Yahoo! and AOL to Merge?

January 29, 2008

Just for fun…. Click the video below and ask yourself if something looks a touch familiar about of the AOL and Yahoo! sites. Click it over and over.

With all of the problems that both companies have encountered (GOOGLE) and the competition they endure (GOOGLE), it would be of great benefit to look towards a consolidation rather than a fight. Aside from the graphic similarities, there is a great deal of overlap between both of these companies.

In their earnings announcement, Yahoo Inc. (YHOO) reported a drop in quarterly profit on Tuesday and its shares fell nearly 7 percent as Chief Executive Jerry Yang predicted a tough 2008 amid a weakening U.S. economy.

“While we will continue to face headwinds this year, we believe that the moves we are making will help us exit 2008 stronger and more competitive and return to higher levels of operating cash flow growth in 2009,” Yang said in a statement.

The article continued to explain, “Yahoo’s larger share of the display market makes it more vulnerable to any spending pullbacks in a recession. Analysts expect key rival Google Inc (GOOG) may fare better in a downturn with its dominance of paid search listings, a form of advertising that is viewed as more closely tied to sales.”

News outlets are not impressed with Yahoo! results either:

Yahoo net drops as reorganization stays in focus
at MarketWatch (Tue 5:00pm)
Yahoo 4Q Earnings Fall Over 23 Percent
AP (Tue 4:59pm)
Yahoo Q4 In Line; Q1, ’08 Outlook Light; Stock Slumps
at Barron’s Online (Tue 4:53pm)
Yahoo disappoints investors again
at CNNMoney.com (Tue 4:49pm)
Another flop at Yahoo!
at Fortune (Tue 4:44pm)

To the Yahoo! an AOL team: DO SOMETHING! ANYTHING EXCEPT WHAT YOU HAVE BEEN DOING! Shareholders are losing out because of your stubbornness. Be brave, be daring and think of the little ant that moved that rubber-tree plant. You can do it…!

 Disclosure: Horowitz & Company clients do not hold positions in stocks mentioned as of the publish date.

VMWare in Despair – Charting the History

January 29, 2008

Brian Shannon from AlphaTrends provides us a history perspective of VMWare (VMW) shares. The video helps to shed some light on the setup and why the stock is taking such a pounding. A great lesson in technical analysis.

See also: VMWare: A WallStreet Chainsaw Massacre

Disclosure: Horowitz & Company clients hold SHORT positions in stock mentioned as of the date of publication.

VMWare – A WallStreet Chainsaw Massacre

January 28, 2008

Watching shares prices bludgeoned is never fun. After hours Monday, VMWare (VMW) bled and the red kept on coming like a scene from a third rate horror flick. The real scare is that there could be more to come.

For some time, we have been concerned about the potential implosion in share prices for VMWare (VMW) shares, since, as of late, there has been a painful awareness of the rotation/stampede out of stocks in which investors have high expectations for enormous earnings momentum. Even so, this particular stock has a very unique story, as it is one of the few pure-plays in the technology market today. We have now come to find this is also their Achilles heel. Further adding to the concern is the fact that in the next few weeks (February 11th), the first wave of available shares will flood the market as the initial lockup period ends for IPO shareholders. The dilution will continue over the next few quarters, which will conceivably add selling pressure. This thought has obviously been weighing heavily on investors and this has been vividly seen as the earnings report of January 28th, while not horrible, sent shares tumbling.

We have held that this stock was severely overvalued when we started to research this name. At that time, it was at $102 and it immediately apparent that the catalysts for growth were in danger as several factors were converging. Immediately, we added positions of the April $60 puts to selective client portfolios and paid a premium of $2.60.

Virtualization Diagram
Before getting into those details, maybe a quick review of the incredible technology know as “virtualization” should be addressed. If you have not heard about virtualization software yet, you are obviously not paying close attention. Perhaps one of the greatest technology advances in years, it is one reason that Apple Computers are able to run Windows…within a window. It has also been a big part of the internet’s explosion as servers are able to run multiple sites under the extreme efficiency provided by virtualization software.

History
Virtualization technology can trace its roots back to IBM at their Watson Research Center. Back then, the original concept was dubbed: time sharing. This can be further dated to a visionary paper written by Christopher Strachey entitled, Time Sharing in Large Fast Computers (1959).

In a recently released Executive Memo from Bob Nuglia, Senior Vice President of Microsoft’s Server and Tools Business, the history and future of virtualization is explored. One particularly interesting area of the memo was his historical references to the industry’s consolidation and the fact that Microsoft has all of their technology lined-up to make a major impact.

“Virtualization is not new. IBM first introduced virtual machine technology for mainframe computers in the early 1960s. Microsoft Windows NT included a virtual DOS machine. Virtual PC was introduced by Connectix in 1997 (Microsoft acquired Connectix in 2003). EMC’s VMware introduced its first product, VMware Workstation, in 1999. Softricity introduced SoftGrid, the first application virtualization product, in 2001 (Microsoft acquired Softricity in 2006).”

Adding to that powerful lineup, Microsoft announced a new relationship by press release on January 21, 2008.

“…an expanded role for virtualization as a key enabler of its Dynamic IT vision and outlined a companywide strategy to help accelerate the broad adoption of virtualization. To help drive its strategy, the company also announced the acquisition of Calista Technologies Inc. to improve the end-user experience for virtualized desktops and applications; an expanded alliance with Citrix Systems Inc. in the areas of client and server virtualization; more flexible licensing options for virtualization using Windows Vista; and new tools that provide best practices to deploy Microsoft virtualization software.”

Since its genesis in 1959, there have been dramatic changes and giant Read more

eBay disappoints: Going to $10?

January 27, 2008

Last week, eBay announced a rather lackluster earnings report citing several factors for the miss. In addition, the long acting CEO, Meg Whitman will also step down making was for new ideas that may help to stop the ongoing share decline. If you were one of the unlucky ones that bought the stock in January 2004, you could be sitting on a whopping 54% loss. That translated to an 85% increase from this level in order to break even!ebay Pioneer

The timing of her departure could not be any worse. It translates to more like an “exit, stage right,” than a graceful departure towards a comfortable retirement. It may be a signal to shareholders that there are more problems that lurk beneath the surface and an indication that this earnings report is simply the horns blaring from the bell-buoy warning ships of the imminent danger ahead.

There is no doubt that eBay has been an amazing success story and a pioneer in the online auction business. Unfortunately, the way that you can recognize a pioneer is usually from the arrows in their back.

When a company invents successfully, you can be sure that fierce competition will soon follow. While eBay has cornered the market for online auctions since their inception, today there are several competitive alternatives such as uBid and even Bidz.com. In addition, what may not be so apparent is the fact that there has been a focused trend toward developing auction sites that do not seem to “look” or “feel” like auctions. The fact is that some people cannot bear the anxiety of the bid-wait-bid-wait-bid-bid-outbid-wait-bid/won or lost process.

Online giants, Amazon.com, MSN Shopping and Yahoo! Shopping each have person-to-person stores that are very similar to the eBay, Buy It Now program. In reality, eBay auctions that use Buy It Now are no different than any of the non-auction online stores. The seller prices the item and if a buyer wants that item, he or she will pay the stated price. There is no bidding, haggling or negotiations.

Then, there is the matter of the very successful PayPal division, which was acquired by eBay in 2002 for $1.5 billion. Now, its dominance is also being challenged. In an apparent move to steal market share, Google’s checkout is Read more

TDI Episode 42: Put Up or Shut Up!

January 27, 2008

Guest: Covestor Co-Founder Rikki Tahta is our guest as we look into a new paradigm of investment advice. This episode starts with a way to buy stocks with less risk and an important discussion about the recent and swift rotation that now favors growth over value. Apple (AAPL) is used as an example of a potential buy if done with a hedge. Selling put options against a position can be a good strategy and provide a hefty return on investment.

Podcast listener Fred S. sent in a wonderful email with a hard hitting commentary on the state of the markets and the future political outlook. Andrew discusses the points of this very poignant and eye-opening message. Thanks Fred!

Covestor

Rikki and Andrew discuss how it is possible to add a level of “transparency” in order to track the actual performance of investment portfolios and potentially the results of Investment Advisors. This is all in an effort to help better understand portfolio risk and performance. The Covestor site has a very unique twist as it is able to integrate real-time trading metrics so that individuals and professionals can share their investment knowledge as they are rated by several metrics. Essentially, Covestor is a real-trade sharing service for, as they say, “proven self-investors” in ordetr to ” share real investment decisions, gain recognition and earn fees by helping others.”

Rikki Tahta

Covestor’s Mantra: “Where all data is private, normalized and anonymous, and membership is free.”

Richard ‘Rikki’ Tahta
Chairman (Co-Founder) Covestor
Rikki Tahta has held a number of senior roles in Finance and Information Services. Previous start-ups include ARK Information (acquired by Thomson Financial), WebTrack (acquired by Jupiter Communications – later public on NASDAQ), Steelhead Systems (acquired by Merrill Lynch) and Bookpages (acquired by Amazon.com). Other positions include Chase Capital Partners (private equity) and Thomson Financial (Securities Data Corporation). Rikki lives in New York and loves fishing.

Stocks Discussed in this Episode: (AAPL) (GRMN) (GOOG) (CROX) (BIDU) (MSFT) (BAC) (ETFC) (QQQQ) (SPY)

Andrew will be teaching an online class on investing January 31 – LIVE! Make sure to get your reservation for this seminar. The cost? FREE! (See info below)

Andrew’s book, The Disciplined Investor – Essential Strategies for Success is available. It is time to get back to basics!

   

Register for Andrew's CourseAndrew’s Portfolio Mastery – Disciplined Investment Strategies for Profits – FREE!!
From Novice to Master Trader – What does it take to get to each new level of success?

Instructor – Andrew Horowitz, “The Disciplined Investor”
(Click Here) for dates and times and details

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