Tabloid Marketing?

I originally wrote this entry on October 7, 2004, and published it on blogs.sun.com.

Attitudes about what "we" do and do not "want the industry to devolve into" can be really novel and original, and yet totally false.

Yes, and as if, the industry, is at "our" exclusive disposal. As if, it exists because "we" are here. Obviously, the industry goes on, and "we" are not gods.

Imagine some copy machine manufacturer stating that "we really do not want the industry to devolve into electronic chit-chat" by way of expressing his opposition to digital document exchange replacing hard copy exchanges. "No e-mail please, it is chit-chat!"

Well, this sort of we-know-it-all-and-are-superior-to-all-the-others-who-just-dont-get-it attitude does happen in the real world. It happens too often.

"We don't want the industry to devolve into tabloid marketing," says (to the WSJ, Oct. 7, 2004, page B3) a marketing vice president for one of H-P's server computer units. (Let's keep the name out of this blog.) According to him, Sun has "crossed the line" with its latest comments about H-P on blogs.sun.com . . .

So, what's more of a tabloid, People or blogs.sun.com? And what about full-page ads on the WSJ and elsewhere? They are literally tabloid marketing. Aren't they?

It is funny how words resist those who insist on changing their original meaning . . .

M&A and Technology

Expect SOA and SaaS deals in the software world.

Energy or Economics

I don't know why people like Vinod Khosla who are not professional energy experts by experience or training (those would be people with training in mechanical, chemical, nuclear or general energy engineering training) get themselves involved in leading investments on energy companies. Some basic training in energy conservation and energy systems, of the sort chemical engineers receive, or employing people who do have such knowledge, on a routine basis, would be minimally necessary in organizing leadership in such ventures. (See "Khosla's Conspiracy," in The Wall Street Journal.)

Boy Shepherd

Boy Shepherd, Foothills of Mount Sabalan, 2004
Originally uploaded by M.Mortazavi

What would your rather be?

A venture capitalist, a Wall Street executive or this boy shepherd?

Startup Showing to VCs

If you have a startup and would like to show your wares to a group of VCs gathered in one place at the same time, a really good opportunity might be the DEMO. Even Financial Times reporters notice it. So, for example, see this "Personal Technology" report by Paul Taylor: "Tailored for a small outfit," which reviews various startup technologies for small businesses.

Venture Capital for Web 2.0 Goes Even More Global

Financial Times reports global VCs are rushing to join the Web 2.0. This contrasts with a relative pause in the Silicon Valley.

Microsoft Secrets--10 years later

Michael Cusumano's Microsoft Secrets, although now more than 10 years old, remains a great study on the production of software on a large scale.

Cusumano's humble attention to details — carried over from his earlier studies of Japanese software factories and combined with his particular focus on the evolution of ideas on process, organization and the art of software production — gives a strange detective-story quality to Secrets.

The volume of interviews and quotes, mini case studies, historical reviews and multiple perspectives from within Microsoft, and the repeated return to essential topics from all these prespectives, make the book a highly valuable read. (Some have made it a required reading in software engineering courses.)

I will try to return to Secrets and Cusumano's other works here in the future, hoping to note some of the highlights.

Funds for Buy-Outs

Martin Arnold reports from London than Buy-Out firms are still out on the hunt for funds:

Yet while their activity has slowed, big buy-out firms seem more eager to raise fresh funds in anticipation of a considerable buying opportunity, as the credit market turmoil cuts the price of companies they buy.

People close to several large private equity investors said that in spite of the credit market difficulties, appetite to invest in buy-out funds from longer-term investors, such as pension funds and insurance companies, was increasing.

...

Carlyle aims to raise €5bn for its third European fund, while Lion Capital and Barclays Private Equity are looking to raise €2bn each. CVC Capital Partners is yet to finalise its fundraising documents but is expected to seek €10bn-€15bn this year.

Nick Arnott, managing director of Private Equity Intelligence, which tracks buy-out fund performance, said: “They seem pretty confident, as some of the mega funds have been raising funds above their targets. Investors are still keen to increase their exposure to private equity.”

Google Acquisition Style: Small As Well As Big

Google has recently made some major acquisitions:

Google paid $1.65 billion to acquire video-sharing site YouTube in November, it's biggest deal at that time. Then, a month ago, it announced a $3.1 billion deal to buy DoubleClick, which offers advertising delivery technology and services.

However, the Reuter's review of Google's recent acqusitions and executive pronouncements also reports that Google "still sees small technology deals as its primary thrust for buying businesses."

Looking into Google large acquisitive actions in the market make, one would conclude that Google sees itself primarily as a company that supplies content (through search or otherwise) and advertising space. Big acquisitions are meant to protect this turf. The big acquisitions seem to be saying that Google might use technology but is not about technology alone, just as neither Amazon nor eBay are simply about technology. So, it is a bit odd when Eric Schmidt, Google's CEO, reiterates "Google's oft-repeated stance that it sees itself as a technology tools maker, not a media content owner."

All these businesses are using technology to provide some very traditional services, which can be provided at lower transaction costs but higher volumes on the digital world-wide web.

However, the smaller acquisitions are rampant:

"In the past, we would buy businesses in lieu of (hiring) engineers," Schmidt said. These days, Google buys a start-up once every few days, or around one a week, he estimated. Two examples of this approach -- Keyhole (Google Earth) and Urchin (Analytics) -- had strong technical teams, a technology head start, and were bought relatively inexpensively in the hopes of later generating billion dollar revenue streams, he said.

That makes it more clear.

Seed Money

Douglass Belkin of The Wall Street Journal reports that Canada is changing its tax rules to extend a tax break to limited-liability corporations.

Because LLCs are excluded from a 1980 U.S.-Canada tax treaty the profits they generate are subject to taxation in both countries. As a result, the partners in LLCs are generally unwilling to invest in Canada. Canadian Prime Minister Stephen Harper is now seeking to amend the treaty to include LLCs and grant them tax relief in Canada.

U.S. private equity firms often partner with LLCs or are formed as LLCs -- or Limited Liability Corporations.

Silos or Centralization

Financial Times reports that Citigroup has made significant savings, moving from silos to centralized computing:

The group has tended to operate as a collection of “silos” without focusing on the opportunities to share costs, he argues.

However, significant savings have been made in recent years.

The introduction of central computerised purchasing is saving more than $500m a year and rationalisation of information technology is expected to yield about $2bn a year.

Mr Prince has made clear he is expecting Mr Druskin to come up with big structural savings rather than more trimming.

“We’re not looking for him to squeeze the rock in terms of magazine subscriptions or black cars,” he told analysts in December.

To Start a Bank

If you want to start a Bank, read the recent article in Financial Times by Andrew Ward, who reports that

Almost 180 banks were opened in the US last year – the highest number since 2000 – with much of the capital provided by individuals rather than institutions.

De novo banks are flourishing in the US as a reaction against the consolidation that has halved the country’s number of banks in the past two decades.

.... But for such a safe investment, the returns can also be impressive. Between 2002 and 2005, banks with assets under $500m generated compounded annual return on investment of 22.6 per cent, compared with 8 per cent for the banking sector as a whole and 9.5 per cent for the S&P 500 index.

Such banks are better at lending to SMEs, Small and Medium-size Enterprises, who do not find equal service from larger banks. Larg bank loan officers, whose incentives seem to be connected to the size of their portfolios, may be less likely to attend to the needs of SMEs.

Georgia had the third largest number of bank start-ups in the US last year, behind California and Florida, with all three states gaining at least 20 new lenders.

We should be aware of the flip side of novo banks.

Chris Marinac, analyst at Fig Partners, an Atlanta-based banking consultancy, warns that competition is increasing among de novo banks at a time when the housing downturn and slowing economy are making lending riskier.

He also questions whether there are enough qualified executives and loan officers available to maintain high standards of management and risk control.

“A credit cycle has yet to truly test these new banks,” Marinac says. “As Warren Buffett says, it’s only when the tide goes out that you know who is swimming naked.”

Marinac believes most well-run de novo lenders will be successful in the long term but warns that their growing number is depressing the price potential acquirers are willing to pay.

The emphasis is mine.