Posts from October 2004

I posted a picture of an IPO Prospectus on my blog back in July. It was for our portfolio company PlanetOut. Well it took quite a while, but PlanetOut is a public company this morning. They went effective last night at $9/share and will be trading this morning under the ticker symbol LGBT. I think there are quiet period obligations so I won’t say much more about the Company, but its a great company, with great management, and I expect it will be a great stock over time.

And in the category of “when it rains, it shines”, we had another public offering in our portfolio this week. On Tuesday night, Gurunet went public at $5/share and is trading under the ticker symbol GRU. For those of you who don’t know GuruNet, go check out the service at Answers.com. It’s a great service and we hope it will be a great stock too.

Congratulations to Lowell Selvin and his team at PlanetOut and to Bob Rosenschein and his team at Gurunet. It’s great to have the IPO market back.

It’s October again. I remember back in the 80s and early 90s, October earnings season was always a time to be defensive. Tech companies usually had weak third quarters and the news was normally bad in October. In addition, public stock managers who had good years didn’t need to take big risks and tended to lighten up in October heading into year end.

As the technology business continues to morph from lumpy licensing oriented businesses into more stable recurring revenue oriented businesses, we are seeing less of this. The hardware companies still have this issue and some of the big software companies still have licensing revenue streams that are lumpy and impacted by the summer slowdown.

But the definition of a technology business is changing. Saleforce.com is the future, Peoplesoft is the past. Google is the future, Microsoft is the past. Red Hat is the future, Sun is the past. These are provocative statements and are meant to be taken that way. I may be off in the specfics, but not in the direction of where technology is headed.

The other thing that is changing is research. It used to be that analysts would talk to the company, the customers, and the channel to figure out how the quarter was. Regulation FD stopped the companies from talking. And talking to the customers and the channel was always an exercise in guesswork. An analyst could rarely compile a sampleof customers large enough to truly be predictive.

The Internet is changing all of that. As technology businesses become “web enabled”, so do their revenue streams. And its now possible to track some of this stuff precisely. We are just at the beginning of this trend, but its happening today and is going to happen in even bigger ways over the next five to ten years. Companies that do business and deliver to their customers over the Internet will become a lot more transparent to Wall Street.

A case in point is Majestic Research, started by my former colleague Seth Goldstein and his partner Tony Berkman. Over the past several weeks, I have been getting research reports from Majestic that have reported on the third quarter activity at Yahoo!, Google, eBay, CarMax, Auto Nation, Mandalay Bay Casino, Ceasar’s Entertainment, WebMethods, RSA Security, and many more companies. All of these reports predicted some important aspect of the third quarter results. And all of them came out well before the earnings are reported.

I’ve been watching a bit as the earnings come in to see how they are doing. In mid-september, Majestic started “pounding the tables” with their research on Yahoo! and Google, saying that paid search results were likely to be up very significantly and predicting that revenues would come in at the high end of the range. Yahoo! reported on Tuesday and in fact did report a blowout quarter with revenues well above management and “street” estimates. We’ll have to wait until Oct 21st to see if Majestic is right about Google too.

But regardless of whether Majestic gets Yahoo! or Mandalay Bay right, the point is that we are seeing business activity become more transparent, more measurable, and more predictable. This is going to impact the way wall street trades stocks. Earnings seasons will bring less surprises because the bad news or good news will be known well before the announcement.

That may make for a better October for everyone involved.

About two months ago, I posted on my search for a combo phone/email device. I’ve been carrying around a blackberry handheld for over five years now and still have my Motorola V60 flip phone. It’s time for a change, but I don’t know to what.

A blueberry phone? – I don’t like the form factor.
A Treo? – I don’t like the form factor and I’ve heard quality concerns.
A Sidekick? – Friends love it, but the outlook integration isn’t great.

So I’ve procrastinated.

Recently a couple friends got the new Blackberry 7100t. It’s a phone, not a PDA. That’s a good start. It has great email, web browsing, and PDA features.

The key for me is the keypad. Will I like two letters per key? Will I be able to type fast enough on it? I don’t know, but I think I am going to give it a try. And I’ll probably keep my Blackberry handheld for longer mobile emails as a backup.

If any of you have thoughts – pro or con – on this decision, please speak now in the comments section. I plan to get it in the next week.

UPDATE: Om Malik loves the keypad – my biggest concern – and hates the network – Tmobile. I already use Tmobile and hate it. But that is not going to stop me from getting this phone.

Defamer says that Viacom might buy Sirius to get Howard Stern back.

I have a hard time seeing how that would happen. Viacom’s worth $60bn. It has almost $30bn in revenues and almost $5bn of EBITDA. Sirius, as valuable as it is with Stern in the fold, is trading at $4.6bn, on revenues of $30mm and EBITDA losses of ($386mm).

Those numbers don’t spell acquisition to me.

There’s this post over at Buzzmachine that has me shaking my head this morning. I’ll cut and paste parts of it here:

Your fears about Bush are (for the most part) about what he would DO that would be wrong. He would appoint right-wing judges; he would work to reverse Roe; he will, and has, worked to pass a Constitutional amendment to ban gay marriage. Stupid, divisive, wrongheaded moves all to pander to his Evangelical base.

By contrast, you are afraid of what Kerry would NOT do. You fear he would NOT act against our enemies without the imprimatur of the French. That he would dither….

For the most part, what you fear from Bush cannot be implemented by the President alone. But what you fear from Kerry CAN be.

Everything you fear from a Bush II administration, I do too. But he won’t be able to do it — for the most part — without significant help from Congress.

By contrast, there is no power on Earth that can force a Kerry administration to bypass the UN when it’s necessary. There is no provision for Congress to sidestep the President and send troops.

Then Jeff adds this to the mix:

It’s ever-more fascinating to me how everything in this campaign is analyzed in the negative. We vote to keep the other guy out of office. We vote to stop something from happening. We don’t vote because we’re enthusiastic. We don’t vote because we want to accomplish something but just prevent something.

If this is the way the American electorate is viewing this election then the negative campaigning has taken over and people are losing their good judgement. We need to vote for what a President will do and not against what he might do. We need to realize that Congress will provide its required system of checks and balances over whomever gets elected. We need to pick a direction we want to go in and vote for it, not against it.

We know what direction Bush wants to take the country in because he’s been doing it for four years. We’ve got much lower taxes, a huge budget deficit, we are at war in Iraq, we’ve got most of the world really irritated with us, we’ve got efforts underway to make gay marriage and abortion illegal. If that’s the direction you want, then vote FOR Bush.

We also know what direction Kerry will take the country because he’s been in congress for a long time and he’s been campaigning for well over a year with a platform that’s available for anyone to see. He’ll roll back the Bush tax cut, he’ll cut the budget deficit, he’ll stick it out in Iraq because he has to, he’ll work to repair the issues we’ve got with the rest of the world, and he’ll protect a woman’s right to choose. If that’s the direction you want, the vote FOR Kerry.

But please don’t vote against the negative “worst case” image that both campaigns are creating of these two guys. As Franklin Roosevelt said, “The only thing to fear is fear itself.”

I’m in love with that song.

I love charts. Graphical representations of numbers always tell me things that pure numbers can’t. And time based charts – trend lines – are my favorite charts.

I’ve been watching three charts for the past couple months.

The first is the Iowa Business School Futures Market. This is a real market where real dollars are traded. And this is by far the most volatile of the three charts. It’s where you see small trends maginified. It’s where you see the biggest movements. This is a market after all.

The second is Bush’s approval ratings. There’s been very little change on this chart so I am not going to post it right now. This election should be a referendum on the job he’s doing. It wasn’t that for about a month, after the Republican convention, but it seems the first debate put the campaign back to where it should be and this chart matters alot. Interestingly, the approval numbers are right at 50/50 and have been since the convention.

The third chart is what ultimately matters. The electoral college. This is from the “pro-Kerry” site called electoral-vote.com so take the absolute numbers with a grain of salt, but its the trends I am talking about anyway. These numbers are moving in Kerry’s direction too.

I’ll be posting these charts every week or so from now until the election. I hope you like them as much as I do.

I’ve seen a few comments and received a few emails since I posted my dual posts on Open Source and most of them accuse me of way oversimplifying the issue.

I plead guilty as charged for oversimplifying. I must have spent too much time listening to the President. But I did decide to sell my Microsoft stock and I am happy about that decision regardless of the comments and emails I’ve gotten.

The whole Firefox experience opened my eyes to the fact that Open Source is becoming a consumer phenomenom. A desktop experience. I’ve always thought that Open Source was an IT thing or a geek thing. But I think that’s changing and Firefox is leading the way. Others will see that as an opportunity and consumers are going to get choice. And this choice is going to be driven by something other than a company that can be put out of business my Microsoft’s monopolistic powers. It’s going to be driven by a “tidal wave” of community driven software development.

I am convinced this is going to happen. It won’t put Microsoft out of business any time soon. It may never put Microsoft out of business. In fact I doubt it will even hurt Microsoft much in the short run. It may hurt others first. MySQL may hurt Oracle faster than Firefox and Linux will hurt Microsoft as one reader asserted correctly in my opinion.

If I had owned Oracle, or IBM, or Computer Associates, I’d probably have sold them too.

Finally, a few readers have suggested that Microsoft is changing their strategy regarding Open Source. They want to embrace and extend Open Source, the way that Sun and IBM have done. I tend to doubt it. Bill and Steve have never played well in the sandbox if you know what I mean. But if they were to open up Windows or IE to open source extensions, then I’d begin to think they’ve seen the light. Until then, I’ll stay out of their stock.

Bush did a lot better. Kerry was about the same. I’d call it a draw.

But Bush did nothing to erase the perception that he’s stubborn and in denial about his mistakes in foriegn policy and Iraq.

Kerry missed a lot of opportunities to pummel Bush. It makes me think he doesn’t have that killer instinct that would help him seal the deal with voters who want a tough president.

But there was one defining moment for me. Bush hit Kerry on his vote against partial birth abortion. Kerry said clearly that he is against partial birth abortion but wants an exception for circumstances where the life and health of the mother requires it. Bush then just shrugged, smiled, and said, “well he voted against it”.

Strong and wrong versus nuanced and right. We’ll see where the american public comes out on this one.