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Taking A Look At Palm | 20 / 08 / 2008 | 0
Palm, the smartphone maker, might just be making a comeback. Over the last year or two, they’ve had a management shakeout, 25% of the company was bought by U2’s Bono and some ex-Apple execs, and the company’s aging product line was refreshed (on the low end by the Centro, and on the high end by the 800w and the Treo Pro a.k.a. Treo 850).
From a product competitiveness standpoint, Palm is in the best shape it’s been in since the launch of the Treo 700 and Treo 750 in 2006. Their new high-end Treos have all the specs needed (WiFi, GPS, HSDPA) to compete with RIM (BlackBerry) and the other Windows Mobile devices (Motorola Q9, Samsung Blackjack II). The problem is that in 2008, the smartphone market is more competitive than it was in 2005 and 2006 — the last period of time that Palm performed well. Palm products now have the iPhone to compete with, as well as a line of BlackBerries that has more depth (different models to serve more niche audiences) and more enterprise adoption (many firms have been running BlackBerry Enterprise Server for years and are unlikely to switch). Clearly, Palm’s new products are not a ‘perfect storm’ scenario. In fact, if anything, it’s a truly sad situation: Palm finally came out of the gate with some really strong products, and their competition has already decided their fate by having cooler products (Apple) and a competitive moat (RIM). Let’s look at Palm stock for a moment. Palm (NASDAQ: PALM) is down 49% in the last 12 months. By comparison, its northern competitor, RIM (NASDAQ: RIMM) is up more than 65%. Palm stock has followed a pattern since November 2007 of occasionally rallying to $7, and then falling down closer to $5. As recently as a month ago, shares could be had for $5.33. Since then, we’ve seen a stronger-than-usual rally, with the stock surpassing $7. Shares today are selling for $7.76 (a gain of more than 40% in only 4 weeks!). Now, if you look at previous rallies from earlier this spring and summer, you’ll see that this one could very well subside just as the previous ones did. Palm’s income statement and cash flow numbers don’t look very promising, which lends to the idea that share purchases will be contained, and share sales would perhaps outpace purchases. But if you believe, as I do, that Palm’s new products will propel them to higher sales numbers during the 3rd and 4th quarters, perhaps buying Palm shares makes sense. I’m still trying to figure out where I stand on Palm. I guess it doesn’t matter if Palm makes a sensational comeback or not. They’ve at least proven that they can take on powerhouse RIM, which may be consolation enough. Edit: Wired GadgetLab and a telecom analyst at Global Crown Capital seem to agree. 
Published under: Business, Cellphones, Finance, Technology
AltaRock | 19 / 08 / 2008 | 0
This is sick. You never thought crack rocks could be so profitable, or so positive for society (technically, using water to crack really hot rocks, underground). Google, Paul Allen, others sink $26 million in geothermal startup
Published under: Business, Finance, Seattle
Whole Foods | 12 / 08 / 2008 | 1
Whole Foods (NASDAQ: WFMI) has been having a tough year. Consumers have been hit by the economic downturn and high gas prices, and are scaling back their spending on top-shelf goods, such as those at Whole Foods. In addition to the broader consumer ills, Whole Foods bought out its chief competitor (acquisitions rarely turn out well, in case you didn’t know), Wild Oats, and integrating their new purchase has been costly and full of unforeseen speedbumps. Then, Whole Foods got hit by the E. coli bug recently, when they found out that one of their beef suppliers had switched up its processing plant without giving notice, which ended in Whole Foods’ beef being contaminated with E. coli, and a costly and embarrassing recall. What does all of this bad news mean? Potentially, it means a buying opportunity: Whole Foods stock is down fully 75% from its peak in early 2006. The Motley Fool, a stock research service for retail investors that I happen to subscribe to, has noticed the stock’s precipitous fall as well, and is advising its subscribers to think about buying shares now. Is Whole Foods a bargain?
Published under: Business, Economics, Finance
The Cloud and the Death of the Computer | 31 / 07 / 2008 | 0
There is a monumental shift going on in the computing world. Increasingly, users are using web apps instead of those on the desktop. The shift began with email, but now, people are using web apps to create documents, spreadsheets, store photos and video; even rich applications like photo editing are now available inside of the web browser. With “the platform” shifted to the web, there is no need to use Microsoft Windows anymore. We can use any old OS (Linux/OSX) with FireFox and we’re good to go. This shift has created a whole new hardware category: netbooks. Netbooks are a cheap and mobile version of the long-heralded “NC”, or network computer. In the 90’s, tech gurus called the death of the PC more than a decade early, and welcomed a future of ultra-cheap NCs. With NCs, they prophecized, we’d store all our data on the web and get by with tiny (<4GB) hard drives, relatively slow processors, no disk drive, and an internet connection. The ASUS Eee PC was the first netbook to make it on the scene. Its selling point: a $245 price tag, WiFi, a 7″ screen, a 2GB solid-state disk for storage, 256 MB of memory, and Linux. ASUS promptly sold millions of Eee PCs in its first 6 months on sale, and has since expanded the line to include larger models with bigger solid-state disks, bigger screens, more memory, Windows XP pre-loaded, and even a desktop version. This development is a huge disappointment for Microsoft and all the major computer makers, including Dell, Lenovo, Apple, and HP. Microsoft will be devastated because there will be no reason to pay extra for Windows Vista. The computer makers will lose because there’s no longer any reason to upgrade one’s computer, and computer sales will shift to ultra-low priced (not to mention low-margin) NCs. This process, as I’ve described it, is already occurring. The best example is Japan, where we’ve seen more than 5 consecutive quarters of falling PC shipments. The reason: most consumers would rather spend money on a new mobile phone (itself a capable mini-computer), video game console (ditto) or flat-screen television over a new PC. Laptops have seen their share of PC sales increase, but combined sales of PCs and Laptops have fallen. This is horrible news for the industry, but it’s also an opportunity for innovative firms that can foresee the future of computer use, and build that future into their products. It’s also a victory for consumers, who will presumably pay much less for their hardware going forward.
Published under: Business, Technology
Apple’s Cleanup Hitters On Deck | 30 / 07 / 2008 | 0
As I’ve said before, Apple is soon poised to unleash its redesigned MacBook/MacBook Pros on us, and the unveiling may provide a significant lift to Apple’s revenues (not to mention their share price). AppleInsider reports that Apple “issued an advisement bulletin to some of its channel partners hinting at a manufacturing ramp down of iPods and certain Mac notebook models, which will result in limited supplies of those products in the coming weeks.” This is standard practice indicating that a new product launch is coming. I believe it will be on us by October 1st at the latest. What he have to look forward to: -redesigned/updated iPod Touch Apple stock isn’t cheap, but it’s trading at a 15% discount to its price in early June. With these impending product introductions and the ensuing monster sales revenue, I wouldn’t be surprised if Apple was able to top $200 by Christmas time. Mark my words.
Published under: Business, Finance, Technology
The Clover | 23 / 07 / 2008 | 1
Must read for Starbucks fans/customers:
Published under: Business, Seattle
Apple Falls | 22 / 07 / 2008 | 1
Apple stock has fallen 14.5% in the last two weeks, to $153/share (it sold for as little as $147 this morning). Apple has just reported third-quarter earnings, and though they beat expectations, their tempered outlook for the future gave analysts cold feet and sent shares lower. Steve Jobs’ health problems surely didn’t make analysts any happier. Mac sales, however, are through the roof. This is particularly cheery news considering Mac computers haven’t had any significant redesign (less the MacBook Air) in ages. If people are going nuts buying the old, outdated Macs, they’ll surely buy more of them (or pay a bigger premium for them) once the redesigned MacBook Pros/MacBooks are available (sometime in the next 12 months). Count me as one of those who is waiting for the redesign(s) to buy a new Mac. This quarter’s iPhone sales clocked in at only 717,000, due to the shortage of first-generation iPhones prior to the iPhone 3G’s launch (remember, 1 million iPhone 3G’s were sold in the opening weekend alone). Next quarter’s report will be much more telling as to the iPhone 3G’s sales numbers, which will be stellar (somewhere in the realm of 2 or 3 million units). Apple stock is no bargain even after its recent fall, but those growth investors looking for a well-branded firm with solid growth prospects and a reliable track record of innovative design (not to mention intense consumer loyalty) need look no further. Apple isn’t leaving the stage anytime soon.
Published under: Business, Finance, Technology
WaMu: Vultures Are Circling | 15 / 07 / 2008 | 1
Outside of Washington Mutual headquarters this morning, things didn’t look so rosy. The local CBS affiliate sent a news crew to report on WaMu’s potential insolvency and the big hit the stock took yesterday. If the media keeps blowing on the flames by reporting on potential bank failures, they might just come up with a self-fulfilling prophecy.
Published under: Business, Finance, Seattle
WaMu Rumors | 14 / 07 / 2008 | 2
Shares of Washington Mutual slid 35% during the trading session today, on fears of the bank failing after IndyMac Bank was taken over by the FDIC over the weekend. The bank’s position is solid, with over $40 billion in liquidity and $150 billion in retail deposits, according to a Business Wire brief sent out at the end of trading. Unfortunately, people aren’t very trusting of bank CEOs right now, what with Bear Stearns’ outright denial that it was troubled up until the day it was bought for pennies on the dollar by JPMorgan. My mother rang me just now and told me that she’d just returned from Washington Mutual, where she’d withdrawn all of her money after hearing from her boss’ lawyer that WaMu was going down. Now, there is no reason to foolishly panic. The only people who need to do anything with their bank accounts are those who have more than $100,000 deposited at any single bank. Those people ought to withdraw money and put it into similar accounts at other banks, so as to ensure that all their deposits are FDIC-protected. Washington Mutual may not be the best-managed bank in the world, but it’s an important employer in my state, and I’d like it to stay solvent. Tell your friends the truth, and correct them when they spread inaccurate rumors. Inaccurate rumors kill banks, and in the end, it may be someone dear to you — a bank employee — who gets fired because of it. What if my bank fails? - BusinessWeek
Published under: Business, Finance, No F***ing Way, Seattle
Spain Takes Over | 14 / 07 / 2008 | 0
Spaniard Rafael Nadal is just coming off historic wins at Wimbledon and Roland Garros. The Spanish national soccer team won the European Championship at the end of June, decisively defeating stalwart Russia and then hosing host-country Germany in the final. Spain is the current world basketball champion, having defeated Greece in 2006, and the world’s undisputed best chef, Ferran Adrià, calls Spain home. Spain’s economy is steamrolling the rest of Europe’s, having passed Italy in per-capita GDP in 2006, and is on course to overtake France and Germany in that measure in the next 5 years. The Spanish are bouyed by tourism, a housing boom, population growth from immigration, a strong fashion/retail sector, and banking. In fact, I used to work for Spanish banking giant BBVA, which has a massive footprint in fast-growing Latin America. BBVA bought a large bank in the southern U.S., Compass Bancshares, just last year. BBVA’s chief rival is Santander, a group that has also made significant inroads in Latin America, but has bought into U.K. banks instead of the American ones. Santander bought British banking giant Abbey National for £9.5 billion in 2004, and today, they’ve announced that they’re buying British retail bank Alliance & Leicester for £2.6 billion;a 50% discount from A&L’s market value in February of this year. Talk about a steal. This acquisition will give Santander another 8% of the banking market in the U.K., and allow for a combination of Abbey and Alliance & Leicester to realize real cost savings, making this acquisition even more worthwhile for Santander.
Published under: Business, Economics, Europe, Finance
Digital Content Fragmenting | 8 / 07 / 2008 | 0
Uncertainty aplenty as Web, media leaders convene “Media, Internet moguls meet at Idaho luxury retreat, most seeking more online revenue When media and technology tycoons convene Tuesday in idyllic southern Idaho for five days of dealmaking and outdoor recreation, the mountain air will carry more than a whiff of uncertainty as most arrive with their businesses in various states of disarray. [...] this year both media and online leaders are grappling with the Internet’s increasing fragmentation. And they’re all looking for more advertising revenue online, where media companies have recouped only a small fraction of what they lost in print and where Web companies want to maximize their investments. Even the top Internet companies — save maybe Google Inc. — are seeing revenue growth slowing as online audiences fragment. And they worry that, without steady access to high-quality content, they won’t be able to attract enough viewers to keep growing fast.” Here’s an idea: buy niche content! AOL did it when it bought Weblogs, Inc. With that measly $25MM outlay, they bought access to readers of the web’s #1 blog (Engadget), car nuts (Autoblog), gamers (Joystiq), luxury consumers (Luxist), and Apple fans (TUAW). Niche digital content is the future. As an example, I used to know some car guys who would spend upwards of two hours per day browsing through a BMW-centered auto enthusiast forum called DTMPower. Tens of thousands of others also browsed the forum regularly, and DTMPower made a perfect niche for advertising. Most of the users drove BMWs and bought aftermarket upgrade equipment, and relevant ads from BMW tuning shops, aftermarket specialists, and BMW sales departments sponsored the site immediately. If a niche as small as a single auto brand can generate this kind of loyalty and readership, big media should take the hint and buy small niche players. Media is increasingly fragmented. The future of media is not the newspaper, aiming for the masses. The future of media is the electronic magazine (the blog); it gives the people what they want, and users can decide which niche content they want to consume.
Published under: Business, Technology
WaMu’s Precipitous Fall | 27 / 06 / 2008 | 0
I thought financial stocks were cheap in February/March, but some have sold off quite a bit more since. Patrick Kavanagh just told me to check Washington Mutual’s share price out, and OUCH, has it been hurt! WaMu is down more than 88% in the last 12 months, which means that if you were to buy shares now for $4.80, and WaMu was to recover to its 52-week-high (around $43), you’d be rewarded with a ~900% return. To accomplish this, WaMu would have to avoid bankruptcy, not get bought-out on the cheap by a competitor, cut costs, and improve the quality of its loan portfolio (easier said than done). After this sobering realization, this hypothetical 900% gain seems extremely unlikely.
Published under: Business, Finance, No F***ing Way, Seattle
Greece Doesn’t Like The Tax Man | 25 / 06 / 2008 | 0
Living in Greece, I’ve discovered some things that could use improvement. One pet peeve of mine is that businesses rarely accept anything but cash. Why? Is Greece stuck in the stone-age? The answer is a little bit more complicated. To make a long story short, Greeks prefer cash to prevent tax authorities from seeing that revenue, effectively lowering their tax bill. Here’s the long story: Greece is a country rife with corruption, and tax evasion is a national sport. It’s estimated that between 28 and 35 percent of Greek GDP goes unreported (amounding to 70 billion euros). 25% of Greeks reportedly live on less than 22 euros a day, yet posh cafés are booked full despite selling the most expensive coffee in Europe (espresso shots often sell for 4 euros/$6.20). Greek income clocks in at 80% of the Euro-zone average, hardly a good showing. But if the underground economy of unreported business was counted, Greek income per-capita would fall ahead of the Euro-zone average. This pervasive tax evasion gives consumers more spending money, but it really hurts the public coffers. Tax revenues could conceivable double with more accurate reporting, leading to a reduction of public debt, increased spending on education, and more money for research and development.
Published under: Business, Economics, Europe, Fashion, Gotham, Politics, Technology
Voodoo, Alienware Face Off | 25 / 06 / 2008 | 0
Computer gaming kiddies armed with their parents’ American Express cards gobbled up Alienware’s aggressive designs over the last decade, turning the upstart into a formidable force in the computer industry — enough of a competitor that Dell scooped it up two years ago in a deal of undisclosed size. That was a smart decision for Dell. Dell largely serves the corporate computer market, and its designs don’t appeal to any niches outside of corporate IT departments. Alienware, on the other hand, has captivated gamers with deep pockets, who don’t want the regular grey box setups that plague American homes and businesses.
Alienware has some problems, however. It’s known for manufacturing errors and shoddy customer service. A friend of mine, James (who is the IDEAL Alienware customer, I might add), has ordered two Alienware desktops, and has had problems both times. The second computer had the wrong part (perhaps it was a graphics card, or an incorrect memory configuration/size). When he called in to complain, Alienware told him he could pay his own way to send the machine in and pay for an upgrade, even though Alienware was responsible for messing up his machine’s configuration in the first place! His experience is not alone; a survey of computer forums shows widespread discontent with Alienware’s customer service. Alienware also has an image problem. Real gamers won’t buy their machines. Gamers like to tout their technical abilities; this includes building their own computers from generic parts, often on the cheap. Alienware computers don’t give you the pride of building your own computer, and they also cost significantly more. It’s often been said that Dell’s XPS line of performance computers outperform Alienware, and at a much lower price. None of these revelations bode well for Alienware in the long term. Their ideal customer is rich, and new to gaming. Once initiated into the gaming community, one might be ostracized for ownng an Alienware and not having built their own for less. Alienware does have pretty solid, differentiated designs. But their designs haven’t evolved enough to validate their additional cost. Enter Voodoo. They’re in the same market segment as Alienware, but they’re doing things differently: they’re doing everything right. Their designs are evolving - not stagnating. Check out the design of their new desktop, the Omen:
It’s understated, modern, sharp, functional, and different. It positions the internal components 90 degrees off, allowing physics (heat rises, people!) to cool the internals and improve performance without resorting to loud internal fans. Another innovative product they have is the Envy 133 notebook. It’s super-thin, and is the only notebook that really challenges Apple’s innovative design.
The trackpad is flush with the palmrest. Its power brick doubles as a WiFi hotspot. How many laptops can claim that? With regard to customer relations, Voodoo also has it down. Their founder blogs to the gaming community, and Voodoo itself has a pretty legitimate blog that leaks photos and specs of their exciting new products. It’s one of the few corporate blogs that people actually read, because the blog isn’t just products, it also chronicles the steps the company takes to stay in touch with the gaming community. Voodoo sends teams armed with prizes and demos to gaming conventions, and they really keep consumers content (and happily engaged with new Voodoo products). Voodoo’s management really has its head on straight, and stands as a beacon of hope for executive managers and entrepreneurs alike, no matter the industry.
Published under: Business, Must. Have., Technology
Time To Buy Goldman Sachs? | 17 / 06 / 2008 | 2
Here are some ideas I’ve been thinking through lately (full disclosure: I have no position in any of the following firms unless specifically noted) 1. Buy Goldman Sachs? 2. Short Airlines? 3. Go long Brazil? 4. Go long China? What assets do you think will outperform in the next year or two?
Published under: Business, Economics, Emerging Markets, Finance
Zango Chokes | 17 / 06 / 2008 | 0
I’m a world away from Seattle, but reading this jewel of a news story from the Seattle P-I really made me perk up this evening: Massive layoffs at pop-up advertiser Zango Zango, formerly 180solutions, has received criticism over the years for installing its ad-serving software without computer users’ knowledge and making the uninstall process difficult to navigate. In 2006, the company settled a dispute with the Federal Trade Commission and agreed to pay a $3 million fine. Since that time the company has made a series of acquisitions to broaden its focus, including New York-based HotBar… I’ve hated this firm from day one, and pray for its demise in the coming months.
Published under: Business, Seattle
Israel and Iran Battle It Out | 10 / 06 / 2008 | 0
Thomas Friedman writes something worthwhile!: People vs. Dinosaurs - The New York Times …in the first quarter of 2008, the top four economies after America in attracting venture capital for start-ups were: Europe $1.53 billion, China $719 million, Israel $572 million and India $99 million [...]. Israel, with 7 million people, attracted almost as much as China, with 1.3 billion. Iranian President Mahmoud Ahmadinejad professes not to care about such things — because oil prices have gone up to nearly $140 a barrel, he feels relaxed predicting that Israel will disappear, while Iran maintains a welfare state — with more than 10 percent unemployment. Iran has invented nothing of importance since the Islamic Revolution, which is a shame. Historically, Iranians have been a dynamic and inventive people — one only need look at the richness of Persian civilization to see that. But the Islamic regime there today does not trust its people and will not empower them as individuals. Iran’s economic and military clout today is largely dependent on extracting oil from the ground. Israel’s economic and military power today is entirely dependent on extracting intelligence from its people. Israel’s economic power is endlessly renewable. Iran’s is a dwindling resource based on fossil fuels made from dead dinosaurs. So who will be here in 20 years? [...] I’ll bet on the people who bet on their people — not the people who bet on dead dinosaurs. (Thanks for linking to this article first, Barak).
Published under: Business, Economics, Emerging Markets, Finance, Philosophy, Politics
Intel Wants LTE Dead | 4 / 06 / 2008 | 0
The two competing fourth-generation high-speed wireless technologies, WiMax and LTE, are prepared for war. Intel is decidedly behind WiMax, having committed to building WiMax into its next generation of chipsets for computers large and small. Intel has also financially backed Bellevue-based Clearwire, which is rolling out WiMax in the US, Ireland, Belgium, Denmark, and Mexico. The cellular carriers, AT&T and Verizon included (as well as myriad players all over the world) have committed to LTE (Long Term Evolution), a superfast wireless network standard primarily to be used for voice but also for superfast data and video. Basically, WiMax is going to get massacred. Each technology will have its own installed base of customers to market to. With LTE, you’ve got hundreds of millions of cellphone customers, and the networks will be rolling out some LTE-compatible devices as early as 2009. People carry their cellphones with them everywhere, so why not just use the high-speed data in the device you already carry? Currently, WiMax has no installed user base. They’re taking a different tack, and trying to ensure that WiMax comes built-in on all new laptops. They’re hoping that WiMax becomes as ubiquitous as WiFi has. That’s a long-shot. Remember that it took 6-7 years from its broad introduction in 1999 for WiFi to become standard on most laptops. LTE already has hundreds of millions of customers waiting in the wings, many of them with contracts to stay with that particular carrier. WiMax has no broad customer base to speak of, and its poster-child Clearwire has already encountered difficulty trying to hawk wireless broadband to an unwilling populace. The competition on price that cable internet offers is just too strong for Clearwire to defeat, and Clearwire’s slow speeds compared to fiber-optics (Verizon’s FiOS, for instance) won’t win it any converts at the high-end of the market. Intel realizes that WiMax is dead in just about any country that already has cable/fiber infrastructure. Now, they want a truce. Intel wants WiMax to MERGE with LTE so that they don’t compete against one another. It’s too bad such a merger won’t ever happen. Sorry, Intel, you’ve already backed a horse — the wrong one. Intel seeks wireless unification - BBC
Published under: Business, Cellphones, Seattle, Technology
Suicidal Centi-Millionaire | 2 / 06 / 2008 | 0
Jim Clark was a quiet, geeky engineer with poor social skills. He invented the Geometry Engine, which brought computer graphics a giant step forward and was the basis for the success of his company, Silicon Graphics. Glenn Mueller was a venture capital investor; the man who funded Jim Clark’s dream company and consequently milked Clark of his ownership stake, to the point that founder Clark controlled only 5% of his own company and his reigns were taken away. Clark plotted his revenge from inside Silicon Graphics. He pioneered the next big idea, interactive TV, along with Time Warner Cable. When the Silicon Graphics CEO took all the credit, it was the final straw, and Clark left Silicon Graphics. His new idea: to defeat Silicon Graphics’ interactive TV with the internet-connected computer. He then founded Netscape to do just that. Silicon Valley venture capitalists wanted a piece of the company. Jim Clark let a select few invest in Netscape, but not Glenn Mueller, who had milked Clark of his ever-so-precious ownership once before and became a centi-millionaire in the process. Mueller called again and again, but Clark just wouldn’t budge. Mueller wasn’t going to get a single share of Netscape. He’d missed the boat on the next big thing, and he knew it. The day Netscape was incorporated, Mueller was on his yacht off Cabo San Lucas. He picked up a gun and shot himself through the head. The Little Creepy Crawlers Who Will Eat You In The Night - Michael Lewis for the New York Times
Published under: Business, Finance, No F***ing Way, Technology
Reversal of Fortune | 20 / 05 / 2008 | 0
Huntington Hartford inherited The Great Atlantic and Pacific Tea Company, a 16,000 locations-strong national retailer akin to a modern-day Wal-Mart. He’s more known, however, for squandering his fortune on a series of unfortunate investments. He bought what is now Paradise Island (that of Atlantis fame) and then sold it at a loss. He built the Gallery of Modern Art in New York City, and spent similarly large amounts trying to get his laggard magazine Show off the ground. At one point, Hartford declared bankruptcy, but had a $500,000/year trust to keep him living the good life. Yesterday, Mr. Hartford died at 97 years of age in the Bahamas. Curiously, the man who successfully developed Paradise Island into what it is today, Sol Kerzner, has had just about the opposite life experience as the often failing Mr. Hartford. Kerzner began life not as an heir but as the youngest of 4 children in a family of Jewish Russian immigrants. He put together a successful hotel chain, Sun International, and then got into development of gambling resorts. Since, he’s put together some of the most successful on earth, including Connecticut’s Mohegan Sun and Paradise Island’s Atlantis, in addition to building a luxury hotel portfolio with his One&Only hotels group (famous for their Cabo San Lucas resort of the same name). He’s had 4 marriages, including former Miss World 1974 Anneline Kriel, and his current wife, the stunning Heather Murphy. Great life for Mr. Kerzner, but quite the polar opposite of the first developer of Paradise Island, Mr. Hartford. Just goes to show that it’s not about what straw you draw, it’s the fight inside you that determines your contribution in life. A.& P. Heir Famous For Losing All His Money Dies At 97 - Luxist
Published under: Business, Philosophy
NetFlix Comes Of Age | 19 / 05 / 2008 | 0
NetFlix allows members paying $8.95/month or higher to stream movies from its library to a computer of their choice. The natural next step is to stream that content to the TV. Over the last year, intrepid hackers have pieced together one solution that allows NetFlix content to be streamed to the TV using the XBOX 360 Windows Media Center. If you don’t have an XBOX 360, you’re out of luck. Until now. NetFlix’s plans of dominating the living room have begun, with the introduction of a $99 box by Roku that slices, dices, and streams video without a hitch. Wired Magazine calls it “just shy of totally amazing.” The player has access to more than 10,000 movies and TV shows, and will expand to close in on the nearly 100,000 that NetFlix offers in traditional DVD format. Its competition, the Apple iTV, costs $229, but sports a hard drive, which the Roku box is without. Another competitor, Vudu, costs $295. Apple is going with the a la carte model for media, but perhaps in this race, $8.95/month will win out. We’ll have to wait and see. TV boxes let Netflix users bypass mail delivery - AP
Published under: Business, Must. Have., Technology
Rice Crisis Shows Cracks In Distribution | 15 / 05 / 2008 | 0
The worldwide increase in prices for food is a true catastrophe, especially considering its effect upon those in the third world, whose food budgets may not be resilient enough to stomach the rise is prices, and will undoubtedly go hungry. Confounding the problem is that the world doesn’t have a truly free market for the commodity. Portfolio kindly pointed out the following limitation mandated during WTO negotiations: “Because of its WTO commitments under the Uruguay Round Agreement, Japan imports a substantial amount of medium-grain rice from the U.S. and long-grain rice from Thailand and Vietnam…But under WTO rules, the government cannot re-export the rice, except in relatively limited quantities as grant aid. So the Japanese government simply stores its imported rice until the quality deteriorates to the point that it is suitable only as livestock feed and sells it to domestic livestock operators…Japan currently has over 1.5 million tons of this rice in storage… Most of this rice is in good condition, and is incurring large storage charges. Japan would be very happy to dispose of this rice to the world market, but it cannot do so without U.S. acquiescence.” Though 1.5 million tons of rice seems huge, my 10 seconds of Google research indicates it would only provide one day’s worth of global supply to the rice market. No matter how small the benefit, governments of the world need to work together to alleviate this crisis. Allowing this rice (and all rice) immediately onto the global market should be common sense, and stagnating on this issue could cost lives. One day’s supply might be all that separates a starved village from a living one. How to Burst the Rice Bubble - Portfolio
Published under: Business, Economics, Emerging Markets, No F***ing Way, Politics
Fuel Economy: Boeing vs. Airbus | 13 / 05 / 2008 | 0
The new Boeing 787 Dreamliner uses carbon fiber and more fuel-efficient engines to bring down its fuel consumption. Airbus isn’t using the same innovative materials, but has improved aerodynamics in a bid to reduce its fuel consumption. The Airbus A380, a superjumbo if there ever was one, can seat 853 people in a 100% economy-class configuration, which would seemingly make it more fuel-efficient per passenger (the only metric that matters). However, it’s extremely unlikely that any airline would order a plane configured in this way, so, for purposes of comparison, a 525 or 555 seat configuration is closer to what we’ll see in the real world. The following table and graph tell the story of Boeing versus Airbus, as measured by range, fuel capacity, passenger capacity, and the statistics generated thereof:
A lot of this information is pretty variable, due to lack of sufficient data (fuel consumption is crudely derived by dividing maximum range by fuel capacity, for instance) and the fact that seating variations can drastically alter statistics like Liters per Kilometer per Passenger. I’ve used normal seating configurations when possible, so as to simulate reality as close as possible. The data shows that the A380 is not so revolutionary, and is in fact quite comparable to the 747-400 when it comes to fuel consumption per passenger. Also, we see that the 787 is only marginally more fuel-efficient than the upcoming A350, and that, due to the A350’s extra passenger capacity, the 787 comes in second place in fuel consumption per passenger. Boeing promises that the 787 will have lower maintenance and operating costs than its predecessors; hopefully, this savings will make the Dreamliner a more competitive aircraft overall. This data just goes to show that the new-new things (A380, Dreamliner) are not definitive champions, even right as they’re introduced.
Published under: Business
Maveron Hits Turbulence | 28 / 04 / 2008 | 2
News just hit that Eos Airlines (the upstart airline that offered 1st class/business class only flights between New York and London) has filed for chapter 11 bankruptcy. This is bad news for Seattle-based Maveron, the venture capital firm backed by Starbucks Chairman and CEO Howard Schultz. Maveron was one of three firms involved in funding Eos with $123 million For reference, Maveron’s other investments include PinkBerry (a high-flying, quickly expanding, and soon to be out-of-fashion purveyor of delicious-but-overpriced custom-built frozen yoghurt), lucy activewear (a women’s activewear firm, the only real competitor to lululemon athletica), and eBay. That Maveron has invested in these firms shows that their principals really know how to spot hot young brands that innovate/differentiate themselves into premium niches. What it doesn’t show is whether they’ll make money doing it. Perhaps I should wait to pass judgment on Maveron - after all, they are a VC firm, and VC’s are known to strike out half the time, hoping for a big payoff in that one grand-slam they hit every once in a while that will bring their fund into the black. And Maveron has hit plenty of grand slams: eBay, Shutterfly, Quellos, PeoplePC, Drugstore.com, Cranium (boardgame). It’s just so easy for me to criticize these guys because I know their strategy so well. In fact, one of the strategies utilized in my ScarletStorm fund is finding growth candidates that have quickly established a premium brand by differentiating themselves and/or displaying real improvements over competitors’ offerings. At first glance, both Eos and PinkBerry fit the mold. The difference between my growth investments and Maveron’s is that I’m a strict value investor: I’ll only bite if the firm’s intrinsic value (as I calculate it) is higher than the price I can acquire a piece for. That restriction would have prevented me from throwing money at Eos, as they’re not even profitable (hence I’d value the firm at $0). Obviously, that means I would’ve never invested in Amazon.com, which went public years before it became profitable. Perhaps to hit home runs, you’ve got to take swings at pitches that don’t appear to be strikes. I commend Maveron for doing something right. Perhaps someone over there could sprout some value-seeking sense and hit some solid doubles.
Published under: Business, Finance, Seattle
The Magic of Compounding Interest | 27 / 04 / 2008 | 0
Albert Einstein is quoted as saying that compounding interest is “the most powerful force in the universe.” L.A. entertainment billionaire David Geffen has just been the victim of compounding interest, according to the L.A. Times: “Media mogul David Geffen [...] recently spent about $10 million on a 1,473-square-foot two-bedroom house [in Malibu]. [...] What makes the transaction interesting is that Geffen owned this same property once before. He bought it in 1996 for approximately $1.2 million and sold it two years later…” David Geffen bought it in 1996 for $1.2 million, sold it, and bought it back 12 years later for $9.8 million (which amounts to a more than 800% markup over the original purchase price). Seems like Geffen got taken, no? Well, the magic of compound interest suggests otherwise. See, that 800% gain over 12 years amounts to only a 19% annual property appreciation rate, and shrewd businessmen like Mr. Geffen can often increase their net worth at rates above that level. They have investment options such as private equity funds (which generally aren’t available to those worth less than 8 figures) which historically generate returns above 25%. Warren Buffet, the famed stock investor, has averaged gains above 25% over the last 30 years. If we assume Mr. Geffen was using appropriate instruments to increase his wealth at these rates, then perhaps his $1.2 million sale and $9.8 million repurchase make sense: $1,200,000 * 1.2510 = $11,175,870 Mr. Geffen’s gains from investments at an assumed 25%/year on $1.2 million dollars from 1998 to 2008 would turn his principal into $11,175,870 pre-tax. Buying the home back in 2008 for $9.8 million means that he would pocket an additional $1,375,870 (his investment gains minus the 2008 purchase price), would have avoided paying waterfront property taxes for 12 years, and still own the home. The only thing that he would’ve missed out on is use of the home for those 12 years, which wouldn’t hurt Mr. Geffen at all because he already owns a multi-lot palace nearby. This calculation is extremely conservative - Geffen probably pocketed much more than this projected $1.375 million because he probably sold the home in 1998 for more than the $1.2 million that he paid.
Perhaps Mr. Geffen didn’t let compound interest beat him, and instead, he taught the power of interest a lesson.
Published under: Business, City of Angels, Finance
Corrupting The Private Sector | 6 / 04 / 2008 | 0
When government oversteps its bounds and imposes undue regulation upon private business, it’s rare that anything good comes of it. Ill-advised government mandates on lenders to lend money to poor people are partly to blame for the subprime mortgage meltdown, according to economics professor Stan Liebowitz:
NYP via Donald L. Luskin
Published under: Business, Finance, No F***ing Way, Politics
Top Cash Hauls 2007: Seattle | 10 / 03 / 2008 | 0
Published in Vanity Fair, 2007’s 50 biggest cash hauls include at least three Seattlites: 1. BILL GATES: $2.8 billion 15. PAUL ALLEN: $775 million Once the third-richest man on the planet, Allen, of late, has seen his fortune in retrograde. Selling big stakes in DreamWorks and Oxygen Media should help turn things around. 30. NICOLAS HANAUER: $282 million As some of you know, Paul Allen hasn’t had the best record with regard to investment. He’s lost money betting on obscure tech companies during the tech bubble, failed in his initial push to create a “Seattle Commons” development, and sold much of his Microsoft stock that later appreciated much in value. Allen owned 28 percent of Microsoft stock in 1985. This would be worth $73 billion today, making him the worlds richest man by far. Instead, he’s worth one-quarter as much. Bill Gates owned 49 percent of Microsoft in 1985, which today would be worth $127 billion. Instead, he’s worth less than half, at around $58 billion. Obviously, none of these metrics account for the extreme amount of philanthropy undertaken by both men, which should not be overlooked. America’s 50 Richest Paydays: Who, What, and How Much - Vanity Fair
Published under: Business, Seattle
Stockbrokers’ Mayday | 25 / 02 / 2008 | 0
The stock market had once been Wall Street’s greatest source of revenues. Commissions were fat, fixed, and nonnegotiable. Each time a share changed hands, some broker somewhere took out a handsome fee for himself, without necessarily doing much work. A broker was paid twice as much for executing a two-hundred-share order as for a one-hundred-share order, even though the amount of work in either case was the same. The end of fixed stock brokerage commissions had come on May 1, 1975-called Mayday by stockbrokers-after which, predictably, commissions collapsed. Investors switched to whichever stockbroker charged them the least. As a result, in 1976, revenues across Wall Street fell by some six hundred million dollars. The dependable money machine broke down. -Michael Lewis, Liar’s Poker, page 62 Though it wasn’t too helpful to stockbrokers, the deregulation of the brokerage industry helped bring down fees and ultimately allowed people of more humble means to own common stocks. Some brokerage firms did benefit from the change, like the disruptive enfant terrible Charles Schwab. Schwab was the posterboy for discount brokerages and reigned supreme all the way up until brokerage fees took another fantastic fall toward zero with the advent of electronic trading over the internet.
Published under: Business, Finance, Quotes
Good Corporate Governance: Starbucks | 25 / 02 / 2008 | 0
I was perusing the 2008 Starbucks Proxy Statement in preparation for the upcoming shareholders meeting, and came upon this gem: Executive Stock Ownership Guidelines Minimum investment levels for each job title are: President and CEO - 5,000,000 The unrealized value of vested, in-the-money stock options counts for up to 25% of the required minimum investment. This is a fantastic way to ensure that all of the executives have their interests aligned. I think all organizations - no matter the size - should adopt rules like this one.
Published under: Business, Finance, Philosophy, Seattle
American Apparel Being Snapped Up By Funds | 19 / 02 / 2008 | 0
American Apparel (which has only been publicly traded on the AMEX since December) is getting a lot of attention from hedge funds. Some recent SEC filings indicate that Morgan Stanley, Fir Tree, and SAC Capital Advisors each own in excess of 5% of American Apparel (AMEX: APP). SAC has a notable record of finding moneymakers in youth retail, making this development something to watch. Click over to the article at FashionInvestor for more. (Full disclosure: author owns shares of American Apparel both directly and indirectly at the time of this writing.)
Published under: Business, City of Angels, Fashion, Finance
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