Friday, July 29, 2011

Thursday, July 28, 2011

A Vision of Tech's Future

From today's RealMoney:


Roger McNamee -- famed Valley venture investor, musician, and buddy of Bono -- recently made a highly entertaining and thought-provoking speech at the Paley Center in Los Angeles on the future of technology. It's a very different vision of the world than we usually get from reading the day-to-day machinations of the debt ceiling debate, or even browsing something like TechCrunch. McNamee's view is far off in the future -- at least five years from now. I want to give RealMoney readers the tangible "investable" ideas coming out of the talk. Keep in mind that these ideas are long term in nature, so it's hard to pin them down for a trading strategy for the next few days or weeks. However, here's how I read his speech on what you should do if you have at least a one-year time horizon.... [Read the rest on RealMoney]

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Do Apple Apps or Android Daily Activations Matter Most?

There is no bigger a debate in mobile tech today than whether the growth of Apple's apps or Google's Android activations are more important as a predictor for which platform will "win" in the long-run. Here's my take.

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Mecox Lane and E-Commerce in China

E-Commerce in China is moving at a breakneck pace. I discussed the landscape with Mecox Lane (MCOX) CFO Paul Zhang recently.

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Wednesday, July 27, 2011

A Big Incentive for Yahoo! to Succeed

The details of Carol Bartz's employment contract from 2009 give her a big reason to make Yahoo! succeed before the end of 2012.


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Bank of America May Soon Unload their CCB Stake

Bank of America might have to soon dump one of its most lucrative investment, because it doesn't have enough capital to stay in the game.


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'Whale' Watching: What Does Soros' Latest Mean?


NEW YORK (TheStreet) -- George Soros announced that he's returning outside capital yesterday. That makes him the third first-generation hedge fund manager to do this this year, joining the ranks of Carl Icahn and -- former Soros protege Stan Druckenmiller.

Don't feel too bad for George though. He'll still be overseeing an estimated $24 billion of his family's money.

Are there any conclusions to draw from this action?

The media and perhaps some smaller investors spend too much time tracking the moves of these "whales." There have probably been no other hedge fund manager moves that the media has spent more time reporting than those of George Soros.

These reports all imply, "If this is what George is doing, well, maybe you should be doing this too, you poor slob."

There are even Web sites that have been set up with names such as "Whale Watching" that report on the holdings of these big hedge fund names as they change quarter to quarter.

The reality is that these "big name" hedge fund managers get it wrong just like the rest of us do. Global Macro printed money as a strategy four years ago but has been a dog's breakfast this year.

The media breathlessly reported over the last couple of months that Soros had "gone to cash." If you mimicked those moves, yesterday's announcement of his returning outside capital now puts that move into perspective.

He isn't necessarily expecting the market to collapse soon. He simply needs an extra billion in cash to redeem his outside investors. Whale watching would have caused you to ape a move that's for a reason very different than you think.

And remember when Icahn returned his $1.76 billion in outside capital to investors last March? The reason cited by Icahn was specifically an imminent market downturn.

"While we are not forecasting renewed market dislocation, this possibility cannot be dismissed," Icahn said at the time in his letter. That's a nice hedge, Carl. If the market tanks, you can say you didn't dismiss the possibility. If it zooms up, you can say you didn't forecast a downturn.

In any case, the Nasdaq is up 3% since Icahn's ominous letter.

The truth is that Soros has been one step removed from the day-to-day activities of his fund management for a while. The 80-year-old essentially has been doing marketing for the fund for some time.

I watched him doing a sit-down with Thomson Reuters global editor Chrystia Freeland a few months ago. Soros does these kinds of events all the time. Davos, New York, London, Shanghai. He could spend all the days of the year traveling around and talking about his macro views on Greece, China, the U.S., and Europe.

To be fair, Soros is good at it. However, at this particular conference during the Q&A, someone rose to ask him about a midmarket U.K. mortgage lender that his fund owned. "Huh?," Soros responded. "I didn't hear it." When the guy repeated the question, Soros waved his hands. "I don't know about that. You'll have to ask the guys that work at my fund."

The media will keep interviewing Soros and other "whales" because it will generate page views, but they should be a little more honest that the "Soros" circa 2011 is not the same "Soros" circa 1992.

What's really behind these moves of returning capital? In all likelihood, these guys don't need the hassle of more reporting requirements to the Securities and Exchange Commission , thanks to new postcrisis rules.

For a guy like Soros, with his family's assets of an estimated $24.5 billion, why keep the extra billion if, by getting rid of the outside capital, you'll avoid more regulatory scrutiny? Same thing for Icahn. Even after getting rid of almost $2 billion from outsiders, it's still believed he has more than $5 billion of his own money that he'll still manage.

The money management game has also certainly changed over their careers. Today, limited partners are more impatient than ever and wanting a steady stream of updates.

If you can manage your own money, without the hassle, why not? Maybe Soros will start trading his billions out of his Ameritrade account in his pajamas and bunny slippers.

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Tuesday, July 26, 2011

Inside the Sausage Maker of Executive Compensation at RIMM

An inside look at how executive compensation gets paid out at Research in Motion.

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Why Do Canadians And Americans See Research In Motion So Differently?

Some Canadian money managers believe that "the pessimism of the big US bulge-bracket firms" are responsible for Research In Motion's low stock price. Really?

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Should Apple Be Worried About Android Activations?

I've written a lot about what was impressive in Apple's most recent quarterly earnings report. Chief Operating Officer and acting CEO Tim Cook once again did a masterful job of explaining Apple's strategy and execution in the conference call. He was especially skilled at pointing out the reasons for the company's successful iPhone and iPad results, as well as why Mac growth is still exciting despite "missing" analyst expectations. But fair is fair: It's time to turn to the least impressive part of Cook's performance last week. In the Q&A session, Piper Jaffray's Gene Munster asked Cook about Google Android activations relative to Apple's iOS activations: "The iPhone clearly is gaining share, but comments from Google last week just said Android activations were up 56% quarter-over-quarter and, by our math, it looks like iOS activations were up around 20%. Tim, you mentioned that China is on fire...


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Monday, July 25, 2011

Those 2000 RIMM Layoffs? 1500 of Them Were Hired Since February 28th

Sometimes truth is stranger than fiction for Research In Motion.


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Why Microsoft Would Be Making Money on Yahoo! If They'd Bought It In 2008

The conventional wisdom that Steve Ballmer dodged a bullet by not buying Yahoo! in 2008 is wrong. Even if he'd bought it for $33, he'd be ahead of the game by now.


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Friday, July 22, 2011

Can Apple Really Hit A $1 Trillion Market Cap?

Many Wall Street analysts think a trillion is a pipe dream. But those are the ones who said Apple wouldn't pass $250 billion.

Read the full post in Forbes here.

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Thursday, July 21, 2011

What's Not to Like About Microsoft?

By Eric Jackson
RealMoney Contributor

7/21/2011 3:00 PM EDT
Click here for more stories by Eric Jackson

After today's close, Microsoft (MSFT - commentary - Trade Now) reports second-quarter earnings. With great results already in from Apple (AAPL - commentary - Trade Now), IBM (IBM) and Google (GOOG -commentary - Trade Now), can we expect good things from Mr. Softee? I think so.

Analysts expect earnings of 58 cents a share on revenue of $17.25 billion. Over the past year, Microsoft has typically beaten EPS estimates by 10%.

I'm warming up to Microsoft. Despite Greenlight Capital's David Einhorn calling for Steve Ballmer to step down, there have been very promising developments at the company under the CEO's watch. I believe Microsoft may be at the brink of its best run since Ballmer took over.

Consider:

  • Skype looks like a winner. Microsoft will be able to use it for both its consumer and business customers, giving it twice the utility that a Google or a consumer company could have. That justifies the higher acquisition price paid, and Skype allowed Microsoft to use some of its plentiful foreign cash.
  • Xbox seems to be the only game console that's still growing. Its latest sales numbers look very healthy. Call it a bump from motion-detecting Kinect, but it's still working.
  • Kinect is probably the most exciting homegrown technology to come out of Microsoft Research. There are thousands of applications for the technology. It's something you would have expected from Apple, not Microsoft.
  • Windows 8 is rumored to be coming out sooner than expected.
  • Microsoft's cloud offering, Office 365, looks solid.
  • The company recently beat Google to claim part of Nortel's treasure trove of patents. This allows Microsoft to pursue its strategy of claiming part of the ongoing revenue stream from the growth of Android devices. It seeks $15 per handset from Samsung for its Android phones. HTC has already agreed to pay Microsoft $5 a phone.
  • Windows 7 phones have yet to appear, but Microsoft hopes to sop up the low-end of the growing smartphone market with Nokia (NOK - commentary - Trade Now) as its key partner.
  • Research In Motion (RIMM - commentary - Trade Now) keeps bleeding market share. With no new phones from RIMM featuring the QNX operating system planned until late 2012, its market share should continue to drop precipitously. Microsoft should be in an even stronger position to pick up share from RIMM's stumbles.
  • Office, even before the cloud offering, has never been stronger. Google Apps is nowhere.
  • There is no expectation for search engine Bing to do well, yet it keeps chipping away at Google's market share.

What else could drive this stock? A recent anonymous letter to Microsoft (later said to be from Ivory Investment Management) presented several sound suggestions for managing its cash:

  • Use 100% of its domestic free cash flow, while borrowing against free cash overseas, to make a big, one-time buyback now (borrowing at 3% to buy a stock that has a 12% free-cash-flow yield).
  • Make regular buybacks thereafter (9% of the float each year).
  • Increase the dividend to 6% from 2.3% (I suggested this kind of dramatic increase last year, but to no avail).

Ballmer will see a big buyback as a non-starter -- been there, done that is his likely response. He also has a deep skepticism of "quick fixes" suggested by Wall Street.

It is reasonable, however, that Microsoft's board could be convinced that a more dramatic dividend yield -- along with regular buybacks -- is beneficial to all and doesn't impinge on the growth of the company. Should that happen, there could be a dramatic repricing in the stock's shares.

There's also the chance that Ballmer quits. There's likely to be a one- or two-day pop in the stock if that happens. But my read is that Ballmer isn't going anywhere. I believe he knows that he has something good at Microsoft. If I were Ballmer, hearing Wall Street's bellyaching for 10 years, I'd want to be around when several initiatives in the works finally come to fruition.

Original post from RealMoney.com



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What It Took To Move Apple’s Stock Price Finally

After trading in a range for 8 months, Apple finally broke out this week. Last April, I said what it would take for that to happen.

Read the full post here on Forbes.

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Wednesday, July 20, 2011

Why Did Google Pay Nearly Twice In Stock-Based Comp than Apple last Quarter?

Google has 39% fewer employees than Apple but paid them 66% more in stock-based compensation last month. Why?

Read the Forbes post here.

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Inside the Apple Distortion Field

I spoke with Kim Parlee on Business News Network today about Apple's quarterly earnings last night and what it means for the stock.

Watch the clip here.

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The 6 Things Analysts Are STILL Missing About Apple

They've been consistently behind the curve. Here's what Wall Street analysts are still missing about Apple.

Read the full post here at Forbes.

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Future of Chinese E-Commerce

By Eric Jackson 07/20/11 - 06:00 AM EDT

NEW YORK (TheStreet) -- Last month, I met about a dozen Chinese tech companies to get a better sense of the businesses and industry trends in China that affect e-commerce companies.

All but one of the companies I met with are public. The only private company was called Letao, and it sells shoes in China. Because of that, it's often called by Americans "the Zappos of China." However, there are important differences.

Letao does all its sales entirely on consignment. Also, because it makes more money on private label sales than reselling premium brands, Letao has been putting a big emphasis on its own white label shoes recently. It started as an ecommerce toy company but switched to shoes last year when it believed the market opportunity there was bigger.

Letao also has some big American backers behind it, including Tiger Global. Although there are no plans for an immediate IPO, that is certainly in the cards for Letao at some point.

Here's an edited version of my conversation with Eric Chai, the assistant to the CEO at Letao.

Eric: Tell us about your CEO.

Chai: Letao's CEO, Mr. Bi, used to be the assistant to Robin Li in Baidu(BIDU_).

Eric: And how many employees do you have?

Chai: We had 100 last year, but this year we have 500. The growth occurred after we made the transition from selling toys to shoes.

Eric: What do you think about all the group buying sites that are prevalent in China today?

Chai: I believe only two or three group buying sites can survive; we only collaborate with them so we can reach more people. Since the third quarter of 2009, we started cooperation with Groupon, Lashou and Nuomi. But since we have the customers now, we don't need to spend as much money to use those group buying sites anymore.

Eric: So how do you market yourself?

Chai: We have a very unique business model. We have some private brand names such as Angry Birds from Rovio, and these cheap products can attract many customers. We collaborated with Focus Media(FMCN_) before, but the commercial fees are high, so this is one of the reasons why we created the coupon strategy.

[Read the full post here at TheStreet.com]

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The 8 Most Important Things Not Being Covered About Apple’s Quarter

Most in the press are missing the most important aspects of Apple's quarter announced last night. Here they are.

Read the full post in Forbes.

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Why Apple Should Never Pay a Dividend – Ever

Stop the whining already! If you want to complain about how Apple spends its money, why don't you make $70 billion and have it sitting in your bank account first.

Read the full post here at Forbes.

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Tuesday, July 19, 2011

What To Watch For From Apple & Yahoo! Tonight

I would say both quarters worked out as expected for Apple and Yahoo!


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Carol Bartz’s 8 Blind Spots that Sunk Yahoo!

She came in full of piss and vinegar, but Carol Bartz's blind spots have derailed her tenure at Yahoo!

Read the full post here on Forbes
.

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Monday, July 18, 2011

Meeting with Sky-Mobi

My meeting last month with CFO Carl Yeung of Sky-Mobi (MOBI)

Read the full post on RealMoney.com

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The Top 6 Reasons Research In Motion Shot Itself in the Foot

How the once omnipresent smartphone provider ceded the market to others in 4 short years.

Read the full Forbes post here.

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Friday, July 15, 2011

Research In Motion’s Leading and Lagging Indicators

RIMM Bulls and Bears need to get their leading and lagging indicators clear.

Read the full Forbes post

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Why Did ISS Recently Advise Yahoo! Shareholders to Re-Elect the Board?

Yahoo!'s board has been one of the worst in Corporate America for 10 years. Why did influential proxy advisory firm ISS recently give them a "Thumbs Up"?

Read the full Forbes article here.

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An "A" For Yesterday's Google Earnings Call

Props to Larry Page for taking past criticisms to heart. One big unanswered question.

Read the full Forbes Post.

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Wednesday, July 13, 2011

Did CEO's Hockey Obsession Doom RIM?

By Eric Jackson07/13/11 - 07:00 AM EDT


NEW YORK (TheStreet) -- When Apple(AAPL_) introduced the iPhone to the world in January 2007, Research In Motion(RIMM_) dismissed the device as a competitive threat, or so we would learn later.

Co-CEO Mike Lazaridis stated internally, according to reports, that no one would want the equivalent of a personal computer on a phone. People just wanted an email messaging device, he asserted -- a worldview shaped by the company he'd built.

But the death knell for RIM probably came earlier, on Oct. 5, 2006. That was the day the other RIM co-CEO, Jim Balsillie, bid $185 million to buy the Pittsburgh Penguins.

That bid began a childish, multiyear quest by Balsillie to buy a hockey team, which diverted his focus from the core RIM business. RIM's competitive position today is arguably unfixable because of Balsillie's quixotic quest.

Balsillie's bid for the Penguins ran from October to December 2006, when he finally withdrew his bid in frustration. But five months later, he announced he was going to buy the Nashville Predators instead.

Again, however, the bid was not to be. After the league fought it and the owner got cold feet, the deal was canceled a year later.

But Balsillie wouldn't let go of his dream. With a net worth much greater then than it is now, he made a $212.5 million offer to buy the Phoenix Coyotes in May 2009. This deal also got derailed several months later.

Did a hockey fantasy kill RIM? Wasn't Jim Balsillie working on his own time to spend his own money, which he has a right to do?

Well, you can call it a coincidence, but here are the numbers:

  • Since Balsillie's Oct. 5, 2006 bid for the Penguins, RIM's shares are down 16%.
  • Over that same period, the Nasdaq is up 24%, and Apple -- riding the incredible success of its iPhone, which it turns out people did want -- has risen 358%.

Maybe this would have happened anyway. Maybe Apple was just too strong and RIM's directors should shrug their shoulders and say, "Hey, it wasn't our fault because this is just a competitive business."


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Tuesday, July 12, 2011

No Silver Bullets for $RIMM

Although some analysts and shareholders are touting some quick fixes for curing what ails RIM, none of them will work.

Read the full post on Forbes.

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Fixing E-Commerce: China Watch

NEW YORK (TheStreet) -- Contributor Eric Jackson details his findings regarding Chinese e-commerce and what companies need to do to fix problems they currently face.Fri 07/08/11 05:15 AM EST -- Brittany Umar & Eric JacksonStocks in this video: FDX SINA AMZN NTES SOHU YOKU UPS



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What Makes It a Perfect World?

By Eric Jackson
RealMoney Contributor
7/11/2011 10:45 AM EDT
Click here for more stories by Eric Jackson

Perfect World (PWRD - commentary - Trade Now) is one of the best-known online gaming companies in China. The storylines and characters for its top games are sourced from popular legends in Chinese literature, so there is an immediate familiarity for gamers.

Similar to all Chinese gaming stocks, Perfect World pulled back in 2010 from the fall 2009 highs, when the stock hit over $40. In the rally earlier this year, Perfect World and other gaming stocks underperformed. It bottomed at $17 a few weeks ago. Now it's back over $21.
Despite the company's conservative guidance, Perfect Worls has a number of promising new games coming out this year and going into next year. Management is playing it down, but the stock is likely to exceed expectations, which is why I took a position in the name a couple of months ago.

Last month, I met with Perfect World Investor Relations Officer Vivien Wang at the company's headquarters, a 22-story building overlooking Beijing's suburbs. What follows is a summary of our conversation.

Eric: So can you tell me about your company and your strategies for the next six to 12 months?

Wang: The company was founded in 1997, and the senior management has worked together for a very long time. Our revenue is not as concentrated as other companies, none of our games contribute more than 30% of the total revenue, whereas some of our competitors rely on 70% of their revenue from a single game.

For the near term, there are no major catalysts, but right now, we are targeting European investors because they tend to have a longer-term vision.

Moreover, we are trying to lengthen the life cycle of our games from one year to two years, and we focus on a low turnover rate.

[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

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Monday, July 11, 2011

Friday, July 08, 2011

What Did Yahoo! Not Want You To Read This Morning?

There is much bigger news about Yahoo today than David Einhorn selling his stake.

A couple of days ago on his blog, Bill Bishop posted some details about an upcoming interview between Jack Ma and China Entrepreneur Magazine.

The interview is the newest example of Ma going out of his way in the Chinese media to defend his actions in transferring Alipay out of Alibaba Group without Yahoo!’s (YHOO) or Softbank’s consent. He previously had spoken out at length to Caixin Magazine and done an extensive press conference at the company’s headquarters in Hangzhou.

This newest interview was the most outspoken yet for Ma. Beyond Bill’s highlights in his post was a SlideShare document with the full Chinese and English translation transcript — 23 pages in all. Some of the most striking language was in that document.

This morning, I noticed the post had been updated. Here was his comment at the bottom of the new post:

UPDATE: I removed the full text of the Jack Ma interview and English translation at the request of China Entrepreneur Magazine. They did not want the full text online anywhere but their own site, and apparently Yahoo and Alibaba were upset at the translation and the portrayal of some of the parties involved. The real issue was probably not the translation but what Jack Ma said. As best as I can glean the Alipay compensation negotiations are not close to completion. Alibaba is doing its own translation, to “clean up” what Jack Ma said. If there are discrepancies that appear to change what was said I will update again.

So, reading between the lines of Bill’s comments, I have to believe it’s more from Yahoo!’s side that they objected to the content of the English translated 23 pages, rather than Alibaba, since Jack Ma is the guy who gave the full interview in the first place.

I read the full post a couple of days ago, included the translation that has now been removed and luckily made a few notes. Here’s a summary of the text that was there and which is no longer there now:

- In June 2009, Alibaba Group’s board transferred 70% of Alipay from the Group to a Caymans-based entity controlled mostly by Ma. This Caymans entity had a Variable Interest Entity (VIE) relationship with the Group, meaning that Yahoo! and Softbank still indirectly owned Alipay

- On June 21, 2010, the People’s Bank of China (PBoC) released rules for Chinese companies in the payment services business

- On August 6, 2010, the final 30% stake of Alipay was transferred over to the Caymans VIE

- According to Ma, the Group board approved both transfers

- On January 26, 2011, the PBoC faxed Alibaba Group asking them to declare if they had a VIE connected to Alipay. Ma states that it was understood that if the Group had a VIE, it would not receive a government license because they do not want any foreigners controlling something strategic like a payments company

- Ma says he had 3 choices: (1) keep the VIE and hope the government changed its mind but risk having them shut down Alipay, (2) maintain the VIE but lie, or (3) terminate the VIE to comply with the government. He chose the latter but claims Softbank’s Son wanted him to do #2 and lie.

- Yang couldn’t make a decision because all of the options would make him look bad to his shareholders. So he abstained from the decision.

- Ma on Son: “he’s the best negotiator in the world and the world’s biggest cheapskate.”

- Ma on Son: “If Ali Group had listened to more than 30% of Sun’s advice on business and operation, this company would have died a long time ago. A lot of his advice was stupid.”

- Several people approached Ma last year about buying a stake in Yahoo but Ma declined due to “kindness”. The magazine speculated that he might not want to own a stake in a company controlled by Son.

- Ma says he did have “special private communication” with the PBoC prior to the rules coming out.

- On the Alibaba Group board: since setting up the board in 2005 “not one decision has been approved by the board. A lot of things have been discussed outside of the board and the board have come to an agreement.”

- On whether there could have been a better solution if there had been more time: “this matter wouldn’t have even been approved with ten times the time. Why? It has to do with the ass-brains of these two. [NB See the update at the bottom of this post for some clarification on what an "ass-brain" is in the original Chinese.] Sun wants to benefit Softbank and Yahoo wants to benefit Yahoo, and they doesn’t care who’s going to take responsibility for this company.”

- On making his unilateral decision: “I admit that this decision isn’t the most perfect one, but it’s the only answer. I’m not saying I’m correct, I’m just saying I think i’ve done what I believe to be right.”

- On whether he should have lied to the government as Son wanted: “I’m almost 50, am I supposed to go and do something illegal?”

- When asked if Yahoo was lying about not knowing about the transfer of shares: “What do you think? Every time we have a board meeting there are minutes taken. Them saying that is so they can say to their shareholders: ‘This is Ma’s responsibility, don’t blame me.’ In reality, it’s giving me more pressure and bargaining chips in negotiations.”

- On Yahoo’s delay between March 31 and mid-May when they revealed the share transfer in their 10Q: “When Yang received the forms, he should have immediately told the Yahoo shareholders, but he waited until May to tell them. So now, Yahoo’s US shareholders blame Yahoo, not us.”

- “Before, this fireball was in my hands, and they said nothing. I was falling all over the place, not knowing what to do, and now i’ve given it to them.”

- On the state of the relationship today between Ma, Son, and Yang: “We’re not really that split. We argue it out in the day then go for a drink in the evening.”

- On why Son is now quiet: “He never shows his cards, his negotiation tactic is never to show his cards, and to force you. He’ll force you into a corner without showing his cards. He still hasn’t shown his cards, he’s waiting for Yahoo to do it, because Yahoo’s bargaining position is worse than his. Sun’s thinking a lot harder than Yahoo, he’s a lot more crafty.”

- On what the compensation to Yahoo and Softbank for Alipay will be: “The compensation will be large, very large.”


Some other interesting points from the article:


- Although Yahoo invested $1 billion for its 40% stake in the Group in 2005, Softbank invested only $80 million (in 2 rounds) for its 30% stake

- Ma was surprised at the criticisms that have come his way from the “domestic press” in China

- Ma was reelected to the Softbank board on June 25th

- Ma claims the US government has been involved in this dispute since it started but then says he can’t say any more.

- Qihoo 360′s (QIHU) CEO, who used to be the CEO of Yahoo China, said “the shares Yahoo has in Alibaba are perhaps worth more than all of its own shares.”

What remains unanswered is why the Chinese government insisted that a VIE not be connected to a payments service. We still don’t know.

It seems that Ma does want to reform how he’s been portrayed within China. That’s the reason for all these interviews.

When will there be a deal and how much will it be for? We don’t know. It doesn’t sound imminent from this conversation. However, the fact that Ma is spending so much time defending his actions makes me hopeful that a resolution will be found.

I hope that Yahoo’s board reads what Ma has said and tries to be a little bit more “crafty” themselves for a change.

[At the time of publication, Jackson was long YHOO]

Read the full post here at Forbes.

[UPDATE: Some have complained they can't see this original post on Forbes, so it's now here. Also, I received an email from Iris Guan, the English Editor of China Entrepreneur, saying that I was welcome to report on the article. They simply made a few updates to the translation that originally appeared on Bill's blog. For example, when Ma refers to Yang and Son as "ass brains" that is a literal translation from a Chinese idiom. According to Guan, it actually refers to "seeing things from your position."]

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Thursday, July 07, 2011

Things Never End Well, Otherwise They Would Never End

Why bubbles will continue to happen. And why the tech bubble in the US and China are destined to end badly.

Read the full post at Forbes here.

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RIMM Bull vs. RIMM Bear Discussion from Last December

Here is a lookLink back on an interview I did with the biggest RIMM Bull -- Gus Papageorgiou of Scotia Capital -- from last December. I have been and continue to be a huge RIMM Bear.

The original article appeared in Real Money.

Looking Through a Bull's Eyes

By Eric Jackson
RealMoney Contributor

12/28/2010 7:30 AM EST
Click here for more stories by Eric Jackson

An epic debate has been raging for the last six months between the bulls and the bears on Research In Motion (RIMM - commentary - Trade Now). I am decidedly on the bear side, but I acknowledge that there are good arguments on both sides

The debate is reflected in the variance in price targets on the company. They range from $35 to $130.

The stock is back to $58, after getting up to the low $60s in recent weeks (prior to the most recent earnings release).

That earnings call was unique because it didn't result in an instant 10% (plus or minus) move in the stock. For once, the bulls and bears found equal amounts to chew on in the results and the stock was basically flat -- though it's dropped a few percentage points since then.

I believe that anytime an investor has a strong view on a stock, they should vet it by talking with someone who sees things from the complete opposite perspective.

So, last week, I called George Papageorgiou of Scotia Capital. George is the one who has the $130 price target on Research In Motion. I asked to chat with him, making it clear that I had a short position in the company.

He got back to me right away, willing to talk, which made me like him. What I also like about him is that he's got a bold call. He's not like 85% of analysts who like to stay within 10% to 20% of a stock's price and say nothing controversial. George is letting it ride with $130.

Another positive for George is that this has been a call of his for over a year now for the stock. He's sticking to his guns here.

I asked him to tell me why I and all the other Research In Motion bears are wrong. In bullet points, here's what he said:
  • Earnings and profitability growth: This is a stock trading at 8x trailing earnings and growing earnings 30%.
  • International growth: George doesn't believe Research In Motion gets any credit for Latin America and Southeast Asia. People are paying full price for phones there and opting in huge numbers for unlimited prepaid BBM/Facebook/email packages.
  • There continues to be strength in the enterprise: This isn't changing anytime soon, according to George.
  • Playbook: George believes this tablet will be a winner. It's going to be the first dual core processor on a tablet (making it 2.5x as powerful as the iPad). George actually thinks many users will prefer to use the Playbook as a phone with full Flash support.

George believes that the market will gradually see how low the company's shares are priced by the middle of next year.

Moreover, he thinks that Research In Motion might be able to show the Playbook's QNX operating system running on smartphones by the second quarter of the company's next fiscal year and that the co-CEOs are being conservative in not committing to dates (though they weren't so conservative last September when they pre-announced the Playbook seven months before shipping).

He also believes that Research In Motion got a bad rap for ceasing to report quarterly net additions in subscribers and devices shipped. After all, neither Apple (AAPL - commentary - Trade Now) nor Nokia(NOK - commentary - Trade Now) report such figures, so why should Research In Motion get so much grief? He is right.

George asked me why I thought the company wasn't a buy here (credit to him for asking). My view is that Research In Motion's price-to-earnings multiple is a reflection of market expectations for an international repeat of what happened in North America. He took offense to me characterizing all of North America for slowing when only the U.S. has. "In Canada, RIMM still has 50% share," he reminded me.

But there are basically no decent Android phones (Google (GOOG - commentary - Trade Now)) in Canada, I responded. There is no HTC Evo or Incredible or Motorola (MOT - commentary - Trade Now) Droid. Maybe Research In Motion pulled some strings with the Canadian carriers, but they can't keep good phones out for long.

We will have to see if the other international markets maintain their BlackBerry momentum or if they start to flag. It's clear that, in China, Research In Motion is nowhere, and that's not going to change anytime soon.

All that said, it will take six months to see how successful the Playbook is and how Research In Motion's results play out. I believe they're dead wrong, but I appreciate the views of George and the other Research In Motion bulls.

Eric Jackson had a short position in RIMM and long positions in AAPL and GOOG at the time of publication.

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A Q&A with 51Jobs


By Eric Jackson
RealMoney Contributor

7/7/2011 12:15 PM EDT
Click here for more stories by Eric Jackson


51job (JOBS - commentary - Trade Now) is often referred to in the U.S. as the "Monster Worldwide(MWW - commentary - Trade Now) of China."


Since the financial crisis of 2008, 51Job's U.S.-listed shares have been on a tear, tripling in the last two years alone. This is due in part to the continued growth of the Chinese economy and the great need to fill white collar jobs there. During a pullback in the U.S. markets in May and June, the stock fell to $45 from $63, but it has bounced back sharply in the last couple of weeks and is now trading around $60 a share.

I recently met with Linda Chien, the director of investor relations, in 51job's Shanghai office and I asked her about the staffing company's business, competition, customers and future, among other things.

JACKSON: Can you give an overview of 51job and what's been happening with the stock of late?

Chien: The volatility has been huge. I don't think the movement is anything related to the fundamentals. We have been listed since 2004, so we have seen ups and downs and so we are not over-worried about daily movements. For our business, we focus on providing job search for companies, but we are trying to diversify into H.R. training. Businesses need to think about retaining human assets, and so we will diversify into that business.

In the U.S., we are being compared to Monster all the time, but only part of our businesses is like that. Our target group is on the professionals rather than workers or laborers. Currently, 50% of our business comes from online, 25% is from print, and 25% is from training/campus recruitment/others. The online business overtook print business since the middle of 2009, and it will continue to grow, whereas print will go down.

How did you start and how do you compare yourself with your competitors?

We use an integrated approach. Our business started with print at first. After we had the lead, it is easier for us to attract more customers. Most of our competitors are playing catch-up with us and we have more diversified businesses.


...

[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]Link

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Wednesday, July 06, 2011

Why Corporate Governance is So Important to China

Crises tend to come from places where we are not looking. Corporate governance in China is a new area where the government needs to focus more attention.

Read the full post here in Forbes.

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How to Ensure Strong Boards and Proper Accounting Standards in China

Corporate governance and a lack of confidence in companies' financial statements threatens China's future growth. Their government must move quickly to clean things up.

Read the full post here at Forbes.

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Why the “Winner Takes All” Strategy Doesn’t Always Work

Chinese Internet companies are going ga-ga pursuing "winner takes all" strategies. It will work for some, but not others.

Read the full post here at Forbes.

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My First-Hand Impressions of the Chinese Tech Sector

Here are my top 11 impressions of the Chinese tech sector from my recent trip there.

Read the full post here at Forbes.

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Zynga: Myths and Truths

By Eric Jackson 07/06/11 - 07:00 AM EDT

NEW YORK (TheStreet) -- A lot has been written about Zynga in the last week since it filed its S-1 last Friday, revealing more details about its financials and future IPO plans.

Overall, most in the press have described the company positively because it appears to be making money compared to Groupon.

The company does have a number of strengths but the general view of the business press is badly misinformed due to a lack of familiarity with the gaming sector.

Here are some myths on Zynga and some underlying truths:

Myth: The company is cheap relative to Facebook and LinkedIn(LNKD_).

Fact: Facebook and LinkedIn are going to be trading at 40 times their 2011 revenues this year, while Zynga is "only" going to trade at 20 times their revenues. Therefore, it's cheap. The reality is that there's a reason Zynga will trade at a discount: It's in a "hits" business where your valuation is only as high as your last hit game.

Myth: Its profitability in the future is assured.

Fact: Again and again in the IPO coverage, you get articles that refer to what Zynga did in net profits last year and in the first quarter of this year. The assumption is that you will see it continually build from there. Whatever its revenue and profit ramp has been so far, that trend will continue. This is the same basic math skills and unquestioned assumptions that caused us to drive the U.S. economy in a ditch because of housing.

Zynga is more vulnerable to a disruption in future profitability because it's a gaming company. Look at the quarterly earnings of any gaming company: it's lumpy over a three- to five-year period. Nobody's figured a way out of that one. And just because they sell their games on Facebook doesn't change that basic industry structure they operate in.

Myth: It is in a weak position because it relies on a few core gamers for most of its revenue and profit.

Fact: This was listed as one of its risk factors in its filing. (By the way, news flash to the media: All companies making filings with the SEC include risk factors. It's not a sign that the company is about to go belly up. Their lawyers write this section.) All gaming companies are in the same boat. Usually 80% to 90% of the users play the game for free. The real money is made off the small addicted users who play.

.....

[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

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Tuesday, July 05, 2011

How is Jack Ma Viewed Within China for What He Did to Yahoo!?

Many inside China, as well as outside, fear Jack Ma because of his and his company's market power.

Read the full post here on Forbes.

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Is Larry Page the Answer to Google’s Problems?

After 3 months on the job, Larry Page has yet to make a speech to investors. That's not a good sign for Google's stock price.

Read the full post here on Forbes.

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What the US Might Do About China’s “Go Slow” Approach to Revaluing the Renminbi

China would rather go slow on the yuan revaluation. The US seems to think it has no power to say otherwise on the matter.

Read the full post on Forbes.

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Friday, July 01, 2011

Zynga’s a Real Company But Here Is the Big Risk

Zynga deserves to be valued highly when it IPOs. But it's a real company that will got through ups and downs like any other.

Read the full post here on Forbes.

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Wall Street Journal China Opinion: 谁将是通吃的赢家?

Who will be the winner of the "Winner-Take-All" strategy in China's Internet Space?

Read the full post in the WSJ China.

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