Saturday, August 27, 2005

Why Yahoo! bought Konfabulator

When Yahoo! bought Konfabulator a few days ago i was thinking that what Yahoo was planning to do by buying a 3 ppl company which makes widgets for the desktop. Well, after the recent release of GDS 2.0 it makes much more sense and the picture is much more clearer.
So, we are soon going to see a desktop tool a la Google's sidebar from Yahoo. Don't know if they knew already how Google was planning to integrate so much into a thing as neat and unobtrusive as sidebar. But now with Konfabulator under thr belt it's just a matter of time.
No wonder Yahoo announced to give it free and keep its API open to developers to writer thr own widgets, ofcourse, inline with Google who is also keeping it open.

Sunday, August 21, 2005

Podcasting

Though podcasting has been around for quite some time now its only now that the thing is catching up mostly due to The Big Apple giving it the official status by integrating podcasting into iTunes 4.9. As most of the apple products listening and donwloading podcasts on iTunes is a breeze. You just select which podcasts u want to listen to and iTunes checks and updates and downloads them for u. Ofcourse the podcasts page in the apple music store adds more zing.
Now with Apple quoting podcasts as the next big thing people surely would listen.
Now tech companies are coming out and sponsoring the podcasts we sure are goin to see more and more of them. One thing i would like to see in podcasts is that some important info should be included in with the info tag, that is the description which appears for each episode on iTunes.
Nothing much but just some handy info and urls which we heard in the show. Nobody cares to open a notepad or browser and note down the url which was just spoken in the show as www dot this this that dot com.
The one big question is what lies in it that Apple is going all out and embracing podcasts.
It sure is a cool tech and having Apple's name associated with it is gr8. As more and more ppl hear abt it, it sure is goin to help Apple a lot in gaining over the Redmond Giant. But what abt the revenue model, is thr ne? Or Apple just wants to cash in on podcasts' popularity into its other products.

Thursday, August 18, 2005

about google selling its 14.2 million shares...whew!

In THEORY, a secondary offering has no impact on current shareholder...

Let us assume that Google is worth $75b (its really 77, but 75 makes easier math).

So, it's pre-money value is $76b. Pretend Google is selling $5b work of shares. Now, Google has an additional $5b in cash, making its value $80b. However, everyone has been diluted. So, your previous 1% of Google is now 15/16 of a percent, but the company is worth 16/15 what is was before.

Now, assuming that Google has a profitable use for that cash, then Google takes that $5 and turns it into $25b of value (but loses the $5b in cash). Now, the new Google is worth $100b. So while you own a smaller share, at the moment of sale you were made whole (by the cash coming in), and you benefit from the increase in value.

However, reality is NOT so kind. In reality, Google selling $4b worth of shares will probably be at a slight discount, to encourage the big funds to pony up the cash (you don't normally unload $4b of shares on the open market and hope for the best), plus the bankers get paid. So the company ends up diluting by more than the net cash position improves.

Assuming Google has a profitable use of that cash, you should still come out ahead, because Google will in theory sell $4b in stock, collect $3.8b, and as long as they turn it into at LEAST $4b of value, you're even, and at $8b-$10b, you come out ahead...

Now let's add a little more reality. Generally, companies deploy their capital in less and less valuable area, which makes sense. If you have 20 profitable investment opportunities, each of which take $1m. If you have $10m to invest, you do the top 10 of them. If you get an extra $10m, you choose the less valuable ones, and if you are stuck with investing another $10m, you either sit on cash or chase the 10 best unprofitable activities to look busy. That's part of why dividend companies with reasonable payout ratios look so good on a dividend-reinvestment basis, they only chase REALLY profitable activities.

In addition, Google is very profitable, so it should be able to chase most of its profitable investment opportunities. With a P/E of 80, the implied cost of capital is MUCH higher than a junk-bond offering, which would only expect an 8%-10% return (interest) compared to investors expecting an 80% return (no I'm not doing the math, but its a ridiculous annual return to justify paying 80 times trailing earnings, somewhere in the 40%-80% annualized range).

Therefore, the non-financial view of the situation is: profitable companies that think their stock is undervalued do stock buy-backs, which boosts EPS, and make sense if the company believes that their stock is a better investment than any other projects that they could invest in (meaning they can only get a 20% return on new projects, but a 40% return buying their shares), and tend to do secondary offerings when they think their stock price is high (meaning, they can get a better return on the money than the market, they expect the company's stock to be a -10% return and they can get a 3% (money market) or higher return on the cash).

I would consider this offering bearish, even though the fundamental financial analysis looks closer to neutral.

Alex

Monday, August 15, 2005

Happiness..

Go to a party. Listen to the laughter, that brittle-tongued voice that says fun on the surface and fear underneath. Feel the tension, feel the pressure. Nobody really relaxes. They are faking it. Go to a ball game. Watch the fan in the stand. Watch the irrational fit of anger. Watch the uncontrolled frustration bubbling forth from people that masquerades under the guise of enthusiasm, or team spirit. Booing, cat-calls and unbridled egotism in the name of team loyalty. Drunkenness, fights in the stands. These are the people trying desperately to release tension from within. These are not people who are at peace with themselves. Watch the news on TV. Listen to the lyrics in popular songs. You find the same theme repeated over and over in variations. Jealousy, suffering, discontent and stress.