Why Google Could 'Disappear' in 5 Years

My discussion today on @SquawkStreet about the challenges mobile presents to $GOOG:



[Long YHOO & AAPL]

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CNBC Video: Apple to Hit $1,650 by 2015

My appearance this morning on CNBC about Apple:



[Long AAPL and YHOO]

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Amazon Deal ‘Final Straw’ for Netflix

My appearance on CNBC today discussing $AMZN $NFLX $CSTR $VZ

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CNBC Video: Betting Against Facebook

Here's my appearance on CNBC this morning about Facebook and Google.

It stems from this Forbes article.

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Who's to Blame for Botched Facebook IPO?

NEW YORK (TheStreet) -- I was at CNBC in Englewood Cliffs, N.J. last Friday when Facebook(FB_) had its initial public offering.

The tension in the room among producers was palpable as the IPO was delayed for half an hour.

Then, suddenly, it opened. The stock quickly jumped to almost $45. There were whoops and clapping atCNBC. People were excited.

However, within 10 minutes, something strange happened. The stock started to fall. It was one long, continuous slide back down to $38, where the underwriters defended it for the rest of the day.

That day, on business TV, the Facebook blame game started. Whose fault was it?

I couldn't have imagined that outcome a few short hours before. I woke up around 6 a.m. that Friday. When I turned on "Squawk Box," there was a sense of excitement similar to the Superbowl for business media. Later that day, people focused on Nasdaq (NDAQ_)and its technical problems. Next, people started pointing fingers at Morgan Stanley (MS_) for retaining too much control over the offering.

Yet, Morgan Stanley was the lead bank behind the most successful social media in the last two years:LinkedIn (LNKD_).

In contrast to Facebook, which sold 421 million shares in the IPO, LinkedIn sold 7 million shares. Did Michael Grimes give bad advice to Facebook and good advice to LinkedIn?

Unlikely.

If Morgan Stanley wasn't the problem, who was? Facebook management, which is to say, Mark Zuckerberg

Read the full post in TheStreet

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Video: Why Yahoo! is the New AOL and Google is the Old Microsoft

My hit from earlier today talking about Yahoo! and why Google is like Microsoft in 1999

[Long YHOO and AAPL]

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CNBC Video: How do Activist Investors Help Companies?

My CNBC appearance from earlier this afternoon discussing activist investors and Yahoo!



[Long YHOO]

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Global Problems Trouble Equity Markets: Jackson

WED 03 AUG 11 | 05:00 AM ET

"I think the equity markets woke up yesterday and realized there are a lot of problems still in the world," Eric Jackson, founder of Ironfire Capital told CNBC. "People are worried about the recession coming and we've obviously got euro zone problems. It was kind of like a sell-the-news type reaction in the market," he added.

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Why CNBC's Mark Haines Was Special

Mark Haines was one-of-a-kind. That's the problem with TV business news today.

Read the full post here at Forbes.

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CNBC: LinkedIn IPO Insanity?

How do you stop a bubble? I don't know. That's really for the regulators and the Fed. I don't see this ending soon. We're still in the 3rd inning.

My appearance on CNBC's Closing Bell today:

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Yahoo! PR Responds to Stock Sale Questions

Yesterday, Jim Goldman of CNBC posted a story on his blog raising questions around seeming inconsistencies in Carol Bartz' comments last Thursday on Squawk Box in (1) saying she "didn't sell anything" earlier this year and agreeing that she "reacquired" them later and (2) that she wanted to keep Yahoo!'s stake in Alibaba.com (YHOO sold $150mm in Alibaba.com stock yesterday).

Here's a transcript of the part of the interview dealing with her publicly reported $2mm in stock sales between February and June 2009:

KERNEN: ALL RIGHT.YOU'RE GOING TO BE THERE FOR A WHILE, I GUESS, HUH, AT YAHOO!?YOU SELL SOME STOCK FOR TAX REASONS?ANY OF THESE GUYS --

BARTZ: I DIDN'T SELL ANYTHING, NO, NO, NO.

KERNEN: YOU REACQUIRED IT. RIGHT

BARTZ: YEAH.

KERNEN: YOU DO ANYTHING, YOU'RE GOINGTO SEE FROM SOME SHAREHOLDERS THAT ARE STILL MAD ABOUT JERRY YANG THAT YOU'RE NOT GOING TO STAY. THAT'S PROBABLY PART OF IT. SO YOU'RE LONG HAULER, RIGHT?

BARTZ: YOU KNOW, LISTEN --

KERNEN: YOU LOOK AT ME LIKE YOU USED TO LOOK AT HAINES.YOU'VE GOT THE SAME LOOK YOU USED TO GIVE HIM.

BARTZ: WELL, YOU KNOW, YOU'RE KIND OF TAKING OVER THE YOU KNOW WHAT SPOT.

QUINTANILLA: HE'S BEEN DOING THAT FOR A LONG TIME.

KERNEN: DOES IT BEGIN WITH AN "A"? FORGET IT. ANYWAY, THANKS, CAROL.AND HOPE TO SEE YOU SOON.

BARTZ: I'M AROUND A LONG TIME. I WILL ANSWER YOUR QUESTION. YES, I'M AROUND A LONG TIME.

Later in the day, Yahoo! responded to the criticisms Goldman raised in his post. I want to address their response to the stock sales question, as I was the one who initially raised this issue. Here's what Yahoo! PR said to Jim:

"As you may know, when RSUs (Restricted Stock Units) vest, income taxes are due similar to ordinary payroll. For RSUs, our programs work that rather than the employee paying us the taxes owed in cash and us remitting to IRS, the employee 'sells' the proportionate amount of shares to cover the taxes (for example 40 percent).

"For reporting purposes this looks just like a sale but it is only to cover taxes due to IRS, State of California, etc. This is common practice - not just Yahoo!. Carol has a substantial portion of her comp tied to stock price performance in the form of options and RSUs and so is aligned with shareholders."

There are several problems with this statement.

Yahoo! appears to be saying that they have a program in place that is rigorously enforced from top to bottom within the organization. If there is actually a policy like this in a Yahoo! employee handbook, it might go something like this:

"When you receive RSUs from us, you must immediately "sell" (although we don't really think of this as a sale here at Yahoo!, even though the SEC does) a portion of them to pay the taxes. If you want to pay taxes out of your pocket in order to keep all your RSUs, we will absolutely not allow it. It would be an administrative nightmare for us to have to change our internal record-keeping in order to comply with your request. If you come back to us and say it is a matter between you and the IRS/State of California etc., and you're happy to remit your taxes directly to those agencies, again, we must insist that you do not. Our Finance and Administration group must be an intermediary between you and any governmental tax agency -- federal or state."

Of course, this is absurd. Yahoo!'s policies don't operate like an Orwellian state. Orwellian state policies are not "common practice" at other companies either.

If any employee, at any company (not just Yahoo!), wants to remit taxes directly and keep all their RSUs, they are free to do so. Of course, many lower-level employees, who don't want to pay taxes out of their own pockets, decide to sell stock in the manner Yahoo! describes. However, as I said yesterday, this is uncommon for senior executives with the financial means to pay even a $2mm tax bill.

Carol Bartz exercised AutoDesk (ADSK) options in CY2007 worth $45mm. She's on track to make $19mm in 2009 at Yahoo! and possibly $30mm if Yahoo!'s stock prices gets up to $17.60 by December 1st and stays there for 20 trading days. She has the financial means to pay a $2mm tax bill if she wanted.

In my view, Bartz deliberately decided not to pay this tax bill and sell stock instead to cover it. Why?

I think part of the answer lies in the final sentence of Yahoo!'s statement: "Carol has a substantial portion of her comp tied to stock price performance in the form of options and RSUs and so is aligned with shareholders."

I think the issue is that Bartz is already over-incented with her options and vesting RSUs. What's the point of keeping another $2mm's worth of RSU stock, when you're going to be making $19mm in your first year -- when not much shareholder value has yet to be created for shareholders (especially ones like Carl Icahn, who bought in when the stock was in the mid-20s)?

And as an analysis I did a few days ago of Bartz' employment contract shows, if Bartz hangs around for 4 years (retention bonus), maxes out her possible annual bonuses (4x her base) which seems likely with Yahoo!'s board, and if Yahoo!'s stock is able to breach $25 for 20 trading days consecutively before February 1, 2016 (that's 7 years from now and Yahoo! was last at $25 1.25 years ago -- I'd say that's pretty good odds), she will take home $187mm for her 4 years of work at Yahoo!

I don't mind execs making lots of money for performing and creating lots of value for shareholders, but is that really a "stretch" goal to get the stock back to $25 in 7 years? Who needs another $2mm of RSUs, when it represents about 1% of your likely total comp package for 4 years?

This is concerning to shareholders who want executives to feel incented to really push hard for big potential gains. It's not in shareholders' interests if executives feel comfortable enough to dump shares because they already have a relatively low hurdle to jump over to get to a big payday. That might be what's going on here.

I suspect there's another reason at work here too and I'll outline it in more detail tomorrow. These particular RSUs that Bartz sold were part of her employment agreement with Yahoo! called "The Make-Up Grant" for unexercised options she left at AutoDesk as Executive Chairman when she came to Yahoo! in January.

I think she viewed these grants as a benefit that should be "grossed-up" by Yahoo! A "gross-up" is when an executive asks a company to increase the amount of an award or a benefit in order to cover the taxes that executive would have to pay on that original benefit or award. Tax "gross-ups" are perfectly legal, but highly objectionable (at least to me) as it makes public company shareholders responsible (instead of the executive) for paying taxes on an award or benefit that an executive is receiving.

Bartz received many gross-ups in her time at AutoDesk (and many other execs do too at many companies). I suspect (although no one can know for certain except Bartz) that she viewed this Make-Up Grant as something that should be grossed-up and probably didn't even hesitate in selling the $2mm in stock to cover the taxes.

However, more on that tomorrow.

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CNBC: Bartz Blunder?

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CNBC: Does Carol Bartz Have a Credibility Problem?

Published: Monday, 14 Sep 2009 | 12:40 PM ET

By: Jim Goldman
Silicon Valley Bureau Chief

CNBC.com Yahoo CEO, Carol Bartz

Last week was a tough one for Yahoo CEO Carol Bartz.

It began when she found herself in the crosshairs of the perennial burr under Yahoo's saddle, in investor Eric Jackson, who mounted a blistering campaign to unseat former CEO Terry Semel from his job, and then set his sights on Jerry Yang after the bungled, $40-plus billion dollar offer from Microsoft [MSFT 24.985 0.125 (+0.5%) ].

In an article he penned for TheStreet.com, Jackson details some stunning insider selling at the company in a tome he titled "Yahoo's Pigs at the Trough," referring to the company's compensation plans as a kind of "personal ATM." Why the venom? Jackson found that insiders bought $67 million in Yahoo [YHOO 15.49 -0.10 (-0.64%) ] stock over the past years, but the vast majority of that was purchased by Carl Icahn (who sold a huge chunk - $189 million - over the past two weeks.) Take out the Icahn purchases and some small acquisitions by Chief Accounting Officer Michael Murray, and Yahoo insiders bought a paltry $103,700 in stock during the last two years.

Over the same period, insiders have "cashed out $233 million in stock," Jackson says.

The stock sales are telling and suggest, Jackson surmises, an executive team hardly putting their money where the mouths are, and the selling action is hardly a vote of confidence for the company.

As for Bartz, her well documented compensation package is front and center with all this: Within five months of being hired, Bartz cashed out $2 million in stock options she was awarded for taking the job. Her options are currently worth $16 million and she can sell them at any time. If shares reach $18, her package could be worth $40 million.

Bartz appeared on CNBC last Thursday and was asked about this in a cursory kind of way, to which she said she did so for "tax purposes," selling the stock to compensate for the tax bill she faced from the compensation package she received.

That did nothing to assuage Jackson who was galled by the fact that Bartz sold shares to cover her tax bill rather than using her own money to do so. Why dilute shareholders by selling stock into the open market to cover a tax bill connected to compensation so directly tied to the performance of that stock? It's a fair question that Bartz largely ducked. I sent a note to Yahoo seeking comment about Jackson's points and I didn't get a response.

But Bartz's appearance on Squawk raised another issue, centered on the company's investment in Alibaba, the Chinese search engine that has been an investment boon to Yahoo. Bartz was asked directly about this just four days ago on Squawk: Would the company sell its stake in Yahoo Japan? Would Yahoo sell its stake in Alibaba? Bartz said Japan adds revenue to the company, that it's a partnership and that "actually very much adds to our profit picture." Her answer on Alibaba was far more intriguing, especially with 20/20 hindsight.

"Alibaba is an investment. Frankly, when I first got here, I thought, 'Oh my gosh, we're not in China," she said. "Everybody's got to be in China. But we all know that China is a tough market to be in, especially media. And my firm believe is the Chinese government is much more interested in media companies being Chinese media companies. So I view this as a way to profit from the China internet market through Alibaba, so I view it frankly, as a very good investment for the future. We have no running power of Alibaba. That is, we have an investment only in them."

So, last week, the stake in Alibaba was absolutely intrinsic to Yahoo. Yet today, just a few short days later, we get word that Yahoo unloads a $150 million stake in the company. Yahoo still keeps its stake in the parent company, but the timing of the dot com sale is intriguing. I get the financials of it all: Yahoo paid $1 billion for a 40 percent piece of the Alibaba Group, which spun out its net operations in an IPO two years later that was right up there with Google's IPO frenzy. We know that a piece of Alibaba is worth something like $13 billion, so Yahoo's 40 percent stake has seen enormous return. That's good. What isn't good is that just a few days before a major stock sale, Bartz is touting Alibaba "as a very good investment for the future."

Jackson calls the timing "strange." And it is.

Look, I like Bartz, she's a great talker, a tough talker, and what I thought was a straight shooter. In her interview with CNBC, she said she hadn't sold anything, and that in fact she had re-acquired the Yahoo shares she sold. Yet there's only filings for her stock sales, and nothing indicating any purchases. And to tout Alibaba as a key investment for such a critical market for Yahoo and then just a few short days later unload $150 million worth of that same investment just seems awkward. I'm not drawing any conclusions here, nor am I making any accusations.

But Bartz ought to pay attention to these kinds of details and the way they're perceived. Her bold, aggressive personality trying to position Yahoo in the marketplace, rally the troops and generate new enthusiasm can certainly be effective; but there's another side to that sword, and saying one thing while doing another doesn't serve Bartz, Yahoo or their shareholders well.

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CNBC: The Bull Case for Hedge Funds

The bull case for hedge funds, with Eric Jackson, of Ironfire Capital, and Paul Kedrosky, of Ten Asset Management

Last Update: Wed. Dec. 31 2008 11:35 AM

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Florida Trend: Webcam Warrior Tackles Yahoo

Eric Jackson takes up the role of small-investor activist.

Published 8/1/2008 in Florida Trend
by Mike Vogel

The emergence of a phenom is usually associated with an individual moment. In the case of Eric Jackson, online shareholder activist, his moment came with Yahoo on a Sunday morning a few days after New Year’s Day 2007 in the guest bedroom of a condo he rents overlooking the Gulf north of Naples.

Staring into a $30 webcam he bought at Office Depot, Jackson videoed his case against Yahoo’s management in a seven-minute and 33-second speech that was as crisp as the part in his hair. He rose early on that Sunday so that he could make the video while his wife was still asleep; he was self-conscious about doing it in front of her.

Jackson, who owned all of 45 Yahoo shares, certainly picked the right moment — and not just to avoid his wife’s eye. His viral campaign against Yahoo, launched when he posted his video on YouTube, fed into the online and business news zeitgeist and transformed him from an unread blogger to a minor media figure with his own investment fund.

Jackson, 36, a Toronto native, got his start out of college at his father’s business, Jackson Leadership, a Toronto-based consulting firm that advises companies on succession planning, building management teams and so on. Going on to Columbia University for a doctorate in business, he and professor Donald Hambrick wrote one of the first studies of whether corporate “good governance” ideas correlated with better performance. (They found that only one mattered: Whether board members made significant purchases of their own company’s stock.) Along the way, Jackson took an interest in activist investment firms and the Carl Icahns of the world.

Jackson is “very sharp, intellectually vibrant” and interested in application more than theory, says Hambrick. In 2000, Jackson went on to become an executive with a Toronto tech startup, VoiceGenie, then rejoined his father in 2004. Two years later, Jackson, now president of the firm, moved his family to Naples.

To help his consulting business, he started a blog, breakoutperformance.blogspot.com. It drew only a couple of readers a day, but Jackson knew he was on to something in 2006 when that number jumped to 1,000 after he offered an opinion on Yahoo. He studied the company and decided it was ripe for improvement through activism. But he lacked Icahn’s money and name recognition, along with the institutional investors who can assemble the 1% to 10% of a company’s shares it typically takes to get leverage on a target. Armed with his idea of online, mass activism, he bought his webcam and 45 shares and hit the internet.

Jackson mounted his campaign as Yahoo ran up a series of poor quarterly results and missed opportunities while Google was making gains. It also came just over a year before Microsoft made public its bid for the company and almost a year and a half before word got out that Carl Icahn was buying up shares and proposing his own board slate.

Unlike disgruntled shareholders who grouse on message boards, Jackson offered a vision he named “Plan B” and allowed shareholders to pledge their support. He utilized YouTube, his blog, Wikia and YouChoose.net, a Thornton, Pa., startup that contacted him and suggested he use its site to gather results. His campaign, with 148 people pledging, would make it the fourth-most popular, as measured by number of signers, in YouChoose’s business category. (The overall winner, with more than 23,000 signers, is a campaign to get the TV show “Supernatural” renewed for a fourth season.)

A symbiotic relationship with the media followed. He appeared on CNBC with Maria Bartiromo, Fox’s Neil Cavuto and on the “CBS Evening News” and attracted coverage in the Wall Street Journal, the New York Times and elsewhere. In Jackson, the talking heads found an articulate shareholder, speaking earnestly about being constructive but with the wit to describe a particular board decision as “Ya-hubris.” Jackson was quite willing to accommodate their needs, even driving to Fort Lauderdale for a studio link to New York.

Jackson also telephoned large institutional shareholders for support. At least one, though not for public attribution, says Jackson is a “real advocate for shareholders.” The proxy voting advice service ISS/RiskMetrics included coverage of Jackson’s plan in its briefing report for Yahoo stockholders. By the time he flew to San Francisco for Yahoo’s 2007 annual meeting, he could claim 2.1 million in pledged shares behind him — two-tenths of 1% of Yahoo’s shares.

In the Q&A session with investors, Jackson had a public dustup with Yahoo CEO Terry Semel. Six days later, Semel was out. His compensation had been criticized, and board members up for re-election had gotten relatively little support in the proxy voting. Jackson sees cause and effect: “I was the outspoken shareholder.”

Yahoo was under stress from many directions. Still, Jackson “was a significant part of the pressure,” says Charles Elson, a University of Delaware professor and authority on corporate governance who has known Jackson since Jackson’s Columbia days.

Eager to show that his Yahoo gambit wasn’t a fluke, Jackson bought 130 Motorola shares and launched a second, less successful campaign. Among the user comments on wsj.com’s coverage is this exchange: “He’s simply a self-promoting wind bag. 130 shares? When he gets to 13,000 maybe he earns the right to feign interest in turning Motorola around,” wrote a user named Cato. Responded a user named Steve: “Self-promoting? Yes, but nonetheless, 1 share gives you a voice, and if his motives are genuine, then it is a good thing.”

Jackson decided to start his own investment fund using a model he developed for identifying overlooked, undervalued small companies. He raised “under $10 million” from family and friends and in February founded Ironfire Capital out of his Naples condo. In an interview on the veranda of the condo beach club, Jackson comes across as far from egomaniacal. Tall, he’s more animated and funnier than the reserved talking head of his YouTube postings.

Jackson says he’ll use activism to push his picks along. “At the end of the day, I’m still a guy who’s going to use the web,” he says. He’s made only two of his first 14 picks public: Barnwell Industries, a Honolulu hodgepodge of businesses that gets most of its revenue from a Canadian oil and gas operation, and GeoEye, a Dulles, Va., space satellite company. Executives at both companies, and Yahoo and Motorola, didn’t respond to requests for comment or declined to comment.

Neither small company is likely to generate the media interest to which he’s become accustomed. “If no one pays attention from CNBC, that’s fine,” Jackson says. “I’m not doing Ironfire to be in the press. I’m doing it to make money for the people who invest.”

Jackson reckons his whole Yahoo campaign — the webcam, plane tickets and hotel for the annual meeting — came to just $2,000. Given the low cost, the ease of online tools and virtual organization, Jackson likely is a pioneer in a field experts expect to grow. Says Jackson’s academic mentor Hambrick, now at Penn State University, “The whole issue of viral and grass-roots influence in all facets of social and economic life is going to mount, and woe be unto the big guys who don’t understand that.”

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