This piece of news might be a few days old, but for those of you that haven’t heard, a few days ago eBay and Yahoo! announced an alliance, or what I would like to call a partnership, that will give Yahoo! control over all advertising on the eBay website and also ensure that Yahoo uses eBay’s PayPal for all online payments.
As a result of this partnership, Google and Microsoft have been shut out of what could have been extreme potential for growth. In the past all of eBay’s advertisement sales were in-house efforts. Bringing in a company like Yahoo!, that has great experience with online advertising due to their acquisition of Overture, will surely benefit both eBay and Yahoo!. eBay will take a certain percentage amount off of the revenues that Yahoo! generates through the advertisements displayed on the eBay website.
As a result of this alliance, Yahoo! will work with eBay on better and more effective website design in order to help the Yahoo! crawlers crawl the eBay website better. Yahoo! also stated that it will not manually manipulate eBay’s page-ranks within the Yahoo! search engine, but would rather crawl the eBay website more frequently which will result in better page ranks when the eBay website is optimized for the Yahoo! crawlers.
Not all is perfect with this alliance though. First of all, Yahoo! will take care of all advertisements on the U.S. version of the eBay website. Additionally, Yahoo! has to prove to eBay that it will be able to design advertisements that won’t drive away any of the eBay business, and finally both eBay and Yahoo are still competitors with Yahoo! having its own auction and classifieds system.
This article at TMCnet and this blog post at Blogging Stocks both raise some good points, such as the fact that eBay and Yahoo! should have teamed up years ago before Google was a major player, as their partnership right now is not as effective with Google in the marketplace. Or as the blog post on Blogging Stocks talks about this alliance being a “web-based partnership to thwart Google’s advances.”
This surely is an excellent alliance for both eBay and Yahoo in terms of creating opportunities for each other in terms of generating more revenues. But will this alliance be able to slow down Google? I do not think so. With Google dominating the online search-engine business, there is no way that anything will stop Google that easy. What are your opinions on this subject?
Under the Money section of USA Today there was a short article titled Microsoft offers ability to bill usage hourly. Microsoft has released a solution for the consumers of lower income countries which will allow them to have access to a computer. This new solution is known as FlexGo, and has been launched in Brazil and will be launched in Mexico, China, Russia, and India over the course of the next 90 days. What this solution does, is that it allows for a consumer to have access to a personal computer in a much more affordable manner.
FlexGo makes consumers pay for roughly half the price of a computer up front. The consumer then must purchase prepaid cards in order to use the computer at home. The prepaid cards will be based on an hourly rate, and will connect to a service to verify the access codes on the prepaid card. Whenever the time on a prepaid card runs out, the consumer no longer has access to the computer until the consumer purchases another prepaid card. This works in the similar manner that prepaid mobile phone lines work.
Microsoft seems to have figured out a way to market computers to people that usually wouldn’t be able to own their own computer. Not a lot of details are available at the moment, but what is known is that a computer running Windows XP that comes along with a 17-inch monitor that would usually sell for around $600 will be selling for between $250 and $350. With the price comes 10 hours of usage time. After that, every additional hour will cost approximately 75 cents. Microsoft has teamed up with the Chinese Lenovo Group to manufacture and distribute the FlexGo machines in China and India. This move by Microsoft most probably directed to compete with the $100 laptop that is being developed by AMD, Google, and Red Hat.
No information is available on the Microsoft website about the FlexGo solution. Press releases have been the only source of information as of right now.
Two weeks ago, I wrote a blog post titled Is Skype in Trouble?, since that time it seems that Skype has started to prepare for the arrival of AOL’s AIM Phoneline, which allows anyone who uses AIM (AOL Instant Messenger) to make free outgoing calls to anywhere in the United States. It seems as though Skype has stepped it up a bit, and has decided to compete head-on with AIM Phoneline in order to retain current customers and attract new ones.
Skype is now offering free SkypeOut calls to anywhere in the United States and Canada for free. Many have called this move brilliant and others have called it a stunt. But will this act of generosity on the behalf of Skype be enough to fend off the competition of AIM Phoneline?
It very much seems as though Skype is worrying about new competition entering the market. Not only do they have to worry about competition from the more known VoIP providers in the U.S. such as Vonage, but now Skype has to worry about competition that will be using Skype’s traditional model of having and instant messaging client bundled with VoIP capabilities.
Personally I think that the move made by Skype will allow them to retain their current customers, and allow for current customers that didn’t use SkypeOut to start using the pay- service after the end of the year, once they realize how beneficial the service is. Skype might be able to retain new customers, but there is no doubt that current users of AIM will be more prone to use AIM Phoneline than have to download a new piece of software, have to pay for the service, and go through the tedious task of registering for a new service. In essence the switching costs are too high for current users of AIM. One last thing that I would like to add is that I do not believe that AOL will keep the AIM Phoneline calling service as a free service over the course of the next few years; they will eventually have to start charging for the service.
For as long as we have known Google, they have simply target the consumer rather than businesses. Yes, Google does have their corporate search solution available for businesses to purchase, but for the most part that is not the market that they are targeting. This might change in the near future for all that we know.
The co-founder of SAP, the world’s biggest business software group (according to the Financial Times), said that SAP is open to be bought, with only three buyers: IBM, Microsoft, and Google. Being bought out by either IBM or Microsoft, as IBM does compete with SAP and Microsoft having approached SAP a few years back with a purchase proposition. But why Google?
No one really knows if Google would really be interested in acquiring such a company, but what is known for sure is that Google has almost double the market capitalization of SAP ($112 billion vs. $64 billion, respectively). Would the acquisition of a company such as SAP leverage Google in terms of its competition from Microsoft? Would the acquisition of SAP by Google create more competition for Google from the likes of IBM? The answer to both these questions is surely yes. It would be great to see Google acquire a company like SAP and increase its potential for providing innovative solutions to businesses.
Any comments or responses from anyone majoring in MIS or currently in the MIS field?
A few weeks ago I wrote about investing in Coach Inc. (COH). I am writing this post, to reiterate and reinforce my judgment on investing in Coach. There are two main points that I would like to make in regard to why Coach will be a valuable investment.
The first point is that Coach closed at $30.65 on Friday. That price is nearing the 52 week low of Coach, which is currently at $27.80. Any bright investor knows that a sign to purchase shares of a company is that company is financially strong and is nearing its 52 week low. And yes, with their return on equity (ROE) growing for the past three years and the ROE for the last fiscal year being in the high 30% range, Coach is a financially strong company. Coach’s ROE is not the only sign that they are a financially strong and growing company, but I shall not discuss this further here as I have dedicated a whole post to it a few weeks ago (read my blog post titled: Time to Invest in Coach Inc.?).
The second point that I would like to make is that a few days ago Coach announced a $500 million share repurchase program which is to be completed by June 2007. The repurchase program was initially set into motion to benefit employees through their compensation plans. At the same time this will increase the value of shareholders’ stocks as it will boost up the earnings per share (EPS) by the time the repurchase program is completed.
I cannot answer the question as to why some people might not decide to invest in Coach and take benefit of the growth potential over the long-run, but what I know is that any smart investor would take hold of the lucrative situation immediately and watch their investment grow.
The content in this blog post reflects the views and opinions of the author. The author will not be held liable for any investment decisions or activities that anyone takes based off of this information. This information should not be used to make investment decisions; rather it should be used for one to expand upon his/her own research.
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While browsing through the content on SmartMoney Select, I came across a rather interesting article talking about three ratios that can be used together to find undervalued stocks. The three ratios being the price/sales (P/S) ratio, the price/earnings (P/E) ratio, and the third being the price/cash flow (P/CF) ratio. At first these three ratios seems like the most common ratios that one should use when screening for stocks, but I would tend to think that a lot of people wouldn’t even bother thinking about the implications of these three ratios when used together.
When used together, these three ratios basically make sure that a company isn’t “manipulating” any one of the above mentioned ratios in order to make the company look stronger than it really is. If a company, lets say, was to increase their sales by cutting down on profit margins (or even in an extreme case, taking a loss on the products that they are selling) to make their P/S ratio look a lot appealing the P/E ratio would counter that, by showing an inflated price for the earnings that a company is raking in.
On the other hand, if a company was to cut down on costs extremely to deflate the P/E ratio and as a result under-valuing the stock price, it is very likely that the company is too busy with cutting down on costs and is ignoring the growth or the expansion of the company. This would lead to a stable or even inflated P/S ratio which should raise eyebrows and alert investors that something is wrong.
Lastly, the P/CF ratio serves as a balance for both the P/E and P/S ratio as the P/CF ratio will simply show how well a company is doing in terms of raking in actual (or physical) cash at the time being instead of taking into consideration accrued (money earned, but not yet collected) income which can be represented in the P/E and P/S ratios.
Lastly, I would like to say that an excellent free stock-screener is the Yahoo! Finance Stock Screener, or even better yet, the subscription-based SmartMoney Select Stock Screener.
A friend of mine recently pointed me to an article located on MarketWatch which discussed the implications of Google, Microsoft, and Yahoo all facing unexpected competition in the online advertising industry. The competition would be coming from MySpace (for those unaware, MySpace is an online social networking website). The article also states that MySpace had 5.7 billion page views in comparison to Google during the month of March according to Nielsen/NetRatings.
On a regular basis, my Internet Marketing professor, Dr. Hair, will send us on a quest of figuring out how websites like MySpace, FaceBook, and even HamsterDance.com (back in the day) would rake in their revenues. The answer evidently, obviously, and simply is through advertisements. A quick visit to the MySpace website reveals that Google is the selected advertiser for MySpace. Google obviously benefits from the current advertising business that it receives from MySpace and benefits even more as over 8% of all traffic to Google comes from MySpace.
What are the implications of MySpace potentially entering the online advertising business in the near future? Well if MySpace is able to get their own in-house advertising system implemented, then Google, Microsoft, and Yahoo will face some serious trouble as MySpace will be able to display more relevant advertisements due to the abundance of demographic information that is available to them, in comparison to the information that the current top advertisers have at their disposal.
Is it likely for MySpace to enter the advertising industry on their own? In my opinion, no, that would require a lot more time and effort than what is required with their current business model. I foresee MySpace taking advantage of an alliance or partnership and teaming up with the likes of Google and using the technology and know-how a big player in the industry has to develop a more specific and targeted advertising system that potentially could rake in some big money.
While reading the Money section of yesterday’s copy of USA Today I came across an interesting article.? AOL plans to offer a free US phone number to users of AIM. This new product offering will be called AIM Phoneline. This will surely mean trouble for Skype and other VoIP providers, as getting a phone number to receive incoming phone calls via Skype costs a bit over $3 a month.
AOL plans on marketing their new addition to AIM to the younger generation of internet users as a cost effective way of not having to pay landline bills. In addition to that, AIM Phoneline Unlimited will also be debuting which will allow for unlimited outgoing calls to anywhere in the US and to 30 international countries for $14.95 a month, which is bound to attract a lot of attention, as Skype’s outgoing call system is credit based and other VoIP providers’ offerings are higher priced.
Is Skype going to lose all of its users to AIM Phoneline? I doubt it, simply due to the switching costs associated with making the move over to AIM Phoneline. AOL will surely tap the college and the recent college graduates market that wasn’t completely tapped by Skype. But with no announcement of whether AIM Phoneline will be compatible with mobile devices, I think Skype still has the edge for the time being.
I predict it won’t be long before Microsoft’s MSN Messenger and Google’s Talk add features similar to AIM Phoneline, and that is when the fun starts as to who will succeed in dominating the VoIP market. Or will Skype continue to dominate?
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