News
on technology, media & telecoms: Highlights - it's war
out there!
 The
news during in last two quarters was mostly dominated by:
- Microsoft; in its efforts to take over Yahoo - little
by little is becoming more like a war with Google and
other media moguls.
- Google; doing its utmost to sustain its leading position
in the lucrative online advertising world by not loosing
fertile grounds to Microsoft and others. Last year they
took over YouTube, so they have a position to defend in
social networking which is growing in acceptance. Their
web based applications gmail, google docs, maps, earth
are winning terrain also in the business world.
- Newscorp; looking for partners for MySpace also teaming
up with Microsoft recently.
- Apple; trying to capitalize on their new success of
its i-Phone, meets the challenge to make the new toy accepted
in the business world.
- Nokia; is the leading party to beat in the consumer
ad business mobile handset world. They keep on innovating
not only developing new models and new features in the
software but also on content.
- RIM; is doing astonishing well in the business world
with their BlackBerry. Their push mail system is a favourite
of many business people. They are trying to sell more
data services and want a peace of cake in the consumer
world too by adding features on their BB's.
 The
telecom empires were also in the news because they are protecting
their investments in the new VoIP broadband networks at
one hand, but also attacking at the same time the cable
companies and mobile giant Vodaphone that are trying to
enter their former fixed line telephone domains. The big
European players are all trying to safe guard their positions.
Especially DT en FT trying their utmost to conquer the last
free operators in respectively Greece and in the Nordic
area. The name of the game is: Triple play and a stronger
role in computer network infrastructure management. Infra
structure is becoming hot again because the new server boom
will trigger a lot of sales for the industry.
In the meantime the war between the largest computer giants
IBM and HP is entering the next stage by HP overtaking EDS
paying an enterprise value of $14bn.
In the media world there is the discussion about protection
of IP but also new alliances in order to compensate for
lost sales. There is news about EMI and Warner, but also
about Sky, SonyBMG, Thomson, Reuters, Dow Jones and Newscorp
(Rupert Murdoch). A new consolidation wave is on its way.
Reed Elsevier is a good example of a transformation of a
traditional publishing company into something totally new
based on new technology by going through a divesting and
acquisition process (acquisition of Choicepoint). Another
Dutch publisher VNU went through an enormous battle with
the share holders and the management before it could be
privatised and transformed into another company namely the
Nielsen Media Research Company.
The same you could say regarding Philips Electronics that
went through internal battles first before it could focus
on the three pillars it stand on today successfully.
 What
is eye catching is the news about the enormous legal battles
governments and enterprises fighting between each other
about monopolistic conduct and/or suspected behaviour, combined
in many cases with patent infringements. Finally M&A
is in the news of all sectors IT, media, telecoms concerning
the consolidation at the top end of the market sealing of
the destiny of several big players we all know here in Europe.
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Hewlett-Packard buys EDS
Published: May 13 2008 14:38 | Last updated: May 13 2008
20:49
 Has
Mark Hurd burst his own bubble? In spite of a stunning share
price run since he took the helm of Hewlett-Packard in 2005,
investors greeted his first big acquisition with a resounding
thumbs down. Almost $16bn has been wiped off HP's market
capitalisation since news of the deal broke on Monday. That
is more than the $14bn enterprise value of EDS, the Texan
information technology services group HP is buying.
Mr Hurd has partly himself to blame. In an uninspiring
conference call, he appeared to take investor faith for
granted. There was no clear attempt to sell the deal by
giving estimates for cost savings. That is a shame, as they
should be significant. There should also be opportunities
for cross-selling. Instead, investors were left to absorb
the fact that HP is buying a low growth, low margin business
in need of a big turnround for about 18-times 2008 earnings.
Faster-growing, more profitable HP trades on a far-lower
13-times.
The deal clearly has risks, not least in integrating two
businesses with their different cultures. If Mr Hurd cannot
improve EDS's profitability and growth he will have overpaid
significantly. But the very weakness of EDS is also the
opportunity. Mr Hurd is taking a long-term view, that he
needs to build up HP's subscale services business, particularly
in EDS's strongest area of big IT outsourcing contracts.
HP brings to EDS the necessary capital and ability to take
upfront earnings hits on contracts in return for longer-term
profits. If Mr Hurd gets even close to replicating IBM's
success in that area, the deal will turn out to have been
shrewd.
However, having messed up the positioning of the acquisition,
Mr Hurd now has the long task of proving that he really
can drive better performance out of EDS.
More worrying, he might have sparked a deeper unease about
why he is doing the long-rumoured deal now. The fear must
be that he can see signs of his own turnround of HP running
out of steam. And that he needs a fresh restructuring opportunity
to provide an engine for earnings growth in the future.
Google tops profit target
Fri Apr 18, 2008
 SAN
FRANCISCO (Reuters) - Internet leader Google Inc said on
Thursday it saw no impact from a weakening U.S. economy
as it posted a better-than-expected quarterly profit and
waved off fears of an online advertising slump.
Google's hard-hit shares surged 18 percent above $500 --
a level last seen in February -- as the company showed signs
of better cost control and earned more revenue abroad than
at home for the first time, partly because of the weak dollar.
"It's clear to us that we're well positioned for 2008
and beyond, regardless of the business environment that
we find ourselves surrounded by," Chairman and Chief
Executive Eric Schmidt told investors on a conference call.
Google, one of the hottest technology stocks of 2007, had
seen its shares erase last year's 50 percent gain since
the start of 2008 on investor concerns that the online ad
industry was maturing and vulnerable to a U.S. economic
downturn.
"It's a good time to be a Google bull," said
Colin Gillis, an analyst with Canaccord Adams. "The
boys delivered."
But Cowen & Co analyst Jim Friedland said the surge
in the shares was not based on dramatic improvements in
Google's growth outlook, simply on relief that the economy
was not dragging down the company's results as had been
feared.
"It was sort of an uneventful quarter other than taking
a major concern -- the economy -- off the table," he
said.
First-quarter net income rose to $1.31 billion, or $4.12
per diluted share, from $1 billion, or $3.18 per share,
a year earlier. Excluding one-time items and stock option
expenses, profit was $4.84 per share, comfortably ahead
of the average Wall Street forecast of $4.53 on Reuters
Estimates.
Gross revenue rose 42 percent to $5.19 billion, just ahead
of Wall Street targets. By contrast, Google's revenue grew
at a 63 percent rate in the same quarter a year ago.
International revenue accounted for 51 percent of the total,
surpassing U.S. revenue for the first time and powering
the company's results. Translating overseas sales into a
weaker dollar helped boost Google revenue by nearly 4 percent.
Google's performance may strengthen Yahoo Inc in its efforts
to wring a higher takeover offer from would-be buyer Microsoft
Corp.
"This signals that the online advertising market is
still healthy, which should help Yahoo get a better price
for its company if it does decide to sell to Microsoft,"
said Peter Dunay, chief investment strategist at broker-dealer
Meridian Equity Partners.
BETTER THAN FEARED
 Google
has been the subject of intense Wall Street debate over
whether recent comScore data showing Google having trouble
converting Web searchers into ad viewers is an indication
its best days of growth are behind it.
Paid clicks, a measure of how often users of its Web search
click on ads tied to search results, rose 4 percent from
the fourth quarter of 2007 and grew 20 percent from a year
ago.
"Clearly the area that Google was trying to focus
on -- having more relevant searches -- is working,"
Global Crown Capital analyst Martin Pyykkonen said.
Measured on clicks, Google's performance was better than
feared, but a far cry from a year ago, when the number of
Google users clicking away grew 52 percent on the year before.
Some of the slowing growth is self-inflicted. Since August,
officials say Google has been axing low-performing ads in
order to encourage clicks on more meaningful ads at higher
rates.
Google's traffic acquisition costs -- the cut of advertising
revenue paid out to affiliated sites that run its ads --
amounted to 29 percent of ad revenue in the first quarter.
A year ago, the proportion was 31 percent.
Google closed a $3.4 billion acquisition of ad technology
company DoubleClick in March. The move strengthened its
position against Yahoo and Microsoft in the market for online
brand advertising preferred by corporate marketers.
Co-founder Sergey Brin said in a phone interview that the
company aimed this quarter to link up DoubleClick's system
for buying and selling online display ads with Google's
own AdSense system for buying and selling other types of
online ads.
"We really feel we're in a position to become the
world's largest display ads provider," added Jonathan
Rosenberg, Google's senior vice president for product management.
Google shares shot up to $529.38 in extended trading from
its close of $449.54 on the Nasdaq earlier on Thursday.
Helping that rebound, Schmidt said Google was confident
its targeted advertising could withstand most economic scenarios.
"On the macro side we've looked at this really carefully
and we do not see an impact as of this time," Schmidt
told analysts and investors on the quarterly conference
call.
"Our conclusion is that we're well positioned, should
economics change, to continue to do well because our model
is so targeted and targeted advertising does well in pretty
much most scenarios, we think."
Nokia flags slowdown in mobile market
Published: April 17 2008
 The
global mobile handset market will shrink in value in euro
terms this year for the first time, industry leader Nokia
warned Thursday. This unexpectedly bleak assessment sent
its shares nearly 13 per cent lower.
The world's largest mobile phone company reported a 25
per cent rise in net profit to €1.22bn ($1.94bn) for
2008's first quarter but said the value of the overall global
mobile device market would drop in euro terms in 2008 compared
with last year because of the weak dollar and slower global
economic growth.
Rick Simonson, chief financial officer, told a conference
call that 50 per cent of Nokia's sales were in dollars or
dollar-linked. "There is growth in this market in volume
and value if you knock out this crazy currency," he
said.
Olli Pekka Kallasvuo, chief executive, insisted Thursday
a combination of slower growth and rising labour and raw
material costs would have little impact on demand for mobile
phones, which he described as "necessity items".
Nokia still expects the number of phones sold industry-wide
to grow 10 per cent in 2008 but these sales are expected
to generate less revenue for vendors as average sale prices
per phone fall.
Despite Nokia's confidence and strong profitability, analysts
have been fretting over Texas Instruments' comments on 3G
order cancellations and Sony Ericsson's recent warning on
handset sales, among other factors. In addition, analysts
have expressed concerns over Nokia's product cycle, particularly
its high-end handsets, which face intense competition from
Samsung, Sony Ericsson and Apple's iPhone, according to
Citigroup. Carolina Milanesi, analyst at Gartner, said:
"Falling revenues will put more strain on handset vendors.
They will have to focus on making low-end devices at a profit
and this is not easy. Only Nokia seem to be able to do it
at the moment. Samsung have been talking about low-end products
but it takes time to learn to cater to this market."
Companies such as Motorola have struggled in the emerging
markets because they have not been able to get their production
costs down low enough to make low-cost phones profitably.
For the quarter, Nokia reported that net sales rose 28
per cent to €12.7bn, compared with the same quarter
last year. The operating margin rose year on year from 13.6
per cent to 14.7 per cent but dropped from 15.9 per cent
in the fourth quarter of last year.
France Telecom eyes bid for TeliaSonera
Published: April 16
 France
Telecom is in the early stages of examining a takeover of
TeliaSonera, the Nordic operator, in a bid to increase its
exposure to emerging markets and strengthen its position
in mobile internet services.
Gervais Pellisier, France Telecom's finance director, told
the Financial Times his company was looking at a possible
tie-up with the Swedish-Finnish operator as well as other
options, including Telenor of Norway. But he indicated the
former French monopoly was some way off opening talks and
was in "no hurry".
"If you ask me whether we are examining a number of
companies, including TeliaSonera, I would say yes,"
he said in an interview with the Financial Times. "But
if you are asking whether this is a full-blown examination,
we are not there yet."
Mr Pellisier said as well as increasing its exposure to
fast-growing developing markets, France Telecom was also
looking to strengthen its position in mobile internet services
so that it could compete with the likes of Google.
He declined to comment on a report in Le Figaro that such
a deal could be achieved through a share swap, which would
prevent the company from increasing its debt pile.
A takeover of TeliaSonera would enable France Telecom to
catch up in the race for emerging market customers among
European operators. The Nordic group's operations in central
Asia account for 40 per cent of operating income and it
also has interests in Russia and Turkey.
For the Swedish government, which owns 37 per cent of TeliaSonera,
the tie-up could provide a neat way of meeting its aim to
privatise the company by 2010. It declined to comment Wednesday.
The Finnish government owns 14 per cent.
Such a move would also mark an sharp acceleration in European
consolidation, following Deutsche Telekom's acquisition
of a 10 per cent stake in OTE of Greece and Telefonica's
rumoured desire to take over Telecom Italia.
A combined France Telecom-TeliaSonera would leapfrog Deutsche
Telekom as Europe's third-largest operator by market capitalisation.
However, shares in France Telecom fell 6 per cent on the
suggestion of a tie-up. Analysts said it would generate
few cost savings.
Vodafone ponders bid for Tiscali
Published: April 16
 Vodaphone
is considering joining the bidding for Tiscali as the Italian
telecoms group set a deadline of May 5 for initial non-binding
offers.
A number of companies are expected to review a bid for
the Cagliari-based group, which could be attractive to larger
companies that want to increase their share in the Italian
and UK fixed-line broadband markets.
A person familiar with the situation said Vodafone was
considering bidding for both the whole group or just its
UK assets. Vodafone already has interests in Italy, having
agreed last October to buy the Italian broadband business
owned by Tele2, the country's fifth-largest internet access
provider.
Vodafone said it would not comment on speculation.
Tiscali has previously indicated that it would prefer not
to break itself up. However, analysts believe that few companies
would be keen to acquire the whole group given the little
overlap between its UK and Italian assets.
The May 5 deadline was only indicative, the people close
to the company said, and Tiscali was not in a hurry to make
a sale.
In the UK, BT Group, British Sky Broadcasting and Carphone
Warehouse are considering bidding for the UK division, which
has a 15 per cent market share and is expected to generate
69 per cent of Tiscali's group revenue in 2008 and 76 per
cent of its earnings before interest, tax, depreciation
and amortisation.
Investment bankers studying the situation said that Italy's
Wind would also take a look at Tiscali's Italian division,
which has only a 6 per cent market share. Telecom Italia
and Fastweb are also interested in Tiscali.
 However,
advisers to some of the interested companies cautioned yesterday
that Tiscali's market capitalisation of about €1.2bn
($1.9bn) implied that bids needed to be higher than would
be reached under industry average subscriber acquisition
costs. A buyer would, therefore, need to find substantial
synergies, they said.
Tommaso Pompei, Tiscali's previous chief executive, quit
recently in a dispute with directors over strategy, though
he had laid the foundations for a turnround in its fortunes.
Mobile sector looks to lift revenues
with data services
Published: April 16
 When
AT&T announces its first-quarter results next Tuesday,
investors will be looking for evidence that the recent surge
in wireless data revenues at US telecoms companies is continuing.
Revenues from wireless data services in the US rose 53
per cent to $23bn last year according to figures prepared
for CTIA Wireless, a Washington-based industry trade group.
Overall, revenue from e-mail, text and picture messaging,
and other non-voice services accounts for about 17 per cent
of total wireless revenues.
US mobile network operators including AT&T Mobility
and Verizon Wireless, the joint venture between Verizon
Communications and Britain's Vodafone, are counting on growing
revenues from mobile data services such as wireless e-mail,
web browsing and mobile
TV to offset flat, or in some cases declining, wireless
voice revenues.
While income from voice calls continues to make up the
bulk of mobile revenues, fierce competition and an expected
slowdown in subscriber growth as the percentage of the US
population with a mobile phone pushes towards 100 per cent,
mean that growth in mobile data is likely to become an increasingly
critical measure for
US carriers.
Most are counting on continued growth in revenues and profits
from their wireless operations to offset steeply declining
revenues from residential phone lines as consumers abandon
fixed-access lines.
AT&T has seen its average revenue per user from data
services including wireless e-mail surge, fuelled in part
by the success of Apple's iPhone, which AT&T has an
exclusive right to sell in the US. Wireless data revenues
at the San Antonio-based group increased 58 per cent last
year and in the fourth quarter, data comprised
20 per cent of AT&T's wireless service income, up from
less than 15 per cent in the last quarter of 2006.
 "iPhone
owners are big data users," says Ralph de la Vega,
president of AT&T's mobile unit. During a speech to
the Mobile World Congress in Barcelona, he described Apple's
iPhone as "a game-changer", noting that 95 per
cent of iPhone owners regularly surfed the mobile web, even
though 30 per cent had never done so before owning an iPhone.
"There isn't a device that's easier to use,"
Mr de la Vega said. "[The iPhone] proves that price
resistance is only as strong as the user experience is weak."
Over half of iPhone owners have also watched videos on
YouTube, fuelling growing optimism that mobile TV services
including Qualcomm's MediaFlo, which AT&T plans to launch
next month, may finally take off.
Like AT&T, Verizon, which reports first-quarter results
later this month, is also betting mobile data services will
build on the success of text messaging and wireless e-mail
and drive data usage higher.
Data revenues at Verizon Wireless, the second-largest US
telecoms group, jumped 53 per cent jump last year and data
now accounts for 21 per cent of the carrier's wireless service
revenues.
Indeed, as Research in Motion, the Canadian manufacturer
of the BlackBerry family of smartphones predicted, the success
of the iPhone appears to have spurred consumer interest
in smartphones and 'data centric' devices. Earlier this
month, RIM said it sold a record 4.4m Blackberrys in its
fiscal fourth quarter, boosting its subscriber base by 32
per cent.
In the US, the number of smartphone users doubled last
year to about 14.6m according to analysts at M:Metrics -
much faster than the rate of growth for mobile phones generally.
Philips' test
Published: April 14
 For
Philips 2008 could be the year that vindicates or calls
into question its strategy of the past four years. Since
2004, the Dutch conglomerate has made €19bn of disposals,
mostly in cyclical sectors. Some of these exits now look
spectacularly well timed. Meanwhile, over the past three
years, about €9bn of proceeds have been spent on deals
bolstering Philips' position in healthcare and lighting.
These two sub-sectors now make up just over half of sales
and, it is hoped, will grow at reasonable rates through
any economic downturn.
General Electric's results on Friday, which showed weakness
in its healthcare and finance divisions in particular, did
not exactly calm nerves. However, yesterday's first quarter
numbers from Philips suggest that so far it is holding up
reasonably well. Excluding the television division, which
is in decline - but where Philips is taking credible action
to exit or restructure offending product areas - organic
sales rose by 2 per cent year-on-year and underlying margins
were roughly stable.
However laudable, this performance also served to emphasise
how ambitious Philips' own medium-term guidance is. This
forecast calls for at least 6 per cent annual sales growth
between 2007 and 2010 and a rise in margins from 7.7 per
cent to a midpoint of 10.5 per cent. The reality is that
today, even excluding TVs, and before an economic downturn
really bites, the group is barely growing.
Fortunately the share price does not appear to place excessive
faith in the guidance: Philips trades on about 12 times
2009 consensus earnings. The company's executives also seem
to be pragmatic rather than zealous: including planned buybacks,
net debt by the end of 2008 will be about a seventh of enterprise
value. Such caution is entirely sensible but is also a reminder
that it is, unfortunately, way too soon to conclude that
Philips can increase profits and cash flow during a downturn.
STMicro and NXP to merge wireless
chip units
Published: April 10
 STMicroelectronics
said on Thursday that it would merge its wireless semiconductor
operations with those of rival NXP to create a joint venture
with $3bn in revenues and some 9,000 staff.
STMicroelectronics will take an 80 per cent stake in the
joint venture and will pay NXP, the semiconductor company
spun out of Philips 18 months ago, $1.55bn including a control
premium. There will also be a put and call option for NXP
to exit its 20 per cent stake in three years' time. The
deal will be funded from STMicro's cash reserves.
The companies, which are key suppliers to mobile handset
companies such as Nokia, Samsung and Sony Ericsson, said
combining their operations would create the world's third-largest
wireless chip company.
It would also put them in a better position to make the
huge technological investments needed to create chips for
increasingly sophisticated mobile phones, they said.
The move comes at a time when the markets are becoming more
concerned about an economic slowdown hitting sales of mobile
phones and their components.
"This deal is about creating scale in a market with
too many players," said Carlo Bozotti, president and
chief executive of STMicro. "The new company will be
a solid top-three industry player and among the few companies
with the scale and expertise to pursue the R&D investments
necessary to establish itself as a leading player in the
wireless and mobile-multimedia market."
"It is increasingly apparent that the most successful
companies in this space are the largest ones," said
Frans van Houten, president and chief executive of NXP.
"The wireless semiconductor industry requires huge
investment in new technology and innovative product road
maps. The move will see two strong players propelling themselves
into a leadership position."
Both companies have research and development budgets of
about $400m a year and Mr Bozotti said that combining the
two would give them more firepower to tackle future developments
in multimedia, internet capable phones.
The companies said they expected more than $250m in annual
cost synergies from the joint venture by 2011. STMicro expects
the deal, which is seen closing in the third quarter, to
add to its adjusted earnings per share in 2009.
The move follows STMicro's move to put its troubled memory
chip operations into a joint venture with Intel.
In the Yahoo! Story, the Conclusion
Is Foregone
Published: April 14
 IN
THE END, MICROSOFT WILL BUY YAHOO! NOT CONVINCED? Pull up
a chair, and I'll explain why that's so obvious.
For all the Sturm und Drang, two-and-a-half months after
Microsoft (ticker:MSFT) made its $31-a-share, $42 billion
stock and cash bid, not much has really changed. No one
else had made a competing offer. Microsoft has not raised
its bid. Yahoo! (YHOO) is still fighting the inevitable.
And despite huge amounts of noise, it still appears Microsoft
will eventually get its way.
But last week, several developments complicated the picture.
Yahoo! signed up for a short-term experiment to run ads
sold by Google (GOOG) against some Yahoo! search queries.
Yahoo! also reportedly was close to a deal to buy AOL from
Time Warner (TWX) in a complex transaction in which Time
Warner would end up with a 20% stake in the combined company,
and Yahoo! would buy back some shares at prices above Microsoft's
current offering price. Finally, Microsoft was apparently
holding talks with News Corp. (NWS) about a plan to combine
MSN, MySpace and Yahoo!, creating...oh, MicroHooSpace.
A few days before that, Microsoft sent a letter to Yahoo!
threatening a proxy fight unless it takes the current offer;
charmingly, Microsoft said it would also consider lowering
its bid. Yahoo! responded with a letter that basically said:
Your bid is too low, but we're open to selling. Please bid
more. Then we had the odd spectacle of Legg Mason mutual-fund
legend Bill Miller, one of the largest Yahoo! holders, asserting
he'd rather see Yahoo! reject Microsoft than take a lower
bid.
Let's sort some of this out, one player at a time.
 Microsoft:
Microsoft wants to be a big player in online advertising,
particularly in search. That market is dominated by Google,
with Yahoo! a distant second. Google has about two-thirds
of the domestic search market, Yahoo! 20%. If Microsoft
wants to be a player, buying Yahoo! seems the only option.
Yahoo!: You might think CEO Jerry Yang is in control, but
that's not entirely true. Microsoft's 60% premium bid has
resulted in huge share turnover, leaving huge amounts of
stock in the hands of merger arbs. Insider ownership is
minimal. The Street seems convinced that the chatter about
deals with AOL and/or Google simply aim to spook Microsoft
into raising its bid. If Yahoo! manages to fight off Microsoft,
the stock will drop $10 or more, and Yang will get whacked
by shareholder lawsuits.
Time Warner: Remember when the company was actually called
AOL Time Warner? Ha! It has no real interest in taking a
stake in Yahoo!; it merely wants to rid itself of AOL, at
last. Charlie DiBona, software analyst at Bernstein Research,
last week suggested that if Microsoft really did walk away,
it could instead make a bid for AOL in cash, which would
likely be more appealing to Time Warner than shares in a
revamped Yahoo!
A nice side-effect: This would hurt Google, which now provides
search services to AOL. But the real point is that Time
Warner wants out, and will eventually sell to somebody.
Google: It has been fascinating to watch Google play faux
big brother to Yahoo!, helping it strategize on how to fend
off that bully Steve Ballmer. Yeesh! Google wants to do
whatever it can to stop a combination of its two largest
rivals. CEO Eric Schmidt wants to delay any deal as long
as possible and force Microsoft to pay as much as possible.
Yahoo! outsourcing search advertising to Google certainly
would be a cash-flow boon to Yahoo! But with a Yahoo! outsourcing
deal, Google would have nearly 90% of the domestic search
ad market. Does antitrust law ring a bell?
News Corp.: I think my employer's position is similar to
Time Warner's. There are signs that its mighty MySpace is
losing altitude. In particular, Google last quarter said
it was having trouble monetizing some of its social-networking
inventory -- in short, it isn't easy to sell ads on Bob
the Burnout's MySpace page. For the right price, I think
Rupert Murdoch would be happy to book his huge profit and
move on. You could argue that Microsoft would like to bump
Google out of its current role as MySpace's ad provider.
Or maybe not, given that their current deal has been a disappointment.
Bill Miller: Microsoft is doing him a huge favor. At the
end of 2007, Legg had almost 84 million Yahoo! shares. Its
position has swelled in value by about $840 million, thanks
to Microsoft's stock offer. Do you really think he would
rather watch the stock drop back to $19 than take even a
slightly lower bid if Microsoft actually follows through
on its threat? I doubt it. And at $31 or more, he and every
other institutional investor seem likely to back the offer.
So, in the end, it's simply obvious. Microsoft needs to
buy. Yahoo! needs to sell. The rest is a sideshow.
PATRICK MCGOVERN, CHAIRMAN, FOUNDER AND principal of privately
held trade publisher IDG Corp., is one of the last great
media moguls. IDG publishes about 300 magazines and newspapers,
operates 450 Websites and boasts total readership of roughly
260 million; it had 2007 revenue of about $3 billion.
I ought to be angry at the guy, really. More than anyone
else, McGovern was responsible for the demise of the Industry
Standard, the great Newsmagazine of the Internet Economy,
where I spent three years as editor during the bubble years.
He owned most of it, after all; had he poured in some more
money, he could have kept it alive.
 But
the statute of limitations has run out on placing blame
for dot-com era collapses. And McGovern certainly hasn't
backed away from the Internet Economy. He has been systematically
shifting the focus of his trade magazine empire to the Web.
InfoWorld, once one of his top brands, no longer has a print
edition. As McGovern explained last week during an interview
in the linoleum-floored cafeteria at Tech Trader HQ in Palo
Alto, over the past three years, online revenues at IDG
have jumped from 11% of total revenue to 43%, and by 2010,
the share will hit 50%. He also notes that the Web model
is far more profitable. No paper, no ink, no postage. In
each of the past three years, he says, IDG profits have
grown more than 100%.
That's amazing. A publisher's profits growing? And by 100%
a year? How the heck is he doing that?
It's the magic of the Web, McGovern says. IDG's approach:
focus on niches that create attractive targets for advertisers
and build community features on the sites to keep people
coming back. McGovern isn't sure the model translates to
daily newspapers; but if I were a publishing-industry executive,
I'd be grilling him for the secret formula.
The fight for Yahoo
Published: April 10
Imagine Yahoo's frustration. As one of the last independent
online properties of real scale, it should be the centre
of a bitter power struggle for the future of the internet
- and pretty much able to name its price. Instead, everybody
wants a piece of the action, but nobody can credibly go
head-to-head with Microsoft's bid, worth about $29 a share
at present.
 In
recent days the phoney war, which has persisted since the
software giant rolled its tanks on to Yahoo's lawn two months
ago, seems to have ended. Yahoo is trying to broker a three-way
alliance with Time Warner and Google. Time Warner would
inject AOL and some cash into Yahoo in return for a stake.
The combined group might outsource its search advertising
to market leader Google.
Nice idea. The trouble is such a deal would not give Yahoo
investors a firm headline price. And it could throw up more
regulatory problems than a sale to Microsoft. If Google
powered Yahoo's paid search, it would completely dominate
the advertising medium. Meanwhile, a straight AOL/Yahoo
deal, without Google's advertising expertise, would involve
two stumbling giants trying to prop each other up.
A sale to Microsoft still makes the most strategic sense
- though it is not clear why it would consider bringing
in News Corporation as a bidding partner. Buying Yahoo is
a risk for Microsoft, both in terms of antitrust problems
and the difficulty of integrating the businesses. But it
needs to try if it wants to have a chance of catching Google
on the internet and heading off competitive threats to its
own core business.
The sudden blur of activity in the battle for Yahoo could
herald the endgame. Alliances may continue to shift. But
the sheer buying power of Microsoft, which can raise its
offer or add more cash, should prevail.
Web giants take sides in battle for
Yahoo
Published: April 9 2008
 Yahoo
ratcheted up its efforts on Wednesday to improve its negotiating
position in the face of an unsolicited takeover bid from
Microsoft, amid signs that it was edging towards a three-way
alliance with Google and AOL that might protect its independence
or at least force Microsoft to pay more.
There were also reports that News Corp was in talks with
Microsoft about joining in that company's bid for Yahoo.
The talks involve News Corp combining MySpace, its social
networking service, with the Microsoft and Yahoo internet
businesses, according to the reports. Both News Corp and
Microsoft refused to comment.
The flurry of activity came as Yahoo and Microsoft positioned
themselves for the end-game in the takeover battle, which
began at the end of January. Microsoft tried to turn up
the heat on Yahoo over the weekend by threatening to take
its cash-and-stock offer, currently worth $42bn, directly
to the embattled company's shareholders and hinting that
it might even cut the value of its offer. Yahoo countered
by repeating that the offer price was too low and that while
it did not rule out a deal with Microsoft at a higher price,
it was pursuing alternatives.
Yahoo gave the first public sign of one possible alternative
on Wednesday when it announced the test of a potential advertising
alliance with Google. The two-week experiment, due to start
next week, will involve Google supplying relevant adverts
alongside a small sample of Yahoo search results.
The test suggested that the two sides were once again discussing
an alliance that would involve Yahoo closing down its own
search advertising system and outsourcing the work to Google.
The idea was discussed last year and again after Microsoft
made its unsolicited bid, but Google had appeared to cool
on the idea amid concerns that it would be blocked by anti-trust
regulators.
The idea of Yahoo abandoning its own search advertising
system and adopting Google's has long been promoted by several
Wall Street analysts. They see it as a way for Yahoo to
cut costs and boost revenues, with Google yielding 30 to
40 per cent more revenue per search than Yahoo.
"What they're doing now is testing revenue assumptions
about what they could expect" from a search advertising
alliance, said one person who is familiar with the situation.
Microsoft was quick to raise the anti-trust flag on Wednesday.
"Any definitive agreement between Yahoo and Google
would consolidate over 90 per cent of the search advertising
market in Google's hands; this would make the market far
less competitive," said Brad Smith, Microsoft general
counsel.
Some analysts were also sceptical that the relationship
could expand beyond a trial.
"We do not think a broader or longer-term Yahoo/Google
search partnership would pass regulatory muster," said
Scott Kessler, Standard & Poor's internet services analyst,
in a note. Even some people close to the situation warned
that the chances were small that the advertising test would
eventually lead to a full-blown partnership.
 Meanwhile,
talks have been continuing over a separate deal involving
Yahoo and AOL, according to people familiar with the situation.
Accounts differed on Wednesday over how close the two sides
were to an agreement. The two have for several weeks been
discussing a deal that would involve Time Warner injecting
its AOL division into Yahoo in return for a stake in the
company.
One person close to the situation described the talks as
"fluid" and said the two sides were still some
way from any deal, though another person said that considerable
headway had been made and an agreement could come as early
as next week.
A deal with AOL alone would not create enough value for
Yahoo shareholders to justify turning down the big takeover
premium offered by Microsoft, according to one Yahoo investor.
It has been seen instead as part of a three-way transaction
also involving Google, since outsourcing search advertising
would have a far bigger and more immediate impact on Yahoo's
earnings.
Bid for Yahoo withers into 'stalemate'
Published: April 1 2008
 Microsoft's
failure to make an impression on Yahoo's board with its
two-month-old takeover bid, and its apparent willingness
to sit back and let the offer run its course, are starting
to test Wall Street's patience.
According to some investors and analysts, the software
company's determinedly non-confrontational tactics increasingly
risk delaying the eventual completion of a deal and make
it even harder in the long run to challenge Google.
However, in spite of the signs of impatience, people close
to Microsoft continued to insist on Tuesday that the company
felt no need to raise its offer or change its tactics, repeating
a negotiating position that has remained unchanged since
it first drew a line in the sand several weeks ago.
"It's kind of like a stalemate," one arbitrage
investor complained on Tuesday. "They should just agree
a price and get on with it."
The delay in reaching an agreement threatens to push the
review of the deal by US antitrust authorities into the
next political administration - something Microsoft executives
said they were eager to avoid when the offer was first unveiled.
Also, with Europe's long-running feud with Microsoft likely
to lead to close scrutiny there, some observers are betting
the regulatory process could take a year to complete - valuable
time that Microsoft will lose even before it embarks on
a difficult integration of the business.
With no public sign of a breakthrough that could lead to
a deal, the stalemate has led to considerable second-guessing
on Wall Street and in Silicon Valley over how both companies
have played their hands. The options before the software
group: try to turn up the heat on Yahoo's board; offer a
carrot to open a more active negotiation; or just sit tight
and wait it out.
For now Microsoft has chosen the latter, conducting what
takeover specialists say is an unusually friendly approach
to an unsolicited deal. That may reflect the fact that it
has few real alternatives.
"Even if Microsoft were to play nasty and try to force
the board's hand, I'm not sure they would do it any faster,"
said Youssef Squali, an analyst at Jefferies.
Yet according to one takeover expert, taking the first
step towards a full-blown proxy fight by proposing its own
alternative slate of directors might help to put greater
pressure on Yahoo's board.
Though the internet company's shareholders would not be
able to vote on the proposal until the company's annual
meeting - and Yahoo has for now put off announcing the date
of that meeting - publishing its slate would be a way for
Microsoft to take off the gloves.
It would also put Yahoo's directors on notice about Microsoft's
seriousness and could increase their legal risk if they
do not give the offer proper consideration, according to
the takeover specialist.
Meanwhile, Microsoft continues to hold out - at least publicly
- against raising the value of its offer, which could prove
the most effective way of breaking the stalemate. With Microsoft's
shares slipping over the past two months, the value of the
cash-and-stock deal has fallen to $29.40 a share, from the
original value of $31, valuing the deal at $42.2bn.
Turning it into an all-cash deal, or even raising it back
above the original price, would help save face for Yahoo's
board and oil the wheels of an agreement, said Mr Squali.
But with Yahoo facing few other options and Microsoft apparently
in no hurry to take that route, there was no immediate sign
on Tuesday that the stalemate was about to be broken.
Yahoo's challenge
Published: February 20 2008 08:51 | Last updated: February
20 2008 19:21
 Yahoo
is starting to look more like Dow Jones by the day. Both
are leaders in their field - the former as an internet portal,
the latter in financial journalism. Both had fallen on tough
times when a deep-pocketed predator (Microsoft and News
Corporation respectively) lobbed in an aggressive offer
at a roughly 60 per cent premium. In both cases, the implied
valuation was extreme, and there were no obvious white knights
to turn to. And now, it seems, Yahoo has taken the same
route as Dow Jones in offering enhanced severance packages
in case of lay-offs following a change of control.
Will the story end differently? With Dow Jones, the controlling
Bancroft family was so disunited it managed to hand over
the company without forcing a higher bid. Yahoo should do
better. Most importantly, while Dow Jones was partly a vanity
project for Rupert Murdoch, Microsoft needs Yahoo strategically.
The deal is so risky in terms of integration, and fraught
with anti-trust risks, that an outright hostile takeover,
complete with bitter proxy fight, could leave Microsoft
with a much weakened asset once it took control.
After all, this deal is not like Oracle's hostile bid for
PeopleSoft. That was all about buying a software maintenance
revenue stream and cutting costs. Microsoft, in contrast,
needs to nurture Yahoo's expertise in building and retaining
a huge internet audience, while adding to the mix its own
technology prowess in order to take on Google.
Yahoo's best defence, therefore, is making clear it will
fight and that Microsoft would be better off paying a little
more to secure a friendly deal. It originally bid $31 a
share. The implied offer has slipped to about $29, as Microsoft's
stock has fallen. It would be odd for Yahoo's board, having
rejected the bid, simply to change its mind. But a sweetened
offer at, say, $33 should do the trick.
Yahoo investors must hope that this plan does not reflect
a determination on the part of the management to remain
independent at any cost. Microsoft is offering cash and
reasonably valued shares to buy Yahoo for $29.27 a share.
That is already a huge premium for Yahoo, which was worth
about $19 when Microsoft first made its bid.
 Given
Yahoo's poor recent record, Jerry Yang, chief executive,
can hardly expect shareholders to welcome a News Corp deal,
even if it came with a very high notional valuation for
Yahoo. In fact, that might give Microsoft a real chance
to gather support for a proxy fight. Instead, Yahoo shareholders
must hope that all this noise is a way of securing a deal
with Microsoft at a meaningfully higher price.
Yahoo and News Corp
Published: February 13 2008 23:45 | Last updated: February
14 2008 08:35
It is natural that Yahoo should try to squeeze a better
offer out of its unwanted suitor, Microsoft. But plans to
help the internet giant fend off the bid smack of desperation.
The gist of the idea seems to be that News Corporation would
inject its online properties, including the social networking
site MySpace, and some cash into Yahoo in return for a stake
of about 20 per cent. Depending on the valuation attributed
to MySpace, the plan looks great for News, which would gain
a stake in the second-most important property on the web.
 It
is tougher to see why Yahoo would want to do it. Absorbing
MySpace would increase Yahoo's internet traffic. But Yahoo
already has plenty of that. Its problem is rather how to
generate more advertising dollars from all those internet
users. On that score, it lags far behind Google. MySpace
hardly offers a solution. In fact it has an even bigger
issue than Yahoo when it comes to making money from its
millions of users.
LG Electronics
The Korean consumer electronics maker is one of this year's
star performers - shares are up 35 per cent year to date.
That comes on top of a near-doubling in 2007, and is comfortably
ahead of the broader Korean market - Apr-10
BT's succession
The UK's largest telephone company has made significant
progress since Ben Verwaayen joined as chief executive,
but all is still not rosy as he hands over to successor
Ian Livingston - Apr-08
TomTom troubles
 The
challenge for the personal navigation device maker is not
to let its data become a cheap commodity - Apr-08
Motorola's truce
With the backing of Carl Icahn, Keith Meister has been
appointed a director of the troubled handset maker - Apr-07
Microsoft/Yahoo
Is Microsoft finally getting ready to play hard? During
the two months of phoney war since the software giant launched
its unsolicited offer for Yahoo, it has avoided doing a
Larry Ellison - Apr-07
Infineon's value
Infineon, its stock down almost 70 per cent from last summer's
peak, has a market capitalisation of €3.3bn. Losses
are anticipated again this year. Why is it worth so much?
- Mar-31
Low-cost laptops
Captains of industry like to point out how their kids are
at the cutting edge of technology trends. It is apt then
that a laptop initially aimed at children, may come to shape
the direction of the PC market - Mar-28
LBO at a crossroads
Every unhappy deal is unhappy in its own way, to paraphrase
Tolstoy. So it is with the Clear Channel bust-up. One novelty
is that the banks that are financing the deal are right
at the centre of the complaint - Mar-27
Reed's Choicepoint bid to spur windfalls
Published: February 22
 Reed
Elsevier's $4.1bn (£2.1bn) bid for ChoicePoint, the
US group that supplies personal data to insurers, governments
and law enforcement agencies, will trigger windfall payments
to its most senior executives.
Derek Smith, chairman and chief executive, stands to collect
$149m for his shareholding in the company, based on the
group's most recent proxy filing. Douglas Curling, president
and chief operating officer, would gain $51m.
The two men were cleared last month after a US Securities
and Exchange Commission investigation into stock sales made
around the time in 2005 when ChoicePoint revealed fraudsters
had gained access to information about 163,000 people in
its records.
The sums are separate from change of control payments,
which could be worth up to $32.1m for the company's senior
executives should they lose their jobs as a result of the
deal.
Sir Crispin Davis, chief executive of Reed, said on Thursday
that he had taken no decisions about personnel. Reed is
paying $50 a share for the group, or a 48 per cent premium
to its previous closing price.
Regulatory filings by ChoicePoint reveal that the company
would have to pay Reed a termination fee of $100m and cover
its expenses up to $15m should the deal collapse.
The two groups expect to overcome regulatory and other
hurdles to completing the deal by the end of the summer
of 2008, the filings show, but either side could walk away
if it is not consummated by December 31.
ChoicePoint has shown 10 years of double-digit revenue
growth in its insurance business, which now accounts for
82 per cent of profits. Added to the risk and information
analytics business in Reed's Lexis-Nexis division, it will
create a leader in its sector.
However, ChoicePoint's screening and authentication division
and its business services operation have struggled.
In the fourth quarter of 2007, falling revenues from the
subprime mortgage lending market prompted an $86m writedown
of its marketing services business.
Reed said it would improve the performance of these divisions
by moving them on to its more advanced technology platform.
Philips: Turning on the Lights
 THE
GLOW IS GETTING BRIGHTER. Koninklijke Philips Electronics,
the big Dutch maker of light bulbs, shavers and MRI machines,
finally looks ready to deliver some high-wattage results.
The company, with a market value of $44 billion, struggled
for years, defying repeated predictions of a turnaround.
Then Chief Executive Gerard Kleisterlee made a series of
smart moves. He pared the company's businesses from an ungainly
24 to just four. He slashed costs and pushed into emerging
markets. Result: Philips' American depositary receipts (ticker:
PHG) are up 23% since Barron's wrote bullishly about the
company two years ago ("Philips' Higher Definition,"
May 29, 2006).
But Philips, and its stock, haven't finished their ascent.
By some estimates, the shares and the ADRs could climb another
30% or more as the company's transformation enters a new
phase, spurred by a two acquisitions announced last year
totaling 5.3 billion euros ($7.7 billion).
Respironics, for which Philips is shelling out €3.4
billion, boosts the company's personal-health-care-equipment
business with devices that look after respiratory problems,
snoring, even insomnia. The deal should more than double
Philips' annual sales in personal health care, to €1.5
billion. Profit margins should get a lift, too.
The other buy was Genlyte, a U.S. maker of mainly commercial
lights. Genlyte's operating margins are close to 15%, which
should raise Philips' total lighting margins to 12.2% from
a current 11.1%.
The acquisitions capped a restructuring that has left Philips
with a promising portfolio of businesses: medical instruments,
domestic appliances and personal care, lighting, and consumer
electronics. The operations cater heavily to industrial
customers, meaning the company should prove resilient in
a consumer downturn.
"What we have now is a portfolio with very defensive
qualities," Kleisterlee tells Barron's.
To boost the profitability of these businesses, Philips
has been aggressively sourcing its components from low-cost
countries. For instance, in 2005, its medical-systems business
bought 16.5% of its parts from China, Eastern Europe and
Mexico; today, the figure is 27%.
With the exception of consumer electronics, the businesses
are now generating double-digit operating margins. This
year, analysts figure, earnings per share should jump more
than 30%, to €1.84, and then another 15% in 2009. That
makes the shares look quite reasonable, trading at 14 times
forward earnings. The multiple has averaged 19 over the
past two years.
Shareholders already have reaped nice rewards. Last year,
the dividend jumped to 60 European cents a share from 44
cents, and this year it's headed to 70 cents. Philips also
plans to buy back €5 billion of shares over the year.
One reason that investors didn't warm to Philips' restructuring
story until 2006 was its cyclical semiconductor business.
But after that operation was shed, the stock got new life;
over the past 12 months, it outpaced its benchmark, the
STOXX 600 index of European companies, by more than four
percentage points.
But there's clearly room for still better performance.
While medical systems account for some 40% of operating
earnings, Philips stock has lagged behind a key health-care
equipment index by 10% in the past year. And while lighting
generates 36% of operating earnings, the stock has underperformed
a global electrical-components and equipment index by 9%.
ONE OF THE PROBLEMS: was a lazy balance sheet: The company
held some €14 billion of liquidity and a grab bag of
minority stakes in other businesses. The big acquisitions
and the share-buyback plan helped address that. The company
is also shedding minority stakes.
Kleisterlee knows that his recent acquisitions will be
put under scrutiny, and last year Philips created a department
to oversee integration. Analyst Jürgen Wagner with
German brokerage Sal Oppenheim is optimistic about the effort;
his price target is €35, up 35% from current levels.
The Bottom Line:
After dipping in recent months, the shares look cheap. They
could climb by 30% or more as the company powers up in lighting
and medical gear, and reaps more cost savings.
Perhaps the biggest opportunity for the company is emerging
markets. The domestic-care and personal- products division,
for instance, saw more than 50% growth in Russia in 2007,
42% in Brazil, 29% in India, and 25% in China. Philips ended
2007 with 30% of its total sales coming from emerging markets.
Yes, there's still work to be done, especially in consumer
electronics. The operation, which makes TVs and audio gear,
generates only 3% operating margins on sales of €10.362
billion. While the company is trying to deal with this through
outsourcing and other measures, Oppenheim's Wagner thinks
this division ultimately must be jettisoned.
Still, Philips' future is looking better than it has in
years. Kleisterlee & Co., it seems, are finally turning
on the lights.
Reed Elsevier
Reed Elsevier shareholders should get their hands on about
$5bn being returned following the sale of the group's education
arm.
Naspers bids for Tradus
Tradus' management, accustomed to the highs and lows of
the technology roller-coaster over the past decade, can
breathe a sigh of relief after receiving an offer from Naspers.
Murdoch's Wall Street Journal
 Rupert
Murdoch has been willing to sacrifice short-term profitability
in the pursuit of viewers and readers. Will he take the
same view when he completes his purchase of Dow Jones?
Murdoch moves on from BSkyB
Being bearish on BSkyB is a bit of a strain. In recent years
the UK's dominant pay-TV provider has flattened all before
it in its quest to diversify revenues.
Vivendi and Activision
Vivendi is injecting its fully owned games business into
US rival Activision in return for a controlling stake. Why?
Sprint
Everybody knows how costly it is to get a US presidential
candidate elected. But how much does a chief executive cost?
More than $5bn, if Sprint is anything to go by.
China's delayed 3G
China has been aiming to introduce 3G telecoms services
almost since the start of the decade. The fact that it has
failed to deliver does nothing to subdue enthusiasm.
Reuters
 While
banks have been clobbered in recent weeks, Reuters has sailed
on serenely, pegged to the terms of a cash-and-share deal
agreed to with Thomson in May.
Vodafone on the up
Vodafone makes consolidated operating profits equivalent
to about 60 per cent of its tangible fixed asset base and
thus will be exposed to regulatory threats.
Tech sell-off
Until Thursday, the technology sector had outperformed
the S&P 500 by some 16 percentage points in 2007 - then
came a few choice comments.
Technology predators on the prowl
Investors have grown more comfortable with stocks in the
sector as many companies have matured and proved far more
efficient at converting their cash into operating profit.
- India's IT outsourcers face increasing costs
- Cisco to network whole cities
- China and India keep building on success
Apple's share price in Christmas rally
 A
Christmas rally in Apple's share price made it the world's
third most valuable new technology company, behind Microsoft
and Google, sealing one of the most dramatic corporate turnrounds
ever achieved.
- Apple signs film deal with Fox studio
- Apple's rumour site closes after settlement
Bargains among the small and mid caps
The smell of burnt fingers was wafting around the City
a week ago after KKR, the US private equity group, made
a £600m cash offer for software group Northgate...
Apple signs film deal with Fox studio
Apple has signed News Corp's 20th Century Fox studio to
a new online video-on-demand service in a deal that could
change the way people pay for online film content.
Intel's venture with STMicro delayed
The credit crunch has forced Intel and STMicroelectronics
to delay the merger of their unprofitable memory chip businesses
as new financing arrangements are worked out.
Cisco to network whole cities
 Cisco
Systems plans to launch a business group, based in Bangalore,
India, that will wire new buildings and even entirely new
cities with state-of-the-art networking technology.
iPhone users raise network hopes
Buyers of Apple's iPhone have turned out to be voracious
users of electronic mail and other data services.
NIS in £593m takeover from KKR
Northgate Information Solutions has provided a shot in
the arm to the UK software sector after agreeing to a £593m
takeover from the US private equity firm.
Philips buys Respironics for
€3.6bn
Philips, the Dutch electronics group, said it would buy
Respironics, the US medical equipment maker specialising
in sleep therapy, for €3.6bn ($5.2bn) in cash - its
biggest acquisition to date.
Qualcomm raises its forecasts
 US-based
wireless chipmaker indicates a strong end to the year for
mobile phone sales by raising its forecasts for revenues
and profits.
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