Filed under: Google (GOOG)

In a somewhat-telegraphed move, the omnipresent Google (NASDAQ: GOOG) is introducing public profiles for its users’ online identities. Google Operating System had an interesting point, “It’s not a stretch to see that these profiles are the perfect host for your activity streams and your public activities could become a part of the profile (uploading photos to a public album, bookmarking web pages, posting a new blog post).”

In addition to being able to share things with friends, this move is putting Google strikingly closer to the News Feed that Facebook uses to keep users abreast of what others are doing in their networks.

With Gmail, GFinance, Search/Web History, Google AdSense, Checkout and Analytics on my blog, Calendar, and Google Chat, I’m a heavy Google user. Now, by connecting me with my friends, Google is on its way to creating a social network by aggregating all my web activities and allowing me to share them with others.

I think this is a stronger position for a social network than Facebook’s closed garden approach. Facebook needs to have ex-Facebook activity in their network, but its Beacon system seems to have met with a lot of pushback from privacy groups. Google just will aggregate my activity where I’m actually doing it.

Oh, and my profile?

*******************
Zack Miller
Analyst from Jerusalem

About Zack:
Backing the truck up to load up on the GOOG!
********************

Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author is long GOOG stock.

Permalink | Email this | Linking Blogs | Comments

Share This

Filed under: Television, Internet, Google (GOOG), Microsoft (MSFT)

I’m definitely looking forward to the “Dexter” finale this weekend. The Showtime Networks series is about a serial killer — who uses his killing talents to snuff other serial killers.

Yes, it’s not a typical show. So, maybe that’s why the producers are going to do something creative; that is, they have partnered with Meebo to develop a Web 2.0 experience.

So, Dexter fans can chat — with AIM, Google (NASDAQ: GOOG), MSN and so on — with executive producers and the talent after the finale.

I had a chance to interview Chase Norlin, who is the CEO of Pixsy (a video search engine), who says:

“This makes perfect sense for Meebo to be in the private label business with instant messaging as the primary application, and certainly seems to be a complement to Showtime Networks’ goals. No doubt, video integration into instant messaging applications stands to be a significant trend. Although, in the case of Meebo, I think they will eventually have to offer broader functionality in their private label product in order to win more distribution partners.”

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Permalink | Email this | Linking Blogs | Comments

Share This

Filed under: Google (GOOG), Microsoft (MSFT), Interviews, Marketing and advertising, Israel

Ever see those smiley faces your friends and family may append to their email messages? Well, the leader in the space is a publicly-traded Israel firm named Incredimail (NASDAQ: MAIL). We, at Israel Opportunity Investor recently had a chance to sit with founder and CEO of Incredimail, Yaron Adler.

Tell us about your company.

Yaron Adler: Incredimail is an Israeli company, founded in late 1999. Incredimail is our flagship product for email. The product allows users to customize and personalize traditional email communication in a way that brings life and excitement to applications they regularly use. We enable you to send emails with 3D effects, funny animations, and customized backgrounds. We aren’t re-inventing the wheel. We take existing applications, like email, and make them fun to use.

Do you have any other products?

YA: We are continuously looking for existing, successful consumer markets, and then we try to bring fun to these markets. Email, Magentic, (our desktop and screensaver application), our soon-to-launch messenger product and social network, we’re launching Q1 2008, called Incrediworld. This product will not only be completely tailored for Incredimail users and products but also act as a fully-fledged social network.

Giving away free content is not a great business. What’s the business model?

YA: The business model is based on what I like to call the “large numbers game.” We are working hard on two fronts: we are working to bring millions of new users to our products and working on how to best monetize them. We started by using viral marketing to promote our content. Every email sent from Incredimail has a link included on the bottom to bring the recipient of that email to our website. This strategy has worked very well. To date we have 80 million users, of which 11 million are active (defined as at least one usage event per quarter). Over 300 million emails are sent per month with Incredimail. We get 300,000 new visits to our website daily just from the viral links we include in our emails.

Viral marketing is fine, but what else are you doing to promote your products?

YA: We have made it a priority to increase our marketing budget, to help build awareness in our company. We felt we could begin to move beyond viral marketing only after we’ve boosted our average return on investment (ROI) for customer acquisition. After achieving this goal, we’re expanding our marketing using more traditional methods, such as billboards and other forms of outdoor marketing, as well as online advertising. In fact the next time you happen to be in Times Square in New York City, you will see Incredimail ads on both the Reuters and Nasdaq buildings.

How are your revenues?

YA: For the first nine months of 2007, revenues increased 94% to $13.3 million from $6.9 million for the first nine months of 2006. Net income for the nine-month period was $1.8 million versus $1.6 million for the same period in ‘06. Again, we’re focused on two things: accelerating growth to get more users plus trying to better monetize our users. To do this, we need increased R&D to make new products for our users to interact with and we need to improve our revenue sources.

You’ve said search revenues are going to play a bigger role in your revenue model. Can you explain how search revenues are going to grow?

YA: You can grow search revenues in two ways: more searches and more profitable searches. We’re just in the early stages of doing this. We’re directing searches to our search engine (powered by Google (NASDAQ: GOOG)) by suggesting to our users to replace their homepage with MyStart page with value-added Incredimail content. A soon-to-be-released browser toolbar increases searches away from Incredimail. We can find a way to promote suggested searches and ultimately, as our search traffic increases, negotiate a better deal with Google. We’ve just started optimizing our search revenues. Our growth continues to accelerate, driven by increased revenues from all streams: products and subscriptions on the one hand, which used to be our big revenue driver, and advertising and search on the other hand, which now accounts for almost 46% of our revenue.

You’ve alluded to a change in strategy — that you’re now focused on top line growth, and not profitability. Why the strategy change?

YA: It’s certainly a strategy shift. Pre-IPO, we had a profitable internet company, and that’s how we were able to go public. I don’t have to tell you that there aren’t too many profitable Internet firms going public. Our focus now is going from a company with revenues in the tens of millions of dollars to a company that will boast revenues of hundreds of millions of dollars. In order for us to do this we need to increase our R&D and marketing.

Will you stay profitable in ‘08?

YA: It’s hard to say. We will be right around the breakeven point. I don’t foresee steep losses. Profitability will come. As I said, our focus is on revenue growth.

We can do that by both launching new products, like our new instant messenger and social network, or by buying new subscribers.

There have been rumors that you maybe acquired. Are you saying that you plan on using your large cash position to be the acquirer?

YA: Yes. We are in the final stages of closing with at least one investment bank to help us find the right candidate for an M&A. Our criteria are clear: acquisition candidates should be lucrative and profitable while being the right size to minimize integration risk. We’re looking at medium size candidates, with a price tag ranging from $10M to $60M.

How have investors reacted to this decision?

YA: I would say they are split. Our large investors have been pushing us to use our cash to make an acquisition to increase our top-line growth. Other investors are worried about the potential risks associated with M&A.

How are your content deals with movie studios coming along?

YA: Doing wonderfully. Through these deals, we publish content from leading movies for our Incredimail users to attach to their emails. So far, we’ve published content from seven movies with a pipeline of four or five additional movies in the works. We’re working on getting to bigger studios. Our business development deals work toward three goals: more users, more revenues, and more content. We’re continuing to invest in our content for the entertainment industry: namely, movies, television, sports and music. We’re growing our content team. The majority of content is still done in-house. But with the launch of our social network, user generated content will eventually become the long tail. The social network is the future of Incredimail. The social network will facilitate the sharing of user generated content (UGC). Incredimail users will create and share content, making Incredimail even more sticky.

Tell us about your international plans.

YA: The Chinese market has huge potential, but it’s going to be a long process. Incredimail has already been translated to Chinese. We’re working on locating and identifying a Chinese partner who can help with content, a website, and a local name. We’re looking for China to become a significant part of our revenue starting in 2009. In addition to Chinese efforts, we’ve focused on European users for the past five or six years, and now Europe is 40% of our revenues and growing more quickly than the U.S.

Yaron, thank you so much for your time.

Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author doesn’t hold a position in MAIL.

Permalink | Email this | Linking Blogs | Comments

Share This

Share This

Share This

Since Governor Schwarzenegger took office in October of 2003, he rode in promising no tax hikes and sent a very unpopular vehicle fee out the door along with Gray Davis. He has faced issues with budget delays but nothing like the current short fall. The Governor announced plans for declaring a fiscal emergency in January since the state’s budget deficit has grown from $10 billion to $14 billion:

“SACRAMENTO, Calif. - Gov. Arnold Schwarzenegger said Friday he will declare a “fiscal emergency” in January to reduce an anticipated $14 billion budget deficit, pressuring lawmakers to fast-track spending cuts and other solutions.

The Republican governor has signaled that he wants to cut spending across the board in state programs, while Democratic leaders have said that both spending reductions and tax increases need to be considered.

It will mark the first time the Republican governor has used the “fiscal emergency” authority that he asked voters to approve in a 2004 ballot measure.”

The deficit is deep enough to cause serious cutbacks and potentially a reneging on his promise of no tax hikes. During the past four years, the California real estate market has been on an incredible appreciation journey. California construction has also been booming and employment in the financial field has provided high paying salaries for people to spend on local commerce. How much of the Governor’s recent success has been skill based and tact and how much was centered on being at the right place at the right time? Sometimes it is important to acknowledge reality. As the famous late night real estate guru Tom Vu once said, “Do you think these girls like me? NO, they like my money!” In fact, it is hard not to like someone when everyone is swimming in a rising golden sea of housing equity.

Yet there are ominous signs now showing through the states economy. The financial and political wizards tried their best to build a fortified wall against the toxic credit pool, but it appears that the damn has now broken and is spilling all over the lands of this country. California, which seemed reluctant until this year to recognize any housing depreciation is now being swept up in the disastrous financial mismanagement of the current decade. It was only a matter of time until the mountain of debt struck the most prosperous state in the nation.

In this article, we will examine the pillars of the California economy and dig deep into the trends that are causing this budget shortfall. We’ll look at automobile sales, construction, and unemployment numbers. The grease of the California economy is drying out and causing the system to come to a screeching halt. The state with a vehicle obsession needs a jump start.

California Unemployment

The current contraction in construction and financial services has hit the golden state particularly hard. Unemployment in the state has increased almost 1 percent since last year going from a low of 4.7% in November of 2006 to our current 5.6% in October of 2007. During this same timeframe, the U.S. unemployment rate has held steady at 4.5% in October of 2006 and is currently running at 4.7%.

Clearly the impact is being faced disproportionately here in the state because of the heavy reliance on the housing and mortgage industries. This will also have an impact on the state’s bottom line since someone that isn’t working will not be paying any state income tax. They will also hold back from purchasing homes.

California Construction

Building permits are a good leading indicator because before you build any future homes, you first need approval. The current permit numbers are abysmal in California dropping an astounding 42% from last year for single unit construction. Approval for single unit permits is at a 12 year low.

Keep in mind the last time we had numbers like this we were at the end of a bursting housing bubble in California. With sub-prime resets and the incredible number of option ARM mortgages in the state, we are in for a few tough years. The jobs that are being lost in construction are appearing in the sharp rising unemployment numbers. There is also a direct impact on spending cut backs and loss of a tax base for the state.

Foreign Trade through California

There was a time in the not too distant past when imports and exports to the state were relatively even. We’ve been running trade imbalances since the 1970s but never has the percentage been so drastic. Take a look at data from 1993-2006:

What these numbers show in a very direct way is what every member of the state already knows. That is, we are spending a lot more than we are producing. Take 1993 for example. In 1993 we were importing 52% more than what we were exporting. In 2006, the imbalance leaped to an astounding 133%. This cannot go on forever and the insatiable consumer appetite will affect our foreign trade partners. For all the talk that a lower dollar will make our goods more lucrative, it doesn’t hold much water since we don’t have that many goods to export and their own growth is very dependent on our spending.

California’s World Ranking

California has the 8^th largest Gross Domestic Product in the world:

California represents 13 percent of the U.S. GDP so any impact here will create large shockwaves throughout the nation. With that in mind, California also has the largest nominal amount of any state with sub-prime, interest only, option ARM, and other exotic mortgage products. With a median home price of over $500,000 and the advent of no money and very little money down products, you can imagine how much equity is about to slip away if it hasn’t already. A large portion of our economy revolved around construction and all things real estate so this contraction will hit our bottom line. But looking at the list, many of these places have asset and credit bubbles too. It will be interesting to see how the numbers play out in the next few years.

Auto Sales

Auto registrations are a good way to keep track of new automobile sales. I think this will be another casualty of the credit debacle. After all, car dealers wouldn’t survive without financing and financing wouldn’t survive without easy credit. Now that easy credit is slowly going away auto sales are starting to feel the pinch here in the state. Take a look at the trend for auto registrations:

Couple of things to notice. First, you’ll notice the amazing jump starting in 1997. Coinciding with the real estate bubble it appears that we also had an auto bubble. The numbers hold steady from 2000 all the way to 2006. The only difference this year is that the numbers did not have their spring and summer jumps and we are entering the slower selling seasons of fall and winter. What happened to real estate in California is happening to auto sales; I’ve examined this seasonal selling trend for housing before. Aside from all the car commercials about people giving $50,000 cars as Christmas gifts (with a nice monthly payment) December isn’t a hot selling month for cars. You normally see an uptrend during the spring and summer months. This is California and you need the hot rides for the sunny weather. The data only goes up till June of this year so I’ll keep my eyes peeled on this sector since it misses the current credit crunch.

California Dreaming

California has many challenges facing its economy and the Governor is going to have his work cut out for him. In the October budget highlights the opening paragraph on the economy states:

“The slumping housing sector continued to weigh on the national and California economies in the first eight months of 2007, slowing job growth and dampening retail sales.”

That is succinct and to the point Governor.

Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information

Share This

Share This

Filed under: Russia, Alcoa Inc (AA), Entrepreneurs, Commodities

Though Gulzhan Moldazhanova is the top female executive in Russia, she is little known outside the former Soviet Union. I hadn’t heard of her, and a quick trip to my frequent first stop on the research trail, Wikipedia, surprisingly had nothing on her when I looked.

Digging a little deeper (thanks to the Globe and Mail) reveals a rags to riches story. This soft-spoken, Khazakstan-born divorced mother of a three-year-old, started her career as the secretary for an ambitious young Russian businessman named Oleg Deripaska (who does have a Wikipedia page). In only ten years she worked her way up the ladder to become CEO of Russia’s biggest and fastest-growing industrial conglomerate, Basic Element. This US$23 billion company is a big player in seven domestic industries — energy, resources, manufacturing, financial services, construction, materials, and aviation — and recently took a US$1.54 billion stake in Canadian auto parts giant Magna International (NYSE: MGA).

Moldazhanova lives in Moscow, speaks English, and according to Fortune magazine is the 20th most powerful woman in the world. She first went to work for Deripaska when he was running an aluminum trading company. After she trained as an accountant at the Russian government’s Finance Academy, her career took off. By 2003, Deripaska, and his company Rusal, had became the undisputed king of Russian aluminum. In 2006, Rusal surpassed Alcoa Inc. (NYSE: AA) and to become the world’s top aluminum maker.

Continue reading Money Winners of 2007: Gulzhan Moldazhanova tops the corporate ladder

Permalink | Email this | Comments

Share This

Filed under: Verizon Communications (VZ), Nortel Networks (NT), Vonage Holdings (VG)

Vonage (NYSE: VG) must has 100 people in its general counsel’s office. The company only has 1,600 people.

The comment may be fanciful, but the Vonage patent problems are not. Nortel (NYSE: NT) has now become one of a long list of companies to sue the VoIP company, which went public at $17. Vonage shares now trade for $2.

The Wall Street Journal writes (subscription required) that “the patents relate to technology that forms the basis of Internet-based voice service, as well as features such as 911 and 411 calling and click to call, according to Nortel spokesman Mohammed Nakhooda.”

Investors in Vonage had hoped that the company’s intellectual property problems were behind it. The company has already lost legal actions to several large U.S. telecom companies, including Verizon (NYSE: VZ).

And, Nortel needs to be careful. The Canadian company may be better off with a quick settlement than with a lengthy lawsuit. Vonage is already crippled by lost legal battles and negative cash-flow. On its last balance sheet, the company had $350 million in cash and investments and $275 million in long-term.debt. Payables were $332 million.

Nortel could win the suit and end up with nothing to show for it.

Douglas A. McIntyre is an editor at 247wallst.com.

Permalink | Email this | Comments

Share This

Filed under: Berkshire Hathaway (BRK.A), Citigroup Inc. (C), Comcast Cl’A’ (CMCSA)

Jay Winthrop of Douglass Winthrop Advisors LLC, a $250 million (assets under management) New York registered investment advisory firm, likes to buy stocks whose prices are so low that the odds of them benefiting from a positive surprise exceed those of losing from a negative one. Douglass Winthrop is ahead of the S&P year-to-date and has delivered “positive, tax-efficient results since inception in 2002.” Through its 10% to 15% stock turnover, it offers investors lower expenses and taxes than its higher turnover “fast money” peers. As Winthrop summed it up: “Good things happen to cheap stocks.”

Four stocks that he mentioned particularly caught my attention:

• Nestle S A (OTC: NSRGY). Nestle has benefited from its investment in emerging markets — giving it a strong brand and distribution presences in countries experiencing rapid growth. A significant share of its profits are generated in developing markets. And its core food business is cheap when its strategic investments are backed out. Nestle trades at a mere 13x to 14 x operating earnings — which is lower than the value of stocks in its peer group. Finally, Nestle is capitalizing on the profitable and growing health and wellness trend.
• Legg Mason (NYSE: LM). Legg Mason is a pre-eminent asset manager with $1 trillion under management. But its stock has declined due to temporary problems. Its Value Trust fund — which had long outperformed the market under its manager Bill Miller — has had two sub-par performing years in a row. And it’s had troubles integrating a merger with Citigroup Inc.’s (NYSE: C) mutual fund unit. Winthrop also thinks Legg Mason has been hit by the overall decline in financials. However, he argues, Legg Mason trades at 1% of assets under management which is far below the 2% industry average. And its valuation is much less than that of newly public alternative investment managers.

Continue reading Douglass Winthrop picks for 2008: Nestle, Legg Mason, Comcast, Markel

Permalink | Email this | Comments

Share This

Filed under: Management, Dell (DELL), Hewlett-Packard (HPQ), International Business Machines (IBM)

When it comes to corporate leadership and stewardship, there is no better example in recent memory than Hewlett-Packard’s (NYSE: HPQ) CEO, Mark Hurd. After presiding over a very public corporate spying scandal in 2006, the former NCR lifer has brought HP back from the confused, muddling days of Carly Fiorina and into the tech and business spotlight.

HP has had a tremendous year in 2007 from a sales and profit perspective, which — for a hardware company — is no small feat. But also, Hurd has engineered larger sales from HP’s software side with the Mercury Interactive acquisition, and has made the HP consumer PC business energized again with fresh designs, more retail exposure, and a solid marketing effort. In a manner of speaking, HP has thumped competitor Dell (NASDAQ: DELL) this year, as the latter has struggled with profitability, an accounting scandal, market share losses, and out-of-control costs. The exact opposite has happened to HP under Hurd’s hand.

In surpassing IBM (NYSE: IBM)as the world’s largest tech company this year (by sales), HP seems to be firing on all cylinders. Having covered many quarterly conference calls this year, there is not a single CEO I can think of that articulates company vision, strategy, sales prowess, and operational efficiency better than Hurd. All those variables and more are what makes a company successful, and a leader successful at leading the charge on all fronts.

For his efforts at turning around HP into the huge success it currently enjoys, Hurd is listed by Forbes as having been compensated to the tune of $15.14 million (2006 figures), which ranks him #91 on the overall list regarding total amount paid annually. Is he worth it? In terms of a CEO bargain, yes. Many (many) other CEOs have made way more than this for middling or disastrous performance. Hurd is definitely not one of them, and from this writer’s perspective, he’s earned every penny.

Be sure to check out more Money Winners of 2007.

Read | Permalink | Email this | Comments

Share This

Filed under: Rich in America, Economic data, Politics, Presidential elections

A new report from the Congressional Budget Office has a pretty startling finding: From 2003 to 2005, the income growth of the top 1% of American income earners exceeded, by 37%, the total earnings of the bottom 20%.

It sounds bad — it is, after all, about as compelling evidence as you’ll find of increasing income inequality. The lowest-earning fifth of households had total income of $383.4 billion in 2005, while the richest 1% saw their earnings increase by $524.8 billion.

One factor was the appreciation in the stock market over that period, with about half of the earnings growth of the top1% coming from investments and business ventures.

Jared Bernstein of the Economic Policy Institute told the New York Times that “A lot of people justifiably feel they are working harder and smarter, they are baking a bigger and better pie, and yet their slice is not growing much at all. It is meaningless to middle- and low-income families to say we have a great economy because their economy looks so much different than folks at the top of the scale because this is an economy that is working, but not working for everyone.”

This is bad news for the Republicans, who are facing pretty long odds at maintaining control of the White House. While they can point to economic growth over the past few years, the reality is that working-class Americans saw an increase in their income that is barely significant — Wealthy Americans cleaned up.

The actual importance of income inequality is a debate that has no end in sight: Does the fact that rich Americans saw their earnings increase a lot really have anything to do with the lowest 20% of income-earners? It doesn’t matter because it still make for great election-year rhetoric.

Read | Permalink | Email this | Comments

Share This