2011年9月30日 星期五

Microsoft-Samsung Deal Strikes a Blow at Google


SEOUL—Microsoft Corp. and Samsung Electronics Co. reached a patent-sharing deal, striking a blow at Google Inc.'s effort to provide free software to makers of smartphones and tablet personal computers.
For months, Microsoft and Apple Inc. have pressured Google and makers of cellphones and tablets based on its Android operating software to recognize that Android incorporates some of their designs—and either pay them or alter the products to avoid those designs.
Associated Press
Samsung this week unveiled new smartphones running on Android software: Galaxy S II LTE, right, and Galaxy S II HD LTE.
Wednesday's agreement is an acknowledgment by Samsung, the largest maker of Android products, that Microsoft's claims could have merit and that the Korean company needed protection from them. Part of the appeal of Android has been that Google offers it free, but Wednesday's pact attaches a cost to Android, at least for Samsung.
Under the deal, Microsoft will receive royalties for Samsung's Android-based smartphones and tablets. Samsung also will work with Microsoft to develop smartphones and tablets based on Microsoft's Windows software.

Editors' Deep Dive: Techs Balance Innovation, Litigation

Samsung, the world's No. 2 maker of cellphones after Nokia Corp., already makes Window-based smartphones, though in much smaller quantities than Android models. Samsung this month provided samples of a Windows-based tablet for programmers who participated in a Microsoft developers conference.
Microsoft already has a cross-licensing agreement with the second-largest maker of Android-based phones, Taiwan's HTC Corp.
With the Samsung agreement in hand, Microsoft issued a statement apparently to pressure cellphone-maker Motorola Mobility Holdings Inc. to forge a similar deal. Microsoft and Motorola Mobility, which Google has agreed to purchase, have traded several lawsuits over whether elements of Android software copy patented Microsoft technology.
"We recognize that some businesses and commentators—Google chief among them—have complained about the potential impact of patents on Android and software innovation," Brad Smith and Horacio Gutierrez, Microsoft's lead in-house attorneys, said in the written statement. "To them, we say this: look at today's announcement. If industry leaders such as Samsung and HTC can enter into these agreements, doesn't this provide a clear path forward?"
Google Chairman Eric Schmidt this month expressed fear that "overbroad patents" would slow the development of mobile-computing software.
"This is the same tactic we've seen time and again from Microsoft," a Google spokeswoman said in response to Wednesday's agreement. "Failing to succeed in the smartphone market, they are resorting to legal measures to extort profit from others' achievements and hinder the pace of innovation." Apple's iOS had 18.2% of the market for smartphone operating systems in the second quarter, while Microsoft had 1.6%, according to research firm Gartner Inc. A Motorola Mobility spokeswoman said, "While we don't comment on pending litigation, we remain confident in our position and MMI will continue to defend ourselves."
Google moved into mobile-computing software two years ago, providing a free operating system to hardware manufacturers and intending to make money from expanded use of its search engine and Web products. But accusations by Microsoft and Apple that Android included their patented technologies created pressure on Android customers to recognize that the system wasn't cost-free.
Samsung and Microsoft didn't disclose precise terms of their cross-licensing deal, saying only that it provided "broad coverage for each company's products." Analysts said it is likely Samsung will make royalty payments to Microsoft for Android products.
Samsung, the world's largest technology manufacturer by revenue, has a huge patent portfolio. But rather than software, it mainly covers factory processes, components like chips and hardware products such as television sets.
The Samsung-Microsoft arrangement has no apparent impact on Samsung's litigation with Apple, a conflict that has generated attention in part because Samsung's Android-based smartphone sales have risen quickly this year to match Apple's iPhone sales volume.
Apple accused Samsung in a U.S. court of design and copyright infringements not covered in its existing cross-licenses with Microsoft or other companies. Samsung countersued in several other countries with accusations of technology-related patent infringements.
Apple and Samsung on Thursday will square off in an Australia court, where Apple is seeking an injunction to prevent sales of a Samsung tablet computer that the Cupertino, Calif., company has said too closely resembles its iPad. An Apple spokesman in Australia declined to comment on the case.
Separately, Samsung and Intel Corp. announced they would support a new operating system, called Tizen, for mobile devices and other products. The move reflects a decision by Intel to reduce support for its MeeGo software, which was hurt when Nokia shifted its support to Windows this year. The Samsung-Intel agreement is another sign that Samsung is hedging its bets in the development of mobile-computing platforms.
Tizen, like Android and MeeGo, relies partly on the widely used Linux operating system and uses an open-source development approach based on contributions from many companies and individual programmers. It will be overseen by the Linux Foundation, the nonprofit group that had helped promote MeeGo's development.
MeeGo failed to gain much traction amid competition from Android and others. Imad Sousou, director of Intel's open-source technology center, wrote in a blog that Intel concluded that the market demanded a new approach based on an increasingly popular Web programming technology called HTML5. Mr. Sousou said Intel will help programmers working with MeeGo to switch to Tizen, which is expected to be in gadgets by the middle of next year.
—Amir Efrati in San Franciso and Don Clark in New York contributed to this article.
Write to Evan Ramstad at evan.ramstad@wsj.com

Read more: http://online.wsj.com/article/SB10001424052970204226204576598661866214854.html#ixzz1ZUfpc3NG

2011年9月28日 星期三

Netflix CEO Unbowed

SEPTEMBER 20, 2011   the wall street journal

If the CEO of Netflix Inc. were in a movie, the townspeople would be chasing him with torches and pitchforks.
The customer reaction was swift and angry against Reed Hastings's late Sunday announcement that the company was separating its DVD-by-mail business and its "Watch Instantly" Internet movie-streaming businesses.
Still, Mr. Hastings, a co-founder of the company, indicated that he's willing to take the short-term heat—and risk losing yet more customers—to usher Netflix into its new digital identity, focused not on snail mail but movies over the Web.

Calling It Splits

Several companies have announced plans to split themselves apart in recent months.
In his overnight email to the company's 23 million domestic subscribers, Mr. Hastings said the DVD business will be renamed Qwikster, hived off into a separate subsidiary that will have its own billing system, website and list of movies.
By late afternoon on Monday, more than 16,000 users had left comments on the Netflix blog— and the overwhelming majority were livid.
"You are making things significantly worse for us," one customer wrote, in a screed that echoed many of the others. "Now not only will we have to pay a LOT more for your services, but we will also have to access two separate websites."
The transition from physical to digital hasn't been easy for any media business. The pain often has been exacerbated by attempts to hang onto their old businesses without focusing on new ones. Mr. Hastings is betting that rankling subscribers is preferable to falling behind those changes.
Two months ago, Netflix said it would price its offerings separately, starting at $8 with no discount for combining the two, an apparent move to accelerate the migration to Web viewing from mailed movies. Just last week, Netflix said price change was costing it more subscribers than it expected. On Sunday, the company conceded that was the first step in creating Qwikster.
Many angry customers, threatening to cancel their Netflix subscriptions, griped that the selection of titles for streaming is small compared to the DVDs. Netflix offers about 100,000 DVD titles and has about 20,000 titles in its streaming library, estimates Wedbush Securities analyst Michael Pachter. The company doesn't disclose the size of its library.
Many users also noted that movies and videos are increasingly available elsewhere on the Web, giving them options.
Underscoring that notion, Dish Network Corp. is expected to soon unveil some kind of streaming service. On Monday, Dish said its recently acquired Blockbuster video-rental chain would make "a stream come true" announcement on Friday. Dish declined to comment.
According to person familiar with his thinking, Mr. Hastings is willing to endure the current drubbing because the long-term dynamics indicate that people will be less and less reliant on the DVD side of the business. By separating the two now, Netflix appears to be preparing for the day when the DVD business dwindles or even disappears.
Netflix expects its DVD business to remain viable for only about 15 more years, the person said. Separating the two businesses could keep the DVD operation alive longer by letting its managers concentrate on their own needs, without the distractions of running the online business.
Netflix shares dropped 7.3%, or $11.39, in a broad market sell-off on Monday, to $143.80, on the Nasdaq Stock Market
Wedbush's Mr. Pachter called Netflix's separation plan "premature," citing the changing economics of the DVD and streaming businesses. He estimates that for now, streaming-only customers are more profitable to Netflix than its DVD customers. But he believes that state of affairs won't last as studios charge Netflix more for the digital licensing deals it relies on.
"On the DVD side the studios have zero ability to raise price," Mr. Pachter says. "On the streaming side, the studios have 100% leverage."
Subscribers to Netflix's DVD-by-mail business, created in 1997, have been leveling off, according to recent company data, while the number of subscribers to its movie-streaming business have grown rapidly since its introduction in 2007.
After assessing the fallout from the price increase, Netflix said it expects to end this month with 2.2 million DVD-only subscribers, down from the previous forecast of 3 million, and 9.8 million streaming-only customers, down from an earlier forecast of 10 million. The company's forecast for combination subscriptions held steady at 12 million. Its current 23 million total subscribers represent a 37% increase from the year-ago level of nearly 16.8 million.
Netflix has run almost no ads promoting its DVD business in the past six to eight months. At the same time, the company has been aggressively expanding the streaming business, moving into Latin America and exploring other international markets.
Though the move could make it more costly for Netflix to license content for its streaming service, it is unlikely to have much effect on the costs of the DVDs it buys from movie studios and television companies. Studios often negotiate DVD and digital deals separately, with Netflix and with other companies, according to people in the movie and technology businesses. Walt Disney Co.'s movie studio is in the process of separating its DVD and digital-distribution operations. DVD sales are being transferred to the consumer-products group that sells toys and clothes to chains like Wal-Mart Stores Inc., while responsibility for striking digital deals will remain with the studio.
Among the factors making the DVD and streaming businesses so different: Streamed versions of movies remain subject to the complex "windowing" deals studios strike with television broadcasters and others. Generally when movies are being shown on premium-cable channels like HBO and Showtime, for instance, they cannot also be available on a service like Netflix. By contrast, Netflix owns outright the DVDs it rents, and can do with them as it likes.
To preserve discounts on bulk purchases of DVDs, Netflix has been willing to make concessions such as waiting 28 days after some movies come out on DVD before offering them to mail-order subscribers. Studio executives view that as a way of protecting DVD sales. Last year domestic DVD and Blu-ray sales generated $5.6 billion in revenue for the studios, according to an estimate from IHS. Physical movie rentals, meanwhile, generated $1.6 billion.

Betting Against China


Q:How can a retail investor put on a trade to short the Chinese yuan? Can an investor use an ETF and are there better ways? Michael Russotti, New York, and Dallas Bond, Healdsburg, Calif.
A:A number of hedge funds have placed wagers against the Chinese currency. The moves run against conventional wisdom. China has been among the fastest-growing nations, and most economists expect the expansion to continue. And China has kept its currency within a tight band. The contrarians counter that the Chinese economy is facing huge debts and is a bubble waiting to burst.
These investors are buying "put" contracts from a bank, which give them the right, but not the obligation, to sell yuan and buy an equal amount of U.S. dollars at a set price. Earlier this year, the cost of a one-year contract allowing the investor to sell $10 million of yuan at 20% below current levels over one year cost just $15,000. If the yuan tumbled 30% the contract would produce a profit of about 5,500%.
Most banks won't enter into these agreements with individual investors unless they're a major client with extensive experience trading currencies, partly because the trade is considered highly risky. Christopher Pavese, chief investment officer at Broyhill Asset Management, suggestsPowerShares DB US Dollar Index Bullish Fund, an ETF that in theory could do well if the yuan falls. Shorting WisdomTree Dreyfus Chinese Yuan, an ETF that wagers on the yuan, is another option.
Matthew Tuttle, president of Tuttle Wealth Management, suggests bets against Chinese companies for those very bearish on China. For those able to handle extreme volatility and possible losses, he recommends Direxion Daily China 3X Bear Shares. This ETF aims to deliver an inverse return of three times an index tracking Chinese American depository receipts. It has lost about 9% so far this year. He also suggests the ProShares UltraShort FTSE China 25, which aims for a return that's twice the inverse of the daily performance of the FTSE China 25 Index.
Mr. Tuttle says investors should wait until weakness begins in China before making bearish bets.
Q:How can an equity portfolio generate income without buying master limited partnerships, utilities and other traditional dividend stocks?
A:Stocks face strong headwinds amid a weak U.S. economy and worries about European debt. As such, more investors are buying shares of companies with generous dividends. But many of those stocks, such as master limited partnerships, already have climbed and may have higher risk.
Peter Amendolair, chief investment officer of Destra Capital Advisors, recommends preferred securities. These shares can be safer than equities. They have a higher claim on any assets of a company and often pay generous dividends. "Preferred securities currently represent the highest yielding investment grade asset class," he says. Destra is a fan of preferred shares ofConstellation Energy Inc.
Another fan of preferreds: Warren Buffett's Berkshire Hathaway, which recently made a $5 billion preferred-stock investment in Bank of America.
"Investors should think of preferreds as somewhere between a stock and a bond," says Mitch Schlesinger, chief investment officer of FBB Capital Partners. "They trade on an exchange the way stocks do, but the dividends are generally quite high, like those from long-maturity bonds," he says.
These dividends usually are paid quarterly, like common stock dividends. Mr. Schlesinger says investors should keep in mind that these shares are more volatile than bonds.
Two that Mr. Schlesinger likes: Public Storage 6.35% series R, and U.S. Cellular's 6.95% offering.
Many preferreds are issued by banks. Marilyn Cohen, president of Envision Capital in Los Angeles, notes that preferred shares of financial companies got burned in 2008, as did regular shares.
To reduce risk, you can invest in a diversified group of preferreds. There are also ETFs and mutual funds that hold these securities, such as iShares S&P U.S. Preferred Stock.
Another way to generate cash from a stock portfolio: Sell stock options. Options give an owner the right, though not the obligation, to buy shares at a specified price at some point in the future.
Paul Stewart, co-portfolio manager of the Gateway Fund, a mutual fund, says investors convinced the market will either fall or be flat for the foreseeable future could sell "call" options on the Standard & Poor's 500-stock index. These options are especially valuable in volatile markets. Currently an investor who sells a one-month call option to buy about $120,000 worth of shares in the S&P 500-stock index could pocket nearly $4,400 if the market remains flat or falls at the end of that month.
The downside: If the market rises 10%, the option would climb in value, and the investor who sold it will pay $12,000 at the option's expiration date. That means losing about $7,600 after pocketing the initial $4,800. But the value of one's stock portfolio also would have risen, easing the pain.
And keep in mind that call profits are taxed like capital gains—at a higher rate than dividends.
Mr. Zuckerman is a special writer for The Wall Street Journal in New York. He can be reached at gregory.zuckerman@wsj.com. Send questions about alternative investing toreports@wsj.com.

2011年9月26日 星期一

Google Is Going Face to Facebook


Turns out Google+ knows how to add.
[googleherd1]Associated Press
Facebook CEO Mark Zuckerberg
The search giant's recently launched social network rolled out new features Tuesday while removing its velvet rope of exclusivity and opening itself up to all comers. That should keep the heat on more dominant social platforms like Facebook and Twitter. Still, it remains far behind and will have to keep innovating to catch up.
Launched as an invitation-only network in June, Google+ saw usage skyrocket early on. It had 10 million users within two weeks. And comScore estimates unique visitors jumped to nearly 25 million world-wide by the end of July. Yet Facebook claims over 750 million active users world-wide and Twitter 100 million.
Part of the problem has been that the initial wave of users who showed up found most of their friends weren't on Google+. Social networks are like parties: They're most fun when you know a lot of people there. Now that Google+ has opened the doors to all, will more join in?
One way Google hopes to encourage them to do so is to integrate Google+ with its other services like Google Search, which it announced Tuesday, as well. Facebook's search is not yet as good as Google's. While it's easy to search for people on Facebook, it's not easy to search for content. Twitter, on the other hand, does have good content-search capabilities.
Google's aggregation of services could be very intriguing for users. So, for instance, users with Google+ accounts may be able to see business reviews posted by friends or family who they have connected with on Google+, rather than relying on postings from unknown people on, say, Yelp.
[googleherd1]Bloomberg News
Google chief Larry Page
Google+ is also expanding the group video-conferencing tool it calls Hangouts to include mobile devices. So a group will be able to hold video conferences across multiple devices, including PCs and smartphones. Google+ is also adding something called Hangouts On Air, allowing users to broadcast their Hangouts to others.
This last feature could prove a good way to attract users to Google+. Remember, celebrities are the key driving force behind social media. Lady Gaga has nearly 14 million Twitter followers and 44 million fans on Facebook. Say, for instance, she wants to video chat with a few friends. Her legions of fans will want to be on Google+ to watch live.
Of course, Google is miles behind Facebook, which is innovating quickly itself. This week the company is expected to announce new tools that will let users share content in real time. Songs they are listening to, for instance. Meanwhile, Facebook quickly imitated Circles, the handy tool first introduced by Google+ that lets users organize their social contacts.
Facebook is no MySpace. It won't stand still while Google+ innovates. Yet, considering all that Google brings to the table, Google+ has a shot at closing the gap with its larger rivals.

2011年9月25日 星期日

Hong Kong Dollar Doubters Rush In


Hedge fund manager Bill Ackman created a stir this week with a call to go long on the Hong Kong dollar, a currency that has been linked in a in a very tight range near 7.8 to the U.S. dollar since 1983.
Why is it time for change? He thinks Hong Kong authorities will eventually relent and let its currency strengthen under economic and social pressure. By tying the Hong Kong dollar to the U.S. dollar, Hong Kong imports U.S. monetary policy, which is super loose and set to stay there for at least another two years, as the Fed recently signaled.
Meanwhile, inflation in Hong Kong hit a scary 7.9% in July and real-estate prices are above the pre-1997 Asian financial crisis bubble-of-all-bubbles peak. Mr. Ackman figures the inflation will exacerbate social tensions, and with a change in Hong Kong’s chief executive set for March 2012, the new government will be forced to let the Hong Kong dollar strengthen around 30%. A stronger currency would make all the imported goods Hong Kong relies on cheaper, ameliorating the inflation pressure.
Mr. Ackman’s doubters quickly chimed in.
Tom Holland, columnist at the South China Morning Post, noted (subscription required) that such a repegging would be painful for Hong Kong’s banks and investors.  The local banking system has a surplus of deposits, some of which it converts to U.S. dollars and lends out abroad. A 30% strengthening of the Hong Kong dollar would leave a HK$60 billion (US$7.7 billion) “hole” in the banking system, he writes. And Hong Kong residents hold a substantial amount of foreign currencies in their accounts. A revaluation would cut into the value of those holdings. Then there is the nearly US$1 trillion portfolio of investments Hong Kongers hold abroad.  A quick repegging would wipe out a proportional amount of that value in local currency terms.
Another skeptical voice, the analysts at research house GaveKal note that repegging would just encourage more people like Mr. Ackman to pile into the Hong Kong dollar, making defending the new level even harder. Because Hong Kong is so linked to the mainland economy, investors would think the strengthening was a precursor to Hong Kong delinking to the dollar and marrying the Chinese yuan. That would cause a massive wave of capital that Hong Kong couldn’t absorb.
“It is simply too risky because it could invite massive speculative flows,” GaveKal writes.  There’s also the character of Hong Kong’s powerful bureaucracy:  “Civil servants do not like to rock the boat in such a risky fashion.”
Doubters or not, in the end, Mr. Ackman’s call is in some ways an easy one to make. There’s very little downside. As Hong Kong proved during the Asian Financial Crisis, it will defend to the death against Hong Kong dollar weakness.
And unlike the yuan, which many also say is undervalued and destined to rise, the Hong Kong dollar is among the most liquid and traded currencies in the world, with none of Beijing’s restrictions or capital controls to worry about. If you have some U.S. dollars lying around earning no interest, you might as well convert them to the Hong Kong version and hope Mr. Ackman’s theory comes true. The worst-case scenario: You lose a bit on the currency-exchange fees when you give up and bring your money back into greenbacks.

2011年9月20日 星期二

TPK block called off after required filing not made

20 September 2011   FinanceAsia

Anette Jönsson

Global equity markets clearly remain difficult, but that was not why a sell-down in Taiwan’s TPK Holding was withdrawn on Friday, a little more than one hour after launch. Instead, the bookrunners were forced to cancel the sale after it emerged that the seller, a unit of German plastic components maker Balda, had not made the required filing with the Taiwanese stock exchange in time.
With a stake of about 16.1%, Balda is the largest shareholder and an insider in TPK, which is the main supplier of touch screens to Apple’s iPhones and iPads. Under Taiwanese regulations, a shareholder counts as an insider if it owns at least 10%, or if it is a member of the company’s senior management. And when an insider wants to sell common shares in a company, the company is required to make a filing on behalf of the seller at least three days before the sale. This means the upcoming deal becomes public knowledge and often results in downward pressure on the share price.
No such filing had been made on behalf of Balda when investors started to receive term sheets for a sell-down of between NT$6.29 billion and NT$6.46 billion ($210 million to $216 million) at about 4.15pm on Friday. Sources say that, in theory, if Balda had filed by 5.30pm on Friday, the deal could have been completed after the market closed yesterday — i.e. after the required three days — which would have limited the market exposure to just one trading session. However, a filing was never made and by 5.40pm on Friday investors were told that the deal was withdrawn.
Balda confirmed in a press release later in the evening that it had not filed for a sale, but the wording in the brief statement made it sound like this was by choice — not because it had missed the filing deadline. The release was headlined “Balda squashes rumours of selling TPK shares” and went on to say that “Balda informs that it has not done the necessary filing with the Taiwanese stock exchange to do this kind of transaction due to the current market volatility and the current market price.”
If Balda did make a choice not to go ahead with the agreed transaction, one has to wonder why J.P. Morgan and Nomura — the joint bookrunners — launched the deal. Asia-based sources said that the statement may be an after-construction, however, and argue that Balda and TPK simply missed making the filing. Why that happened is less clear. It is possible that the German seller simply wasn’t aware of the rules, but even if it wasn’t, the bookrunners should have informed it of what needed to be done. They should also have made sure that a filing had been done before sending the term sheet to investors.
At the very least, there was insufficient communication between the seller and the two banks involved, but one can also argue that it was a case of poor execution.
There are several precedents for similar transactions, including a series of sell-downs by Royal Philips Electronics in Taiwan Semiconductor Manufacturing Company (TSMC) between 2003 and 2008. Two recent transactions that required the sellers to make a filing are Baring Private Equity’s sell-down in Airtac in June and Morgan Stanley’s sale of shares in E.Sun Financial in July. No filing is required if the seller is offering global depositary receipts instead of common shares.
Not surprisingly, TPK’s share price fell 5.5% yesterday and the stock is likely to remain under pressure until a transaction has been completed. Balda said it will monitor the market situation and coordinate closely with TPK to “ensure a smooth exit process and to minimise market impact”.
Investors were already aware that the German company intended to reduce its stake in TPK, however, and short-selling activity in the stock had picked up in the past month. The level of short positions currently account for about 2% of the outstanding shares, versus 1% a few weeks ago. In addition to the Balda sale, TPK itself is also planning a sale of GDRs that based on the current share price could be as big as $450 million. It is rumoured that J.P. Morgan and Nomura are mandated for that transaction as well. The two banks also arranged a $400 million convertible bond for TPK in April this year.
At the end of May, following its annual general meeting, Balda said that it intended to sell shares in TPK no later than by the end of October and to distribute an appropriate dividend from the profit achieved through the sale next year.
However, Balda’s share price jumped 8.7% on Friday after the block trade was called off. One reason for this may be that TPK actually accounts for a significant portion of the company’s market value. In fact, based on yesterday’s closing prices, its 16% stake in TPK has a market value of $842 million, while Balda’s entire market capitalisation is only $588 million. The share price gains could be a signal to the management that investors want it to keep the profitable investment.
Even though TPK’s share price has come off from a high of NT$910.48 in May, it is up 215% since the company raised $200 million in an initial public offering in October last year. And analysts continue to like the stock, as evidenced by the fact that their recommendations include 23 “buys”, versus just five “sells”.
Balda lost some of Friday’s gains yesterday, however, as European markets again came under pressure due to concerns about a Greek default. The stock finished down 5.6% at €7.25.
According to the term sheet, Balda was looking to sell a quarter of its TPK stake, or 9.5 million shares, which would have reduced its holding to about 12.1% from 16.1%.
The shares, which are held by its Balda Invest Singapore unit, were offered at a price between NT$662 and NT$680. The range translated into a discount of 2.4% to 5% versus Friday’s closing price of NT$697.
TPK, whose main production site is located in Xiamen in China, has grown rapidly since it was established in 2003, thanks to its partnership with Apple. The inventor of the so-called projected-capacitive (P-Cap) touch technology, the company has worked together with Apple to develop the touch screens for its iPhones and iPads and, while competitors have started to emerge (Apple does need more suppliers to support the consumer demand for its products), TPK’s position as the main supplier of this technology is not in question.