Category: Stock Talk

Friday was a terrible day for Research in Motion’s (RIMM) shareholders and employees. The stock’s 21% pummeling was the culmination of a series of bad management decisions that date back to first time the word iPhone was uttered in January of 2007. RIMM’s management snickered at the announcement. After all, RIMM was king of the mobile hill. It had a legion of fanatical customers. Its market share was growing like weeds. All was good.

Four years later, management still believes it’s 6 months away from a viable response. In the mean time, I carved out a few bucks on the short side. Not nearly as much as I should have, but I am ready to move on to the next casualty in the smartphone wars.

Here are a series of tweets that I tweeted after the RIMM conference call:

I received several responses back, but none were ready to accept my thesis. Matter of fact, my thesis sounds bizarre. Android is an state of the art OS. Its users are fanatical about it and it’s growing like weeds. Sounds familiar. All is true, but Google’s secret sauce is under attack. Android manufacturers love it, because it’s a much better OS than they could design and the price is right – $0. Google gives Android away hoping to make money from ads.

Well – free is not free anymore. HTC pays Microsoft a $5 fee for every Adroid device it sells as part of a patent settlement between the two companies. Microsoft has also filed a lawsuit against Motorola claiming their devices infringe on nine patents. Microsoft is also pursuing patent deals with other Android manufacturers including Acer and ASUS.

Oracle is also getting into the mix. A filing from Google hinted that Oracle wants more in damages than Android has earned in its entire existence.  Hot off the press today – an Oracle expert claims that Google may owe up to $6 billion.   If Microsoft delivers on its upcoming Windows Phone 8 OS – these lawsuits may push many Android OEMs into Steve Ballmer’s arms.

If Larry Ellison and Steve Ballmer don’t inflict enough pain – Google is doing a pretty good job itself. Solar initiatives and driverless cars will all prove to be superfluous expenses. Worse yet it’s entire mobile revenue/expense structure is upside down. Although Android is growing like wildfire, Google’s share of profits is not growing proportionally. It has effectively become the software R&D department for Android manufacturers in exchange for a hope that an end user will click on an ad.

Google’s Wallet mobile payment service continues its “hope for a click model.” IMO, the amount of money that it has/will spend is not commensurate with its return. Its desktop search advertising cash cow has allowed Google to maintain its current business model. However, desktop search is under attack as different discovery models emerge.

Every analyst and their grandmother downgraded RIMM on Friday. That horse is out of the barn. Where were they 6 months ago? Check my archives.  I felt like a lone wolf 1.5 years ago.  Google is still in the barn grazing. I don’t expect it to shed $500 in the next few days. This is a long term play for me.

Disclosure: Short Google. Position subject to change at any time.

The past few months I have been thinking quite a bit about the concept of “Big Data” – the ability to create, manipulate and manage very large data sets. Companies like this week’s love child Linked In wouldn’t be economically viable without a method to process Big Data. Their monetization model is dependent on understanding its customer’s behaviors and usage patterns which is mined from its data.

One of the reasons I spend so much time on StockTwits is that it’s a great place to share ideas with really smart people. After my blog on Where Mobile Social and the Cloud Meet, Robert Irr aka techinsidr, suggested I take a look at Micro Strategy. On Thursday, when it broke out on heavy volume it joined Tibco and Yahoo , in my 8 Ballers of Mobile portfolio, as plays on Big Data.  The 8 Ballers of Mobile is a Long Term strategy designed to profit from technologies driving the next generation of computing – Mobile, Social and the Cloud.

Here is why I believe MicroStrategy deserves Baller status.

 

Making deals with the Social Media Giants:

March 30, 2011 /PRNewswire:  Groupon will use MicroStrategy to analyze its daily deals and gain a deeper understanding of consumer behavior by examining the types of goods and services purchased, discounts offered, location, and purchaser demographics. The MicroStrategy-based reports and dashboards will give Groupon visibility into trends that can help to optimize and maximize the deals for improved performance. In addition, Groupon will use MicroStrategy to analyze and evaluate the effectiveness of its advertising expenditures.

The Whales want in:

George Soros discloses 5.6% stake in MicroStrategy 13D

An Industry Leader:

Stock hitting multi-year highs:

 

 

Disclosure: Long: Micro Strategy.

 

Research in Motion’s (RIM) Playbook has been hyped so much over the past 6 months that it was time for me to see one in person.  Since there are no RIM stores, showcasing RIM products with RIM trained sales people – I had to go to my local Staples. [Disclosure: This was a purely a fact finding mission. I am a happy iPad owner]

Before I could put my hands on a Playbook I had to walk by a Kindle, a Nook and 3 Android tablets – as I turned the corner there it was.

As I began playing with it, a salesperson walked up.

Sales Guy (SG): Do you have any questions?

Me: Sure, how’s it selling.

SG: We have sold a couple.  Do you have a Blackberry?

Me: No.

SG: It is really designed for people with Blackberries – you probably want to check out the Motorola Xoom.

Next thing you know – we are over looking at the Xoom.  The sales guy starts going over all of the features.  I ask do you have one? He said, No.  Another sales guy passed and he didn’t have one either.  The sales manager overheard our conversations and said that he owned one.  He started talking about how he loved it.  How he and his 3 year old daughter were using it.  What were some of its shortfalls.  If I was seriously in the market – I  would have walked out with a Xoom.

My question is – How does RIM expect to succeed in this environment?

• Poor product placement
• Simple sales qualifying questions (Do you own a BlackBerry?)
• No subject matter experts at point of sale

Apparently, RIM is expecting its customers to do their research online and the channel stores are simply places to get hands-on before the final purchase.

I have long since written off RIM  as an investment and this exercise reinforced my conviction. The likelihood of RIM going belly-up is low.  It has a dedicated, but shrinking user base that will continue buying their products. However, the prospects of the company growing earnings without significantly reducing expenses is unlikely.  At some point, management must admit that it is simply a niche player.  For example, why sell the Playbook thru a general retailer like Staples. It should be selling through technical boutiques that it could equip with subject matter experts.  IMO, RIM remains an avoid or short.

Disclosure: Long Apple. No position in RIM or Motorola.

I started trading stocks in 1995.  My interest quickly gravitated towards internet related stocks.  Fortunately, there was an abundance of investment choices.  Netscape IPO’ed in 1995. Yahoo followed in 1996.  Many others would become tradeable over the next few years.  However, if I had started trading in 1990 or even 1994 my choices would have been very limited.  Sorta like it is today with Social Media Companies.  The more interesting pure plays like Facebook, Twitter and Zynga aren’t public yet.  So, unless you are an angel investor your only choices are derivative (related) plays.

I have recently become interested in an area at the intersection of mobile, social and cloud  –  real-time data processing in context. Imagine chatting with a friend on Twitter about buying an iPad.  Then while on your way to the Apple store, you receive an offer from Best Buy for free a $25 iTunes card if you buy an iPad from them.  Mining Twitter data and making recommendations in real-time is extremely complex.  A technology that enables such analysis is called Hadoop.   Pure play companies in this area are still private, thus attaining investment exposure requires a derivative play.

Last week the following headline hit my Twitter feed, “Yahoo Mulls Spinoff for Hadoop Software Unit.”  Unbeknownst to me, over the past six years Yahoo has helped developed Hadoop.  It uses the software to managed spam in Yahoo mail, determine which stories to place on its home page and pick relevant ads for viewers.  The Business Insider thinks that Yahoo could have a Billion Dollar business up its sleeve.  So, in spite of Yahoo’s anemic stock performance it was added to my watch list as a Hadoop derivative play.

On Monday, as it broke out  on news that hedge fund manager David Einhorn had established a new position – I pulled the trigger.

Josh Brown at The Reformed Broker says, “Finally, someone with the clout and capital comes along to help Yahoo common stock realize its full value. This company has some of the most prized assets on the Internet worldwide, all it needs is a little help making that fact pay off for long-suffering shareholders.” (WSJ Blogs)

Eric Jackson does an excellent sum of the parts analysis of Yahoo (Why I Love Yahoo).  He believes that Yahoo is worth over $30/share.   Interestingly, when most talk about Yahoo’s unlocked value it’s in reference to their 40% stake in Chinese internet company Alibaba Group.  It is time to start tacking on a few additional bucks per share for their Billion Dollar Hadoop business also.

Once upon a time Yahoo had “game.” It was a “baller.” Can it regain its glory? I don’t know, but I’m giving  it a shot.

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The 8 Ballers of Mobile is portfolio leveraging the current trends in Mobile, Social and the Cloud.  The portfolio holds a maximum of eight stocks.  Under performers are constantly sold – this pruning serves as a risk reduction strategy.  Stocks are not equally weighted.

Year to date performance:  8 Ballers of Mobile 24.1% vs. S&P 500 8.2%

Disclosure: Currently long: ARM Holdings, NXP Semiconductor, Aruba Networks, TIBCO, Open Table, Sina Corporation, Apple, Yahoo. Positions may be sold at any time.

Transactions in 2011 include:

Buys: NXPI 2/1, ARMH 2/23, SINA 2/23, ARUN 2/23, TIBCO 4/15, YHOO 5/2

Sells: FFIV 2/23, RVBD 4/1, QCOM 4/13

Sooner or later we will collectively agree on a name for the next era in computing; post-PC, Social Local Mobile (SoLoMo) and mobile computing are names used quite often.  A few days ago I was introduced to a new term – Evernet.  According to whatis.com:

The term Evernet has been used to describe the convergence of wireless, broadband, and Internet telephony technologies that will result in the ability to be continuously connected to the Web anywhere using virtually any information device. Considered the next generation of Internet access, the Evernet assumes the emergence of an amount of bandwidth that would enable millions of homes to access the Web through inexpensive cable modem, DSL, or wireless connections.

I love the definition, but I am hoping for a catchier name. An investor, Stewart Alsop, was recently on Bloomberg West talking about a bubble in the Evernet.  This was the first time I’ve heard of the term and here is a guy already talking about a bubble in it.  Since most talking heads completely missed the internet and real estate bubbles, they are determined not to miss the next one.  To play it safe – now everything going up is a bubble.  I imagine the talking heads sleep better taking comfort in knowing that we were warned.

I normally tune out people whenever they utter the B word.  However, Alsop was saying something different.  He was saying that there is a new bubble on the horizon and we are years away before it pops.  Now I was all ears.

His thesis is that the next big thing is a ubiquitous broadband network that’s always present whether you are on a cell phone, in your office or at home.  Its key attributes will be its ubiquity and speed.  More access.  Faster access.  Where do I sign up?

This slide helps us think about this in investable themes.

The most recent addition into my 8 Ballers of Mobile portfolio, TIBCO , fits perfectly into Alsop’s theme.  TIBCO’s software enables companies to process their “Big Data” in context.

Where I slightly differ with Alsop is that he includes Social media in the internet (pre-Evernet) era.   Social Media is one of the forces driving the desire for an ubiquitous fast connection.  In my opinion, the next era will not only be about the plumbing (Evernet); but the applications like Social Media as well.

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The 8 Ballers of Mobile is portfolio leveraging the current trends in Mobile, Social and the Cloud.  The portfolio will not contain more than eight stocks.  Under performers are constantly sold.  This pruning strategy combined with the use of the 200DMA as a catastrophic stop – serves as the primary risk management methods.  Stocks are not equally weighted.

Year to date performance:  8 Ballers of Mobile 24.7% vs. S&P 500 8.3%

Disclosure: Currently long: ARM Holdings, NXP Semiconductor, Aruba Networks, TIBCO, Open Table, Sina Corporation, Apple. Positions may be sold at any time.

Transactions in 2011 include:

Buys: NXPI 2/1, ARMH 2/23, SINA 2/23, ARUN 2/23, TIBCO 4/15

Sells: FFIV 2/23, RVBD 4/1, QCOM 4/13