Archive for June 22nd, 2011

As 3-D Falls From Favor, Director of ‘Transformers’ Goes on Offensive to Promote It


Here’s the latest on the status of Alibaba Group’s talks with shareholders Yahoo and Softbank on the status of the online payment company Alipay: they are still talking.

Alibaba recently transferred ownership of the unit to Alibaba CEO Jack Ma, a move the company said was necessary to comply with Chinese regulations barring foreign investment in domestic online payment services. Since the news of the move broke, Yahoo shares have fallen sharply, on fears that it will not be properly compensated for its share of the Alipay.

The three companies together late Tuesday (or early Wednesday, depending on your time zone) issued the following statement on the discussions:

“Alibaba Group and its major shareholders, Yahoo! Inc. and Softbank Corp. continue to be engaged in constructive negotiations, and we have made substantive and encouraging progress toward an agreement regarding Alipay. Our objective is to reach an agreement in a timely manner that serves the interests of all stakeholders. The companies will not comment in further detail until it is appropriate to do so.”

Yahoo, Alibaba, Softbank Still Talking On Status Of Alipay


Here’s the latest on the status of Alibaba Group’s talks with shareholders Yahoo and Softbank on the status of the online payment company Alipay: they are still talking.

Alibaba recently transferred ownership of the unit to Alibaba CEO Jack Ma, a move the company said was necessary to comply with Chinese regulations barring foreign investment in domestic online payment services. Since the news of the move broke, Yahoo shares have fallen sharply, on fears that it will not be properly compensated for its share of the Alipay.

The three companies together late Tuesday (or early Wednesday, depending on your time zone) issued the following statement on the discussions:

“Alibaba Group and its major shareholders, Yahoo! Inc. and Softbank Corp. continue to be engaged in constructive negotiations, and we have made substantive and encouraging progress toward an agreement regarding Alipay. Our objective is to reach an agreement in a timely manner that serves the interests of all stakeholders. The companies will not comment in further detail until it is appropriate to do so.”

Bellwort technologies pvt. ltd.

Salesforce.com: J.P. Morgan Starts At Neutral; Cautious On Valuation


J.P. Morgan analyst John DiFucci this morning picked up coverage of Salesforce.com with a Neutral rating and $140 price target, not much above yesterday’s close at $139.45. His sole concern with the stock is the one that often comes up with the software-as-a-service giant: valuation.

“While there could be material upside from here if the company is able to penetrate new markets, we believe the upside is offset by a similar level of risk,” he writes in a research note.

DiFucci contends that the software-as-a-service approach “makes even more sense today that it has in the past, as recent computing advances make it a more viable alternative for many more users.” He notes that the company has become the leader in salesforce automation, and that it should continue to gain share while extending into adjacent markets like marketing automation and customer service, where penetration rates are much lower. He notes that growth at the company is “nothing short of stellar,” particularly given the company has a revenue run rate of over $2 billion.

The paradox of Salesforce.com, he says, is that cash flow could be higher if it didn’t have such a high appetite for growth. “To be clear, we think management is acting appropriately at this time given the huge opportunity in front of it,” he writes. “But, we are mindful that if growth does not continue, what today looks like the aggressive pursuit of opportunity could be viewed as imprudence. This scenario could provide a chance to own an attractive franchise rather than what might look like the demise of
a high flyer.”

He contends the stock – trading at 110x consensus calendar 2011 EPS estimates – is “fairly valued at current levels.”

CRM this morning is up $1.65, or 1.2%, to $141.10.

SAP and its Significance


SAP may refer to:

Standard Assessment Procedure, a method system for measuring the energy rating of residential dwellings used in the United Kingdom
IATA code for Ramón Villeda Morales International Airport, located in San Pedro Sula, Honduras
Serum amyloid P component, the identical serum form of Amyloid P component (AP)
Santa Paula, California (Amtrak station code: SAP)
Second audio program, an auxiliary audio channel for broadcast and cable television
Seminal acid phosphatase, an enzyme produced by the prostate
Special Assistance Plan, an academic programme in Singapore
Special access program, Pentagon terminology for secret government programs
Stabilisation and Association Process of the European Union for the western Balkans states
Statutory accounting principles
Strong anthropic principle, the idea proposing that the universe must produce life
Structural Adjustment Program of the International Monetary Fund
Superabsorbent polymer, a polymer able to absorb tens or hundreds of times its own weight in water
South African Police, the national law enforcement organisation of South Africa between 1913 and 1994
Shrimp Alkaline phosphatase, a common alkaline phosphatase from a species of arctic shrimp
The Seabirds Advisory Panel, a committee set up to advise the British Birds Rarities Committee on seabird records

Research In Motion A Takeover Target? That’s Hard To Believe


BELLWORT TECHNOLOGIES PVT. LTD.

Adding fuel to the fire, Macquarie USA analyst Kevin Smithen this afternoon launched coverage of the company with an Outperform rating and $40 price target. His basic thesis is that Research In Motion’s international business and services arms are worth more than the Street generally believes.

“RIM’s numerous challenges have been well-documented in recent downgrades, earnings reports and press articles: delayed product launches, insufficient and misallocated R&D, poor management reaction to changing industry trends, subpar communication with investors, strengthening competition, falling ASPs, and ineffective CEO and Board structure ring the loudest,” he writes. “We view these risks, both self-inflicted and structural, as formidable but not yet insurmountable. We believe that RIM’s international business and its software and services segments have a longer tail than many shareholders expect and that current share prices already imply negative value for the U.S. device and tablet businesses.”

In the same report, Smith writes that with an enterprise value of “just” $10.4 billion and with significant IP, the company is “a potential takeout candidate for multiple cash-rich mature tech names.” He even suggests that “local Canadian banks and pensions could act to take RIM private.” Adding some gasoline to the fire, he notes that Microsoft’s deal with Nokia is non-exclusive, asserting that “MSFT needs to make bold moves to gain credibility in mobile.” His list of potential acquirers includes pretty much every tech company not run by Steve Jobs: HP, Dell, Oracle, Cisco, Microsoft and SAP.

Suggesting that RIMM is a takeover target certainly sounds like a heroic call, but seriously, do you really think any of the companies on that list would buy RIM? I don’t.

Let’s walk through them:

HP? They’re still trying to integrate Palm, and they’ve made a major commitment, for better or worse, to WebOS. And CEO Leo Apotheker has declared an intention to build up the company’s position in enterprise software. Buy RIM? No way.
Dell? Ha! The company is ratcheting up their spending on the data center, and trying to move away from being strictly a device company. Highly doubtful. Would RIM plus Dell be any more competitive with Apple and Android than RIM alone?
Oracle? Larry Ellison does not want to be in a business as consumer-dependent as this one has become. Not Oracle’s style.
Cisco? Get real. The market would run John Chambers out of town. Chambers in the past has flat-out denied any interest in making handsets. The Street wants the company to focus on the core, not to tack on a handset company. No.
Microsoft? A well-worn rumor, but hard to believe Steve Ballmer would buy RIM while trying to make a go of the deal with Nokia. I suppose you could tie them all together – RIM, Nokia and Windows Phone – and pretend that you really had something. But I find such a possibility hard to believe. That would be like thinking you could build a really nice raft by tying three bricks together.
SAP? Now, that’s just ridiculous. What does SAP know about hardware, or handsets, or Canada? No. Nein. Not happening.
Canadian pension funds. Well, I have no idea how Canadian pension funds think. Who knows? But do you really want to own the stock on that theory?
Look, all of this talk about someone buying RIM fails to recognize the basic underlying dynamics of the market. Apple and the Android gang are simply wiping out the rest of the players in the handset market. RIM, HP, Nokia, Microsoft…it will not be easy for any of them to stay relevant in the rapidly evolving market for mobile devices. Would you actually want to go out and buy a handset company that is hemorrhaging market share? At today’s close, RIM had a market cap of $15 billion; with even a modest premium such a deal could cost a buyer close to $20 billion – and leave them with the task of turning around a plummeting business. I simply don’t think that is a likely scenario.

True, even Palm found a buyer – but for $1.2 billion, not $20 billion. Some day, a bottom-fisher could take a flier on RIM. But I don’t think we’re anywhere near the bottom.

BELLWORT TECHNOLOGIES PVT. LTD.

SWATI JAIN

In New Crop of Chinese IPOs, Is There Another Baidu?


BELLWORT TECHNOLOGIES PVT. LTD.

I just returned from a 2 week trip to China where I met with a dozen tech companies. Some were private, some were newly public and some had been public for a few years now.

Before I left for the trip, the number one question my friends asked me was: “Let me know if you see the next Baidu (BIDU)… ok?” It’s sort of like going out to prospect for gold in the Yukon. People think the next gold nugget could be sitting in plain sight at the next stream crossing.

The Chinese market is still bubbly. Despite the problems of fraud afflicting companies like Longtop Financial (LFT) and poor performance of most Chinese tech companies in the last 6 weeks, there is still a long line-up of Chinese companies waiting to do IPOs in the next year or so.

At the start of my trip, the prognosis was still good for new Chinese IPOs. By the end of my trip, the stock market sell-off back in the US and Greek default concerns had hammered Chinese tech stocks. Sina (SINA) is down 30% in the last month. More recent IPOs like RenRen (RENN) and Youku (YOKU) are down 40%.

But, no matter what happens in the stock market, these are all operating companies. It was fascinating for me to sit down with many executives from these companies to see the world through their eyes.

When you talk candidly with Chinese executives or investors, most will speak openly about how they are living in the positive upswing part of the cycle. They also know that this stage won’t last forever. Eventually, this bubble will burst too. They just hope to cash in now before the party ends.

So what about hope for the next Chinese Baidu? In short, I didn’t see many obvious ones.

In China today, there are three big tech gorillas: Baidu, Tencent, and Alibaba Group (which is comprised of of Taobao, Tmall, Alipay, Alibaba.com and some smaller businesses – Yahoo! (YHOO) is a 40% owner of the group). These are all companies that are worth $40 – 50 billion (although Alibaba is still private).

Then, there is a big drop to the next “big” Chinese tech companies. Sina is a $5 billion company again after its recent sell-off. Jaiyuan (DATE) a recent IPO – which bills itself as the Match.com of China — is a $300 million company.

Among these smaller companies, some will make excellent investments in the coming years. But few have the potential to become $40 billion companies.

There are two companies that I see possessing that $40 billion potential: Alibaba Group and 360Buy.

Alibaba Group is obviously in the middle of a long and protracted battle in public with Yahoo! and Softbank. But the company’s operations continue to shine. Tmall, which will soon be set up as a separate entity from Taobao has the potential to be a huge money-maker for the company as they continue to attract merchants and more users. Eventually, the problems with Yahoo! and Softbank will get sorted out. This is still a monster company.

360Buy is much smaller and newer than Alibaba Group but it is going to be a formidable competitor in the e-commerce space. Robin Li of Baidu just made a big investment (personally). DST Ventures is a backer. The most recent financing put 360Buy’s valuation at $10 billion. They are trying to be the Amazon (AMZN) of China – especially in electronics. They are probably going to succeed – although they are spending a lot of money on customer acquisition and logistics to make this happen. They are a well-run company going after a big market with ambitious backers. They will likely IPO by the end of 2011.

But bigger isn’t necessarily better. Many of these niche IPOs could see very strong returns as they execute their business plans. They might go from $300 million to $1 or $2 billion . That’s still a fantastic return. It’s just not going from $300 million to $40 billion.

With the recent downturn, more Americans will throw in the towel on many of these lesser known Chinese names. That’s exactly why you should start paying attention to them and look for some hidden gems in the months ahead.

But do your due diligence. There will definitely be winners and some big losers in the months ahead from the recent IPO crop.

BELLWORT TECHNOLOGIES PVT. LTD.

SWATI JAIN

The Worst Cars On The Road


BELLWORT TECHNOLOGIES PVT. LTD.

By all accounts, Detroit’s Big Three automakers have begun producing better-made, longer lasting, more efficient vehicles. It’s a distinct change from the 1990s and early 2000s, when they fell behind their European and Asian counterparts in each category.

“This change is not even a gradual thing,” says Christine Overstreet, an automotive consultant and director of Heels and Wheels. “It’s like they’ve said, ‘OK, we really want to step it up, we really want to compete, we’re ready.’ After past years of being so bad, they’ve really stepped up their game.”

But with three exceptions–the Mercedes-Benz S550, Smart Fortwo and Nissan Titan–all of the cars on this year’s list of the Worst Cars on the Road are (still) made by domestic companies. That includes the Dodge Dakota, Chevy Tahoe Hybrid and Chrysler Town & Country. The only American car company with zero vehicles on the list? Ford.

To determine our list of the worst-made cars on the road, we started with the lowest-rated vehicles from six reliability and performance studies conducted this year by Consumer Reports (for more details, click here).

Any car, truck or SUV named among the worst in at least two of those studies made the final cut to be on the “Worst” list.

We should note that the Mercedes S550 is the only vehicle that qualified for our list because of a high cost of ownership, low fuel efficiency and a low rating for overall value, not because of any problems with reliability, safety or performance, which affected every other vehicle in the top 10. Indeed, luxury vehicles like that sedan and the Cadillac Escalade are arguably at a disadvantage on lists like this–their luxurious interior upgrades, high-quality trim and powerful engines work against them.

“The worst value, the highest cost of ownership–you’ve got to remember there is a numerator and a denominator in these things,” says Terry Woychowski, the vice president for quality and global launches for General Motors ( GM – news – people ). “To use an analogy of a watch: If you looked at dollars to buy a watch vs. accuracy of time, you’d probably buy a Casio. [Compare that] to the price and value in a Rolex–you’d say, ‘Well, shoot. It costs so much!’ For vehicles like this, it’s an uphill battle.”

We should also note that nearly every car or truck made today is safer, more efficient and more reliable than anything on the road even as recently as 15 years ago. But that doesn’t excuse just how often vehicles like the Jeep Liberty are panned for poor reliability or poor fuel economy–or both.

Jeep’s Liberty and Wrangler earned spots on Consumer Reports’ Least Reliable list for 2011. The Wrangler also received Consumer Reports’ Worst Value and Worst Cars distinctions, the latter of which is based on more than 50 individual Consumer Reports tests and evaluations. The Wrangler also appeared on our Worst Cars list last year.

BELLWORT TECHNOLOGIES PVT. LTD.

SWATI JAIN

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