The Rayno Report

News Brew: $33 for 3Par

Thu, 02 Sep 2010 11:02:07 GMT

Well, the 3Par bidding war saga looks to be coming to an end as HP's final $33 offer has been accepted and Dell has pulled out of the race.

It makes you wonder about the "efficient market" theory, doesn't it? I mean, here is a stock that was trading around $10 and basically flatlined for about a year, only to suddenly increase by more than 300% in a period of three weeks. The market certainly wasn't efficient at pricing 3Par shares.

Here are the latest stats on 3Par at the current near-$33 level:

Market Cap: $2B

Forward P/E: 122

Revenue (TTM) $203M

Price/Sales (TTM): 9.84

Enterprise value/EBITDA: 294

Hmmm. Not sure I'd call that a bargain.

Onto the rest of the news:

The Atlantic coast of the U.S. is prepping for Hurricane Earl (New York Times).
Andy Roddick is out at the U.S. Open (Wall Street Journal). But the real reason to cite this story is because of this great line: "Andy Roddick’s early exit breaks the hearts of T.V. producers dependent on repeated Brooklyn Decker reaction shots"
3G Capital is acquiring Burger King (Wall Street Journal). Will that yield downloadable mobile burgers?
Bernanke admits he "wasn't straightforward" on Lehman (Bloomberg). According to my thesaurus, here are some synonyms for being "not straightforward": dishonest, crafty, crooked, deceitful, evasive, fraudulent, oblique, shady, shifty, sly, surreptitious, tricky.
Jobless claims decline (CNNMoney.com). Barely.
Ten questions and answers on Apple TV (PCMag). Silliest uestion: Does Apple have a Twitter killer?
In case you haven't refinanced yet, you might want to note the current 30-year mortgage is at 4.32% which is a new all-time record since records starting being kept in 1971 (did they not have mortgages before 1971?) (Wall Street Journal).
Most interesting financial headline of the day: "I'm selling the house and piling the proceeds into Greek government bonds." (Telegraph)
The verdict is in: People hate the new Digg (Mashable). Yes, I do too.

CIO's 10 Loathsome Tech Industry Types

Tue, 31 Aug 2010 13:55:18 GMT

I'm a key influencer. I'm also a technology evangelist, analyst, and journalist. And I can also leverage core competencies. Uh-oh. Sick of me yet?

We live in a world of prototypes, buzzwords, hype, and cliche. That's why I think CIO has hit the market with an article on the "10 Loathsome Technology Industry Types."

Here's an excerpt:

Vendor Marketing EVP You've got great hair—and you know it. Every conversation inevitably returns to "synergistic opportunities for the brand" or "CSR initiatives." You've got an iPhone 4 and you're hip to Facebook and Foursquare. Your most recent and greatest idea (if you do say so yourself): "I know how we'll get potential customers' contact information: Free iPad Giveaway! No one else is doing it!"

Venture Capitalist Wait, wait, don't tell me: You're based in the San Francisco / Palo Alto area, right? Uh-huh. And you once worked for HP or IBM? Yes. You enjoy yachting and golf? You betcha. And, of course, don't forget about your passion for "fine wine." How unique.

The Influencer A relatively new moniker for the same old type of self-aggrandizing, undeserving attention whore of years past: You've probably referred to yourself as a "guru" or "visionary" before. But your "highly soughtafter" methodology for measuring your Twitter influence is a secret worth keeping close to the vest. Definitely.

Pretty good stuff. Go check out the full story at CIO.com: "Influence This: 10 Loathsome Technology Industry Types."

VMware: Cisco's Big Strategic Dilemma

Tue, 31 Aug 2010 12:27:10 GMT

If only you could have the problem of having a 2% investment in a company whose share price has gone to the moon, right? Well, that's where Cisco is with VMware. While its equity stake looks smart at this stage, in the longer term Cisco is going to have to make a bid for either EMC (VMWare's parent company) or figure out the next step to get in the virtualization game.

Here's the problem: Virtualization and cloud computing, VMware's bread-and-butter, is the technology flavor of the decade, and Cisco is relying heavily on a strategic partnership with VMware to get it done. Sources in Silicon Valley are chattering about what Cisco will do about virtualization, a party its been largely left out of. As VMWare's price has shot up while Cisco's share price has stagnated, it's now become all but unaffordable to for Cisco -- VMware now has a market capitalization of $33B.

Bloomberg Survey Sees Gold $1,500

Tue, 31 Aug 2010 09:42:32 GMT

Gold is popping this morning on a number of bullish forecasts, among them a survey of analysts by Bloomberg that sees the yellow metal going to $1,500:

Gold may rise as high as $1,500 next year, 21 percent more than the $1,240 traded at 1:45 p.m. in London, according to the median in a Bloomberg survey of 29 analysts, traders and investors. Dan Brebner, an analyst at Deutsche Bank in London who is the most accurate forecaster so far this year, says the metal may reach $1,550.

With the economy stuck in neutral and Ben Bernanke's money-printing minions firing up another round of Monopoly money, I don't see any reason why gold can't go to $1,500. However, if you are late to the gold party and are afraid of chasing it, here's an idea: Buy some gold mining stocks. They have lagged the gold rally most of the way up.

Some quality gold and silver stocks, including Newmont Minining (NEM), Royal Gold (RGLD), and Pan American Silver (PAAS), are breaking out this morning with bullish action.

News Brew: Litigation Central

Mon, 30 Aug 2010 12:08:46 GMT

What's on my mind this morning? Litigation. Like, Paul Allen suing everybody. And everybody suing Facebook.

What's up with that? Has the economy gotten so bad that the world is looking to lawyers to boost buisness activity?

In other news:

Genzyme rejects Sanofi bid (Wall Street Journal)

Intel to buy Infineon's wireless outfit for $1.4B (CNN Money).

Blackberry gets a stay in India (BBC). Quick -- figure out how to let people spy!

HP authorizes $10B buyback (Bloomberg). Bidding wars, buybacks -- who needs all that cash, anyway.

Government to propose new fuel economy stickers (USA Today). They'll come with pretty new graphics! Yay, now that's what I call bureaucracy at work...

Most people don't want to be located (NY Times). Especially me. Right now.

Google plans pay-per-view films (Financial Times).

Cisco is reportedly trying to buy Skype before its IPO (TechCrunch).

The M&A Boomlet: Is Big Tech Stuck?

Thu, 26 Aug 2010 12:29:57 GMT

This bidding war between HP and Dell for 3Par says something to me about big technology companies: They are stuck. They can't grow internally, so they have to look outside the company.

If you think about the evolution of all big industries, they trend toward consolidation and giant companies eating up new companies in the search for growth and innovation. This certainly appears to be the case with players like HP, Dell, Microsoft, and Cisco. The new innovation is not coming from within, it's coming from outside.

What's So Sexy about 3Par? Virtualization

Mon, 23 Aug 2010 10:19:12 GMT

Little storage player 3Par Data is suddenly the envy of many, as it gets caught up in a massive bidding war between Dell and HP which have caused its share price to nearly double in a period of a week.

What gives? Well, virtualization and data centers, in a nutshell. As traditional enterprise spending slows, data centers continue to grow like mad, fueled by Internet services, social networking, and "cloud computing." It turns out that storage and virtualization services -- 3Par blends both of these -- are crucial to this high-growth area of computing.

The Newest Green Fuel: Urine

Mon, 23 Aug 2010 10:11:10 GMT

First there was "greentech," now there is "yellowtech." A team of research scientists in the U.K. are investigating whether urea, a major component of urine, could be used to create energy through low-cost fuel cells.

From Physorg.com:

The biggest obstacles to commercialising these proton exchange membrane fuel cells are cost, with the membrane and conventional, platinum-based catalysts, and challenges involving the transportation and storage of the highly flammable hydrogen or the toxic methanol.

The Carbamide Power System involves far cheaper membrane and catalysts, and can be run on urea (also known as carbamide), a mass manufactured industrial fertilizer and a major component of human and animal urine.

Read the rest here.

News Brew: Intel Locks Down McAfee for $8B

Thu, 19 Aug 2010 09:38:43 GMT

Another day, another deal. Intel has agreed to buy security software firm McAfee for $7.68 billion (Wall Street Journal). That's $48 per share, or a 60% premium to Wednesday's closing price. Nice pop!

This is a pretty interesting move for Intel, as the chipmaker moves into the big security software market, taking on other giants such as Symantec.

Some more news:

Dick's Sporting Goods (DKS) reported earnings jumped 32% (Wall Street Journal).People need more tube socks.
Williams Sonoma posted strong earnings and raised outlook (ABC News). Pots and pans are back?
Germany's economy is growing strongly, expected to hit 3% growth this year (BBC).Get me a Porsche.
The dark side of Mark Hurd's management style (MarketWatch). Rumored to have locked employees in a room to make them watch bad B movies.
RIM is looking to get into mobile advertising (Wall Street Journal). Kinda late guys, no?
Facebook launches "Places" (TechCrunch). It's now gonna tell people where you are.
The tragic death of everything (Technologizer).
378 million shareholders voted against Michael Dell (CNNMoney.com).
Man killed by exploding mobile phone (Daily Telegraph). Really! The brand was Nokia, FYI.

Biotech IPOs Could Fuel Genomics Boom

Wed, 18 Aug 2010 16:30:33 GMT

Two big coming biotech IPOs are likely to reignite investor interest in biotech, specifically the genomoics sector. Complete Genomics (Future symbol: GNOM) and Pacific Biosciences (Future symbol:PACB) have filed S-1 Registration Statements with plans to go public in the fourth quarter. This also happens to be the time when the biotech market is bullish seasonally.

Biotech had a good year in a choppy overall 2010 market, with the NYSE Arca Biotech Index up 15.3% year-to-date (YTD). Selected molecular diagnostics stocks have fared well YTD with GenProbe (GPRO) up 12%, Illumina (ILMN) up 50% , and Sequenom (SQNM) up 44%.

Stock Watch: Looking at Our Picks

Wed, 18 Aug 2010 10:54:04 GMT

Let's catch up on many of the public companies and stocks we've been following:

Notebook Dump: Tech Thoughts, Trends, Rumors

Tue, 17 Aug 2010 11:38:32 GMT

After months of talking to smart people and taking notes, my latest notebook is filled. Usually what I do at this point is read back through the whole thing to see if there are any nuggets that I missed or forgot about.

Why not just dump it straight onto the Web? This is stuff that real people are saying in the real world. For your pleasure, here you go:

News Brew: iPhone 4 Goes to China

Tue, 17 Aug 2010 11:15:18 GMT

Is there a more explosive economic concept than combining iProducts with China? Didn't think so. In that vein, MarketWatch reports that China Unicom starts to ship iPhone 4 in China next month.

Our mind is boggled by the concept of hundreds of millions of frenetic Chinese citizens roaming the fastest growing country on earth clutching iPhones and iPads.

On to the rest of the news:

News Brew: Dell Ponies Up for 3Par

Mon, 16 Aug 2010 09:30:22 GMT

Dell is making a big move into the data storage market with a $1.15 billion all-cash deal for 3Par Inc. It comes at an interesting time, as 3Par's growth and share price had recently slowed and it is still losing money. The offer is an 86% premium to 3Par's closing price Friday of $9.65

The move shows Dell has an interest in moving outside the commoditized world of PCs and comsumer electronics and into higher margin data-center products. 3Par specializes in building large storage arrays for corporations and data centers which can be "virtualized," or partitioned so that the system can handle data from many applications at once.

At any rate, it's paying off big for 3Par shareholders this morning with the stock indicating it will trade up nearly 85%.

Hulu is said to be preparing an IPO that would value the company at more than $2B (New York Times).
Japan's economy is stuck in its tracks again. And theoretically, that means China is now more powerful (Bloomberg). Bullish on Moo-shu, bearish on Sushi?
Want a 4.4% mortgage? Good luck, says Fortune.
China's currency fell to a seven-week low agains the U.S Dollar (Wall Street Journal). Remember all that noise about them strengthening the Chinese currency?
This is what I want for Christmas: A Ferrari simulator (Physorg.com). Scratch that, I want a real Ferrari.
Facebook is buying Chai Labs for $10 million (VentureBeat). Here's a fun fact: it was founded by a former Google executive.
VCs and Super Angles: The War for the Entrepreneur (TechCrunch). Hmm, a bunch of rich arrogant people beating each other to a pulp. Sounds fun.
Tim Ferriss thinks he has a way for you to read 300% faster (Tim Ferriss blog).

Are Net Neutrality Fanatics Being Naive?

Fri, 13 Aug 2010 10:39:53 GMT

The "Net Neutrality" debate has taken a interesting turn this week, triggered by Verizon and Google's joint statement to move toward more tiered services on the Internet.

Here's where I am on net neutrality: It's not black or white. It's gray. Yes, we need to preserve an element of freedom to access applications over broadband. But also, the definition of net neutraility needs to leave some wiggle room to help telecom and media companies roll out some newer premium appications that make money.

I think the recent developments are actually exciting, because there is now a catalyst for change and the debate is out on the table. Verizon and Google getting together is kind of like the executives of the Boston Red Sox and New York Yankees coming to the table on a stadium-sharing deal. But this shows how crucial the issue is, if two of the most powerful corporations in the world are willing to come to the table to talk about it.

[img:/assets/10/0813/1241.500]

As the net neutraility fanatics grab their pitchforks and fire up their blogs, ready the roast the big evil corporations that are trying to swipe away their YouTube Internet, they're being naive if they think things can stay as they are. Stuff's gonna change.

News Brew: Oracle vs. Google -- Battle of the Titans!

Fri, 13 Aug 2010 09:35:42 GMT

Oh, this is fantastic, Oracle is suing Google. Larry Ellison vs. Eric Schmidt -- the Alpha Male vs. the Science Geek. This is going to be very interesting!

Oracle says in a press release that Google "knowingly, directly and repeatedly infringed Oracle's Java-related intellectual property." What's interesting is that it involves Java technology, which Oracle acquired when it bought Sun Microsystems earlier in the year. Hmmm, did Oracle lawyers know something that Sun lawyers didnt?

I'm sure you'll be reading more about that in the days ahead. On to some more news:

IBM is buying software company Unica for $480 million (ZDNet). Unica helps retail sellers target marketing efforts and predict consumer behavior. I bet they can't predict my behavior.
Sequoia is backing Airstrip, a software company that makes mobile patient monitoring applications (VentureBeat).
WePay raises $7.5 million for group payment systems (TechCrunch).
Retail sales rise less than estimated (Bloomberg). Hmm, just a theory here, but does that mean everybody spent their tax refunds?
China mudslides kill more than 1,000 (CNN).
Russian fire spreads near nuclear facility (Bloomberg). No, they don't mean it's come close to Boris Yeltsin.
Google defends net neutrality plan (PCWorld).
New Google apps extend the cloud (InformationWeek).
Citizen scientists, using their computers in the Einstein@Home project, have discovered a rare star (BBC).
Belgium is looking to get greener -- by liquifying corpses (Greenbiz.com). Ewwww.
Liberals start "F*ck Tea" party compaign (CBSNews). Now, that's kind of funny.

Internet Advertisers in EU May Lose Their Cookies

Thu, 12 Aug 2010 10:24:58 GMT

Quietly, the European Union is moving toward broad privacy tightening of privacy on Internet applications, specifically in relation to advertising.

The European "Data Protection Working Party" is developing rules for online privacy, and one of the more commonly discussed elements of the new rules is the "cookie directive," which would require all opt-in by consumers to accept a cookie.

This, of course, is a big change in the way online advertisers currently track your activity. They don't need opt-in to insert a cookie in your browser.

Coming Privacy Freakout: Ad Industry in Denial

Mon, 16 Aug 2010 10:20:29 GMT

The Internet advertising industry appears to be in denial about the growing momentum behind Internet privacy -- and it should start to prepare for more protection of data through global privacy legislation.

As I noted last week, the European Union is moving toward privacy policies, most notably with the "cookie directive" which would require all advertisers to obtain opt-in to place cookies in user browsers. In addition, we are in the early stages of new privacy legislation in the United States which would introduce tighter Internet privacy.

All of these powerful new regulations are likely to put signficant pressure on Internet media, most notably the ecosystem of ad networks and data exchanges.

Chamberspeak Gone Bad

Thu, 12 Aug 2010 00:36:17 GMT

Something on Cisco's earnings call last night went terribly wrong. In a rational business sense, Cisco made plenty of money, even though they missed analyst estimates: $1.9B in profit and $40 billion in revenue for the first time in the company's history really isn't that shabby.

But something else was going on. The conference call was awful. It did not inspire confidence. Cisco executives bungled words, proceeded with a new "four-part" format as if they were trying to choreograph an opera at the Met, and struggled to explain the business climate. Even John Chambers himself, master of the bullish technology catchphrase, seemed to have trouble elucidating exactly what the problem was.

"We think the words unusual uncertainty are ... a description of what's happening."

Whaaa? Had we been suddenly been dropped into some metaphysical California Yoga retreat? Unusual uncertainty? What is that? That's not the Chambers I know. That's downright whimpy.

Cisco Misscos!

Wed, 11 Aug 2010 16:25:17 GMT

Cisco shares are getting hammered nearly 6% after hours after the company missed targets set by analysts.

The company said in a release that it earned $1.9 billion, or 33 cents per share, in the fiscal fourth quarter that ended July 31. That is an increase of $1.1 billion, or 19 cents per share, over a year ago. But analysts had expected 42 cents in earnings. Overall revenue grow to a record $40 billion.

That's a big miss, especially for Cisco, a company that often beats estimates. Given that it's a technology bellwether and often looked to for guidance on the economy as a whole, it will likely add to pressure on the general market tomorrow.

Internet Privacy War Gathers Steam

Wed, 11 Aug 2010 09:48:40 GMT

The Internet privacy movement appears to be gathering steam and leading to growing paranoia (warranted) among those who have the most to lose: Dozens of venture-backed ad networks and advertising data companies.

What's going on? Well, certainly the Wall Street Journal series on data privacy didn't help. This may be the high-profile media piece that tips public opinion toward the privacy advocates, who have been quietly ramping up their assault on the free-and-easy exhange of Internet advertising data.

What should be scaring the Internet marketing companies: The ideas are starting to gain traction in Washington, D.C. Reps. Ed Markey (D-Mass.) and Joe Barton (R-Texas) recently issued statements that "that the price of consumers' daily use of the Internet increasingly is surrender of their personal information."

At the same time, you have other escalating assaults on the Internet advertising marketing machine. Let me name just a few examples:

Europe is ramping up on Internet privacy, including cracking down on cookies. In fact, the EU has issued on opinion that all behavioral advertising must be opt-in. Why aren't more people talking about this?
The U.S. Senate is prepping online privacy legislation!! (Washington Post)
Facebook's privacy errors continue to boggle the mind (Christian Science Monitor)
Other countries aren't happy with Google's Street View. South Korea recently seized Google's computers in an office raid.
The media is starting to question free-and-easy Internet ad data. This may only be the beginning.
The solid privacy series in the Wall Street Journal woke a lot of people up to reality. Maybe this will start to tilt public opinion in the direction of more legislation?

This potentially huge development doesn't seem to be getting that much play. Over the past few years, the venture capital industry has funded hundreds of ad data and ad network companies, all of them based on the premise that ad data would be freely acquired, exchanged and even traded. One such company is Blue Kai, a company I've followed on this site, which has their entire business model based on the exchange of anonymous ad data. There are dozens more. What happens to companies like that if powerful privacy legislation is passed?

And then we have even a bigger story: What about Google? Imagine what could happen to Google's market cap if the legislators initiate sweeping changes to Internet privacy laws.

This story is currently being underreported and underhyped. If you are in the Internet advertising or media industry, you should watch it closely. It could change your life.

Market Update: Batten the Hatches

Wed, 11 Aug 2010 08:47:28 GMT

Let's see, the stock market rallied while economic data was weakening. Yet bonds were rallying at the same time, and yields have been plunging -- to near record-lows of 2.75% in the 10-year! This was a great dichotomy that had many people scratching their heads. Why would stocks rally and bond yields plunge while we got weakening economic data?

Well, if they were fueling up the helicopters, that would make sense.

Remember the bond market is often "smarter" than the stock market. The plunge in yields has been telling you something. Is it not interesting that the stock market and bond rally continued until the Fed announcement and then failed on yesterday's news? Sell the news, baby.

RightNow Opens Up the Customer Cloud

Tue, 10 Aug 2010 13:31:05 GMT

BIG SKY, MT -- RightNow Technologies (Nasdaq: RNOW), a provider of customer-service software, today launched an ambitious new platform to open up the way customer service applications are built "in the cloud."

With the new "Cloud CX Platform," RightNow is honing its focus around improving customer experiences across the Web. With so much marketing hype and confusion built around "cloud computing," this is an important expansion of RightNow's CX (Customer Experience) product that the company hopes will help differentiate itself in the larger cloud services market -- basically any software than can be sold as a service (Saas).

"This is our largest product announcement to date," said Greg Gianforte, CEO of RightNow, at the launch event here this morning. "We're exposing our cloud platform to our customers."

Marketo En Fuego: Close to $20M in Sales

Tue, 10 Aug 2010 08:37:29 GMT

Service-as-a-software (Saas) company Marketo is riding the trend of real-time analysis of customer behavior, making it one of the fastest enterprise software companies in the venture market and a solid IPO prospect for 2011.

The company, a startup founded in 2006, recently surpassed 600 customers in July. Marketo’s revenue is approaching the $20 million level, based on estimates from company sources that the average annual sales per customer is in the $30,000 rage. While the company is not yet profitable, it looks to be a solid IPO candidate for later in 2011 or 2012.

Zero Hedge & Nanex Confirm How HFT is Corrupting Markets

Tue, 10 Aug 2010 00:01:00 GMT

Still wondering why the market has such bizarre action? Why the Mom-and-Pop investor wants little to do with it? Wondering if fear of Flash Crash II runs high? Look no further, High Frequency Trading (HFT) has been indicted in full.

The blog Zero Hedge, one of the most cutting-edge and informative places to get inside knowledge on how the market works, has been pointing to anslysis from Nanex, a market data provider, on how HFT is corrupting markets and trigger May's "Flash Crash." It paints an incredibly disturbing picture of a dysfunctional market rigged by crooked robots.

I won't reprise the entire analysis -- you can wade through the orginal posting on Nanex discoveries yourself, and it's worth a look if only to see the fascinating and bizarre charts. But I can summarize it: The markets have run amok with diabolical "quote stuffing" programs that try to mine holes in the market system and fool other computers and markets into coughing up stock quotes at absurd prices.

Jodie Fisher: Who Is She, and Did She Do Porn?

Mon, 09 Aug 2010 12:11:21 GMT

There is never a dull moment in business scandal world, and the journos and bloggers are being kept very busy by this Mark Hurd story. But let's get down to the most important questions: 1) Did they have sex and 2) Was she ever a porn star?

I'm speaking of Jodie Fisher, the Hewlett-Packard contractor and "actress" which led to the demise of Mark Hurd, who resigned as the company's CEO on Friday following his having falsified expense reports that involve her.

First question: Did they have sex. Oddly, all of the news reports say no. Okay, but I'm real skeptical. It's hard for me to imagine this being a full-blown "scandal" without there being a little more than some aggressive courtship and falsified expense records.

News Brew: The Hurt's on HP's Hurd

Mon, 09 Aug 2010 11:42:48 GMT

Well, what's more important -- a generous severance package or avoiding being disgraced by a sketchy expense-account scandal involving a sub-contractor that happens to be a reality-show actress? That's the moral balance former HP boss Mark Hurd is contemplating this morning.

Hurd resigned on Friday after the Hewlett-Packard board had decided he had broken company policies by falsifying expenses and conducting a personal relationship with a contractor named Jodie Fisher, a former "actress" (yes she has been in porn) and a reality TV contestant. Meanwhile, Hurd's severance package could reach $40 million, reports CNBC.

Pretty weird. Pretty creepy, and I imagine it will only get more so. Here's some other goings-on in the news:

Skype files to raise $100 million in an IPO (Bloomberg). The phone calls might be free, but the investment bankers won't be, I'm sure.
Naomi Campbell took blood diamonds from a brutal dictator. She also flirted with him. Mia Farrow is testifying against her, saying she lied about it (ABCNews). I just find this story fascinating. Maybe Mark Hurd is involved as well?
Yet another Black Swan event: Tiger Woods now sucks at golf (WSJ). He might not even make the Ryder Cup.
Apple's executive in charge of the iPhone has left the company after only one year (PCWorld). Yeah, but how weird is it that his name is "Mark Papermaster"? Is he related to Chris Moneymaker?
Is Net Neutrality Socialism? (PCWorld). Some broadband apps are more equal than others.
A giant ice-sheet is breaking off a Greeland glacier (BBC). I don't know if y'all saw "Day After Tomorrow," but I think that means it's about to get really cold, before it gets really hot. Or something. As long as it doesn't involve Randy Quaid playing a scientist again, I'm cool with that.
Needham says AAPL will go to $375 (Macnn). But can they do it with out Mark Papermaster?
Why do people hoard (Time). I'm glad we have those serious journalists over at Time to answer these important questions for us.

Slip, Sliding Away: Google's Superpoke!

Fri, 06 Aug 2010 12:02:09 GMT

It's Friday, so rather than do any real work, I've been soaking in the news, networking, and catching up on all the gossip surrounding the developing sale of Slide to Google for some $182 million + employee retention bonuses.

Slide, you say? What's that? They make "casual games," which is Silicon Valley speak for: goofy cheap stuff you can build quickly then flip. And what's the big technology innovation Slide will leave the world for $182 million? Superpoke! -- the Facebook app. Yipppeeee! In 10 years will anybody give a damn what Superpoke! is?

The gossip is juicy. Credit where credit is due: TechCrunch had a huge scoop here, digging up the story before it was announced and even publishing the amount that everybody will make (or not make) on the deal. Judging from chatter on various message boards, the top employees at Slide make out well but the great-unwashed -- pretty much everybody on down the line below employee #10 -- didn't make diddly.

News Brew: Jobs, Yoko Ono, and the iPod

Fri, 06 Aug 2010 09:21:28 GMT

The engine of value creation, economic growth, and mortgage payments is jobs. To build stuff, you still need to hire people. Unfortunately this morning's jobs report was a bit of a disappointment, as private-sector jobs creation fell short of expectations, growing by only 71,000 for the month.

Unemployment remains elevated, with the number of unemployed persons, at 14.6 million, and the unemploymen rate, at 9.5 percent, unchanged in July, according to the Bureau of Labor Statistics (BLS) report.

Where are the jobs? Healthcare, and surprisingly, manufacturing. Healthcare added 27,000 jobs and manufacturing employment increased by 36,000 jobs in the month.

I've been doing my own research in the technology industry, and I will say, I have noticed an uptick in activity lately. Two sources at Internet jobs boards indicated that jobs listings are growing. Individual companies have also been expanding their hiring. For example, take a look at the "Careers" page of Right Now Technologies, a local company I have been following here in Montana. Their listings have expanded to 58 people.

Now, 58 jobs is not enough to counteract the macro trend, but it's clear that there is still growth in innovation markets (hey, I had to find the positive spin somewhere).

On to more of the news:

CNN's take on the jobs market. Before you read this, you have to realize the big headline loss was in temporary Census workers.
Wheat prices are hitting highs on the Russian drought situation. Meanwhile, millions of metric tons of wheat are rotting in India (AP).
Activision Blizzard fell on disappointing results (AP). No blizzard of cash, apparently.
Yoko Ono says the Beatles won't be coming to iTunes any time soon (AppleInsider). As long as they keep Yoko Ono's music off iTunes as well, we'll be okay.
Mixed metaphor of the day: "RIM, Adobe, and Microsoft Grasping at Mobile Straws" (PCWorld). I am trying very hard to imagine what a mobile straw is. Aren't all straws mobile?
All 1,000 studemts at Kearns High School in Utah will get an iPod touch (Salt Lake Tribune). And just in case you don't know how to get some people riled up -- point out that these were bought with stimulus money!
Neither Google or Verizon officials are talking about the latest net neutrality kerfuffle -- the rumors that they're going to do a "deal" for tiered traffic pricing (CNET). Meanwhile, I'm still campaigning for beer neutrality -- all the beer you can drink.
1 million little brown bats have been killed by a disease known as white-nose syndrome (BBC). That's not to be confused with white-man syndrome, which renders Silicon Valley executives unable to stomp their feet in rhythm to soul music.
Japanese social games company DeNA is on track for $1B in revenue (TechCrunch).That's a lot of sushi.
Avere Systems raises $17 million (VentureBeat).

WSJ's "DataGate": Did They Forget Google?

Thu, 05 Aug 2010 12:50:35 GMT

You have to commend the Wall Street Journal for assigning the resources and churning out the investigative pieces as part of the "What They Know" series. But I thought they missed a lot of things.

For example, didn't they forget Google?

The series of articles goes on at length about cookies, with much detail about data aggregation firms such as BlueKai and [x+1], and the way advertisers target you through your browsing. But there wasn't much in depth about the bigtime data machines like Google or Bing and where that will go in the future -- such as location-based tracking and artifical intelligence.

Marketing & Ads: it's the Metrics, Silly

Thu, 05 Aug 2010 11:25:13 GMT

There is a lot of buzz, hype, critical analysis, and downright drivel out there about trends in marketing and ad spending. Some have even asked whether advertising is dead. They're wrong.

Advertising is not dead folks, it has become more vibrant and complex than ever. It's growing in the online world where aggressive metrics and analysis demand instant accountability.

Here's an experiment: Try to go the next five minutes without seeing some kind of add. Ooops, too late, already happened, right?

In the Q4 of 2009, online advertising hit a new all-time quarterly high of $6.3 billion. What's changing about advertising is that its morphing, and the metrics and data used to track it are becoming more sophisticated than ever.

Take the famous "Cog" ad by Honda. Reportedly took $6M and more than three months to develop this high-concept, cross platform viral video ad. It got lots of media attention too:

News Brew: Intel Settles with FTC (As Expected)

Wed, 04 Aug 2010 13:43:28 GMT

Well, who doesn't like to say, "I told ya so?" I certainly do, which is why I'm pointing out that Intel has settled (again) with the Federal Trade Commission (FTC), promising to stop using bundled pricing to keep down the competition. On June 24 we pointed out that a variety of sources were expecting a settlement soon, with a minor wrist slap for Intel.

It has turned into a complete non-event. Investors today reacted with a yawn, as Intel shares in afternoon trading were exactly flat, at $20.71.

In other news:

BP says it has the oil spill solved (Washington Post). Really. No, this time, you should believe them.
Apple rumor mills are already cranking up for the fall, with speculation over the iPhone 5 and iPad mini (CNET). Also coming: iPad Double-mini, iPhoneMiniPad, the iPodPad, the iToilet, and the iToldYaSo.
Why the UAE is done with the Blackberry (WSJ).
ISM service index expanded in July (Bloomberg). Apparently, there was a surge in sales of Big Macs.
Billionaires like Bill Gates and Larry Ellison are pledging more money to charity (WSJ).
Time Warner revenues and earnings increased (TheStreet.com). Just in case it sounds foreign, let's repeat that: Time Warner revenues and earnings increased!
ADP sees slight uptick in jobs (Forbes). Apparently that Big Mac surge forced McDonalds to hire.
Priceline and Electronic Arts helped boost tech stocks (MarketWatch).
Toyota's back with $2.2B in profit (Detroit Free Press). I don't know why I used the DFP link. Mildly sadistic, I guess.
Senators are taking for-profit education to the woodshed (Reuters). Fifteen schools investigated.

Gold Update: Comex Inventories Under Siege?

Wed, 04 Aug 2010 11:13:26 GMT

There has been a remarkable turnaround in gold in the last week, which happens to coincide with the monthly futures roll from the August to the October or December contracts. Eric De Groot says this week's strong moves may be related to physical delivery notices at the COMEX exchange.

De Groot writes on his blog:

"There were unusual movements of COMEX gold inventories on July 28 and July 30 that 1) coincidentally roughly equaled what was needed for the sellers of contracts to meet delivery requirements, and 2) may indicate that unusually large quantities of COMEX gold will be withdrawn by the end of August."

This is a big deal, as it could be the start of the massive COMEX short squeeze that people have been waiting for for a long time. It follows rumors of a run on COMEX silver inventories.

Gold Bears Still Don't Get It

Wed, 04 Aug 2010 09:33:09 GMT

Amazing to me, having followed, traded, and invested in gold over the last 8 years, that there are still so many gold skeptics out there. Like being wrong for a decade isn't enough?

Gold bears have trouble with basic comprehension of the bull market. Primary example is Ben Bernanke, who naively stated before Congress that he "didn't understand" why gold was going up. Why Ben, it's easy: It's because you are creating mountains of debt and paper money. You want some gold coins or burning paper money? What's not to understand?

[img:/assets/10/0804/1007.500]

This morning, Gold is breaking out again into bull territory, the beginning of a new phase that will likely carry it back above $1,300 by year-end. The correction is over.

A China Reality Check

Tue, 03 Aug 2010 12:55:48 GMT

Today's story about garbage threatening the Three Gorges Dam could be seen as a metaphor of all things going on in China. China is huge. It's got a gigantic, expanding economy, which also yields huge amounts of trash, toxic waste, and social pressures.

[img:/assets/10/0803/1335.500]

China is hyped by the mainstream press and many investment gurus, including hedge-fund ace Jim Rogers. Sometimes it reads as if China is the golden growth story. But a lot of this hype is overdone, and ignores many serious problems within both the Chinese economy and political-social landscape.

This doesn't mean I don't like China. It's an incredibly complex country. It has immense cultural and political history, and an a deep culture -- not to mention good wonton soup. But, China's got issues.

The WSJ's "Data Panic"

Tue, 03 Aug 2010 11:18:42 GMT

Apparently the Wall Street Journal discovered over the weekend that companies can gather lots of data about you on the Internet.

I suppose this is their play for a Pulitzer Prize -- a groundbreaking story that exposes the evil of Internet data collection. Only one problem: The Internet -- and financial industry -- has been mining your data for over a decade. And unless you hide in a cave with Ted Kaczynski, you're not going to escape it.

In fact, everybody mines your data. Think of the credit-card companies or your bank. Or Google. They know everything. I like to tell my wife that, "Google knows more about me than you do."

News Brew: Rehab is a Booming Business

Tue, 03 Aug 2010 10:36:01 GMT

At the Rayno Report, we are always looking at hot new growth trends. Why not rehab? Charlie Sheen and Lindsay Lohan are doing it.

Now, I haven't done much research on it but I don't think there are too many publicly-listed rehab plays. Maybe there is a private-equity rollup in there somewhere.

What we really need is rehab for Washington D.C. and Wall Street. Now, that's a great idea! Can you see all the Federal Reserve officials, Senators, and Goldman Sachs bankers doing Yoga in California with Lindsay Lohan? Hey, it worked for Michael Milken.

Okay, onto more news:

Pfizer beats the street and its stock-price hiccups (Reuters). Gets my award as the most boring blue-chip of the last ten years. Maybe it's time to buy that 5% divvy?
Meanwhile, when's the last time you heard about Pfizer and Proctor & Gamble both listed in the WSJ as "Hot Stocks" (WSJ)?
For those who think China's now a preeminent global leader: China's Three Gorges dam is imperiled by islands of garbage (Reuters).
Blackberry threatened by a Gulf states ban (BBC).
Federal government declares Gulf Spill the "worst ever" (CNN). No report on what they think about Charlie Sheen's shenanigans.
Pending home sales decrease 2.6% (Bloomberg). Hmm. People are buying houses. Shocking, isn't it?
Blackberry is introducing it's new touch-screen phone today (Bloomberg). No word on whether you can use it to call Saudi Arabian intelligence officials.
Remember when the U.S. Dollar was a piece of trash? Well, that's back again... (WSJ). I will trade you dollars for rubles.
Is Bing outmaneuvering Google? (CNN).
Corning is trying to bring back "Gorilla glass," a product from the 1960s (AP). Can you call something 50 years old innovation?

Synaptics: Good Play on Tablets, Touch

Fri, 30 Jul 2010 12:30:14 GMT

A great why to find advantageous companies is to look at those driving key technology market trends and generating good business results when the rest of the market is struggling. This story fits Synaptics, the touch-interface specialists, perfectly.

Synaptics makes human interfaces (mostly touchpads and touchscreens) for a variety of PC and smartphone devices. Big customers include Dell, LG, Ericsson, HTC, and Sony. The company has grown fast, roughly doubling revenue and earnings since 2007, at a time when the economy has been dark, at best. During this time, the stock price has been volatile, but largely flat, and the stock price relative to earnings has gotten cheaper and cheaper.

[img:/assets/10/0730/1253.500]

The company announced earnings yesterday, reporting net income of $19.3 million, or 54 cents a share, compared with $12.4 million, or 34 cents a share, a year ago. Synaptics earned 70 cents a share. Revenue hit $145.8 million, a ries of 27% over last year.

Traders: Data Center Addicts, Too

Fri, 30 Jul 2010 11:13:08 GMT

Interesting post on Themis Trading which I picked up via Zero Hedge on the trading investment in data centers. Equity firms spent $1.8B in data centers last year, wow!

The only problem with this trend? Programmers are getting gypped:

"According to our buddies at the Tabb Group, equity firms spent $1.8 billion last year on data centers; half of that total came from sell-side shops. But even though they are spending tons of cash on the infrastructure, they are not exactly doling out the cash to their programmers."

Source: Themis Trading.

Market Update: Chop Suey

Fri, 30 Jul 2010 08:52:30 GMT

Trying to trade or game this market? Be careful, you can get your head ripped off. That being said, I believe the downtrend has now resumed and that the market is currently a downtrending market.

I expect we'll revisit sub-1,000 on the S&P again -- more likely even sub-900 -- before the federales start fueling up the helicopters for another money drop. I'd buy the market on a 200-point S&P drop Reasons why I remain negative on the market:

CEOs: Please Buy Stuff

Fri, 30 Jul 2010 08:19:07 GMT

Is leadership finally starting to lead? CEOs and corporate executives, who lead our business climate, have been victim of the same cautious and negative thinking as consumers and investors for a long time. But they may finally be emerging from the psychological funk.

The last few quarters have shown a capital-spending led recovery. Companies are sitting on record piles of cash and free-cash flow, and they are finally starting to invest. This is an important trend that show business leaders are finally finding the will to invest.

This would be a huge trend reversal, if it holds. What's interesting about cash and capital spending, as you can see in the chart below, is that it is not a recent trend established in the last recession. Companies have actually been decreasing their capital spending for the last ten years.

[img:/assets/10/0730/0834.500]

Let's face it, the economic engines won't get humming along until executives start getting a little more confident and start building new things, buying equipment, and hiring people. The equipment buying is starting to happen, which hopefully means the jobs are next. Jobs will be where its at. In fact, there is evidence that business leaders are starting to come out of the long slumber.

Bloomberg has a nice article pointing to this topic today.

RightNow: Steady as She Goes

Thu, 29 Jul 2010 10:44:58 GMT

RightNow Technologies, a scrappy CRM company that is starting to become a more serious competitor with CRM giants such as SAP, Oracle's Siebel, and Salesforce, just announced a solid quarter in which they continue to make customer and revenue gains.

The company reported GAAP earnings of $1.4 million, or 4 cents per share, for the quarter. The non-GAAP earnings, which analysts use in their estimates, were 9 cents per share, matching the street view. Revenue grew 20 percent from the year-ago period to $43.5 million. But company executives were careful to stress on the call that recurring revenue stream is growing at a 27% clip.

News Brew: Google Googles Gaming

Wed, 28 Jul 2010 11:49:09 GMT

The bandwagon story of the day is Google looking into creating a "Facebook competitor" by talking with popular online gaming companies (Wall Street Journal). That's funny, I thought Facebook was a social networking site and not a gaming company. Shows you what I know.

That's also not to mention that Google has already tried to "do" social networking, but looks to be failing miserably with Buzz.

The spin in the Wall Street Journal is that by talking to social gaming companies like Zynga, Google is contemplating creating an alternative to Facebook, where many of the social gaming companies are growing like weeds (e.g. "Scott has acquired a semi-automatic weapon to blow you away in Mafia Wars!").

Apple's Secret: The Billing Relationship

Wed, 28 Jul 2010 09:34:03 GMT

Very interesting article by Peter Kafka in AllThingsD this morning about Time Inc.'s frustration with Apple. Apparently Time executives are mystified as to why Apple won't give them control to sell their own subscriptions via an app for the iPad.

Well, I'll tell you why: Apple loves to control the billing relationship. They don't want to give it up. This was the brilliance of iTunes and how they ended up taking control of digital music from the music industry. It was the music industry's huge strategic error. Apple knows that if they control the billing relationship, they control the access to the customer, and therefore can dictate the terms of just about any ecommerce relationship.

Why Time Inc. executives are so "mystified" by this is a mystery to me. Apparently their magazine executives are not talking to executives in the same company that got reamed in the music business. Apple wants to control billing, they want to control pricing, and they want to control the consumer. Period. You want to try to mess with that? Take a hike.

This is one reason why I don't think the iPad will be the "savior" of the media industry that everybody has made it out to be. Unless Apple opens up, and starts sharing a bigger piece of the pie with content and applications producers, it will be the same movie all over again.

WSJ Pay Survey: Barry Diller #2, huh?

Tue, 27 Jul 2010 12:20:32 GMT

The Wall Street Journal pay survey is a fascinating read. My initial impression was surprise that Steve Jobs was only number five. But the thing that shocked me the most is that Barry Diller, the CEO of IACI, is number two on that list, having made $1.14B over the years 2000-1010.

This is egregious. Not because Barry Diller is incompetent. He's a a smart guy, and a media visionary. It's because it's way out of line with what his company did. If you include Expedia shares, an IACI spinoff, IACI shareholders lost 18% over the decade period in which Dillar's compenstation was measured, according to the Wall Street Journal. In fact, IACI alone stock fell 80% during the time that Barry Diller made $1B.

News Brew: Do You Feel Like a Squirrel?

Tue, 27 Jul 2010 11:34:40 GMT

I read somewhere recently that watching the market these days is like watching a squirrel trying to cross the street. It zigs, it zags, you're not sure if it will make it to the forest or get flattened by a bus. Couldn't think of a better metaphor.

How else to explain a market that gives up 8% one month and gains it all back another, only to sell off when consumer confidence numbers are announced? And by the way, how do you explain the fact that the market is at highs while consumer confidence is at a five-month low? The answer: We are all squirrels, zigging and zagging randomly across a economically screwed up landscape, trying to find our way.

If there's any good news to be had, it's that the cost of debt is approaching an all-time low. Greeaaaattttt!!! Go borrow some money (if anybody will lend it to you). Yes, today, the 30-year mortgage yield hit all-time lows. Can you figure it out? I can't.

Onto more of the news:

DuPont profits top estimates, raises guidance (Bloomberg). Well, at least we're still selling tons of chemicals.
So, we're now back to zero (Bloomberg). Is that really something to get excited about?
Apple has a new "27-inch Cinema Display." (Apple) Translation: Apple is selling TVs.
Yes, ComScore is cooking Yahoo's numbers (TechCrunch). And Yahoo is pissed.
BP CEO Tony Hayward -- one of the most popular people in the Gulf States -- is being banished to Sibera (AP).
Among Hayward's parting words, before he heads of to a Siberia oil-executive slave camp (we wish): BP was 'a model of social corporate responsibility' (The Guardian). Can somebody, uh, shut this guy up?
Funnest headline of the day: Blagojevich lawyer may be muzzled (Chicago Tribune). Why stop with the lawyer?
Fannie and Freddie conference to convene (MarketWatch). Lawmakers said to start with a game of "pin the losses on the asshole."
Home prices show stability after modest gain (CNNMoney). All five people who still have equity in their homes said to be ecstatic.

Biotech Diagnostic Stocks Rally

Mon, 26 Jul 2010 13:29:01 GMT

A rally in diagnostics stocks was triggered last week by earnings from for major players. This week, the AACC (American Association of Clinical Chemistry) meeting could add fuel to the fire, when close to 20,000 clinical lab professionals and over 500 exhibitors gather to discuss key industry developments.

As of mid-morning trading, many diagnostic stocks are up 2%. Here is a financial summary from last week's earnings announcements:

		7/26/2010	2010
Company	Symbol	P $	Q2 Rev $	Q2 EPS	PEG	P/S	Sh.Equity $
Cepheid	CPHD	16.5	49.6	-0.03	n/a	4.8	137
Immucor	BLUD	19.3	82.9	0.3	1.27	3.87	439
Meridian	VIVO	19.5	33.9	0.16	1.72	5.4	139
Neogen	NEOG	28.3	39	0.2	1.66	3.8	153

Among the topics that will be covered in Plenary Sessions at the AACC are: Biomarkers for Alzheimer Disease, the Changing Healthcare Landscape, Stem Cells, Inflammation and Cardiovascular Disease and Systems Medicine (P4).

There are several symposia such as Personalized Medicine and Immunosuppression in Solid Organ Transplantation. Laboratory medicine topics are very broad including diabetes, endocrinogy testing, pharmacogenomics,lipid management and sepsis diagnosis. The conference program is here.

Our focus for the Meeting will be companies in the "Tools and Diagnostics" area as well as hot topics in laboratory medicine. Some players exhibiting in our universe in addition to those four above are: Abaxis (ABAX), Alera (ALA), GenProbe (GPRO), Luminex (LMNX), Quidel (QDEL), SeraCare (SRLS) and ThermoFisher (TMO) .

Rod N. Raynovich is the principal with Raygent Associates, a biotech consultancy, as well as a regular contributor to The Rayno Report.

What Happened to Calix Shares? R&D Spending.

Mon, 26 Jul 2010 09:35:59 GMT

Calix shares got hammered pretty hard on Friday after the company issued weak earnings guidance on the quarter. But investors might have been panicking about a whole lot of nothing.

In fact, more intrepid investors might look at why the earnings forecast were down: More R&D spending, possibly related to more big customers. But on Friday this did not matter, investors were in no mood for optimism. The earnings started out well enough: The company announced record revenues that were up 50% from the year-earlier period. In the pre-market, shares were up 10%.

Then the conference call came. The company gave revenue guidance of $70-$75 million and said earnings would only be in the 4 to 8-cent range. Most analysts had earnings of 14 cents or so. Most analysts were also expecting $80 million in revenue.

Why the NYT is Competely Out of Touch

Sun, 25 Jul 2010 12:32:07 GMT

It's official, the New York Times has completely lost the plot. In a world racked by recession, a massive oil spill, financial fraud, and historic levels of debt and wealth inequality, the most popular article today on the Website on the bible of the "liberal media elite" is "36 Hours in Florence."

Yes, Florence. How refreshing! And symbolic. When the world is melting down in fianncial disasters and toxic sludge, why worry when you can sip some Brunello. This says it all about the New York Times.

That piece is followed quickly in the queue by Thomas Friedman's latest piece of hypocritical liberal 'tude: "We're Gonna Be Sorry." Thanks, Thomas: Another short-on-substance, 1,000-word diatribe about looming dangers of greehnous gas, mailed in from his own carbon-spewing 11,000-ft. mansion. Memo to Thomas Friedman: Shut down the AC in your West Wing, and you might do more to stop global warming.

Tech Earnings Winners & Losers

Fri, 23 Jul 2010 10:37:35 GMT

Tech earnings reports are rolling in like Budeweisers in a NASCAR infield, and we've got it covered. What's striking is the range of results, from earnings bombs like Netflix, and Amazon, to solid efforts from blue chips Apple and Microsoft.

Here's our recap of the Winners and Losers of earnings season:

Calix Breaks Out on First Earnings

Fri, 23 Jul 2010 09:20:53 GMT

Broadband equipment maker Calix is rallying on its first post-IPO earnings release, after it announced that revenue increased 50%.

The company announced revenue for the second quarter of 2010 of $71.7 million, an increase of 50% from revenue reported for the second quarter of 2009 of $47.8 million. It also booked a GAAP net loss of $3.2 million, or pro forma $(0.09) per share, compared to a GAAP net loss of $8.8 million, or pro forma $(0.33) per share, reported for the second quarter of 2009.

In the pre-market, the stock was bid at around $11.75, which would be a 10% gain over yesterday's closing price of $10.80.

[Editor's update: Though the stock initially rallied, it later sold off on the conference call when the company issued weaker-than-expected guidance. Read our update here.]

Calix President and CEO said the results were due to gains in braodband sales and that the results represent gaining "momentum."

Calix is the beneficiary of several trends, among them the demand for broadband access brought about by mobile and the expansion of Web and video applicatoins, as well as a boost to the rural broadband market brought about by the broadband stimulus package from the government.

Two Markets: Technology and the Rest

Thu, 22 Jul 2010 10:29:14 GMT

One thing becoming clear in as the volatile stock market marches into they unknown world of bank stress tests, serious government intervention, and bank roulette -- technology is set apart from the rest of the field.

Many mid-to-large technology companies are well capitalized, cash-rich, and profitable. This means they can simply power through the economic doldrums, generate a large cash stash to reinvest through either acquisitions or R&D.

Below is a list of cash-rich technology companies. What will they do with all this money? My guess is that eventually, acquisitions will be on the docket.

Just for chuckles, I screened for stocks with more than $1B in cash. Below is what I got:

Some Thoughts on Bernanke

Wed, 21 Jul 2010 16:26:38 GMT

There has been a massive amount of attention focused on Fed Chairman Ben Bernanke's testimony before Congress today. The testimony lacked any new large developments. However, we did glean more insight into his thinking and what it means for the American -- and global -- economy.

My macro opinion of "the economy" is that it is being held hostage by debt and uncertainty. For too long, our financial markets have focused on government largesse, policy moves, and debt funding to drive growth on Wall Street. Unfortunately, this is not what the real economy -- "Main Street" -- is all about.

The economy cannot be controlled by Ben Bernanke and the federal government. You see that now when 0% interest rates are doing nothing. That is because for too long, the economy has been fueled by financing and easy money that drove Wall Street bonuses and the debt bubble. As we saw, the more debt we create, the more we borrow from the future.

News Brew: Goldman Goes Down

Tue, 20 Jul 2010 10:53:03 GMT

Just when you thought Goldman was a rigged, unstoppable money-printing machine, the bank's profits fell 86% in the first quarter of 2010, missing estimates badly, as it settles with the U.S. government for a half-a-billion-dollar fine.

Did you really think Goldman was that good? Or did you think they were just a bunch of proprietary traders playing with free government money. It would be interesting to see what Goldman's profits would be if they had to borrow at 4% like the rest of us, instead of the 0% gift from the U.S.A.

In other news:

Here's an update on the oil spill (AP). Now there's seeping. When will it end?
Five things to watch on Appl's earnings (Macworld). Will you be able to hear Steve Jobs on the conference call or will you get disconnected?
Home construction sinks again (AP). Shocking, isn't it?
Nokia-Siemens has won a $7B contract with the LightSquared venture (Reuters). That's a lot of bandwidth.
Great story: Social networking sites are as annoying as cable companies (TechCrunch). That's pretty annoying.
Amazon says its selling more e-books than hardcovers (Wall Street Journal).
Top 30 Android apps for 2010 (PCMag).
The mysterious Facebook claimant has a few questions to answer (Bloomberg). My question: Who the heck are you?

What's to Like About the S&P Chart? Not Much.

Thu, 15 Jul 2010 13:59:12 GMT

The other day I ranted on the many opinions of the economists. Everybody has an opinion. What's my opinion on the market? The S&P chart stinks.

The market action fits almost exactly the technical picture I expected: A rally to 1100 on the S&P might run out of steam and reverse. This is exactly what happened to the last rally, nearly a month ago, for those of you who forgot: We had a rather violent bounce of 100 S&P points that failed.

Today, like clockwork, the rally is starting to weaken. Don't listen to the pundits on TV telling you earnings matter. They don't. The market is marching to the beat of a different drummer.

We remain in a violently chopping, downtrending market that is switching direction roughly once per month. If you are an investor, stay away. If you are a trader, make sure you can switch teams quickly, as it appears to me the S&P may be starting another rollover. We topped out almost exactly at the top of the channel carved out by recent descending highs and lows. See the chart below to see what I mean:

[img:/assets/10/0715/1413.500]

Keep in mind, if you have been trying to jump on rallies or jump on bear raids, there's a high risk of a violent reversal. A post on Zero Hedge encapsulates this very well. The data below shows you that a 6% rally is just as likely to be followed by a 6% selloff, and vice versa.

[img:/assets/10/0715/1414.500]

What's really uncomfortable about this is how perfectly the market has alternated between aggressively rallies and vicious sell-offs -- a month up has been followed by a month down (often bigger) each time. I think if you are trying to pick stocks in this market you certainly need to do it carefully. If we were all geniuses, we would buy cheap stocks at the end of the selloffs and then put some hedges in after these 6% rallies. Or you could just sit on a lot of cash and watch the hedge-fund computers chew each other up, which is what appears to be happening to me.

What's my course of action? I have just re-initiated a small S&P short and bought a few index puts to hedge my smallish stock positions. Do I feel confident at all that this will work out? Not really. But my read on the chart is that we are rolling over again.

News Brew: Apple Under Pressure, BP Relieving Pressure

Thu, 15 Jul 2010 11:45:13 GMT

Funny how fortunes swing. Just a few weeks ago, BP was racing quickly to the bottom as Apple was contemplating world domination. This week, their fortunes have reversed -- if only a bit -- as Apple confronts antenna engineering problems and BP's shares are on the rebound on the promise of an oil cap and/or takeover.

Apple shares were down 3.73 (1.45%) to $249 and BP shares rose .84 (2.3%) to $37.02 in midday trading. Apple will be holding a press conference on Friday, as its antenna problems on the iPhone 4 appear to be expanding.

Read on, for the full news:

An Apple engineer alerted CEO Steve Jobs to the presence of an antenna problem, reports Bloomberg.
U.S. Sen. Schumer has written a letter to Steve Jobs about the iPhone 4 problems (AppleInsider). Dear Steve, my phone's not working. Can you fix it for a tax break?
The antenna problems don't seem to be stopping Apple's rollout of new products -- an 11.6-inch MacBook and new iPod Touch are on the way (DigiTimes).
Here's some fun: A writer says the Droid X self-destructs if you try to modify it (MobileCrunch).
If the Droid X is a big success, Verizon may not need the iPhone, says the New York Times. Somehow we doubt that.
The Pentagon is running out of funds (Reuters). Soon to be downgraded to a Triangle.
Manufacturing data bad = stocks down (Bloomberg). One question I've always had: If the stock market is "forward looking" and "discounting," why can it react so violently to news?
Billionaire Carlos Slim is digging for gold in Mexico (Bloomberg). Funny how even Billionaires want to find more money, isn't it? I mean, I'd hit the beach after the first $2B.
BP says it's repaired the cap on the well and a test is proceeding (New York Times). We can only hope this doesn't end in another disappointment.
I've seen lots of folks distributing the "Methane Bubble Doomsday" story on the social networks. Other journalists appear to be debunking it. Don't believe everything you read on the Internet, folks!
Thierry Henry has retired from International football (WSJ). All washed up, at 32 years old, apparently. Hello MLS!
I just don't know what to think of this headline. What do you think? Woman With World's Largest Breasts Fights For Life.
2.5 million muslims are threatening to quit Facebook (tnerd).

Innovation Succeeds: Growing in the "Great Recession"

Wed, 14 Jul 2010 13:44:24 GMT

Just because an economy is crummy, or just sub-par, does not mean you cannot make money. Plenty of companies have proven that innovation can create value even in a down economy.

This was a fascinating topic to me in the earlier part of the last recession as I watched Google and Whole Foods Markets climb steadily during the recession of 2000-2002. If you think about it, these were very strong companies that created lots of value, jobs, and profits during a period in which the economy was stagnant or shrinking.

What about now? Regardless of the worst economy in 80 years, there are still opportunities.

To give you some examples, where are some more ways companies create value in a down economy:

Providing a technology that performs a task more efficiently, better, and cheaper. This is a basic goal of technology innovation: Give your customer 5X the power at the same price, then they buy a product. Some examples I see of companies doing this include Riverbed (RVBD), in enterprise networking, CREE in LED lighting, and Western Digital (WDC) in digital storage. All three of these companies have grown during the "Great Recession."
Scientific discovery in healthcare. A scientific discovery can create value no matter what the macro economy is doing. Many biotech companies are still booming and creating value, regardless of what the economy does. This is because they can make discoveries that create new markets out of thin air. Some quick examples: Qiagen (QGEN) develops new test for human papillomavirus -- its stock us up 50% in five years. Illumina (ILMN) has outstepped the competition in sequencing genes. In five years, its stock is up 500%, compared with the S&P being down in the single digits.
Providing a high quality product and brand. Markets are constantly choked by competition, but if you can consistently provide high-quality product that gets consumers excited, you will take market share and grow your brand. Some great examples of this are Apple (AAPL), Green Mountain Coffee Roasters (GMCR), True Religion Apparel (TRLG), and the Intercontinental Exchange (ICE). All of these companies have grown in the last five years. In fact, Green Mountain tripled revenue in the years 2007-2009, and ICE doubled reveune from 2007-2009.

Adtran Ramps on Connectivity Buildout

Wed, 14 Jul 2010 13:09:41 GMT

One of the themes we've been following here is the buildout in more telecom connectivity -- whether it be Ethernet connections or all those data connections to mobile-phone towers -- and Adtran's earnings appear to bear that out.

The Alabama-based networking and telecom equipment company handily beat analyst estimates, announcing quarterly Earnings Per Share (EPS) of .44, whereas consensus expecations were for .35. The stock was trading up 7% -- about $2 -- to $30.90 in midday trading.

Morning Market Update: Don't Get Fooled Again

Tue, 13 Jul 2010 12:06:30 GMT

This morning I woke up and flipped on the computer and my market-monitoring screens to find a sea of green. Everything up: stocks, commodities, gold & silver. Then what happened? My music player, in shuffle mode, queued up the Who's "Don't Get Fooled Again."

Funny. Coincidence? I don't think so. Roger Daltry is onto something. It would be easy to get lulled into a newfound sense of complacency if you didn't consider that just a month ago, the S&P rallied from a bottom of 1,050 to 1,116. That was a huge fakeout.

This last rally has now taken us from a low of 1022 back to the current 1,094. Powerful, no doubt. But it's also giving me a funny sense of deja vu. Note that the last rally, in June, was about 66 points in the S&P. The current rally has retraced 82 points of the recent decline, but it's still below June's high. If it's going to fail, it should fail this week. If not, the bulls have a solid argument to get bullish again.

Are the bulls really confident? So far in the last two months or so, the 50-day moving average has turned down, it's cross the 200-day moving average, and we've traced out a lower low and a lower high on a subsequent high. Would that make you comfortably long stocks? Not for me.

Reddit: We're Totally Pathetic

Mon, 12 Jul 2010 14:37:10 GMT

Tired of touchy-feely blogs from arrogant Internet companies? Might want to take a look at the recent post from the Internet sharing company Reddit, in which company officials admit they are totally pathetic.

"We've been kinda bummed at reddit these days. It seems like every week something comes up that slows performance to a crawl or even leads to a total site outage. And we almost never get a chance to release new features anymore."

Huh? You mean, you have trouble running your business and I'm supposed to care? You're a business. You're supposed to figure out how to make money. It's not like you are some starving orphan in Somalia, right?

But wait... there's more:

"The good news is, our traffic continues to grow by leaps and bounds. In July 2008, we served up 51 million pageviews and it took four engineers to support it. Since then, we've added user-created reddits, self posts, sponsored links, self-serve sponsored links, awards, a mobile interface, RSS feeds, moderation tools, layers of anti-spam and anti-cheating code, we've gone open source, and our traffic has grown to about 280 million pageviews per month. But after all that, we still only have four engineers. We're reaching the limits of sustainability."

Um. Okay. So here you admit to "getting traffic," which on the Internet is akin to "seeing cars drive by on the freeway," but you have no idea how to make money from that and run a business. Sympathy level rising rapidly!

Then they go on to metion some experimental (stupiod) ideas, and then they ask readers they're advice:

"As long as we're going to be taking suggestions and money from you guys, we might as well also take the name you came up with: this new program will be called "reddit gold".

How much would you pay for this wonderful opportunity? $10? $30? $∞?

No, seriously, how much would you pay? We have no idea what we should be charging. So for now, we're just going to let you pay whatever you want. You can even just send us a postcard. Visit http://www.reddit.com/help/gold for details"

I'm hoping this blog is some kind of hoax or joke. I really didn't know much about your company, but now that I have read this I have concluded you are the most pathetic, sad company on earth. Good luck to you.

Prechter's Impossible Forecast

Sat, 10 Jul 2010 12:53:49 GMT

Thank you Jason Zweig. I was looking at a way to debunk Robert Prechter's absurd, self-serving prediction of Dow 1,000, when Jason Zweig picked up the baton and took it apart about as well as anybody, in his Wall Street Journal column.

Now, I'm as bearish as the next guy. But I'd be buying Dow 6,000 pretty aggressively. It'll never get to 1,000. Precter's apocalyptic forecast is clearly a publicity stunt, probably designed to sell more research from his company. The New York Times turned Prechter's obvious (effective) marketing ploy into a major feature story, without any critical analysis. That's where Zweig's analysis comes in.

When I first saw the "Dow 1,000" prediction, my first thought was, "What would the earnings of Dow companies have to be to get there?" Zweig effectively describes:

"A 90% drop in the Dow (if the weighting of its 30 companies didn't change) would leave only one of the components—IBM—trading above $10 a share. Alcoa, Bank of America, General Electric and Pfizer would be under $2 apiece, in danger of being delisted by the New York Stock Exchange.

To get to Dow 1000, the earnings of these leading companies would have to fall by a punishing amount—and investors would have to price them at record-low multiples of those ravaged earnings. Take Pfizer: One way it could lose 90%, says Jeffrey Yale Rubin, director of research at Birinyi Associates, is if its earnings shrank by 70% and its stock traded at a price/earnings ratio of 2.3."

As Zweig says, this is pretty much impossible. The entire global economy would have to grind to a halt, and P/E ratios would have to fall to historic lows. The entire population would have to stop buying basic items such as toothpaste, drugs, or gas.

But there's yet another component of impossibility. Where Prechter really goes wrong, other than not even considering the components of the Dow, is inflation. He completely ignores it, just like he's been getting the greatest bull market of the decade (gold) wrong for ten years. In fact, maybe Prechter is making desperate forecasts exactly because it's been so long since he's been right.

The last time the Dow was at 1,000 was 1983. The index currently treading water nearly ten times higher, around 10,000, but not all these gains since 1983 are from organic growth. Much of the gain in the index is due to the perpetual rise in inflation. According to inflation indexes, $10,000 today was worth $4,700 in 1983 in inflation adjusted dollars.

To get to Dow 1,000, not only would the world economy have to collapse, but we'd also have to reverse three decades of inflation with a 50% haircut in the value of the dollar. At the rate the government's printing money now, that does seem pretty much impossible. Zweig is exactly correct.

What if the Economy is Just Boring?

Tue, 13 Jul 2010 13:34:15 GMT

As you scan the landscape of pundits and economists these days, it seems as if there are only two options: Implode in a fiery economic inferno or come roaring back like economies of yore.

Just remember one thing: Economists are often spectacularly wrong.

I've found that if you hear too much chatter about one thing, it's more likely that the opposite will happen. How many times has the economy threaded the needle of non-expectancy, just as Nassim Taleb outlined in his now-famous book, The Black Swan.

Time for Microsoft to Reorg and Focus

Thu, 08 Jul 2010 13:23:20 GMT

Yesterday, I pointed out that it's absurd to consider Microsoft a declining company when in fact it's been making an average of $15B a year in profit and has increased the value of its balance sheet by billions of dollars every year for the past three years, during the worst recession of the past 80 years.

Today, to answer the critics, I will point out what's gone well and what's gone wrong with Microsoft. I'll even make suggestions about what the company should change. I believe the company is coming to a crucial point in its history, and CEO Steve Ballmer needs to make some radical changes.

First off: Microsoft's core businesses are as healthy as ever. Now that it fixed the Windows Vista debacle and Windows 7 is shipping, Microsofts' Windows Division and its Business Division are firing on all cylinders. Consider this: in fiscal year 2009, which ended June 30, 2009, the Windows division made $10B in profit. It has already equalled that in only 3 quarters of business this year. That means when Microsoft announces its earnings later this month it's likely to report year-on-year profit growth of more than 20% in the Windows division.

News Brew: Video & Search, What Else?

Thu, 08 Jul 2010 10:22:15 GMT

Today's headlines are filled with the usual obsessions: bank risks, online video, iPhone's and search.

What I find interesting about today's market dynamics is the dichotomy between Silicon Valley, where everything's gravy and people think it's still easy to get rich -- and the rest of the world, where people are worried about their state or country going bankrupt and making a dime is very tough.

Here's the news for today:

As we predicted a while ago, YouTube would go to HTML5 soon. It has now, with a mobile version of YouTube (TechCrunch).
Fast Company says Twitter now has the world's fastest growing search engine. But Silicon Alley Insider begs to differ, saying the numbers are inflated.
Speaking of Twitter, it can get you in a lot of trouble. A CNN Senior Editor is leaving the company following a tweet in which she praised Hezbollah leader Sayyed Mohammed Hussein Fadlallah. Say that three times, very fast (Mediaite).
It was only a matter of time before we got naked pictures of the "Sexy Russian Spy" (Mediaite). “I found her Russian accent such a turn-on,” says her ex-husband.
Meanwhile, back to the economy. A reader of Jim Sinclair's Mineset has pointed out that the banks being seized by the FDIC had their assets inflated by 20 to 80% (MineSet). Amazing stuff, that is.
Speaking of greedy, lying banks. Yes, the European stress tests probably are a joke (Bloomberg).
"American Dream Elusive for New Generation," declares the New York Times, profiling a recent college grad. And then you read that da guy lives in a "comfortable suburb West of Boston," he's pictured with a nice road bike and a computer, and he turned down a job for $40,000 per year. Shall I play the violin on my small pinky?
They've picked an English ref for the World Cup final (Telegraph). Hmm, it's hard to figure out who he'll be more biased against, the Dutch or the Spanish.
Bond market signals depression, nobody cares (Telegraph).
Pharma giant Merck is closing 16 factilities (WSJ).They just don't make drugs like they used to.
Greece "Paralyzed By Strike" ahead of key pension vote (WSJ). Let them eat Souvlaki!
Experimental solar aircraft makes a historical overnight flight (BusinessWeek). Yes -- a solar night flight. I had trouble figuring it out to. Add in the fact that it averaged 26 miles-per-hour, and it becomes a real head-scratcher.
The next iPod Touch will include most of the features of the iPhone 4, says this reporter (CNET). Yes, that means all of the features except for the phone -- which doesn't really work that well anyway.

AT&T: Software Patch Will Fix Data Problems

Wed, 07 Jul 2010 16:31:25 GMT

Following the reports yesterday of dysfunctional data downloading on the iPhone 4 via AT&T's network, AT&T sent us an email today with an offical response -- saying it's a software problem in Alcatel-Lucent equipment that will be fixed shortly.

Here's the response from AT&T:

"AT&T and Alcatel-Lucent jointly identified a software defect -- triggered under certain conditions – that impacted uplink performance for Laptop Connect and smartphone customers using 3G HSUPA-capable wireless devices in markets with Alcatel-Lucent equipment. This impacts less than two percent of our wireless customer base. While Alcatel-Lucent develops the appropriate software fix, we are providing normal 3G uplink speeds and consistent performance for affected customers with HSUPA-capable devices."

The Absurdity of a Microsoft "Death"

Wed, 07 Jul 2010 13:23:00 GMT

It had become popular in the mainstream media to popularize the "dying" of Microsoft. This is absurd. What is common with a "dying" company is a deterioration of its financial position and diminishing assets. Microsoft is a money machine.

I'm not saying that Microsoft does not have challenges. I'm just saying that the negative sentiment against the company does not reflect certain business fundamentals.

Martin Armstrong Predictions Still Look True

Tue, 06 Jul 2010 14:46:36 GMT

Martin Armstrong is a fun character to follow. The famous economic forecaster -- the fomer head of Princeton Economics who is now spending some time in jail for conpiracy to commit fraud -- regularly writes market missives from jail. What's interesting is that his predictions have been uncanny.

For example, look at the chart below. This chart was actually published in 1997. It correctly predicted a major top at the end of the millenium, an interim bottom in 2002, and another top in 2007. It is now predicting the resumption of the downtrend into a major, secular bottom in the 2011/2012 timeframe.

[img:/assets/10/0707/1218.500]

Armstrong is a big believer in Kondratieff cycles -- long-term market cycles that are said to follow and predict long-term human psychology in economics.

Here is a description of his beliefs from a recent New Yorker profile:

"One day, in a newspaper, the young Martin Armstrong came across a list of financial panics between 1683 and 1907. He found that, on average, there had been a panic every 8.6 years. As he read more, he began to suspect that 8.6 was a highly significant number. In the early seventies, Armstrong became a trader and dealer in gold, and began compiling forecasts about commodities and currencies, which he sent out to clients. Over time, forecasting became his business. He constructed what he called an Economic Confidence Model, which he relied on to predict an upturn in the price of commodities in the early days of 1977. It worked."

The legal intrigue and conspiracy theorists behind the famous economic forecaster make him even more interesting to follow. Armstrong was stuck in a long-term legal battle in which he was held in contempt of court for 7 years. He finally pleaded guilty this year and is now serving a 5-year sentence for conspiracy to commit fraud. He regularly published writings from his jail cell which can be followed here.

iPhone 4 Upload Caps: More to Come?

Tue, 06 Jul 2010 12:30:17 GMT

Word on the street is that more iPhone 4 users are complaining about mobile data upload caps (hat tip to Gizmodo). Shocking, isn't it, that as carrier networks are brought to their knees by massive data consumption, that they would try to dial it back? Expect more.

The users are complaining that AT&T is capping the download speeds to 100Kbit/sec in some regions, predominately New York. I have put a call into AT&T to see if they will comment on this.

This is only the beginning. Expect to see more aggressive "traffic management" from service providers as the smartphones proliferate in the market. As we have analyzed in the Rayno Report sponsored whitepaper, "The Data Deluge," mobile data consumption is about to take off with the next generation of smartphones, and the problem of managing data consumption will increase by an order of magnitude.

July 4th News Brew: Explosions or Implosions?

Mon, 05 Jul 2010 10:54:51 GMT

I hope all the Yanks -- and anybody else celebrating -- had a happy July 4th. Yesterday we hosted two riders from the Texas 4000 who were doing a lot more than I will do this month -- riding 4,000 miles from Texas to Alaska to help fight cancer. Kudos to Joel and Shilen and good luck! You can track our friends on the "Rocky Route" here.

In the news, ironically the July 4th festivities were marred by financial pyrotechnics rather than the celebratory kind, as the papers jumped on the fiscally depleted state of the nation -- and the world:

Illinois is drowning in red ink (New York Times). Depressing story. And you thought California was bad?
Huge pension problems in Illinois were not helped by the fact that they turned to the OTC derivatives casino to make back their lost money (Medill).
Bank meltdowns continue (Fed.gov). Yikes!
The recession has now killed of 7.9 million jobs in America (CNNMoney). Hey, I hate to be a downer, but it's reality, bro!
Hey, not everything's bad! Markets are stable today (Associated Press). Maybe we should just keep the U.S. markets closed.
The BP tab is now over $3B (USA Today). That's if you can actually put a price on the total environmental and economic destruction.
The first test of the "superskimmer" are inconclusive (Reuters). Let's all hope it works.
All about Google's $700 million purchase of ITA (TechCrunch). Vertical search is the new deal.
Apple is sucking wonton in China, says Lenovo chief (Financial Times). Hmm. Big competitor trash talks big competitor, says "C'mon over." Why, exactly.
The Kin was the mother of all consumer toy flops, says the New York Times. File under Microsoft's epic flops along with "Bob."

Biotech Buyout Targets: Who's Best?

Fri, 02 Jul 2010 13:11:17 GMT

Bloomberg yesterday started the rumor-mill going that Sanofi-Aventis is on the prowl for a large biotech company, sending many biotech stocks higher on Friday (on a day in which the market is down).

The rumors make sense, as big pharma is constantly on the prowl for solid biotech companies. Let's take a look at the dynamics and which companies would be most attractive from a valuation standpoint. The three companies mentioned cited by Bloomberg as targets include Allergan (AGN), Biogen-Idec (BIIB), and Genzyme (GENZ).

The Wall Street Journal, trying to catch up with Bloomberg, has tossed in Amgen (AMGN), Gilead (GILD), and Celgene (CELG).

Let's take a closer look at all of these stocks to try to see who is the best bet. Biogen jumps out to me the most. Including the most recent quarterly results, Biogen is trading at a forward P/E of 10. It has an operating margin of 30%, return on equity of 16%, and has been growing at a 7% clip. The market cap is $13B.

Google Gets ITA for $700M

Fri, 02 Jul 2010 12:54:36 GMT

After a long, drawn-out bidding process, Google has finally scooped up ITA for $700 million.

Reports of the bidding war for ITA first surfaced in April. From what I understand, Google first approached ITA with a cash affer (in the $700 million) range, but then ITA's Internet travel partners freaked out about the prospect of Google owning their chief travel-software provider. Other companies in the bidding included Orbitz and Kayak.

This deal is going to cause a lot of competitive hand-wringing because Cambridge, Mass.-based ITA, which has 500 employees, supplies travel software to a lot of Google competitors, including Orbitz and Microsoft's Bing. It is widely anticipated to be challenged along anticompetitive lines, though Reuters today quoted law experts as saying it's not likely that the deal will be blocked.

Google's CEO Eric Schmidt says that Google will honor all of ITA's contracts and that its intention is to improve its travel search information, not get into the business of selling travel services.

Look Out Below: Market Cracks Key Technicals

Wed, 30 Jun 2010 16:17:50 GMT

Well, today's fairly predictable late-day puke will give the "technicians" a field day tomorrow.

Here are just some relevant technical points:

Market back below 200-day moving average (MA), which has flattened and looks to be turning down.
"Death Cross": 50-day MA crosses the 200-day MA.
12-month moving average is turning down.
Market made a new 6-month low.
Significant level of support -- 1030 to 1050 -- taken out with conviction.
Market has been rallying on low volume and selling off on high volume.
The tape has generally been ugly, with a bear-market morning rally, late-day sellof mode that was characteristic of the bear market 2008/2009.

Now, I am not a technical black magician, but I do believe that techicals have a way of confirming changes in fundamentals and psychology. The fundamental data has been weakening. A weak jobs report on Friday could be the nail in the coffin.

Technically, all of the above indicates resumption of the secular bear market. It will have all the talking heads, traders, and banks in a new psychological framework.

As they say, at any point in time the market has a way of creating the most pain for the most people and I think the violent reversal off the recovery rally and the contrairian plunge in bond yields has taught everybody that lesson once again.

Mobile App Usage: An Apple and Android Story

Thu, 01 Jul 2010 01:00:00 GMT

Apple and Google Android application development communities continue to flourish while others languish.

This has huge implications for everybody. Growth in application environments often represent key turning points in tech markets. If you think of Microsoft's ascendancy, it was the emergence of the PC (more bandwidth) and the Windows application envrionment which provided an explosion in business applications.

Want another example? The Web and pervasive broadband sparked an explosion of Internet applications. Now a similar thing is happening in the mobile world where an explosion of bandwidth and device power is providing a fertible market for new apps.

What's that mean for the legacy players? It means they are in a world of pain. If RIM and Nokia don't do something soon, their leadership in the worldwide phone market will quickly become a footnote. I continue to believe that Nokia's connection to the Symbian operating system is its biggest liability. As Apple and Android gain steam, Symbian is being marginalized and the longer that Nokia puts all its eggs in this basket, the more trouble it will be in.

Below is an interesting chart from the latest Morgan Stanley report on Internet developments, which I think is a must read.

[img:/assets/10/0701/0936.500|Source: Morgan Stanley]

The explosion of apps in the mobile market is a fascinating, positive development for the technology industry and its implications should not be underestimated.

Morning Market Wrap: A Snoozer, So Far

Wed, 30 Jun 2010 13:05:12 GMT

Time to write up the morning market wrap, before I fall asleep. Kind of a snoozer. Markets are enjoying a small relief rally this morning as no new disastrous news emerged overnight. Data was relatively benign.

The ADP jobs number came out weak, but market digested that. We all know the jobs situation sucks. None of the European banks blew up overnight, and the CDS spreads (an indication of risk) stabilized after hitting new highs yesterday. Euro banks also apparently borrowed less from the ECB than believed, which we are supposed to take as good news.

What to expect going forward? I say, watch the bond market. The fact that bonds hit record highs yesterday, sending the 10-year yield down below 3%, is a big warning sign. This is the trade that has caught everybody -- even the biggest smarty-pants hedge funds -- flat-footed. Yields were supposed to go up, remember? Apparently a lot of hedge funds are being trashed on "yield-steepener" trades (that is a bet that short-term rates do not go up as fast as long-term rates -- i.e. the spread widens), or so says Zero Hedge.

The fact that the yield curve is flattening is surprising a lot of people and does not transmit a good signal about the economy.

In the meantime, it does not look like anything big will happen today. Grab a sandwich, call your mortgage broker about refinancing your mortage at 4.50%, and check back on the market with 60 minutes to go, when all the wild stuff usually happens anyway.

News Brew: Smartphone Madness

Wed, 30 Jun 2010 11:21:32 GMT

If you think about what's happened the last 4-5 years in smartphones, it's truly remarkable. Apple has created an entirely new, multibillion-dollar franchise. Nokia and RIM's dominance have been severly damaged. And entirely new app and OS systems have been developed.

What's it all mean? As we surmised back in January, it probably means more pain for the legacy market leaders -- people such as Nokia, Ericsson, and RIM. Clearly their market-share is eroding, but more importantly they are losing their grips on OS and apps markets. Apps willd drive this market forward, and Apple and Google's Android are leading here.

With that, on to the news, which in the tech world today is dominated by smartphones:

With Verizon rumored to be close to picking up the iPhone, look for them to sell upwards of 12 million (Apple Insider). Boy, Nokia and RIM are totally screwed now.
ZDNet answers your Verizon iPhone questions (ZDnet)
Credit where credit is due: Bloomberg had the original iPhone-on-Verizon story (Bloomberg). The big Bloomie can still rock out!
RIM CEO puts on the gameface, even though quarterly subscribers were weak and clearly the iPhone-on-Verizon story is scary for RIM (WSJ). Rearranging deck chairs, anybody?
RIM is trying to lure developers to its App store (WSJ). Here, kitty kitty.
How to troubleshoot the iPhone 4 antenna problems (BGR). 1) Get out of car 2) Put on tin-foil hat.
Cisco introduced a tablet device! (ZDnet). Picture John Chambers speaking in his soothing tones: "This will really enable collaboration and innovation in the workplace.. " yada yada yada.
Cool international espionage news of the day: A Russian spy worked in the Barclays office in London (Guardian). I love the fact that she had a LinkedIn profile. Think of all your Facebook friends that could be spies!
Market looks pretty snoozy today (MarketWatch). Time for the hedgies to spruce of their end-of-Q marketups and markdowns and then grab a facial. Don't be lured into complacency, becuase the next market facial may be coming.
Wall Street psychology cheat sheet (The Big Picture).
Profiles of "Open Carry" advocates (Time). In Montana, this is not news. My friend pointed out that he walked by a guy carrying a shotgun down the street the other day.

Five Reasons to Stay Negative on the Market

Tue, 29 Jun 2010 10:45:25 GMT

For the past few weeks I have been alerting readers to some negative technical signs in the market, including the development of a "Head & Shoulders" pattern in addiction to a potential "Death Cross."

But is that all? Am I saying sell the market because of a couple eccentric technical indicators for stock-market geeks? No, in fact. Technicals should be used to confirm a fundamental view. There has actually been a lot of confirmation of the technical indicators via fundamental data.

I am still short the market, and I in fact added to that position this morning. Here are my top five reasons why the market will remain weak:

Jobless claims aren't really declining that much. The four-week moving average has only declined by 1,500 claims. In other words, the employement situtation remains weak.

Barry Ritholtz points out in his blog that the Chicago Fed National Activity Index appears to be peaking, and still reflects negative consumer and housing activity.

The Death Cross is here. This reflects a flip in investment sentiment and a growing negative picture in the stock-market technicals.

Mutual fund cash levels recently hit an all-time low. This means that mutual funds have less cash to invest, and potentially more stock to sell.

Head & Shoulders: Never a stock chart to like.

Tesla IPO: Money-Losing Mania

Tue, 29 Jun 2010 10:07:26 GMT

The Tesla Motors IPO is the talk of the town today, but to me it is a bad flashback to the poor IPO practices of the 1990s. The electric car company priced 1 million shares yesterday at $17 per share and it is expected to start trading today.

Tesla doesn't make a dime, and it's still a cash-flow negative entity, bringing back fond memories of the late 1990s when hundreds of unprofitable venture-capital backed firms were floated on the public markets, making entrepreneurs and venture capitalists rich while draining the accounts of millions of unsuspecting investors. A very small percentage of these compeanies ended up doing well. It's a high-risk prospect. This is not an IPO for my taste. When investing in public companies, I prefer companies that actually make money.

But set aside these fiscal details for a moment and consider this: Tesla sells expensive electric cars -- each of which require complex battery packs made up of thousands of cells -- for close to $100,000 each. They are trying to market this product in the teeth of the worst recession in 100 years.

Here are some more facts about Tesla you may want to consider before you buy any of the stock:

The company's loss in the first quarter rose to $29.5 million from $16 million a year ago
Production of Tesla's sedan, which is years behind schedule and is consider the key to making the company money, has slipped again. The big guys, such as GM and Nissan, are catching up in electric vehicle production.
The company will have a market cap around $1.3 billion after it floats.
Venture Beat did some fine work in uncovering that founder and CEO Elon Musk has been having cash-flow issues. Might that have rushed the IPO along?

Good luck, Tesla.

News Brew: iPhones, G-20, and FIFA

Mon, 28 Jun 2010 10:22:30 GMT

Another Monday, another predictable news flow: Apple is selling millions of iPhones, oil is gushing into the Gulf of Mexico, the stock market is falling, and FIFA refs are botching calls in the World Cup.

It would be more fun to be distracted by the World Cup if there were better officiating (On two hand, I can count major, game-changing botched calls I have witnessed). Bloomberg has pointed out that it may now be time to use technology -- can I suggest some eyeglasses?

Meanwhile, Apple's money machine churns along and the G-20 accomplishes exactly nothing. Here's this morning's news:

Apple says iPhone 4 sales have topped 1.7 million already (Apple).
Oh dear. What's Steve Jobs going to do about iPhone sex chat? (Business Insider)
BP says it's now capturing 24,000 barrels of oil per day (Reuters). Of course, this is the same company that once pegged the spill at 5,000 barrels a day.
Elevation Partners -- otherwise known as the VC Firm of Bono -- is putting another $120 million into Facebook (TechCrunch).
G-20 decides that debt is bad, flying in the face of Obama administration policy of running up the tab (Bloomberg). Go ahead, a dare you to name the 19 and 20 countries in the G-20.
A Macallan 50-year-old for $10,000, anybody? (Bloomberg)
Wondering why gold is rallying? Veteran bank-watcher Ambrose Evans-Pritchard says another round of quantitative easing is on the table (Telegraph).
Senator Robert Byrd, 92, is dead, and there's a scramble on to figure out how he will be replaced (Wall Street Journal).
England gets a good kicking from the press after its demoralizing 4-1 loss to Germany (Guardian).

California: "Screwed Up and Dysfunctional"

Fri, 25 Jun 2010 09:55:39 GMT

The situation in "Greece by the Pacific" -- a.k.a California -- is truly fascinating. The state filled with Hollywood actors, Porsche-driving venture capitalists, and mega-yacht owning entrepreneurs is in the middle of a financial meltdown, and nobody seems to care.

The fiscal situation continues to devolve, yet it's amazing the complacency and nonchalance you encounter in discussions about the world's 8th largest economy.

I think CEO Bob Nichols of Windward Capital Management Co. in Los Angeles nails it when he calls it "screwed up" and "dysfunctional" in a Bloomberg article.

“It’s unbelievable,” says Nichols. “How do you screw up a place with the growth capability of California? It’s so dysfunctional.”

What Will Intel's Wrist Slap Look Like?

Thu, 24 Jun 2010 12:13:43 GMT

There are wide-ranging reports, including this one from the San Jose Mercury News, that Intel and the Federal Trade Commission are in settlement talks and a resolution may be imminent.

Given the history of the FTC and technology companies, this is not surprising. They aim for settlement and wrist-slaps as opposed to brack-beaking fines, unlike the Euro trade commission, whose goal is often to slow down as many American technology companies as possible with gigantic fines. Intel was fined $1.5 billion by the EU last year.

The basic claim is that Intel used customer rebates and discounts, as well as other tactics, to unfairly compete with competitors AMD and Nvidia.

Gleacher & Company is out with a report today saying they do not expect any big fireworks in the settlement, but rather a consent degree that is already priced into Intel's stock. Gleacher says a settlement could be more of a "tailwind" for AMD than Nvidia.

"The FTC is unlikely to issue a fine in the same way the EU did. It is likely to issue a consent decree, whereby INTC is required to comply with certain practices as outlined by the FTC; non-compliance could result in criminal prosecution," says the Gleacher note, issued by analysts Doug Freedman and Ian Eng.

Overall, Gleacher expects the market to react favorably to a settlement for AMD, negatively for NVDA. It has a favorable opinion of Intel going forward.

Morning Market Report: Soft and Soggy

Thu, 24 Jun 2010 10:55:45 GMT

An analyst I often consult with described this morning's market as "soggy," which is just about the best term I can think of. The Fed did nothing to buoy spirits yesterday, as they downgraded their outlook on the economy, keeping rates artificially low (perhaps forever?).

This morning, equities are trading down. Right now the market is trading on headline news, the regulatory framework in Wasthington, and largely ignoring corporate profits news, which has been positive-to-benign.

Tonight we have big tech reports from RIM (RIMM) and Oracle. Lately the trend has been for the market to sell off on good news, which is indicative of a bear market approaching, so this will be interesting to watch. Remember: it is the reaction to the news not the news itself that matters.

I am looking more at technicals as I believe this is a technical/supercomputer driven market and I continue to believe we are setting up for a "death cross" as the 50-day moving average threatens to crossover the 200-day moving average shortly. I am surprised that more people are not talking about this, as it is a medium-trend indicator not to be ignored. In addition to that, we have formed a large head-and-shoulders pattern in the S&P, another formation that I do not like, especially given the recent action in the market.

In my long-term investment accounts, I am currently largely in cash. In my short-term trading accounts, I am short the S&P. I added to that S&P position this morning. I also re-entered a gold position.

(Disclosure: Short S&P futures, long gold)

iPhone Fanatics Queue Up in NYC Heat

Thu, 24 Jun 2010 09:39:06 GMT

According to recent news reports, it's 84 degrees in NYC, and climbing rapidly. And it's only 9AM. Of course, that doesn't stop iPhone fanatics who are queuing up like mad to get their hands on the new goods.

See below, for some video footage shot and posted to YouTube by BTIG research.

Yes, these people are fanatics. Apple seems to manufacture more of them every year.

In other iPhone news:

Piper Jaffray says 1 million iPhones are likely to be sold in the first 3 days (MocoNews).

A shortage of the devices is likely to frustrate consumers (The Guardian).

Bloomberg puts the tally at 1 million in the first day (Bloomberg).

News Brew: iPhone Mania, U.S. Victory!

Wed, 23 Jun 2010 12:42:16 GMT

Nothing to get a bunch of slathering sycophantic tech journos rolling like a new iPhone upgrade. This morning's news focuses on the rollout of the new iPhone and related upgrade and connectivity issues.

Excuse the brevity, but this morning we were delayed this morning by the important professional business of watching the U.S. World Cup victory over Algeria! Here are the links:

Walt Mossberg: iPhone is "Top of Class." (Wall Street Journal)
Engadget: iPhone 4 is the best smartphone on the market.
If you are shopping for all things Apple, the iPhone 4 is slower than an iPad, says MacRumors.com.
In non-Apple news, how many people would like to be a fly on the wall for the Obama/McChrystal meeting? (Bloomberg). I would!
Sales of new homes plunge to lowest level on record (Bloomberg). But seriously, would you expect anything else? The country is awash in empty, new houses.
Unemployed people are frittering away their free time (Wall Street Journal). This comes from a government study. Better question: is the government studying unemployed people a good use of government-employed people?
The Fed is likely to do nothing (Wall Street Journal). Possibly for another 10 years.
Uh-oh. BP's taken the cap off (BusinessWeek). What will they screw up next?
Scammers were all over the U.S. homebuyer credit, says a watchdog (Reuters).
Adobe was down on earnings of 28 cents per share, up from 24 cents last year (MarketWatch).
Facebook CEO says: We're really gigantic (Guardian).
New meaning to the word, "GOOOOOOOOOOLLLLLLLLLLLLLL!" (USA Today).

Can Google Win With Free? Doubtful.

Tue, 22 Jun 2010 13:42:36 GMT

There is a growing "meme" out there that Microsoft is on the verge of death and that Google will take over the world with free stuff. Please.

I'm actually anti-Free. I haven't even read Chris Anderson's book titled "Free." Don't really feel like I need to read it either. I think free as a business is almost always representing subsidy -- a crutch to gain market share in the eary going. Eventually, if you want a business, you need to move to premium, paid services.

Think of all the free stuff out there, and then try to give me an example of some free stuff that holds the best market position: That is: Highest quality, high margins. I can't think of anything.

Market Update: Dancing on the 200-Day

Tue, 22 Jun 2010 09:41:16 GMT

The equities markets are reaching a critical juncture following a two-week rally off the "flash-crash" bottom. What now? My view is that we are still in the process of forming a rather signficant top, which will be confirmed if this rally starts to fail in the next week.

Much of the trading being done now -- the battles between the large hedge funds and juiced-up High Frequency Traders -- is a technical skirmish over key levels. The market worked hard to recapture the 200-day moving average (MA). This would be a common place for the rally to either fail or bust through in recapturing the bull trend. Another technical level that many traders have their eye on is S&P 1150.

The problem I have with the notion that we could be re-entering a bullish mode is this 1) Volume on rallies has been light 2) The 200-day MA is starting to flatten out, rather than upslope. This is an indication that the one-year-old cyclical bull market is losing some steam.

[img:/assets/10/0622/1256.500]

But here's an even bigger problem I have with the market: It looks to me like we are going to get the "death cross" within the next month. This is a technical indicator that occurs when the 200-day MA crosses over the 50-day MA. At the same time, there is a bearish "head-and-shoulders" pattern forming in the S&P, as marked by the triangle above. Of course this formation would not be completed unless the rally fails here -- but if the rally does fail, that would paint a very bearish picture for the markets.

I realize it's bad to "anticipate" technical market events, but this is just a gut feeling I have from looking at the chart knowing that it's very similar to market charts in 2007. This leaves me extremely cautious and I am now out of most stocks. If we get the death cross, I will have no problem being short this market.

Technicals can be used to onfirm fundamental ideas. And here is a fundamental idea I've been considering for quite some time: the year-long rally from March 2009 to April 2010 was created largely by government stimulus programs and the creation of liquidity by the federal government. Wouldn't it confirm that idea if just two months after they announce the end of many of these federal programs (the buying of treasuries and $1T in mortgage-backed securities), the stock-market rally starts to fail? That would confirm to me that this "steroid market" has been juiced by government money and has little to do with economic reality.

A really economic boom and stock-market rally cannot be built on the Feds artificially lowering the cost of financing -- it must come from actual business growth.

My Neighbor: I'm in All Cash!

Tue, 22 Jun 2010 09:31:36 GMT

I like to chat about the market, with anybody who will tolerate it (I'd say this is about 30% of the public). Yesterday I was out in the beautiful Montana sunshine, talking to one of my neighbors about the market.

I think it's good to get this "man on the street" perspective as much as you can, just to get a qualitative sense of what the individual investor thinks of the market. Here's it in a nutshell: My neighbor hates the market. He's in 100% cash. He scoffs at the notion of the economy recovering. "Recovery? What Recovery!?"Now, he qualified this by pointing out that he is sending his kid to Dartmouth, so he needs to come up with $50,000 in tuition every 12 months, so it doesn't make sense for him to risk a lot of cash in the market.

My neighbor says that he was lucky in that he pulled most of his money out of the market in 2007, because his kid was going to college. So he missed the "great collapse" as he called it. Many of his friends were not so lucky, he points out. Many of them had their nest eggs seriously damaged.

This perspective is important, I think, only because you really don't read about it much in the mainstream media. I think the individual investor feels burned by Wall Street and won't be back as a major player for a long time. This is why the market liquidity remains somewhat thin and is being driven by mostly large hedge funds and institutional players battling each other.

News Brew: Gold, China, and e-Book Readers

Mon, 21 Jun 2010 10:14:45 GMT

We live in a world of well-defined growth markets. These appear to now consist of Gold, eBook readers, emerging markets, and anything manufactured by Apple. If you go to sleep for 5 years do you really think any of this will change?

This morning, markets were driven by the much-ballyhooed news that China will allow its currency to float more freely. This ends a two-year peg to the U.S. Dollar, which many economists and U.S. politicians say has made goods in China unnaturally affordable (take a trip to Walmart, if you don't know what they mean).

Lots of people seem to think that a Chinese currency revaluation is the cure for the world's ills. But trying to derive market direction out of a Chinese currency decision is problematic. Here's why: China only announced that they will widen the band in which the Yuan will trade, which means they will still tightly control it. And past moves have been slow and methodically controlled by the Chinese government.

To put things in perspective, take a look at what happened to the Yuan in 2005 -- it was revalued 2.1% against the dollar, a more powerful move than the one just announced. But if you read this Washington Post story from 2005, you can see how quickly these moves can fade in importance.

More news from this morning's market activity:

The latest government revaluation helps the Chinese Yuan rise to its highest level ever (Wall Street Journal). Waiting for the new movie: A Fistful of Yuan.

U.S. ambassador says China's move will help us get along (Reuters). Yes, until China introduces a $5,000 automobile to the U.S. Market.

Gold hits an all-time high of 1266.50 in overnight trading, before backing off after the New York open (Kitco News).

The stocks analysts like the least performed the best (Bloomberg). Any real surprise here?

Looking for a private suite for your transatlantic flight? No problem. (Wall Street Journal)

Bernie Madoff has allegedly told prison inmates he's got a secret $9B stash (Fox News). Is it held in Gold? Or Yuan? In China?

Abnormal levels of radiation have been discovered at the North Korea/South Korea border (AP).

A large armada of U.S. warships are heading toward the Persian Gulf (Debka.com). That can't be good.

Telecom New Zealand: 10% Div Worth a Shot

Wed, 16 Jun 2010 01:00:45 GMT

I've been poking around Telecom New Zealand (NZT) for quite a while. It first showed up in a dividend stock screen when the dividend was paying about 8%. Forbes' Ken Fisher, who is a pretty good stock picker, recommended it. Now the stock is lower and the dividend is at about ten percent.

What happened? They recently reduced guidance. Then the CFO left. But as the stock goes down, the dividend goes up. This company has generous free cash flow -- somewhere in excess of $150M in 2010, likely. It's got $1.5 billion in debt, but it also has EBIDTA approaching $1B, so it is adequately covering the debt payments and the dividend.

The forward P/E is about 11. Basically, I feel lucky that I waited to buy this stock, because it looked like it was cheap, and then it got even cheaper. But now that it's fallen to a level of about $6 and is paying 10% dividend, which is almost irresistable to me. I think it's worth a shot. After all, we are talking about a telecom services stock in one of the healthiest regiona economies in the world.

With this week's bounce off of $6, the stock could be forming a long-range double-bottom. A buy here with a stop at $5.50 seems like the right thing to do.

[img:/assets/10/0615/1417.500]

(Disclosure: Long NZT)

The Meaning of 4G

Tue, 15 Jun 2010 10:15:41 GMT

I recently penned a column for Light Reading on the arrival of 4G and what it will mean for the large global service providers. I think this is a watershed moment for the telecommunications industry and not many folks seem to be paying attention to it.

The business models of the major service providers are about to change radically -- as they go from a heavily regulated, profitable, "utility" model of landline-phone service to the Wild West of the mobile Web. in the pre-4G world, the bulk of their revenue came from predictable and profitable voice services. In the post 4G-world, they will have to provide larger amounts of commoditized data at a lower price point. The bottom line is that 4G is expensive and their margins on mobile data are much lower than voice.

Not only that, but data traffic will predominate the traffic and revenue on 4G networks. When 4G networks get rolled out in 2011-2012, the delivery of mobile data will increase by an order of magnitude. This will present challenges to them on the cost front.

Here are a few facts you might want to follow:

The global mobile data revenues reached $220 billion and mobile data now contributes 26 percent of the overall global mobile service revenues, according to Chetan Sharma Consulting.
2009 also marked the year when the global data traffic (monthly) exceeded the global voice traffic. In the US, the yearly mobile data traffic exceeded the voice traffic for the first time.
It is expected that 2009 marked the year that mobile data traffic reached a new milestone of 1 exabyte (EB) or 1 million terabytes (TB). By 2016-17, the global yearly mobile data traffic is likely to exceed 1 zettabyte (ZB) or 1,000 exabytes, according to Chetan Sharma Consulting.
Over 50 percent of the world's households carry a mobile device, according to Accel Partners.

You can read the article in its entirety here.

Twitter on the Fritz: Back to Real Work?

Tue, 15 Jun 2010 08:34:16 GMT

Millions of people yesterday had to resort to verbal communication with friends and colleagues in addition to returning to actual, productive work as Twitter was down for several hours. We're not sure, but this may have resulted in a slight, although temporary, uptick in the global economy.

Meanwhile, the techno-pundits are also all over the fact that the Twitter is moving into the geo-location business. Obviously they have to do this, given the popularity of rising social networking company Foursquare.

Now, I'm not a big geo-location guy. Maybe because that's because I'm worried that if I tweet that I'm out of town, somebody will rob my house. Or maybe it's just because I don't want people to know where I am.

The Twitter blog notes that geolocation is especially timely with the World Cup. I'm trying to figure out this spin. You mean, you need the right technology tool to tell people in the office that you are blowing off work to watch the World Cup?

In the interest in geo-location disclosure: I will note to readers that I'm technically on vacation this week so updates will be sporadic, at best. Here's a clue: At some point, I will be checking into a Broadway show, and possibly a beach on the Atlantic.

News Brew: Another AT&T Headache

Thu, 10 Jun 2010 10:37:25 GMT

Can AT&T stop messing up? In this morning news, Gawker appears to have broken the scoop that 114,000 iPads have been victim of a security breach exposing email and iPad IDs.

The security breach has "exposed the most exclusive email list on the planet, a collection of early-adopter iPad 3G subscribers that includes thousands of A-listers in finance, politics and media, from New York Times Co. CEO Janet Robinson to Diane Sawyer of ABC News to film mogul Harvey Weinstein to Mayor Michael Bloomberg," writes Gawker.

AT&T confirmed the story this morning (Wall Street Journal). Just another black eye for AT&T, which is still trying to work out connection issues with the iPhone.

In other news:

Why just focus on bad news from AT&T? They're rolling out 3D coverage of the World Cup with ESPN (Businessweek).
AllThingsD reports that a Wall Street analyst says T-Mobile will be the next carrier to get the iPhone. InformationWeek's Eric Zeman says that's completely wrong.
BP tries to reassure investors (New York Times). No, really, we're not a disaster! We know what we're doing! Really!
Meanwhile, BP's bonds are starting to look like junk (Zero Hedge)
Global markets rally (Bloomberg). Well, you can't go in the same direction all the time. That wouldn't be very interesting.
Six strange iPad accessories (Newsweek).
The HTC EVO is seriously flawed, says TechCrunch.
Far out news of the day: Is the Obama administration looking at a plan to scrap social security? (Washington Post)

Bernanke Needs to Get Tougher

Wed, 09 Jun 2010 11:42:08 GMT

For the first time in a while, I actually watched the Chairman of the Federal Reserve's testimony before Congress this AM. Not quite as exciting, as, say, a Celtics-Lakers game, but it offered a moderate amount of intersting information.

There are plenty of people in the "I hate Bernanke" club, mostly those of the Austrian "rip the lungs out of the market" economic school, but I believe the jury is still out. There is still hope for Bernanke to change his tune, from Mr. Softy to a harder line.

This morning I sensed for the first time that Bernanke was speaking to the markets, acknowledging firmly that the United States could lead the world out of the recession and fiscal crisis -- if it finds a way to address the enormous budget deficits. He even mentioned specifically that he thought markets would respond positively if Congress showed some will to take on the budget deficits.

News Brew: Obama Wants to Kick Ass

Tue, 08 Jun 2010 12:27:18 GMT

You know what's fun? When the president threatens to kick some ass.

President Obama's highly visible comments on national TV are garnering many video and Google searches worldwide, as everybody pitches in on exactly how Obama can kick some ass down there in the Gulf of Mexico, where BP has turned an entire ocean into a toxic waste dump.

One version of the ass-kicking threat can be seen below:

Now, can Obama actually kick somebody's ass? Debatable. But certainly this is a historic moment for the president. When we reached deep into our archives (i.e., many Google searches), though, we did find evidence of other presidents kicking ass. For example, George H.W. Bush (Bush I), said he kicked some ass in a vice presidential debate.

iNews Roundup: Apple's Next Phase

Tue, 08 Jun 2010 01:01:23 GMT

Don't you love the way that Apple dominates the news? Steve Jobs could put out a press release saying he's going to have his teeth cleaned and it would dominate the news flow on Financial TV. Oh really? Who's the dentist? Will this delay a product release?

Yesterday, of course was the release of the new iPhone 4, which had every tech pundit and their cousin covering every angle. For that reason, I'll keep this post short, giving you a few links to coverage and a few thoughts for what it means for Apple.

The main points of iPhone 4:

It's slimmer, .37 inches vs. .45 inches for the prior iPhone (PC World review)
It's got video calling (mirror.co.uk).
It's got a sharper screen. And a Gyroscope (CNN)
Actually, they are calling the screen a "retina display," because its density of 326 pixels per square inche allegedly rivals the human retina. Yeah, right Apple (Tom's Guide).
IOS 4, which includes support for multitasking, iBooks, and other stuff (Mashable).

Okay, so what's it all mean? What's interesting to me is the statement that Apple has made with its last two releases: iPad and the iPhone 4. Have you noticed that Apple and Steve Jobs in particular claim to be "driving industries forward." For example, the message of the iPad as that it will enable the publishing industry to function in the digital world.

But rather than focus on whether or not the iPhone is driving some industries forward I can't help but think how it's driving the telecommunications industry backward. What do I mean by that? It is becoming more evident that the iFranchise is making the telecommunications provider increasingly commoditized and irrelevant.

What's AT&T's role in the iPhone franchise other than to connect the thing to a mobile network and then disappoint users. is AT&T adding any other value at all?

If all of the innovation is coming from Apple, what value are the service providers adding? What does this mean for the future of the mobile telecommunications industyr? Check out the videoconferencing component of iPhone which uses a WiFi connection and could certainly accelerate the trend of Internet communications platforms cannibalizing service provider networks.

Think about that, AT&T: Just look at what's happened to Apple's shareprice when compared to yours. Clearly they are the innovator and you are now the commoditized service provider.

[img:/assets/10/0608/0023.500]

[img:/assets/10/0608/0022.500]

Now, who has derived the most value out of the iPhone franchise?

News Brew: Zuck's a Sitting Duck

Thu, 03 Jun 2010 14:00:50 GMT

Am I the only one perplexed by this Mark Zuckerberg fiasco? I mean, yes, the guy is the founder and CEO of Facebook. But he's mucking things so badly it's probably time for him to get kicked upstairs.

The headlines are blaring this morning about Zuckerberg's disastrous appearance at the Wall Street Journal D8 conference, in which apparently he was sweating like Albert Brooks playing the news anchor in the movie Broadcast News.

Here's a roundup of what's going on with Sweaty Zuck, and other news:

Liveblog of Kara Swisher and Walt Mossberg interviewing Zuckerberg onstage at D8. Best quote: "When I was in college I did a lot of stupid things." Amen, brother!
MarketWatch comments on Zuck's "Richard Nixon" moment. Please note the tie-in above to Broadcast News, in which the TV producer comments, "He's sweating more than Richard Nixon!"
Facebook continues to face heat over privacy. As much heat as a Finnish sauna, apparently.
Top 5 Facebook privacy settings you need to know (HuffPost). Plus, I really hope you don't have anything truly personal in there.
BP's turned to the "Giant Shears" (Guardian). Seriously, could a multinational corporation appear any more incompetent?
Gulf oil could spread to Atlantic Coast (Wired).
Israeli Parliament members come close to blows over flotilla debate (LA Times)
And they killed a U.S. Citizen (The Atlantic). Oops. How's that for improving relations?
Whirlpool recalls 1.7 million dishwashers (Reuters). Apparently they have the ability to whirl flames.
Stocks give up most gains (CNN). Is that from yesterday, or from 10 years ago?
Neilsen files for $1.75 billiion IPO (Reuters). Better hurry.
Hoenig says Fed should raise rates (Reuters). Now that would make things interesting!

Stop Freaking Out about AT&T's Plan Switch!

Wed, 02 Jun 2010 23:32:56 GMT

Well, AT&T has eliminated the unlimited data plan, and Internet anarchists everywhere are having a cow. The funny thing is AT&T's headline on the announcement: "AT&T Announes New Lower-Priced Wireless Data Plans..."

First question: Are the plans really lower priced, as AT&T claims? Now that's funny. If you read the headline on this press release you would think it was some mundane, tiny pricing shift -- like AT&T thought it could slip one by millions of frothing-mouthed, blogging mobile data heads. Of course the digital-media addicted Internet anarchists note that by definition eliminating an all-you-can eat plan is raising prices. MobileCrunch calls this a "sad day in data land."

Five Signs Big Media is Screwed -- and Why It's Okay

Wed, 02 Jun 2010 19:02:46 GMT

I'm in the media business. Hahahahahaah. Is that a sick joke? Is there even a media business any more? Last I checked it looked like one of those smoldering post-napalm scenes from Apocalypse Now.

No, you certainly can't hammer on a typewriter next to Cary Grant and enjoy a two-martini lunch and a union paycheck anymore, I will tell you that. Those days are over.

Why even bring this up? Because apparently Steve Jobs is telling the media world they need to cut their prices to survive. Hahahahah. The prices are already cut, Steve. MOST STUFF IS FREE, geddit?! We're already broke, how does cutting prices help?

Steve Jobs: AT&T is Working on It

Wed, 02 Jun 2010 18:18:44 GMT

Looks like it's Steve Jobs Wednesday here in the tech media world. Lots of stuff coming out of the Wall Street Journal's D8 Conference, where Jobs spoke at length. There were some especially interesting comments on the iPhone, the iPad, and the service from AT&T.

Jobs downplayed his knowledge of "how telecom networks work," but he did answer a question that we all want to know the answer to: When will AT&T fix its iPhone service issues? Much of this involves around the challenges of high-speed mobile data, especially via the backhaul networks. This is the topic of our new report, "The Mobile Data Deluge."

Introducing: The Mobile Data Deluge

Tue, 01 Jun 2010 13:03:06 GMT

The Rayno Report recently completed "The Data Deluge: A Mobile Revolution," which details enormous changes that will becoming to telecom networks over the next few years.

The explosion of smartphones over the next 2-3 years is likely to put enormous burdens on telecommunicaitons networks, and it's going to force telecom companies to do a lot of upgrading of their equipment and technology, especially the area of the network known as the "mobile backhaul" portion which links cell sites to the core of the network.

This and forthcoming sponsored research papers will be available, free of charge to registered users, in our reseach store, which is here. Our first report is sponsored by Adtran. I am happy to announce that Adtran will be sponsoring this site for the next few months (hopefully longer), and that they have sponsored some research which the Rayno Report has conducted on their behalf.

The reason that the shift from mobile voice to mobile data will have such a huge impact on the industry is that it was orginally architected to handle voice calls, and the move to 4G represents a historic shift. This will create many problems and challenges for the telecom industry. As you can see below they make a lot more money from voice.

Here's just an example of the growth we expect to see in new data-rich mobile applications: the number of mobile phones has grown 460 percent in just seven years. As these types of growth rates extend into the 4G "smartphone market" -- which will accelerate in the next two years -- you will see data on the telecom networks increase by an order of magnitude.

Consider this:

* A 4G network will accomodate data speeds up to 150 Mbit/s. Considering that most 3G networks provide data rates under 10 Mbit/s, this will be a huge jump in data. This will result in an explosion of new data-rich applications and user demand, which will flood the networks with more data.

* New smartphones applications are already blossoming, with billions being downloaded every month. This is shifting the user demand from voice to data. Telecommunications networks will need to accomodate this new demand for data.

* Smartphones currently have under 20% market-share of the mobile phone market. That will probably expand to more than 50% in the next three years, creating even more demand for data networks.

To read more, check out our free sponsored research paper.

News Brew: Stop the Oil!

Tue, 01 Jun 2010 11:38:31 GMT

Hopefully one of these mornings we'll wake up to learn that they've stopped the oil leaking into the Gulf of Mexico. Depressing stuff, it is.

Meanwhile, while the oil spills, Google and Microsoft are sparring, with Google launching an anti-Windows campaign. Here's what's in the news today:

BP shares plunge after top-kill effort fails (Reuters). Now, you would think they would have had a plan to stop this. It appears they don't.
BP tries again with the dome (New York Times).
The White House Tries to control the PR damage (Washington Post). Good luck wid that.
As if there's not enough going on, we now have another conflict off the coast of Israel (AOL News).
Hewlett-Packard is taking a hefty axe to the workforce -- to the tune of 3,000 workers (Reuters). Let me get this straight -- company doing great, but taking a $1B charge and cutting 3,000 workers?
Stocks were boosted by manfacturing data (Reuters). For about 30 minutes, after which point they started to fall again.
ZipCar files for $75 million IPO (Reuters).
The Financial Times says Google is ditching Windows because of security issues. Eric Schmidt got tired of all those uninvited pop-ups.
Microsoft responds by mocking Google (Business Insider).
Meanwhile, Google is talking about something called a sensor revolution. Check it out.

Exclusive! Detailed Analysis the Facebook "Hoodie Video"

Fri, 28 May 2010 12:57:12 GMT

I admit, I have become fascinated with Facebook Founder and CEO Mark Zuckerberg's "Hoodie Video," which was released this week to announce changes to Facebook's privacy settings. I'm sure that this video will be analyzed by cultural anthropologists years from now, as they point to the the peak of arrogance and juvenile behavior in Internet culture.

I have set out the analyze the film in entirety. I believe it is representative of the failure of Facebook's entire marketing and PR program, as well as the general dysfunction in Web media.

Real Metrics on Apple vs. Microsoft

Thu, 27 May 2010 18:15:17 GMT

It's funny how the financial and technology press like stampede onto the same story like uneducated mass of Angus cattle. Yesterday's example: 15,000 stories about how Apple has surpassed Microsoft in market cap.

Chetan Sharma: 7 Billion App Downloads

Thu, 27 May 2010 12:36:44 GMT

I have been digging into the excellent research put out by consultancy Chetan Sharma which digs deep into the telecom industry. Today I was shocked to read that more than 7 billion mobile apps downloads were made in 2009.

That is a shocking number. Now, some of this is misleading, I realize. I have several contacts in the mobile apps business which tell me that it is still hard to earn a living from mobile apps, unless you hit a real home-run and are in the top 5% of apps, it's hard to make money. The reason for this is that many apps are free, or very low cost, so if you include a revenue share from a partner such as Apple you really need to sell millions and millions of apps to make any money.

Facebook's PR Disaster

Thu, 27 May 2010 11:37:05 GMT

I believe it's evident now that Facebook is not yet a grown-up company or ready for IPO, proven by its feeble response to the privacy crsis over the last few weeks. CEO Mark Zuckerberg has not fared well in a crisis of leadership indicating the company cannot master even basic principles of public relations and customer satisfaction.

Today, Facebook is finally making some serious changes to its privacy policy, privacy controls, and public-relations approach. But it has taken far too long. And I don't think it helps that in the video, Zuckerberg has personality of a robot reading from a script.

Massive Shakeup in Microsoft's Gadget World

Tue, 25 May 2010 14:00:21 GMT

A big shakeup is coming in Microsoft's consumer products division -- the Entertainment and Device Division -- which produces mobile phone technology,the Xbox, videogames, and other devices. The biggest news is that two huge names in technology and senior Microsoft executives, J Allard and Robbie Bach, will be leaving Microsoft.

Market Update: Death Cross Coming?

Fri, 21 May 2010 11:50:26 GMT

About a week ago, fortunately, I was actually right and [story:/2010/05/three-bad-signs-for-this-market/|alerted readers that I would be selling any rallies in the S&P]. After the famous "Euro Bailout Rally," which turned out to be a one-day wonder, we have done nothing but go straight down. You get the feeling that some of that bullish complacency is eroding from a year-long cyclical bull rally that took indices up nearly 100%. What next? Well, I say, watch out for the "Death Cross."

What is the Death Cross? It’s a technical indicator produced when the 50-day moving average crosses over the 200-day moving average. The reason it’s important is that a lot of professionals watch these averages, and it’s also an indicator of a medium-term change in trend. In other words, if we get the death cross, you would see a lot of people move from bull to bear mode, and you would also see a mad scramble for a lot of people to sell and lock in all those profits from the last year.

Things can change in a hurry. What I find so dangerous about this rally is that a lot of it was artificially produced — i.e. the government giving big banks free money to trade and run things up — and thus I think there is a lot of "fast money" in the market. What happens when fast money starts losing? It sells quickly.

Will Google's Global IP Bid Turn up FTC Heat?

Tue, 18 May 2010 13:44:35 GMT

As if Google isn't doing enough to rile up the Federal Trade Commission, today it announced that it is offering $68 million in cash to buy Global IP Solutions (GIPS), a company that makes Voice Over IP (VOIP) software. Google's press release says it's offering to buy all the shares of Oslo, Norway-based GIPS for $2.12 a share. GIPS is listed on the Oslo Stock Exchange and the offer represents a 27% premium over the closing price of May 14, but after being acquired it will be delisted and become part of Google. A Wall Street Journal article noted that GIPS financial performance is quite small -- it only has $12M in revenue and was losing money -- but that its tools will be useful to plug VOIP technology into various Google communications applications.

Where to Buy Gold Next

Tue, 18 May 2010 12:56:13 GMT

Well, gold had a nice aggressive run from $1,100 to $1,250 in the space of a month. And now, in classic fashion, gold is experiencing one of its nasty bull-market corrections. It's down about $16 today. Yet another indication that you should sell gold when CNBC announcers are getting hysterical about it, and buy it when they forget about it. I think nailing the bottom of this particular gold correction is going to be very difficult. Gold is entering the third and final stage of its majestic bull market, which will result in a parabolic rise. It's going to be wild from here on out, and I don't think $50 intra-day moves are out of the questions. That being said, this may be your last chance to get in before price movements become too big to stomach. Where do I think you do that? The typical pattern has been for the correction to retrace 50% of the prior move. As I mentioned the last aggressive move was $150, so you could reasonably expect to retrace half of that, which would yield $75, down to $1175. But in this case, we might not get that far down. Due to the accelerating nature of the gold chart, I think there may only be a few days to buy it in my "buy zone," which is between $1175 to $1200. I would love to be buying more gold in the green circle identified in my chart below. My stop would be $1150. I really, really doubt that we will get down as low as $1150. Now, if you don't own any gold, it's a little more tricky than if you've been riding this move up and sold off some of the gold into the strength. If you are trying to establish a position it may be wise to just wait a few days and see how this correction pans out. The first say you see a decelerating decline at or below $1,200, that's the time to give it a shot.

A Respite Rally?

Tue, 18 May 2010 12:44:07 GMT

Okay, so, as expected, the S&P filled the "Flash Crash" gap we talked about here a few days ago. Kind of. Now what? This morning we are exeperiencing a relief rally. The Euro is actually green by a few points. Gold is getting pummeled (as it always does after a $150 run). Will it last? I think it's important to see how powerful this rally is after a few days, rather than a few hours. I have covered my shorts for the time being but I expect to reload at a later date, possibly as early as later in the week. And I will be buying gold on its decent toward the 1200 area, where there is a lot of support. I will not really be impressed with a rally in stocks unless they can convincingly break through 1160 level on the S&P. There are too many reasons to sell right now.

Ron Paul: It's the Debt, Stupid

Mon, 17 May 2010 14:14:02 GMT

For those of you who are still scratching your heads wondering why the stock market hasn't gone anywhere for ten years, why there's a new sovereign debt crisis every two weeks, and why it seems as if financial markets are inherently unstable these days, I believe Ron Paul has the answer: It's the debt, stupid. Still, a lot of people seem to be not aware of this basic common sense. If you run up the tab, you have to pay for it somehow. Usually that subtracts from future potential growth -- or provides a headwind to the current growth rate. At any rate, what's so scary about this debt crisis is that it is global in nature and involves some of the largest Western economies. Remember when the Unted States and Europe ruled the world? Follow Ron Paul's thread on why debt's weighing us down and the global currency system is falling apart:

Weekend Reading: Brunch with Debt?

Sun, 16 May 2010 14:16:55 GMT

Happy Sunday. Are you putting that Sunday brunch on your credit card? After all, we are a debt-driven society. And in this weekend's reading, debt seems to be all over the map. Greek debt. UK debt. U.S. debt. College debt. Mortgage debt. My debt to society. I'll have more on this tomorrow, but debt is the foundation of the weakness in Western Capital markets. If any of us thinks that creating more debt, rather than paying of debts, is the answer -- we're sorely mistaken. We can dig our way out of this, but it's not by borrowing money and spending. It's by creating -- business, technology, companies, artwork, literature. Here are some articles I'm surfing in the press today: Paul Volcker sees Euro disintegration. So do the markets. That's okay, I have fond memories of the French Franc and the Deutsche Mark. Especially back in the 1980s when you could change 8 Francs for a dollar and a cold Duvel could be had in a cafe for 8 Francs. When you boil down the Euro disagreements, here's what it comes down to: You're going to see a lot of intense arguments about who works harder, who doesn't, who should pay off whose debts, and who has the right to retire at age 60 on the government dole. The Boulder startup scene gets some props into the New York Times. Funny, though, in the first paragraph the reporter refers to Boulder as "usually seen as an enclave of hippies, marijuana dispensaries and rock climbers." Apparently this reporter hasn't been to Boulder since 1982. The last hippie I saw in Boulder is now running a social media startup. It's a great time to browse mansions built by a movie mogul. Google says it was "accidentally collecting data" from thousands of Wifi sites since 2006. Um. You're kidding, right, Google? I mean data is your business. What's next? "Sorry, but we accidentally handed all of your email over to the Russian government." Joe Queenan has a great piece in the Wall Street Journal about the economic malaise of our youngest generations. This is something I've thought about a lot. And I'd have more sympathy for the "millennials" if I met more of them that weren't ADD-addled, entitled, spoiled brats. Maybe more of them should work on street fairs!

Three Bad Signs for This Market

Thu, 13 May 2010 19:51:30 GMT

I don't want things to fall apart in the stock market. No really, I don't. But the unusual level of "CNBC Optimism" combined with a bad chart, and terrible reactions to so-called "good news" today are all leading indicators, to me, that all is not well in market land. Let's take a look at these items one-by-one: 1) A $6B deal between SAP and Sybase is announced. It can't help the market though. As I like to say, it's not the news but the reaction to the news that matters. The market's reaction was muted, at best. Tech stocks have been selling off all day. 2) Even John Chambers can't save the market. When America's most polished optimist, John Chambers, announces a "great quarter" and comes on CNBC, but the market sells off, that's a bad sign. Cisco reported its "strongest quarter ever," but the stock has sold off nearly 5% so far today. Hmmm. 3) The S&P chart, which I commented on here, is looking more and more awful. Following the trillion-dollar Euro bounce, further gains have been muted, and we are getting yet another rounded top in the context of a scary looking waterfall like pattern. You think all those High Frequency Trader (HFT) programs are done with their mini-panics? I don't. On the chart below, I have shown the downward angle of the top we've formed in the last few weeks, as well as circle the area where that interesting "panic gap," was created after the Euro bailout was announced. Notice that the "Euro Bailout Rally" is now just a blip in the overall chart. For whatever reasons, markets like to gravitate back to areas of huge turbulence -- especially when there was a large gap. This is what I expect to happen to this market. That area will be tested again and either fail or succeed. Disclosure: Short S&P (stop at 1175), long S&P puts.

$6B SAP-Sybase Deal: The Value of the Stock Screen

Thu, 13 May 2010 07:00:01 GMT

SAP AG has agreed to acquire Sybase Inc. in a deal valued at $5.8 to beef up its mobile platform and help compete with arch-enemy Oracle Corp. The deal is an all-cash offer for Sybase shares at $65 per share. Could you have spotted the deal coming? Yes. I'm a big fan of stock screens. Sybase was on the radar here at the Rayno Report after it started showing up on stock screens as being undervalued, with the screens singling it out for solid profit growth and a low P/E value. We cited it in early March on our shopping list of stocks to pick up after the February market swoon. Another reason is that Fred Hickey, well-known technology stock analyst, was on top of the Sybase situation, calling it an undervalued company with buyout potential in this year's Barron's roundtable. Hickey has the hot hand, he also called out Novell for its large cash position just before it was picked up a bid from hedge fund Elliot Associates. If you were sitting on shares of Sybase, there's a huge premium. The deal price is 56 percent higher than the closing price of $41.57 yesterday. In after-hours trading stock last night, the stock was up 35 percent at about $56.

What Gold and Technology Have in Common

Tue, 11 May 2010 12:53:41 GMT

I get a lot of questions about why I write about technology, the stock market, and gold so much. Why mix it up? Well, that's because I believe that the world is very connected -- especially the financial and economic world. Technology really isn't that different from gold, actually. They are both currencies. They are both means of trade. I also believe that both are capable of spawning revolutions.� You see, gold, like technology, is based on a standard: it's a standard for the monetary base.That's becoming more evident today as we see gold head to new highs, as I wrote would happen here. As the world fiat monetary system collapses (we're witnessing this before our very eyes), that will spawn a move to more open monetary systems. Think of the days back during mainframes and proprietary mini-computer standards. The world was ruled by technology fiefdoms� and proprietary systems produced by powerhouses such as IBM in Wang Labs. The mini-computer was replaced by the industry-standard PC. Wang filed for bankruptcy. In the 1980s, and later, in the 1990s, the move to open systems accelerated as chips, networking standards, and communications opened up and could become interchangeable, spawning the creating of a massive ecosystem of suppliers. There were suddenly thousands of technology producers, rather than a handful. Technology activity throughout the world exploded. That's the power of open standards.

Bizarro S&P Chart Now Has Huge Gap

Tue, 11 May 2010 01:30:34 GMT

I like stock charts. I have studied many of them over the years, and consulted with the best chartologist. Today's big rally, following last week's meltdown, has retraced about two-thirds of the markets losses in the last week. But it has also produced a scary, bizarro chart. Today's gap-up now leaves a huge gap between the 1130 and 1145 level, which I have marked below with some white lines. Let's call it a "Euro freak-out" gap.� It is my experience with dramatic moves like this that these gaps are almost always filled again.This ugly chart is among several reasons why I'm not confident in today's "comeback rally."

Um. A Trillion Dollars for This?

Mon, 10 May 2010 18:21:44 GMT

After the European Central Bank (ECB) announced an unprecedented market intervention, the Euro and global stock markets have fallen after this morning's gap up, which is not a good sign at all. During the weekend, with markets and the Euro in freefall, the Euro bankers enacted a $1T bailout package to reassure markets before they opened in Asia early this morning. The plan includes nearly $1 trillion in loans and a bond purchase program to stanch the bleeding in sovereign debt in countries including Greece, Spain, Portugal, and Ireland. Unfortunately, the markets do not appear reassured. The Euro is only up a few points, after being up nearly 2% earlier in the morning. The ECB policy actions were designed to prop up the Euro, after all. Remember, a market's reaction to the news is always more important than the news itself. Can this be construed as good news? Hardly. The size of the response indicates the crisis may have been bigger than we thought. Last week there were many rumors of European bank insolvencies and Credit Default Swaps (CDS) were rising, signaling genuine alarm.

The Trillion Dollar (Euro) Gambit!

Mon, 10 May 2010 13:23:29 GMT

The Euro bankers have taken a page out of Ben Bernanke's playbook and pledged nearly $1 trillion in aid to fight the declining markets. Well, I didn't think they had it in 'em. Therefore, the situation must have been worse than we thought. Nearly� $1 trillion dollars in loan guarantees and bond buybacks will be deployed to stem the bleeding in European sovereign bonds, which started in Greece but then quickly spread to Spain, Portugal, and Ireleand. Will it be enough? We can only hope so, because I think the alternative is something along the lines of financial armageddon. Unfortunately, I think their show of force is demonstrative of just how scary things were getting last week, and that they know further dangers are lurking below the surface of sovereign debt plan. So here's my plan over the next two weeks:

Monitor the bounce in markets. If the bounce loses altitude at an early stage (say, after a day or two), re-short markets
Buy more gold and silver on any weakness

Do I think things are "saved"? Probably not, though we have bought some time. I will let the markets tell me the story. If this rally cannot be sustained and gold continues to hold its gains, that's a sign that Trichet's $1 trillion bazooka may not be enough.

Can the Euro Bankers Save the System?

Sat, 08 May 2010 16:04:10 GMT

While the rest of the world sips coffee, mows the lawn, takes the kids to soccer practice, or whatever else it is that you do on Saturday, the world banking system is frantically meeting behind closed doors to save the global financial system. This is it. This is the mother of all crises. They really need to announce a Hank Paulson bazooka. After reading and analyzing reports from the top sources in the markets, it's clear to me that panic is going on behind the scenes and European banks are planning to launch several efforts to staunch the bleeding on Monday, including opening up currency swap lines with the Federal Reserve as well as creating some sort of "rescue fund."

Crash Watch

Fri, 07 May 2010 19:54:06 GMT

I remain on crash watch over the weekend. If the Euro bankers don't do something soon, this could be a real mess. I have gone to basically 80% cash, plus I am short S&P futures with a stop set at 1120. The market action today was simply horrible. You would think there would have been some kind of bounce from yesterday's debacle, but any bounce was feeble and the market is now trading in a steady downtrend. What's more, from charts I have looked over from prior crashes, this doesn't look good. Expect some fireworks on Monday.

Is the Market Haywire? Of Course it's Haywire -- It's Run by Lunatics

Fri, 07 May 2010 14:02:00 GMT

It's funny to watch all the commentators and analysts come out of the woodwork this mornin g to explain how "things could go wrong in the market." It's as if they haven't noticed the market has been dysfunctional for quite some time. The market, fundamentally, is broken. I think this is because of the lack of liquidity from the small guy and the growing influence of gigantic over-leveraged quant traders. Think of the crises we've had in the past: Long-Term Capital Management in 1998, the banking crisis of 2007/2008. Both were basically caused by hot-shot bankers with lots of overleveraged money and too little liquidity. Inevitably, some rocket-scientist trader starts making money, leverages up, and gets a god complex.That's when things go wrong. Case and point: The major investment banks, coming off record profits in 2006/2007,� were leveraged more than 30-to-1 going into the 2008 crisis! The financial markets always have a way over going overboard and plunging us into crisis. I believe there are two things at the heart of this: Overleverage, and ego (or greed). Go back and read "When Genius Failed," it's a great book that explains this perfectly. Isn't it interesting that the Long-Term Capital Management Crisis in 1998 was triggered by a sovereign-debt crisis. As for what happened yesterday: For those who weren't there, it was a wild ride, with the largest Dow Jones Industrial Average point swing ever -- with the average down 10% and 1,000 points at some time. People are still trying to explain what happened. I was actually at my screen when it happened (luckily, I just happened to be short at the time), and it felt like I had been sucked into some kind of science-fiction film. I saw the S&P E-mini plunge nearly 70 points in about 10 minutes. Markets recovered quickly from the 10-minute intraday plunge, and now the analysts and commentators are trying to explain the unreal things that� happened with the market and some particluar stocks (at one point in the day, Accenture -- a $40 stock -- was trading at .01). Here's a chart of the action in the E-mini S&P futures contract, one of the alleged culprits of yesterday's weirdness: Yes, this was an extraordinary move. But my feeling is that more "strange things" like this are happening all the time. During the recent market "meltup," I can remember many days in which the market didn't move at all for hours, and then suddenly out of the blue it vaulted 10 S&P points in 10 minutes. Should we investigate that, too? Even this morning's action is strange, and discomforting. Looking at the chart above, I would not be surprised if the market heads back down toward yesterday's mythical intraday low (if you blinked you missed it), just because it now lies in the memory chip of some high-powered quant trading fund. CNBC and others have pointed out that these sort of events do nothing to restore the confidence of the average retail investor (let alone Jim Rogers), and they are absolutely correct. In addition to the scary trades that still go on in the "dark market" (credit derivatives swaps as detailed in the SEC investigation of Goldman Sachs), we have the market increasing being controlled by highly leveraged computer-driven traders. These shops use the most sophisticated technology in the world and they trade tens of thousands of shares of stock in a microsecond, mostly driven by computer algorithms. The best analogy I can think of is take a look at what happened to Toyota. Imagine a Prius with bad software. Then imagine that happening to global trading markets. Scary thought.

Cloud Genius: Citrix CTO Simon Crosby

Thu, 06 May 2010 16:12:38 GMT

At the trade conference Interop last week, I did a "power-course" on cloud computing with the mission of discovering: What about cloud computing is total BS and what is real? It turned out that I ran into the right person. I learned more eating tacos and listening to� Simon Crosby, CTO of the Datacenter and Cloud Division at Citrix Systems Inc.� (CTXS), than I did anywhere else. If you want a quick definition of cloud computing, here it is:� “Cloud Computing is a data center that serves you back applications and content," says Riverbed CEO Jerry Kennelly. The way Citrix' Crosby tells it, elements of cloud computing� are the Wild West of Information Technology (IT) -- inviting people to break out from the bolt-down world of enterprise computing and do what they really want. This may also put a lot of people out of business, and make fortunes.Crosby's also filled with radical technology statements such as: [caption id="attachment_2259" align="alignright" width="120" caption="Simon Crosby, Datacenter CTO of Citrix"][/caption] "Anything that runs on an operating system is legacy technology." "Networks scale. The limit is humans." "The storage industry is about to be completely transformed again." "The security business and the detection business has totally failed." In short, some fundamental "cloud computing" concepts are enough the change fundamental business models for entire industries: For operating systems vendors, service providers, and software vendors as well.

News Brew: Euro Groundhog Day

Thu, 06 May 2010 14:27:30 GMT

It's Groundhog Day again in the markets! Repeat after me: Euro down, Greece unrest, sovereign debt panic, Angela Merkel, Jean-Claude Trichet. Euro down, Greece unrest, sovereign debt panic, Angela Merkel, Jean-Claude Trichet.Rinse and repeat, as markets collapse. What I'm watching carefully is that despite incredible dollar strength, gold is threatening new highs. It's funny though, not a whole lot of people seem concerned that this is signaling something: a full-blown global currency crisis. Currency crises are the most pernicious of market events, because it means that suddenly you don't know how to value things. That means volatility. More ahead. Moving on to other news:

It's the CONTAGION! It's spreading! (Bloomberg). It's like a giant, hedge-fund fueled green slime.
Cut, cut, cut, says Trichet (Bloomberg). Is it just me or does Trichet look a little bit like a deer in the headlights
Trichet keeps ECB nukes in the silo (Marketwatch). Headline of the day.
Productivity continues to rise (Wall Street Journal). Of course it is. That's because the five people left with jobs are doing the work of 50 people.
The FCC wants to regulate the Internets some more (Wall Street Journal). That's because, like, the Internet has grown too fast when it's unregulated, you know?
Another company joins the HTML5 parade (TechCrunch). For those of you who don't know what that means, it's like, bad for Adobe.
Another great headline: "Facebook's Mark Zuckerberg: 'I'm CEO ... b****!' (Fortune). More confirmation that the billionaire is just a spoiled brat.

AT&T Leads in Dropped Calls, Survey Says

Wed, 05 May 2010 15:46:26 GMT

No, that crummy connection from AT&T on your iPhone is not your imagination. According to some new research from ChangeWave research, AT&T (T) drops three times as many calls as Verizon (VZ). The issues of whose network is better was the heart of Luke Wilson's war. Looks like AT&T is losing. ChangeWave says that in a� survey of 4,040 consumers using North American mobile carriers, Verizon customers reported only 1.5% of their calls being dropped over the past three months, the lowest in the� industry. AT&T reached its all time worst rating in this measure, with customers reporting 4.5% of calls dropped in the last three months. AT&T finished last in the March survey of North American mobile providers. Sprint finished second with 2.4% of calls dropped, and T-Mobile finished third with 2.8% of calls dropped.� The trend shows� an increasing number of dropped calls among AT&T customers surveyed and a decreasing number of dropped calls for Verizon customers.

Can HP's Memristor Start a Revolution?

Wed, 05 May 2010 15:00:55 GMT

Recently several members of the analyst and press community had the opportunity to attend an HP Labs event on Energy and Infrastructure. Prith Banerjee, senior vice president of research at HP and director of HP Labs, laid out the foundation of HP's vision for sustainability. I met with representatives from numerous labs including: color reflective display technology, real-time streaming analytics, information and quantum systems, sustainable IT, exa-scale data center technology and advanced wireless networking. But the big news for data centers was in memristors. All the meetings offered valuable insight into the future of computing. Stan Williams, HP Fellow and Director of� the Information & Quantum Systems Lab, discussed two fundamentally game changing and related technical efforts that his labs are working on: For the purpose of this blog, I will focus on memristors and its initial application. The original idea of the memristor, which is an abbreviation for memory resistors, was defined in the 1970's by Leon Chua. HP was the first to build a working memristor in 2008.� Today, capacitors, inductors and resistors form the three basic circuit elements with the memristor now being considered the fourth fundamental circuit element. The memristor differs from the other circuit elements in that it can retain memory without power.� This leads to three critical questions: Why does this matter? What is the practical application for it? When does it leave the Labs? First, memristors will offer dramatic improvements in storage (e.g. days of video on the form factor the size of a thumb drive). If Memristor production is successful, it could be replace flash memory as we know it. Mr Williams said it would be approximately 3 years before we could expect commercial prototype but at that time he expects memristors to offer storage density of about 20 gigabytes per square centimeter. HP expects memristors to be faster, lower powered and to offer at least twice what comparable Flash technology could offer in 2013. If HP is right, they could change the Flash market overnight and make a mint on licensing fees. Imagine how an increase in storage with a reduction in power consumption could change the capabilities of small factor consumer electronic devices such as cameras, e-readers and smartphones. But Mr. Williams also offered a longer term, roughly 8 year vision, of how memristors could change the computing landscape by integrating offer both logic and storage. This April, in the science journal Nature, HP published advances in its research study in nature titled� "'Memristive' switches enable 'stateful' logic operations via material implication" This means memristors could replace transistors on processing chips. Mr. Williams painted avision of memristors as a bridge that brings storage and computing closer together. Over time, memristors could entirely flatten data center architectures by enabling computation to be performed in chips where data is stored, rather than on a specialized CPU. This is important because space and power are such huge factors in the cost of data centers. Some sort of memristor revolution could result in data centers that require less square footage and less power even if it is no longer possible to make transitors smaller. In short, it could spark a revolution in the data center as well as in the CE field.

News Brew: Leaking Oil, Leaking Markets, and E.T.

Wed, 05 May 2010 14:33:28 GMT

It's Groundhog Day in the market this morning where you wake up and hear about a "Plunging Euro" and "Greek Contagion" and "Angela Merkel." As one of my favorite market mavens in Chicago said, "It's like Chinese water torture." Only, it's more like, Greek water torture... on to the news:

Euro tumbles to 1-year low vs. the dollar (Reuters). Great, maybe next time I go to Europe I can finally get a beer for under $8.
Three people killed in Greek protests (New York Times).
Moody's warns on Portugal (Wall Street Journal)
Scottish airports closed by volcanic ash (BBC). This time, scientists say the smoke might be coming from Greece.
"1 or 3 Gulf leaks halted but oil flow same." Okay, so, if you've halted a leak, but the flow is the same, have you really accomplished anything?
Rupert Murdoch brags about his iPad (Paidcontent.org) Says his makes more money than yours.
But is the News Corp. subscription strategy months away? (AllThingsD)
Picasso work sells for $106 million dollars! (New York Times). Is there an ETF for Picasso?
Ernie Harwell: RIP (Detroit Free Press). Great man, great life.
Scientists explain why computers crash but humans don't (Physorg.com). I beg to differ. I've crashed many times.
NASA team claims to have evidence of extraterrestrial life (Washington Post)

Ten Interesting Trends To Look At

Tue, 04 May 2010 17:58:05 GMT

For those of you new to the Rayno Report (oh wait -- I'm new too), one of our big themes is investigating, analyzing, and playing the big trends, whether it be in markets or technology. I am a big believer that at fundmental turning points there are huge opportunities. Here are some of the trends to look at and pay attention to� in reverse order: 10) The world is running out of rare-earth metals (Forbes) 9) Growth of LEDs. Eight) Terrorism-scanning software is becoming very sophisticated. And that means a growing threat to personal liberty (Telegraph). 7) Growth of digital Imaging. In all forms. 6) Computer-algorithms are taking over financial markets (Source: NYSE, Nasdaq) 5) Government debt is becoming the biggest threat to world financial markets (Source: BBC) 4) World currencies are being debased. And Gold is becoming the ultimate world currency. Again. 3) Cloud Computing -- and what it means for many technology businesses. 2) Video is taking over the Internet (Source: Cisco Systems). 1) Internet data traffic -- and mobile data traffic, in particular -- is exploding. Unfortunately, revenues aren't!

News Brew: Bomber Busters, Euros, and iPads

Tue, 04 May 2010 17:04:27 GMT

Yesterday I remarked about the proliferation of bad news. Well, here's some good news: The NYPD did an incredible job defusing a bomb in Times Square, conducting a quick investigation, and rounding up a potential suspect. Amazing if you think about the alternative. Heroic execution. Not only was there heroic execution on the part of the police in diffusing the bomb and launching a quick investigation, but if they got the right guy, it has a Hollywood twist: They nabbed him as the plane was about to take off. Here's more on that story, as well as other stuff going on in the busy world:

Times Square bomb plot suspect arrested at last second (CNN). I think he's lucky Jason Bourne wasn't on the plane.
The suspect allegedly drove to the airport packing a 9MM gun (NPR). I'm ready to see the movie. Now.
Times Square bomb, oil spill complicate White House agenda (Washington Post). Nobody says it was easy being the President of the United States.
Bomb suspect may have been targeting military recruiters (Washington Post).
What we know about the suspect (The Atlantic).
Shifting gears to market action: More Euro-melting triggered this morning's swoon (WSJ).
Think you understand the sovereign debt crisis? If not, just take a quick look at this chart, courtesy of Pimco (Business Insider).
Just when it looks like the VIX has collapsed -- yes, that's the time to sell (Bloomberg BusinessWeek).
Apple policy said to trigger investigation by the Federal Trade Commission (Bloomberg). Only one entity can stop god: the government.
Apple feels the heat from the FTC. Maybe it's time to pull a switcheroo? (Electronista)
Ning is going to stay free for teachers (New York Times). Great, now do you know anybody that uses Ning? Any teachers? Right, didn't think so....
YouTube is developing a self-serve rental model (MediaPost). Netflix executives must be taking notice.
Apparently there is a black-market for IP addresses (Infoworld). "Psst.. hey buddy... wanna buy 72.145.228.27!?"
Was wondering what the local snowpack was like. I found this cool site (NOAA). At least they put some of my tax dollars where I want them.
Things you learn without running water (The Daily Green). Some of them, I just don't want to know.
Twitter has launched its "embed Tweet" program (HuffingtonPost). More evidence that civilization will be ending as we know it.

Market Action: S&P Diving Board Chart?

Tue, 04 May 2010 14:13:26 GMT

This morning, the stock-market action is looking a bit like Charlie Sheen after a raging Hollywood party. Remember, the best parties always have a hangover. The market has grown increasingly volatile over the last few days. It's not the kind of action that I like. In addition, the currency world has been positively insane, with massive swings in the Euro, Dollar, and gold. Right now the dollar is screaming and the Euro is down about 150 points. This wild currency action is indicative of more instability in the sovereign debt markets. I spent the morning unloading the most of the remaining stocks that I owned that had been accumulated in the last 6-12 months. The reason? A lot of these stocks have run long and strong. These violent market swings, and the S&P chart, have my spidey-sense tingling. I will keep a few low-priced blue chip stocks but for the moment, with this kind of market action, I'm content to sit on a very large cash position. And I'm hedging that by shorting S&P futures. With the futures position, I don't have any problem being slightly net short at the moment. See the chart below and what do you think? I've seen this� formation before and I like to call it a "diving-board chart." That's fine, if there's water in the pool. But what if the pool is just cold, hard cement?

Apple's Sold 1M iPads -- but Stock's Only up $6

Mon, 03 May 2010 18:57:48 GMT

Apple announced today that it has already sold 1 million iPads, coming in less than a month after it was launched. Wow. As pointed out in the press release, that means it took less than half the time it took the iPhone to get to 1 million (74 days). And as an experienced trader and investor, I know to watch the reaction to the news rather than the news itself. Apple, a stock I'm accustomed to seeing up $10 or $20 in short swatches of time, is only up $6 (2%). That seems like a lot but in the Apple world, it's quite a pedestrian gain.� In addition, on the chart, it looks like it's struggling to take out a new high (around the $267 level). Watch this development carefully. If it fails to take out a new high today or tomorrow,� I think it's time to book profits. Disclosure: I was in Apple briefly earlier in the year, but I unloaded my Apple stock around the $230 level. Doh! But sometimes you can't get greedy.

News Brew: Can We Have Some Good News Now?

Mon, 03 May 2010 15:21:52 GMT

As a long-time journalist, I know that the media world is hopelessly slanted toward negative news. But unfortunately, this week's bad news is all real -- and not exaggerated. Greece is melting down, sovereign debt issues plague the globe, and now we have a massive environmental and economic catastrophe in the Gulf of Mexico. Can you cut us a break, boss? Here's a rundown on what's going on on this dreary Monday:

The Gulf oil spill will probably take months to contain (Washington Post)
BP says it's ready to pay (Reuters) But it also says it's not to blame... figure that one out.
Will the spill affect Obama's new "drill, drill, drill" policy?(CNN) That's what Barry gets for pretending to be Ronald Reagan.
Deepwater Horizon had a history of problems, before the spill (Nola.com)
Apparently blowout preventers fail frequently... (Kansascity.com)
On to Greece... The Baklava Bailout is finally here (BusinessWeek). That's the slowest cooking Baklava, ever.
Germany's share is $30B (Associated Press). And Angela Merkel can say goodbye now.
Apple iPad 3G estimated to have sold 300K on launch weekend (Apple Insider). AT&T engineers trying to figure out what to do now.
Is an anti-trust investigation at hand for Apple's app world? (New York Post). Steve Jobs' squeaky clean, integrated world may be just a little too integrated.
Roger Ebert hates 3D (Newsweek). Funny, given that he's not exactly 2D.
Is IronMan 2 about Bill Gates and Steve Jobs? (TechCrunch) If so, I'm glad they went with an allegory, instead of real life.
A detailed analysis of Groupon (TechCrunch).

Interop News Brew: The Future is Cloudy

Thu, 29 Apr 2010 08:00:17 GMT

LAS VEGAS -- You've heard about the "cloud," yeah? That's a fancy marketing term for connecting to computer services over a wire. In the old days they called that a mainframe. But we're oversimplifying, of course. Whatever it is, cloud is clearly where it's at here at Interop. Better yet, people actually seemed moderately excited to be here. The gloom and doom of recession felt as if it were lifting. A conference organizer told me that paid attendance was up, even though booth revenue was flat. Here are some highlights of the show: Cloud Champions: Two of the leading "cloud networking" software vendors -- which we defined yesterday as deploying content and applications as a service -- are VMWare and Citrix, who were ever-present at the show. VMWare (VMW)� launched VMForce with Salesforce.com (CRM) which allows developers to deploy Java-based applications in service-as-a-software environment. Citrix was demonstrating a cool product in Receiver, which allows you to access your Windows desktop and applications from an iPad. Hot Startup: Arista Networks, the brainchild of networking heavyweights Jayshree Ullal (ex Cisco) and Andy Bechtolsheim (ex Sun), is making some real progress with a high-performance Ethernet data-center switch. First, they shipped the sucker. And impressive demo with Ixia shows the switch delivers 800Gbps of throughput with less than 3 microseconds of delay (between you and me, that's damn fast). The company is clearly trying to take out Cisco's data-center switch business. The Arista 7500 claims 10 terabits per second of switching capacity with one-tenth the power of competitive platforms. We saw some big-time potential customers in the booth, including some top network architects from Yahoo and United Airlines. It was� winner of a Best of Show award. Quote of the Day -- Had a great lunch with Simon Crosby, CTO, and Laura Heisman, Director of Analyst Relations, both from Citrix. Simon fascinated with long soliloquies about the future of cloud computing and IT technology. More on this later. For now, his zinger on cloud computing and what it means for the IT business:� "Anything with an operating system is legacy technology." Hmmm. Cloud Hype: Whoever came up with the term Cloud Computing has won. I searched on Google and found 21,400,000 results for "cloud computing." This YouTube video ranks highly in defining it. Avaya Doubles Down on Data: Many have been wondering what Avaya would do with it's dumptruck filled with Nortel gear that it acquired in Nortel's implosion. They're not taking it to the dump, they said, as CEO Kevin Kennedy is working hard to re-energize interest in their data portfolio. Remember, this is one to watch. Avaya went private in an $8B deal. I imagine they are trying to claw their way back to the public markets. Las Vegas Wind Warning: Hmm, is it any coincidence that during a major technology show infiltrated by reams of 'cloud computing' announcements, the National Weather Service had issued a high-wind warning? I don't think so.

Palm Wednesday: HP Can Do Everything

Wed, 28 Apr 2010 21:43:18 GMT

HP is starting to sound like the first year of the Obama Adminstration. They have their own version of fixing the economy, winning a war, and giving everybody health insurance -- it's beating Cisco with 3Com and then conquering the mobile-phone market with today's announcement that they'll buy Palm for $1.2B. Is HP biting off more than they can chew? Can't say we were right about Palm, or were we? HP did the deal at $1.2B. It surprises me. My premise was that paying over $1B for a company that is losing money and market share, with a negative book value, and $400B in debt is just slightly nutty, but what do we know. Apparently the HP CFO knows more than me.

Broadpoint AmTech: Mad About OVTI

Wed, 28 Apr 2010 18:19:35 GMT

Research firm Broadpoint AmTech, which has been on top of the solid rally in specialty chipmakers, yesterday raised its earnings estimates and price target for Omnivision (OVTI), a chipmaker that specializes in imaging silicon for applications such as cameras in mobile phones. OVTI, a favorite of the momentum investing crowd, had huge moves from 2002-2006, but then stumbled badly in 2008. Broadpoint AmTech analyst Doug Freedman seems believes it will rally on faster-than-expected earnings growth tied to smartphone growth and other markets driving the adoption of Omnivision's imaging technology. The favorite speculation among investors now is whether it will gain entry into Apple's i-Business. It could also ride the wave of growth of cameras and imaging technology in smartphones in general.

HP CTO: Cisco Gear Costs Too Much

Wed, 28 Apr 2010 16:43:36 GMT

LAS VEGAS -- Demonstrating HP's feisty attitude in its escalating networking row with Cisco, HP Network Chief Technologist Paul Congdon attacked Cisco's dominant position in the networking business, saying it is leading to "crazy behavior" and overpriced products. At the top of Congdon's� list of industry problems? "Lack of Competition." This is leading to "crazy behavior... causing you to pay too much for your networking equipment," said Congdon, on a panel titled " Why Networking Must Change," Congdon did not name Cisco by name. But it was clear who it was when he remarked that "In most industries, the market share is separated by 10 percentage points..." Take a look at the chart below and conclude what you may. Congdon's solution for customers? "Open up and write your own RFPs." More standardization would help too. But Congdon's contribution wasn't all Cisco bashing. He also had a� list of trends for the industry. Other than "Cisco Charges Too Much," Here are the rest... * Growing complexity in networks is breeding inefficiency * Massive growth in Internet- connected devices, projecting to 20 million new video-enabled mobile devices in 2010 alone * Scaleability requiring more networking intelligence on the edge of networks * Applications need to be dynamically adaptable to the network, rather than vice-versa Did Cisco respond? Not really. Thomas Scheibe, Director of Data Center Switching, the Cisco representative on the panel, remained civil -- and boring. He kept to a script that involved heap of Layer 2 switch fabrics, mobility, and virtualization. Congdon's got a point -- though it's not really clear how easily HP or anybody else can do anything about it. Networking upstarts have been trying to create "best-of-breed" products with more aggressive price/performance technology to take on Cisco -- and not making a lot of progress. See the chart below. Doug Gourlay, VP of Marketing from Arista Networks, took another jab at Cisco: "Many of the incumbents have used switching and routing technologies as cash cows to� fund entrance into marketing adjacencies to bring us wonderful technologies such as Flip cams." That drew laughter from the audience, which then went back to taking notes on future data-center virtualization.

Cloud Computing in 400 Words or Less

Tue, 27 Apr 2010 21:54:15 GMT

LAS VEGAS -- I entered the show floor here at Interop, a long-running IT and networking technology conference, only to be bombarded with the words "cloud computing." For those of you who don't know what it is -- in addition to being the hottest technology marketing concept du jour -- it's the idea that you can tap into computing services and applications by "plugging into the cloud" of a service provider, rather than building the technology infrastructure yourself. This can work on an individual level or a corporate level. On a personal consumer level, I think a good example of cloud computing is Web photo services. We used to manage and store photos ourselves -- first in analog format and later in a digital mode. Increasingly, consumers are turning to a managed photo service where they store photos on a company's servers, to access and manage as they please. On a corporate level, the same thing is happening: companies are increasingly outsourcing technology and IT infrastructure to the "cloud" -- that is, a network that they can connect to remotely.

How to De-Supersize Healthcare

Tue, 27 Apr 2010 21:30:43 GMT

LOS ANGELES -- On Monday April 26, a panel moderated by CNBC anchor Maria Bartiromo including executives and leaders including Michael Milken convened to discuss Health Reform in a session focused on "Prevention and Cures". The primary focus of the discussion was the need for government policy and health reform to address "wellness" and chronic diseases such as diabetes. One of the conclusions from the panel is that the healthcare reform recently been enacted into law is "uneconomic" and has put prevention and wellness on the "back-burner" even though unhealthy living represents a major �cost to society. A lingering concern is that we are a few years away from�price-setting�of medical products and services.

Facebook Wants Everything

Mon, 26 Apr 2010 14:24:14 GMT

Sometimes it's nice to get away a few days, disconnect, and refresh the mind. And then you come back, and find out that Facebook wants to rule the world. I was aware of the Facebook f8 announcements last week, but an impending vacation spared me the need to expend brainpower on it. I did not hop on this Facebook F8 story like all the other slathering Web 2.0 toadies out there. No, we're not like this. This is supposed to be an analytical and skeptical source of information. So I will tell you: Facebook wants to take everything. Watch out or they'll pick your pocket. The heart of these new Facebook initiatives, loosely grouped as the "open graph," is that if you "opt in" to Facebook's new personalization tools, it will be able to track pretty much anything you do on the Web and your information relationships to other Facebook friends� -- and show it to other people. Now, Facebook uses the term "opt-in" loosely. That's because it has automatically opted in its hundreds of millions of users. Facebook apparently knows when and where you want to "opt." Here's what I think about that: Boy, these Facebook people sure are greedy. They want to control everything. And most people who are trying to compete with them are pretty much screwed. Especially media companies and publishers. Many Facebook competitors for sure. If you are a publisher or some sort of niche social network, you should be very, very careful of you you use the new Facebook APIs. Yes, it's true, Facebook's new tools will make it easier for you to "plug in" to social network. You may get more traffic. But guess what -- who owns the data? Facebook. As soon as you hook into Facebook, you will be handing them over the keys to your kingdom. And you know Facebook wants to advertise to your users. It's all about the data. Google is about the data. Facebook is about the data. If you do anything on the Web that entails a service, content, and advertising, it's about the data of your users. That's your gold. And Facebook now wants to hijack all of the data on the entire Web. This is why Google engineers are freaked out about it. Geddit now? So the big question is: Are users going to allow them to do that? Well, they already have. Because Facebook has decided by default that you are opted in. Well, you say, the Web is already like that. Like Scott McNealy famously said, there is no such thing as privacy anymore. But I'm not just talking about privacy. Yes, the privacy freaks are going to have a cow about this. And you should really be concerned about which settings you've checked on Facebook. But I'm not just talking about that. I'm talking about business. Control. Owning things. We are told now, over and over, that Facebook has 400 million users. It's allegedly surpassed Google in total audience (I still have a hard time believing this). So the really already own a lot of stuff. But that's not enough for the Zuck-man. Now not only does he want to own all these users, but he wants access to every single piece of data about where they go, what they like, and how they interact with the Internet. Do you trust them? I don't.

A Look at HP's Looming Battle Against Cisco

Thu, 22 Apr 2010 16:00:36 GMT

With the recent acquisition of 3Com under its belt, HP is positioning itself as an alternative to Cisco Systems and expects it to be a two horse race. Given the acquisition, how does HP stack up against Cisco? While the question is simple, the answer is not. In aggregate, the combined HP-3Com company is positioned favorably against the networking giant Cisco. In Monday's industry analyst call, Dave Donatelli, Executive Vice President, Enterprise, said HP would win in the industry for five reasons: 1. HP has superior technology that empowers business innovation. 2. HP has an architecture built on open standards so clients can leverage best in class solutions and market driven innovation, while adopting an evolutionary approach to a simpler, more flexible network environment. 3. HP has an end-to-end product portfolio - from the network edge to the core of the data center - under a single pane of glass management that significantly lowers operational costs. 4. HP has networking as part of the Converged Infrastructure to deliver a complete strategy and portfolio for building the data center of the future today. 5. HP offers our customers lower total cost of ownership (TCO). In a later slide, HP claimed 30-65% TCO savings depending on the category.

Gilead, Abbott Trigger Biotech Retreat

Wed, 21 Apr 2010 19:59:53 GMT

Gilead Sciences (GILD) share got clobbered today, trading down 10% at midday, after the company lowered its 2010 sales forecast to a range of $7.4-$7.5B from $7.6-$7.8B citing recently enacted healthcare legislation. Net income for the quarter ended March 31 jumped from $854.9M or $0.92/sh. compared with $589.1M or $0.63/sh. in the Year ago period. Gilead’s first-quarter sales increased 24% to $1.79B primarily due to strong sales of its antiviral drugs to treat HIV-related conditions. CFO Robin Washington said the decrease reflects the impact of recently passed U.S. healthcare legislation which would have an sales impact of $200M and an earnings impact of $0.15 sh. in 2010 primarily in the HIV business.�Sales of its HIV drug Atripla increased 36% to $692 M for Q1 compared to analysts’ estimate of $726M. Royalties from Roche sales of Tamiflu were $246.3M from increased sales related to the influenza pandemic. The healthcare reform impact would be �related to pricing of antiretroviral sales in the use from Medicaid and Medicare Part D. However, no 2011 guidance was given due to the fact that the bill was passed only on March 23. There are also pricing pressures in Europe.

Google's Rumored $1B ITA Deal: Bing Travel Killer?

Wed, 21 Apr 2010 16:04:34 GMT

Bloomberg has scooped everybody this morning with the news that Google is talking to travel-technology power ITA Software about a potential acquisition in the $1B range (article available to Bloomberg subscribers only). This would not only provide a nice juicy exit to ITA, a venture-backed company in Cambridge, Mass., that's been steadily growing since the late 90s, but it would also represent a potentially violent shakeup of the travel industry data business. With a purchase of ITA, Google would making a grand entrance into the complicated business of travel data and technology, which ITA supplies to leading travel information and agencies such as Orbitz.� If you're curious about ITA, here's a profile. I've spoken to a handful of people this morning, none of whom want to go on the record about this, but the consensus seems to be: "Hmm, interesting, I wonder what Google's up to?" Here's what I've concluded: Google's bid is just a direct play to up the ante on its search and advertising business in general, especially in the travel search vertical. It would certainly be viewed as a competitive move against Microsoft's Bing, which is a customer of ITA's and has been lately been beefing up its travel offerings.

Apple's Mac Attack Adds to Cash Stash

Wed, 21 Apr 2010 13:12:29 GMT

It gets to the point where you wonder of maybe Apple will make enough money that they can help us bail out the U.S. government. Apple announced earnings last night, and it was a barn-burner of a quarter, with the company thrashing earnings per share (EPS) estimates by almost $1.00. Shares look like they will open about 6% higher, blowing through the $250 mark. The company announced earnings per share EPS of $3.33, beating consensus estimates of $2.45.� Revenue was $13.5 billion vs. $12.04 billion consensus estimates, and a 49% increase over the prior March quarter’s results. Most notably, the company is showing strong growth in its core Mac computer growth, which may demonstrate that as it launches newer products such as the iPhone and the iPad, that's adding strength to the overall franchise. Mac sales were up 33% from the prior year. "This very strong performance was due primarily to the more than doubling of iPhone sales and the strong momentum of our Mac products," said Apple CFO Peter Oppenheimer on the conference call. Some other quick facts from the call:

Oppenheimer pointed out that they company printed a much smaller sequential revenue decline from the December to March quarters than they normally experience after the falloff from the holiday season, which demonstrates how strong the quarter was.
Operating margin was $4 billion representing 29.5% of revenue. Net income of $3.1 billion was up 90% over the year-ago quarter.
Apple sold 2.94 million Macs, a record for the March quarter. This represents 33% year-over-year growth.
Sold 10.9 million iPods, about equal to the 11 million sold in the year-ago quarter. "iPod Touch continued to be very strong with units growing 63% year-over-year."
Sales of $1.1 billion for the iTunes store.� In February the store crossed the 10 billion mark for songs purchased and downloaded.
8.75 million iPhones sold during the quarter, an all-time high exceeding the previous record set in the December quarter.
The company now holds cash plus short-term and long-term marketable securities totaling $41.7 billion at the end of the March quarter compared to $39.8 billion at the end of the December quarter, an increase of $1.9 billion. Cash flow from operations was over $2.3 billion.
Forecast for revenue on the June quarter: between $13-13.4 billion compared to $9.7 billion in the June quarter last year. Company said it expects the gross margin to come down to 36%� from 41.7% in the March quarter reflecting increased stock-based compensation expense.

MFLEX: Cheap Smartphone Play

Tue, 20 Apr 2010 17:35:14 GMT

Here’s an interesting company: It’s the second-largest manufacturer of “flex circuitry assemblies” in the world, which go into many consumer devices and mobile phones. It’s grown earnings 16% in the last year, and the company has nearly doubled in size since 2006. Think you’ve heard of it? The company is called MFLEX (Nasdaq: MFLX). I’d be impressed if you named it. The Anaheim, Calif.-based company, whose full corporate name is Multi-Fineline Electronix Inc, keeps a low profile – and its Website lacks some flash. But it’s a profitable company that’s been growing for decades and it’s now positioned well in the growing smartphone market. The flexible assemblies, which it manufactures to put into electronic components that can bend and fold,� are in high demand for products such as smartphones.

News Brew: Gimme My iPhone Back

Tue, 20 Apr 2010 15:25:26 GMT

Yesterday we covered the brewing story of the mysterious lost iPhone prototype which was scooped up by voracious journalists at Gizmodo (for cash) and then shown to the world. Well, the story has, of course, bloomed, with Apple requesting its property be returned. Seems reasonable to me. I mean, you lost your phone, you know who has it, so you ask for it back, right? That's just common courtesy. We'll see what happens with Gizmodo. I have a hunch that this could get really ugly. Read on, for that story, plus even more about the guy who lost the phone:

This is the new� iPhone. And everything about it (Gizmodo). I wonder, did they try to hotwire it too?
Here's the letter from Apple's lawyer (AppleInsider).
Shameless Gizmodo has also published a detailed account about how they think the iPhone was lost (Gizmodo). By an Apple employee. In a German-style beerhouse. Drinking. On his birthday.
ZDnet asks if Apple will sue (ZDnet). Well, of course they're going to sue.
In other news, Google is being pinned down on privacy policies (WSJ).
Google's services are currently blocked in a quarter of the countries in which they operate (Washington Post). Didn't know that.
Google takes a picture of a woman 43 times (CNET).
Steve Jobs: If you want porn, buy an Android phone (TechCrunch). And don't lose your phone in a bar.
IMF say high debt levels are dangerous ( Bloomberg). Thanks, Dr. Obvious.
Goldman Sachs doubles profit, says it's clean (Bloomberg).
Microsoft is looking at sweatshop allegations (Eurogamer). Sweatshops? In Asia? No, you have to be kidding...
Euro flights are slowly resuming (CNN). Just watch out for spewing volcanoes.
The most-loved CEOs (Forbes). That is, until their scandals break.
Facebook owns 41% of social media traffic (Mashable). So what are they going to do with it?
Watch out for the Internet coupon that knows everything about you (New York Times).

Apple, Gizmodo, and the Stolen iPhone

Mon, 19 Apr 2010 23:36:06 GMT

Tech blog Gizmodo has acknowledged paying for the acquisition of prototype next-generation iPhone that was allegedly "found in a bar" in Redwood City (oohhh, what was the Apple employee drinking?). Gizmodo then took lots of photos, disassembled it, and published detailed reports. Nick Denton, publisher of Gizmodo, acknowledged that he paid for the device and says he's a proud practitioner of "checkbook journalism." How pathetic. This has got to be the beginning of the end of the techno-blogosphere. Has Gizmodo gone TMZ on us? The Guardian points out that technically, this is quite possibly illegal. Did cheeky Nick check with his lawyer's before proudly tweeting it around town? But even a better question: Is it real? To show you how far Apple geeks will go, Daring Fireball blog author John Gruber has gone to extreme analytical lengths to prove this may be a real Apple prototype. The clue in his hunch is the presence of a glass-like ceramic enclosure: "Apple patent application, for high-durability ceramic enclosures. Glass-like appearance and feel but far stronger and more scratch resistant. And: radio transparent." Not everybody is buying it. One contributor to the Gizmodo message board says it's a "controlled fake":

I'm with thousands others who believe this is a controlled fake. And for all I've seen so far, Giz could be in it. Some things just don't add up, like how Giz wasn't able to figure out the screen resolution and CPU. Giz, if you managed to display anything on this (and you said you did get the "Connect to iTunes" screen) you can photograph it next to a ruler, zoom in and count the pixels per cm and extrapolate to the screen size. It will give you "only" an estimate, but it's better than nothing. And you managed to crack it open and yet no pics of the CPU? Puh-lease! How high on crack do you think we are?

We like conspiracy theories. We'll see if Apple retaliates. What if both Apple and Gizmodo were both� in on the action? This could be an elaborate hoax. Nick Denton is an innovator -- maybe this is some kind of new,� avant-garde advertising business model. It just goes to tell you, you can't really tell what's what anymore on the Internet.� It's a hall of mirrors.

2009: The Inverse of 1999?

Mon, 19 Apr 2010 22:23:10 GMT

It is remarkable how fast things have changed in just a decade, isn't it? I've thought many times about how the mindset of people today is almost the photographic negative of life in the Internet bubble in 1999. I was� embedded in the Internet bubble in 1999, building a Website for the then-hot publication Red Herring, and writing about, of all things, Internet stocks. When I wrote positive stuff about Internet stocks people wrote in calling me an idiot and when I wrote something negative -- for example, we published a series of investgative pieces about a stock called Corel, which I opined was likely to collapse -- people threatened to sue me or worse (incidentally, Corel stock did eventually collapse and was recently delisted). What fun! But that's how journalism works in general: You never win.

The Goldman Sachs Selloff: A Rear-View Mirror Panic

Mon, 19 Apr 2010 17:29:18 GMT

It was fascinating how the SEC lawsuit against Goldman Sachs precipitated a global selloff in just about everything on Friday: Stocks, commodities, pieces of paper. Its seems to me the mass hysteria was overdone. What gives? After all, the SEC launches lawsuits all the time -- and often fails to win them. What's more, this was a civil suit, not even a more official prosecutorial effort by a real organization, such as a District Attorney. Here's what I think: The markets are dumb. Really. The market is not going to go up or down based on the output of this SEC lawsuit. The markets are going to go up or down based on whether or not there is a strong recovery in the economy. The lawsuit itself has virtually no bearing on this, because it consists of government bureacrats picking over the carcass of a Wall Street disaster that started unfolding nearly 3 years ago. The damage is done. The SEC is looking in the rear-view mirror.

News Brew: Why We Don't Trust Government ... or Wall Street

Mon, 19 Apr 2010 16:46:34 GMT

Now, I don't want to get off on a rant here, but nobody trusts the government, it's confirmed by the Pew Research Center and The Atlantic magazine. And why should we? We all know that our system is now run by a bunch of greedy, power-hungry, and pork-infested politicians. What's interesting is this comes at a time when the public's confidence in Wall Street is also at an all-time low. So who to trust if you don't trust the beltway or Wall Street? I vote for main street, where hardworking people are still struggling get it done the right way, without pork-barrel spending or shady derivatives products. Since distrust and cynicism are rampant, let me present you today's "Conspiracy +" News Brew, where you can take hold of how the Powers That Be are doing their best to keep hard-working people down:

The SEC fraud charges against Goldman continue to dominate the news. I'm sure the lawsuit will be a tricky one. BusinessWeek has a nice article detailing what the SEC will have to prove. Namely, that Goldman Sachs was being 'materially misleading.'
Was there fraud? It's not clear-cut, says much of the Monday-morning analysis (Wall Street Journal)
For you legal eagles, here's a nice wrap of the defense strategies Goldman might use (The Atlantic)
20 Winners and Losers from the Goldman Sachs accusations (The BusinessInsider)
Malaise on Wall Street continues, with the markets bleeding red (MarketWatch).
The consensus is that the Goldman lawsuit will embolden the Obama agenda to regulate the finance industry. There's only one thing worse than conniving and greedy investment bankers -- politicians trying to clean up the mess. It just never works out the right way.
How financial regulation might resemble airport security (The Atlantic).
You have to love all the headlines linking selling to Goldman Sachs. I think the most far-fetched would be a connection to the wheat market (BusinessWeek).
It looks like there was a secret, government run prison in Iraq (L.A. Times).
Jim Sinclair has a brilliant analysis of how TARP money translated directly into bank bonsues (JSMineset).
What's next for the "Volcano Crisis" -- Reuters has a full report.
An incredible collection of Volcano images (Huffington Post). Resembles, in some way, the portfolios of mortgages that Goldman Sachs was selling.
Here's an interesting report on the tax bills for some of the largest companies in the world (CNNMoney). I don't feel like I got any of it.
For those who still care about Guantanamo, Col. Lawrence Wilkerson's charges are certainly interesting (The Public Record).
Al Gore's environmental organization is fueling up with cash from Dow Chemical (The Independent). What's wrong with this picture?

Key Trends from Google Earnings Call

Mon, 19 Apr 2010 14:59:58 GMT

This is a big year for new Google products, as the company has introduced its own smartphone, the Nexus One, and is in the process of trying to buy AdMob, the mobile advertising player, pending Federal Trade Commission (FTC) review. I thought it would be a good idea to run through the Google earnings call from last week and see which key trends the company is focusing on. Here they are:

Mobile advertising. Google sees huge growth in mobile advertising. This is why they would like to close the AdMob deal. On the earnings call, the company said that advertising customers are seeing increased mobile search & advertising activity and and that the company is focused on a "mobile first" strategy of adding mobile-friendly features. It was mum on what's going on with AdMob and the FTC other than saying they are "working with the FTC."
Location: A main component of mobile is location. During the quarter Google launched Near Me Now which allows you to search via location to find services in the vicinity.
Android & Chrome growth: Google is pushing hard with its new operating systems. The company said that Android is now powering 34 devices, up 70% quarter-over-quarter. 60,000 Android devices are sold and activated every day, according to Google. There are now 38,000 apps, up 70% quarter-over-quarter.
Nexus One Profitable: The company stated on the conference call that Nexus One is now a profitable business.
Traffic acquistion costs: On the negative side, Google's costs for traffic acquisition were up. One financial analyst noticed that it's interesting that Google is becoming more of a marketing company. Traffic acquisition costs were $1.7 billion or 26% of total advertising revenue. in fact, overall, Google's marketing spend overall increased nearly 50% year-over-year.
Paid Click & Ad trends: Susan Wojcicki, VP of products, Google said: "We saw advertisers come back and start spending again driven by a lot of our largest advertisers really increasing their spend ..."
Social Networking Competition: Perhaps the most interesting part of the conference call came when a financial analyst, Imran Khan of JP Morgan, asked about growth in social networks, including Facebook : "They are growing significantly faster as a [profit] source to a lot of your big customers like Ebay. How do you think Facebook and other social networking sites are a big long-term threat to Google’s business model?" Google's answer: "We don't comment on the issue of Facebook."

Goldman Chart: At Least the Suit Wasn't Leaked

Fri, 16 Apr 2010 16:02:45 GMT

Well, I like to look at the bright side of the SEC fraud charges against Goldman Sachs. At least by the look of the 5-day chart of GS, nobody saw it coming. So we know that the SEC wasn't leaking information and trading on it!

Goldman Sachs Charges are Mind-Blowing. Not.

Fri, 16 Apr 2010 15:22:27 GMT

I'm reading through the SEC complaint and many of the news stories about the alleged fraud in a mortgage-backed security called ABACUS 2007-AC1 (it just sounds diabolical, doesn't it?). The complaint� charges that the game was rigged, with Goldman Sachs allowing a hedge fund, Paulson & Co. (which was predominantly short the mortgage market) help select the securities that were in ABACUS, which was loaded with poor-quality mortgages, and then sold it to an unsuspecting client. Now, in Goldman's defense... it was acting as a broker between the two parties. So the question is what material knowledge it should have disclosed to the buyer. The SEC is essentially saying that Goldman was rigging a little time bomb on the declining mortgage market, and did not disclose that it knew the deal was filled with danger and conflict. It says that a Goldman executive, Fabrice Tourre, structured the deal and purposely left out material information about how dangerous the securities in ABACUS were. You can read the complaint here. Here is the Wall Street Journal article. And the Reuters story. If true, this story will confirm what we already knew: that the large Wall Street operators are filled with snake-oil salesmen trying to sell stuff to people to fill up their own bank accounts. What will probably happen? Goldman will get a wrist-slap, and we'll go back to business as usual... The market is currently freaking out with a big selloff. Presumably, this is because we'll now have suspicion about Goldman Sachs and all of Wall Street and it will be harder for them to mint money churning trades onto unsuspecting fools. The market is possibly also selling off because this will impact Paulson & Co., one of the largest hedge funds on earth, may have to liquidate some positions or be investigated itself. Have we learned anything?