Archive for the 'Investing' Category

Why Palm doesn’t Make Sense for Nokia

Published on March 27, 2007 in Business and Investing. 0 Comments

Over the past week or so, there has been a lot of speculation and rumors about the acquisition of Palm, Inc. (NASDAQ:PALM). Potential buyers included Motorola, Inc. (NYSE:MOT) and Nokia Corp. (NYSE:NOK). Nokia being a potential buyer of Palm didn’t seem right to me simply because of the vested interest that Nokia has in the Symbian (which is the largest smart phone operating system right now).

This Canalys press release shows that Nokia shipped out 55% of all smart phones in 2006, and Palm lagged behind three positions, being only able to secure 5.5% of the market. Now lets not forget that Palm devices operate on both the Palm and Windows Mobile operating systems. Nokia’s smart phones on the other hand run on the Symbian operating system and Nokia additionally has 47.9% ownership in Symbian.

Is it just me, or does it seem as though it would be a conflict of interest for Nokia to acquire Palm? The only logical explanation is that Nokia plans on integrating the Symbian OS into Palm devices in order to help grow Symbian’s market share in the United States, which is lagging right now.

$98.8 Billion to Acquire 330 Companies

Published on March 26, 2007 in Business, Internet and Investing. 0 Comments

Last week’s Red Herring issue (subscription required) had an article discussing a little buying spree that 10 companies went on from 2002 to 2006 where a total of 330 companies were acquired for over $98.8 billion. The acquiring companies that were looked at were Broadcom (NASDAQ:BRCM), Sisco Systems (NASDAQ:CSCO), EMC (NYSE:EMC), Google (NASDAQ:GOOG), Hewlett-Packard (NYSE:HPQ), IBM (NYSE:IBM), Microsoft (NASDAQ:MSFT), Oracle (NASDAQ:ORCL), Sun Microsystems (NASDAQ:SUNW), Symantec (NASDAQ:SYMC), and Verisign (NASDAQ:VRSN).

Of those 330 companies that were acquired 133 we backed by venture capitalists. Of the 10 companies that were analyzed IBM acquired more companies than anyone else spending a total of $16 billion on 65 companies, 20 of which were VC backed. Broadcom on the the other hand acquired the smallest amount of companies spending a total of $835 million on 13 companies, 9 of which were VC backed. IBM might have picked up the largest amount of companies to add under its belt, but Hewlett-Packard was able to outspend everyone else by acquiring 38 companies for a total of $26.6 billion.

The total number of acquisitions that were web 2.0 companies was not disclosed but one can imagine that they made up a large portion of 330 companies that were involved. This goes on further to prove that acquisitions are exceeding IPOs as an exit strategy for many companies as a result of stricter regulations on requirements to go public. Oh yeah, its also been proven that an acquisition for more than a billion dollars doesn’t require a company to have a proper model for generating revenues.

A Great Day for Apple Inc.

Published on January 9, 2007 in Business, Internet, Investing and Technology. 0 Comments

AAPL-MOT-RIMM-PALM-NOK 1day
At today’s MacWorld Steve Jobs introduced the Apple (NASDAQ:AAPL) iPhone. During the iPhone introduction, Jobs stated that the iPhone is going to be another revolutionary device released by Apple. The iPhone is going to redefine the way smartphones operate and according to Jobs is five years ahead of its time, while acting as the most advanced iPod, a revolutionary phone, and a breakthrough internet device.

A look at the way the market reacted in terms of this “futuristic” device is pretty interesting. Motorola (NYSE:MOT) who produces the Motorola Q smartphone, Nokia (NYSE:NOK) who produces enterprise phones and multimedia phones, based off of the Symbian OS, Palm (NASDAQ:PALM) who produces the Treo line of smartphones, and Research in Motion (NASDAQ:RIMM) who produces the Blackberry line of professional communications devices, all acted negatively to the news of the Apple iPhone.

Additionally Apple, will be dropping the word “computer” form Apple Computer, Inc. and will become known as Apple, Inc. as they move deeper into the consumer electronics market.

Discount / Variety Stores vs. Oil Fund

Published on November 21, 2006 in Business and Investing. 1 Comment

WMT-TGT-USO

Its just great to see how discount / variety stores such as Wal-Mart Stores Inc. (NYSE:WMT) and Target Corp. (NYSE:TGT) react in comparison to US Oil (AMEX:USO), a fund that invests in futures of crude oil, heating oil, gasoline, natural gas, etc. Shows how big of an impact energy prices has investors in terms of how they think energy prices will affect consumer spending.

For those of you that still can’t figure it out, ignore the time frame, prices, and the gains and losses, and just focus on the correlation between the entities being graphed.

The Outlook for COH…Still Undervalued?

Published on November 21, 2006 in Business and Investing. 0 Comments

Back in April I blogged about Coach Inc. (NYSE:COH) being undervalued (Time to Invest in Coach Inc.?), that is when COH was at $35.07. After it had dropped to $30.65 in May, I blogged about how Coach was still undervalued (Reiteration to Invest in Coach). Since the $30.65 COH has been up about 36.4%, not to mention the rough 60% increase in price since its dip into the $25 range this past July.

COH now resides at $41.80 with quite a few analysts still having COH labeled as a buy, outperform, or as an overweight. Everything points to COH still climbing up to being properly priced somewhere in the $48-$52 range. Is COH really that undervalued?  Is there enough evidence to support those claims?

Over the course of the next few days, I will be re-evaluating COH to see where I believe it should be priced. For the time being, I would like to know what everyone thinks about COH sitting at the $41-$42 range and where they believe COH should be priced. All comments are welcome.

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. The author does not currently own any shares in Coach Inc.

The Right Way to Acquire: Google Acquires YouTube for $1.65bn

Published on October 9, 2006 in Business, Internet, Investing and Marketing. 1 Comment

Google (GOOG) today announced that has struck a deal to acquire YouTube, the leading online video distributor, for $1.65 billion. For those that are unaware, YouTube serves approximately 120 million videos on a daily basis. Even though the reach of YouTube is quite higher than the reach of some broadcast media, YouTube has yet to define a revenue model. This is where Google’s acquisition of YouTube will play a crucial role in defining a revenue model that is bound to make a whole lot of money. A few months ago, Google announced that AdSense would, in addition to their contextual advertisements and banner advertisements, also provide video advertisements. With Google Video only having close to 6.5% market share, surely Google’s video advertisements wouldn’t be a huge moneymaker through Google Video. This is where YouTube has a whole lot of potential to rake in a big chunk of change for Google, as YouTube owns close to 43% of the online video market share.

I would say that this is a different type of acquisition for Google. First of all, YouTube was bought out not with cash, but in exchange for Google stock. Additionally, Google will not be rebranding YouTube; YouTube will remain as a separate entity and resume operations as it always did with its full staff. Sounds pretty good to me, knowing that it is the YouTube brand name that is attracting 43% of viewers of online video.

Many people were skeptical about the acquisition of YouTube by Google. Especially since the first big leak of a potential acquisition surfaced on Friday, October 6th. As it turns out, YouTube and Google were in talks for about two weeks, and one can conclude that both entities were pretty serious about the talks. This draws my attention to the potential acquisition of Facebook, the second largest social networking website. It seems that it has been over a year since Facebook has been taking turns having talks with potential acquirers, such as Yahoo! (YHOO) and Microsoft (MSFT). But every time a rumor of a potential acquisition of Facebook is ever mentioned, the rumors turn out to be rumors after all. What might be the cause behind it? I would have to say that Facebook has put too big of a price tag on itself. Rumors and leaks state that Facebook is asking in excess of $1 billion, which is obviously turning away the buyers. Yes, the largest networking website, MySpace, was bought out for $750 million. But that three-quarters of a billion dollars was paid to acquire a huge chunk of the social networking market share (currently a few percentage points over 75%), while Facebook commands less than 10% of the social networking real estate. Trying to catch up to first place, Facebook was willing and is willing to try anything, first diversifying away from its niche market of college students to high school students, then diversifying away from students and opening up to the general public (something that angered hundreds of thousands of college students).

Just to tie things back all together, I would like to say that I doubt Facebook will ever be bought out for a price that they are asking for, especially when they are trying to do anything to gain market share. Yahoo! is falling behind Google by being unable to diversify its portfolio of products and services and take the lead in the many online ventures that Google has a hold on. Google on the other hand is able to acquire small ventures that have a lot of growth potential, and at the same time, small companies like YouTube on the receiving end are able to take advantage of their “huge potential for growth” situations.

Zecco Defines a New Way of Online Trading

Published on October 9, 2006 in Business, Internet, Investing and Marketing. 0 Comments

If you haven’t checked out Zecco by now, I really recommend that you do, especially if you’re an online trader or investor. Online trading has reached a new milestone with Zecco, by allowing online investors to trade for free. Some research into the Zecco through the Zecco Community Forums has provided me with answers as to how Zecco plans on generating income to sustain the business.

First off, not all trades are free through Zecco, only market orders and limit orders are for free. But other services cost a minimal amount. For instance options trading is priced at $3.50 plus $0.60 per contract. Browsing the Zecco Forums led me to learn the following:

  1. Looking at E*Trade’s 10-K filings, one notices that 49% of the revenues that E*Trade generates is from interest.
  2. Companies like E*Trade spend on average $5 on advertising for every trade that is conducted.

This all makes sense when one realizes that Zecco requires a minimum account balance of $2,500 and that they do not plan on advertising their service. Zecco seems to be hoping that the minimum $2,500 account balance will help them generate enough revenues through interest. Furthermore, rather than spending big money on advertising, Zecco plans on having their community forums and blogs, generate enough viral marketing to attract new customers. With the average Zecco page having three Google AdSense advertisements on it, it is quite evident as to how Zecco plans on generating a big chunk of their revenues in order to help cover clearing fees that result from the free trades.

Many people talk about Zecco being the Google of online trading. Whether or not Zecco is the Google of online trading, it wouldn’t come as a shock to me if sometime in the future we learn of Google and Zecco signing off on a deal where Google will guarantee a certain amount of advertising dollars to be generated through the Zecco website. Something similar to the Google and MySpace deal that we saw two months back.

For those who are interested here are some more Zecco links: a comparison of Zecco and other online brokers, the Zecco team, and the Zecco backers.

Google to Target Corporations in addition to Consumers?

Published on May 19, 2006 in Business, General Business, Internet and Investing. 2 Comments

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?

Reiteration to Invest in Coach

Published on May 14, 2006 in Business and Investing. 0 Comments

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.

Three Ratios to use when Screening for Stocks

Published on May 11, 2006 in Business and Investing. 0 Comments

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.