Thursday, March 31, 2011

How Big Could China Be For Apple? $547 Stock Price in 2012?

China's growth is a critical factor in determining what Apple's stock price will be next year. We make some assumptions based on recent torrid growth and conclude a $547 stock price next year is very possible.

Read my full post at Forbes.

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A First Quarter Report Card

By Eric Jackson
RealMoney Contributor

3/31/2011 9:00 AM EDT
Click here for more stories by Eric Jackson


On Dec. 24, I gave my top four picks for the Chinese Internet sector for 2011. The video, with my picks and rationale, can be accessed here.

It's time for my report card.

In the video, I offered the following picks for the quarter:

Of these, Sina has been a monster. It's risen 56% this quarter, having touched new highs this week above $100. The stock has come a long way since I said it was deeply undervalued, given the performance of its Weibo microblogging platform, as compared with Twitter. I still love everything the company's management is doing and will continue to hold it likely for the balance of the year.

Baidu has also had a stellar quarter. It's up 39% so far. Early in January, the stock was below $100. It's going out above $130. There's a bit of a tempest in a teapot going on over there at the moment, with some fellow RealMoney contributors accusing Baidu of illegally posting their content online. There are copyright negotiations ongoing, but it's a sideshow. Baidu remains the top dog in search in China, and it's poised for more gains for the balance of the year.

Youku has also been a winner. It's up 45% for the quarter so far. However, you'll notice in my video that I suggested waiting until the company's first quarterly numbers in March before buying -- because I expected the stock to stay lower. It didn't. If you had taken my advice, though, you would still have had a 14% gain for the quarter. Still, as I noted in a RealMoney piece Monday, I'm now bearish on these shares. I believe it has run way ahead of itself, and that its competitive environment has changed even since December. I'm now short the stock

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[*** 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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Inside Secure CEO Sees Mobile Payment Boom

Eric Jackson03/30/11 - 08:58 AM EDT

NEW YORK (TheStreet) -- We've all heard that within a year or so we're going to be paying for stuff in stores with our phones instead of our wallets, using near field communication (NFC) technology.

I spoke recently with CEO Remy de Tonnac of Inside Secure. Based in Aix-en-Provence, France, Inside Secure is a fabless semiconductor company. It designs and marketing the secure chips and technologies used by payment cards and mobile phone manufacturers to allow contactless payments.

The company competes primarily against NXP Semiconductors(NXPI_) and counts Visa(V_),Qualcomm(QCOM_) and Nokia(NOK_) among its investors. Inside Secure is privately held, but it has said it thinks a public listing could make sense in the future.

The entire NFC space has been hot asGoogle(GOOG_) has announced support for contactless payments through its Android mobile operating system and as there has been much speculation about whether Apple(AAPL_) will enter the space.

Here are some highlights of de Tonnac's comments from our conversation:

We got started in this space in 1995. We were called GemPlus back then. We were a leader back then in smart cards. In 2000, we took a strong position with banks and what was known then as smart contactless cards. Today, we have a 75% market share in that business.

Back in 1999, our chief innovation officer wanted to put contactless chips into PDAs. We were really the pioneer in this space and got some of the earliest patents for what was to later be called NFC.

At the same time, Philips(PHG_) was working with Nokia on what they called "proximity services." They later coined the term NFC in 2002. We were among the earliest members of the NFC Forum with the company that's now known as NXP Semiconductor [then still part of Philips].

We all had this vision for where the industry was heading with payments, but we had to wait for the world to catch up with us. After leaving Inside Secure and being one of the venture capitalists in it, I rejoined the company as CEO a few years ago to help us get back some of the momentum we lost to NXP.


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

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How Do You Slow Down Executive Pay?

By Eric Jackson, Senior Contributor03/30/11 - 08:43 AM EDT

NEW YORK (TheStreet) -- CEO and executive pay keeps going up in America. It goes farther and farther away from the "typical" worker and it goes farther and farther away from other CEOs and executives around the world.

Are we worth it? Our CEOs and the people they hire say they are. The members of the AFL-CIO and other pro-labor groups say they are not. It's an impossible argue to settle.

But now, as part of the new Dodd-Frank act, all public companies are required to submit to non-bindingshareholder votes on compensation. The companies themselves get to choose whether the votes will occur annually, semi-annually, or once every three years. However, shareholders will also get to vote on how frequently they want to vote on the issue.

Most companies want to hold the votes every three years. Most shareholder groups want annual votes as the norm. (TheStreet(TST_), owner of this Web site, recently decided to take the high road and hold a vote every year.)

Will these votes work in slowing down executive pay? Not overnight, that's for sure. The votes will hopefully shame bad boards into changing their ways. But many of them will ignore the non-binding votes. After all, these are the bad boards, remember?

Shareholders should spend less time sending a message about executive pay or some other matter that gets put up for a vote on a proxy. Instead, they should actually vote out directors responsible for decisions that they disagree with.

For example, you don't like the executive pay and you think it's not tied to performance? Why not coalesce all the shareholders around voting out the entire compensation committee responsible for signing off on the pay? That would certainly send a clear and binding message to the rest of the board.

And can you imagine what the new members of the compensation committee would think coming into that role after seeing their past colleagues fired from a cushy corporate director gig? That would change behavior quick.

I favor simple approaches (such as voting the bums out through no votes for directors) versus more items for shareholders to consider voting on. By giving shareholders more choices -- say-on-pay, how often you want say-on-pay, director re-elections, shareholder resolutions -- your message to shareholders becomes more diffuse and weakened.


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

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Video: BullHorn -- China's Internet Surge



Baidu and other Chinese online stocks may still be attractive to investors in the United States. But not all are worth buying

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Video: Google's Strategy: China Watch



NEW YORK (TheStreet) - Contributor Eric Jackson details Google's actions in regards to China and how its relations with the country stands to impact the stock.
Wed 03/30/11 06:00 AM EST -- Eric Jackson & Brittany Umar
Stocks in this video: YHOO | SINA | AMZN | BIDU | SOHU | CTRP| GOOG

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Tuesday, March 29, 2011

Why I Never Dated Mia Sara and 7 Reasons Any Investor Should Write

Mia Sara and the son of Pierre Trudeau helped teach me that writing makes you a better investor.

Read my full post at Forbes.

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Monday, March 28, 2011

Why Stock Analysts Are Clueless

They have no accountability, skewed compensation, and are inherently conservative. Why do we continue to pay attention to them?

Read my full post at Forbes.

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Be Wary of Youku

By Eric Jackson
RealMoney Contributor

3/28/2011 11:30 AM EDT
Click here for more stories by Eric Jackson


Youku (YOKU - commentary - Trade Now) has been probably the hottest IPO of the last 12 months. But there's good reason to be wary of holding the stock from here. Some growing competitive threats within China and a looming IPO lockup expiration in a little over two months will weigh on the stock.

Youku is a leader in the exploding online video space within China. It went public last Dec. 8 and closed at $33.44 -- 160% above its offer price of $12.80.

On Friday, the stock closed a penny under $50 -- its highest close ever. That means that it now has a market capitalization of over $5 billion. This is a company that did $23 million in revenue in the fourth quarter, with a net loss of $6 million.

Youku is a great "story stock," like Tesla Motors(TSLA - commentary - Trade Now) or some pre-revenue biotech company in a hot new space. It has low to no revenue but infinite upside, so the story goes.

I've defended the company before, especially at the time of its IPO and in the following weeks. Skeptics have been saying this company was over-hyped. In its defense, it is the No. 1 online video player in China today. Great U.S.-based venture capitalists have poured money into it. And its CEO, Victor Koo, is well-spoken and very credible. Listen to the recent earnings call, and you can understand why many U.S. investors would be comfortable buying into a company under his leadership. He gives the sense of a very steady hand on the wheel.

However, I can't defend Youku at the $50 range with over a $5 billion market capitalization -- 4x its IPO offer price.

When Youku went public, the most common reference point you heard in the U.S. media was that it was the "YouTube of China." Over the last couple of months, you hear a shift, and the majority of people drawing comparisons now call it the "Netflix (NFLX - commentary - Trade Now) of China."

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[*** 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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Video: SINA Buyout Talk: China Watch



NEW YORK (TheStreet) - Contributor Eric Jackson details what makes Sina Corp an attractive buyout candidate.
Mon 03/28/11 06:00 AM EST -- Eric Jackson & Brittany Umar
Stocks in this video: YHOO | SINA | BIDU | SOHU | CTRP | GOOG

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Friday, March 25, 2011

RIMMber! Why Research in Motion is Still Risky

Research In Motion's recent earnings call and guidance promised big things in the 2nd half of this year. But they've been saying "stay tuned" for 8 months now.

Read my full post at Forbes.

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Thursday, March 24, 2011

6 Things Analysts Are Missing About Apple

Analysts have consistently missed the upside to Apple's stock. They're doing it again.

Read my full post at Forbes.

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Apple and the Wild Hedge Funds

By Eric Jackson
RealMoney Contributor

3/24/2011 12:15 PM EDT
Click here for more stories by Eric Jackson

One of the funniest semi-regular segments on Jim Cramer's "Mad Money" show is the one he calls "Hedge Funds Gone Wild." He brings it out every time there has been an indiscriminate market selloff, and he's trying to preach to the longer-horizon investor to ignore the volatile movements of certain stocks caused by these short-term hedge funds.

In our 24-7 world where we judge our CEOs on a quarter-by-quarter basis, it's not surprising that we give our money managers an even harder time. Hedge funds have to report their monthly numbers to their investors, and in recent years, many of the larger funds have to provide more regular updates than that. It's quite common to hear about funds providing weekly updates, and I've even heard of some funds providing some of their bigger investors with daily updates.

This type of scrutiny means that fund managers are even more under the gun to perform and simply cannot have even a couple of bad days. Otherwise, they risk getting a bunch of angry phone calls or, worse, redemption notices.

Therefore, many hedge-fund managers have an especially itchy trigger finger these days. If the broader macro environment hits a rough patch, due to Libyan bombings, protests in Bahrain or uncertainty in Japan, it's "sell now and ask questions later."

That said, certain stocks are among the bigger hedge funds' more popular holdings. Goldman Sachs updates a regular list of the top holdings of hedge funds. They include MasterCard (MA - commentary -Trade Now), Visa (V - commentary - Trade Now), Qualcomm (QCOM - commentary - Trade Now) and Wal-Mart (WMT - commentary - Trade Now).

But perhaps no other stock is as loved these days by hedge funds (and other investors) as Apple (AAPL -commentary - Trade Now). More and more, you hear new hedge fund managers throwing their weight behind the name. A few months ago, David Einhorn of Greenlight Capital made the case for it. Value investor Lee Cooperman owns it in his Omega Advisors fund. John Burbank of Passport Capital owns it

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[*** 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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Wednesday, March 23, 2011

After Quitting on Icahn, why is Keith Meister still on the Motorola Mobility Board?

By Eric Jackson

Carl Icahn no longer manages outside investors' money. This prompted his former right-hand man, Keith Meister, to leave last December to start a new hedge fund. So why is Meister still serving on the Motorola Mobility board as Icahn's representative?

Read my full post at Forbes.

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Jobs Deserves to Be on Disney Board

By Eric Jackson, Senior Contributor03/23/11 - 08:00 AM EDT

NEW YORK (TheStreet) - Although I've been an outspoken proponent for strong corporate governance and am genuinely sorry about the state of it today in Corporate America, I'm not always in agreement with what some argue is in the best interests of shareholders.

A case in point is push by some for more "Say-On-Pay" votes at shareholders' meetings. Large institutional shareholders and pension funds carp on the fact that CEO and executive pay continue to climb in this country. Often, CEOs get paid even when their companies are chronic under-performers of the market. We often hear about how much more than the "average" worker CEOs are getting today versus the 1960s.

And, look, I'm against over-paying fat-cat CEOs who add no value as much as the next guy. Heck, that's partly why I launched my campaign against Terry Semel at Yahoo!(YHOO_) in 2007 to remove him. He ended up pulling out more than $600 million from that company for his 6 years of work there. Most would say he got way more than he deserved.

Yet, these say-on-pay votes are always non-binding. Shareholders keep putting them on the proxies to be voted on whether to include them or not. Sometimes they pass. Sometimes they don't. Even when they do pass and then -- a year later -- get voted on in a disapproving manner, not much has changed.

In my view, shareholders can already show their displeasure with high executive compensation: vote "no" against the re-election of the directors who served on the compensation committee or -- if you don't feel that's sufficient -- against all the directors.

I was irate that Terry Semel got paid that amount of money but, at the end of the day, if I were in his shoes and Yahoo!'s board offered me that kind of sweet deal, I couldn't say I wouldn't have accepted the same package. It wasn't an inanimate object known as Yahoo! who offered the deal to Semel, it was the members of the board.

I also recently objected to some overly-zealous corporate governance advocates who banged the drum for Apple(AAPL_) to reveal its succession plan for Steve Jobs. They stirred up this belief that the board was holding something back. The media also ran with this.


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

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Don’t Own Google for Next Six Months

Larry Page is taking over as CEO from Eric Schmidt on April 4th. He's likely to struggle in the first 6 months of the job as he learns the ropes of being the public face of Google.

Read my full post at Forbes.

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Monday, March 21, 2011

Who's Running Google's China Strategy?

By Eric Jackson
RealMoney Contributor

3/21/2011 4:00 PM EDT
Click here for more stories by Eric Jackson


What is Google (GOOG - commentary - Trade Now) thinking in terms of its China strategy?

It was exactly a year ago, in March of 2010, that reports started circulating saying Google would leave China over hacker attacks and China's attempts to limit free speech on the Internet. A few weeks later, Google pulled its servers off the mainland and placed them in Hong Kong.

Looking at the 12 months since then, I would have to say that that decision was a complete failure.

Google's share of searches in China dropped to 27% last summer, down from 36% prior to the pull-out. The prime beneficiary has been China's top search engine, Baidu (BIDU - commentary -Trade Now), which saw its market share rise to 71% from 68% over the same period.

Google's share price has fallen 2% to $569 a share in that time. Meanwhile, Baidu's U.S.-traded shares have more than doubled, from just below $60 a share to $120.50 at the close Friday.

At the time of the pull-out from China, both of Google's co-founders, Sergey Brin and Larry Page, supported the move. Reading the psycho-social tea leaves, it appears that Brin was replaying the childhood trauma of his family fleeing the pre-Glasnost Soviet Union for America in pushing Google to leave China.

As Brin tells it in a recent interview at a TED conference, the decision to leave China was easy:

"We'll do as much as we can, but we don't want to run a service that's politically censored. We're not talking about porn and gambling, things like that, but really the political stuff. ... I want to find a way to really work within the Chinese system and provide more and better information. So, I think a lot of people think I'm naive, and that may well be true, but I wouldn't have started a search engine in 1998 if I wasn't naive in that way. ... Perhaps we won't succeed immediately, tomorrow or not, but we will in a year or two. ... Our focus has really been what's best for the Chinese people. It's not been about our particular revenue or profit or whatnot."

According to some reports, Google's decision to leave China led to some conflict between the co-founders and CEO Eric Schmidt. Though not the only reason, it is perhaps part of the reason why Larry Page decided to assert himself and take over the leadership of Google starting next month.

The recent action in Google's stock since that leadership announcement suggests that the market is still uneasy about Page's ascension and whether he will be a boost to the stock or an inexperienced and undisciplined leader.

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[*** 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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Friday, March 18, 2011

Chinese IPOs Are Coming (Back)

By Eric Jackson
RealMoney Contributor

3/17/2011 12:15 PM EDT
Click here for more stories by Eric Jackson


After the successful U.S. market debuts of E-Commerce China Dangdang (DANG -commentary - Trade Now) and Youku.com(YOKU - commentary - Trade Now) in December, I expected to see many more Chinese companies file for initial public offerings in early 2011. Until a few days ago, though, there were none.

There are signs, however, that several new Chinese companies plan to come to market soon in the U.S. On Monday, Qihoo 360 Technologyfiled a prospectus with the Securities and Exchange Commission to hold an IPO. Qihoo says it is China's third-largest Internet company by user numbers (339 million). It makes antivirus computer security software and is the second-most-popular Internet browser in China after Microsoft's (MSFT - commentary - Trade Now) Internet Explorer. UBS and Citi are co-managing the offering.

Qihoo's revenue has exploded over the past two years, going from $17 million in 2008 to $58 million last year. Over this time, the business has completely remade itself. Previously, two-thirds of its revenue came from selling third-party security software, but now more than 93% of its revenue comes from selling its own software and Internet services, including online advertising.

Unlike Dangdang and Youku, Qihoo is solidly profitable. Its net margins were 15% last year. The company already has $61 million in cash on its balance sheet as of the end of December. In its filing, the company said it seeks to raise up to $200 million from this offering.

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[*** 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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Wednesday, March 16, 2011

Yahoo! Gets Smacked by Japan Disaster

By Eric Jackson, Senior Contributor03/16/11 - 06:00 AM EDT

NEW YORK (TheStreet) - Yahoo!(YHOO_) was taken to the woodshed Tuesday morning following the overnight fear of a nuclear meltdown in Japan.

The stock touched $16.04 in early trade Tuesday after closing at $17.67 last Wednesday. The stock is being smacked down because of its ties to Yahoo! Japan. It's a major over-reaction.

Yahoo! has made it clear since its earnings call in January that it is exploring how to most tax-efficiently monetize its stake in Yahoo! Japan. Investors in the company have been calling for this for some time.

CFO Tim Morse reiterated a few weeks later to aGoldman Sachs(GS_) conference that Yahoo! was working closely with Yahoo! Japan owner Softbank on the best solution for doing this.

It appeared, based on the price action in the stock last week, that a deal between Softbank and Yahoo! was imminent, giving Yahoo!'s stock a major boost. However, the Japanese earthquake and aftermath have smacked down the stock.

Yahoo! Japan's stock was down 17% from last Wednesday to Tuesday. The biggest part of the drop came on Tuesday alone. Yahoo! Japan (ticker 4689 in Tokyo or YAHOY on the pink sheets in the US) ended Tuesday down 8.3% -- but, at the height of the panic, after the Nikkei re-opened after lunch, Yahoo! Japan was down more than 15% like the overall market over there. It rallied in the afternoon session.

There is no reason for Yahoo!'S early drop Tuesday - more than 7%, significantly more than the U.S. market -- other than following Yahoo! Japan in sympathy. That was much more severe of a drop compared toGoogle(GOOG_) or Apple(AAPL_).

One media outlet on Tuesday speculated if the large drop meant that someone knows that a deal with Yahoo! Japan is not going to happen or that a deal is much more complicated than first thought.

Everyone needs to take a pause.

Yahoo! Japan's exposure to a Japanese GDP slowdown is likely much less than other consumer discretionary names -- especially at the high-end (like Tiffany(TIF_) and Coach(COH_) -- yet it has been dumped in the same way as every other Japanese manufacturer.


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

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