Wednesday, August 31, 2011

Motorola Patents May Not Help Google

NEW YORK (TheStreet) -- An interesting debate is opening up over the actual value of the patents Google(GOOG_) is getting via its $12.5 billion purchase of Motorola Mobility(MMI_).

David Martin, who founded patent consulting firm M-Kam and data outsourcing company Mosaic Technologies, recently called those patents "crap" in an interview on Bloomberg West.

Read the full post on

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Why the DOJ was Right and Pro-Capitalist to Block AT&T - T-Mobile

The DOJ ruling on AT&T isn't anti-business, it's pro-capitalist

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Steve Jobs' 1985 Response to Andrew Ross Sorkin

How Jobs would have answered Sorkin -- from 1985.

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Tuesday, August 30, 2011

Why Andrew Ross Sorkin Should Apologize to Steve Jobs

Andrew Ross Sorkin's "column" criticizing Steve Jobs' lack of public charity was misguided and disrespectful. He should apologize.

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Why Steve Jobs Wouldn't Care About Being Called Stingy or Having Gender Bias

There have been some recent attacks on Steve Jobs for not having enough women on his management team or for not donating enough of his money. Here's why he wouldn't care.

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Monday, August 29, 2011

Could Apple Be Getting Ready for Big Apple TV Announcement?

The newest iPhone ads in the US might have tipped Apple's big push into TV.

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N.Y. Fed Board Fails to Serve Public Interests

From last week's TheStreet. My op-ed on the NY Fed.

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Was There a Steve Jobs Discount Built Into Apple's Stock?

Read the full Forbes post here.

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Apple Trading Strategy for Thursday Morning

From 8/24/11

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Just Who Is the New York Federal Reserve Serving? The Public or Wall Street?

Read my full Forbes post here.

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Will Apple Ever Be The Same Company Without Steve Jobs as CEO?

[I wrote the following for the Chinese Wall Street Journal over the weekend. Here is the English translation which may differ from the original, due to final edits.]

Since Steve Jobs announced he would be stepping down as CEO of Apple (AAPL) last week, observers can't stop asking if the company has now changed forever.

Jobs is loved by his investors, customers, and employees. There's probably never been a CEO as admired by so many in the last 100 years.

Besides being a compelling communicator, Jobs is admired for his uncanny ability to envision and deliver products that consumers don't know they yet want.

Most companies get focus groups together to study how to build products that the most number of people want. Apple creates products that people had no idea they wanted or needed.

I remember when the iPad was introduced 18 months ago. For weeks before the official announcement, there were rumors that Apple would present a new tablet. Microsoft (MSFT) had built a couple of unsuccessful tablets previously. So, most weren't too excited about a new Apple tablet.

On the day of the announcement, I remember that many bloggers criticized the choice of the name "iPad." Several journalists asked Jobs after the event whether he was worried about people laughing at the name he'd selected. "No," he said, as he smiled and walked away.

By next year, Apple will have sold 100 million iPads.

Can Apple continue to innovate under new CEO Tim Cook? We might not know for 4 - 5 more years.

Cook doesn't have to "innovate" to create iPhone 5, 6, 7, etc., or iPad 3, 4, 5, etc. He won't have to innovate to create Apple TV, or deliver iCloud. The tracks have been set for many years to come -- with Jobs' blessing.

For someone who is as rumored to be as much of a "control freak" as Jobs, I find it hard to believe that Jobs hasn't helped sketch out the product road map for the next 10 years.

Cook clearly excels in the areas of operations, financials, and communicating with investors. I expect he'll keep focusing on those areas, and relying on the deep bench of talent at Apple for marketing, design, and new products. With a product roadmap well set out thanks to Jobs, we might not have to see Cook "innovate" until over a decade from now.

I expect that Jobs has sought to learn from another iconic American company, Disney (DIS), for inspiration for how to ensure Apple can continue to innovate. Jobs will continue to be the legend and inspiration for future product people at the company, just as Walt Disney is.

Disney is one example of a company that has continued to grow after its founder departed. Wal-Mart (WMT) is another example. Some will say that a technology or product company is different from a movie company or a low-cost merchant. It's true that Apple's users will be more fickle if they come out with a Newton or other less impressive product 10 years from now.

But if Steve Jobs is truly a "control freak," he's likely seen the mistakes made by other companies and by Apple during his exile in the 1990s. I suspect he's taken a lot of care, since he was first diagnosed with pancreatic cancer 8 years ago, to ensure that Apple and Tim Cook is set up for success in the foreseeable future.

Jobs hopes his legacy will not be any Apple product, but the organization he leaves behind.

[At the time of publication, Jackson was long MSFT and AAPL]

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Why I'm Short Gold: Because No One Else Is

From 8/22/11

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The Steve Jobs Stanford Commencement Speech

Read the full Forbes post here.

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How Much Are Palm’s Patents Worth Now?

Read my full post on Forbes.

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Determining Apple's Next Buy Signal

| AUG 25, 2011 | 9:30 AM EDT

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Now that Steve Jobs has resigned as CEO, the question is what's the next buy signal forApple (AAPL)?

There have been a number of announcements and rumors this week relating to Apple including that the company will announce a slimmed down version of iPhone 4 announced in September. It will be called iPhone 4GS with 8G of memory -- a much smaller version.

There was also news on Tuesday that Sprint (S) would sell the iPhone starting this Fall. It helped juice Sprint's stock by 10% on Tuesday and it means that Apple might sell another 6 million phones next year.

While all that is a net positive for Apple's stock, these are both relatively small pieces of news for a company the size of Apple.

What might be much more significant for Apple and its stock is if the company can confirm a specific plan for taking this smaller and cheaper version of the iPhone (or perhaps an even smaller/cheaper model) that is targeted for the pre-pay emerging market with specific carrier partners in China and India.

There has been a lot of speculation about Apple announcing a deal with China Mobile(CHL). In addition to newly appointed CEO Tim Cook's personal visits, Steve Jobs apparently courted China Mobile directly over the last few months.

Announcing a deal with China Mobile that is geared toward the prepay market in China (representing over 90% of China's cell phone market) would be a huge deal for Apple.

That is the kind of single news piece that could move Apple's stock. And it might be coming as soon as in a few weeks.

As far as Jobs himself, I actually think we're about to see that there has been a "Jobs discount" built into Apple's stock, rather than a premium. This fear -- will Steve leave? -- has been hanging over the company for some time. Now, there is certainty about Cook's ascension.

I don't expect it to happen today, but I think that as investors see Cook perform in the next few weeks and months, we are going to see many more buyers than sellers of Apple.

At the time of publication, Jackson was long AAPL.

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What to do About Tudou

| AUG 24, 2011 | 1:30 PM EDT

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China's Tudou Holdings (TUDO) had a tough first week of as a U.S. public company.

The stock's American Depositary Receipts have slipped about 20% from lasty week's offering price of $29 -- and that's after the company discounted its shares by 58% to online video rival Youku (YOKU) just to get the deal done.

It's hard to believe that Tudou's fortunes have fallen so far in less than nine months. Last November, Tudou was arguably the top online video website in China (depending on what metric you used). In fact, it was ahead of Youku in terms of filing with the Securities and Exchange Commission to hold an initial public offering on Nasdaq. (It took Youku two more weeks to file.)

The IPO was delayed by problems arising from a messy divorce between Tudou CEO Gary Wang and his wife. The very ownership structure of Tudou was in question and, as a result, had to be sorted out before the IPO could proceed.

The company needed the cash from the IPO as its cash levels declined from $336 million at the end of December to $41 million at the end of March. They IPO raised about $180 million.

How long the cash will last is another question. Tudou will not likely be able to do a successful secondary -- unlike Youku, which now has more than $600 million in cash.

Tudou is too risky, even after rumors Monday that China's top online portal, Sina Corp.(SINA), has bought a big chunk of the company since the IPO. I still wouldn't touch it.

However, when Tudou's cash runs low in three or four months, you can expect other big Chinese names like Baidu (BIDU), Sina, Sohu (SOHU) or even Youku to buy the company, and you could play it with that outcome in mind.

At the time of publication, Jackson had a long position in YOKU, BIDU and SINA, although positions may change at any time.











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When Do You Buy HP?

| AUG 23, 2011 | 9:30 AM EDT

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HP (HPQ) is perhaps the biggest Dog of the Dow these days.

The stock is down 43% year-to-date and seems to be universally hated at the moment after announcing plans to spin off its PC division, shut down its WebOS efforts, and buy a billion-dollar-a-year business for $10 billion.

So, after investors threw in the towel last Friday, should you look to buy in for a dead cat bounce?

No. There's still just too much risk tied up in HP.

The stock is likely in the dog house for at least the next six months, much the same way that Google (GOOG) was earlier this year after the company announced that it was replacing Eric Schmidt with Larry Page.

In my view, you can expect a further slippage in the stock for the next three-to-four weeks, followed up by five months of relative flatness. Over that period, you'll likely hear of key executives leaving the firm (like Todd Bradley, who heads up their PC division called PSG), as well as some further rank-and-file job cuts. None of that is going to prop up the stock.

I think you're also likely to hear about some more billion-dollar acquisitions in the coming months. If the HP board has done nothing, it's shown that they are not afraid to keep doubling down on a strategy, even if the mainstream media disapproves.

What will be the catalysts for buying in to the stock again?

Look for a deal announced for the PC division. Some think this is going to take up to a year. I expect it will be sooner as the HP board is feeling the pressure to make something happen.

Look for a deal to sell the Palm group and its patents. I haven't seen anyone quote the raw number of patents received by Palm in the mobile space but the final price tag for these will likely be high. The price could be close to the Nortel (NT) bid price and that could wake up investors to HP's stock again.

Of course, overly strong earnings would help as well, but that's still likely over a year away.

The bottom line: look again at HP in January. Until then, consider it a falling knife.

At the time of publication, the author had no positions in any of the securities mentioned.

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Friday, August 19, 2011

Dangdang's Problems

Read the full Forbes Post

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Is Google Crazy? Or Crazy Like a Fox?

Read the full Forbes post

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How Moto Screwgled Google

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WebOS and Palm Patents Now Wait For Apple

Bye-bye WebOS and Palm. Now those patents will be bid on - most likely by Apple.

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Right From Google's Clutches

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There was an interesting article by Forbes' Eric Savitz on Tuesday night, covering a Macquarie USA report that speculated Microsoft (MSFT) might take a run at Motorola Mobility (MMI) and claim it from Google's (GOOG) grip.

How can this be?

Macquarie analyst Kevin Smithen points out that Motorola has $3.5 billion in cash and $1.7 billion in net operating loss carry forwards. Once you assume that Google is going to spin off the home business to private equity, you're probably looking at only a $5.3 billion price tag for the patents and handset business.

Why couldn't Microsoft also spin-off the handset business? Well, it has more than $50 billion in cash and the ability to draw down its debt facilities. As such, it's clear the company certainly could pay an even bigger number for Motorola if it wanted to do so.

Why would Microsoft do this? To knee-cap a bitter enemy -- that's why. The firm could go after Google's remaining handset makers, such as HTC and Samsung, with the patents that Motorola was about to wield against them. Microsoft could convince them -- Redmond-style -- that the Windows 7 phone operating system was actually much better than the latest Android iteration.

So how much would Microsoft have to pay? It wouldn’t be much more, in all likelihood. Google is really now at the maximum of what its board can credibly approve. The $12.5 billion represents almost one-third of their cash on hand, although it’s less when you back out the various components described above.

Motorola's stock could give a boost to any merger-arbitrage hedge funds playing for an increased bid. On the other hand, shares of Microsoft and Google might take a short-term hit if a bidding war breaks out.

This could get interesting.

At the time of publication, Eric Jackson was long MSFT.

From RealMoney

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Google's Telecom Arms Race

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Google's (GOOG) purchase of Motorola Mobility (MMI) is all about arming itself for an increasingly heated patent war with the likes of Apple (AAPL), Microsoft (MSFT), Oracle(ORCL), Hewlett-Packard (HPQ) and Research In Motion (RIMM).

Google is effectively paying $9.5 billion (net of Moto's cash) for Motorola's patents. It gets 17,000 now and 7,500 in the queue that are still awaiting approval.

Suddenly, the Nortel patent haul for over $4 billion seems like chump change.

If I were Larry Page, I would have pulled the trigger on this deal for the patents alone at this price. But what he does with Motorola from here will tell the tale on whether this deal makes sense in the long run.

My view is that it will be an albatross if Google really tries to keep it as a separate unit and make a go of it as a hardware vendor. I just don't see how it can succeed at that. Google would anger its partners, and it would have to rely on mediocre Motorola management to make it a success. Or it will jump into something with both feet that it has no experience in (running a low-margin manufacturing business).

It's a recipe for stepping in it.

Google might plan to close this business down after it gets governmental approval for the deal. It might be keeping up appearances of continuing to run this business when it has no interest in doing this.

I have no position in Google, but I would suggest that any Google longs be concerned if they see evidence that Google does seriously want to continue as a hardware maker and out-Apple Apple.

At the time of publication, Jackson was long AAPL and MSFT.

From RealMoney

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Forgotten Giant Is a Winner

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Giant Interactive (GA) is up about 10% in the last month, while the Nasdaq is down about 10%.

Why? Because it's got a winning game on its hands -- ZT2 -- that is performing well in the early stages of its release. It's also still trading at a very low price-to-earnings ratio relative to several of the high-momentum stocks that faced a buzz saw over the last month of global uncertainty.

GA was unloved and unrecognized before the global financial crisis renewed itself. So the weak-hand sellers had long since sold out of the stock.

But that doesn't fully explain it as the same logic applies to Perfect World (PWRD) and that stock has still declined in the past few weeks.

With GA, its winning game is more clear cut at this point among Chinese gamers and this knowledge is being reflected in the price action of the stock, even in a terrible tape.

I suspect that this stronger uptrend is still at the beginning stages for GA and therefore would be worth looking into in more detail.

Stocks like GA and PWRD are also interesting to think about in relation to the expected IPO of Zynga. Either American investors are going to wildly overpay for Zynga or they are already wildly under-paying for these Chinese gaming companies.

GA is currently sporting a forward price-earnings ratio of less than 11x. PWRD has one below 6x.

Probably both these stocks (and other gaming stocks) will see their multiples increase over time when the Zynga IPO comes. Also, Zynga's will probably come down over time.

There's no magic for what Zynga does that's different than GA. They're both just gaming companies that make money when creative people make really interesting games.

GA is still overlooked and deserving of a higher stock price.

At the time of publication, the author had no positions in any of the securities mentioned.

From RealMoney

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Thursday, August 11, 2011

Choose Your Momentum Stocks Wisely

Some momentum tech stocks have really fizzled this year: Akamai (AKAM -commentary - Trade Now) is down 52% year to date, Juniper (JNPR - commentary - Trade Now) is down 42% year to date and JDS Uniphase (JDSU - commentary - Trade Now) is down 25%, year to date.

Both Akamai and Juniper are trading back to May 2009 levels -- almost near the March 2009 market bottom levels. It's difficult to understand such a brutal correction.

High-flying Netflix (NFLX - commentary - Trade Now) has only fallen back to May 2011 levels.Apple (AAPL - commentary - Trade Now) is back to July 18, 2011 levels. Amazon (AMZN -commentary - Trade Now) is back to late June 2011 levels.

Choose your momentum stocks wisely.

What do Akamai, Juniper, and JDSU have in common? All were part of the momentum trade in tech stocks and each was built on a simply story: Next-generation networks built out more than a decade ago in the dot-com bubble were finally at capacity and current bandwidth application data hogs such as video streams were forcing carriers to upgrade to more gear and networks to keep up.

As the signs became clear that the economy was at risk for heading into a double-dip recession (or worse), these stocks got killed. In a shrinking economy, these stocks all sell gear that is a nice to have but is not must-have.

The damage done to these stocks won't soon heal. It will take months of them settling out and some signs that the economy is on the mend before you'll want to get back in to them.

In future, these kinds of stocks might be as valuable as the 10-year in predicting when the economy is slumping.

From RealMoney

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