Category Archives: stocks

Google’s KinderGate: Your kids are welcome here for $57,000 a year.

Posted on by
3

When I first read about trouble in Google land over child care costs I thought it would be another case of the how super well paid but whiney Silicon Valley parents were unreasonably complaining about a minor bump in their charmed luxury lives. But maybe not.

Google appears to be on a search for the holy grail of child care, and even after charging parents for the service Google wound up subsidizing things to the tune of 37,000 *per child per year* – managing to spend the approximate average national income on every kid lucky enough to reach the nirvanesque kinderplex environment. The solution to this negative cash flow – unusual for the company known for showering employees with benefits like laundry service and free meals – was to raise the child care rates to about 2500 per month per child.

The NYT reports that two kids in Google childcare will run you $57,000. Although Googlers take home an average of something like $140,000 per year this isn’t going to ruin them, but this sure ain’t a page from the Brady Bunch days.

The situation is interesting economically but I think even more interesting as an experiment in Google’s approach to social engineering, which I think argue may be failing because it may not be able to scale in the same fashion as many of Google’s magnificent technological innovations.

Although Silicon Valley employees have historically enjoyed some great benefits, Google shined as the company that outdid everybody with free gourmet meals, free laundry, and great parties all within a context of individual freedom to work pretty much as you pleased as long as you were productively engaged, and even that was defined in some part by the employee.

This approach seemed to be working well, but I wonder how much of this was just an illusion caused by Google’s huge wash of incoming cash. The NYT article suggests that the company hardly even noticed the child care subsidy until recently. I’m guessing that only recently have the Google bean counters been called up from their free lunch to sharpen their pencils and find ways for Google to trim the company budget.

There are obviously two huge human resource pressures on Google now as it grows within the context of providing the world’s best company bennies. First is the fact that the legions of Googlers are for the most part…kidless. As employees age, especially the key folks from the early days, Google will see a lot more departures of key folks and a lot more demands for family time and benefits. Even stronger will be the pressure from the growing number of employees in Google’s empire, far more of whom are likely to be “in it for the money and perks” than in the early days. I remember touring the Googleplex a few years ago with an exec who, when asked about this problem, said it was not happening. But I think that was about 10,000 employees ago and before the level of concern over Google’s KinderGate scandal.

I will be very interesting to see if Google can scale their sometimes pesky human resources as effectively as they have scaled their technological and commercial resources.

I’m guessing…make that strongly predicting….the answer is no.

New York Times Reports

Microsoft Yahoo Deal – Enter the Fat Lady and $34 per share?

Posted on by
Reply

The Wall Street Journal has a great summary of the breakdown of the initial Yahoo Microsoft merger talks a few months ago, complete with something of a  play by play in how corporate strategies on both sides …failed.    My read is that the personal mix of Yang and Ballmer was probably all wrong for this, though I still think that part of Yang and Yahoo board’s idea was to play foolishly hard to get in an effort to either kill the deal or boost the price to an unreasonably high $37.

It’s now clear that strategy failed and I’m sticking to my prediction when all this began – Yahoo will be sold to Microsoft, who might work with other partners in the deal, for very close to $35 per share.

Microsoft and Yahoo are clearly back at the table and I think it is even clearer than before that a deal will be done.    I’m compelled to say “I told you so” and I’m looking forward to looking up the many foolish stories written last month that suggested the deal was clearly over when it was obvious then and now that this is a deal that is very unlikely to die.

Disclosure:  Long on YHOO

More bad news for Startups and Venture Capitalists

Posted on by
Reply

More bad news for Startups and Venture Capitalists from the New York Times “bits” section about technology trends.    Not only is the number of IPOs falling (zero in Q2 of 2008), but it also the number of mergers or aquisitions of startups appears to be way off as well.

Venture capital folks look to the most favorable “liquidity event” and generally that is an IPO where they may realize tens or even hundreds of times their original investments.    Also favorable though generally offering less profit than an IPO is an aquisition or merger where other companies take over the startup without it going public.

I found this number very interesting and potentially alarming for Venture investors:  An average of 8.6 years from startup to IPO, the longest in some time.    Given that the present value of money is greater than future value, time horizons this long suggest, for example, that even a doubling of your VC money over that long period of time would represent only a “fair to poor” return compared to alternatives.   Given that most startups never go IPO anyway it would seem that the risk factor is going way up for these investments.

Yahoo Announces Reorganization Plan which is sung to the tune of the Who’s “Won’t Get Fooled Again”

Posted on by
4

Yahoo’s plans for reorganizing their reorganization have now been announced.  Kara seems to have the best scoops on this.

Meet the new boss Sue Decker, same as the old boss.

I am paraphrasing somewhat, but IMHO this is the gist of the Yahoo reorganization, sung to the tune of the Who’s: “Won’t Get Fooled Again”:

Yahoo’s fighting on the screen.
Over revenues unseen.
All the money that we worship will soon be gone.

And the Yang who spurred us on.
Sits in judgement – Ballmer’s wrong!
They decide and the board all sings the song.

I’ll tip my hat to Yahoo constitution
Take a bow for Yahoo revolution
Smile and grin at the change all around me
Open my laptop and play
Just like yesterday
Then I’ll get on my knees and pray
We don’t get fooled again

[scream guest appearance by Carl Icahn: YAAAAAAAAAAAAAAAAHHHHH!]

Disclosure: Long on YHOO.

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. 

Yahoo Google Agree to Thwart Microsoft and Icahn

Posted on by
4

The Yahoo Microsoft Merger saga continues as Yahoo and Google have signed an advertising pact in the face of mounting new pressure on Yahoo to sell to Microsoft.     Carl Icahn, corporate mega-investor, has purchased a large stake in Yahoo and was preparing to force changes on the Yahoo board that have led to a Microsoft takeover.   Today’s announcement appears to leave the Microsoft deal in the lurch, though I’m not clear yet why Icahn can’t fight a proxy battle to get control of the company and then back out of the agreement.    Based on today’s news that is not part of his plan, though anything is possible in the rapid fire take no Microsoft prisoners battle where the Yahoo board appears more interested in thwarting Microsoft than doing good for Yahoo’s shareholders who today saw a drop of 10% in shares as another potential Microsoft deal crumbled.    Last year Yahoo rejected $40 per share, and a few months back they rejected $34.   One does not have to have much imagination to wonder how long it’ll be before they are rejecting $25.

An interesting investment question right now is whether Yahoo is priced low or high given all the new information.  If, for example, a new board will come in within a year or so it’s very possible that MS will make another aquistion offer well above current prices.  A new board would probably view this favorably.   If true Yahoo’s a good buy now.   However if the stubborness will continue for years it’s not at all clear that Yahoo can dig itself out of the profit and morale busting hole it’s been digging for several years while Google was eating Yahoo’s lunch and serving it back – free – to Google investors and employees. 

Disclosure:  I have Yahoo.   Which means I have 90% of the value I had this morning.

Ballmer has left the Building

Posted on by
5

Talks between Microsoft and Yahoo have stalled and may be over.   33 vs 37 per share.    I still think Microsoft is just calling what better be a bluff by Yahoo, because if they don’t take this MS offer the stock is going back to the sub 20’s and Yahoo is looking at a huge number of shareholder lawsuits asking why they sabotaged the offer of $33 when they are only worth $19 without Microsoft.

Here is my view at Webguild with the letter to Yang from Ballmer

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

ASUS, eee PC, and cheap computing: Watch this company!

Posted on by
Reply

I’m very impressed with my eee PC so far and it appears ASUS has a lot more cleverness in store including a 200 desktop and a larger ultra mobile computer in May.     This is an interesting play in that they are breaking ground in two computing areas that may have a lot of potential:  mobile internet computers for business and personal use and cheap desktops to capture the market of the millions who have one computer and want more or don’t have one at all.    The brilliancy here is that ASUS has set the price points so low that they are really no barrier to purchase.     Other UMPCs have been so expensive that the viability of buying one for the x/365 number of days a businessperson needs one was very limited, but at $300 for the cheapest eee PC  most traveling onliners can hardly afford to be without one until perhaps mobile phone technology creates usable keyboards and comfortably viewable screens. 

I recently wrote an analysis of the Airbook, suggesting it would have limited appeal.    Technically it is not a UMPC but it’s close, and I was also skeptical of much growth in the UMPC market.   However, as prices plummet things could change considerably as even school kids may start to sprout eee PCs as an alternative to tiny mobile phone surfing and higher priced, heavier, and clunkier laptops.   

ASUS appears to be a privately held Taiwan company, so … no stock available on public exchanges.

Google: We see no evil.

Posted on by
Reply

I’m very disappointed in the Google board’s recommended decision to reject a shareholder request for a human rights committee and anti-censorship rules.

These decisions make Google’s claims to be improving search around the globe ring somewhat  … hollow:  Official Google Blog: Making search better in Catalonia, Estonia, and everywhere else

Here are the details:
www.investor.google.com/documents/2008_notice_n_proxy_statement.html

I have a longer post about this  this over at WebGuild

Over there I wrote:

This is a sad day for Google and the recommendation is a death blow to their now transparently specious “Do No Evil” mantra. Google has an obligation to promote human rights within the reasonably confines of their business structure and goals. In this obligation, they have now dramatically failed.