Category Archives: Finance & Markets

Kodak Points to Capture

Kopin Tan argues in this week’s Barrons that Kodak remains a viable force in digital imaging, that "prospects for a turnaround might be brighter than Kodak skeptics think."

While Kodak faces competition in each segment — Hewlett-Packard is a big name in printers, Snapfish a popular Internet printer — few rivals can challenge the company across the entire photo-finishing spectrum, where a still-formidable brand remains a key asset. Study after study has shown how awareness of the Kodak name helps drive purchase consideration. Taking a page from Apple Computer’s (AAPL) playbook, Kodak this month opened lifestyle stores in New York and San Francisco, ostensibly to showcase its multitude of gadgets, but in fact to brand itself as the shrine for all things imaging.

Although Kodak is No. 1 in U.S. camera sales, it trails Sony (SNE) and Canon worldwide. Moreover, as the digital business grows, the company must stay ahead of rapidly evolving technology and fickle consumer tastes. It doesn’t inspire confidence to know that the average age of Kodak’s board is 59 and that the executives leading the turnaround are old enough to have starred in home movies shot with a Brownie. On the other hand, Kodak’s storied past could be a source of future revenues. […] Every few decades, something comes along to transform the way people take pictures. If Kodak can keep pace today, its customers — and its shareholders — will relish the results. As Ivan Feinseth, director of research at Matrix USA and Wall Street’s lone Kodak bull, observes, Kodak’s return on capital already is edging up, after bottoming at 2.5% three years ago. Given its strong brand, and his belief that the worst is behind it, Kodak should trade up as management makes more progress.


SAP Gives SocialText Stamp of Approval

Matt Marshall, who recently reported that SocialText had raised additional funding from SAP, also quotes Ross Mayfield on why the Los Angeles Times’ experiment with (group written and edited) wikitorials failed. Mayfield is CEO of SocialText.

The public nature of the LA Times project is slightly off-point
from Mayfield’s core corporate focus. But had the Times developed the
product more prudently, allowing in a few interested users in a test
mode, perhaps behind a firewall, it could have generated a trusted
community that would have had a stake in participating and editing,
Mayfield explains. And perhaps this group of buy-in readers, once
developed, would have quickly editing out the offensive pornographic
references that eventually caused a quick backlash against the project.
And if the community failed to edit out the porn reference quickly
enough, and members of the greater readership protested, the Times
could have simply wiped its hands of responsibility, saying it was the
job of the interested community to keep up the site. It may have also
argued that the wiki should be maintained precisely because there was
an interested community that supported it. But instead, it was just the
LA Times vs. everybody else — and it died.

Jeff Nolan of SAP comments on the investment.

When I first started talking about wikis the conversation typically
started and ended on what wikis are, and quite often more than a little
skepticism that any company would want to have a tool that enabled
"anyone to edit anything". Fast forward to today and the conversation
is not preoccupied with what wikis are, it’s now about whether or not
you can build a successful business around wiki technology. To me this
shift is a good thing, it signifies that the market is maturing,
accepting the technology, and most important that Socialtext was
successful in being far enough ahead of the market swing but not too
far ahead to have people say "oh yeah, they’ve been around for a long
time". It’s funny how the Valley works…

The Thirst for Oil

Reading through the world press about rising oil prices, I have long been surprised at how many writers have ignored the link between the price moves and "easy money" conditions in the United States. The Economist does not make that same mistake.

The two main engines for the world, the United States and China (also the two biggest oil consumers), have both had their growth boosted by lax monetary conditions in the past couple of years. Indeed high oil prices can partly be seen as a consequence of low interest rates. The two most important prices in the world economy are the price of oil and the price of money, and they are linked. If interest rates are abnormally low (in bond yields as well as short-term rates), then as global demand increases in response, oil prices should rise—especially if production capacity is tight, as it is today.

Jim Rogers made the case for a long bull market in oil and other commodities in his latest book Hot Commodities. Everyone knows the rapaciousness of China’s growing economy, but the bullish end of commodity cycles have been driven by other growing countries in the past: more recently and notably Japan and Germany as they rebuilt themselves in the aftermath of World War II. You do not have to believe in the dwindling of long-term supplies of oil to understand that current bottlenecks in refining and other structural factors will keep prices high until market participants find conditions economically favorable enough to solve those problems. So eventually, we will reach a tipping point where new oil technologies or alternative energy forms will drive oil and gas prices down again, but that time might still be years away. In the meantime,  I have been surprised at how many pundits have attributed oil prices solely to speculation, even as we have watched oil climb from $30 to $70. But I guess those of us long energy and natural gas need someone to take the other side of our trades.

In Digital Photography, Still a Silver Lining

Barron’s reports that while digital photography is curbing the demand for silver, it has not completely dampened photographic interest in the metal.

A surprising development in
the digital boom is the fact that many shutterbugs are taking their
prized digital snapshots to processing shops to have them reproduced on
glossy, high-quality photography paper, which is loaded with silver. Digital images printed on plain paper tend to fade
and can become easily damage by moisture. A lot of people are not
willing to take these risks with their wedding photos or pictures of
the new baby.

Is Buffet a Lazy Fool?

Contrarian Marc Faber wonders why he is seeing analysts with rose-colored glasses appear on CNBC. He points to a "persistent weakness (pdf file)" in U.S. financials and retailers, and questions the quality of corporate earnings.

Manufacturing accounted for about 40% of corporate earnings in the early 80s; today it accounts for about 10%. Financials used to account for about 10%, and today they have surged above 40%. So Faber concludes that a lot of U.S. corporate earnings are from financial shuffling.

Additionally, Faber points to a chart in a recent column by Eric Fry that shows how aggressively legendary investor Warren Buffet has been cashing out of his portfolio. Fry asks, tongue-in-cheek, whether  Buffet is losing his touch.

Is Warren Buffett lazy? Or foolish? Why else would he allow more than $40 billion dollars to pile up on the balance sheet of Berkshire Hathaway? Why else would he refuse to buy any of the stocks that Wall Street’s finest minds recommend? It’s possible, of course, that the Oracle of Omaha is still as shrewd as ever.

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The Art of Money

I have heard of at least one distressed investor (or "vulture investor") who collected depictions of the Garuda, a Hindu figure who is half-man and half-vulture. I wonder how many Wall Street professionals collect the art of Victor Debreuil, a French American painter, who, along with other 19th century American trompe l’oeil still-life painters (including William Harnett and John Haberle), became fixated with drawing and painting money." They had several aims: to show off their replicative skills, to confound federal counterfeiting laws, and, perhaps most importantly, to join in the then – highly- emotional debates over American monetary policy," says The Butler Institute of American Art. Debreuil was known to paint both single bills as well as "barrels" of money. The Federal Reserve Board owns one such painting. (See also the virtual exhibits at The Museum of Money & Financial Institutions.)

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MGM vs. Grokster: Cuban Supports Small Firm Innovation

Mark Cuban explains why he is supporting Grokster in the MGM Studios versus Grokster legal case.

We are a digital company that is platform agnostic. Bits are bits. We dont care how they are distributed, just
  that they are. We want our content to get to the customer in the way the customer wants to receive it, when they want
  to receive it, at a price that is of value to them. Simple business. Unless Grokster loses to MGM in front of the Supreme Court. If Grokster loses, technological innovation might not
  die, but it will have such a significant price tag associated with it, it will be the domain of the big corporations
  only. It wont be a good day when high school entrepreneurs have to get a fairness opinion from a technology oriented law
  firm to confirm that big music or movie studios wont sue you because they can come up with an angle that makes a
  judge believe the technology might impact the music business. It will be a sad day when American corporations start
  to hold their US digital innovations and inventions overseas to protect them from the RIAA, moving important jobs
  overseas with them. Thats what is ahead of us if Grokster loses.

Thanks to Fred Wilson for posting a pointer to the post. The Supreme Court will hear the case Tuesday.

HP Acquires Snapfish

… and Hewlett Packard is acquiring Snapfish, the photo processing service. Ecommerce Times notes that the transaction "puts HP up against Eastman Kodak and its Ofoto service." HP says that the deal is a natural extension of its digital photography business in printers and digital cameras. Forbes in February noted that the pace of digital camera sales has slowed, while lab-produced digital prints continue to drop in price. PCWorld in its April 2005 issue analyzes the print capability and costs of 11 printers, including a chart with the per print costs of each device.

Yahoo Acquires Flickr

Reactions to the news that search engine company Yahoo is acquiring photo hosting site Flickr:

Flickr tells its users that its DNA will remain unchanged. The statement did not impress Loren Baker. Eric Brochu says that Yahoo is a company that does not "get it." Jeff Jarvis says Flickr is running for the safety of a deep-pocketed, big brother. Om Malik reports the price tag at close to $35 million, while John Battelle calls it $15 to $17 million.  Terren Tong calls it a reaction to Google’s Picasa. BusinessWeek says Jerry Yang is focused on Flickr’s ability to generate a photo-oriented community, in part by making tagging a popular group activity. According to Search Views, the transaction confirms the "the credibility and profit-making potential of such an application," but wonders why Google has not yet folded in the photo-oriented applications that it has acquired. Fred Wilson says that he will "be watching what Yahoo! does with Flickr a lot more closely than what [Barry] Diller does with [AskJeeves]." (Speaking of Diller, Bambi Francisco says his acquisition of Ask Jeeves will not improve the search engine’s rankings.)

(Update 3/24) – Charlene Li says it is a great move for a portal like Yahoo; she calls portals the 800 pound gorillas of social networking. Clay Shirky believes the deal will allow Yahoo to focus on backend stability while Flickr focuses on responding to its users and developing new features.)

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From The Street to a Blog

A recent issue of Crain’s New York has an article about former Wall Street equity research analysts who have turned themselves into bloggers ("Former Analysts Put Stock in Blogs," 3/14-20).

About a dozen former Wall Street research analysts have started blogs in the last few months in an effort to strut their smarts before a new audience and revamp reputations that took a severe beating when the stock market bubble popped. The trick for these analysts accustomed to pocketing multi-million dollar paychecks is finding an audience and earning more than a few dollars that are dribbling in.

Crain’s mentions Stephen Castellano, Bill Burnham, David Jackson, David Strahlberg, Ezra Marbach and Tom Brown.