Google’s search algorithm philosphy is that they don’t share details because spammers would exploit them before honest people.   Although a weak case can be made for this idea, a better one is that in  non-transparent systems dishonest folks will do *better* because they invest more energy into finding the loopholes.    For example inbound linking, a very hot SEO topic last year at SES San Jose, has complex rules nobody understands outside of Google.    For example linking between sites in an information network can be advantageous or it can be penalized depending on whether Google (rather than the community or webmaster) sees the practice as manipulative of the algorithm or user-friendly and thus allowable.

Amit – a clear policy is one where the webmaster will know, rather than guess, what they are doing to annoy the Google algorithm or the manual intervention folks.

There is a pretty good source for information about how to approach site architecture for optimal ranking and it is to read Matt Cutts’ SEO related posts here.

Although Matt won’t give out much about the algorithmic penalties that create much of the Google confusion and frustration for established websites, if you follow Google’s guidelines and Matt’s posts on SEO you are unlikely to have serious problems with ranking.     Of course unless you work to optimize a new website you will have the *standard problems* with ranking since your competition is probably doing basic SEO on their site.   I’d argue (along with many SEO folks) that the best way to enter things this late in the game and hope for good ranks is with a topical *blog* to support your website.   Start with several posts about your general area of business, using a lot of the terminology people would use to find your website, and add posts regularly.

I’ll be covering the SES San Jose Search Conference and expect to hear a lot more debate about the issue of transparency, blogging, and SEO.

Twitter less?

Posted on by
Reply

Seems to me that Twitter is, in fact, a very important issue with far too much discussion about downtime and not enough about why Twitter appears to be replacing blogging, Facebook, and email as the communications paradigm of choice for the digital elites, which often means  the rest of the online world will soon follow.

Twitter’s system failures have become so common that several of the silicon folks like Mike Arrington are suggesting that people should be moving  to other services – most noted is FriendFeed which now allows “room” conversations as a way to sort noise from signal and talk with a group about specific topics.   I think if they’d come along at same time FriendFeed would be winning the war for the hearts and minds of the legions of twitterers, but Twitter has such a foothold as the microblogging / communication tool of choice it’ll be hard to unseat Twitter unless their services fail to improve over the coming months.   Improvement is likely given their recent Venture capital injection which effectively valued Twitter at about 100 million – enough that money will  soon pour in as needed to beef up their shaky infrastructure.

Why is Twitter important?   It’s really a form of A.D.D. blogging – fast and furious with links out to full treatments which can be read only if they really look interesting.  Because Twitter caters to short attention spans and also throws everybody in regardless of laptop color or digital creed, it’s going to keep catching on fast with the business and tech crowd.   I am NOT convinced it’ll be a big hit for grandma or even Nascar dads, who will see Twitter for the time waster it tends to be…

Yikes.. my Twitter Deficit Disorder makes me think a blog post of more than 143 letters won’t generally get read anyway, and makes it harder to write.

Buy before the rumor, sell before the news?

Posted on by
Reply

One of the really intriguing aspects of the blogOspheric chatterfest is how the big markets tend to react to rumors from key business related blogs.    When TechCrunch reported yesterday that talks between Microsoft and Yahoo had resumed Yahoo stock increased, only to fall after several other blogs reported the rumors as false or weak.

Although I have no reason to believe that Mike Arrington or Henry Blodget are trading options based on their market-moving blog reporting, I’m not at all clear it would be illegal for them to do so as long as they were reporting “real” rumors.

Henry answered at his blog that posting a false rumor to manipulate for investment purposes would likely be seen by SEC as a violation but this leaves a lot of gray areas open for an aggressive options trader/journalist. 

Here’s what I just asked Mike Arrington over at TechCrunch:
Mike just to set the record straight the ValleyWag poster “Mike Arrington”, who claims to have made 10k trading on Yahoo rumors, is fake … right?

More importantly I’m very interested in your views on legality/ethics of trading Yahoo options based on the rumor mill. Let’s say you heard a solid rumor that MS was about to offer $37 for Yahoo and Yahoo was going to sell. Could you legally trade on that before you posted it? One second after?

What if you emailed *me* right before you posted, I think I could legally trade based on current SEC rules, right?

P.S. What kind of Single Malt Scotch do you like? : )

Although I have no plans to manipulate any markets, it is reasonable to assume that if a market can be legally manipulated it *will be* manipulated, and soon. 

Carl Icahn: Blogger

Posted on by
5

There’s a new guy in blog town and he’s shooting from the hip about the defects of the corporate governance models we’ve all come to know and hate over the past decades. His name is Carl Icahn and his blog offers great insight into the mind of one of the most successful corporate raiders in history.

Although it is obviously favorable to Icahn’s bottom line to maintain how incompetent boards are leading to the decline of western economic civilization as we know it, I’m hardly going to disagree with the notion that corporate governance, especially in the technology sector, often seems out of whack with shareholder interests.

It is important not to confuse Icahn’s critiques with the whacky ones of many who suggest the corporation itself is a bad model and should be replaced by outmoded socialistic and centralized approaches that brought economic ruin on an entire generation of eastern Europeans and helped bring genocidal regimes into power in asia.    On the contrary Icahn’s point is more that we need to make sure the corporation model can thrive by insisting on better governance for struggling companies.

In the case of Yahoo, Biz Doctor Icahn’s prescription is to buy up a huge share, then throw the corporate board bums out and sell the company to Microsoft.  The stakes here are so high for Icahn (he could see over a billion in profit if his plan works), that he’s hardly in a position to entertain alternatives that might be better for Yahoo, but I think most shareholders already are rooting him on in the hopes of salvaging the $11+ per share lost when Microsoft withdrew from the bidding for Yahoo last month.

Disclosure:  Long on YHOO

Posted on by
Reply

The huge wait over approval for the Sirius XM Satellite radio merger is almost over as FCC staff has recommended approval of this action making approval very likely.

In my view the merger will have a positive effect on the profitability of the combined companies because it will effectively increase the reach of the advertising offerings dramatically while eliminating upper and some mid-level management positions.   Unlike small terrestrial stations (which are quickly falling under national networks anyway), satellite radio is very capital intensive but relatively labor NONintensive.  e.g once established the satellite network can scale to millions more subscribers without a lot of extra labor or infrastructure costs.    The XM Sirius merger is the logical extension of those technological and labor efficiencies in a market where technology forces are a lot more determinative than normal market forces.

To the extent the merger helps the combined company by increasing their share of the radio advertising market it is likely to have some negative impact on terrestrial radio stations, though I think most of this damage has already been done.  Also, I see the key negative pressure on radio advertising as coming from the growth in online advertising and the merger is unlikely to have much affect on the online advertising market.

Following are notes from the XM / Sirius press release describing the advantages of this merger.

PR info is in italics, [my comments are bolded and bracketed]:

The combination creates a nationwide audio entertainment provider with combined 2006 revenues of approximately $1.5 billion based on analysts’ consensus estimates. Today the companies have approximately 14 million combined subscribers. Together, SIRIUS and XM will create a stronger platform for future innovation within the audio entertainment industry [skeptical – this is a profit move not an innovative one] and will provide significant benefits to all constituencies, including:

* Greater Programming and Content Choices — The combined company is
committed to consumer choice, including offering consumers the ability
to pick and choose the channels and content they want on a more a la
carte basis. The combined company will also provide consumers with a
broader selection of content, including a wide range of commercial-free
music channels, exclusive and non-exclusive sports coverage, news,
talk, and entertainment programming. Together, XM and SIRIUS will be
able to improve on products such as real-time traffic and rear-seat
video and introduce new ones such as advanced data services including
enhanced traffic, weather and infotainment offerings. [theoretically reasonable statements, though I’m skeptical they’ll work hard to innovate, choosing instead to reap the increased profits from the merger efficiencies]

* Accelerated Technological Innovation — The merger will enable the
combined company to develop and introduce a wider range of lower cost,
easy-to-use, and multi-functional devices through efficiencies in chip
set and radio design and procurement. Such innovation is essential to
remaining competitive in the consumer electronics-driven world of audio
entertainment. [Again in theory true, but the radios are already subsidized so I see prices stable or higher after merger.  Innovation will happen as necessary to maintain market]

* Benefits to OEM and Retail Partners — The combined company will offer
automakers and retailers the opportunity to provide a broader content
offering to their customers. Consumer electronics retailers, including
Best Buy, Circuit City, RadioShack, Wal-Mart and others, will benefit
from enhanced product offerings that should allow satellite radio to
compete more effectively. [Auto space – lots of potential as drivers expect more amenities and are willing to pay for them and these partnerships are a very natural win-win for autos and XM Radio.   Retail – skeptical of more than current levels of subscriber increases via this market.]

* Enhanced Financial Performance — This transaction will enhance the
long-term financial success of satellite radio by allowing the combined
company to better manage its costs through sales and marketing and
subscriber acquisition efficiencies, satellite fleet synergies, combined
R&D and other benefits from economies of scale. Wall Street equity
analysts have published estimates of the present value of cost synergies
ranging from $3 billion to $7 billion. [Absolutely yes, though my gut doubts the 7 billion number without having done any financial research.  If this 7 billion efficiency is realistic this appears to be a good stock buy as it could catapult the bottom line of the combined companies, which now have a combined market cap of only about 7 billion]

* More Competitive Audio Entertainment Provider — The combination of an
enhanced programming lineup with improved technology, distribution and
financials will better position satellite radio to compete for
consumers’ attention and entertainment dollars against a host of
products and services in the highly competitive and rapidly evolving
audio entertainment marketplace. In addition to existing competition
from free “over-the-air” AM and FM radio as well as iPods and mobile
phone streaming, satellite radio will face new challenges from the rapid
growth of HD Radio, Internet radio and next generation wireless
technologies. [Maybe, but I think for at least the first few years the focus will be on more efficient delivery of the existing niche networking, news, shock and political talk shows, and other existing products.   I do not see XM and Sirius as major content innovators.   Rather they have been innovative in the distribution space.]

Summary:

Look for the merger to be approved, to bring cost efficiencies, and to breath life into the stock of the combined company.     Do not expect significant other impacts in the radio or other sectors.   Merger = more of the same, more cost-effectively delivered by the combined company.

WSJ Reports

Why O’Reilly’s wrong about Arrington being wrong about Yahoo being wrong about Microsoft

Posted on by
Reply

What did the normally very insightful Tim O’Reilly and Fred Wilson have for lunch, some free hallucinogenic deserts over at Google?

Both are criticizing Mike Arrington for stating the obvious – Yahoo’s not acting in the best interest of shareholders or Yahoo or anybody except Google, who clearly is the big winner in Yahoo’s squandered megadeal with Microsoft.

Fred very correctly notes that Yahoo’s has faced leadership challenges for a long time, but he says he likes the one option that keeps the current Yahoo board intact and very much on track for much more of the same company crushing behavior. Yes, a clean house is needed and that is certainly less likely to happen *now*.

It seems to me there are two issues and they have it wrong on both counts where Arrington’s got it right.

First, Yahoo’s Google move proved that in terms of shareholder obligations it should have sold to MS. Yahoo cannot reasonably make a case that they will come out of the monetization hole using core values while immediately outsourcing their most potentially lucrative biz to Google. Sure this will make more than Yahoo alone, but nothing like what the MS deal would have offered Yahoo in terms of ad cash plus money to develop the search biz. MS offered a shot at glory. Yahoo took Google’s money so they could keep sitting back and watching the really big search money pass them by.

Is Fred saying there is a Googley path back to $34+ per share? Even if yes, it is nonsense to think it’ll happen fast enough to justify turning down MS’s offer of $34 and their subsequent offer of $35 for 1 in 6 of Yahoo’s outstanding shares.

Second, this just gives Google even more of a near monopoly on monetization. As Mike suggests competiton is lacking and needed in the search space. This is a big step in the wrong direction.

Disclosure: Long on YHOO

Yahoo Microsoft – the Sequel?

Posted on by
2

TechCrunch is reporting that Microsoft has “excused” the proposed slate of new Yahoo board members telling them that they won’t be needed anymore.    I don’t think this tells us much if anything about the status of a new deal which rumors suggest may come from the Yahoo board’s concern over losing…billions of dollars.

I think MS is just playing this very smart.  These little measures are designed to get the current Yahoo board to rethink their folly.   I think only Jerry was dead set against the merger and the rest of the board would have settled for 35 or even 34 per share.   Why wouldn’t they?   Yahoo has been languishing for years, and the chance of getting back to 34 *without Microsoft* is fairly slim in the coming lean advertising years, not to mention the fact that low morale, challenges at the company, and the declining prospects with Microsoft may take the stock even lower.

Yahoo should have sold at 33 and I think they will almost certainly sell at 35 due to pressure from Shareholders and (more importantly) heavily vested board members who are “losing”, collectively, several billion dollars by sticking to their guns in this.

Medford Oregon Dentist

Posted on by
Reply

Medford Oregon Dentist – Wu Family Dentistry Review

I’ve lived in the Rogue Valley of Oregon for over twenty years.  There are many excellent dentists in the area but in my opinion the best Medford Oregon Dentists are Dr. Kevin Wu and Dr. Julie Wu of Medford.    Kevin is a Table Tennis pal of mine and we recently returned from a trip to China, but that’s not why I’m recommending Wu Family Dental as the best in Medford Oregon.    When my son was to have his wisdom teeth extracted his dentist recommended an oral surgeon.    I asked Kevin for a second opinion and he wound up doing the extractions in a very short and painless procedure.  My son was very pleased with the efficiency of Dr. Wu, his staff, and his office as well as the fact that he recovered from the procedure much faster than his friends who had gone elsewhere.

I’ve also had work done by Dr. Kevin and his assistants and found Wu Family Dentistry to be the most professional, friendly, and modern dental facility in the Rogue Valley.    High tech, low invasive X ray equipment, excellent technicians and office staff, and waiting room snacks are the types of people and amenities you won’t find in some of the other dental offices in the Medford Area.

So, this is an unsolicited endorsement of Wu Family Dentistry as the Best Medford Oregon Dentists.

 

 

CNET SWOT Analysis

Posted on by
Reply

CNET is back in the news as today brings layoffs and ominous internal memos so I thought I’d put out this CNET SWOT analysis I did over at the Techdirt Insight Community not so long ago:

CNET Mini SWOT

CNET Strengths:

Brand awareness and brand respect.   CNET has been one of technologies most recognizable and respected brands for many years, and continues to maintain the high respect of the technology community.

Writers.  CNETs technology writing and analysis is recognized as some of the best in technology.  Unbiased reviews and authoritative articles from seasoned technology journalists are the mainstay of CNETs content. 

Editorial staff.  CNETs reputation for editorial and quality control is unsurpassed in the industry.   

Dan Farber promotion.  Dan Farber is one of technologies most informed and seasoned professionals.   As a blogger who is extensively familiar with and actively participating in social media Dan was a great choice to help guide CNET into a more aggressive social networking posture.

Huge internet traffic.  CNET remains one of the most visited news sites on the internet.

High revenues with potential for high profitability.   CNET’s revenues are strong despite significant earnings declines in the past year. Zacks analysis suggests a modest profit downturn in the coming year, but CNET is still generating very substantial revenues and some profits.   Under a JANA acquisition scenario the aggressive management for profit could boost earnings significantly. 

CNET Weaknesses:

Labor intensive content production.  CNET’s quality writers and editors are her blessing and her curse.   Writers cost money and good writers, collectively, cost a lot of money.    Blogging and the social media revolution have led to an online environment that creates a tidal wave of quality tech-focused content every day at very low average cost per article.

News delays.   Although CNET remains very current, it simply cannot always compete with the 24/7/365 blogging community that is posting (and increasingly scooping) CNET and other media outlets when technology news breaks.  Again, the editorial standards force CNET to delay where bloggers and online journals will report first and ask questions later.  The practice is questionable from a journalism point of view, but usually it is just fine for advertisers and certainly helps with traffic generation as the early reports often garner the most page views. 

Earnings declines.   CNETs earnings are down significantly, placing huge pressure on the company to cut costs and increase monetization for content.    CNETs early success may have led them to incorrectly assume they would remain unchallenged in the tech news space where they are under pressure from both bigger players like Yahoo and smaller players like TechCrunch.

CNET Opportunities:   

Socialism!   CNET’s attempts to build an online CNET-centric community at the website have been modest and in many ways have failed.    With a sterling brand and reputation, CNET is in a great position to leverage the existing tech-centric user base into a number of community endeavors.   One small example would be to create more niche CNET communities online and then evangelize these communities via CNETs advertising as well as Facebook, Myspace, and other social media powerhouses.   Even more powerful would be to facilitate the creation of much more reader-driven content.   For example make registration for CNET simpler with just an email signup and encourage far more guest articles.   Digg style rankings for CNET articles would be another positive step in this direction.  

Be more like TechCrunch.  Mike Arrington has brilliantly leveraged the fast pace of internet journalism, modest journalism standards, advertisement flexibility, and most importantly the powers of social media.   Where TechCrunch initially produced content at a fraction of the cost of CNET using freelance writing and little office overhead, it also distributed and monetized this content in more powerful ways such as massive emailings and very aggressive social media participation and real socializing.   Once again however CNETs high journalistic standards provide some barriers here.   

JANA board coup:  If JANA succeeds in the fight to change the direction of CNET, and this appears likely, a new focus on monetization and innovation will lead to a stronger and more viable CNET.     Unfortunately profitability is probably going to call for a reduction in journalistic standards and quality coverage, but from a company health perspective CNET is likely to benefit from a leaner, faster, broader, but more superficial approach to tech news coverage.

CNET Threats: 

Diminished advertising revenues.   The coming recession may not hit online advertising as hard as some other sectors but online advertising spending growth is likely to slow in the coming year and possibly even go down.   Financial sectors, for example, were huge spenders last year and may be unable to continue spending at the same levels due to the housing crisis.  

Blogging and the social media revolution.   These represent a substantial threat to CNETs long term prospects and profitability.   Blogs and non-traditional media coverage are generating huge volumes of quality content every day, and technology focused content is especially abundant since blogging’s early adopters tended to be technology enthusiasts.  Bloggers are increasingly respected as quality journalists and analysts who in some cases have more expertise than the technology journalists that are covering the same story, product, or events.   Yet the average cost to produce a blogged story is effectively zero as many bloggers are writing simply for the fun of coverage and the internet soapbox.   Monetization of blogs is also becoming easier and more lucrative in the form of Google Adsense per click advertising as well as projects like Federated Media which match publishers to advertisers – a service for which advertisers are increasingly willing to pay a high premium.


A Google aquisition of CNET?

Despite the reasonable assumption that CNET has significant potential for a valuation far beyond current capitalization of approximately 1 billion,  I consider a Google aquisition *unlikely*.      Google’s actions and stated intention for many years have been to concentrate on content *monetization* and avoid content production.    Also, Google stresses the value of machine scalability which is not compatible with the labor intensive content and editorial style of CNET.   

That said, I think that CNET and Google cultures would be fairly compatible.  Not because they are similar but because they would have a high degree of mutual respect as leaders in their respective fields.  Where Google is relaxed, fast paced, and extremely innovative CNET culture appears to be more formal, professional, and along the lines of a traditional journalism environment with attention to detail, high journalistic standards, and an older workforce.    This is probably an acceptable recipe for a comfortable working relationship.

CNET Linkage:JANA Board Fight:
http://biz.yahoo.com/bw/080107/20080107005660.html?.v=1

Zacks YHOO summary:
http://biz.yahoo.com/zacks/080222/11619.html?.v=1